##### Table of Contents

---

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---



FORM 10-K/A



Amendment No. 2



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2003



or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period



Commission file number 0-19410



---



POINT THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)





|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 04-3216862                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|125 Summer Street Boston, Massachusetts                        |  | 02110                               
|(Address of principal executive offices)                       |  | (Zip Code)                          



Registrants
telephone number, including area code:

(617) 933-2130



Securities registered pursuant to Section 12(b) of the Act:

NONE



Securities registered pursuant to Section 12(g) of the Act:

Common Stock, Par Value $.01 Per Share

(Title of Class)



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



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K/A or any amendment to this
Form 10-K/A.    Yes ̈No  x



Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act).    Yes ̈No  x



The aggregate market value of
voting stock held by non-affiliates of the Registrant as of June 30, 2003 was approximately $10,407,000.



The number of shares outstanding of the Registrants common stock as of May 28, 2004 was approximately 18,185,143.



Documents incorporated by reference: None.



---



---

##### Table of Contents

Explanatory Note



This Amendment No. 2 to the Registrants Annual Report on Form 10-K for the year ended December 31, 2003, filed
with the Securities and Exchange Commission on March 16, 2004, is being filed: (1) to provide additional information in Items 1 and 7 primarily in response to comments from the staff of the Securities and Exchange Commission, and (2) to correct the
removal of Footnotes 11 through 15 that were inadvertently left out of the previously submitted 10-K/A filing. In addition, although no revisions were made to Items 2, 3, 4, 4A, 5, 6, 7A, 8, 9, 9A, 10, 11, 12, 13, 14 and 15, such items have been
included in this Amendment No. 2 because it is the Registrants intention to distribute this Amendment No. 2 to its stockholders in satisfaction of its obligations under Rule 14a-3 promulgated under the Securities Exchange Act of 1934.



This Amendment No. 2 does not reflect events
occurring after the filing of the original Annual Report on Form 10-K on March 16, 2004, or modify or update the disclosures prescribed in the original Annual Report on Form 10-K, except to reflect the revisions noted above.



---

##### Table of Contents

POINT THERAPEUTICS, INC.

TABLE OF CONTENTS



Year 2003 Form 10-K
Annual Report



|         |  |                                                                                                               |  |   
|-------- |  | ------------------------------------------------------------------------------------------------------------- |  | --
|PART I  
|         |  |                                                                                                              
|ITEM 1.  |  | BUSINESS                                                                                                      |  | 4 
|         |  |                                                                                                              
|ITEM 2.  |  | PROPERTIES                                                                                                    |  | 25
|         |  |                                                                                                              
|ITEM 3.  |  | LEGAL PROCEEDINGS                                                                                             |  | 25
|         |  |                                                                                                              
|ITEM 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                           |  | 25
|         |  |                                                                                                              
|ITEM 4A. |  | EXECUTIVE OFFICERS OF THE REGISTRANT                                                                          |  | 25
|        
|PART II 
|         |  |                                                                                                              
|ITEM 5.  |  | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDERS MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |  | 26
|         |  |                                                                                                              
|ITEM 6.  |  | SELECTED FINANCIAL DATA                                                                                       |  | 27
|         |  |                                                                                                              
|ITEM 7.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                         |  | 28
|         |  |                                                                                                              
|ITEM 7A. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                    |  | 36
|         |  |                                                                                                              
|ITEM 8.  |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                   |  | 36
|         |  |                                                                                                              
|ITEM 9.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                          |  | 36
|         |  |                                                                                                              
|ITEM 9A. |  | CONTROLS AND PROCEDURES                                                                                       |  | 36
|        
|PART III
|         |  |                                                                                                              
|ITEM 10. |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                                            |  | 37
|         |  |                                                                                                              
|ITEM 11. |  | EXECUTIVE COMPENSATION                                                                                        |  | 40
|         |  |                                                                                                              
|ITEM 12. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                |  | 44
|         |  |                                                                                                              
|ITEM 13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                |  | 46
|         |  |                                                                                                              
|ITEM 14. |  | INDEPENDENT AUDITOR FEES AND SERVICES                                                                         |  | 46
|        
|PART IV 
|         |  |                                                                                                              
|ITEM 15. |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                                              |  | 49
|         |  |                                                                                                              
|         |  | SIGNATURES                                                                                                    |  | 50



In this report,
Point, the Company, we, us and our refer to Point Therapeutics, Inc.





---

##### Table of Contents

PART I



Item 1.Business



Overview



We are
developing small molecule drugs for the treatment of solid tumors, hematologic malignancies, hematopoietic disorders and infectious diseases. Our lead product candidate, PT-100, is an orally-active small molecule which, through a novel mechanism of
action, has the potential both to inhibit the growth of malignant tumors and to reconstitute the hematopoietic system.



We believe that PT-100 has a large market opportunity because of its current portfolio of potential applications, including:



| |  |  | Cancers: PT-100 could be used in combination with chemotherapeutic agents, monoclonal antibodies, and/or vaccines to treat both solid tumors and hematologic malignancies;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Hematopoietic Disorders: PT-100 could be used to treat both neutropenia and anemia; and
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | Infectious Diseases: PT-100 could be used as an adjuvant to enhance the efficacy of certain vaccines.
| | - |  | -----------------------------------------------------------------------------------------------------



The strategy of our clinical development program is to develop the full range of commercial applications of PT-100 and to
prioritize its fastest-to-market applications. We have initiated a Phase 2 human clinical trial of PT-100 in combination with Taxotere®for the treatment of non-small cell lung cancer (NSCLC). In addition, we plan to initiate in the first half of 2004 Phase 2 clinical studies of PT-100 in combination with cisplatin to treat metastatic
melanoma, PT-100 in combination with Rituxan®to treat chronic lymphocytic leukemia (CLL),
and PT-100 as a single agent to treat metastatic melanoma. We are currently conducting a Phase 1 clinical study to test the safety and efficacy of PT-100 in combination with Rituxan®in patients with hematologic malignancies, such as non-Hodgkins lymphoma, and are also clinically developing PT-100 as a
potential therapy for the treatment of hematopoietic disorders. In addition, we from time-to-time evaluate new technology opportunities to broaden our portfolio of potential products, including in-licensing opportunities, collaboration arrangements
as well as more expansive corporate relationships, including mergers and acquisitions.



Common Mechanism of Action



PT-100s current portfolio of potential applications share a common mechanism of action. See Figure 1 below. PT-100 interacts with a target enzyme that we currently believe is Fibroblast Activation Protein (FAP) located primarily in
the bone marrow, the spleen, the lymph nodes and the stroma surrounding certain solid tumors. We have demonstrated that PT-100 stimulates the production of soluble proteins known as cytokines, growth factors and chemokines, which, we believe, cause
enhanced immune system effector cell expansion and chemoattraction (the migration of immune system effector cells to a specific site). In the case of tumors, this cell expansion and chemoattraction can facilitate cytotoxicity, or tumor cell death.



4



---

##### Table of Contents

Figure 1



LOGO



Cancer



We have demonstrated that PT-100 stimulates the production of a variety of
cytokines and chemokines (for example, G-CSF, IL-1ß, IL-6, IL-8, IP-10 and Mig) that promote innate immunity by causing an increase in the production and/or activity of immune system effector cells such as neutrophils, macrophages and natural
killer cells. We believe that the cytokine and chemokine response to PT-100 also enhances the development of acquired immunity by increasing the proliferation and activity of antigen-specific cytolytic T-lymphocytes and memory T cells. In addition,
the chemokines that are up-regulated by PT-100 can cause the effector cells of both innate and acquired immunity to migrate into a tumor, thereby facilitating an immune attack that can eventually lead to tumor death. See Figure 2 below.



5



---

##### Table of Contents

Figure 2



LOGO



Because the anti-tumor activity of
PT-100 is mediated by stimulating the immune system to mount an attack against the tumor, PT-100 is different from conventional chemotherapeutic agents that kill tumors directly. We believe that PT-100 could be incorporated into many existing
chemotherapy regimens that are used to treat solid tumors. Used in combination with chemotherapy, PT-100 may be able to stimulate an independent mechanism of attack on the tumor, thereby resulting in a more effective treatment than that provided by
chemotherapy alone.



In addition, we believe that PT-100 can
enhance the therapeutic effects of monoclonal antibodies (MAbs) against a tumor through the mechanism known as antibody-dependent cell-mediated cytotoxicity. We believe that by causing an increase in both the innate and acquired immune effector
cells and by facilitating, through enhanced chemokine activity, the migration of effector cells to the tumor sites, PT-100 can improve the efficacy of a number of different monoclonal antibodies. Such antibodies include Rituxan® in certain hematological malignancies and
Herceptin® in certain breast cancer solid tumors.
See Figure 3 below.



6



---

##### Table of Contents

Figure 3



LOGO



Hematopoietic Disorders



Hematopoietic disorders are medical conditions
characterized by an abnormally high or low level of mature blood cells. The different types of mature blood cells include neutrophils, red blood cells, T and B lymphocytes (types of white blood cells) and platelets, each of which plays an important
role in the body. For example, neutrophils are the bodys first defense against infection. A person with an abnormally low level of neutrophils (a condition known as neutropenia) is at an increased risk of developing an infection.



Various diseases and disease treatments can suppress the bodys
production of blood cells, causing hematopoietic disorders. For example, chemotherapy targets cell types that grow rapidly, such as tumor cells, and destroys them. However, an unwanted side effect of chemotherapy is the loss of neutrophils, red
blood cells and other blood cell types. This occurs because the levels of blood cells, particularly those of neutrophils and red blood cells, are maintained by rapid cell growth, and as a result, their hematopoietic progenitor cells are especially
sensitive to chemotherapy. Cancer patients receiving chemotherapy are, therefore, vulnerable to neutropenia, anemia and other hematopoietic disorders.



We believe that PT-100 stimulates the production of a variety of cytokines and growth factors that promote the growth of primitive hematopoietic
progenitor cells and more mature progenitor cells that are committed to forming red and white blood cells. Furthermore, by expanding both the red and white cell progenitors, and by promoting the differentiation of neutrophils, we believe that PT-100
could aid in the regeneration of blood cells that are lost as a result of chemotherapy. See Figure 4 below.



7



---

##### Table of Contents

Figure 4



LOGO



Infectious Diseases



Effective vaccination against infectious agents with
protein or peptide antigens requires the co-administration of an adjuvant, the role of which is to enhance the bodys specific immune response. We believe that the biological activity of PT-100 gives it these adjuvant properties. The cytokines
and chemokines that are produced in response to PT-100 administration can, potentially, enhance both antigen-presentation to naïve T cells and the co-stimulation of antigen specific T cells. We believe that immunity to infectious agents may be
significantly enhanced by the incorporation of PT-100 into vaccination regimens.



Proof of Principle



Cancer



We have shown in a variety of well-accepted mouse tumor
models that PT-100 given orally can inhibit the growth of certain established tumors. In addition, when PT-100 is administered shortly after certain strains of mice have been exposed to a tumor, tumor rejection rates can exceed 50%. We have also
shown that mice which rejected a tumor after early treatment with PT-100 displayed specific immunity when rechallenged by that tumor.



We have also demonstrated in preclinical models that PT-100, when used in combination with any one of several chemotherapeutic agents (Taxol®, cisplatin, 5-fluorouracil and gemcitabine), produced
slower growth in certain established tumors than either PT-100 or the chemotherapeutic agent used by itself, and produced a higher frequency of tumor rejection than the chemotherapeutic agent used by itself. We have also shown in preclinical models
that PT-100, when used in combination with either of the monoclonal antibodies Rituxan® or Herceptin®, resulted in slower tumor growth than either PT-100 or the monoclonal antibody used by itself.



Hematopoietic Disorders



In well-accepted mouse models of neutropenia, we have demonstrated that PT-100 significantly accelerated neutrophil recovery in mice following treatment
with chemotherapy. In addition, the effect on the rate of neutrophil regeneration was achieved at microgram doses of PT-100 after only a few days of administration. This supports other observations we have made, namely, that PT-100 acts to stimulate
hematopoietic cell growth and differentiation in vivo in mice and in vitro in cultures of primitive hematopoietic progenitor cells.



8



---

##### Table of Contents

We have also tested PT-100 in an animal model of acute hemolytic anemia in which mature red blood cells
were destroyed by a chemical treatment. Results of these experiments demonstrated that mice pretreated with PT-100 developed less prolonged anemia due to significantly faster recovery of mature red blood cells than in the control animals. In
addition, committed progenitors of red blood cells were substantially increased in PT-100-treated mice. We have also performed further tests of PT-100 in mice treated with a chemotherapeutic agent that caused anemia by the destruction of
hematopoietic progenitor cells. When we started PT-100 treatment immediately after chemotherapy had been administered, we observed accelerated recovery of committed red blood cell progenitors together with a reduction in the overall severity of
anemia.



Infectious Diseases



We have shown that oral administration of PT-100 in combination with the
injection of antigenic peptides can substantially stimulate the induction of specific T-cell immunity when compared to the antigenic peptides administered alone. The peptide immunizations we have investigated include well-accepted mouse models for
viral immunity, and the type of T-cell response that PT-100 stimulates is known to protect against infection. The adjuvant activities of PT-100 observed to date include: (1) the induction of significant and durable immunity to peptide antigens that
when given alone barely elicit detectable responses, and (2) the establishment of immunological memory.



Clinical Development



Phase 2 Oncology Studies



We have initiated a
Phase 2 human clinical trial of PT-100 in combination with Taxotere® for the treatment of non-small cell lung cancer. We also plan to initiate in the first half of 2004 Phase 2 clinical studies of PT-100 in combination with cisplatin to treat metastatic melanoma, PT-100 in combination
with Rituxan® to treat chronic lymphocytic
leukemia, and PT-100 as a single agent in metastatic melanoma.



Phase 1 Monoclonal Antibody Combination Study



We are currently conducting a Phase 1 human clinical study to test the safety and efficacy of PT-100 in combination with Rituxan® in patients with hematologic malignancies, such as non-Hodgkins lymphoma. The study was initiated in June 2003 and has a primary endpoint of
maximum tolerated dose and secondary endpoint of tumor response. We currently intend to complete this study in 2004.



Phase 1 Chemotherapy-Induced Neutropenia Study



We have also completed a Phase 1 chemotherapy-induced neutropenia study in which PT-100 was administered up to and including a 1200 microgram daily dose
given over a seven-day period. The study was designed to observe the safety of PT-100 in cancer patients receiving chemotherapy and to measure blood levels of neutrophils and important biological mediators of hematopoiesis, such as G-CSF, IL-6 and
IL-8. Subjects received two 21-day cycles of chemotherapy. Each subjects duration of severe neutropenia (a condition which increases a subjects risk of severe infection) in the first cycle of chemotherapy, where patients did not receive
PT-100, was compared to the duration of severe neutropenia in the second cycle, when PT-100 was administered.



The greatest biological activity was observed in patients receiving a daily dose of 800 micrograms of PT-100 administered on the second through the eighth
day following the administration of chemotherapy. In the 800 microgram cohort, we observed a median improvement of two days in the duration of severe neutropenia and a 60% median reduction in the duration and severity of neutropenia in seven
patients. See Figure 5 below. We also observed an increased level of cytokines and chemokines.



9



---

##### Table of Contents

Figure 5



LOGO



We intend to continue to study the
hematopoietic effects of PT-100 in the Phase 2 study combining PT-100 with Taxotere® in NSCLC. Because of the increased cytokine and chemokine activity we observed in our Phase 1 chemotherapy-induced neutropenia study, we believe PT-100 could be used as both an antitumor agent and to treat
neutropenia and anemia resulting from chemotherapy.



Phase 1 Safety
Studies



We have completed single and multiple dose
tolerance studies of PT-100 in 90 healthy volunteers.



To date,
we have not submitted PT-100 or any other product to the FDA for marketing approval. Due to risks and uncertainties inherent in clinical testing and the regulatory process, we are not able to estimate at this time when PT-100 may be submitted to the
FDA for marketing approval or be commercially available for any application, if at all.



Competitive Advantages



If we are able
to obtain FDA approval to market PT-100 for the treatment of cancer and/or hematopoietic disorders in cancer patients undergoing chemotherapy, we believe that PT-100 may have clinical and competitive advantages over currently available products.



| |  |  | PT-100 has the potential to inhibit the growth of malignant tumors and reconstitute the hematopoietic system, positioning PT-100 uniquely in the cancer market place as a
first-in-class targeted cancer treatment.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | PT-100 has the potential to be used in both solid tumors and hematologic malignancies and in combination with a range of chemotherapies, monoclonal antibodies and various forms of
immunotherapy.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



10



---

##### Table of Contents

| |  |  | If it demonstrates efficacy in such treatments, PT-100 could be administered orally in tablet form as opposed to by injection or other means of drug administration that are
generally used for currently available products for the treatment of cancer or hematopoietic disorders.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | As a chemically-synthesized small molecule, PT-100 is easier and less expensive to manufacture than the large, complex proteins made in biological systems which are currently the
products available for the treatment of neutropenia and anemia.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Intellectual Property



Protection of
our compounds and technology owned or licensed by us is essential to our business. Our policy is to protect our technology by, among other things, filing or causing to be filed on our behalf, patent applications for technology relating to the
development of our business.



In May 1997, Point
Massachusetts entered into a license agreement with the Tufts University School of Medicine (Tufts). Under the Tufts license agreement, we have been granted exclusive, worldwide rights to the boroproline family of small molecule
compounds, including PT-100. The boroproline family includes all compounds of the structure X-Boro-Pro where X is any amino acid, Boro is boronic acid and Pro is the amino acid proline. In return,
Point Massachusetts paid Tufts a non-refundable license fee and issued to Tufts and its designees a total of 377,294 shares of our common stock. In addition, we are required to pay Tufts a minimum annual payment of $20,000; a total of $300,000 in
potential clinical-based milestone payments; royalties on net sales of products covered by the license; and a percentage of milestone payments received by us from any sublicensor of the Tufts patents or technology. To date, the Company has paid a
total of $712,500 in licensing and milestone payments to Tufts. We also are required to pay for patent prosecution and maintenance. We have the right, but not the obligation, to pursue infringers at our own expense. If we decided to abandon any
patent or patent application, then Tufts has the right to assume our related obligations, and that patent or patent application would be withdrawn from the license agreement. The Tufts license agreement remains in effect until the later of the date
of the last-to-expire patents, or 15 years from the date of initial commercial sale of a licensed product. Tufts also has the right to terminate the license if no licensed product is sold in the United States by May 2009. See Risk
FactorsIf Tufts University School of Medicine terminates our license, we could experience delays or be unable to complete the development and commercialization of our potential products.



The license from Tufts includes seven issued U.S. patents, five pending
U.S. patent applications and, except for US Patent 4935493 which expires in 2007, corresponding foreign patents or patent applications in major commercial markets, including North America, Europe, and Japan. Among these are composition of matter
patents or patent applications covering our PT-100 stereoisomer which will expire in 2011 (without giving effect to any possible extensions based on regulatory review periods which could increase the U.S. patent terms).



Additionally, we own four issued U.S. patents, nine pending U.S. patent
applications and corresponding foreign patents or patent applications in the major commercial markets, including North America, Europe and Japan. Among these are patents or patent applications relating to treatment of cancer using combinations of
PT-100 with other anti-tumor agents, treatment of hematopoietic disorders, and treatment of infectious diseases in combination with antigens, all expiring in 2018 or after.



Government Regulation



Regulation by governmental authorities in the United States and other countries is a significant factor in the development, manufacture and marketing of
pharmaceuticals and in our ongoing research and development activities. All of our products will require regulatory approval by governmental agencies prior to commercialization. In particular, pharmaceutical drugs are subject to rigorous preclinical
testing and clinical



11



---

##### Table of Contents

trials and other pre-marketing approval requirements by the FDA and regulatory authorities in other countries. In the United States, various federal, and in
some cases state, statutes and regulations also govern or impact upon the manufacturing, safety, labeling, storage, record-keeping and marketing of pharmaceutical products. The lengthy process of seeking required approvals and the continuing need
for compliance with applicable statutes and regulations require the expenditure of substantial resources. Regulatory approval, when and if obtained for any of our products, may be limited in scope, which may significantly limit the indicated uses
for which our products may be marketed. Further, approved drugs and manufacturers are subject to ongoing review and discovery of previously unknown problems that may result in restrictions on their manufacture, sale or use or in their withdrawal
from the market.



The following paragraphs provide a general
overview of the approval process for a new drug.



Investigational new drug application.    If a company wants to test a new drug in human patients, an IND must be prepared and filed with the FDA to request FDA authorization to begin human testing of the drug. The
IND becomes effective if not put on clinical hold by the FDA within 30 days. In addition, an Institutional Review Board, comprised in part of physicians at the hospital or clinic where the proposed studies will be conducted, must review and approve
the study protocol and monitor the study on an ongoing basis. The FDA may, at any time during the 30-day period or at any time thereafter, impose a clinical hold on proposed or ongoing clinical trials. If the FDA imposes a clinical hold, clinical
trials cannot commence or recommence without FDA authorization and then only under terms authorized by the FDA. In some instances, the IND application process can result in substantial delay and expense.



Clinical trials.    Clinical trials typically are
conducted in three sequential phases, Phases 1, 2 and 3. These phases may be compressed, may overlap or may be omitted in some circumstances.



Phase 1 clinical trials.    After an IND becomes effective, Phase 1 human clinical trials can begin. These studies
evaluate a drugs safety profile and the range of safe dosages that can be administered to the patient, including the maximum tolerated dose that can be given to a patient with the target disease. Phase 1 studies also determine how a drug is
absorbed, distributed, metabolized and excreted by the body and duration of its action.



Phase 2 clinical trials.    Phase 2 clinical trials of drugs typically are designed to evaluate the potential effectiveness of the drug on patients with specific types and stages of
disease or medical condition and to further ascertain the safety of the drug at the dosage given in a larger patient population.



Phase 3 clinical trials.    In Phase 3 clinical trials, the drug is usually tested in a controlled randomized trial
comparing the investigational new drug to an approved form of therapy in an expanded and well defined patient population and at multiple clinical sites. The goal of these studies is to obtain definitive statistical evidence of safety and efficacy of
the investigational new drug regimen as compared to an approved standard treatment in defined patient populations with a given disease and stage of illness.



New drug application.    After completion of clinical trials, if there is substantial evidence that the drug is safe and
effective, a New Drug Application, or NDA, is prepared and submitted for the FDA to review. The NDA must contain all of the essential information on the drug gathered to that date, including data from clinical trials, and the content and format of
an NDA must comply with all FDA regulations. Accordingly, the preparation and filing of an NDA is a major undertaking for a company.



The FDA reviews all NDAs submitted before it accepts them for filing and may request additional information from the sponsor rather than accepting an NDA
for filing. In such an event, the NDA must be submitted with the additional information and, again, is subject to review before filing. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA. The review process is
often significantly extended by the FDA through requests for additional information and clarification. The FDA may refer the application to an appropriate advisory committee, typically a panel of clinicians, for review, evaluation and a
recommendation as to whether the application should be approved. The FDA is not bound by the



12



---

##### Table of Contents

recommendation, but gives great weight to it. If the FDA evaluations of both the NDA and the manufacturing facilities are favorable, the FDA may issue either
an approval letter or an approvable letter, which usually contains a number of conditions that must be satisfied in order to secure final approval. If the FDAs evaluation of the NDA submission or manufacturing facilities is not favorable, the
FDA may refuse to approve the NDA or issue a not approvable letter.



Other regulatory requirements.    Any products we manufacture or distribute under FDA approvals would be subject to pervasive and continuing regulation by the FDA, including record-keeping requirements and
reporting of adverse experiences with the products. Drug manufacturers and their subcontractors are required to register with the FDA and, where appropriate, state agencies, and are subject to periodic unannounced inspections by the FDA and state
agencies for compliance with good manufacturing practice regulations, which impose procedural and documentation requirements upon us and any third party manufacturers we utilize.



We are also subject to numerous other federal, state, local and foreign laws relating to such matters as safe working
conditions, manufacturing practices, environmental protection, fire hazard control and disposal of hazardous or potentially hazardous substances. We may incur significant costs to comply with such laws and regulations now or in the future. In
addition, we cannot predict what adverse governmental regulations may arise from future United States or foreign governmental action.



Approvals outside of the United States.    We will also be subject to a wide variety of foreign regulations governing the
development, manufacture and marketing of its products. Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries must still be obtained prior to manufacturing or marketing the
product in those countries. The approval process varies from country to country and the time needed to secure approval may be longer or shorter than that required for FDA approval. We cannot make assurances that clinical trials conducted in one
country will be accepted by other countries or that approval in one country will result in approval in any other country. We are not currently conducting any clinical trials outside of the United States.



Competition



The biotechnology and pharmaceutical industries are subject to rapid and significant technological change. Our competitors
include, among others, major pharmaceutical companies, specialized biotechnology companies, and universities and other research institutions. In the treatment of cancer, because PT-100 could be used in combination with a range of chemotherapies and
monoclonal antibodies, we believe that our principal competitors would include not only those marketing products or technologies that could be used in combination with existing chemotherapies and monoclonal antibodies but also those marketing
products or technologies competing with the underlying chemotherapies and monoclonal antibodies with which PT-100 would be combined. We could also have a number of direct competitors in the treatment of hematopoietic disorders.



The following sections describe the products with which PT-100 would likely
compete if it were to be approved for marketing as a combination therapy with Taxotere® for the treatment of non-small cell lung cancer, as a combination therapy with cisplatin for metastic melanoma, as a combination therapy with Rituxan® for the treatment of non-Hodgkins lymphoma and chronic lymphocytic leukemia, and
as a treatment for hematopoietic disorders in cancer patients undergoing chemotherapy, currently our most advanced clinical indications. Based on SEC filings and analyst reports of public companies, we believe that the annual sales of drugs that
treat lung cancer and hematologic malignancies such as non-Hodgkins lymphoma and chronic lymphocytic leukemia currently exceed $1 billion, respectively and annual sales of drugs that treat chemotherapy-induced hematopoietic disorders currently
exceed $4 billion.



Treatment of Certain Cancers



Any products or technologies that are directly or
indirectly successful in addressing the causes or incidence of non-small cell lung cancer, metastic melanoma, non-Hodgkins lymphoma or chronic lymphocytic leukemia



13



---

##### Table of Contents

could negatively impact the potential market for PT-100 if approved. In addition, other competitive small molecules and biologic therapies for NSCLC,
metastic melanoma, non-Hodgkins lymphoma and chronic lymphocytic leukemia currently in development could also negatively impact the potential market for PT-100.



In the non-small cell lung cancer market, first-line therapies for Stage IIIb/IV NSCLC patients involve a
platinum-containing regimen. The current standard of care in the United States is carboplatin/paclitaxel. Gemcitabine/cisplatin, docetaxel/cisplatin and vinorelbine/cisplatin are also FDA-approved regimens. The only drug we believe approved in the
United States for second-line treatment is docetaxel.



In the
metastatic melanoma market, we believe the only approved chemotherapy regimen for stage IV melanoma is decarbazine. IL-2 (Proleukin®) is also approved for the treatment of metastic melanoma.



In the non-Hodgkins lymphoma market, IDEC received marketing approval from the FDA and began commercial shipments in late March 2002 for
Zevalin® (ibritumomab tiuxetan), a product which
could also potentially compete with Rituxan®. In
addition, Corixa Corporation received marketing approval from the FDA in June 2003 for Bexxar® (tositumomab and iodine I 131 tositumomab), a drug which may potentially compete with Rituxan®. Both Zevalin® and Bexxar® are radiolabeled molecules while Rituxan® is not.



In the chronic lymphocytic leukemia market, ILEX Pharmaceuticals, L.P. and Berlex Laboratories have received marketing approval for Campath® (alemtuzumab), a monoclonal antibody which we believe is the only currently approved drug therapy for advanced chronic lymphocytic leukemia.



Treatment of Neutropenia



Any products or technologies that are directly or indirectly successful in
addressing the causes or incidence of low levels of neutrophils could negatively impact the potential market for PT-100 if it is approved for the treatment of neutropenia in cancer patients undergoing chemotherapy treatment. These include products
that could receive approval for indications similar to those for which we plan to seek for PT-100, development of chemotherapy treatments that are less myelosuppressive than existing treatments and the availability of anti-cancer modalities that
reduce the need for myelosuppressive chemotherapy.



Currently,
the primary product marketed for the treatment of neutropenia in cancer patients undergoing chemotherapy treatment is granulocyte-colony stimulating factor. Amgen, Inc. markets the injectible neutrophil stimulant product, Neupogen®, as an adjunct to chemotherapy in the United States,
countries of the European Union (EU), Canada, and Australia. Neupogen® is a recombinant-methionyl human granulocyte colony-stimulating factor (G-CSF). Also, Amgen, Inc. received marketing approval for Neulasta®, a polyethylene glycol molecule which extends the half-life of Neupogen® to a once per chemotherapy cycle dose administration,
in 2002. Chugai markets a G-CSF product in Japan as an adjunct to chemotherapy. Chugai and Aventis market a G-CSF product in certain EU countries as an adjunct to chemotherapy. Chugai, through its licensee, AMRAD, markets this G-CSF product in
Australia as an adjunct to chemotherapy. Under an agreement with Amgen, Chugai is precluded from selling its G-CSF product in the U.S., Canada and Mexico.



In addition, Schering AG markets a competing injectible CSF product, granulocyte macrophage colony stimulating factor (GM-CSF) in the U.S. as
an adjunct to chemotherapy treatments for acute non-lymphocytic leukemia and acute myelogenous leukemia. Novartis AG markets another GM-CSF product for use in bone marrow transplant patients and as an adjunct to chemotherapy in the EU and certain
other countries. This GM-CSF product is currently being developed for similar indications in the U.S. and Canada. Nartograstim, a modified G-CSF protein, is sold by Kyowa Hakko Kogyo Co., Ltd. in Japan.



Treatment of Anemia



If we develop and obtain FDA approval to market PT-100 for the treatment of
chemotherapy-induced anemia, any products or technologies that are directly or indirectly successful in addressing the causes or



14



---

##### Table of Contents

incidence of low levels of red blood cells caused by chemotherapy could negatively impact the potential market for PT-100 of this indication. Currently,
Johnson & Johnson markets the erythropoietin drug Procrit® for the treatment of anemia associated with chemotherapy. Amgen also markets Aranesp®, an erythropoiesis stimulating protein which requires less frequent dosing than the existing therapies. Also, Aventis, S.A. and Transkaryotic
Therapies, Inc. are currently developing a gene-activated erythropoietin drug.



Scientific Advisory Board and Certain Key Consultants



Our scientific advisors and consultants regularly interact with us to assess our scientific and medical direction, to review development progress, and to assess new technologies relevant to our development efforts.
Our scientific advisors and consultants are leading clinicians and researchers from major medical and academic centers in the United States.



The following persons serve as members of our Scientific Advisory Board:



| |  |  | Paul Allen, Ph.D., Professor of Pathology, Washington University School of Medicine. Dr. Allen received his Ph.D. in Immunology from the University of Michigan in 1981. His
postdoctoral training was performed at Harvard Medical School, and he joined the Washington University faculty in 1985. His research involves the T cell recognition of antigens, with an emphasis on autoimmune responses and tumor immunotherapy.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Richard Benjamin, MBChB, Ph.D., Chief Medical Officer of the American Red Cross, New England Region. Dr. Benjamin also serves as an Assistant Professor of Pathology at Harvard
Medical School and is a member of the Joint Program in Transfusion Medicine. He received his medical training at the University of Cape Town, South Africa, followed by doctoral studies in Immunology at Cambridge University, England. Thereafter, he
undertook post-doctoral studies on the molecular mechanisms of antigen presentation at Stanford University, before initiating Hematopathology and Transfusion Medicine training at the Brigham and Womens Hospital. His research is focused
clinically on technologies to improve the safety and efficacy of transfusion.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Herman Eisen, M.D., Professor Emeritus, Department of Biology and Center for Cancer Research, Massachusetts Institute of Technology. Dr. Eisen has been teaching and conducting
research at the MIT Department of Biology and Center for Cancer Research since 1973. Since 1977, he has held multiple special appointments with the National Academy of Sciences and the National Cancer Institute. In 1997 he was honored with a
Lifetime Service Award by the American Association of Immunologists. He received his M.D. from New York University.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Alfred Goldberg, Ph.D. Professor of Cell Biology, Harvard Medical School. Dr. Goldbergs laboratory has conducted research with respect to the mechanisms and regulation of
protein breakdown in animal and bacterial cells. He has consulted widely in the pharmaceutical and biotechnology industries and has served on the scientific advisory boards of Biogen, Tanox, and Proscript, as well as on the editorial board of
several major journals of biochemistry and physiology. Among his honors is the 1998 Novartis-Dew Award for biomedical research. Dr. Goldberg received his Ph.D. from Harvard University.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Robert T. Schooley, M.D. Professor of Medicine, Head of the Division of Infectious Diseases for the Health Sciences Center, University of Colorado. Dr. Schooley received his M.D. in
1974 from The Johns Hopkins University School of Medicine in Baltimore, Maryland. He has subsequently held several clinical and academic positions at the National Institutes of Health and at the Harvard Medical School, and his research concentrates
on immunology and infectious diseases. Dr. Schooley joined the faculty of the University of Colorado Health Sciences Center in 1990.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Barbara Wallner, Ph.D. Former Senior Vice President, Research and Development, and Chief Scientific Officer at Point Massachusetts. Dr. Wallner has also held senior positions at
each of ImmuLogic Pharmaceutical Corporation, Biogen, Inc and BioTransplant Inc. Dr. Wallner currently serves as a consultant to us.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



15



---

##### Table of Contents

The following persons are our key consultants:



| |  |  | George Demetri, M.D. Director, Center for Sarcoma and Bone Oncology, Dana Farber Cancer Institute, and Associate Professor of Medicine, Harvard Medical School.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Richard Flavell, M.D. Chairman, Section of Immunobiology, Howard Hughes Medical Institute, Yale University.
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | Bruce Walker, M.D. Director of AIDS Research Center, Massachusetts General Hospital, and Professor of Medicine, Harvard Medical School.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



Former Business of the Company



We are a successor of a merger between Point Therapeutics, Inc., a privately
held Massachusetts corporation (Point Massachusetts), and HMSR Inc., a publicly-traded Delaware corporation (HMSR). Point Massachusetts was incorporated in September 1996 as a biopharmaceutical company to develop small
molecule drugs. HMSR was incorporated in December 1993 and from 1994 to May 2001 operated under the name HemaSure Inc.



In April 2000, HMSR was notified that the American Red Cross, HMSRs largest customer, was suspending use of HMSRs r/LS System pending the
outcome of an investigation of a small number of non-critical adverse reactions in patients who had received a transfusion of blood filtered with the r/LS System. In September 2000, HMSR was notified that the American Red Cross terminated its supply
contract for the r/LS System based on the extended period of time taken to prove product improvements resolved these reactions. In August 2001, HMSR and the American Red Cross signed a termination and release agreement in connection with the supply
contract between the two parties. The agreement provided for HMSR to pay the American Red Cross $600,000 and the release of any and all claims that either party may have against the other, with certain exceptions.



In March 2001, HMSR signed a termination and release agreement with Gambro
BCT (HMSRs exclusive distributor of its r/LS System worldwide, except for sales to the American Red Cross), effective November 2000, which ended the distribution and development agreement. In consideration for HMSRs inventory (net book
value at December 31, 2000 of $332,000) of products bearing Gambros company name, and by way of complete resolution of all issues outstanding between HMSR and Gambro, Gambro agreed to return 101,169 shares of common stock with a fair market
value at closing of $332,000.



The termination of the purchase
contract by the American Red Cross and the distribution and development agreement with Gambro had an adverse impact on HMSRs ability to generate revenues from the sale of HMSRs r/LS System and on HMSRs supply contracts with
manufacturers of key components to the r/LS System. On May 29, 2001, HMSR sold substantially all of its non-cash assets to Whatman BioScience Inc., a Massachusetts corporation and a subsidiary of Whatman plc, an English corporation, pursuant to the
terms of an Asset Purchase Agreement by and among HMSR, Whatman and Whatman plc, dated as of February 3, 2001 and amended on April 2, 2001. The sale and the name change of HemaSure Inc. to HMSR Inc. were approved at the special meeting of
stockholders of HMSR held on May 21, 2001. On June 6, 2001, HMSR announced that stockholders of HMSR had voted in favor of the sale of the non-cash assets to Whatman and that it had changed its name from HemaSure Inc. to HMSR Inc.



Under the terms of the Asset Purchase Agreement, Whatman acquired
substantially all of the non-cash assets of HMSR for consideration which included a potential royalty payment in the amount of 4% on sales by Whatman or its affiliates of filtration products using HMSRs technology. The royalty payments were
subject to a maximum, aggregate amount of $12 million and were subject to certain reductions set forth in the Royalty Agreement, dated as of May 29, 2001, by and among HMSR, Whatman and Whatman plc, including any damages and certain settlement
amounts paid by Whatman related to certain patent litigation with Pall Corporation. In March 2003, Whatman sold the non-cash assets it had previously purchased from HemaSure to



16



---

##### Table of Contents

Pall Corporation. In connection with that sale, the ongoing patent litigation among Pall Corporation, Whatman and HMSR was settled, and the litigation was
dismissed, with prejudice, in the United States District Court in the Eastern District of New York and the District of Colorado. From March 15, 2002, the effective date of the merger of HMSR and Point Massachusetts through March 5, 2003, the
effective date of the sale of the Whatman assets to Pall Corporation, approximately $115,000 of net royalties was accrued and was payable to HMSR under the Royalty Agreement. We received payment in January 2004.



In connection with the Whatman transaction, HMSR retained certain
liabilities, including, without limitation, (i) any liabilities under any benefit plan of HMSR, (ii) tax liabilities incurred which relate to periods prior to the closing of the Whatman transaction, (iii) accounts payable arising prior to the
closing of the Whatman transaction, (iv) any liabilities of HMSR owed to HMSRs security holders in their capacity as security holders of HMSR, and (v) any liabilities of HMSR owed to Gambro Inc. or Sepracor, Inc. arising or resulting from
their respective contractual relationships with HMSR.



After
the sale to Whatman and before the merger with Point Massachusetts, HMSRs continuing operations consisted of general and administrative expenses to operate a shell company and to investigate various strategic business combinations.



Forward-Looking Statements



This Item and other Items in this report contain forward-looking
information as that term is defined in the Private Securities Litigation Reform act of 1995 or by the Securities and Exchange Commission (SEC) in its rules, regulations and releases. This information includes statements on the prospects for our drug
development activities and results of operations based on our current expectations, such as statements regarding certain milestones with respect to our technologies and product candidates. All statements, other than statements of historical facts,
included in this report regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words anticipates,
believes, estimates, expects, intends, may, plans, projects, will, would and similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our
forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in
this Prospectus, particularly under the heading Risk Factors, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the
potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. We do not assume any obligation to update any forward-looking statements.



Risk Factors



We operate in a rapidly changing environment that involves a number of risks, some of which are beyond our control. The following discusses these risks.



If we fail to obtain the capital necessary to
fund our operations, we will be unable to successfully develop or commercialize PT-100



As of March 31, 2004, we had a cash balance of approximately $24.5 million. We currently anticipate spending between $1.2 and $1.5 million per month to
fund our pre-clinical and clinical programs and related general and administrative activities. Our current cash balance is expected to be sufficient into the second half of 2005. Therefore, additional funding of operations will be required by the
second half of 2005. It is difficult to estimate at this time the additional funds required to finance our operations as we are currently uncertain about the therapeutic indications that we will continue to clinically develop into later stages, the
extent of the clinical



17



---

##### Table of Contents

program required to successfully develop a selected therapeutic indication, and if any of these programs will eventually be financed through a collaboration
with a better funded partner. Also, we do not know whether additional funding will be available when needed, or that, if available, we will be able to obtain funding on satisfactory terms. We have incurred approximately $27.7 million of expenses
since inception through March 31, 2004, and expect our capital outlays and operating expenditures to increase over the next several years as we expand our infrastructure and preclinical and clinical trial activities. We may raise these funds through
corporate partnerships, the sale of securities in both public and private offerings as the markets allow, and merger and acquisition activities and consolidations.



In addition to the progress of our pre-clinical and clinical effort, our future capital requirements depend on many
other factors, including: the cost and timing of regulatory approvals of PT-100, technological advances, the reevaluation of the commercial potential of PT-100 in light of developments in our industry or market, the status of competitive products,
the establishment of a sales force and the development of manufacturing capacity. Unexpected events or other factors beyond our control could also impact our capital requirements.



We may be required to relinquish rights to our technologies or PT-100, or grant licenses on terms that are not favorable
to us, in order to raise additional funds through alliance, joint venture and licensing arrangements. If adequate funds are not available, we will be required to delay, reduce the scope of or eliminate one or more of our pre-clinical and clinical
programs.



Our lead product candidate,
PT-100, is in the early stages of human clinical development, and its safety and effectiveness are still being determined.



Our lead product candidate, PT-100, is currently undergoing evaluation in early-stage clinical trials for the treatment of solid tumors and neutropenia.
To obtain regulatory approval for the commercial sale of PT-100 for its intended therapeutic applications, we must demonstrate in carefully controlled and well-designed clinical trials that PT-100 is safe and effective in humans for the proposed
therapeutic indications. In addition to animal safety studies, we have conducted Phase 1 human clinical safety studies, both in single and multiple doses, which have provided us sufficient safety information to select dose ranges for our Phase 1
human clinical dose finding studies. These Phase 1 dose finding studies have, in turn, provided us safety and effectiveness information to select doses for our Phase 2 human clinical studies which are evaluating safety and effectiveness of PT-100 in
larger cohort groups. Although with the completion of each of our human clinical studies we are learning more about the safety profile of PT-100, we cannot yet predict whether subjects in clinical trials will suffer unacceptable health consequences
related to PT-100. Our clinical trials may be suspended at any time if the Food and Drug Administration (the FDA) or we believe that the participating subjects are exposed to unacceptable health risks. In addition, we cannot yet predict
whether PT-100 will be effective treating the therapeutic applications for which the human clinical studies we are conducting have been designed or that physicians or the FDA will consider PT-100 effective for such therapeutic applications. In
addition, even if PT-100 is shown to be effective in our clinical trials, we can not predict whether the FDA will determine that the therapeutic benefits of PT-100 outweigh any perceived adverse effects of the drug. If PT-100 is not safe or
effective, or is perceived as not being safe or effective by the FDA or physicians, our business, financial condition, results of operations and prospects will be harmed.



Our lead product candidate, PT-100, is in the early stages of human clinical development, and we may not be able
to design or implement an effective clinical development plan which will result in timely FDA approval for the selected therapeutic applications.



Our lead product candidate, PT-100, is currently undergoing evaluation in early-stage clinical trials for the treatment of solid tumors and
neutropenia. Conducting clinical trials is a lengthy and highly uncertain process. The length of time to complete clinical trials varies according to the type, complexity, novelty and intended use of the product candidate. We may not have designed
our clinical trials in a way that results in their fastest completion because of unforeseen safety or effectiveness issues. Our trials may take longer to complete than we



18



---

##### Table of Contents

anticipate because of a slower than expected rate of eligible patient recruitment in the trials. If our clinical trials take longer than we expect, we may
have greater expenses than we project and may have a more difficult time raising additional capital to fund future or even existing capital requirements.



Even if we are able to conduct our clinical trials in a timely manner, other factors related to the conduct of the trials could still adversely
affect our chances of obtaining FDA approval. We may not be able to adequately follow or evaluate the subjects of the clinical trials after their treatment to establish a positive therapeutic effect. We may not be able to maintain a database of
sufficient integrity to track safety and effectiveness information of treated subjects that would withstand appropriate FDA scrutiny. We, or our chosen vendors, may fail to comply with FDA regulations for good clinical practices.



If we obtain FDA approval for one or more therapeutic indications, we may
then elect to perform further clinical studies intended to broaden the labeling indications. If such studies do not support expanding the labeling indications, our ability to promote and market such products will be limited.



If PT-100 is not a successful drug candidate, we may be unable to
obtain other potential drug candidates



In addition to
our substantial efforts developing PT-100 on a pre-clinical and early-stage clinical basis, we from time to time evaluate new technology opportunities to broaden our portfolio of potential drug candidates, including in-licensing opportunities,
collaboration arrangements as well as more expansive corporate relationships, such as mergers and acquisitions. However, we may not be able to consummate a transaction to broaden our portfolio of potential drug candidates on terms satisfactory to
us. If PT-100 is not ultimately a successful drug candidate and we cannot obtain other potential drug candidates through one or more strategic transactions, our business, financial condition and results of operations could be materially adversely
affected.



We have had a history of losses, and expect to
continue to incur losses and may not achieve or maintain profitability



As of March 31, 2003,we had an accumulated deficit of approximately $27.7 million. The extent of our future losses and the timing of profitability are highly uncertain, and we may never achieve profitable
operations. We have not had any products that generated any sales revenue, and we likely will not until PT-100 or any other of our products become commercially available, if ever. We expect to incur losses at least until we begin commercial sales of
our first approved product, if any. We expect that our operating expenses will increase and accelerate as our preclinical, clinical and support operations expand, even if we succeed in developing one or more commercial products. Our ability to
achieve product revenue and profitability is dependent on our capability, alone or with partners, to successfully complete the development of PT-100, conduct clinical trials, obtain necessary regulatory approvals, and manufacture, distribute, market
and sell PT-100. We cannot provide assurance that we will generate product revenues or achieve profitability.



If Tufts University School of Medicine terminates our license, we could experience delays or be unable to complete the development and
commercialization of our potential products



We
license key technology including the rights to PT-100, our lead product, from Tufts University School of Medicine. The underlying licenses for this technology terminate on the later of the date of the last-to-expire patents, or 15 years from the
date of initial commercial sale of the licensed product. Termination of these licenses prior to or upon expiration of the term could force us to delay or discontinue our development and commercialization programs. Pursuant to the terms of the
license, Tufts University School of Medicine has the right to terminate the license prior to expiration of the term upon a material breach of the license by us, our ceasing to do business or becoming insolvent, or our failure to sell a licensed
product in the U.S. market by May 2009. We have no assurance that we would be able to license substitute technology in the future. Our inability to do so could impair our ability to conduct our business because we may lack the technology, the
necessary rights to such technology, or the finances required, in each case, to develop and commercialize our potential products.



19



---

##### Table of Contents

If we fail to obtain regulatory approval for PT-100 in a timely manner, our operating results and
business may be adversely affected



We must obtain
regulatory approval before marketing or selling PT-100 in any major world pharmaceutical market for any therapeutic application for PT-100. Due to risks and uncertainties inherent in clinical testing and the regulatory process, we are not able to
estimate when PT-100 may be commercially available for any application, if at all.



In the U.S., we must obtain FDA approval for PT-100 and each indication that we intend to commercialize. The FDA approval process is typically lengthy and expensive, and such approval is never certain and entails a
high degree of risk. Products marketed, manufactured or distributed abroad are also subject to foreign government regulation. PT-100 has not received regulatory approval to be commercially marketed and sold for any therapeutic indication. If we fail
to obtain regulatory approval, we will be unable to market and sell PT-100. We cannot predict with certainty if or when we might submit PT-100 for regulatory approval for any therapeutic indication. Once we submit PT-100 for review, we cannot assure
you that the FDA or other regulatory agencies will grant approvals on a timely basis or at all. If regulatory approval for any therapeutic application for PT-100 is delayed, our business, financial condition or results of operations would be
materially adversely affected.



Because we rely on
third parties to conduct human clinical studies, we may encounter delays in product development and commercialization.



We have relatively few employees and do not have sufficient internal resources or experience to conduct human clinical trials completely on our own. We
must therefore contract with third parties to perform the clinical trials needed for us to submit PT-100 to the FDA for marketing approval.



Although we have increased our internal clinical development capability substantially over the past 18 months, including our ability to supervise, manage
and, as necessary replace, outside vendors, we still outsource a substantial amount of the clinical trial development process. Thus, we may lose control over the cost of and time required to conduct these studies. In addition, these third parties
might not conduct our clinical trials in accordance with regulatory requirements. Currently, we rely on a small number of contractors for conducting clinical trials of PT-100, although we believe we can replace these contractors, as necessary, on
terms acceptable to us. The failure of any contractor to carry out its contractual duties could delay or increase the cost of the successful development and commercialization of PT-100.



We may fail to adequately protect or enforce our intellectual property
rights, and our products and processes may infringe the intellectual property rights of others



Protection of our compounds and technology owned or licensed by us is essential to our business. Our policy is to protect our technology by, among other
things, filing or causing to be filed on our behalf patent applications for technology relating to the development of our business. We own or have licensed eleven issued U.S. patents and 14 pending U.S. patent applications. These patents and patent
applications relate to our anti-tumor, hematopoiesis and vaccine adjuvant technologies. If regulatory extensions are not taken into account, one U.S. patent expires in 2007; two U.S. patents and one application expire in 2011; and the remaining
patents and applications expire in 2016 and beyond. We also own or have licensed foreign patents and patent applications corresponding to most of the U.S. patents and patent applications. It is possible that no patents will be issued on our pending
patent applications, and it is possible that our patent claims, now or in the future issued, will not be sufficient to protect our products and technology, will not be sufficient to provide protection against competitive products, or otherwise will
not be commercially valuable.



Our commercial success will
also depend in part on our ability to commercialize PT-100 without infringing on patents or other proprietary rights of others. Any patents issued to or licensed by us could be challenged, invalidated, infringed, circumvented or held unenforceable.
PT-100 may infringe current or future patents or



20



---

##### Table of Contents

other proprietary rights of others. To date, we have not received any communications from third parties nor are we aware of any claims by third parties that
PT-100 or any of our other activities infringe upon the patent or other proprietary rights of any third party. However, we cannot assure you that other companies or individuals have not or will not independently develop substantially equivalent
proprietary rights or that other parties have not or will not be issued patents that may prevent the sale of our products or require licensing and the payment of significant fees or royalties in order for us to be able to carry on our business. We
have not notified another party that they are infringing any of our proprietary rights.



Litigation or other legal proceedings could result in substantial costs to us and may be necessary to enforce any of our patents or other proprietary rights or to determine the scope and validity or enforceability of
other parties proprietary rights. The defense and enforcement of patent and intellectual property claims are both costly and time consuming, even if the legal outcome is favorable to us. Any adverse legal outcome could subject us to
significant liabilities to third parties, require disputed rights to be licensed from third parties, or require us to cease manufacturing or selling our future products.



Our employees, consultants and advisors are required to enter into written confidentiality agreements that prohibit the
disclosure or use of confidential information. We also have entered into written confidentiality agreements that are intended to protect our confidential information delivered to third parties for research and other purposes. However, these
agreements could be breached, and we may not have adequate remedies for any breach, or our trade secrets and proprietary information could otherwise become known or be independently discovered by others. We have not notified any person of a
violation of a confidentiality agreement that has materially harmed our business.



If our competitors reach the market sooner or develop products and technologies that are more effective or have reduced side effects, our commercial opportunity will be reduced or eliminated



The pharmaceutical and biotechnology industries are intensely
competitive. There are existing products on the market that are used for the treatment of patients with the same indications that we have targeted including, among others, Chirons Proleukin®, Bayers DTIC-Dome®, Aventis Taxotere®, Bristol-Myers Squibbs Paraplatin® and Platinol AQ®, AstraZenecas Iressa®, Amgen Inc.s Neupogen® and Neulasta® , Corixas Bexxar® and IDECs Zevalin®. Because PT-100 is still in the early stages of clinical development, we do not have the sales, marketing, manufacturing or distribution capabilities necessary to compete with well-established companies. If PT-100 is
approved by the FDA for one or more therapeutic applications, we may enter into collaboration agreements with one or more established companies in order to compete in the marketplace. There can be no assurances that we would be able to successfully
enter into any such collaborations with third parties or that any such collaborations would be entered into on terms satisfactory to us.



There are also many public and private pharmaceutical companies, biotechnology companies, public and private universities, governmental agencies and
research organizations actively engaged in drug discovery and research and development of products for the treatment of patients with the same indications that we have targeted. Many of these organizations have financial, technical, regulatory,
patenting, manufacturing and marketing resources that are far greater than ours. If a competitor were to successfully develop or acquire rights to a similar or more effective treatment of patients with the same indications targeted by us or one that
has reduced side effects or offers significantly lower costs of treatment, or were to successfully enter the market in advance of us with a similar or superior therapy, our business, financial condition or results of operations could be materially
adversely affected.



We cannot provide assurances that research
and development by others will not render our technology or PT-100 obsolete or non-competitive or result in treatments superior to any therapy or drug developed by us, or that any drug or therapy developed by us will be preferred to any existing or
newly developed technologies.



21



---

##### Table of Contents

Our manufacturing strategy presents a number of risks



We do not currently have our own manufacturing facilities. We expect in the
future to depend on outside contractors for the manufacture of PT-100. Completion of our clinical trials and the commercialization of PT-100 will require access to, or development of, manufacturing capabilities. We have entered into short-term
arrangements with third parties with respect to the manufacture of the quantities necessary for pre-clinical and early-stage clinical development. As we approach later-stage clinical development and commercialization of a product candidate, however,
our intention is to enter into longer-term arrangements with multiple manufacturing sources. We may not be able to enter into additional third-party manufacturing arrangements on acceptable terms, if at all. An outside contractor may give greater
priority to other products or for other reasons may fail to manufacture or deliver the required supply of PT-100 in a cost-effective or timely manner. Our current and future manufacturers are and will be subject to ongoing periodic unannounced
inspection by the FDA and corresponding state and foreign agencies for compliance with strictly enforced good manufacturing practice regulations and similar state and foreign standards, and we do not have control over our third-party
manufacturers compliance with these regulations and standards.



Any of these factors could in the future delay clinical trials or commercialization of PT-100, interfere with sales, entail higher costs or result in us being unable to effectively sell our products. To the extent
that we are reliant on a sole source of supply of a drug, any interruption in that supply could delay us in effectively developing, testing and commercializing the drug.



Our ability to generate revenues will be diminished if PT-100 is not accepted in the marketplace, if we fail to obtain
acceptable prices or if adequate reimbursement is not available for PT-100 from third-party payors



There are competing products to PT-100 already in the market for the treatment of each therapeutic indication we are currently pursuing in clinical
trials. Even if approved for sale and distribution for one or more therapeutic indications, PT-100 might not achieve market acceptance for such indications or remain on the market. PT-100 may be rejected by the marketplace due to many factors,
including cost and the perceived risks versus the benefits of PT-100. Physicians, patients, payors or the medical community in general may be unwilling to accept, prescribe, utilize, recommend or reimburse for PT-100 for such indications.



Our ability to commercialize our drugs may be limited due to
the continuing efforts of government and third-party payors to contain or reduce the costs of health care through various means. For example, in many markets outside the U.S., the pricing and profitability of prescription pharmaceuticals are subject
to government control. In the U.S., we expect that there will continue to be federal and state proposals to implement additional government control. For example, the recently enacted Medicare Prescription Drug, Improvement, and Modernization Act of
2003 provides a new Medicare prescription drug benefit beginning in 2006 and mandates other reforms. Although we cannot predict the full effects on our business of the implementation of this new legislation, it is possible that the new benefit will
result in decreased reimbursement for prescription drugs which may further exacerbate industry-wide pressure to reduce the prices charged for prescription drugs. This could harm our ability to market PT-100 and generate revenues.



Also, increasing emphasis on managed care in the U.S. and the possibility of
government regulation of prescription drug prices will likely continue to put additional pressure on the pricing of pharmaceutical products. Cost control initiatives could decrease the price that we might otherwise achieve for PT-100 in the future.
Further, cost control initiatives could adversely affect our ability to commercialize PT-100 and our ability to realize profits and revenues from this commercialization.



Our ability to commercialize pharmaceutical products, alone or with distributors or others, may depend in part on the extent
to which reimbursement for the products will be available from:



| |  |  | government and health administration authorities;
| | - |  | -------------------------------------------------



| |  |  | private health insurers; and
| | - |  | ----------------------------



| |  |  | other third-party payors.
| | - |  | -------------------------



22



---

##### Table of Contents

Significant uncertainty exists as to the reimbursement status of newly approved healthcare products.
Third-party payors, including Medicare, are challenging the prices charged for medical products and services. Government and other third-party payors increasingly are attempting to contain healthcare costs by limiting both coverage and the level of
reimbursement for new drugs and by refusing, in some cases, to provide coverage for uses of approved products for disease indications for which the FDA has not granted labeling approval. Third-party insurance coverage may not be available to
patients for any products we discover and develop, alone or with our strategic alliance partners. If government and other third-party payors do not provide adequate coverage and reimbursement levels for PT-100, the market acceptance of these
products may be reduced.



We use hazardous chemicals and
radioactive and biological materials in our business; any disputes relating to improper use, handling, storage or disposal of these materials could be time consuming and costly



Our pre-clinical and clinical operations involve the use of certain hazardous materials, including certain chemicals and
radioactive and biological materials. The hazardous materials used most frequently by us in our operations include sodium chromate containing chromium-51 (51 Cr), nucleotides containing phosphorus-32 (32 P) and phenol. Our operations also produce
hazardous waste products. We are subject to the risk of accidental contamination or discharge or any resultant injury from these materials, and we do not maintain liability insurance for contamination or injury resulting from the use of the
materials. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of these materials. We could be subject to damages, fines and penalties in the event of an improper or unauthorized release of, or
exposure of individuals to, these hazardous materials, and our liability could exceed our total assets. Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may impair our business. To
date, our compliance costs with respect to environmental laws and regulations have been minimal.



We may be sued for product or operational liability



We may be held liable if any of our products or operations cause injury or death or are found otherwise unsuitable
during product testing, manufacturing, marketing or sale. We currently maintain a $2 million general liability policy and a $5 million annual aggregate product liability insurance related to our clinical trials consistent with industry standards
which we believe is adequate to insure us against such potential losses. When necessary for our products, we intend to obtain additional product liability insurance. Insurance coverage may be prohibitively expensive, may not fully cover our
potential liabilities or may not be available in the future. Inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the commercialization of
our products. If we are sued for any injury caused by our products, the litigation could consume substantial time and attention of our management and our liability could exceed our total assets.



If we lose key personnel or are unable to attract or retain additional
personnel, we may be unable to develop PT-100 or achieve commercialization objectives



We are highly dependent on Donald R. Kiepert, Jr., our Chairman, President and Chief Executive Officer, Richard N. Small, our Senior Vice President, Chief Financial Officer and Treasurer, Michael P. Duffy, our Senior
Vice President, General Counsel and Secretary, Barry Jones, our Senior Vice President for Research, Margaret J. Uprichard, our Senior Vice President of Clinical and Regulatory Affairs, as well as other key members of our management and scientific
staff. To date, we have not maintained key-man liability insurance to protect against the loss of any of these personnel, with the exception of Mr. Kiepert, for whom we maintain a key-man liability insurance policy. The loss of any of these
personnel may have a disruptive effect on our operations until they are replaced, and may have a material adverse effect on our product development and commercialization efforts if we are not able to attract qualified replacements.



Our success depends on our continued ability to attract, retain and motivate
highly qualified management and scientific personnel. In particular, our pre-clinical and clinical operations depend on our ability to attract and



23



---

##### Table of Contents

retain highly skilled scientists and clinical development and regulatory affairs personnel. In addition, we will need to hire additional personnel and
develop additional collaborations as we continue to expand our pre-clinical and clinical operations. To date, we have been able to attract and retain key personnel when needed. We are not aware of any key employee who plans to retire or terminate
his or her employment with us in the near future. Despite our ability in the past in attracting and retaining key personnel, we cannot provide assurances that we will be able to continue to attract, retain or motivate personnel or develop or
maintain such outside relationships in the future.



We
have contingent liabilities relating to our historical discontinued operations that could give rise to liability risks in the future



Prior to the sale of substantially all of our non-cash assets to Whatman in May of 2001, we were engaged in the business of developing and supplying blood
filtration devices. Although Whatman contractually assumed and agreed to indemnify us and hold us harmless from and against most liabilities and obligations arising out of the conduct of our blood filtration business, we retained certain known and
unknown risks that were not contractually assumed by Whatman including without limitation, (i) any of our liabilities under any benefit plan, (ii) tax liabilities incurred which relate to periods prior to the closing of the Whatman transaction,
(iii) accounts payable arising prior to the closing of the Whatman transaction, (iv) any of our liabilities which were owed to our security holders in their capacity as such, and (v) our liabilities which were owed to Gambro Inc. or Sepracor, Inc.
arising or resulting from their respective contractual relationships with us. If for any reason Whatman is not able to satisfy any of the assumed liabilities, such outcome could have a material and adverse effect on our financial condition.
Accordingly, there can be no assurances that claims arising out of our historical business and operations would not be asserted against us in the future and, if asserted, there can be no assurances that we would prevail.



If we are unable to maintain compliance with NASDAQ listing
requirements, our stock could be delisted



As of April
2, 2004, our common stock began trading on the NASDAQ SmallCap market. Previously, our common stock was traded on the OTC Bulletin Board. There can be no assurances, however, that we will be able to maintain compliance with NASDAQs present
listing standards, or that NASDAQ will not implement additional listing standards with which we are unable to comply. Failure to maintain compliance with NASDAQ listing requirements could result in the delisting of our shares from trading on the
NASDAQ system, which could have a material adverse effect on the trading price, volume and marketability of our common stock.



Our stock price could be volatile and our trading volume may fluctuate substantially



The price of our common stock has been and may in the future continue to
be extremely volatile, with the sale price fluctuating from a low of $0.51 to a high of $6.90 in the two-year period ended May 26, 2004. Factors such as the announcements of results from our clinical trials, technological innovations or new products
of our competitors, governmental regulation, health care legislation, developments in patent or other proprietary rights of us or our competitors, including litigation, fluctuations in operating results and market conditions for health care and life
sciences stocks in general could have a significant impact on the future price of our common stock. In addition, the stock market has from time to time experienced extreme price and volume fluctuations which may be unrelated to the operating
performance of particular companies. For the three-month period ended May 26, 2004, the daily trading volume for shares of our common stock ranged from 5,825 to 637,693 shares traded per day, and the average daily trading volume during
such three-month period was only 51,702 shares traded per day. Accordingly, our investors who wish to dispose of their shares of common stock on any given trading day may not be able to do so or may be able to dispose of only a portion of their
shares of common stock.



The subsequent sale of
a substantial number of shares of our common stock could cause our stock price to decline and cause our stockholders to experience substantial dilution



In total, certain entities and individuals hold existing warrants to purchase up to 4,220,058 shares of our common stock at
an average exercise price of $3.62, which includes the 1,150,000 warrants issued in the



24



---

##### Table of Contents

Placement. On a fully-diluted basis, the 4,220,058 shares of common stock represents 16.6 percent of the fully-diluted ownership of the Company. In addition,
certain entities and individuals hold existing options to purchase 3,031,989 shares of our common stock at an average exercise price of $3.37. The exercise and subsequent sale of a substantial amount of these warrants and options could adversely
affect the market price of our common stock. To the extent we raise additional capital by issuing equity securities, all stockholders may experience substantial dilution.



Available Information



Our Annual Report on Form 10-K, our quarterly reports on Form 10-Q and any current reports on Form 8-K that we may file or
furnish to the SEC pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act) as well as any amendments to any of those reports are available free of charge on or through our website as soon
as reasonably practicable after we file them with or furnish them to the SEC electronically. Our website is located at http://www.pointtherapeutics.com or http://www.pther.com.; these reports can be found under Investor Relations
 SEC Filings.



Our Board of Directors adopted a
new code of business ethics and conduct, The Point Therapeutics Corporate Code of Ethics and Conduct (the Code of Ethics), applicable to all of our executives, directors and employees, on March 16, 2004. If we make substantive amendments
to this Code of Ethics or grant any waiver, including any implicit waiver, we will disclose the nature of such amendment in a report on Form 8-K within five days of such amendment or waiver. For more information, please refer to the Code of Ethics
attached to the Preliminary Proxy Statement filed with the SEC on April 26, 2004 as Appendix A. The Code of Ethics has also been posted on the corporate governance portion of the Investor Relations section of our website at www.pther.com. The
Code of Ethics and Conduct is also available in print to any shareholder that requests a copy. Copies may be obtained by contacting Michael P. Duffy, our Senior Vice President and General Counsel at our corporate headquarters.



Employees



As of March 11, 2004, we employed nineteen persons, of which fourteen were engaged in research and development and five in
administration, finance and legal. All of our employees have signed an agreement prohibiting the disclosure of confidential information to anyone outside our company and assigns us any ideas, developments, discoveries, and inventions made. None of
our employees are covered by a collective bargaining agreement, and we have experienced no work stoppage. We consider our employee relations to be good.



Item 2.Properties



Currently, we sublease approximately 4,600 square feet of office space at 125 Summer Street, Boston, Massachusetts. The sublease term is for three years,
ending in April 2005. We recently signed an agreement to sublease an additional 2,800 square feet of office space at 125 Summer Street, Boston, Massachusetts. The sublease term is for two years, ending in December 2005. In addition, we sublease
approximately 3,000 square feet of laboratory space at 75 Kneeland Street, Boston, Massachusetts from New England Medical Center (NEMC). NEMC is affiliated with Tufts, from which we licenses certain technology, and is one of our
stockholders. We currently have no written sublease with NEMC and are a tenant-at-will. We believe that our current facilities will be adequate and suitable for our present and future needs for the foreseeable future.



Item 3.Legal Proceedings



As of March 11, 2004, we had no outstanding litigation.



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



We did not submit any matter to the vote of its security holders during the fourth quarter of 2004.



Item 4A.Executive Officers of the Registrant



Information regarding the executive officers of the Company is set forth in Part III, Item 10 of this Report.



25



---

##### Table of Contents

PART II



|Item 5. |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|------- |  | ------------------------------------------------------------------------------------------------------------



| | 1. |  | Market Information.
| | -- |  | -------------------



Since April 2, 2004, our common stock has been traded on the NASDAQ SmallCap Market under the symbol POTP. From March 18, 2002 through April
1, 2004, our common stock was included for quotation on the OTC Bulletin Board under the symbol POTP. From January 14, 1998 until March 17, 2002, our common stock had been included for quotation on the OTC Bulletin Board under the symbol
HMSR. The following table sets forth for the periods indicated the range of high and low bid information per share of the common stock as included for quotation on the OTC Bulletin Board (giving retroactive effect to the 1-for-10 reverse
split that occurred on March 15, 2002).



|               |  |      |      |     |   |     
|-------------- |  | ---- | ---- | --- | - | ----
|               |  | High |      | Low
|2003           |  |      |      |     |   |     
|First Quarter  |  | $    | 1.10 |     | $ | 0.65
|Second Quarter |  | $    | 3.10 |     | $ | 0.76
|Third Quarter  |  | $    | 4.75 |     | $ | 1.20
|Fourth Quarter |  | $    | 4.75 |     | $ | 2.85
|2002           |  |      |      |     |   |     
|First Quarter  |  | $    | 5.98 |     | $ | 2.45
|Second Quarter |  | $    | 3.25 |     | $ | 1.05
|Third Quarter  |  | $    | 1.60 |     | $ | 0.76
|Fourth Quarter |  | $    | 1.30 |     | $ | 0.51



| | 2.Holders. |  | 
| | ---------- |  | 



On March 11, 2004, our common stock was held by approximately 230 stockholders of record. On March 11, 2004, the last reported sale price of our common stock on the OTC bulletin board was $5.90 per share.



| | 3.Dividend |  | Information.
| | ---------- |  | ------------



We have never paid dividends on our common stock. We do not expect to pay cash dividends in the foreseeable future.



| | 4.Issuer |  | Purchases of Equity Securities.
| | -------- |  | -------------------------------



Not applicable.



26



---

##### Table of Contents

Item 6.Selected Financial Data



SELECTED FINANCIAL INFORMATION



The selected consolidated financial data set forth below have been derived from our consolidated financial statements. These historical results are not necessarily indicative of results to be expected for any future period. You should read
the data set forth below in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and related Notes included in this Annual Report on Form
10-K/A. Per share data presented below has been adjusted to reflect all stock issuances as if the merger which occurred on March 15, 2002 had taken place prior to all periods presented.



|                                                      |  |                         |        |   |      |   |        |      |  |   |        |   |      |   |       |  |   |        |  
|----------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - | ---- | - | ----- |  | - | ------ | -
|                                                      |  | Year Ended December 31, |       
|                                                      |  | 2003                    |        |   | 2002 |   |        | 2001 |  |   | 2000   |   | 1999 |  
|Revenues:                                             |  |                         |        |   |      |   |        |      |  |   |        |   |      |   |       |  |   |        |  
|License revenue                                       |  | $                       |        |   |      | $ |       |      |  | $ |       |   |      | $ | 4,333 |  | $ | 667    |  
|Sponsored research revenue                            |  |                         | 115    |   |      |   |       |      |  |   |       |   |      |   | 900   |  |   | 1,200  |  
|                                                      |  |                         |        |   |      |   |        |      |  |   |        |   |      |   |       |  |   |        |  
|Total revenues                                        |  |                         | 115    |   |      |   |       |      |  |   |       |   |      |   | 5,233 |  |   | 1,867  |  
|Costs and expenses:                                   |  |                         |        |   |      |   |        |      |  |   |        |   |      |   |       |  |   |        |  
|Research and development                              |  |                         | 5,646  |   |      |   | 5,160  |      |  |   | 3,422  |   |      |   | 2,296 |  |   | 2,293  |  
|General and administrative                            |  |                         | 2,271  |   |      |   | 2,501  |      |  |   | 2,010  |   |      |   | 854   |  |   | 839    |  
|                                                      |  |                         |        |   |      |   |        |      |  |   |        |   |      |   |       |  |   |        |  
|Income (loss) from operations                         |  |                         | (7,802 | ) |      |   | (7,661 | )    |  |   | (5,432 | ) |      |   | 2,083 |  |   | (1,265 | )
|Other income (expense)                                |  |                         | 75     |   |      |   | 182    |      |  |   | 225    |   |      |   | 259   |  |   | 103    |  
|                                                      |  |                         |        |   |      |   |        |      |  |   |        |   |      |   |       |  |   |        |  
|Net income (loss)                                     |  | $                       | (7,727 | ) |      | $ | (7,479 | )    |  | $ | (5,207 | ) |      | $ | 2,342 |  | $ | (1,162 | )
|                                                      |  |                         |        |   |      |   |        |      |  |   |        |   |      |   |       |  |   |        |  
|Net income (loss) per common share:                   |  |                         |        |   |      |   |        |      |  |   |        |   |      |   |       |  |   |        |  
|Basic                                                 |  | $                       | (0.73  | ) |      | $ | (0.84  | )    |  | $ | (0.74  | ) |      | $ | 0.41  |  | $ | (0.22  | )
|                                                      |  |                         |        |   |      |   |        |      |  |   |        |   |      |   |       |  |   |        |  
|Diluted                                               |  | $                       | (0.73  | ) |      | $ | (0.84  | )    |  | $ | (0.74  | ) |      | $ | 0.40  |  | $ | (0.22  | )
|                                                      |  |                         |        |   |      |   |        |      |  |   |        |   |      |   |       |  |   |        |  
|Shares used in computing net income (loss) per share: |  |                         |        |   |      |   |        |      |  |   |        |   |      |   |       |  |   |        |  
|Basic                                                 |  |                         | 10,657 |   |      |   | 8,898  |      |  |   | 7,017  |   |      |   | 5,764 |  |   | 5,349  |  
|Diluted                                               |  |                         | 10,657 |   |      |   | 8,898  |      |  |   | 7,017  |   |      |   | 5,864 |  |   | 5,349  |  



BALANCE SHEET DATA



|                                             |  |                         |        |      |   |        |  |      |       |      |   |       |  |   |      
|-------------------------------------------- |  | ----------------------- | ------ | ---- | - | ------ |  | ---- | ----- | ---- | - | ----- |  | - | -----
|                                             |  | Year Ended December 31,
|                                             |  | 2003                    |        | 2002 |   | 2001   |  | 2000 |       | 1999
|                                             |  | (In thousands)         
|Cash and cash equivalents                    |  | $                       | 14,062 |      | $ | 11,925 |  | $    | 5,563 |      | $ | 4,478 |  | $ | 2,338
|Restricted cash and cash equivalents         |  |                         | 80     |      |   | 80     |  |      |      |      |   |      |  |   |     
|Working capital                              |  |                         | 13,628 |      |   | 10,840 |  |      | 4,198 |      |   | 4,037 |  |   | 1,347
|Total assets                                 |  |                         | 14,837 |      |   | 12,553 |  |      | 5,651 |      |   | 4,551 |  |   | 2,435
|Long-term debt and capital lease obligations |  |                         | 52     |      |   | 57     |  |      | 60    |      |   | 64    |  |   | 67   
|Stockholders equity                         |  |                         | 13,856 |      |   | 11,095 |  |      | 4,218 |      |   | 4,039 |  |   | 680  



Dividendsnone



27



---

##### Table of Contents

Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations



The following discussion and analysis should be read in conjunction with the Selected Financial Data and our
Consolidated Financial Statements and related Notes included elsewhere in this Prospectus.



Managements Discussion and Analysis of Financial Condition and Results of Operations that follows contains forward-looking statements based on current management expectations. Meaningful factors that could cause
future results to differ materially from such expectations include, without limitation, the following: (i) results from our ongoing clinical trials, (ii) scientific data collected on our technologies currently in preclinical research and
development, (iii) decisions made by the FDA or other regulatory bodies with respect to the initiation or continuation of human clinical trials, (iv) decisions made by the FDA or other regulatory bodies with respect to approval and to the commercial
sale of any of our proposed products, (v) the commercial acceptance of any products approved for sale and the ability of us to manufacture, distribute and sell for a profit any products approved for sale, (vi) our ability to obtain the necessary
patents and proprietary rights to effectively protect its proposed products and technologies, and (vii) the outcome of any collaborations or alliances to be entered into by us in the future with pharmaceutical or other biotechnology companies.



Overview



We are developing small molecule drugs for the treatment of solid tumors,
hematologic malignancies, hematopoietic disorders and infectious diseases. Our lead product candidate, PT-100, is an orally active small molecule which, through a novel mechanism of action, has the potential both to inhibit the growth of malignant
tumors and to reconstitute the hematopoietic system.



We
believe that PT-100 has a large market opportunity because of its current portfolio of potential applications, including:



| |  |  | Cancers: PT-100 could be used in combination with chemotherapeutic agents, monoclonal antibodies, and/or vaccines to treat both solid tumors and hematologic malignancies;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Hematopoietic Disorders: PT-100 could be used to treat both neutropenia and anemia; and
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | Infectious Diseases: PT-100 could be used as an adjuvant to enhance the efficacy of certain vaccines.
| | - |  | -----------------------------------------------------------------------------------------------------



The strategy of our clinical development program is to develop the full range of commercial applications of PT-100 and to
prioritize its fastest-to-market applications. We have initiated a Phase 2 human clinical trial of PT-100 in combination with Taxotere® for the treatment of non-small cell lung cancer. We also plan to initiate in the first half of 2004 Phase 2 clinical studies of PT-100 in combination
with cisplatin to treat metastatic melanoma, PT-100 in combination with Rituxan® to treat chronic lymphocytic leukemia, and PT-100 as a single agent in metastatic melanoma. We are also currently conducting a Phase 1 clinical study to test the safety and efficacy of PT-100 in combination with
Rituxan® in patients with hematologic malignancies,
such as non-Hodgkins lymphoma. We are also clinically developing PT-100 as a potential therapy for the treatment of hematopoietic disorders. In addition, we from time to time evaluate new technology opportunities to broaden our portfolio of
potential products, including in-licensing opportunities, collaboration arrangements as well as more expansive corporate relationships, including mergers and acquisitions.



To date, we have generated no material revenues from product sales and have primarily depended upon equity financings,
interest earned on invested funds, and collaboration payments received from pharmaceutical companies to provide the working capital required to pursue our intended business activities. We have a net accumulated deficit of $24,536,000 through
December 31, 2003. The accumulated deficit has resulted principally from our efforts to develop drug candidates and the associated administrative costs required to support these efforts. We expect to incur significant additional operating losses
over the next several years due to our ongoing developmental and clinical efforts. Our potential for future profitability is dependent on our ability to effectively develop our current pharmaceutical product candidate, PT-100, and to license and
develop new pharmaceutical compounds.



28



---

##### Table of Contents

We are the successor of a merger between Point Therapeutics, Inc., a privately held Massachusetts
corporation (Point Massachusetts), and HMSR Inc., a publicly-traded Delaware corporation (HMSR). Point Massachusetts was incorporated in September 1996 as a biopharmaceutical company to develop small molecule drugs. HMSR was
incorporated in December 1993 as a Delaware Corporation and from 1994 to May 2001 under the name HemaSure Inc., developed and supplied innovative blood filtration technologies. On May 28, 2001, HMSR sold substantially all of its non-cash assets to a
subsidiary of Whatman Plc (Whatman), a leader in separations technology, and then changed its name from HemaSure Inc. to HMSR Inc. From May 2001 until the merger on March 15, 2002 (described below) with Point Massachusetts, HMSRs
operations consisted primarily of investigating various strategic business combinations.



On November 15, 2001, HMSR and PT Acquisition Corp., a wholly-owned subsidiary of HMSR formed for the purpose of consummating a merger transaction, entered into the Agreement and Plan of Merger (the Merger
Agreement) with Point Massachusetts. At that time, HMSR paid Point Massachusetts a $500,000 lock-up fee. The lock-up fee was included when determining the final stock conversion ratio between Point Massachusetts and HMSR, as described below.



On March 15, 2002, HMSRs stockholders approved a
1-for-10 reverse split of HMSRs common stock and a name change of HMSR from HMSR Inc. to Point Therapeutics, Inc. The stockholders of Point Massachusetts also approved on March 15, 2002 the Merger Agreement previously entered into by both
parties. In accordance with the terms of the Merger Agreement, immediately prior to the effective time of the merger, and after taking into account the 1-for-10 reverse split with respect to HMSRs common stock prior to the merger, each share
of Point Massachusetts common stock outstanding immediately prior to the effective time of the merger (including all shares of Point Massachusetts preferred stock converted prior to the effective time) was converted into the right to receive 4.16168
shares of HMSRs common stock. This ratio also took into account the $500,000 HMSR lock-up fee paid on November 15, 2001. In addition, all outstanding options and warrants of Point Massachusetts were converted at the same conversion rate of
4.16168.



As a result of the merger, HMSR acquired all of the
outstanding shares of Point Massachusetts capital stock and Point Massachusetts became a wholly-owned subsidiary of us. For accounting purposes, the acquisition has been treated as the acquisition of HMSR by Point Massachusetts with Point
Massachusetts as the acquiror. Our historical financial statements presented prior to March 15, 2002 are those of Point Massachusetts. Point Massachusetts capital structure has been restated to reflect all stock issuances as if the merger had
taken place prior to all periods presented. In addition, if the merger with HMSR had occurred at the beginning of the periods presented, the effect of the inclusion of HMSR operating results on the financial statements presented would not be
material.



For additional information regarding the terms of
the merger, refer to our Form S-4, which was filed with the Securities and Exchange Commission on February 11, 2002.



Our business operations after the merger consist solely of the business previously conducted by Point Massachusetts.



Critical Accounting Policies and Significant Judgments and Estimates



Critical Accounting Policies



In December 2001, the Securities and Exchange
Commission (SEC) requested that all registrants list their most critical accounting policies in Managements Discussion and Analysis of Financial Condition and Results of Operations. The SEC indicated that a
critical accounting policy is one which is both important to the portrayal of our financial condition and results and requires managements most difficult, subjective or complex judgments, often as a result of the need to make
estimates about the effect of matters that are inherently uncertain. Our significant accounting policies are fully described in Note 2 to our consolidated financial statements, included elsewhere in this Annual Report on Form 10-K/A.



29



---

##### Table of Contents

Revenue Recognition



Revenue is deemed earned when all of the following have occurred: all of our obligations relating to the revenue have been
met and the earning process is complete; the monies received or receivable are not refundable, irrespective of research results; and there are neither future obligations nor future milestones to be met by us with respect to such revenue incurred.



Revenues from corporate collaborations are earned based upon
research expenses incurred and milestones achieved. Non-refundable payments upon initiation of contracts are deferred and amortized over the period which we are obligated to participate on a continuing and substantial basis in the research and
development activities outlined in each contract. Amounts received in advance of reimbursable expenses are recorded as deferred revenue until the related expenses are incurred. Milestone payments are recognized as revenue in the period in which the
parties agree that the milestone has been achieved.



For the
year ended December 31, 2003, we recognized $115,000 of license revenues relating to royalties payable to us as successor to HMSR following the merger. We have not recognized any revenue under such agreements during the years ended December 31, 2002
and 2001. Royalty revenue is recognized upon the sale of the related products, provided the royalty amounts are fixed or determinable and collection of the related receivable is reasonably assured.



Clinical Trial Accrual



We accrue the estimated cost of patient recruitment and related
supporting functions for our clinical trial as patients are enrolled in the trial. We accrue the costs for the trials based on percentage of completion of the contract entered into. In the past, our estimates have been materially accurate with the
actual billings received. These costs consist primarily of payments made to the clinical centers, investigators and patients for participating in our clinical trial. As actual or expected costs become known, they may differ from estimated costs
previously accrued for and this clinical trial accrual would be adjusted accordingly. Clinical trial expenses were $1,731,000, $1,853,000 and $997,000 for the years ended December 31, 2003, 2002 and 2001 respectively.



Significant Judgments and Estimates



The preparation of our consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires that we make estimates and assumptions that affect the reported amounts and disclosure of certain assets and liabilities at our balance sheet date. Such estimates include the
carrying value of property and equipment and the value of certain liabilities. Actual results may differ from such estimates.



Results of Operations



Our historical financial statements presented prior to March 15, 2002 are those of Point Massachusetts. Point Massachusetts capital structure has
been restated to reflect all stock issuances as if the merger had taken place prior to all periods presented. In addition, if the merger with HMSR had occurred at the beginning of the periods presented, the effect of the inclusion of HMSR operating
results on the financial statements presented would not be material.



|                           |  |                         |            |   |                       |   |            |      |  |   |            |   |  |           |   |  |       |  
|-------------------------- |  | ----------------------- | ---------- | - | --------------------- | - | ---------- | ---- |  | - | ---------- | - |  | --------- | - |  | ----- | -
|                           |  | Year Ended December 31, |            |   | Annual Percent Change |  
|                           |  | 2003                    |            |   | 2002                  |   |            | 2001 |  |   | 2003/2002  |   |  | 2002/2001 |  
|License revenue            |  | $                       | 115,041    |   |                       | $ |           |      |  | $ |           |   |  | 100.0     | % |  |      | %
|Sponsored research revenue |  |                         |           |   |                       |   |           |      |  |   |           |   |  |          |   |  |      |  
|                           |  |                         |            |   |                       |   |            |      |  |   |            |   |  |           |   |  |       |  
|Total revenues             |  |                         | 115,041    |   |                       |   |           |      |  |   |           |   |  | 100.0     |   |  |      |  
|Research and development   |  |                         | 5,646,230  |   |                       |   | 5,159,957  |      |  |   | 3,422,358  |   |  | 9.4       |   |  | 50.8  |  
|General and administrative |  |                         | 2,270,915  |   |                       |   | 2,501,187  |      |  |   | 2,010,127  |   |  | (9.2      | ) |  | 24.4  |  
|                           |  |                         |            |   |                       |   |            |      |  |   |            |   |  |           |   |  |       |  
|Total operating expenses   |  |                         | 7,917,145  |   |                       |   | 7,661,144  |      |  |   | 5,432,485  |   |  | 3.3       |   |  | 41.0  |  
|Interest income            |  |                         | 75,332     |   |                       |   | 182,559    |      |  |   | 225,463    |   |  | (58.7     | ) |  | (19.0 | )
|                           |  |                         |            |   |                       |   |            |      |  |   |            |   |  |           |   |  |       |  
|Net loss                   |  | $                       | (7,726,772 | ) |                       | $ | (7,478,585 | )    |  | $ | (5,207,022 | ) |  | 3.3       | % |  | 43.6  | %
|                           |  |                         |            |   |                       |   |            |      |  |   |            |   |  |           |   |  |       |  



30



---

##### Table of Contents

Revenues



For the year ending December 31, 2003, we recorded license revenue totaling $115,000. The royalties were due from
Whatman Inc. related to revenues generated from the sale of HMSR blood filters. We recorded no revenues during the year ended December 31, 2002 and 2001.



Operating Expenses



Research and development



During the years ended December 31, 2003, 2002 and 2001, almost all of our research and development efforts have been focused on the preclinical and
clinical development of PT-100 for the treatment of solid tumors, hematologic malignancies and hematopoietic disorders. We had no other material research and development programs during this time period and thus the expenses disclosed for research
and development in our financial statements has primarily been directed towards developing PT-100. We have initiated a Phase 2 human clinical trial of PT-100 in combination with Taxotere® for the treatment of non-small cell lung cancer. We also plan to initiate in the first
half of 2004 Phase 2 clinical studies of PT-100 in combination with cisplatin to treat metastatic melanoma, PT-100 in combination with Rituxan® to treat chronic lymphocytic leukemia, and PT-100 as a single agent in metastatic melanoma. We are also currently conducting a Phase 1 clinical study
to test the safety and efficacy of PT-100 in combination with Rituxan® in patients with hematologic malignancies, such as non-Hodgkins lymphoma.



We are also developing PT-100 as a potential therapy for the treatment of hematopoietic disorders caused by chemotherapy treatments. We recently completed
a Phase 1 human clinical study in which patients undergoing chemotherapy were treated with PT-100 for neutropenia.



Research and development expenses increased 9.4% to $5,646,000 for the year ended December 31, 2003 and 50.8% to $5,160,000 for the year ended December
31, 2002.



|                               |  |                         |           |                       |   |           |  |           |           |  |           |   |  |       |  
|------------------------------ |  | ----------------------- | --------- | --------------------- | - | --------- |  | --------- | --------- |  | --------- | - |  | ----- | -
|                               |  | Year Ended December 31, |           | Annual Percent Change |  
|Research and development       |  | 2003                    |           | 2002                  |   | 2001      |  | 2003/2002 |           |  | 2002/2001 |  
|Clinical development           |  | $                       | 3,170,618 |                       | $ | 2,473,538 |  | $         | 1,151,890 |  | 28.2      | % |  | 114.7 | %
|Research                       |  |                         | 2,475,612 |                       |   | 2,686,419 |  |           | 2,270,468 |  | (7.8      | ) |  | 18.3  |  
|                               |  |                         |           |                       |   |           |  |           |           |  |           |   |  |       |  
|Total research and development |  | $                       | 5,646,230 |                       | $ | 5,159,957 |  | $         | 3,422,358 |  | 9.4       | % |  | 50.8  | %
|                               |  |                         |           |                       |   |           |  |           |           |  |           |   |  |       |  



Clinical
development:    Clinical development expenses include costs of drug development and conducting clinical trials. Such costs include costs of personnel (including salary, fringe benefits, recruiting and relocation costs), drug
supply and testing costs, facility expenses, including depreciation. Total clinical development expenses increased 28.2% to $3,171,000 in 2003 and 114.7% to $2,474,000 in 2002.



The increase in 2003 was primarily due to increased internal personnel costs ($624,000) due to the addition of four
employees at the beginning of 2003 in order to internally manage the clinical trial process for PT-100 in place of utilizing outside contractors. The increase in 2002 was primarily due to higher external clinical development expenses related to
PT-100 for the Phase I Neutropenia trial ($1,076,000) due to increased enrollment in the trial during 2002.



During 2004, we anticipate that our clinical development costs will continue to increase due to the initiation of four Phase 2 PT-100 clinical studies in
three different oncology indications where PT-100 will be studied in combination with chemotherapeutic agents and monoclonal antibodies as well as a single agent anti-tumor therapeutic. In addition, we currently anticipate completing the current
Phase 1 PT-100/Rituxan® study during 2004 and the
hiring of four additional employees in this area bringing total employees in the clinical development area to nine.



31



---

##### Table of Contents

Research:    Research includes expenses associated with research and testing
of our product candidates prior to reaching the clinical development stage. Such expenses primarily include the costs of internal personnel, outside contractors, facilities, including depreciation, and lab supplies.



Research expenses decreased 7.8% to $2,476,000 in 2003 and increased 18.3% to
$2,686,000 in 2002. The decrease in 2003 was primarily due to one-time outside contractor preclinical work performed in 2002 ($387,000), offset in part by increased personnel and related costs due to full-year effect of the hiring of two new
employees mid-2002 and raises ($174,000). The increase in 2002 was primarily due to increased outside contractor preclinical and support work performed in 2002 ($603,000) offset in part by lower personnel costs due to severance accrued in 2001
($200,000).



During 2004, we currently anticipate that research
expenses will remain approximately consistent with 2003 levels as activity levels overall are expected to remain constant and total employees in this area to remain at seven.



General and administrative



General and administrative:    General and administrative costs include the associated
administrative costs required to support the clinical development and research efforts including legal, finance & accounting, business development, investor relations and other administrative support functions.



General and administrative expenses decreased 9.2% to $2,271,000 in 2003 and
increased 24.4% to $2,501,000 for 2002. The decrease in 2003 was primarily due to legal costs incurred with the merger with HMSR Inc. ($265,000) which occurred in the first quarter of 2002 and the hiring of a commercial strategy consulting group in
2002 ($260,000) offset in part by higher personnel costs ($265,000) due to the full-year effect of the hiring of three employees in mid-2002 and raises.



The increase in 2002 was primarily due to an increase in needed internal support and external costs associated with us becoming a public entity on March
15, 2002 as a result of the merger between Point Massachusetts and HMSR Inc. ($595,000) and the hiring of a consulting group in 2002 to assist us in developing an optimal commercialization strategy for PT-100 ($331,000) offset in part by lower
external legal costs in 2002 as compared to 2001 due to decreased activity the hiring of a general counsel in mid-2002 ($558,000).



During 2004, we currently anticipate that general and administrative expenses will increase moderately from 2003 levels as we plan to expand our business
development efforts by allocating additional resources and hiring one additional employee in business development bringing total employees in this area to six.



Interest Income



Interest income includes interest earned on invested cash balances. During the years ending December 31, 2003, 2002 and 2001, our investments consisted
entirely of funds deposited in money market funds.



Interest
income decreased 58.7% to $75,000 and 19.0% to $183,000 for 2002. The decrease in interest income for 2003 resulted from lower interest rates earned and a lower average invested cash balance as compared to 2002. The decrease in 2002 resulted from
lower interest rates earned on the invested cash balance in 2002 as compared to the same period in 2001, offset in part by a higher invested cash balance compared to 2001.



Net loss



As a result of the foregoing, we incurred a net loss of $7,727,000, or $0.73 per share, for the year ended December 31, 2003 compared to a net loss of
$7,479,000, or $0.84 per share, for the year ended December 31, 2002 and a net loss of $5,207,000, or $0.74 per share, for the year ended December 31, 2001.



32



---

##### Table of Contents

Liquidity and Capital Resources



We have financed our operations since inception principally through private
placements of equity securities and collaboration payments received from pharmaceutical companies. Since our inception in September 1996, we have raised approximately $22,858,000, net of costs of raising capital, in private equity financings and
$7,515,000 from licensing and sponsored research collaborations with pharmaceutical companies. In addition, we received $14,335,000 as a result of the merger between Point Massachusetts and HMSR, including a $500,000 lock-up fee received upon the
signing of the Merger Agreement. We have also received $983,000 from interest earned in invested cash balances.



At December 31, 2003, our cash and cash equivalents increased $2,137,000 as compared to December 31, 2002. The increase was primarily due to net proceeds
totaling $10,424,000 resulting from the sale of 5,600,001 shares of common stock in a private placement which closed on October 3, 2003 offset in part by $8,221,000 used in operations for the year ended December 31, 2003. Cash utilized in operations
included net operating losses of $7,727,000 primarily to support the pre-clinical and clinical program for PT-100 and related general and administrative activities. Other current assets increased by $180,000 from December 31, 2002 mainly as the
result of recognizing a $115,000 receivable in 2003 on royalty revenues due from Whitman, Inc. and a $60,000 increase in prepaid clinical costs related to initiating the Phase 1 PT-100/rituximab trial in 2003 and the Phase 2 non-small cell lung
cancer study in the first quarter of 2004. In addition, current liabilities decreased by $472,000 primarily due to a reduction in the clinical trial accrual and payables related to the completion of the Phase 1 PT-100 neutropenia trial during 2003.



Since inception, we have incurred $23,010,000 in expenses
on research and development activities. Almost all of our research and development efforts have been focused on the preclinical and clinical development of PT-100 for the treatment of solid tumors, hematologic malignancies and hematopoietic
disorders. We have had no other material research and development programs, and thus the $23,010,000 disclosed for research and development in our financial statements has primarily been directed towards developing PT-100. We have initiated a Phase
2 human clinical trial of PT-100 in combination with Taxotere® for the treatment of non-small cell lung cancer. We also plan to initiate in the first half of 2004 Phase 2 clinical studies of PT-100 in combination with cisplatin to treat metastatic melanoma, PT-100 in combination
with Rituxan® to treat chronic lymphocytic
leukemia, and PT-100 as a single agent in metastatic melanoma. We are also currently conducting a Phase 1 clinical study to test the safety and efficacy of PT-100 in combination with Rituxan® in patients with hematologic malignancies, such as non-Hodgkins lymphoma. We are
also developing PT-100 as a potential therapy for the treatment of hematopoietic disorders caused by chemotherapy treatments. We recently completed a Phase 1 human clinical study in which patients undergoing chemotherapy were treated with PT-100 for
neutropenia. We cannot predict whether the results of further testing will be successful or will result in FDA approvals. Thus, due to the uncertainties inherent in clinical testing and the regulatory process, we are not able to estimate at this
time when PT-100 may be commercially available for any application, if at all, nor the costs associated with completing the clinical trial process.



On October 3, 2003, we closed on a private placement of 5,600,001 shares of common stock at a price of $2.00 per share and five-year warrants to purchase
an additional 2,800,000 shares of common stock at a price of $2.66 per share. The per unit purchase price represented a 12.5% discount to the average closing price of our common stock for the five trading days immediately preceding September 10,
2003, the date on which the offering commenced. Total gross proceeds were $11,200,000 with costs of approximately $600,000 resulting in net proceeds to us of $10,600,000, less additional expenses of $200,000 for the registration of the shares. We
also issued warrants to purchase 300,000 shares of common stock at a price of $2.22 per share to Paramount, Inc. the placement agent in the transaction. In addition, upon closing of the financing on October 3, 2003, we recorded and paid bonuses to
all employees totaling approximately $414,000.



Since
inception, we have incurred operating expenses of $32,951,000 and have accumulated a deficit as of December 31, 2003 of $24,536,000. At December 31, 2003, we had $14,062,000 in cash and cash equivalents.



33



---

##### Table of Contents

We currently anticipate that our existing capital resources and interest to be received on invested cash balances should enable us to maintain current and
planned operations through the end of 2004. Therefore, the accompanying financial statements have been prepared assuming that we will continue as a going concern. We are currently considering several strategic options in order to ensure the
continued funding of our operations including, but not limited to, the sale of securities in both public and private offerings as the markets allow, raising additional funds through corporate collaborations and merger and acquisition activities and
consolidations. There can be no assurance that a transaction will be consummated in a reasonable time frame or on terms acceptable to us. Should we be unable to raise sufficient funds, we may be required to curtail our operating plans after 2004. In
addition, increases in expenses or delays in product development not currently forecasted or anticipated may adversely impact our cash position and require further cost reductions.



Our expectations regarding our rate of spending and the sufficiency of its cash resources over future periods are
forward-looking statements. Our funding requirements are expected to increase over the next several years as we continues with the clinical development of PT-100 and initiates human clinical trials for additional clinical indications for PT-100 and
additional product candidates. The rate of spending and sufficiency of such resources will be affected by numerous factors including the success of our clinical trials and the rate of acquisition of new products and technologies. Success in
early-stage clinical trials or acquisition of new products and technologies would lead to an increase in working capital requirements. Our actual cash requirements may vary materially from those now planned because of the results of research and
development, clinical trials, product testing, relationships with strategic partners, acquisition of new products and technologies, changes in the focus and direction of our research and development programs, competitive and technological advances,
the process of obtaining United States Food and Drug Administration or other regulatory approvals and other factors.



Contractual Obligations



As of December 31, 2003, we had future payments required under contractual obligations and other commitments approximately as follows:



|                         |  |                      |         |      |   |        |  |      |        |      |   |            |  |   |        |  |   |       
|------------------------ |  | -------------------- | ------- | ---- | - | ------ |  | ---- | ------ | ---- | - | ---------- |  | - | ------ |  | - | ------
|                         |  | Payments Due By Year
|                         |  | 2004                 |         | 2005 |   | 2006   |  | 2007 |        | 2008 |   | Thereafter
|Operating Leases         |  | $                    | 177,198 |      | $ | 63,867 |  | $    | 1,678  |      | $ |           |  | $ |       |  | $ |      
|Licensing Obligations    |  |                      | 10,000  |      |   | 10,000 |  |      | 10,000 |      |   | 10,000     |  |   | 10,000 |  |   | 37,895
|                         |  |                      |         |      |   |        |  |      |        |      |   |            |  |   |        |  |   |       
|Total Future Obligations |  | $                    | 187,198 |      | $ | 73,867 |  | $    | 11,678 |      | $ | 10,000     |  | $ | 10,000 |  | $ | 37,895
|                         |  |                      |         |      |   |        |  |      |        |      |   |            |  |   |        |  |   |       



In addition, in
connection with the sublease for our offices at 125 Summer Street in Boston, we issued a letter of credit on April 11, 2002 in the amount of $80,168. The letter of credit is renewable annually on April 11th for the term of the sublease with the
landlord.



Off-Balance Sheet Arrangements



We had no off-balance sheet arrangements as of
December 31, 2003 that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources
that is material to investors.



New Accounting
Pronouncements



In June 2002, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS 146 addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The principal difference between SFAS 146



34



---

##### Table of Contents

and Issue 94-3 relates to SFAS 146s requirements for recognition of a liability for a cost associated with an exit or disposal activity. SFAS 146
requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost as generally defined in Issue 94-3 was recognized at the date of an
entitys commitment to an exit plan. A fundamental conclusion reached by the FASB in this Statement is that an entitys commitment to a plan, by itself, does not create an obligation that meets the definition of a liability. Therefore,
this Statement eliminates the definition and requirements for recognition of exit costs in Issue 94-3.



This Statement also establishes that fair value is the objective for initial measurement of the liability. This Statement is effective for exit or
disposal activities that are initiated after December 31, 2002, with early application encouraged. The adoption of SFAS 146 had no impact on our financial statements in 2003.



In December 2002, the FASB issued SFAS 148 Accounting for Stock-Based CompensationTransition and
Disclosure. SFAS 148 amends SFAS 123 Accounting for Stock-Based Compensation, to provide alternative methods of transition to SFAS 123s fair value method of accounting for stock-based employee compensation. SFAS 148 also
amends the disclosure provisions of SFAS 123 and Accounting Principles Board Opinion (APB) No. 28 Interim Financial Reporting, to require disclosure in the summary of significant accounting policies of the effects of an entitys
accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. While SFAS 148 does not amend SFAS 123 to require companies to account for employee stock
options using the fair value method, the disclosure provisions of SFAS 148 are applicable to all companies with stock-based employee compensation, regardless of whether they account for that compensation using the fair value method of SFAS 123 or
the intrinsic value method of APB No. 25 Accounting for Stock Issued to Employees. SFAS 148 became effective for fiscal years ending after December 15, 2002. We have elected to continue to account for employee stock-based compensation
using the intrinsic value method as described in APB No. 25 and therefore, the adoption of SFAS No. 148 did not have any impact on our results of operations or financial position in 2003.



In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No.
51. The primary objective of the Interpretation is to provide guidance on the identification of, and financial reporting for, entities over which control is achieved through means other than voting rights. Such entities are known as
variable-interest entities (VIEs). Although the FASBs initial focus was on special-purpose entities (SPEs), the final guidance applies to a wide range of entities. FIN 46 applies to new entities that are created after the effective date, as
well as applies to existing entities. The FIN is effective to preexisting entities as of the beginning of the first interim period beginning after December 15, 2003, and to any new entities beginning February 1, 2003. FIN 46 is the guidance that
determines (1) whether consolidation is required under the controlling financial interest model of Accounting Research Bulletin No. 51 (ARB 51), Consolidated Financial Statements, or other existing authoritative guidance, or,
alternatively, (2) whether the variable-interest model under FIN 46 should be used to account for existing and new entities. The adoption of FIN 46 is not expected to have a material impact on our results of operations or financial position.



In May 2003, the FASB issued SFAS No. 150, Accounting
for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is within its scope as a liability. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning
of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have any impact on our results of operations or financial position in 2003.



35



---

##### Table of Contents

Item 7A.Quantitative and Qualitative Disclosure About Market Risk



At December 31, 2003, 2002 and 2001, our investments consisted entirely of funds deposited in money market funds and as a result we were not subject to
interest rate risk.



Item 8.Financial Statements and Supplementary Data



Financial statements and supplementary data required by Item 8 are set forth at the pages indicated in Item 15(a) below.



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



Not applicable.



Item 9A.Controls and Procedures



Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2003. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of December 31, 2003, our disclosure
controls and procedures were (1) designed to ensure that material information relating to us, is made known to our chief executive officer and chief financial officer by others within those entities, particularly during the period in which this
report was being prepared, and (2) effective, in that they provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and Exchange Commission.



No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal
quarter ended December 31, 2003 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



36



---

##### Table of Contents

PART III



Item 10.Directors and Executive Officers of the Registrant



The following table sets forth the name, age as of April 13, 2004, positions and offices of each person who serves as our director:



|                              |  |     |  |                                                                          
|----------------------------- |  | --- |  | -------------------------------------------------------------------------
|Name                          |  | Age |  | Position                                                                 
|Donald R. Kiepert, Jr.        |  | 56  |  | Chairman of the Board of Directors, President and
Chief Executive Officer
|Timothy J. Barberich(1)(2)(3) |  | 56  |  | Director                                                                 
|Thomas M. Claflin(2)          |  | 63  |  | Director                                                                 
|Daniel T. Roble(1)(3)         |  | 58  |  | Director                                                                 
|William J. Whelan, Jr.(1)(2)  |  | 49  |  | Director                                                                 

---

|(1) |  | Member of the Compensation Committee
|--- |  | ------------------------------------

|(2) |  | Member of the Audit Committee
|--- |  | -----------------------------

|(3) |  | Member of the Nominating and Corporate Governance Committee
|--- |  | -----------------------------------------------------------



Except for Mr. Barberich, each person who serves as our director was appointed as a director on March 15, 2002, pursuant to the terms of the Merger
Agreement among Point, PT Acquisition Corp. and Point Therapeutics Massachusetts, Inc. (Point Massachusetts). No director or executive officer of Point is related to any other director or executive officer of Point by blood or marriage.



Mr. Kiepert has served as our President, Chief Executive
Officer and as a director since March 2002, the date of the merger with Point Massachusetts, and served as President, Chief Executive Officer and as a director of Point Massachusetts since its inception in 1996. Prior to that, he was President and
Chief Executive Officer of Chartwell Home Therapies, a home infusion services company, from 1989 to 1996. Mr. Kiepert also started and managed several healthcare-based companies and worked in various management positions at Baxter Travenol, Inc. Mr.
Kiepert presently serves as chairman and as a director of two private companies. Mr. Kiepert received his M.S. degree in clinical pharmacy from Purdue University.



Mr. Barberich has served as our director since inception in 1993 and was Chairman of the Board of Directors from 1993 until
March 1996 and from April 1997 until March 15, 2002. Mr. Barberich has also served as a director of Point Massachusetts since March 1999. Mr. Barberich was a founder of Sepracor, Inc. and since 1984, Mr. Barberich has served as Chairman of the Board
of Directors and Chief Executive Officer of Sepracor. From 1984 to 1999, Mr. Barberich served as President of Sepracor. Mr. Barberich also serves as a director of BioSphere Medical, Inc. and he also served as a director of Vicuron Pharmaceuticals
until February 21, 2003.



Mr. Claflin has served as our
director since March 15, 2002 and as a director of Point Massachusetts since December 1999. He is the President and Chief Executive Officer of the venture capital firm of Claflin Capital Management, which he founded in 1978. Prior to forming Claflin
Capital, he was a general partner of PaineWebbers venture capital partnership group and a general partner at the venture capital firm of T.A. Associates.



Mr. Roble has served as our director since March 15, 2002 and as a director of Point Massachusetts since January 1997. He is a limited partner in the
Health Care Group at the law firm of Ropes & Gray, Boston, Massachusetts. He has practiced law at Ropes & Gray since 1975.



Mr. Whelan has served as our director since March 15, 2002 and as a director of Point Massachusetts since January 1997. He is a partner at the private
bank of Brown Brothers, Harriman & Company, where he has worked since 1988. Prior to that, he worked at the Bank of New York as Vice President, Middle Market Lending.



37



---

##### Table of Contents

Audit Committee Financial Expert



Our Board of Directors has determined that William J. Whelan, the Chairman of our Audit Committee, is an audit committee
financial expert, as that term is defined under Regulation S-K, Item 401(h), and that he is independent, as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act.



See Security Ownership of Certain Beneficial Owners and Management included in Item 12 of the Annual Report on
Form 10K/A for a summary of the shares of common stock owned by each of the directors and director nominees.



Executive Officers



The
following is a list of our executive officers and their principal positions with us as of April 13, 2004. Each individual officer, with the exception of Michael P. Duffy, who joined us in May 2002 and Margaret Uprichard, who joined us in January
2003 has served in their respective positions with us since March 15, 2002, the effective date of the merger with Point Massachusetts. All of our officers are employed pursuant to employment agreements.



|                                |  |     |  |                                                             
|------------------------------- |  | --- |  | ------------------------------------------------------------
|Name                            |  | Age |  | Position                                                    
|Donald R. Kiepert, Jr.          |  | 56  |  | Chairman, President, Chief Executive Officer, and Director  
|Richard N. Small                |  | 49  |  | Senior Vice President, Chief Financial Officer and Treasurer
|Michael P. Duffy                |  | 43  |  | Senior Vice President, General Counsel and Secretary        
|Barry Jones, Ph.D.              |  | 55  |  | Senior Vice President, Research                             
|Margaret J. Uprichard, Pharm.D. |  | 45  |  | Senior Vice President, Clinical and Regulatory Affairs      



Mr. Kiepert has served
as our President, Chief Executive Officer and as a director since March 2002, the date of the merger with Point Massachusetts, and served as President, Chief Executive Officer and as a director of Point Massachusetts since its inception in 1996.
Prior to that, he was President and Chief Executive Officer of Chartwell Home Therapies, a home infusion services company, from 1989 to 1996. Mr. Kiepert also started and managed several healthcare-based companies and worked in various management
positions at Baxter Travenol, Inc. Mr. Kiepert presently serves as chairman and as a director of two private companies. Mr. Kiepert received his M.S. degree in clinical pharmacy from Purdue University.



Mr. Small has served as our Senior Vice President, Chief Financial Officer
and Treasurer since March 2002, the date of the merger with Point Massachusetts, and served as Senior Vice President, Chief Financial Officer and Treasurer of Point Massachusetts since its inception in 1996. Prior to that, he was Vice President and
Chief Financial Officer at ImmuLogic Pharmaceutical Corporation from 1992 to 1996. Mr. Small has also worked in various management positions at Dennison Manufacturing Company and the public accounting firm of Coopers and Lybrand LLP. Mr. Small
presently serves as a director for a private company.



Mr.
Duffy has served as our Senior Vice President, General Counsel and Secretary since May 2002. Prior to that, he was Senior Vice President, General Counsel and Secretary of Digital Broadband Communications, Inc. from 1999 through 2002. Mr. Duffy was
also Senior Vice President, General Counsel and Secretary of ETC w/tci, a sub-portfolio of TCI Ventures, Inc. / Liberty Media Corporation from 1996 through 1999. Prior to that, Mr. Duffy practiced law at Ropes & Gray in Boston,
Massachusetts. Mr. Duffy is also a founder and principal of a private business advisory firm.



Dr. Jones has served as our Senior Vice President of Research since January 2003 and as our Vice President of Research since March 2002, the date of the merger with Point Massachusetts and as Vice President of



38



---

##### Table of Contents

Research of Point Massachusetts since January 2000, and Director of Immunology of Point Massachusetts since 1997. Prior to joining Point Massachusetts, he
was Director of Immunology at Procept, Inc., from 1993 through July 1997. Dr. Jones has also held academic research positions at Yale Universitys School of Medicine and at Pennsylvania State University.



Dr. Uprichard joined us in January 2003 as Vice President, Clinical and
Regulatory Affairs. In December 2003, she was promoted to Senior Vice President, Clinical and Regulatory Affairs. Prior to joining us, she founded a consulting company in drug development and served as Head of Regulatory, Clinical and/or Preclinical
Affairs for both Curis, Inc and Paion, GmbH, from 2001-2003. From 1990-2001, Dr. Uprichard held senior positions in both Clinical and Regulatory Affairs for Warner-Lambert/Pfizer in the oncology, neurology, cardiovascular, and rheumatology areas.



Section 16(a) Beneficial Ownership Reporting Compliance



Section 16(a) of the Securities Exchange Act of 1934, as amended (the
Exchange Act), requires our officers and directors, and persons who own more than 10% of our outstanding common stock, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than 10%
stockholders are required by SEC regulations to furnish us with all copies of Section 16(a) forms they file.



Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons that no Form 5s were
required for those persons, we believe that during the fiscal year ended December 31, 2003, all filing requirements were timely satisfied, except that for each of Messrs. Kiepert, Small, Duffy, Barberich, Claflin, Roble and Whelan and Drs. Jones and
Uprichard, Forms 4 reporting options granted under one of the applicable Plans for the fiscal year were filed in compliance with the previously effective reporting rules but late under the most recent revisions to such rules. In addition, a Form 4
reporting a grant to Mr. Claflin under the 2003 Option Plan for Non-Employee Directors was subsequently amended to also include the purchase by an affiliate of Mr. Claflin of shares of our common stock in a recently consummated private placement,
which purchase we had otherwise previously reported.



Code of Ethics and
Conduct



Our Board of Directors adopted a new code of
business ethics and conduct, The Point Therapeutics Corporate Code of Ethics and Conduct (the Code of Ethics), applicable to all of our executives, directors and employees, on March 16, 2004. If we make substantive amendments to this
Code of Ethics or grant any waiver, including any implicit waiver, we will disclose the nature of such amendment in a report on Form 8-K within five days of such amendment or waiver. For more information, please refer to the Code of Ethics attached
to the Preliminary Proxy Statement filed with the SEC on April 26, 2004 as Appendix A. The Code of Ethics will also be posted on the corporate governance section of our website at www.pther.com. The Code of Ethics and Conduct will also be available
in print to any shareholder that requests a copy. Copies may be obtained by contacting Michael P. Duffy, our Senior Vice President & General Counsel at our corporate headquarters.



39



---

##### Table of Contents

Item 11.Executive Compensation



The following table provides certain summary information for the fiscal years ended December 31, 2003, 2002 and 2001, concerning compensation paid or
accrued by us to or on behalf of the persons who served as our executive officers in 2003:



SUMMARY COMPENSATION TABLE (1)



|                                                                                          |  |                     |  |                        |                       |           |     |                             |  |                                 |  |                             |  |     |              
|----------------------------------------------------------------------------------------- |  | ------------------- |  | ---------------------- | --------------------- | --------- | --- | --------------------------- |  | ------------------------------- |  | --------------------------- |  | --- | -------------
|                                                                                          |  | Annual Compensation |  | Long-Term Compensation
|Name and Principal Position                                                               |  | Year                |  | Salary ($)             |                       | Bonus ($) |     | Other AnnualCompensation($) |  | SecuritiesUnderlyingOptions (#) |  | All OtherCompensation($)(2)
|Donald R. Kiepert, Jr. Chairman, President and Chief Executive Officer                    |  | 200320022001        |  | $$$                    | 309,637300,000283,615 |           | $$$ | 90,00090,00081,000          |  |                              |  | 120,00060,00041,616         |  | $$$ | 4,1203,326110
|                                                                                          |  |                     |  |                        |                       |          
|Richard N. Small Senior Vice President, Chief Financial Officer and Treasurer             |  | 200320022001        |  | $$$                    | 196,065190,000164,423 |           | $$$ | 57,00058,00048,000          |  |                              |  | 80,00040,00020,808          |  | $$$ | 6,1614,96572 
|                                                                                          |  |                     |  |                        |                       |          
|Michael P. Duffy(3) Senior Vice President, General Counsel and Secretary                  |  | 200320022001        |  | $$                     | 196,065114,000       |           | $   | 57,000                    |  |                              |  | 80,000106,000              |  | $$  | 72096       
|                                                                                          |  |                     |  |                        |                       |          
|Barry Jones, Ph.D. Senior Vice President, Research                                        |  | 200320022001        |  | $$$                    | 190,961160,000137,449 |           | $$$ | 57,00048,00027,000          |  |                              |  | 80,00030,00016,646          |  | $$$ | 6,2714,319110
|                                                                                          |  |                     |  |                        |                       |          
|Margaret J. Uprichard, Pharm.D.(4) Senior Vice President, Clinical and Regulatory Affairs |  | 200320022001        |  | $                      | 184,719             |           | $   | 10,000                    |  |                              |  | 100,000                   |  | $   | 5,503      

---

|(1) |  | The merger between us and Point Massachusetts was effective as of March 15, 2002. Accordingly, the summary compensation information provided in this table for the period from March
16, 2002 through December 31, 2003 was paid entirely by us, and the compensation information for the periods from January 1, 2002 through March 15, 2002 and the years ending December 31, 2001 consists of compensation paid entirely by Point
Massachusetts. In accordance with the merger that took place on March 15, 2002, securities underlying options for the years ending December 31, 2001 granted by Point Massachusetts are presented reflecting the conversion into the right to receive
4.16168 shares of our common stock.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Other compensation in 2003 includes a matching 401K contribution totaling $3,088, $5,801, $480, $5,719 and $5,143 for Mr. Kiepert, Mr. Small, Mr. Duffy, Dr. Jones and Dr. Uprichard,
respectively. Other compensation in 2002 includes a matching 401K contribution totaling $3,002, $4,319 and $4,754 for Mr. Kiepert, Mr. Small and Dr. Jones, respectively. All other amounts in 2003, 2002 and 2001 represent the taxable portion of
group term-life insurance.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Mr. Duffy joined us part-time in May 2002 and full-time in September 2002.
|--- |  | --------------------------------------------------------------------------

|(4) |  | Dr. Uprichard joined us in January 2003.
|--- |  | ----------------------------------------



Option Grants During 2003



The following table sets forth option grants by us to Mr. Kiepert, Mr. Small, Mr. Duffy, Dr. Jones, and Dr. Uprichard during the year ended December
31, 2003 under our Amended and Restated 1994 Stock Option Plan. The maximum term of each option granted was ten years from the date of grant, subject to earlier termination in the event of resignation or termination of employment. The percentage of
the total options granted to our employees in 2003 shown in the table below is based on options to purchase an aggregate of 615,000



40



---

##### Table of Contents

shares of our Common Stock granted to employees during the year ended December 31, 2003. The exercise price of each option was equal to the fair market value
of our common stock on the date of grant as determined by the Board of Directors.



The potential realizable values are net of the exercise prices and before taxes associated with the exercise, and are based on the assumption that our common stock would have appreciated at the annual rate shown from
the date of the grant until the expiration of the ten-year option term. We have calculated these numbers based on the rules of the Securities and Exchange Commission, and they do not represent our estimate or projection of our future common stock
prices. The amounts reflected in the table may not necessarily be achieved. The actual amount the executive officer may realize will depend upon the extent to which the stock price exceeds the exercise price of the options on the exercise date.



|                                |  |                                                  |  |                                                     |   |                                                                                            |                             |      |  |           |  |        |         |  |   |        
|------------------------------- |  | ------------------------------------------------ |  | --------------------------------------------------- | - | ------------------------------------------------------------------------------------------ | --------------------------- | ---- |  | --------- |  | ------ | ------- |  | - | -------
|                                |  | Option Grants Individual Grants (1)              |  | ExpirationDate                                      |   | Potential RealizableValue at AssumedAnnual Rates of Stock PriceAppreciation forOption Term
|Name                            |  | Number ofSecuritiesUnderlyingOptions Granted (#) |  | % of TotalOptions Grantedto Employees inFiscal Year |   |                                                                                            | ExerciseOr BasePrice ($/Sh) |      |  | 5%($)     |  | 10%($)
|Donald R. Kiepert, Jr.          |  | 120,000                                          |  | 19.5                                                | % |                                                                                            | $                           | 0.80 |  | 4/02/2013 |  | $      | 156,374 |  | $ | 248,999
|Richard N. Small                |  | 80,000                                           |  | 13.0                                                | % |                                                                                            | $                           | 0.80 |  | 4/02/2013 |  | $      | 104,249 |  | $ | 166,000
|Barry Jones, Ph.D.              |  | 80,000                                           |  | 13.0                                                | % |                                                                                            | $                           | 0.80 |  | 4/02/2013 |  | $      | 104,249 |  | $ | 166,000
|Michael P. Duffy                |  | 80,000                                           |  | 13.0                                                | % |                                                                                            | $                           | 0.80 |  | 4/02/2013 |  | $      | 104,249 |  | $ | 166,000
|Margaret J. Uprichard, Pharm.D. |  | 60,000                                           |  | 9.8                                                 | % |                                                                                            | $                           | 0.65 |  | 1/22/2013 |  | $      | 63,527  |  | $ | 101,156
|Margaret J. Uprichard, Pharm.D. |  | 40,000                                           |  | 6.5                                                 | % |                                                                                            | $                           | 0.80 |  | 4/02/2013 |  | $      | 52,125  |  | $ | 83,000 



Aggregated
Option Exercises and Fiscal-Year-End Option Values



The following table sets forth option exercises by Mr. Kiepert, Mr. Small, Dr. Jones, Mr. Duffy and Dr. Nussbaum and value of in-the-money unexercised options held by each such person at December 31, 2003.



The value of unexercised in-the-money options held at December 31, 2003
represents the total gain which the option holder would realize if the option holder exercised all of the in-the-money options held at December 31, 2003, and is determined by multiplying the number of shares of our common stock underlying the
options by the difference between $3.35 (which was the fair market value per share of our common stock at fiscal year end December 31, 2003) and the applicable per share option exercise price. An option is in-the-money if the fair market value of
the underlying shares exceeds the exercise price of the option.



|                                |  |                                |  |                   |  |                                                                 |  |                                                     |  |             |         |               |   |        
|------------------------------- |  | ------------------------------ |  | ----------------- |  | --------------------------------------------------------------- |  | --------------------------------------------------- |  | ----------- | ------- | ------------- | - | -------
|                                |  |                                |  |                   |  | Number Of SecuritiesUnderlying UnexercisedOptions At FY-End (#) |  | Value Of Unexercised In-The-Money Options At FY-End
|Name                            |  | Shares AcquiredOn Exercise (#) |  | ValueRealized ($) |  | Exercisable                                                     |  | Unexercisable                                       |  | Exercisable |         | Unexercisable
|Donald R. Kiepert, Jr           |  |                               |  |                  |  | 150,255                                                         |  | 196,213                                             |  | $           | 20,128  |               | $ | 323,103
|Richard N. Small                |  |                               |  |                  |  | 129,648                                                         |  | 125,606                                             |  |             | 59,839  |               |   | 215,176
|Barry Jones, Ph.D.              |  |                               |  |                  |  | 75,127                                                          |  | 113,945                                             |  |             | 40,673  |               |   | 212,281
|Michael P. Duffy                |  |                               |  |                  |  | 53,000                                                          |  | 133,000                                             |  |             | 100,700 |               |   | 304,700
|Margaret J. Uprichard, Pharm.D. |  |                               |  |                  |  |                                                                |  | 100,000                                             |  |             |        |               |   | 264,000



41



---

##### Table of Contents

Employment Agreements



We have employment agreements with the following executive officers:



| |  |  | Donald R. Kiepert, Jr., Chairman, President and Chief Executive Officer
| | - |  | -----------------------------------------------------------------------



| |  |  | Richard N. Small, Senior Vice President, Chief Financial Officer and Treasurer
| | - |  | ------------------------------------------------------------------------------



| |  |  | Barry Jones, Ph.D., Senior Vice President, Research
| | - |  | ---------------------------------------------------



| |  |  | Michael P. Duffy, Senior Vice President, General Counsel and Secretary
| | - |  | ----------------------------------------------------------------------



| |  |  | Margaret J. Uprichard, Pharm.D., Senior Vice President, Clinical and Regulatory Affairs
| | - |  | ---------------------------------------------------------------------------------------



Mr. Kieperts employment agreement provides for his employment as Chairman of the Board of Directors, President and
Chief Executive Officer through October 31, 2004. The employment agreement is automatically renewed for successive one year terms thereafter, unless terminated by either party. The agreement provides for a base salary, currently $345,000 per year,
subject to yearly merit and performance based bonuses to be granted in an amount in the Board of Directors discretion. If we terminate Mr. Kieperts agreement for any reason other than for cause, as that term is defined in the agreement,
he is entitled to continue to receive his base salary for twelve months following the time of the termination and a lump-sum payment of $25,000 for fringe benefits. If Mr. Kiepert terminates his agreement for good reason, as that term is defined in
the agreement, he is entitled continue to receive his base salary for twelve months following the time of the termination and a lump-sum payment of $25,000 for fringe benefits. If Mr. Kieperts agreement is terminated under certain
circumstances following a change of control, as that term is defined in the agreement, we are obligated to pay him a lump-sum payment equal to two times the sum of his base salary as in effect at the time of the termination and a lump-sum payment of
$50,000 for fringe benefits.



Mr. Smalls employment
agreement provides for his employment as Senior Vice President, Chief Financial Officer and Treasurer through October 31, 2004. The employment agreement is automatically renewed for successive one year terms thereafter, unless terminated by either
party. The employment agreement provides for a base salary, currently $220,000 per year, subject to yearly merit and performance based bonuses to be granted in an amount in the Board of Directors discretion. If we terminate Mr. Smalls
employment agreement for any reason other than for cause, as that term is defined in the agreement, he is entitled to continue to receive his base salary for twelve months following the time of the termination and a lump-sum payment of $25,000 for
fringe benefits. If Mr. Small terminates his agreement for good reason, as that term is defined in the agreement, he is entitled to continue to receive his base salary for twelve months following the time of the termination and a lump-sum payment of
$25,000 for fringe benefits. If Mr. Smalls employment agreement is terminated under certain circumstances following a change of control, as that term is defined in the employment agreement, we are obligated to pay him a lump-sum payment equal
to one and one-half times the sum of his base salary as in effect at the time of the termination and a lump-sum payment of $37,500 for fringe benefits.



Dr. Jones employment agreement provides for his employment as Senior Vice President, Research through January 1, 2006. The employment agreement is
automatically renewed for successive one year terms thereafter, unless terminated by either party. The employment agreement provides for a base salary, currently $220,000 per year, subject to yearly merit and performance based bonuses to be granted
in an amount in the Board of Directors discretion. If we terminate Dr. Jones employment agreement for any reason other than for cause, as that term is defined in the agreement, he is entitled to continue to receive his base salary for
twelve months following the time of the termination and a lump-sum payment of $25,000 for fringe benefits. If Dr. Jones terminates his agreement for good reason, as that term is defined in the agreement, he is entitled to continue to receive his
base salary for twelve months following the time of the termination and a lump-sum payment of $25,000 for fringe benefits. If Dr. Jones employment agreement is terminated under certain circumstances following a change of control, as that term
is defined in the employment agreement, we are obligated to pay him a lump-sum payment equal to one and one-half times the sum of his base salary as in effect at the time of the termination and a lump-sum payment of $37,500 for fringe benefits.



42



---

##### Table of Contents

Mr. Duffys employment agreement provides for his employment as Senior Vice President, General
Counsel and Secretary through May 28, 2005. The employment agreement is automatically renewed for successive one year terms thereafter, unless terminated by either party. The employment agreement provides for a base salary, currently $220,000 per
year, subject to yearly merit and performance based bonuses to be granted in an amount in the Board of Directors discretion. If we terminate Mr. Duffys employment agreement for any reason other than for cause, as that term is defined in
the agreement, he is entitled to continue to receive his base salary for twelve months following the time of the termination and a lump-sum payment of $25,000 for fringe benefits. If Mr. Duffy terminates his agreement for good reason, as that term
is defined in the agreement, he is entitled to continue to receive his base salary for twelve months following the time of the termination and a lump-sum payment of $25,000 for fringe benefits. If Mr. Duffys employment agreement is terminated
under certain circumstances following a change of control, as that term is defined in the employment agreement, we are obligated to pay him a lump sum payment equal to one and one-half times the sum of his base salary as in effect at the time of the
termination and a lump-sum payment of $37,500 for fringe benefits.



Dr. Uprichards employment agreement provides for her employment as Senior Vice President, Clinical and Regulatory Affairs through January 13, 2006. The employment agreement is automatically renewed for successive one year terms
thereafter, unless terminated by either party. The employment agreement provides for a base salary, currently $220,000 per year, subject to yearly merit and performance based bonuses to be granted in an amount in the Board of Directors
discretion. If we terminate Dr. Uprichards employment agreement for any reason other than for cause, as that term is defined in the agreement, she is entitled to continue to receive her base salary for twelve months following the time of the
termination and a lump-sum payment of $25,000 for fringe benefits. If Dr. Uprichard terminates her agreement for good reason, as that term is defined in the agreement, she is entitled to continue to receive her base salary for twelve months
following the time of the termination and a lump-sum payment of $25,000 for fringe benefits. If Dr. Uprichards employment agreement is terminated under certain circumstances following a change of control, as that term is defined in the
employment agreement, we are obligated to pay her a lump sum payment equal to one and one-half times the sum of her base salary as in effect at the time of the termination and a lump-sum payment of $37,500 for fringe benefits.



43



---

##### Table of Contents

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



Security Ownership of Certain Beneficial Owners and Management



The following table sets forth, as of April 13, 2004, certain information
concerning beneficial ownership of our stock (as determined under the rules of the SEC) by (i) each person known by us to be the beneficial owner of more than five percent (5%) of our common stock, (ii) each of our Directors and nominees for
Director, (iii) each of the executive officers named in the Summary Compensation Table and (iv) all Directors and executive officers as a group.



Except as otherwise indicated, the stockholders listed in the table have sole voting and investment powers with respect to the shares indicated.



Except as otherwise indicated, the address for each person is
to the care of Point Therapeutics, Inc., 125 Summer Street, Suite 1840, Boston, MA 02110.



|                                                                                                     |  |                                  |  |                    |  
|---------------------------------------------------------------------------------------------------- |  | -------------------------------- |  | ------------------ | -
|Name                                                                                                 |  | Number ofSharesBeneficiallyOwned |  | Percentageof Class |  
|Federated Investors, Inc.(1) Federated Investors Towers Pittsburgh, PA 15222-3779                    |  | 2,800,525                        |  | 15.01              | %
|ProQuest Investments(2) 600 Alexander Park Road, Suite 204 Princeton, NJ 08540                       |  | 2,625,000                        |  | 13.79              |  
|Thomas M. Claflin II(3) c/o Claflin Capital Management 10 Liberty Square, Suite 300 Boston, MA 02109 |  | 1,013,251                        |  | 5.54               |  
|Deutsche Bank AG, London Branch 527 Madison Avenue, 8th Floor New York, NY 10022                     |  | 1,000,000                        |  | 5.51               |  
|J. Jay Lobell(4) 365 West End Avenue New York, NY 10024                                              |  | 1,000,000                        |  | 5.42               |  
|Claflin Capital Management(5) 10 Liberty Square, Suite 300 Boston, MA 02109                          |  | 978,251                          |  | 5.36               |  
|Graystone Venture Partners, LLC(6) One Northfield Plaza, Suite 530 Northfield, IL 60093              |  | 923,902                          |  | 5.04               |  
|Donald R. Kiepert, Jr.(7) 32 Garrison Street, 40-505 Boston, MA 02116                                |  | 770,389                          |  | 4.20               |  
|Richard N. Small(8)                                                                                  |  | 327,088                          |  | 1.79               |  
|Barry Jones, Ph.D.(9)                                                                                |  | 102,627                          |  | *                  |  
|Timothy J. Barberich(10)                                                                             |  | 67,508                           |  | *                  |  
|William J. Whelan, Jr.(11)                                                                           |  | 66,212                           |  | *                  |  
|Michael P. Duffy(12)                                                                                 |  | 73,000                           |  | *                  |  
|Daniel T. Roble(13)                                                                                  |  | 55,808                           |  | *                  |  
|Margaret J. Uprichard, Pharm. D.(14)                                                                 |  | 25,000                           |  | *                  |  
|All directors and executive officers as a group (9 persons)(15)                                      |  | 2,500,884                        |  | 13.14              |  

---

|* |  | Beneficial ownership does not exceed 1% of our outstanding common stock.
|- |  | ------------------------------------------------------------------------

|(1) |  | Consists of 1,300,525 shares of common stock held by the Federated Kaufmann Fund, 650,000 shares of common stock held by the Federated Kauffmann Small-Cap Fund, a
portfolio of Federated Equity Funds,
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



44



---

##### Table of Contents

| | 350,000 shares owned by American Skandia Trust, a portfolio of Federated Equity Funds, 325,000 shares issuable to the Federated Kauffmann Small-Cap Fund upon
the exercise of common stock warrants and 175,000 shares issuable to American Skandia Trust upon the exercise of common stock warrants.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Consists of 1,036,000 shares of common stock held by ProQuest Investments II, L.P., 674,100 shares of common stock held by ProQuest Investments, L.P., 31,150 shares of common stock
held by the ProQuest Investments II Advisors Fund, L.P., 8,750 shares of common stock held by the ProQuest Companion Fund, L.P., 518,000 shares issuable to ProQuest Investments II, L.P. upon the exercise of common stock warrants, 337,050 shares
issuable to ProQuest Investments, L.P. upon the exercise of common stock warrants, 15,575 shares issuable to the ProQuest Investments II Advisors Fund, L.P. upon the exercise of common stock warrants and 4,375 shares issuable to by the ProQuest
Companion Fund, L.P. upon the exercise of common stock warrants.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Consists of 306,355 shares of common stock held by the Claflin Capital VI Fund, 216,570 shares of common stock held by the Claflin Capital VII Fund, 360,410 shares of common stock
held by the Black Diamond Fund, L.P., 41,950 shares issuable to the Claflin Capital VI Fund upon the exercise of common stock warrants, 27,966 shares issuable to the Claflin Capital VII Fund upon the exercise of common stock warrants and 25,000
shares issuable to the Black Diamond Fund, L.P. upon the exercise of common stock warrants. Mr. Claflin in his capacity of President and Chief Executive Officer of Claflin Capital Management has voting and investment power with respect to these
shares but disclaims beneficial ownership with respect to these shares. Also includes 35,000 shares issuable to Mr. Claflin upon the exercise of options currently exercisable or exercisable within 60 days of April 13, 2004.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Consists of 600,000 shares of common stock held by the Rosenwald Family Trust, for which Mr. Lobell serves as the trustee, 100,000 shares owned directly by Mr. Lobell, 250,000
shares issuable to the Rosenwald Family Trust upon the exercise of common stock warrants and 50,000 shares issuable to Mr. Lobell upon the exercise of common stock warrants.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Consists of 306,355 shares of common stock held by the Claflin Capital VI Fund, 216,570 shares of common stock held by the Claflin Capital VII Fund, 360,410 shares of common stock
held by the Black Diamond Fund, L.P., 41,950 shares issuable to the Claflin Capital VI Fund upon the exercise of common stock warrants, 27,966 shares issuable to the Claflin Capital VII Fund upon the exercise of common stock warrants and 25,000
shares issuable to the Black Diamond Fund, L.P. upon the exercise of common stock warrants. Mr. Claflin in his capacity of President and Chief Executive Officer of Claflin Capital Management has voting and investment power with respect to these
shares but disclaims beneficial ownership with respect to these shares.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) |  | Consists of 753,983 shares of common stock held by Graystone Venture Direct Equity, L.P., which is managed by Graystone Venture Partners, LLC, and 169,916 shares issuable to
Graystone Venture Direct Equity, L.P., upon exercise of common stock warrants.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) |  | Includes 205,659 shares issuable to Mr. Kiepert upon the exercise of options currently exercisable or exercisable within 60 days of April 13, 2004.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

|(8) |  | Includes 164,850 shares issuable to Mr. Small upon the exercise of options currently exercisable or exercisable within 60 days of April 13, 2004.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------

|(9) |  | Consists solely of shares issuable to Dr. Jones upon the exercise of options currently exercisable or exercisable within 60 days of April 13, 2004.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

|(10) |  | Consists solely of shares issuable to Mr. Barberich upon the exercise of options currently exercisable or exercisable within 60 days of April 13, 2004. Mr. Barberich, our director
who is also Chairman of the Board of Directors and Chief Executive Officer of Sepracor Inc., another one of our stockholders, disclaims beneficial ownership of any shares owned by Sepracor Inc.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) |  | Includes 55,808 shares issuable to Mr. Whelan upon the exercise of options currently exercisable or exercisable within 60 days of April 13, 2004.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------

|(12) |  | Consists solely of shares issuable to Mr. Duffy upon the exercise of options currently exercisable or exercisable within 60 days of April 13, 2004.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

|(13) |  | Consists solely of shares issuable to Mr. Roble upon the exercise of options currently exercisable or exercisable within 60 days of April 13, 2004.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



45



---

##### Table of Contents

|(14) |  | Consists solely of shares issuable to Dr. Uprichard upon the exercise of options currently exercisable within 60 days of April 13, 2004.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------

|(15) |  | Includes 880,176 shares of common stock subject to options or warrants currently exercisable or will become exercisable within 60 days of April 13, 2004.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|(16) |  | As of April 13, 2004, there were 18,158,143 common stock shares of Point outstanding.
|---- |  | -------------------------------------------------------------------------------------

|(17) |  | Information included in this report was derived from various sources known to us including filings made with the Securities and Exchange Commission, statements filed with us by our
directors and executive officers and our company records.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We maintain four stock option plans; the 1997 Stock Option Plan, as amended, the Amended and Restated 1994 Stock Option Plan, the 1994 Directors Stock Option Plan, as amended, and the 2003 Stock Option Plan for Non-Employee Directors
(the Plans), which were approved by Board of Directors and our stockholders. The following table gives information about awards under the Plans as of December 31, 2003:



|                                                       |  |                                                                                       |  |                                                                           |      |                                                                                                                                 |          
|------------------------------------------------------ |  | ------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------- | ---- | ------------------------------------------------------------------------------------------------------------------------------- | ---------
|Plan Category                                          |  | Number of shares to be issuedupon exercise of outstandingoptions, warrants and rights |  | Weighted average exercise price ofoutstanding options,warrants and rights |      | Number of shares remainingavailable for future issuanceunder equity compensationplans (excluding sharesreflected in column
(a))
|                                                       |  | (a)                                                                                   |  | (b)                                                                       |      | (c)                                                                                                                            
|Equity compensation plans approved by shareholders     |  | 2,261,023                                                                             |  | $                                                                         | 2.32 |                                                                                                                                 | 1,517,645
|Equity compensation plans not approved by shareholders |  |                                                                                      |  |                                                                           |     |                                                                                                                                 |         
|                                                       |  |                                                                                       |  |                                                                           |      |                                                                                                                                 |          
|Total                                                  |  | 2,261,023                                                                             |  | $                                                                         | 2.32 |                                                                                                                                 | 1,517,645
|                                                       |  |                                                                                       |  |                                                                           |      |                                                                                                                                 |          



Item 13.Certain Relationships and Related Transactions



On November 15, 2001, HMSR and PT Acquisition Corp., a wholly-owned subsidiary of HMSR formed for the purpose of consummating a merger transaction,
entered into an Agreement and Plan of Merger with Point Massachusetts. On March 15, 2002, HMSRs stockholders approved a 1-for-10 reverse split of HMSRs common stock and a name change from HMSR Inc. to Point Therapeutics, Inc. The
stockholders of Point Massachusetts also approved on March 15, 2002 the merger agreement previously entered into by both parties. The merger became effective on March 15, 2002, at which time, Point Massachusetts became our wholly-owned subsidiary.
Point Massachusetts subsequently changed its name to Point Therapeutics Massachusetts, Inc.



As noted above, Mr. Barberich, our director, is a Chairman of the Board of Directors and Chief Executive Officer of Sepracor, which beneficially owned
approximately 31.5% of HMSRs common stock as of December 31, 2001. Mr. Barberich also has served as a director of Point Massachusetts since March of 1999. As of December 31, 2001, Mr. Barberich beneficially owned approximately 1% of
HMSRs outstanding common stock and less than 1% of Point Massachusetts outstanding common stock. Mr. Barberichs interests were disclosed to and considered by HMSRs and Point Massachusetts Boards of Directors in
connection with their consideration of the merger. Mr. Barberich abstained from voting on the merger and the merger agreement at the meetings of each companys Board of Directors because of these interests.



Mr. Daniel T. Roble, our director, is a limited partner of the law firm of
Ropes & Gray LLP. Ropes & Gray LLP provided Point Massachusetts with legal services in the past and currently provides legal services to us.



Item 14.Independent Auditor Fees and Services



The Board of Directors has appointed Ernst & Young LLP to examine the financial statements of Point for the fiscal year 2004. In 2003, in addition to
audit services, Ernst & Young LLP provided tax compliance and tax preparation services to Point. The Audit Committee has considered whether the provision of these additional services is compatible with maintaining the independence of Ernst &
Young LLP. We understand the need for



46



---

##### Table of Contents

Ernst & Young LLP to maintain objectivity and independence in its audit of our financial statements. To minimize relationships that could appear to
impair the objectivity of Ernst & Young LLP, our audit committee has restricted the non-audit services that Ernst & Young LLP may provide to us primarily to tax services and merger and acquisition due diligence and audit services. In
addition, we will obtain these non-audit services from Ernst & Young LLP only when the services offered by Ernst & Young LLP are more economical and efficient than services available from other service providers.



The aggregate fees billed for professional services Ernst & Young LLP in
2003 and 2002 for these various services were:



|                     |  |      |         |      |   |        
|-------------------- |  | ---- | ------- | ---- | - | -------
|                     |  | 2003 |         | 2002
|Audit Fees           |  | $    | 115,000 |      | $ | 97,000 
|Audit Related Fees   |  |      | 3,000   |      |   |       
|Tax and related Fees |  |      | 26,000  |      |   | 36,000 
|                     |  |      |         |      |   |        
|Total                |  | $    | 144,000 |      | $ | 133,000
|                     |  |      |         |      |   |        



In addition,
PricewaterhouseCoopers LLP billed us an aggregate of $87,000 for fees rendered to us in conjunction with tax filings, the Merger Agreement and S-4 filing between us and Point Massachusetts, during the fiscal year ended December 31, 2002.



Appointment of Independent Auditor and Pre-Approval of Audit and Non-Audit Services



The Board of Directors has selected Ernst & Young LLP
to serve as the Companys independent accountants for fiscal year 2004. All of the Ernst & Young LLP fees for 2003 shown above were pre-approved by the Audit Committee. The Audit Committee pre-approves all audit and other permitted
non-audit services provided by our independent auditors. Pre-approval is generally provided for up to one year, is detailed as to the particular category of services and is subject to a monetary limit. Our independent auditors and senior management
periodically report to the Audit Committee the extent of services provided by the independent auditors in accordance with the pre-approval, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services
on a case-by-case basis. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and will have an opportunity to make a statement and to respond to appropriate questions.



47



---

##### Table of Contents

Comparative Stock Performance



The graph below compares the cumulative total stockholder return on our common stock for the period from January 1, 1999
through December 31, 2003 with the cumulative total return on (i) Nasdaq Biotechnology Index and (ii) Russell 2000 Index. The comparison assumes investment of $100 on January 1, 1999 in the Common Stock and in each of the indices and, in each case,
assumes reinvestment of all dividends.



LOGO



|                           |  |            |        |            |   |            |  |            |        |            |   |            |  |   |        |  |   |       
|-------------------------- |  | ---------- | ------ | ---------- | - | ---------- |  | ---------- | ------ | ---------- | - | ---------- |  | - | ------ |  | - | ------
|COMPANY/INDEX/MARKET       |  | 12/31/1998 |        | 12/31/1999 |   | 12/31/2000 |  | 12/31/2001 |        | 12/31/2002 |   | 12/31/2003
|Point Therapeutics, Inc.   |  | $          | 100.00 |            | $ | 355.45     |  | $          | 14.81  |            | $ | 22.51      |  | $ | 3.85   |  | $ | 19.85 
|Nasdaq Biotechnology Index |  | $          | 100.00 |            | $ | 214.99     |  | $          | 283.80 |            | $ | 243.92     |  | $ | 162.59 |  | $ | 235.53
|Russell 2000 Index         |  | $          | 100.00 |            | $ | 119.59     |  | $          | 114.43 |            | $ | 115.60     |  | $ | 90.65  |  | $ | 131.78



48



---

##### Table of Contents

PART IV



Item 15.Exhibits, Financial Statement Schedules, and Reports on Form 8-K



|(a) |  | The following documents are included as part of this Annual Report on Form 10-K/A.
|--- |  | ----------------------------------------------------------------------------------



| | 1. |  | Financial Statements
| | -- |  | --------------------

The Consolidated Financial
Statements and related Notes filed as part of this Report are listed and indexed on Page F-1.



| | 2. |  | Financial Statement Schedules
| | -- |  | -----------------------------

All schedules are omitted
because they are inapplicable, not required or the information is included in the Consolidated Financial Statements or the related Notes.



| | 3. |  | Exhibits
| | -- |  | --------

The Exhibits listed in the Exhibit Index
immediately preceding the Exhibits are filed as part of this Annual Report on Form 10-K/A.



Accompanying this Annual Report on Form 10-K/A are the certificates of the Chief Executive Officer and Chief Financial Officer required by Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, copies of which are furnished as exhibits to this report.



|(b) |  | The Registrant filed the following Report on Form 8-K during the fourth quarter of 2003 and through March 11, 2004:
|--- |  | -------------------------------------------------------------------------------------------------------------------



|                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                               
|----------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Date of Report    |  | Reported                                                                                                                                                                                                                                                                                                                                                                                                                      
|October 20, 2003  |  | Current Report on Form 8-K to report, pursuant to Item 5 (Other Events) that we issued a press release on October 20, 2003 announcing that members of our management will be presenting at the
First Annual Rodman & Renshaw Techvest Healthcare Conference on Tuesday, October 21, 2003.                                                                                                                                     
|                  | 
|October 27, 2003  |  | Current Report on Form 8-K to report, pursuant to Item 5 (Other Events) that we issued a press release on October 27, 2003 announcing that members of our management will be presenting at MASS
Opportunities: A Biotechnology Investment Conference hosted by the Massachusetts Biotechnology Council on Tuesday, October 28, 2003.                                                                                          
|                  | 
|November 3, 2003  |  | Current Report on Form 8-K to report, pursuant to Item 12 (Results of Operations and Financial Condition), that we had issued a press release on November 3, 2003 to report our financial
results for the third quarter ended September 30, 2003.                                                                                                                                                                             
|                  | 
|November 21, 2003 |  | Current Report on Form 8-K to report, pursuant to Item 5 (Other Events) that we issued a press release on November 20, 2003 announcing the presentation of results from a study of our lead
product candidate PT-100 demonstrating preclinical tumor growth suppression and enhancement of chemotherapy. These results were presented on November 20, 2003 in a poster session of the AACR-NCI-EORTC International Conference.
|                  | 
|February 26, 2004 |  | Current Report on Form 8-K to report, pursuant to Item 12 (Financial Results) that we issued a press release on February 26, 2004 announcing our financial results for the fourth quarter and
fiscal year ended December 31, 2003.                                                                                                                                                                                            
|                  | 
|March 9, 2004     |  | Current Report on Form 8-K to report, pursuant to Item 5 (Other Events) that we issued a press release on March 9, 2004 announcing that we initiated a Phase 2 clinical trial for the treatment
of advanced non-small cell lung cancer.                                                                                                                                                                                       



49



---

##### Table of Contents

SIGNATURES



Pursuant to the
requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 1stday of June, 2004.



|                         |  |                                                            
|------------------------ |  | -----------------------------------------------------------
|POINT THERAPEUTICS, INC.
|                         | 
|By:                      |  | /s/    DONALD R. KIEPERT, JR.                              
|                         |  |                                                            
|                         |  | Donald R. Kiepert, Jr President and Chief Executive Officer



50



---

##### Table of Contents

The following exhibits are filed as part of this Annual Report on Form 10-K/A:



|            |  |                                                                                                                                    
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                        
|2.1(12)     |  | Agreement and Plan of Merger, dated November 15, 2001, among HMSR Inc., PT Acquisition Corp., and Point Therapeutics,
Inc.         
|            | 
|2.2(8)      |  | Asset Purchase Agreement, dated as of February 3, 2001, by and between Point Therapeutics, Inc., Whatman and Whatman
plc.          
|            | 
|2.3(9)      |  | Amendment to Asset Purchase Agreement, dated as of April 2, 2001, by and between Point Therapeutics, Inc., Whatman and Whatman
plc.
|            | 
|2.4(17)     |  | Engagement Agreement dated as of September 10, 2003 between Point Therapeutics, Inc. and Paramount Capital, Inc.                   
|            | 
|2.5(17)     |  | Subscription Agreement, dated on or about September 19, 2003, by and among Point Therapeutics, Inc. and several
purchasers.        
|            | 
|3.1(1)      |  | Certificate of Incorporation of Point Therapeutics, Inc.                                                                           
|            | 
|3.2(10)     |  | Certificate of Amendment of Certificate of Incorporation Point Therapeutics, Inc.                                                  
|            | 
|3.3(11)     |  | Certificate of Amendment of Certificate of Incorporation of Point Therapeutics, Inc.                                               
|            | 
|3.4(13)     |  | Certificate of Amendment of Certificate of Incorporation of Point Therapeutics, Inc.                                               
|            | 
|3.5(1)      |  | By-Laws of Point Therapeutics, Inc.                                                                                                
|            | 
|4.1(14)     |  | Specimen Certificate for shares of Common Stock, $.01 par value, of Point Therapeutics, Inc.                                       
|            | 
|4.2(14)     |  | Form of Warrant for Point Therapeutics, Inc.                                                                                       
|            | 
|4.3(17)     |  | Form of Investor Warrant for Point Therapeutics, Inc., dated as of September 24, 2003.                                             
|            | 
|4.4(17)     |  | Form of Paramount Warrant for Point Therapeutics, Inc., dated as of September 24, 2003.                                            
|            | 
|4.5(2)      |  | Registration Rights Agreement, dated January 23, 1997, by and among Point Therapeutics, Inc. and Novo Nordisk A/S.                 
|            | 
|4.6(3)      |  | Registration Rights Agreement, dated as of September 15, 1998, between Point Therapeutics, Inc. and Sepracor.                      
|            | 
|4.7(4)      |  | Warrant Agreement, dated as of September 15, 1998, between Point Therapeutics, Inc. and Sepracor.                                  
|            | 
|4.8(4)      |  | Warrant Certificate, dated as of September 15, 1998, between Point Therapeutics, Inc. and Sepracor.                                
|            | 
|4.9(5)      |  | Registration Rights Agreement, dated as of March 23, 1999, between Point Therapeutics, Inc. and Sepracor.                          
|            | 
|4.10(5)     |  | Warrant Agreement, dated as of March 23, 1999, between Point Therapeutics, Inc. and Sepracor.                                      
|            | 
|4.11(5)     |  | Warrant Certificate, dated as of March 23, 1999, between Point Therapeutics, Inc. and Sepracor.                                    
|            | 
|4.12(16)    |  | Warrant Agreement, dated as of August 10, 1998, between Point Therapeutics, Inc. and Thomas D. Foley.                              
|            | 
|4.13(16)    |  | Warrant Agreement, dated as of July 24, 1998, between Point Therapeutics, Inc. and Claflin Capital VI.                             
|            | 
|4.14(16)    |  | Warrant Agreement, dated as of July 24, 1998, between Point Therapeutics, Inc. and Claflin Capital VII.                            
|            | 
|4.15(16)    |  | Warrant Agreement, dated as of August 10, 1998, between Point Therapeutics, Inc. and Dr. Pennington.                               
|            | 
|4.16(16)    |  | Warrant Agreement, dated as of July 24, 1998, between Point Therapeutics, Inc. and Fieldmark, Inc.                                 
|            | 
|4.17(16)    |  | Warrant Agreement, dated as of July 24, 1998, between Point Therapeutics, Inc. and Graystone.                                      
|            | 
|4.18(16)    |  | Warrant Agreement, dated as of August 10, 1998, between Point Therapeutics, Inc. and Kenneth Zito.                                 
|            | 
|4.19(16)    |  | Warrant Agreement, dated as of August 10, 1998, between Point Therapeutics, Inc. and Medical Investments.                          
|            | 
|4.20(16)    |  | Warrant Agreement, dated as of August 10, 1998, between Point Therapeutics, Inc. and Nancy Finn.                                   



---

##### Table of Contents

|            |  |                                                                                                                                        
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                            
|4.21(16)    |  | Warrant Agreement, dated as of August 10, 1998, between Point Therapeutics, Inc. and Cornelia Stutz.                                   
|            | 
|10.1(2)     |  | Point Therapeutics, Inc.s 1994 Stock Option Plan.                                                                                     
|            | 
|10.2(2)     |  | Point Therapeutics, Inc.s 1994 Director Option Plan.                                                                                  
|            | 
|10.3(2)     |  | Amendment to Point Therapeutics, Inc.s 1994 Director Option Plan, dated June 25, 1996.                                                
|            | 
|10.4(2)     |  | Amendment to Point Therapeutics, Inc.s 1994 Director Option Plan, effective as of May 16, 1996.                                       
|            | 
|10.5(2)     |  | Amendment to Point Therapeutics, Inc.s 1994 Stock Option Plan, dated June 25, 1996.                                                   
|            | 
|10.6(2)     |  | Amendment to Point Therapeutics, Inc.s 1994 Stock Option Plan, effective as of May 16, 1996.                                          
|            | 
|10.7(5)     |  | Securities Purchase Agreement, dated as of March 23, 1999, between Point Therapeutics, Inc. and Sepracor.                              
|            | 
|10.8(7)     |  | Form of Purchase Agreement, dated March 2, 2000.                                                                                       
|            | 
|10.9(7)     |  | Schedule of purchasers which purchased shares of common stock pursuant to the Form of Purchase Agreement set forth in
10.31.           
|            | 
|10.10(9)    |  | Royalty Agreement, dated as of May 29, 2001, by and among Point Therapeutics, Inc., Whatman and Whatman plc.                           
|            | 
|10.11(14)   |  | Amended Employment Agreement dated October 31, 2001 by and between Point Therapeutics, Inc. and Donald R. Kiepert, Jr.                 
|            | 
|10.12(14)   |  | Amended Employment Agreement dated October 31, 2001 by and between Point Therapeutics, Inc. and Richard N. Small.                      
|            | 
|10.13(14)   |  | Employment Agreement dated September 26, 2001 by and between Point Therapeutics, Inc. and Dr. Lawrence Nussbaum.                       
|            | 
|10.14(14)   |  | Amended and Restated License Agreement dated January 12, 1999 by and between Point Therapeutics, Inc. and Tufts
University.            
|            | 
|10.15(15)   |  | Employment Agreement dated May 28, 2002 by and between Point Therapeutics, Inc. and Michael P. Duffy.                                  
|            | 
|10.16(16)   |  | Employment Agreement dated January 1, 2003 by and between Point Therapeutics, Inc. and Barry Jones.                                    
|            | 
|10.17(16)   |  | Employment Agreement dated January 13, 2003 by and between Point Therapeutics, Inc. and Margaret J. Uprichard.                         
|            | 
|10.18(14)   |  | Point Therapeutics Massachusetts, Inc. 1997 Stock Option Plan.                                                                         
|            | 
|21.1(18)    |  | Subsidiaries of Point Therapeutics, Inc.                                                                                               
|            | 
|23.1        |  | Consent of Ernst & Young LLP.                                                                                                          
|            | 
|24.1       |  | Power of Attorney.                                                                                                                     
|            | 
|31.1        |  | Certification of Donald R. Kiepert, Jr. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 29,
2004                
|            | 
|31.2        |  | Certification of Richard N. Small pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 29, 2004.                     
|            | 
|32.1        |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
herewith.

---

|(1) |  | Incorporated herein by reference to Point Therapeutics, Inc.s Registration Statement on Form S-1, as amended (File No. 33-75930).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Incorporated by reference to Point Therapeutics, Inc.s Annual Report on Form 10-K for the year ended December 31, 1996.
|--- |  | ------------------------------------------------------------------------------------------------------------------------

|(3) |  | Incorporated by reference to Point Therapeutics, Inc.s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
|--- |  | --------------------------------------------------------------------------------------------------------------------------

|(4) |  | Incorporated by reference to Point Therapeutics, Inc.s Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 1998.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------

|(5) |  | Incorporated by reference to Point Therapeutics, Inc.s Annual Report on Form 10-K for the year ended December 31, 1998.
|--- |  | ------------------------------------------------------------------------------------------------------------------------



---

##### Table of Contents

|(6) |  | Incorporated by reference to Point Therapeutics, Inc.s Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------

|(7) |  | Incorporated by reference to Point Therapeutics, Inc.s Annual Report on Form 10-K for the year ended December 31, 1999.
|--- |  | ------------------------------------------------------------------------------------------------------------------------

|(8) |  | Incorporated by reference to Point Therapeutics, Inc.s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------

|(9) |  | Incorporated by reference to Point Therapeutics, Inc.s Definitive Proxy Statement on Schedule 14A filed on April 27, 2001.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------

|(10) |  | Incorporated by reference to Point Therapeutics, Inc.s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.
|---- |  | --------------------------------------------------------------------------------------------------------------------------

|(11) |  | Incorporated by reference to Point Therapeutics, Inc.s Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 2001.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------

|(12) |  | Incorporated by reference to Point Therapeutics, Inc.s Registration Statement on Form S-4 filed on February 11, 2002.
|---- |  | ----------------------------------------------------------------------------------------------------------------------

|(13) |  | Incorporated by reference to Point Therapeutics, Inc.s Current Report on Form 8-K filed on March 28, 2002.
|---- |  | -----------------------------------------------------------------------------------------------------------

|(14) |  | Incorporated by reference to Point Therapeutics, Inc.s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------

|(15) |  | Incorporated by reference to Point Therapeutics, Inc.s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.
|---- |  | --------------------------------------------------------------------------------------------------------------------------

|(16) |  | Incorporated by reference to Point Therapeutics, Inc.s Annual Report on Form 10-K for the year ended December 31, 2002.
|---- |  | ------------------------------------------------------------------------------------------------------------------------

|(17) |  | Incorporated by reference to Point Therapeutics, Inc.s Registration Statement on Form S-1 filed on November 18, 2003.
|---- |  | ----------------------------------------------------------------------------------------------------------------------

|(18) |  | Incorporated by reference to Point Therapeutics, Inc.s Annual Report on Form 10-K for the year ended December 31, 2003.
|---- |  | ------------------------------------------------------------------------------------------------------------------------

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



---

##### Table of Contents

POINT THERAPEUTICS, INC.

(A Development Stage Company)



INDEX TO FINANCIAL STATEMENTS



|                                                                                                                                                                                               |  |     
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                                                                               |  | Page
|Report of Independent Auditors                                                                                                                                                                 |  | F-2 
|                                                                                                                                                                                               | 
|Consolidated Balance Sheets at December 31, 2003 and 2002                                                                                                                                      |  | F-3 
|                                                                                                                                                                                               | 
|Consolidated Statements of Operations for the Years Ended December 31, 2003, 2002 and 2001 and for the Period from Inception (September 3,
1996) through December 31, 2003                     |  | F-4 
|                                                                                                                                                                                               | 
|Consolidated Statements of Stockholders Equity (Deficit) for the Years Ended December 31, 2003, 2002 and 2001 and for the Period from
Inception (September 3, 1996) through December 31, 2003 |  | F-5 
|                                                                                                                                                                                               | 
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2003, 2002 and 2001 and for the Period from Inception (September 3,
1996) through December 31, 2003                     |  | F-6 
|                                                                                                                                                                                               | 
|Notes to Consolidated Financial Statements                                                                                                                                                     |  | F-7 



F-1



---

##### Table of Contents

REPORT OF INDEPENDENT AUDITORS



Board of Directors and Stockholders

Point
Therapeutics, Inc.



We have audited the accompanying
consolidated balance sheets of Point Therapeutics, Inc. and subsidiaries (a development stage company) (the Company) as of December 31, 2003 and 2002, and the related consolidated statements of operations, stockholders equity
(deficit), and cash flows for each of the three years in the period ended December 31, 2003 and the period from September 3, 1996 (date of inception) through December 31, 2003. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial statements based on our audits.



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



In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position of Point Therapeutics, Inc. at December 31, 2003 and 2002, and the consolidated results of its operations and its cash flows for each of the three years in the period
ended December 31, 2003, and the period from September 3, 1996 (date of inception) through December 31, 2003, in conformity with accounting principles generally accepted in the United States.



/s/ Ernst & Young LLP



Boston, Massachusetts

February 17, 2004



F-2



---

##### Table of Contents

POINT THERAPEUTICS, INC. AND SUBSIDIARIES

(A Development Stage Company)



CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                                                                                                                      |  |      |             |   |      |   |             |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                                                                                                                                                                                                                                      |  | 2003 |             |   | 2002 |  
|Assets                                                                                                                                                                                                                                                                |  |      |             |   |      |   |             |  
|Current assets:                                                                                                                                                                                                                                                       |  |      |             |   |      |   |             |  
|Cash and cash equivalents                                                                                                                                                                                                                                             |  | $    | 14,062,104  |   |      | $ | 11,925,327  |  
|Cash and cash equivalents  restricted                                                                                                                                                                                                                                |  |      | 80,168      |   |      |   | 80,168      |  
|Prepaid expenses and other current assets                                                                                                                                                                                                                             |  |      | 413,941     |   |      |   | 234,378     |  
|                                                                                                                                                                                                                                                                      |  |      |             |   |      |   |             |  
|Total current assets                                                                                                                                                                                                                                                  |  |      | 14,556,213  |   |      |   | 12,239,873  |  
|Office and laboratory equipment, net                                                                                                                                                                                                                                  |  |      | 243,056     |   |      |   | 273,385     |  
|Deposits and other assets                                                                                                                                                                                                                                             |  |      | 37,373      |   |      |   | 39,316      |  
|                                                                                                                                                                                                                                                                      |  |      |             |   |      |   |             |  
|Total assets                                                                                                                                                                                                                                                          |  | $    | 14,836,642  |   |      | $ | 12,552,574  |  
|                                                                                                                                                                                                                                                                      |  |      |             |   |      |   |             |  
|                                                                                                                                                                                                                                                                      |  |     
|Liabilities and stockholders equity                                                                                                                                                                                                                                  |  |      |             |   |      |   |             |  
|Current liabilities:                                                                                                                                                                                                                                                  |  |      |             |   |      |   |             |  
|Accounts payable                                                                                                                                                                                                                                                      |  | $    | 438,475     |   |      | $ | 488,603     |  
|Accrued expenses                                                                                                                                                                                                                                                      |  |      | 356,343     |   |      |   | 728,987     |  
|Accrued professional fees                                                                                                                                                                                                                                             |  |      | 103,025     |   |      |   | 178,000     |  
|Accrued severance                                                                                                                                                                                                                                                     |  |      | 30,389      |   |      |   | 4,713       |  
|                                                                                                                                                                                                                                                                      |  |      |             |   |      |   |             |  
|Total current liabilities                                                                                                                                                                                                                                             |  |      | 928,232     |   |      |   | 1,400,303   |  
|Patent liability, less current portion                                                                                                                                                                                                                                |  |      | 52,367      |   |      |   | 57,055      |  
|Stockholders equity:                                                                                                                                                                                                                                                 |  |      |             |   |      |   |             |  
|Preferred stock, $0.01 par value, 1,000 shares authorized; no shares issued or outstanding                                                                                                                                                                            |  |      |            |   |      |   |            |  
|Common stock, $0.01 par value; 30,000,000 shares authorized; 14,976,925 shares issued at December 31, 2003 and 9,376,924 shares issued at
December 31, 2002, 14,875,756 shares outstanding at December 31, 2003 and 9,275,755 shares outstanding at December 31, 2002 |  |      | 149,769     |   |      |   | 93,769      |  
|Treasury stock (101,169 shares outstanding at $3.28 per share)                                                                                                                                                                                                        |  |      | (331,936    | ) |      |   | (331,936    | )
|Additional paid-in capital                                                                                                                                                                                                                                            |  |      | 38,574,572  |   |      |   | 28,142,973  |  
|Deficit accumulated during the development stage                                                                                                                                                                                                                      |  |      | (24,536,362 | ) |      |   | (16,809,590 | )
|                                                                                                                                                                                                                                                                      |  |      |             |   |      |   |             |  
|Total stockholders equity                                                                                                                                                                                                                                            |  |      | 13,856,043  |   |      |   | 11,095,216  |  
|                                                                                                                                                                                                                                                                      |  |      |             |   |      |   |             |  
|Total liabilities and stockholders equity                                                                                                                                                                                                                            |  | $    | 14,836,642  |   |      | $ | 12,552,574  |  
|                                                                                                                                                                                                                                                                      |  |      |             |   |      |   |             |  





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



F-3



---

##### Table of Contents

POINT THERAPEUTICS, INC. AND SUBSIDIARIES

(A Development Stage Company)



CONSOLIDATED STATEMENTS OF OPERATIONS



|                                            |  |                         |            |   |                                                                       |   |            |      |  |   |            |   |  |   |             |  
|------------------------------------------- |  | ----------------------- | ---------- | - | --------------------------------------------------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ----------- | -
|                                            |  | Year ended December 31, |            |   | Period FromSeptember 3,1996 (Date ofInception)ThroughDecember 31,2003 |  
|                                            |  | 2003                    |            |   | 2002                                                                  |   |            | 2001 |  |  
|Revenues                                    |  |                         |            |   |                                                                       |   |            |      |  |   |            |   |  |   |             |  
|License revenue                             |  | $                       | 115,041    |   |                                                                       | $ |           |      |  | $ |           |   |  | $ | 5,115,041   |  
|Sponsored research revenue                  |  |                         |           |   |                                                                       |   |           |      |  |   |           |   |  |   | 2,400,000   |  
|                                            |  |                         |            |   |                                                                       |   |            |      |  |   |            |   |  |   |             |  
|Total revenues                              |  |                         | 115,041    |   |                                                                       |   |           |      |  |   |           |   |  |   | 7,515,041   |  
|                                            |  |                         |            |  
|Operating expenses                          |  |                         |            |   |                                                                       |   |            |      |  |   |            |   |  |   |             |  
|Research and development                    |  |                         | 5,646,230  |   |                                                                       |   | 5,159,957  |      |  |   | 3,422,358  |   |  |   | 23,009,540  |  
|General and administrative                  |  |                         | 2,270,915  |   |                                                                       |   | 2,501,187  |      |  |   | 2,010,127  |   |  |   | 9,941,723   |  
|                                            |  |                         |            |   |                                                                       |   |            |      |  |   |            |   |  |   |             |  
|Total operating expenses                    |  |                         | 7,917,145  |   |                                                                       |   | 7,661,144  |      |  |   | 5,432,485  |   |  |   | 32,951,263  |  
|                                            |  |                         |            |   |                                                                       |   |            |      |  |   |            |   |  |   |             |  
|Loss from operations                        |  |                         | (7,802,104 | ) |                                                                       |   | (7,661,144 | )    |  |   | (5,432,485 | ) |  |   | (25,436,222 | )
|                                            |  |                         |            |  
|Interest income                             |  |                         | 75,332     |   |                                                                       |   | 182,559    |      |  |   | 225,463    |   |  |   | 982,512     |  
|Interest expense                            |  |                         |           |   |                                                                       |   |           |      |  |   |           |   |  |   | (82,652     | )
|                                            |  |                         |            |   |                                                                       |   |            |      |  |   |            |   |  |   |             |  
|Net loss                                    |  | $                       | (7,726,772 | ) |                                                                       | $ | (7,478,585 | )    |  | $ | (5,207,022 | ) |  | $ | (24,536,362 | )
|                                            |  |                         |            |   |                                                                       |   |            |      |  |   |            |   |  |   |             |  
|Net loss per share                          |  |                         |            |   |                                                                       |   |            |      |  |   |            |   |  |   |             |  
|Basic and diluted                           |  | $                       | (0.73      | ) |                                                                       | $ | (0.84      | )    |  | $ | (0.74      | ) |  |   |             |  
|                                            |  |                         |            |   |                                                                       |   |            |      |  |   |            |   |  |   |             |  
|Shares used in computing net loss per share |  |                         |            |   |                                                                       |   |            |      |  |   |            |   |  |   |             |  
|Basic and diluted                           |  |                         | 10,656,577 |   |                                                                       |   | 8,897,917  |      |  |   | 7,017,145  |   |  |   |             |  
|                                            |  |                         |            |   |                                                                       |   |            |      |  |   |            |   |  |   |             |  









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



F-4



---

##### Table of Contents

POINT THERAPEUTICS, INC. AND SUBSIDIARIES

(A Development Stage Company)



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)



|                                                                                                            |  |              |  |                                              |         |  |               |            |   |                                                  |   |          |                            |  |   |             |   |  |   |            |  
|----------------------------------------------------------------------------------------------------------- |  | ------------ |  | -------------------------------------------- | ------- |  | ------------- | ---------- | - | ------------------------------------------------ | - | -------- | -------------------------- |  | - | ----------- | - |  | - | ---------- | -
|                                                                                                            |  | Common Stock |  | AdditionalPaid In Capital/ Discount on Stock |         |  | TreasuryStock |            |   | Deficit Accumulated During the Development Stage |   |          | Total Stockholders Equity | 
|                                                                                                            |  | Shares       |  | Amount                                       |         |  |               |           
|Issuance of common stock on September 3, 1996                                                               |  | 2,300,543    |  | $                                            | 23,005  |  | $             | (3,005     | ) |                                                  | $ |         |                            |  | $ |            |   |  | $ | 20,000     |  
|Net loss                                                                                                    |  |              |  |                                              |         |  |               |            |   |                                                  |   |          |                            |  |   | (60,135     | ) |  |   | (60,135    | )
|Balance at December 31, 1996                                                                                |  | 2,300,543    |  |                                              | 23,005  |  |               | (3,005     | ) |                                                  |   |          |                            |  |   | (60,135     | ) |  |   | (40,135    | )
|Issuance of common stock on January 22, 1997                                                                |  | 820,716      |  |                                              | 8,207   |  |               | (1,072     | ) |                                                  |   |          |                            |  |   |             |   |  |   | 7,135      |  
|Issuance of common stock on May 7, 1997                                                                     |  | 717,890      |  |                                              | 7,179   |  |               | 1,671,412  |   |                                                  |   |          |                            |  |   |             |   |  |   | 1,678,591  |  
|Issuance of common stock for license rights on May 7, 1997                                                  |  | 372,292      |  |                                              | 3,723   |  |               | 890,847    |   |                                                  |   |          |                            |  |   |             |   |  |   | 894,570    |  
|Issuance of common stock on June 17, 1997                                                                   |  | 15,606       |  |                                              | 156     |  |               | 37,344     |   |                                                  |   |          |                            |  |   |             |   |  |   | 37,500     |  
|Issuance of common stock on October 1, 1997                                                                 |  | 426,572      |  |                                              | 4,266   |  |               | 1,007,293  |   |                                                  |   |          |                            |  |   |             |   |  |   | 1,011,559  |  
|Net loss                                                                                                    |  |              |  |                                              |         |  |               |            |   |                                                  |   |          |                            |  |   | (2,329,746  | ) |  |   | (2,329,746 | )
|                                                                                                            |  |              |  |                                              |         |  |               |            |   |                                                  |   |          |                            |  |   |             |   |  |   |            |  
|Balance at December 31, 1997                                                                                |  | 4,653,619    |  |                                              | 46,536  |  |               | 3,602,819  |   |                                                  |   |          |                            |  |   | (2,389,881  | ) |  |   | 1,259,474  |  
|Issuance of compensatory stock options to non-employees                                                     |  |              |  |                                              |         |  |               | 45,837     |   |                                                  |   |          |                            |  |   |             |   |  |   | 45,837     |  
|Issuance of warrants in connection with Convertible note payable                                            |  |              |  |                                              |         |  |               | 200,000    |   |                                                  |   |          |                            |  |   |             |   |  |   | 200,000    |  
|Net loss                                                                                                    |  |              |  |                                              |         |  |               |            |   |                                                  |   |          |                            |  |   | (2,914,399  | ) |  |   | (2,914,399 | )
|                                                                                                            |  |              |  |                                              |         |  |               |            |   |                                                  |   |          |                            |  |   |             |   |  |   |            |  
|Balance at December 31, 1998                                                                                |  | 4,653,619    |  |                                              | 46,536  |  |               | 3,848,656  |   |                                                  |   |          |                            |  |   | (5,304,280  | ) |  |   | (1,409,088 | )
|Issuance of common stock upon conversion of debt on March 9, 1999, net                                      |  | 675,549      |  |                                              | 6,756   |  |               | 1,949,523  |   |                                                  |   |          |                            |  |   |             |   |  |   | 1,956,279  |  
|Issuance of common stock for license rights on March 9, 1999                                                |  | 5,002        |  |                                              | 50      |  |               | 16,057     |   |                                                  |   |          |                            |  |   |             |   |  |   | 16,107     |  
|Issuance of compensatory stock options to non-employees                                                     |  |              |  |                                              |         |  |               | 39,388     |   |                                                  |   |          |                            |  |   |             |   |  |   | 39,388     |  
|Issuance of common stock pursuant to private placement agreement on July 2, 1999, net                       |  | 201,874      |  |                                              | 2,019   |  |               | 643,111    |   |                                                  |   |          |                            |  |   |             |   |  |   | 645,130    |  
|Issuance of common stock pursuant to private placement agreement on October 12, 1999, net                   |  | 185,848      |  |                                              | 1,858   |  |               | 591,666    |   |                                                  |   |          |                            |  |   |             |   |  |   | 593,524    |  
|Net loss                                                                                                    |  |              |  |                                              |         |  |               |            |   |                                                  |   |          |                            |  |   | (1,161,786  | ) |  |   | (1,161,786 | )
|                                                                                                            |  |              |  |                                              |         |  |               |            |   |                                                  |   |          |                            |  |   |             |   |  |   |            |  
|Balance at December 31, 1999                                                                                |  | 5,721,892    |  |                                              | 57,219  |  |               | 7,088,401  |   |                                                  |   |          |                            |  |   | (6,466,066  | ) |  |   | 679,554    |  
|Issuance of compensatory stock options to non-employees                                                     |  |              |  |                                              |         |  |               | 32,929     |   |                                                  |   |          |                            |  |   |             |   |  |   | 32,929     |  
|Issuance of common stock pursuant to private placement agreement on November 2, 2000, net of issuance costs |  | 260,106      |  |                                              | 2,601   |  |               | 981,777    |   |                                                  |   |          |                            |  |   |             |   |  |   | 984,378    |  
|Net income                                                                                                  |  |              |  |                                              |         |  |               |            |   |                                                  |   |          |                            |  |   | 2,342,083   |   |  |   | 2,342,083  |  
|                                                                                                            |  |              |  |                                              |         |  |               |            |   |                                                  |   |          |                            |  |   |             |   |  |   |            |  
|Balance at December 31, 2000                                                                                |  | 5,981,998    |  |                                              | 59,820  |  |               | 8,103,107  |   |                                                  |   |          |                            |  |   | (4,123,983  | ) |  |   | 4,038,944  |  
|Issuance of compensatory stock options to non-employees                                                     |  |              |  |                                              |         |  |               | 22,052     |   |                                                  |   |          |                            |  |   |             |   |  |   | 22,052     |  
|Issuance of common stock pursuant to private placement agreement on April 13, 2001, net of issuance cost    |  | 1,352,546    |  |                                              | 13,526  |  |               | 5,150,616  |   |                                                  |   |          |                            |  |   |             |   |  |   | 5,164,142  |  
|Issuance of common stock on April 30, 2001                                                                  |  | 52,021       |  |                                              | 520     |  |               | 199,480    |   |                                                  |   |          |                            |  |   |             |   |  |   | 200,000    |  
|Net loss                                                                                                    |  |              |  |                                              |         |  |               |            |   |                                                  |   |          |                            |  |   | (5,207,022  | ) |  |   | (5,207,022 | )
|                                                                                                            |  |              |  |                                              |         |  |               |            |   |                                                  |   |          |                            |  |   |             |   |  |   |            |  
|Balance at December 31, 2001                                                                                |  | 7,386,565    |  |                                              | 73,866  |  |               | 13,475,255 |   |                                                  |   |          |                            |  |   | (9,331,005  | ) |  |   | 4,218,116  |  
|Issuance of compensatory stock options to non-employees                                                     |  |              |  |                                              |         |  |               | 20,400     |   |                                                  |   |          |                            |  |   |             |   |  |   | 20,400     |  
|Issuance of common stock in connection with the merger on March 15, 2002                                    |  | 1,889,190    |  |                                              | 18,892  |  |               | 14,647,318 |   |                                                  |   |          |                            |  |   |             |   |  |   | 14,666,210 |  
|Treasury stock assumed in connection with the merger on March 15, 2002                                      |  | 101,169      |  |                                              | 1,011   |  |               |            |   |                                                  |   | (331,936 | )                          |  |   |             |   |  |   | (330,925   | )
|Net loss                                                                                                    |  |              |  |                                              |         |  |               |            |   |                                                  |   |          |                            |  |   | (7,478,585  | ) |  |   | (7,478,585 | )
|                                                                                                            |  |              |  |                                              |         |  |               |            |   |                                                  |   |          |                            |  |   |             |   |  |   |            |  
|Balance at December 31, 2002                                                                                |  | 9,376,924    |  | $                                            | 93,769  |  | $             | 28,142,973 |   |                                                  | $ | (331,936 | )                          |  | $ | (16,809,590 | ) |  | $ | 11,095,216 |  
|Issuance of compensatory stock options to non-employees                                                     |  |              |  |                                              |         |  |               | 64,073     |   |                                                  |   |          |                            |  |   |             |   |  |   | 64,073     |  
|Issuance of 5,600,001 shares of common stock on October 3, 2003 in a private placement, net of costs        |  | 5,600,001    |  |                                              | 56,000  |  |               | 10,367,526 |   |                                                  |   |          |                            |  |   |             |   |  |   | 10,423,526 |  
|Net loss                                                                                                    |  |              |  |                                              |         |  |               |            |   |                                                  |   |          |                            |  |   | (7,726,772  | ) |  |   | (7,726,772 | )
|                                                                                                            |  |              |  |                                              |         |  |               |            |   |                                                  |   |          |                            |  |   |             |   |  |   |            |  
|Balance at December 31, 2003                                                                                |  | 14,976,925   |  | $                                            | 149,769 |  | $             | 38,574,572 |   |                                                  | $ | (331,936 | )                          |  | $ | (24,536,362 | ) |  | $ | 13,856,043 |  
|                                                                                                            |  |              |  |                                              |         |  |               |            |   |                                                  |   |          |                            |  |   |             |   |  |   |            |  



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



F-5



---

##### Table of Contents

POINT THERAPEUTICS, INC. AND SUBSIDIARIES

(A Development Stage Company)



CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                            |  |                         |            |   |                                                                   |   |            |      |  |   |            |   |  |   |             |  
|--------------------------------------------------------------------------- |  | ----------------------- | ---------- | - | ----------------------------------------------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ----------- | -
|                                                                            |  | Year ended December 31, |            |   | Period FromSeptember 3,1996 (Date ofInception)ThroughDecember 31, |  
|                                                                            |  | 2003                    |            |   | 2002                                                              |   |            | 2001 |  |   | 2003       |  
|Operating activities                                                        |  |                         |            |   |                                                                   |   |            |      |  |   |            |   |  |   |             |  
|Net loss                                                                    |  | $                       | (7,726,772 | ) |                                                                   | $ | (7,478,585 | )    |  | $ | (5,207,022 | ) |  | $ | (24,536,362 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                         |            |   |                                                                   |   |            |      |  |   |            |   |  |   |             |  
|Depreciation                                                                |  |                         | 91,758     |   |                                                                   |   | 56,521     |      |  |   | 26,317     |   |  |   | 231,164     |  
|Issuance of compensatory stock options                                      |  |                         | 64,073     |   |                                                                   |   | 20,400     |      |  |   | 22,052     |   |  |   | 224,679     |  
|Common stock issued under license agreement                                 |  |                         |           |   |                                                                   |   |           |      |  |   |           |   |  |   | 910,677     |  
|Accrued interest on convertible notes                                       |  |                         |           |   |                                                                   |   |           |      |  |   |           |   |  |   | 82,652      |  
|Patent costs                                                                |  |                         |           |   |                                                                   |   |           |      |  |   |           |   |  |   | 75,557      |  
|Changes in operating assets and liabilities:                                |  |                         |            |   |                                                                   |   |            |      |  |   |            |   |  |   |             |  
|Accounts receivable                                                         |  |                         | (115,336   | ) |                                                                   |   |           |      |  |   |           |   |  |   | (115,336    | )
|Prepaid expenses and other current assets                                   |  |                         | (64,227    | ) |                                                                   |   | (227,846   | )    |  |   | (483       | ) |  |   | (317,882    | )
|Restricted cash                                                             |  |                         |           |   |                                                                   |   | (80,168    | )    |  |   |           |   |  |   | (80,168     | )
|Deposits and other assets                                                   |  |                         | 1,943      |   |                                                                   |   | (39,316    | )    |  |   |           |   |  |   | (37,373     | )
|Accounts payable and accrued expenses                                       |  |                         | (472,071   | ) |                                                                   |   | 527,990    |      |  |   | 424,934    |   |  |   | 925,788     |  
|                                                                            |  |                         |            |   |                                                                   |   |            |      |  |   |            |   |  |   |             |  
|Net cash used in operating activities                                       |  |                         | (8,220,632 | ) |                                                                   |   | (7,221,004 | )    |  |   | (4,734,202 | ) |  |   | (22,636,604 | )
|                                                                            |  |                         |            |  
|Investing activity                                                          |  |                         |            |   |                                                                   |   |            |      |  |   |            |   |  |   |             |  
|Purchase of office and laboratory equipment                                 |  |                         | (61,429    | ) |                                                                   |   | (248,719   | )    |  |   | (40,971    | ) |  |   | (474,220    | )
|                                                                            |  |                         |            |   |                                                                   |   |            |      |  |   |            |   |  |   |             |  
|Net cash used in investing activity                                         |  |                         | (61,429    | ) |                                                                   |   | (248,719   | )    |  |   | (40,971    | ) |  |   | (474,220    | )
|                                                                            |  |                         |            |  
|Financing activities                                                        |  |                         |            |   |                                                                   |   |            |      |  |   |            |   |  |   |             |  
|Proceeds from issuance of common stock net of costs, net                    |  |                         | 10,423,526 |   |                                                                   |   |           |      |  |   | 5,364,142  |   |  |   | 20,965,485  |  
|Principal payments of patent liability                                      |  |                         | (4,688     | ) |                                                                   |   | (3,579     | )    |  |   | (3,579     | ) |  |   | (20,746     | )
|Proceeds from merger between Point with HMSR, Inc.                          |  |                         |           |   |                                                                   |   | 13,835,285 |      |  |   | 500,000    |   |  |   | 14,335,285  |  
|Proceeds from issuance of convertible note                                  |  |                         |           |   |                                                                   |   |           |      |  |   |           |   |  |   | 1,892,904   |  
|                                                                            |  |                         |            |   |                                                                   |   |            |      |  |   |            |   |  |   |             |  
|Net cash provided by financing activities                                   |  |                         | 10,418,838 |   |                                                                   |   | 13,831,706 |      |  |   | 5,860,563  |   |  |   | 37,172,928  |  
|                                                                            |  |                         |            |   |                                                                   |   |            |      |  |   |            |   |  |   |             |  
|Net increase in cash and cash equivalents                                   |  |                         | 2,136,777  |   |                                                                   |   | 6,361,983  |      |  |   | 1,085,390  |   |  |   | 14,062,104  |  
|Cash and cash equivalents at beginning of period                            |  |                         | 11,925,327 |   |                                                                   |   | 5,563,344  |      |  |   | 4,477,954  |   |  |   |            |  
|                                                                            |  |                         |            |   |                                                                   |   |            |      |  |   |            |   |  |   |             |  
|Cash and cash equivalents at end of period                                  |  | $                       | 14,062,104 |   |                                                                   | $ | 11,925,327 |      |  | $ | 5,563,344  |   |  | $ | 14,062,104  |  
|                                                                            |  |                         |            |   |                                                                   |   |            |      |  |   |            |   |  |   |             |  





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



F-6



---

##### Table of Contents

POINT THERAPEUTICS, INC.

(A Development Stage Company)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.    Basis of Presentation



The Company



Point Therapeutics, Inc. (the Company or Point) is a Boston-based biopharmaceutical company developing small molecule drugs for
the treatment of solid tumors, hematologic malignancies, hematopoietic disorders and infectious diseases. Points lead product candidate, PT-100, is an orally active small molecule which, through a novel mechanism of action, has the potential
both to inhibit the growth of malignant tumors and to reconstitute the hematopoietic system.



Point believes that PT-100 has a large market opportunity because of its current portfolio of potential applications, including:



| |  |  | Cancer: PT-100 could be used in combination with chemotherapeutic agents, monoclonal antibodies, and/or vaccines to treat both solid tumors and hematologic malignancies;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Hematopoietic Disorders: PT-100 could be used to treat both neutropenia and anemia; and
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | Infectious Disease: PT-100 could be used as an adjuvant to enhance the efficacy of certain vaccines.
| | - |  | ----------------------------------------------------------------------------------------------------



The strategy of Points clinical development program is to develop the full range of commercial applications of PT-100
and to prioritize its fastest-to-market applications. Point has initiated a Phase 2 human clinical trial of PT-100 in combination with Taxotere® for the treatment of non-small cell lung cancer. Point also plans to initiate in the first half of 2004 clinical studies of PT-100 in combination with
cisplatin to treat metastatic melanoma, PT-100 in combination with Rituxan® to treat chronic lymphocytic leukemia, and PT-100 as a single agent in metastatic melanoma. Point is also currently conducting a Phase 1 clinical study to test the safety and efficacy of PT-100 in combination with
Rituxan® in patients with hematologic malignancies,
such as non-Hodgkins lymphoma. Point is also clinically developing PT-100 as a potential therapy for the treatment of hematopoietic disorders. In addition, Point from time to time evaluates new technology opportunities to broaden its portfolio
of potential products, including in-licensing opportunities, collaboration arrangements as well as more expansive corporate relationships, including mergers and acquisitions.



The Company is a successor of a merger between Point Therapeutics, Inc., a privately held Massachusetts corporation
(Point Massachusetts), and HMSR Inc., a publicly-traded Delaware corporation (HMSR). Point Massachusetts was incorporated in September 1996 as a biopharmaceutical company to develop small molecule drugs. HMSR was incorporated
in December 1993 as a Delaware corporation, and from 1994 to May 2001, under the name HemaSure Inc., developed and supplied innovative blood filtration technologies. On May 28, 2001, HMSR sold substantially all of its non-cash assets to a subsidiary
of Whatman Plc (Whatman), a leader in separations technology and then changed its name from HemaSure Inc. to HMSR Inc. From May 2001 until the merger on March 15, 2002 (described below) with Point Massachusetts, HMSRs operations
consisted primarily of investigating various strategic business combinations.



On November 15, 2001, HMSR entered into an Agreement and Plan of Merger (the Merger Agreement) with Point Massachusetts. On March 15, 2002, HMSRs stockholders approved a 1 for 10 reverse split of
HMSRs common stock and a name change from HMSR to Point Therapeutics, Inc. The stockholders of Point Massachusetts also approved on March 15, 2002 the Merger Agreement, at which time Point Massachusetts became a wholly owned subsidiary of the
Company and changed its name to Point Therapeutics Massachusetts, Inc.



F-7



---

##### Table of Contents

POINT THERAPEUTICS, INC.

(A Development Stage Company)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



1.    Basis of Presentation  (continued)



The historical financial statements of the Company presented prior to March
15, 2002 are those of Point Massachusetts. Point Massachusetts capital structure has been restated to reflect all stock issuances as if the merger had taken place prior to all periods presented. In addition, if the merger with HMSR had
occurred at the beginning of the periods presented, the effect of the inclusion of HMSR operating results on the financial statements presented would not be material.



For additional information regarding the terms of the merger, refer to the Companys Form S-4, which was filed with the
Securities and Exchange Commission on February 11, 2002.



The
Companys business operations after the merger consist solely of the business previously conducted by Point Massachusetts.



On October 3, 2003, the Company closed on a private placement of 5,600,001 shares of common stock at a price of $2.00 per share and five-year warrants to
purchase an additional 2,800,000 shares of common stock. The per unit purchase price represented a 12.5% discount to the average closing price of the Companys common stock for the five trading days immediately preceding September 10, 2003, the
date on which the offering commenced. The warrants will be exercisable at a price of $2.66 per share. Total gross proceeds were $11,200,000 with costs of approximately $600,000 resulting in net proceeds to the Company of $10,600,000, less additional
expenses of $200,000 for the registration of the shares. The Company also issued warrants to purchase 300,000 shares of common stock at a price of $2.22 per share to Paramount, Inc. the placement agent in the transaction. In addition, upon closing
of the financing on October 3, 2003, the Company recorded and paid bonuses to all employees totaling approximately $414,000. Participants in the private placement included ProQuest Investments, a new investor, along with certain existing and new
accredited investors.



Point intends to use these funds for
general corporate purposes including the costs of continuing and future clinical trials of PT-100, its lead clinical compound. PT-100 is currently being evaluated in a clinical study with Rituxan® in non-Hodgkins lymphoma and chronic lymphocytic leukemia patients.



Since inception, the Company has incurred operating expenses of
$32,951,000 and has accumulated a deficit as of December 31, 2003 of $24,536,000. At December 31, 2003, the Company had $14,062,000 in cash and cash equivalents. The Company currently anticipates that its existing capital resources and interest to
be received on invested cash balances should enable it to maintain current and planned operations through the end of 2004. Therefore, the accompanying financial statements have been prepared assuming that the Company will continue as a going
concern. The Company is currently considering several strategic options in order to ensure the continued funding of its operations including, but not limited to, the sale of securities in both public and private offerings as the markets allow,
raising additional funds through corporate collaborations and merger and acquisition activities and consolidations. There can be no assurance that a transaction will be consummated in a reasonable time frame or on terms acceptable to the Company.
Should the Company be unable to raise sufficient funds, the Company may be required to curtail its operating plans after 2004. In addition, increases in expenses or delays in product development not currently forecasted or anticipated may adversely
impact the Companys cash position and require further cost reductions.



F-8



---

##### Table of Contents

POINT THERAPEUTICS, INC.

(A Development Stage Company)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



2.    Significant Accounting Policies



Use of Estimates



The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.



Reclassifications



Certain amounts in 2002 have been reclassified to conform to the 2003
presentation.



Consolidation



The accompanying consolidated financial statements include the Company and
its wholly owned subsidiaries, Point Massachusetts, Inc., HemaPharm Inc., and HemaSure A/S.



Cash Equivalents



All
highly liquid investments with a maturity of three months or less at date of purchase are considered cash equivalents. The carrying value of cash equivalents approximates fair value. At December 31, 2003, the Companys investments consisted
entirely of funds deposited in money market funds.



Office
and Laboratory Equipment



Office and laboratory equipment
is recorded at cost. Depreciation is calculated using the straight-line half-year convention method over the estimated useful lives of three and five years, respectively.



Research and Development Costs



Research and development costs, including internal and external costs, are charged to operations as incurred. Certain
research and development projects are or have been partially funded by research and development contracts, and the expenses related to these activities are included in research and development costs. Research and development costs include personnel
costs, lab and animal supplies, outside services and contract laboratory costs, and legal costs associated with the Companys patent portfolio.



Income Taxes



The Company provides for income taxes as set forth in Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS
109). Under SFAS 109, the liability method is used in accounting for income taxes. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured
using the enacted tax rates in effect when the differences are expected to reverse.



Net Loss Per Share



Basic net loss per common share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per common share is typically computed using the weighted average number of common and dilutive
common equivalent shares from stock options, warrants and convertible



F-9



---

##### Table of Contents

POINT THERAPEUTICS, INC.

(A Development Stage Company)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



2.    Significant Accounting Policies  (continued)



debt using the treasury stock method. For all years presented, diluted net loss per share is
the same as basic net loss per share, as the inclusion of outstanding common stock options, warrants and convertible debt would be antidilutive.



Stock-Based Compensation



The Company has elected to follow Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees (APB No.
25), in accounting for its stock based employee compensation plans using the intrinsic value method, rather than the alternative fair value accounting method provided for under SFAS No. 123, Accounting for Stock Based Compensation (SFAS
No. 123), as SFAS No. 123 requires the use of option valuation models that were not developed for use in valuing employee stock options. Under APB No. 25, when the exercise price of options granted to employees under these plans equals
the market price of the underlying stock on the date of grant, no compensation expense is required.



The reconciliation of net loss and net loss per share, as reported, to pro forma net loss and net loss per share giving effect to employee stock-based
compensation accounted for using the fair value accounting method, is as follows:



|                                                                                                                                                                                                            |  |                         |            |   |      |   |            |      |  |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                                                                                                                                            |  | Year Ended December 31, |           
|                                                                                                                                                                                                            |  | 2003                    |            |   | 2002 |   |            | 2001 | 
|Net loss, as reported                                                                                                                                                                                       |  | $                       | (7,726,772 | ) |      | $ | (7,478,585 | )    |  | $ | (5,207,022 | )
|Deduct: Stock compensation cost as computed under APBNo. 25                                                                                                                                                 |  |                         | 64,073     |   |      |   | 20,400     |      |  |   | 22,052     |  
|Add: Stock based employee compensation cost, net of related tax effects, that would have been included in the determination of net loss as
reported if the fair value method had been applied to all awards |  |                         | (817,757   | ) |      |   | (580,388   | )    |  |   | (690,525   | )
|                                                                                                                                                                                                            |  |                         |            |   |      |   |            |      |  |   |            |  
|Pro forma net loss                                                                                                                                                                                          |  | $                       | (8,480,456 | ) |      | $ | (8,038,573 | )    |  | $ | (5,875,495 | )
|                                                                                                                                                                                                            |  |                         |            |   |      |   |            |      |  |   |            |  
|Net loss per share, as reported                                                                                                                                                                             |  | $                       | (0.73      | ) |      | $ | (0.84      | )    |  | $ | (0.74      | )
|                                                                                                                                                                                                            |  |                         |            |   |      |   |            |      |  |   |            |  
|Net loss per share, pro forma                                                                                                                                                                               |  | $                       | (0.80      | ) |      | $ | (0.90      | )    |  | $ | (0.84      | )
|                                                                                                                                                                                                            |  |                         |            |   |      |   |            |      |  |   |            |  



The fair value of the
stock options at the date of grant was estimated using the Black-Scholes option pricing model with the following average assumptions:



|                        |  |                         |  |             |  |            
|----------------------- |  | ----------------------- |  | ----------- |  | -----------
|                        |  | Year Ended December 31,
|                        |  | 2003                    |  | 2002        |  | 2001       
|Expected life (years)   |  | 4.00                    |  | 4.00        |  | 4.00       
|Risk-free interest rate |  | 2.4%  3.5%             |  | 2.6%  4.7% |  | 3.7%  4.3%
|Volatility              |  | 93%                     |  | 93%         |  | 93%        
|Dividends               |  | None                    |  | None        |  | None       



F-10



---

##### Table of Contents

POINT THERAPEUTICS, INC.

(A Development Stage Company)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



2.    Significant Accounting Policies  (continued)



Concentration of Credit Risk



Financial instruments that potentially subject the Company to credit risk
consist primarily of cash equivalents. The risk is minimized by the Companys policies in which investments have relatively short maturities and are only placed with highly rated issuers.



Revenue Recognition



Revenue is deemed earned when all of the following have occurred: all
obligations of the Company relating to the revenue have been met and the earning process is complete; the monies received or receivable are not refundable, irrespective of research results; and there are neither future obligations nor future
milestones to be met by the Company with respect to such revenue incurred.



Revenues from corporate collaborations are earned based upon research expenses incurred and milestones achieved. Non-refundable payments upon initiation of contracts are deferred and amortized over the period which
the company is obligated to participate on a continuing and substantial basis in the research and development activities outlined in each contract. Amounts received in advance of reimbursable expenses are recorded as deferred revenue until the
related expenses are incurred. Milestone payments are recognized as revenue in the period in which the parties agree that the milestone has been achieved.



Comprehensive Income (Loss)



The Company follows Statement of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income (SFAS
130). SFAS 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. There was no difference between the Companys net loss and its comprehensive
loss for the periods presented in the accompanying consolidated statements of operations.



New Accounting Pronouncements



In June 2002, the Financial Accounting Standards Board (FASB) issued SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS 146 addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). The
principal difference between SFAS 146 and Issue 94-3 relates to SFAS 146s requirements for recognition of a liability for a cost associated with an exit or disposal activity. SFAS 146 requires that a liability for a cost associated with an
exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost as generally defined in Issue 94-3 was recognized at the date of an entitys commitment to an exit plan. A fundamental
conclusion reached by the FASB in this Statement is that an entitys commitment to a plan, by itself, does not create an obligation that meets the definition of a liability. Therefore, this Statement eliminates the definition and requirements
for recognition of exit costs in Issue 94-3. This Statement also establishes that fair value is the objective for initial measurement of the liability. This Statement is effective for exit or disposal activities that are initiated after December 31,
2002, with early application encouraged. The adoption of SFAS 146 had no impact on the Companys financial statements.



In December 2002, the FASB issued SFAS 148 Accounting for Stock-Based CompensationTransition and Disclosure. SFAS 148 amends SFAS 123
Accounting for Stock-Based Compensation, to provide



F-11



---

##### Table of Contents

POINT THERAPEUTICS, INC.

(A Development Stage Company)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



2.    Significant Accounting Policies  (continued)



alternative methods of transition to SFAS 123s fair value method of accounting for
stock-based employee compensation. SFAS 148 also amends the disclosure provisions of SFAS 123 and Accounting Principles Board Opinion (APB) No. 28 Interim Financial Reporting, to require disclosure in the summary of significant
accounting policies of the effects of an entitys accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. While SFAS 148 does not amend SFAS
123 to require companies to account for employee stock options using the fair value method, the disclosure provisions of SFAS 148 are applicable to all companies with stock-based employee compensation, regardless of whether they account for that
compensation using the fair value method of SFAS 123 or the intrinsic value method of APB No. 25 Accounting for Stock Issued to Employees. SFAS 148 became effective for fiscal years ending after December 15, 2002. The Company has elected
to continue to account for employee stock-based compensation using the intrinsic value method as described in APB No. 25 and therefore, the adoption of SFAS No. 148 did not have any impact on the Companys results of operations or financial
position in 2003.



In January 2003, the FASB issued FIN 46,
Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51. The primary objective of the Interpretation is to provide guidance on the identification of, and financial reporting for, entities over which control is
achieved through means other than voting rights. Such entities are known as variable-interest entities (VIEs). Although the FASBs initial focus was on special-purpose entities (SPEs), the final guidance applies to a wide range of entities. FIN
46 applies to new entities that are created after the effective date, as well as applies to existing entities. The FIN is effective to preexisting entities as of the beginning of the first interim period beginning after December 15, 2003, and to any
new entities beginning February 1, 2003. FIN 46 is the guidance that determines (1) whether consolidation is required under the controlling financial interest model of Accounting Research Bulletin No. 51 (ARB 51), Consolidated Financial
Statements, or other existing authoritative guidance, or, alternatively, (2) whether the variable-interest model under FIN 46 should be used to account for existing and new entities. The adoption of FIN 46 is not expected to have a material impact
on the Companys results of operations or financial position.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability. SFAS No. 150 is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have any impact on the Companys results of operations or financial
position in 2003.



3.    Merger



On November 15, 2001, the Company and PT Acquisition Corp., a wholly-owned
subsidiary of the Company formed for the purpose of consummating a merger transaction, entered into the Agreement and Plan of Merger with Point Massachusetts. At that time, HMSR Inc. paid Point Massachusetts a $500,000 lock-up fee which was recorded
as deferred merger consideration. The lock-up fee was included when calculating the final stock conversion ratio between Point Massachusetts and HMSR Inc.



The merger allowed Point Massachusetts to increase its capital resources by providing Point Massachusetts with immediate access to HMSR Inc.s
existing cash assets which enabled Point Massachusetts to fund its clinical program and other product development activities through 2003. For HMSR Inc., the merger allowed the HMSR Inc. stockholder to potentially enhance the value of their shares
by investing in Point Massachusetts.



F-12



---

##### Table of Contents

POINT THERAPEUTICS, INC.

(A Development Stage Company)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



3.    Merger  (continued)



On March 15, 2002, the Companys stockholders approved a 1-for-10
reverse split of the Companys common stock and a name change of the Company from HMSR Inc. to Point Therapeutics, Inc. The stockholders of Point Massachusetts also approved on March 15, 2002 the Merger Agreement previously entered into by both
parties. In accordance with the terms of the Merger Agreement, immediately prior to the effective time of the merger, and after taking into account the 1-for-10 reverse split with respect to the Companys common stock prior to the merger, each
share of Point Massachusetts common stock outstanding immediately prior to the effective time of the merger (including all shares of Point Massachusetts preferred stock converted prior to the effective time) was converted into the right to receive
4.16168 shares of the Companys common stock. This ratio also took into account the $500,000 HMSR Inc. lock-up fee paid on November 15, 2001. In addition, all outstanding options and warrants of Point Massachusetts were converted at the same
conversion rate of 4.16168.



As a result of the merger, the
Company acquired all of the outstanding shares of Point Massachusetts capital stock. For accounting purposes, the acquisition has been treated as the acquisition of HMSR Inc. by Point Massachusetts with Point Massachusetts as the acquiror. The
historical financial statements of the Company presented prior to March 15, 2002 are those of Point Massachusetts. Point Massachusetts capital structure has been restated to reflect all stock issuances as if the merger had taken place prior to
all periods presented. In addition, if the merger with HMSR Inc. had occurred at the beginning of the periods presented, the effect of the inclusion of HMSR Inc. operating results on the financial statements presented would not be material.



4.    Agreements



On May 7, 1997, Point Massachusetts entered into a license agreement (the
Agreement) with the Tufts University School of Medicine (Tufts). Under the Agreement, the Point Massachusetts has received a worldwide license to certain patent and patent applications in exchange for a nonrefundable license
fee of $50,000. In addition, Point Massachusetts issued to Tufts, or its designee, 372,292 shares of common stock in 1997 valued at $894,570, which was expensed to research and development based on the fair market value of the common stock at the
date of issuance. In 1999, 5,002 shares of common stock, valued at $16,107, were issued to Tufts and expensed in a similar manner.



Commencing in May 1999, Point Massachusetts is required to pay $20,000 per year to Tufts. One-half of this payment is offset against Point
Massachusetts patent liability through 2010. Thereafter, each payment will be credited against royalties due to Tufts. Point Massachusetts is obligated to make an additional $87,895 of patent right payments as follows:



|                                  |  |   |         |  
|--------------------------------- |  | - | ------- | -
|Year ended December 31:           |  |   |        
|2004                              |  | $ | 10,000  |  
|2005                              |  |   | 10,000  |  
|2006                              |  |   | 10,000  |  
|2007                              |  |   | 10,000  |  
|2008                              |  |   | 10,000  |  
|Thereafter                        |  |   | 37,895  |  
|                                  |  |   |         |  
|                                  |  |   | 87,895  |  
|Less amount representing interest |  |   | (31,198 | )
|                                  |  |   |         |  
|                                  |  |   | 56,697  |  
|Less current portion              |  |   | (4,330  | )
|                                  |  |   |         |  
|                                  |  | $ | 52,367  |  
|                                  |  |   |         |  



F-13



---

##### Table of Contents

POINT THERAPEUTICS, INC.

(A Development Stage Company)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



4.    Agreements  (continued)



The present value of the patent reimbursement payments, assuming an interest
rate of 10%, was expensed to research and development in 1997.



The Agreement calls for certain milestone payments totaling $300,000 to be paid to Tufts upon commencement of the first Phase 3 trial, marketing application of the first licensed product and marketing approval of the
first licensed product, and a royalty based on future sales of products covered under the Agreement. In addition, the Agreement calls for Tufts to perform research jointly agreed upon with Point Massachusetts, in the scientific areas covered under
the Agreement. Point Massachusetts was obligated to reimburse Tufts for $500,000 of such research over a two-year period beginning on May 7, 1997.



On January 12, 1999, Point Massachusetts amended the existing license agreement with Tufts in connection with definitions of field of use, license period
and net sales, and entered into a collaboration agreement to license its developed technology to a pharmaceutical company. Upon signing the agreement, Point Massachusetts received an initial $2,000,000 nonrefundable license fee. The collaboration
also called for development milestone and royalty payments to Point Massachusetts, as well as an arrangement to equally share all reasonable expenses incurred while obtaining and defending technology patents subsequent to signing this agreement. In
January 2000, Point Massachusetts amended the master license agreement to reflect the partial completion of a milestone. As a result of this amendment, Point Massachusetts received in cash and recognized as revenue $3,000,000 from the pharmaceutical
company in 2000. As part of the Agreement, Point Massachusetts is required to pay Tufts 10% of all milestone payments received and supplemental milestone payments related to the collaboration with the pharmaceutical company. Total payments to Tufts
as a result of milestones achieved totaled $412,500 in 2000. To date, the Company has paid a total of $712,500 in licensing and milestone payments to Tufts. Under the agreement, Point Massachusetts received $900,000 in 2000 for research and
development for the benefit of the pharmaceutical company. In July 2000, the agreement with the pharmaceutical company was terminated, however, the license agreement with Tufts remains in effect, as amended.



Upon execution of the collaboration, Point Massachusetts convertible notes
payable were converted into common stock (see Note 5).



5.    Warrants



In
connection with the private placement which closed in October of 2003, the Company issued warrants to purchase 2,800,000 shares of common stock at a price of $2.66 per share which will expire in 2008. In addition, the Company issued warrants to
purchase 300,000 shares of common stock at a price of $2.22 per share to Paramount, Inc., the Placement Agent in the offering. The warrants expire in 2009.



Sepracor holds warrants to purchase 66,700 shares of common stock at $15 per share which will expire in 2004. The warrants held by Sepracor have certain
registration rights associated with them. In certain circumstances, the Company is entitled to require Sepracor to exercise these warrants. Also, various investors in the Company hold warrants to purchase a total of 195,062 shares of common stock at
a price of $2.90, as determined by the warrant agreement. The warrants expire in 2005.



As of December 31, 2003, no warrants have been exercised.



F-14



---

##### Table of Contents

POINT THERAPEUTICS, INC.

(A Development Stage Company)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



6.    Office and Laboratory Equipment



Office and laboratory equipment consist of the following at December 31:



|                              |  |      |          |   |      |   |          |  
|----------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                              |  | 2003 |          |   | 2002 |  
|Laboratory equipment          |  | $    | 298,817  |   |      | $ | 257,171  |  
|Computer equipment            |  |      | 114,420  |   |      |   | 97,307   |  
|Furniture                     |  |      | 49,979   |   |      |   | 47,309   |  
|Leasehold improvements        |  |      | 11,004   |   |      |   | 11,004   |  
|                              |  |      |          |   |      |   |          |  
|                              |  |      | 474,220  |   |      |   | 412,791  |  
|Less accumulated depreciation |  |      | (231,164 | ) |      |   | (139,406 | )
|                              |  |      |          |   |      |   |          |  
|                              |  | $    | 243,056  |   |      | $ | 273,385  |  
|                              |  |      |          |   |      |   |          |  



Depreciation expense
was $91,758, $56,521 and $26,317 for the years ended December 31, 2003, 2002 and 2001, respectively. The Company records repairs and maintenance as incurred and did not incur any material repairs and maintenance expense during the years ended
December 31, 2003, 2002 and 2001.



7.    Operating
Leases and Commitments



The Company conducts all of its
operations in leased facilities. The Company subleases approximately 4,600 square feet of office space at 125 Summer Street, Boston, Massachusetts. The sublease term is for three years, ending in April 2005 and is non-renewable. In connection with
the above sublease, the Company issued a letter of credit on April 11, 2002 in the amount of $80,168. The letter of credit is renewable annually on April 11th for the term of the sublease with the landlord. In addition, the Company subleases
approximately 3,000 square feet of laboratory space at 75 Kneeland Street, Boston, Massachusetts from New England Medical Center (NEMC). The Company currently has no written sublease with NEMC and is a tenant at will. Rent expense under
these arrangements amounted to $311,000, $290,000 and $200,000 in 2003, 2002 and 2001, respectively.



The Company also has in place operating leases for its telephone system and copiers, each with a term of three years ending in 2005. The Company does not
have any capital leases for any of its capital equipment, furniture or fixtures.



At December 31, 2003, future minimum commitments, under leases with noncancelable terms of more than one year are as follows:



|                        |  |   |        
|----------------------- |  | - | -------
|Year ended December 31: |  |  
|2004                    |  | $ | 177,198
|2005                    |  |   | 63,867 
|2006                    |  |   | 1,678  
|                        |  |   |        
|Total                   |  | $ | 242,743
|                        |  |   |        



In addition to the
above future minimum commitments, the Company incurs annual rent expense totaling approximately $192,000 under the current tenant-at-will arrangement with NEMC and anticipates that the level of expense incurred under the arrangement will continue
into the foreseeable future.



On January 8, 2004, the Company
entered into a sublease agreement for approximately 2,800 additional square feet of office space at 125 Summer Street, Boston, Massachusetts. The sublease term is for two years ending December 31, 2005. The annual rent expense under the sublease
agreement is $70,000.



F-15



---

##### Table of Contents

POINT THERAPEUTICS, INC.

(A Development Stage Company)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



8.    Stock Option Plans



Prior to the merger, which occurred on March 15, 2002, options to purchase stock of Point Massachusetts were granted under
the Point Massachusetts 1997 Stock Option Plan, as amended (the 1997 Plan) and options to purchase stock of HMSR Inc. were granted under HMSR Inc.s Amended and Restated 1994 Stock Option Plan (the 1994 Plan) and HMSR
Inc.s Directors Plan, as amended (the Director Plan). All options outstanding under the 1994 Plan and the Director Plan were adjusted in accordance with the 1-for-10 reverse split of the Companys common stock which took
place immediately prior to the merger. All options outstanding under the 1997 Plan at the time of the merger converted into the right to receive 4.16168 shares of the Companys common stock (see Note 3). From and after the merger, the 1994 Plan
and the Director Plan remained in full effect while the 1997 Plan was frozen such that options may still be exercised under that plan but no further grants of options may be made under the 1997 Plan. In 2003, the



Company authorized a new 2003 Stock Option Plan for Non-Employee Directors.
As of December 31, 2003, a total of 3,835,123 shares have been authorized for grants of options or shares under the 1994 Plan, the 1997 Plan, the Director Plan and the 2003 Directors Plan (the Plans), of which 1,517,645 are
available for grant. Stock options granted during 2003, 2002 and 2001 generally have a maximum term of ten years and vest periodically over a period of one to five years.



The exercise price and vesting period of the options are determined by the Board of Directors at the date of grant. The
exercise price for incentive stock options cannot be below the fair market value of the Companys stock on the date of grant. Furthermore, the option exercise period will not exceed ten years from the date of grant.



The following table presents the activity of the Plans for the years ended
December 31:



|                                                         |  |        |           |                                |   |        |  |   |                                |   |        |   |                                |  |   |         |  |   |     
|-------------------------------------------------------- |  | ------ | --------- | ------------------------------ | - | ------ |  | - | ------------------------------ | - | ------ | - | ------------------------------ |  | - | ------- |  | - | ----
|                                                         |  | 2003   |           | 2002                           |   | 2001  
|                                                         |  | Shares |           | Weighted-AverageExercise Price |   | Shares |  |   | Weighted-AverageExercise Price |   | Shares |   | Weighted-AverageExercise Price
|Outstanding at beginning of year                         |  |        | 1,275,638 |                                | $ | 2.80   |  |   | 993,376                        |   |        | $ | 3.11                           |  |   | 762,403 |  | $ | 2.87
|Granted                                                  |  |        | 985,385   |                                |   | 1.11   |  |   | 375,900                        |   |        |   | 2.11                           |  |   | 230,973 |  |   | 3.84
|Canceled                                                 |  |        |          |                                |   |       |  |   | (93,638                        | ) |        |   | 3.27                           |  |   |        |  |   |    
|                                                         |  |        |           |                                |   |        |  |   |                                |   |        |   |                                |  |   |         |  |   |     
|Outstanding at end of year                               |  |        | 2,261,023 |                                | $ | 2.32   |  |   | 1,275,638                      |   |        | $ | 2.80                           |  |   | 993,376 |  | $ | 3.11
|                                                         |  |        |           |                                |   |        |  |   |                                |   |        |   |                                |  |   |         |  |   |     
|Exercisable at end of year                               |  |        | 1,129,262 |                                | $ | 3.18   |  |   | 706,294                        |   |        | $ | 2.89                           |  |   | 499,002 |  | $ | 2.71
|                                                         |  |        |           |                                |   |        |  |   |                                |   |        |   |                                |  |   |         |  |   |     
|Weighted-average per share fair value of options granted |  | $      | 0.74      |                                |   |        |  | $ | 1.43                           |   |        |   |                                |  | $ | 2.60    |  |   |     
|                                                         |  |        |           |                                |   |        |  |   |                                |   |        |   |                                |  |   |         |  |   |     



F-16



---

##### Table of Contents

POINT THERAPEUTICS, INC.

(A Development Stage Company)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



8.    Stock Option Plans  (continued)



The following table presents weighted-average price and life information
about significant option groups outstanding at December 31, 2003:



|                    |  |                                            |  |                     |                    |         |                                |       
|------------------- |  | ------------------------------------------ |  | ------------------- | ------------------ | ------- | ------------------------------ | ------
|Options Outstanding |  | Weighted-AverageRemaining Contractual Life |  | Options Exercisable
|Exercise Price      |  | Number Outstanding                         |  |                     | Number Exercisable |         | Weighted-AverageExercise Price
|$0.55-$0.80         |  | 874,200                                    |  | 9.22                |                    | 112,533 |                                | $0.76 
|$1.14-$1.45         |  | 172,000                                    |  | 8.44                |                    | 84,500  |                                | $1.43 
|$2.41               |  | 308,772                                    |  | 3.74                |                    | 308,772 |                                | $2.41 
|$3.00               |  | 168,500                                    |  | 8.22                |                    | 42,125  |                                | $3.00 
|$3.22               |  | 391,190                                    |  | 5.80                |                    | 346,973 |                                | $3.22 
|$3.45               |  | 120,000                                    |  | 9.72                |                    | 60,000  |                                | $3.45 
|$3.85               |  | 210,161                                    |  | 7.68                |                    | 158,142 |                                | $3.85 
|$6.25               |  | 7,500                                      |  | 4.06                |                    | 7,500   |                                | $6.25 
|$15.00-$162.50      |  | 8,700                                      |  | 1.26                |                    | 8,700   |                                | $60.87



9.    Common
Stock



During November 2000, Point Massachusetts issued
260,106 shares of common stock to a corporate investor at a price of $3.84 per share. The stock was issued pursuant to a letter of intent that allowed the investor exclusive rights, but no obligation, to purchase Point Massachusetts within a given
period. Subsequent to year-end of 2000, the agreement was mutually terminated.



During April 2001, Point Massachusetts issued 52,021 shares of common stock at a price of $3.84 per share to an institutional investor. The investment was made pursuant to the investors right to participate in
the sale of Common Stock, up to their ownership percentage, under the current common stockholders agreement.



During April 2001, Point Massachusetts issued 1,352,546 shares of common stock to outside investors at a price of $3.84 per share.



On March 15, 2002, in connection with the merger (see note 3) the Company
announced the approval of an amendment of its Certificate of Incorporation to effect a 1 for 10 reverse split of the Companys common stock and to change the Companys name to Point Therapeutics, Inc. Effective on March 18, 2002, the OTC
Bulletin Board stock symbol for the Companys common stock was changed to POTP. Pursuant to the Merger Agreement, each share of Point Massachusetts common stock outstanding immediately prior to the effective time of the Merger was
converted into the right to receive 4.16168 shares of the Companys common stock. The total number of issued and outstanding shares of the Companys common stock was approximately 9,276,000 immediately after giving effect to the Merger and
the 1 for 10 reverse split. As a result of the Merger, the former stockholders of Point Massachusetts held, immediately after the Merger, approximately 79.6% of the issued and outstanding shares of the Companys common stock; the remaining
20.4% of the issued and outstanding shares of the Companys common stock were held by the stockholders who held the Companys common stock immediately before the Merger became effective.



During October 2003, the Company issued 5,600,001 shares of common stock at a
price of $2.00 per share to various investors in a private placement.



F-17



---

##### Table of Contents

POINT THERAPEUTICS, INC.

(A Development Stage Company)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



10.    Income Taxes



The Companys effective income tax rate as of December 31, 2003, 2002 and 2001 differed from the expected US federal
tax statutory expense as set forth below:



|                                           |  |              |            |   |      |   |            |      |  |   |            |  
|------------------------------------------ |  | ------------ | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                           |  | December 31, |           
|                                           |  | 2003         |            |   | 2002 |   |            | 2001 | 
|Expected federal tax benefit               |  | $            | (2,627,102 | ) |      | $ | (2,542,719 | )    |  | $ | (1,770,387 | )
|State income taxes, net of federal benefit |  |              | (484,469   | ) |      |   | (468,907   | )    |  |   | (326,480   | )
|Stock compensation expense and other       |  |              | 21,785     |   |      |   | 6,936      |      |  |   | 7,498      |  
|Other permanent differences                |  |              | 7,710      |   |      |   | 2,380      |      |  |   | 1,530      |  
|Carryforward of net operating losses       |  |              | 3,082,076  |   |      |   | 3,002,310  |      |  |   | 2,087,839  |  
|                                           |  |              |            |   |      |   |            |      |  |   |            |  
|Income tax expense                         |  | $            |           |   |      | $ |           |      |  | $ |           |  
|                                           |  |              |            |   |      |   |            |      |  |   |            |  



As of December 31,
2003, the Company has net operating loss carryforwards of approximately $107,883,000 and $58,297,000, to offset future federal and state taxable income, respectively. The Company also has research and development tax credit carryforwards of
approximately $2,139,000 and $569,000 to offset future federal and state tax liability, respectively. The tax losses and tax credits will expire at various times through 2023. The net operating loss and research and development tax credit
carryforwards may be subject to annual limitations provided in Internal Revenue Code (IRC) sections 382 and 383.



Deferred tax assets at December 31, 2003 and 2002 consist of the following:



|                                              |  |              |             |   |      |   |             |  
|--------------------------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                                              |  | December 31, |            
|                                              |  | 2003         |             |   | 2002 |  
|Deferred tax liabilities:                     |  |              |             |   |      |   |             |  
|Depreciation                                  |  | $            | (17,005     | ) |      | $ | (13,045     | )
|                                              |  |              |             |   |      |   |             |  
|Total deferred tax liabilities                |  |              | (17,005     | ) |      |   | (13,045     | )
|Deferred tax assets:                          |  |              |             |   |      |   |             |  
|Net operating loss carryforwards              |  |              | 40,336,159  |   |      |   | 37,236,420  |  
|Research and development credit carryforwards |  |              | 2,708,196   |   |      |   | 2,508,372   |  
|Accrued expenses                              |  |              | 35,088      |   |      |   | 22,840      |  
|Intangible assets                             |  |              | 358,552     |   |      |   | 394,461     |  
|                                              |  |              |             |   |      |   |             |  
|Total deferred tax assets                     |  |              | 43,437,995  |   |      |   | 40,162,093  |  
|                                              |  |              |             |   |      |   |             |  
|Net deferred tax assets:                      |  |              | 43,420,990  |   |      |   | 40,149,048  |  
|Valuation allowance                           |  |              | (43,420,990 | ) |      |   | (40,149,048 | )
|                                              |  |              |             |   |      |   |             |  
|Net deferred taxes                            |  | $            |            |   |      | $ |            |  
|                                              |  |              |             |   |      |   |             |  



The Company has
established a valuation allowance equal to the net deferred tax assets, as their utilization is not probable at this time. The valuation allowance increased by $3,272,000 during 2003.





F-18



---

##### Table of Contents

POINT THERAPEUTICS, INC.

(A Development Stage Company)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



11.    Net Income (Loss) Per Share



Net loss per share is presented under the requirements of FAS No. 128,
Earnings per Share (FAS 128), which requires disclosure of basic and diluted earnings per share. Basic and diluted earnings per share is calculated using the weighted-average number of shares of common stock outstanding
during the period, less shares subject to repurchase. Diluted earnings per share includes the impact of potentially dilutive securities. As the Companys potentially dilutive securities (stock options, warrants and convertible preferred stock)
were anti-dilutive for the years ended December 31, 2003, 2002 and 2001, they have been excluded from the computation of weighted-average shares used in computing dilutive net loss per share for the years ended December 31, 2003, 2002 and 2001.



|                                           |  |                         |            |   |      |   |            |      |  |   |            |  
|------------------------------------------ |  | ----------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                           |  | Year ended December 31, |           
|                                           |  | 2003                    |            |   | 2002 |   |            | 2001 | 
|Net loss                                   |  | $                       | (7,726,772 | ) |      | $ | (7,478,585 | )    |  | $ | (5,207,022 | )
|                                           |  |                         |            |   |      |   |            |      |  |   |            |  
|Weighted-average shares outstanding:       |  |                         |            |   |      |   |            |      |  |   |            |  
|Denominator for basic earnings per share   |  |                         | 10,656,577 |   |      |   | 8,897,917  |      |  |   | 7,017,145  |  
|Common stock equivalent:                   |  |                         |            |   |      |   |            |      |  |   |            |  
| stock options                            |  |                         |           |   |      |   |           |      |  |   |           |  
| warrants                                 |  |                         |           |   |      |   |           |      |  |   |           |  
|                                           |  |                         |            |   |      |   |            |      |  |   |            |  
|Denominator for diluted earnings per share |  |                         | 10,656,577 |   |      |   | 8,897,917  |      |  |   | 7,017,145  |  
|                                           |  |                         |            |   |      |   |            |      |  |   |            |  
|Net loss per share                         |  |                         |            |   |      |   |            |      |  |   |            |  
|Basic and diluted                          |  | $                       | (0.73      | ) |      | $ | (0.84      | )    |  | $ | (0.74      | )
|                                           |  |                         |            |   |      |   |            |      |  |   |            |  



12.    Retirement Savings Plan



The Company implemented a 401(k) retirement savings plan covering all of the Companys employees on January 1, 2002. Matching Company contributions are at the discretion of management of the Company. Management
authorized matching contributions up to 3% of participants salaries amounting to approximately $46,000, $24,000 and $0 for the year ended December 31, 2003, 2002 and 2001, respectively.



13.    Related Party Transactions



The Company utilizes the services of a law firm, of which a Director of
the Company is a Partner. During 2003, 2002 and 2001, the Company paid fees totaling approximately $309,000, $558,000 and $703,000, respectively, for legal services in connection with organizational, general corporate, transaction and other related
matters. The Company believes that the fees charged by the law firm to the Company are as fair to the Company for the services provided as could have been obtained from another comparable law firm.



14.    Subsequent Events



As of December 31, 2002, the Company was a defendant in a lawsuit
brought by Pall Corporation (Pall) in the United States District Court for the Eastern District of New York and the District of Colorado regarding the Companys LeukoNet System, which is no longer made or sold by the Company (the
Pall Litigation). In a complaint filed in November 1996, Pall alleged that the manufacture, use and/or sale of the LeukoNet System infringed upon two patents held by Pall. Pall dropped its allegations concerning infringement of one of
the patents and alleges only that the LeukoNet System infringed Palls U.S. Patent No. 4,952,572 (the 572 Patent).



F-19



---

##### Table of Contents

POINT THERAPEUTICS, INC.

(A Development Stage Company)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



On March 5, 2003, Whatman sold the non-cash assets it had previously purchased from HemaSure to
Pall Corporation. In connection with that sale, the ongoing patent litigation among Pall Corporation, Whatman and the Company was settled, and the litigation was dismissed, with prejudice, in the United States District Court in the Eastern District
of New York and in the District of Colorado. From March 15, 2002, the effective date of the merger of the Company and Point Massachusetts, through March 5, 2003, the effective date of the sale of the Whatman assets to Pall Corporation, approximately
$115,000 of net royalties was accrued and is payable to the Company. The Company received payment in January 2004.



15.    Quarterly Financial Information (unaudited)



|                                             |  |                                 |            |   |                                 |   |            |                                    |  |   |                                    |   |  |   |            |  
|-------------------------------------------- |  | ------------------------------- | ---------- | - | ------------------------------- | - | ---------- | ---------------------------------- |  | - | ---------------------------------- | - |  | - | ---------- | -
|                                             |  | First QuarterEndedMarch 31,2002 |            |   | SecondQuarterEndedJune 30, 2002 |   |            | ThirdQuarterEndedSeptember 30,2002 |  |   | FourthQuarterEndedDecember 31,2002 |  
|Total revenues                               |  | $                               | 96,150     |   |                                 | $ |           |                                    |  | $ |                                   |   |  | $ | 18,891     |  
|Operating expenses:                          |  |                                 |            |   |                                 |   |            |                                    |  |   |                                    |   |  |   |            |  
|Research and development                     |  |                                 | 1,486,573  |   |                                 |   | 1,142,267  |                                    |  |   | 1,417,852                          |   |  |   | 1,599,538  |  
|General and administrative                   |  |                                 | 496,114    |   |                                 |   | 511,217    |                                    |  |   | 501,187                            |   |  |   | 762,397    |  
|                                             |  |                                 |            |   |                                 |   |            |                                    |  |   |                                    |   |  |   |            |  
|Total operating expenses                     |  |                                 | 1,982,687  |   |                                 |   | 1,653,484  |                                    |  |   | 1,919,039                          |   |  |   | 2,361,935  |  
|Loss from operations                         |  |                                 | (1,886,537 | ) |                                 |   | (1,653,484 | )                                  |  |   | (1,919,039                         | ) |  |   | (2,343,044 | )
|Interest income                              |  |                                 | 24,936     |   |                                 |   | 17,373     |                                    |  |   | 11,069                             |   |  |   | 21,954     |  
|Interest expense                             |  |                                 |           |   |                                 |   |           |                                    |  |   |                                   |   |  |   |           |  
|                                             |  |                                 |            |   |                                 |   |            |                                    |  |   |                                    |   |  |   |            |  
|Net loss                                     |  | $                               | (1,861,601 | ) |                                 | $ | (1,636,111 | )                                  |  | $ | (1,907,970                         | ) |  | $ | (2,321,090 | )
|                                             |  |                                 |            |   |                                 |   |            |                                    |  |   |                                    |   |  |   |            |  
|Basic and diluted net loss per share:        |  | $                               | (0.20      | ) |                                 | $ | (0.18      | )                                  |  | $ | (0.21                              | ) |  | $ | (0.16      | )
|                                             |  |                                 |            |   |                                 |   |            |                                    |  |   |                                    |   |  |   |            |  
|Shares used in computing net loss per share: |  |                                 | 9,275,755  |   |                                 |   | 9,275,755  |                                    |  |   | 9,275,755                          |   |  |   | 14,754,017 |  
|                                             |  |                                 |            |   |                                 |   |            |                                    |  |   |                                    |   |  |   |            |  
|                                             |  |                                 |            |   |                                 |   |            |                                    |  |   |                                    |   |  |   |            |  
|                                             |  | First QuarterEndedMarch 31,2002 |            |   | SecondQuarterEndedJune 30, 2002 |   |            | ThirdQuarterEndedSeptember 30,2002 |  |   | FourthQuarterEndedDecember 31,2002 |  
|Total revenues                               |  | $                               |           |   |                                 | $ |           |                                    |  | $ |                                   |   |  | $ |           |  
|Operating expenses:                          |  |                                 |            |   |                                 |   |            |                                    |  |   |                                    |   |  |   |            |  
|Research and development                     |  |                                 | 923,671    |   |                                 |   | 1,224,173  |                                    |  |   | 1,506,621                          |   |  |   | 1,505,492  |  
|General and administrative                   |  |                                 | 695,073    |   |                                 |   | 502,811    |                                    |  |   | 759,787                            |   |  |   | 543,516    |  
|                                             |  |                                 |            |   |                                 |   |            |                                    |  |   |                                    |   |  |   |            |  
|Total operating expenses                     |  |                                 | 1,618,744  |   |                                 |   | 1,726,984  |                                    |  |   | 2,266,408                          |   |  |   | 2,049,008  |  
|Loss from operations                         |  |                                 | (1,618,744 | ) |                                 |   | (1,726,984 | )                                  |  |   | (2,266,408                         | ) |  |   | (2,049,008 | )
|Interest income                              |  |                                 | 29,823     |   |                                 |   | 64,691     |                                    |  |   | 49,845                             |   |  |   | 38,200     |  
|Interest expense                             |  |                                 |           |   |                                 |   |           |                                    |  |   |                                   |   |  |   |           |  
|                                             |  |                                 |            |   |                                 |   |            |                                    |  |   |                                    |   |  |   |            |  
|Net loss                                     |  | $                               | (1,588,921 | ) |                                 | $ | (1,662,293 | )                                  |  | $ | (2,216,563                         | ) |  | $ | (2,010,808 | )
|                                             |  |                                 |            |   |                                 |   |            |                                    |  |   |                                    |   |  |   |            |  
|Basic and diluted net loss per share:        |  | $                               | (0.21      | ) |                                 | $ | (0.18      | )                                  |  | $ | (0.24                              | ) |  | $ | (0.22      | )
|                                             |  |                                 |            |   |                                 |   |            |                                    |  |   |                                    |   |  |   |            |  
|Shares used in computing net loss per share: |  |                                 | 7,743,413  |   |                                 |   | 9,275,755  |                                    |  |   | 9,275,755                          |   |  |   | 9,275,755  |  
|                                             |  |                                 |            |   |                                 |   |            |                                    |  |   |                                    |   |  |   |            |  



F-20