** **

**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549**

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**FORM 10-QSB/A**
| **(Mark One)**                                                                                                                                                                                                     | ** ** | ** **                                                                                   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------|
| ** **                                                                                                                                                                                                              | ** ** | ** **                                                                                   |
| **x**                                                                                                                                                                                                                   | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                                                                                                                                                                                              | ** ** | ** **                                                                                   |
| **For the  quarterly period ended October 31, 2006**                                                                                                                                                                    |
| ** **                                                                                                                                                                                                              | ** ** | ** **                                                                                   |
| **o**                                                                                                                                                                                                                   | ** ** | **TRANSITION REPORT UNDER SECTION 13 or 15(d) OF  THE EXCHANGE ACT**                         |
| ** **                                                                                                                                                                                                              | ** ** | ** **                                                                                   |
| **For the  transition period from                                 to** |

 

**Commission File No. 333-116480**

**FERMAVIRPHARMACEUTICALS, INC.**(Exact name of small businessissuer as specified in its charter)

| **Florida**                                               | ** ** | **16-1639902**                     |
|-----------------------------------------------------------|------------|------------------------------------|
| (State or  jurisdiction of incorporation or organization) |       | (IRS Employer  Identification No.) |

** **

**420Lexington Avenue, Suite 445, New York, NY 10170**(Address of Principal Executive Office)

 

**(212)413-0802**(Issuer’s telephone number)

 

**N/A**

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

 

Check whether theregistrant (1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (orfor a shorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past 90 days.

Yes  x     No  o

Indicate by check markwhether the registrant is a shell company (as defined by Rule 12b-2 of theExchange Act:

Yes  o     No  x

The number of sharesoutstanding of the Registrant’s Common Stock, $.0001 par value, as of December19, 2006 was 19,059,898

 

 

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****INTRODUCTORYNOTE****

This Report on Form 10-QSB/Afor FermaVir Pharmaceuticals, Inc. may contain forward-looking statements.  You can identify these statements byforward-looking words such as “may,” “will,” “expect,” “intend,” “anticipate,”believe,” “estimate” and “continue” or similar words.  Forward-looking statements includeinformation concerning possible or assumed future business success or financialresults.  You should read statements thatcontain these words carefully because they discuss future expectations andplans, which contain projections of future results of operations or financialcondition or state other forward-looking information.  We believe that it is important tocommunicate future expectations to investors. However, there may be events in the future that we are not able toaccurately predict or control. Accordingly, we do not undertake any obligation to update anyforward-looking statements for any reason, even if new information becomes availableor other events occur in the future.

The forward-lookingstatements included herein are based on current expectations that involve anumber of risks and uncertainties set forth under “Risk Factors” in our Form10-KSB filed with the SEC on August 16, 2006. Accordingly, to the extent that this Quarterly Report containsforward-looking statements regarding the financial condition, operatingresults, business prospects or any other aspect of the Company, please beadvised that the Company’s actual financial condition, operating results andbusiness performance may differ materially from that projected or estimated bythe Company in forward-looking statements.

**EXPLANATORY NOTE**

***This Form 10-QSB/A has been amended to correcttypographical errors in Item 3(B) in the Form 10-QSB filed onDecember 29, 2006.***

i

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****PART I - FINANCIAL INFORMATION****

****Item 1:   FinancialStatements****

**FermaVirPharmaceuticals, Inc. and Subsidiary(A Development Stage Company)Condensed Consolidated Balance Sheets**

 
| ** **                                                                                                                                                              | ** ** | **October 31,** | ** ** | **April 30,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|--------------------|------------|
| ** **                                                                                                                                                              | ** ** | **2006**             | ** ** | **2006**           | ** ** |
| ** **                                                                                                                                                              | ** ** | **(Unaudited)**      | ** ** | **(Note 2)**  | ** ** |
| **Assets**                                                                                                                                                              | ** ** | ** **           | ** ** | ** **         | ** ** |
| ** **                                                                                                                                                              | ** ** | ** **           | ** ** | ** **         | ** ** |
| Current assets:                                                                                                                                                         |       |                 |       |               |       |
| Cash                                                                                                                                                                    |       | $                    | 47,386     |               | $          | 127,121 |   |
| Prepaid expenses                                                                                                                                                        |       | 46,924               |       | 17,439             |       |
| Total current  assets                                                                                                                                                   |       | 94,310               |       | 144,560            |       |
|                                                                                                                                                                    |       |                 |       |               |       |
| Property and equipment,  net                                                                                                                                            |       | 16,468               |       | 22,490             |       |
| Other assets                                                                                                                                                            |       | 43,890               |       | 43,890             |       |
|                                                                                                                                                                    |       |                 |       |               |       |
| Total assets                                                                                                                                                            |       | $                    | 154,668    |               | $          | 210,940 |   |
|                                                                                                                                                                    |       |                 |       |               |       |
|                                                                                                                                                                    |       |                 |       |               |       |
| **Liabilities  and Stockholders’ Deficiency**                                                                                                                      | ** ** | ** **           | ** ** | ** **         | ** ** |
|                                                                                                                                                                    |       |                 |       |               |       |
| Current liabilities:                                                                                                                                                    |       |                 |       |               |       |
| Accounts payable  and accrued expenses                                                                                                                                  |       | $                    | 741,043    |               | $          | 401,743 |   |
| Notes payable,  net of discount of $238,353                                                                                                                             |       | 161,647              |       | —             |       |
|                                                                                                                                                                    |       |                 |       |               |       |
| Total current  liabilities                                                                                                                                              |       | 902,690              |       | 401,743            |       |
|                                                                                                                                                                    |       |                 |       |               |       |
| Non-current liabilities  - deferred rent                                                                                                                                |       | 15,349               |       | 12,157             |       |
|                                                                                                                                                                    |       |                 |       |               |       |
| Total  liabilities                                                                                                                                                      |       | 918,039              |       | 413,900            |       |
|                                                                                                                                                                    |       |                 |       |               |       |
| Commitments                                                                                                                                                             |       |                 |       |               |       |
|                                                                                                                                                                    |       |                 |       |               |       |
| Stockholders’  deficiency:                                                                                                                                         |       |                 |       |               |       |
| Preferred stock,  $0.001 par value, 20,000,000 shares authorized, no shares outstanding                                                                                 |       | —               |       | —             |       |
| Common stock,  $0.0001 par value, 100,000,000 shares authorized, 17,616,509 and 17,575,884  issued and outstanding at October 31, 2006 and April 30, 2006, respectively |       | 1,762                |       | 1,757              |       |
| Additional  paid-in capital                                                                                                                                             |       | 5,883,380            |       | 5,685,785          |       |
| Deferred  stock-based compensation                                                                                                                                      |       | —               |       | (308,615           | )          |
| Deficit  accumulated during development stage                                                                                                                           |       | (6,648,513           | )          | (5,581,887         | )          |
| Total  stockholders’ deficiency                                                                                                                                    |       | (763,371             | )          | (202,960           | )          |
|                                                                                                                                                                    |       |                 |       |               |       |
| Total liabilities and  stockholders’ deficiency                                                                                                                    |       | $                    | 154,668    |               | $          | 210,940 |   |

 

The accompanyingnotes are an integral part of these unaudited condensed consolidated financialstatements

1

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**FermaVirPharmaceuticals, Inc. and Subsidiary**

**(ADevelopment Stage Company)**

**CondensedConsolidated Statements of Operations**

**(Unaudited)**

 
| ** **                                               | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** | **For the period  November 15, 2002  (Inception) to** | ** ** |
|----------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|--------------------------------------------------------------------------------|------------|
| ** **                                               | ** ** | **October 31**              | ** ** | **October 31**            | ** ** | **October 31,**                                                           | ** ** |
| ** **                                               | ** ** | **2006**                         | ** ** | **2005**                       | ** ** | **2006**                                                                       | ** ** | **2005** | ** ** | **2006** | ** ** |
| ** **                                               | ** ** | ** **                       | ** ** | ** **                     | ** ** | ** **                                                                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenues                                                 |       | $                                | —     |                           | $          | —                                                                         |       | $ | — |   | $ | — |   | $ | — |   |
|                                                     |       |                             |       |                           |       |                                                                           |       |   |   |   |   |
| Operating expenses:                                      |       |                             |       |                           |       |                                                                           |       |   |   |   |   |
|                                                     |       |                             |       |                           |       |                                                                           |       |   |   |   |   |
| Research and  development:                               |       |                             |       |                           |       |                                                                           |       |   |   |   |   |
| Non-cash charge  for stock-based compensation            |       | 14,220                           |       | —                         |       | 28,440                                                                         |       | — |   | 58,333 |   |
| Other                                                    |       | 126,956                          |       | 291,272                        |       | 274,684                                                                        |       | 291,272 |   | 1,128,448 |   |
| Total research  and development                          |       | 141,176                          |       | 291,272                        |       | 303,124                                                                        |       | 291,272 |   | 1,186,781 |   |
|                                                     |       |                             |       |                           |       |                                                                           |       |   |   |   |   |
| Charge for  acquired in-process research and development |       | —                           |       | 2,695,054                      |       | —                                                                         |       | 2,695,054 |   | 2,713,996 |   |
|                                                     |       |                             |       |                           |       |                                                                           |       |   |   |   |   |
| General and  administrative:                             |       |                             |       |                           |       |                                                                           |       |   |   |   |   |
| Non-cash charges  for:                                   |       |                             |       |                           |       |                                                                           |       |   |   |   |   |
| Warrants issued  for services                            |       | —                           |       | 3,863                          |       | —                                                                         |       | 3,863 |   | 1,086,546 |   |
| Stock-based  compensation                                |       | 32,240                           |       | 16,719                         |       | 62,736                                                                         |       | 16,719 |   | 104,406 |   |
| Other                                                    |       | 178,125                          |       | 185,962                        |       | 453,015                                                                        |       | 186,186 |   | 1,169,409 |   |
| Total general  and administrative                        |       | 210,365                          |       | 206,544                        |       | 515,751                                                                        |       | 206,768 |   | 2,360,361 |   |
|                                                     |       |                             |       |                           |       |                                                                           |       |   |   |   |   |
| Total operating  expenses                                |       | 351,541                          |       | 3,192,870                      |       | 818,875                                                                        |       | 3,193,094 |   | 6,261,138 |   |
|                                                     |       |                             |       |                           |       |                                                                           |       |   |   |   |   |
| Operating loss                                           |       | (351,541                         | )          | (3,192,870                     | )          | (818,875                                                                       | )          | (3,193,094 | ) | (6,261,138 | ) |
|                                                     |       |                             |       |                           |       |                                                                           |       |   |   |   |   |
| Other income (expense):                                  |       |                             |       |                           |       |                                                                           |       |   |   |   |   |
| ** **                                               | ** ** | ** **                       | ** ** | ** **                     | ** ** | ** **                                                                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Interest income                                          |       | —                           |       | 1,866                          |       | 134                                                                            |       | 1,866 |   | 8,766 |   |
| Interest expense                                         |       | (221,791                         | )          | (4,373                         | )          | (247,885                                                                       | )          | (4,373 | ) | (396,141 | ) |
| Total other  expense, net                                |       | (221,791                         | )          | (2,507                         | )          | (247,751                                                                       | )          | (2,507 | ) | (387,375 | ) |
|                                                     |       |                             |       |                           |       |                                                                           |       |   |   |   |   |
| Net loss                                                 |       | $(573,332                        | )          | $(3,195,377                    | )          | $(1,066,626                                                                    | )          | $(3,195,601 | ) | $(6,648,513 | ) |
|                                                     |       |                             |       |                           |       |                                                                           |       |   |   |   |   |
| Net loss per  common share:                              |       |                             |       |                           |       |                                                                           |       |   |   |   |   |
| Basic and  diluted                                       |       | $(0.03                           | )          | $                              | (0.12      | )                                                                              | $(0.06     | ) | $ | (0.06 | ) |   |   |
|                                                     |       |                             |       |                           |       |                                                                           |       |   |   |   |   |
| Weighted average  shares of common stock outstanding:    |       |                             |       |                           |       |                                                                           |       |   |   |   |   |
| Basic and  diluted                                       |       | 17,591,781                       |       | 27,368,262                     |       | 17,582,832                                                                     |       | 53,374,131 |   |   |   |
|                                                     |       |                             |       |                           |       |                                                                           |       |   |   |   |   |
|                                                          |            |                                  |            |                                |            |                                                                                |            |  |  |  |  |  |  |  |  |  |

 

The accompanyingnotes are an integral part of these unaudited condensed consolidated financialstatements.

 

2

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**FermaVirPharmaceuticals, Inc. and Subsidiary(A Development Stage Company)Condensed Consolidated Statements of Stockholders’ Equity (Deficiency)(Unaudited)**
| ** **                                                                                                                                | ** ** | ** **               | ** ** | ** **            | ** ** | ** **  | ** ** | ** **       | ** ** | ** **     | ** ** | ** **      | ** ** | ** **       | ** ** | **Deficit**     | ** ** | ** ** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------|------------|-------------|------------|------------------|------------|----------------|------------|-----------------|------------|------------------|------------|-----------------|------------|------------|------------|
| ** **                                                                                                                                | ** ** | ** **               | ** ** | ** **            | ** ** | ** **  | ** ** | ** **       | ** ** | ** **     | ** ** | ** **      | ** ** | **Deferred**     | ** ** | **Accumulated** | ** ** | ** ** | ** ** |
| ** **                                                                                                                                | ** ** | ** **               | ** ** | ** **            | ** ** | ** **  | ** ** | ** **       | ** ** | **Additional** | ** ** | ** **      | ** ** | **Stock-**       | ** ** | **During**      | ** ** | ** ** | ** ** |
| ** **                                                                                                                                | ** ** | **Preferred Stock** | ** ** | **Common Stock** | ** ** | **Paid-In** | ** ** | **Subscription** | ** ** | **Based**      | ** ** | **Development** | ** ** | ** **       | ** ** |
| ** **                                                                                                                                | ** ** | **Shares**               | ** ** | **Amount**            | ** ** | **Shares**  | ** ** | **Amount**       | ** ** | **Capital**    | ** ** | **Receivable**  | ** ** | **Compensation** | ** ** | **Stage**       | ** ** | **Total**  | ** ** |
| Balance, November 15, 2002 (Inception)                                                                                                    |       | —                   |       | $                     | —     |        | —     |             | $          | —         |       | $               | —     |             | $          | —          |       | $          | —     |   | $ | — |   | $ | — |   |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Issuance of common stock  to founders for cash at $0.00003 per share                                                                      |       |                     |       |                  |       | 70,560,000  |       | 7,050            |       | (5,050         | )          | (2,000          | )          |             |       |            |       | —     |       |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Balance, April 30, 2003                                                                                                                   |       | —                   |       | —                |       | 70,560,000  |       | 7,050            |       | (5,050         | )          | (2,000          | )          | —           |       | —          |       | —     |       |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Payment of subscription  receivable                                                                                                       |       |                     |       |                  |       |        |       |             |       |           |       | 2,000           |       |             |       |            |       | 2,000      |       |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Issuance of common stock  for cash at $0.0014 per share                                                                                   |       |                     |       |                  |       | 8,820,000   |       | 882              |       | 11,618         |       |            |       |             |       |            |       | 12,500     |       |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Net loss                                                                                                                                  |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       | (159            | )          | (159       | )          |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Balance, April 30, 2004                                                                                                                   |       | —                   |       | —                |       | 79,380,000  |       | 7,932            |       | 6,568          |       | —          |       | —           |       | (159            | )          | 14,341     |       |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Net loss                                                                                                                                  |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       | (24,117         | )          | (24,117    | )          |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Balance, April 30, 2005                                                                                                                   |       | —                   |       | —                |       | 79,380,000  |       | 7,932            |       | 6,568          |       | —          |       | —           |       | (24,276         | )          | (9,776     | )          |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Acquisition of FermaVir  Research, Inc:                                                                                                   |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Stock issued valued at  $0.70 per share                                                                                                   |       |                     |       |                  |       | 1,829,000   |       | 183              |       | 1,280,117      |       | (5,600          | )          |             |       |            |       | 1,274,700  |       |
| Issuance of stock  options to consultants                                                                                                 |       |                     |       |                  |       |        |       |             |       | 504,835        |       |            |       |             |       |            |       | 504,835    |       |
| Issuance of stock  options to employee                                                                                                    |       |                     |       |                  |       |        |       |             |       | 303,348        |       |            |       | (303,348         | )          |            |       | —     |       |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Issuance of common stock  and warrants for cash at $0.75 per share net of expenses                                                        |       |                     |       |                  |       | 3,863,527   |       | 386              |       | 2,864,431      |       |            |       |             |       |            |       | 2,864,817  |       |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Issuance of common stock  and warrants in exchange for note payable with a fair value of $1.55 per  share and $1.06 per warrant ($23,865) |       |                     |       |                  |       | 150,000     |       | 15               |       | 256,350        |       |            |       |             |       |            |       | 256,365    |       |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Issuance of stock  options to employee                                                                                                    |       |                     |       |                  |       |        |       |             |       | 64,348         |       |            |       | (64,348          | )          |            |       | —     |       |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Stock issued in  connection with the exercise of warrants at $1.50                                                                        |       |                     |       |                  |       | 33,334      |       | 3                |       | 49,998         |       |            |       |             |       |            |       | 50,001     |       |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Redemption and  retirement of stock at $0.011 per share                                                                                   |       |                     |       |                  |       | (67,679,977 | )          | (6,762           | )          | (743,238       | )          |            |       |             |       |            |       | (750,000   | )          |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Issuance of warrants to  consultants                                                                                                      |       |                     |       |                  |       |        |       |             |       | 1,086,546      |       |            |       |             |       |            |       | 1,086,546  |       |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Amortization of deferred  stock-based compensation for employee and directors                                                             |       |                     |       |                  |       |        |       |             |       | 12,482         |       |            |       | 59,081           |       |            |       | 71,563     |       |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Collection of  subscription receivable                                                                                                    |       |                     |       |                  |       |        |       |             |       |           |       | 5,600           |       |             |       |            |       | 5,600      |       |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Net loss                                                                                                                                  |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       | (5,557,611      | )          | (5,557,611 | )          |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Balance, April 30, 2006                                                                                                                   |       | —                   |       | $                     | —     |        | 17,575,884 |             | $          | 1,757          |       | $               | 5,685,785  |             | $          | —          |       | $          | (308,615   | ) | $ | (5,581,887 | ) | $ | (202,960 | ) |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Reclassification of  deferred stock-based compensation upon adoption of SFAS 123R                                                         |       |                     |       |                  |       |        |       |             |       | (308,615       | )          |            |       | 308,615          |       |            |       | —     |       |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Stock-based compensation  expense:                                                                                                        |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Employees                                                                                                                                 |       |                     |       |                  |       |        |       |             |       | 81,467         |       |            |       |             |       |            |       | 81,467     |       |
| Directors                                                                                                                                 |       |                     |       |                  |       |        |       |             |       | 9,709          |       |            |       |             |       |            |       | 9,709      |       |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Common stock issued in  connection with notes                                                                                             |       |                     |       |                  |       | 40,625      |       | 5                |       | 17,618         |       |            |       |             |       |            |       | 17,623     |       |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Warrants issued in  connection with notes                                                                                                 |       |                     |       |                  |       |        |       |             |       | 397,416        |       |            |       |             |       |            |       | 397,416    |       |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Net loss                                                                                                                                  |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       | (1,066,626      | )          | (1,066,626 | )          |
|                                                                                                                                      |       |                     |       |                  |       |        |       |             |       |           |       |            |       |             |       |            |       |       |       |
| Balance, October 31, 2006                                                                                                                 |       | —                   |       | $                     | —     |        | 17,616,509 |             | $          | 1,762          |       | $               | 5,883,380  |             | $          | —          |       | $          | —     |   | $ | (6,648,513 | ) | $ | (763,371 | ) |

 

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

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**FermaVirPharmaceuticals, Inc. and Subsidiary****(A Development Stage Company)****Condensed Consolidated Statement of CashFlows****(Unaudited)**
| ** **                                                                                                                    | ** ** | ** **                                      | ** ** | **For the period**                         | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                                                                    | ** ** | **Six Months Ended  October 31** | ** ** | **November 15, 2002  (Inception) to** | ** ** |
| ** **                                                                                                                    | ** ** | **2006**                                        | ** ** | **2005**                                             | ** ** | **October 31, 2006** | ** ** |
| ** **                                                                                                                    | ** ** | ** **                                      | ** ** | ** **                                           | ** ** | **(Unaudited)** | ** ** |
| Operating activities:                                                                                                         |       |                                            |       |                                                 |       |   |   |
|                                                                                                                          |       |                                            |       |                                                 |       |   |   |
| Net loss                                                                                                                      |       | $                                               | (1,066,626 | )                                                    | $          | (3,195,601 | ) | $ | (6,648,513 | ) |
|                                                                                                                          |       |                                            |       |                                                 |       |   |   |
| Adjustments to  reconcile net loss to net cash used in operating activities:                                                  |       |                                            |       |                                                 |       |   |   |
| Non-cash charges  for:                                                                                                        |       |                                            |       |                                                 |       |   |   |
| Write-off of  acquired in-process research and development                                                                    |       | —                                          |       | 2,695,054                                            |       | 2,713,996 |   |
| Issuance of  warrants for services                                                                                            |       | —                                          |       | 3,863                                                |       | 1,086,546 |   |
| Value of shares  and warrants issued in excess of the principal amount repaid in connection  with a note due to related party |       | —                                          |       | —                                               |       | 143,865 |   |
| Stock-based  compensation                                                                                                     |       | 91,176                                          |       | 16,719                                               |       | 162,739 |   |
| Depreciation                                                                                                                  |       | 6,022                                           |       | 1,265                                                |       | 10,584 |   |
| Amortization of  debt discount to interest expense                                                                            |       | 237,184                                         |       | —                                               |       | 237,184 |   |
| Changes in  operating assets and liabilities:                                                                                 |       |                                            |       |                                                 |       |   |   |
| (Increase)  decrease in prepaid expenses                                                                                      |       | (29,485                                         | )          | 6,129                                                |       | 5,346 |   |
| Increase in  other assets                                                                                                     |       | —                                          |       | (43,890                                              | )          | (43,890 | ) |
| Increase  (decrease) in accounts payable and accrued expenses                                                                 |       | 364,302                                         |       | (11,839                                              | )          | 600,403 |   |
| Increase in  non-current liabilities                                                                                          |       | 3,192                                           |       | 8,525                                                |       | 15,349 |   |
| Net cash used in  operating activities                                                                                        |       | (394,235                                        | )          | (519,775                                             | )          | (1,716,391 | ) |
|                                                                                                                          |       |                                            |       |                                                 |       |   |   |
| Investing activities:                                                                                                         |       |                                            |       |                                                 |       |   |   |
|                                                                                                                          |       |                                            |       |                                                 |       |   |   |
| Purchase of  property and equipment                                                                                           |       | —                                          |       | (27,052                                              | )          | (27,052 | ) |
| Cash acquired in  acquisition                                                                                                 |       | —                                          |       | 27,156                                               |       | 27,156 |   |
| Cash paid in  connection with acquisition transaction costs                                                                   |       | (25,000                                         | )          | —                                               |       | (170,025 | ) |
| Net cash  provided by (used in) investing activities                                                                          |       | (25,000                                         | )          | 104                                                  |       | (169,921 | ) |
|                                                                                                                          |       |                                            |       |                                                 |       |   |   |
| Financing activities:                                                                                                         |       |                                            |       |                                                 |       |   |   |
|                                                                                                                          |       |                                            |       |                                                 |       |   |   |
| Proceeds from  issuance of notes payable net of expenses                                                                      |       | 339,500                                         |       | —                                               |       | 339,500 |   |
| Proceeds from  sale of common stock net of expenses                                                                           |       | —                                          |       | 2,613,317                                            |       | 2,929,318 |   |
| Redemption of  common stock                                                                                                   |       | —                                          |       | (400,000                                             | )          | (400,000 | ) |
| Repayment of  notes payable to related party                                                                                  |       | —                                          |       | (937,875                                             | )          | (940,720 | ) |
| Collection of  subscription receivable                                                                                        |       | —                                          |       | —                                               |       | 5,600 |   |
| Net cash  provided by financing activities                                                                                    |       | 339,500                                         |       | 1,275,442                                            |       | 1,933,698 |   |
|                                                                                                                          |       |                                            |       |                                                 |       |   |   |
| Net change in cash                                                                                                            |       | (79,735                                         | )          | 755,771                                              |       | 47,386 |   |
|                                                                                                                          |       |                                            |       |                                                 |       |   |   |
| Cash - Beginning of  period                                                                                                   |       | 127,121                                         |       | 224                                                  |       | — |   |
|                                                                                                                          |       |                                            |       |                                                 |       |   |   |
| Cash - End of period                                                                                                          |       | $                                               | 47,386     |                                                 | $          | 755,995 |   | $ | 47,386 |   |
|                                                                                                                          |       |                                            |       |                                                 |       |   |   |
| Supplemental disclosure  of non-cash investing and financing activities:                                                      |       |                                            |       |                                                 |       |   |   |
|                                                                                                                          |       |                                            |       |                                                 |       |   |   |
| Issuance of  common stock in business combination                                                                             |       | $                                               | —     |                                                 | $          | 1,280,300 |   | $ | 1,280,300 |   |
| Assumption of  consultants’ options in connection with business combination                                              |       | —                                          |       | 508,698                                              |       | 504,835 |   |
| Assumption of  employee options in connection with business combination                                                       |       | —                                          |       | 303,348                                              |       | 303,348 |   |
| Net liabilities  assumed in business combination                                                                              |       | —                                          |       | 785,992                                              |       | 785,992 |   |
| Note payable  issued in connection with redemption of shares                                                                  |       | —                                          |       | 350,000                                              |       | 350,000 |   |
| Shares and  warrants issued in connection with repayment of note payable                                                      |       | —                                          |       | —                                               |       | 112,500 |   |
| Value attributed  to warrants in connection with the issuance of notes payable                                                |       | 397,416                                         |       | —                                               |       | 397,416 |   |
| Value attributed to  common stock in connection with the issuance of notes payable                                            |       | 17,623                                          |       | —                                               |       | 17,618 |   |

 

The accompanyingnotes are an integral part of these unaudited condensed consolidated financialstatements

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**FermaVirPharmaceuticals, Inc. and Subsidiary(A Development Stage Company)Notes to Condensed Consolidated Financial StatementsFor the Six Months Ended October 31, 2005 and 2006(Unaudited)**

**1)    Business**

****FermaVirPharmaceuticals, Inc. (t****he “Company”) was organizedunder the laws of the State of Florida on November 15, 2002 as Venus BeautySupply, Inc. The Company had no operations through August 16, 2005. On thatdate, it acquired 100% of the outstanding common shares of FermaVir Research,Inc. (“FermaVir”), raised funds through the sale of common stock, and changedits name to FermaVir Pharmaceuticals, Inc.

Through its whollyowned subsidiary, the Company has licensed patents on a series of compounds forthe treatment of viral diseases including compounds for the treatment ofvaricella zoster virus (“VZV”), the causative agent for shingles and chickenpoxand human cytomegalovirus (“CMV”), a member of the herpes virus group whichincludes the viruses that cause chicken pox, mononucleosis, herpes labialis(cold sores) and genitalis (genital herpes).

Additionally,through its wholly owned subsidiary, the Company has performed preclinicalstudies on its compounds and has selected a clinical candidate for developmentfor the treatment of shingles. The Company’s clinical candidate will undergoextensive preclinical testing. The Company is conducting pharmacology andsafety studies of its clinical candidate in order to file an InvestigationalNew Drug Application (“IND”) with the Food and Drug Administration.

Upon acceptance ofthe IND, the Company intends to commence Phase I safety studies of its clinicalcandidate for the treatment of shingles in humans. In addition, the Companyintends to identify from its proprietary anti-viral compounds, a clinical candidatefor the treatment of CMV infections in transplant patients. The Company is alsocurrently seeking other opportunities and technologies for in-licensing fromacademic, research institutions, and commercial sources which would complementand enhance its business.

The Company’sprimary activities have been organizational in nature, including recruitingpersonnel, establishing office facilities, licensing patents, conductingresearch and development, performing business and financial planning, andraising capital. Since inception, the Company has not generated any revenuesand, accordingly, is considered to be in the development stage.

**2)   Basisof Presentation and Significant Accounting Policies**

***Basis of Presentation***

The accompanyingunaudited condensed consolidated financial statements include the accounts of FermaVirPharamaceuticals, Inc. and FermaVir Research, Inc., a 100% owned subsidiary,and have been prepared in accordance with accounting principles generallyaccepted in the United States of America and the rules and regulations of theSecurities and Exchange Commission for interim 

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financialinformation. Accordingly, the condensed consolidated financial statements donot include all information and footnotes required by accounting principlesgenerally accepted in the United States of America for complete annualfinancial statements. In the opinion of management, the accompanying unauditedcondensed consolidated financial statements reflect all adjustments, consistingof only normal recurring adjustments, considered necessary for a fairpresentation. Interim operating results are not necessarily indicative ofresults that may be expected for the fiscal year ending April 30, 2007 or forany other interim period. These unaudited condensed consolidated financialstatements should be read in conjunction with the Company’s audited ConsolidatedFinancial Statements as of and for the year ended April 30, 2006, which areincluded in the Company’s Annual Report on Form 10-KSB for such year. Thecondensed consolidated balance sheet as of April 30, 2006 has been derived fromthe audited consolidated financial statements included in the Form 10-KSB forthat year.

The accompanyingunaudited condensed consolidated financial statements have been prepared on agoing concern basis which contemplates the realization of assets and thesettlement of liabilities and commitments in the normal course of business. TheCompany has incurred losses totaling $6,648,513 from November 15, 2002(Inception) to October 31, 2006 and has negative working capital. Thesefactors, among others, raise substantial doubt that the Company will be able tocontinue as a going concern. The condensed consolidated financial statements donot include any adjustments that might result from the outcome of thisuncertainty.

The Company hassustained operating losses since its inception and expects such losses tocontinue over the next several years. Management plans to continue financingthe operations with a combination of equity issuances and debt arrangements. Ifadequate funds are not available, the Company may be required to delay, reducethe scope of, or eliminate its research or development programs, or ceaseoperations.

Our continuedoperations will depend on whether we are able to raise additional funds throughvarious potential sources, such as equity and debt financing, collaborative andlicensing agreements, strategic alliances, and our ability to realize the fullpotential of our technology in development. Such additional funds may not become available on acceptable terms, ifat all, and there can be no assurance that any additional funding that we doobtain will be sufficient to meet our needs in the long term. Through October31, 2006, virtually all of our financing has been through private placements ofcommon stock and warrants. We intend to continue to fund operations from cashon-hand and through the similar sources of capital previously described for theforeseeable future. We can give no assurances that any additional capital thatwe are able to obtain will be sufficient to meet our needs.  We believe that we will continue to incur netlosses and negative cash flows from operating activities for the foreseeablefuture.  Based on the resources availableto us at October 31, 2006, we will need additional equity or debt financing tosustain our operations through the balance of 2007 and we will need additionalfinancing thereafter until we can achieve profitability, if ever.  These matters raise substantial doubt aboutour ability to continue as a going concern.

***Use of Estimates***

The preparation offinancial statements in conformity with accounting principles generally acceptedin the United States of America requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and thedisclosure of contingent liabilities at the date of the financial statements aswell as the reported expenses during the reporting periods. On an ongoingbasis, management evaluates its estimates and judgments. Management basesestimates on its historical experience and on various other factors that itbelieves are reasonable under the circumstances, the results of which form thebasis for 

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making judgmentsabout the carrying value of assets and liabilities that are not readilyapparent from other sources. Actual results may differ from these estimatesunder different assumptions or conditions.

***Propertyand Equipment***

Property andequipment are recorded at cost. Depreciation is provided for furniture andequipment on a straight-line basis over their estimated useful lives of fiveand three years, respectively.

***Research and Development***

Research and developmentexpenses consist of costs incurred to further the Company’s research anddevelopment activities and include salaries and related employee benefits,costs associated with clinical trials, non-clinical activities such as testing,regulatory activities, and fees paid to external service providers and contractresearch organizations who conduct certain research and development activitieson behalf of the Company. Research and development costs are expensed asincurred.

***Computation of Net Loss per Common Share***

Basic net loss percommon share is calculated by dividing net loss applicable to common shares bythe weighted-average number of common shares outstanding for the period. Dilutednet loss per common share is the same as basic net loss per common share, sincepotentially dilutive securities from stock options and stock warrants wouldhave an anti-dilutive effect because the Company incurred a net loss duringeach period presented. The amounts of potentially dilutive securities excludedfrom the calculation were 3,721,029 and 2,808,029 shares at October 31, 2006and 2005, respectively.

***Stock-Based Compensation***

EffectiveMay 1, 2006, the Company adopted Financial Accounting Standards Board issuedStatement of Financial Accounting Standard No. 123 (Revised 2004), *Share-Based Payments* (“SFAS 123R”). SFAS123R requires a public entity to measure the cost of employee services receivedin exchange for the award of equity instruments based on the fair value of theaward at the date of grant. The expense is to be recognized over the periodduring which an employee is required to provide services in exchange for theaward. See Note 7, “Adoption of Statement of Financial Accounting Standard No.123 (Revised 2004), *Share-Based Payments”*, for additional 

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disclosuresregarding the adoption of SFAS 123R and the Company’s accounting forstock-based compensation expense.

**3)    Acquisitionof FermaVir Research, Inc.**

On August 16,2005, the Company issued 1,829,000 common shares in exchange for alloutstanding common shares of FermaVir Research, Inc (“FermaVir”). Additionally,the Company exchanged 1,850,000 options to purchase common stock of the Companywith the holders of all outstanding options to purchase common stock ofFermaVir as of that date.

After thecompletion of this transaction and the additional related simultaneoustransactions described in Note 5, “Stockholders’ Equity” the shareholders ofthe Company owned approximately 70% of the combined company. The acquisition ofFermaVir has been accounted for by the Company under the purchase method ofaccounting in accordance with Statement of Financial Accounting Standards No.141 “Business Combinations”. Under the purchase method, assets acquired andliabilities assumed by the Company are recorded at their estimated fair valuesas of the date of acquisition and the results of operations of the acquiredcompany are consolidated with those of the Company from the date ofacquisition.

Thefollowing unaudited pro forma financial information presents the consolidatedresults of operations of the Company and FermaVir, as if the acquisition hadoccurred on May 1, 2005 instead of August 16, 2005 and includes the charge forthe write-off of acquired in-process research and development of $2,695,054. Thepro forma information does not necessarily reflect the results of operationsthat would have occurred had the entities been a single company during thoseperiods.

|                                                       | ** ** | **Three Months**          | ** ** | **Six Months**            | ** ** |
|-------------------------------------------------------|------------|--------------------------------|------------|--------------------------------|------------|
| ** **                                            | ** ** | **Ended**                      | ** ** | **Ended**                      | ** ** |
| ** **                                            | ** ** | **October 31, 2005** | ** ** | **October 31, 2005** | ** ** |
| Net loss                                              |       | $(586,176                      | )          | $(3,553,051                    | )          |
| Weighted average  number of common shares outstanding |       | 16,407,222                     |       | 16,380,623                     |       |
| Loss per common share—Basic  and fully diluted   |       | $(0.04                         | )          | $(0.22                         | )          |

 

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**4)   Licensing Agreement and Commitments**

On February 2,2005, FermaVir entered into a Patent and Technology License Agreement (the “LicenseAgreement”) with University College Cardiff Consultants Limited (“Cardiff”), anaffiliate of Cardiff University located in the United Kingdom, for a series ofpharmaceutical compounds for the treatment of viral diseases.

Under the terms of this License Agreement, the Company, through itswholly owned subsidiary, has the exclusive, worldwide rights to research,develop, and commercially exploit such technology during the period of existingpatent protection which extends from fifteen to twenty years in targetedmarkets in North America, Western European nations, Japan, Australia, and NewZealand and any new related patents. Remaining obligations under this LicenseAgreement consist of milestone payments aggregating $550,000 during theclinical trial phase of development for each product, and royalty paymentsbased upon net sales of such products as defined in the Agreement. Additionally,the Company is obligated to make good faith expenditures of at least $2,000,000for the clinical development of at least one pharmaceutical compound during theinitial three years of the License Agreement. As of October 31, 2006, nomilestone payments were due to Cardiff. Substantially all of the Company’sresearch and development expenditures excluding in-process research anddevelopment discussed in Note 3, “Acquisition of FermaVir Research, Inc.”,relate to development efforts for the technology related to this LicenseAgreement.

See Note 8, “Repurchase Agreements with Founders”, foradditional information concerning this licensed technology.

**5)    Stockholders’Equity**

***StockSplit***

On August 16,2005, the Company initiated a 35.28 for one stock split effective August 22,2005 resulting in authorized capital stock of 120,000,000 shares consisting of100,000,000 shares of common stock with $0.0001 par value and 20,000,000 sharesof preferred stock with $0.001 par value. All share and per share data havebeen restated for this stock split.

***FinancingActivities***

On June 16 andJuly 28, 2006, the Company issued promissory notes in the aggregate principalamount of $325,000 together with warrants and received net proceeds of$298,500. The notes bear interest at 12% and mature on January 1, 2007.

Proceeds from theissuance of these instruments were allocated to notes payable and warrantsbased upon the relative amounts of the face value of the notes and theestimated fair value of the warrants. This resulted in the recording of adiscount related to the notes of $199,242. This discount is being amortized tointerest expense utilizing the interest method through the scheduled maturitydate of the 

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notes. The Companyrecorded non-cash expense for the amortization of this discount of $39,020, $62,631,and $62,631 during the three and six months ended October 31, 2006 and theperiod from November 15, 2002 (Inception) to October 31, 2006, respectively.

If prior to thematurity date the Company receives gross proceeds from the sales of securitieswherein the aggregate proceeds exceeds two times the then outstanding principalbalance of the promissory notes, the promissory notes become immediately dueand payable within six days. The Company may repay, in whole or in part, thepromissory notes at any time for consideration equal to 106% of the thenoutstanding principal balance.

In conjunctionwith the issuance of these notes, the Company issued warrants to purchase325,000 shares of common stock at price of $1.00 per share. The warrants expireon June 30, 2012. As previously indicated, proceeds from the issuance of theseinstruments was allocated to notes payable and warrants based upon the relativeamounts of the fair value of the notes and the estimated fair value of thewarrants. This resulted in the allocation of $172,742 to the warrants and thisamount was accounted for as an increase to Additional Paid-In Capital.

On September 22, 2006, the Company entered intoan agreement with an investor under which the investor agreed to purchase$75,000 principal amount of 8% notes due January 1, 2008 (the “New Notes”)and 112,500 warrants to purchase shares of the Company’s common stock for $1.00per share until June 30, 2014 (the “2014 New Warrants”).

On September 22, 2006, the Company entered into aLetter Agreement and Amendment Agreement (the “Amendment”) with certaininvestors (the “Prior Investors”) who participated in a private placement of theCompany’s $325,000 principal amount 12% notes due January 1, 2007 (the “PriorNotes”) and warrants (the “Prior Warrants”) in June and July 2006 (the “PriorPlacement”). Pursuant to the Letter Agreement, the Investors agreed to amendthe Prior Notes 

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by (i) extending the maturity date of the Prior Notesto January 1, 2008 (the “Maturity Date”), (ii) lowering the interest rateaccruing on the principal amount of the Prior Notes from 12% per annum to 8%commencing as of September 1, 2006, (iii) increasing the financing triggerrequiring mandatory redemption of the Prior Notes from two to three times theoutstanding principal of the Prior Notes and (iv) lowering the optionalredemption price of 106% of the principal amount of the Prior Notes, plusaccrued interest to 103% of the principal for the period from July 1, 2007 tothe Maturity Date. In addition, pursuant to the Amendment, the Investors agreedto amend the Prior Warrants by extending the expiration date of the PriorWarrants from June 30, 2012 to June 20, 2014. The Amendment essentially changedthe terms of the Prior Notes and Prior Warrants to be equivalent to the NewNotes and New Warrants, including extending the maturity date of the PriorNotes from January 1, 2007 to January 1, 2008.

In exchange for the Investors entering into theAmendment, the Company issued 40,625 shares of common stock and 162,500 NewWarrants.

The amendmentreferred to above constitutes a material modification. Consequently thetransaction was accounted for in accordance with the guidance in the consensusof Emerging Issues Task Force Issue No. 96-19, “Debtors Accounting for Modificationor Exchange of Debt Instruments” as a extinguishment of the existing debt withthe issuance of new debt. A loss from the extinguishment of debt of $125,007resulted from the write-off of the unamortized debt discount relating to theoriginal debt and is included in interest expense. The fair value of commonstock and warrants issued in connection with the modification was allocated tothe instruments based on their relative fair values. Such amounts exceeded theproceeds and, accordingly, unamortized discount of $247,478 was recorded to theextent of the remaining balance. This resulted in allocation of $17,623 and $397,416to the common stocks and warrants, respectively, was accounted for as anincrease to additional paid in capital during the three months endedOctober 31, 2006. The Company recorded non-cash expense for theamortization of discount of $9,126 for each of the three and six months endedOctober 31, 2006 and for the period from November 15, 2002(Inception) to October 31, 2006. 

The Company issueda warrant for the purchase of 40,000 common shares at an exercise price of $1.00per share with a fair value of $33,897 to an advisor who provided assistancewith the transactions. The fair value of the warrant was charged to interestexpense.

See Note 8, “RepurchaseAgreements with Founders”, for additional information concerning outstanding commonstock.

**6)    StockOptions and Warrants**

On August 16, 2005the Company adopted the FermaVir Pharmaceuticals, Inc. 2005 Equity CompensationIncentive Plan (the “Equity Plan”). The Equity Plan authorizes the granting ofincentive stock options within the meaning of Section 422 of the InternalRevenue Code of 1986, as amended, non-statutory options and restricted stockawards with respect to up to 7,500,000 shares of common stock.

On August 16,2005, the Company exchanged 1,050,000 options to purchase common stock of theCompany with the holders of outstanding options to purchase common stock ofFermaVir as 

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of that date. Theseoptions are 100% vested, expire in 2015, and have exercise price of $0.75 pershare. The estimated fair value of these warrants of $504,835 was included inthe purchase price of FermaVir.

On August 16,2005, the Company exchanged 800,000 options to purchase common stock of theCompany with the holder of outstanding options to purchase common stock ofFermaVir as of that date. These options vest in varying amounts through 2010,expire in 2015, and have exercise price of $1.10 per share. The Companyestimated the fair value of these warrants to be $303,348.

On September 1,2005 the Company, in connection with a professional services agreement, grantedwarrants to purchase 36,000 shares of common stock at an exercise price of$0.85 for a period of five years. The Company estimated the fair value of thewarrants as of the grant date to be $3,863.

On September 24,2005 the Company granted options to members of the Board of Directors topurchase 300,000 shares of common stock at an exercise price of $1.25 for aperiod of ten years. Such options vest ratably on the first, second, and thirdanniversary dates of the grant. The Company estimated the fair value of theoptions as of the grant date to be $33,200.

On September 24,2005 the Company, in connection with a professional services agreement, grantedto a member of the Board of Directors immediately vested options to purchase20,000 shares of common stock at an exercise price of $1.25 for a period offive years. The Company estimated the fair value of the options as of the grantdate to be $1,453.

On November 1,2005 the Company, in connection with a professional services agreement, grantedwarrants to purchase 150,000 shares of common stock at an exercise price of$1.10 for a period of five years. The Company has estimated the fair value ofthese warrants as of the grant date to be $170,795.

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On December 12, 2005 theCompany, in connection with a professional services agreement, granted warrantsvested immediately to purchase 1,000,000 shares of common stock at an exerciseprice of $1.50 for a period of three years. The Company has estimated the fair value of these warrants as of thegrant date to be $910,435.

On December 27, 2005 theCompany granted options to members of the Board of Directors to purchase 18,000shares of common stock at an exercise price of $1.25 for a period of tenyears.  Such options vest ratably on thefirst, second, and third anniversary dates of the grant.  The Company estimated the fair value of theseoptions as of the grant date to be $26,889.

On March 28, 2006 theCompany granted options to a member of management to purchase 60,000 shares ofcommon stock at an exercise price of $1.60 for a period of ten years.  Such options vest ratably over the first twelvemonths of the grant.  The Companyestimated the fair value of these options as of the date of the grant to be$64,348.

On September 26, 2006 theCompany granted options to a member of management to purchase 45,000 shares ofcommon stock at an exercise price of $1.05 for a period of ten years.  15,000 of such options vest immediately and15,000 each vest on September 26, 2007 and 2008.  The Company estimated the fair value of theseoptions as of the date of the grant to be $31,500.

See Note 8, “RepurchaseAgreements with Founders”, for additional information concerning outstandingwarrants to purchase the Company’s shares.

**7)****                                     Share Based Payments**

The following tablerepresents all warrants issued, exercised, cancelled and outstanding during thesix months ended and as of October 31, 2006:
| ** **                                               | ** ** | **Number of  Shares ** | ** ** | **Weighted Average  Price Per Share** | ** ** |
|----------------------------------------------------------|------------|----------------------------------|------------|------------------------------------------------------|------------|
| Outstanding at May 1,  2006                              |       | 1,754,695                        |       | $                                                    | 1.45       |   |
| Issued                                                   |       | 640,000                          |       | 1.00                                                 |       |
| Cancelled                                                |       | (966,666                         | )          | 1.50                                                 |       |
| Warrants outstanding and exercisable at October 31, 2006 |       | 1,428,029                        |       | $                                                    | 1.22       |   |

 

In December 2004, theFinancial Accounting Standards Board issued Statement of Financial AccountingStandard No. 123 (Revised 2004), *Share-BasedPayments* (“SFAS 123R”).  SFAS123R requires a public entity to measure the cost of employee services receivedin exchange for

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the award of equityinstruments based on the fair value of the award at the date of grant.  The expense is to be recognized over theperiod during which an employee is required to provide services in exchange forthe award.  SFAS 123R is effective as ofthe beginning of the first interim or annual reporting period that begins afterDecember 15, 2005 and, accordingly, the Company adopted this standard on May 1,2006.

For all awards grantedprior to May 1, 2006, the unrecognized portion of stock based compensation isbeing recognized as an expense on a straight line basis over the remainingrequisite service period.  The Companyhas chosen the modified prospective method for transitioning to SFAS 123R and,accordingly, the financial results for prior periods have not been restated.

Prior to May 1, 2006, theCompany had employed the principles of Statement of Financial AccountingStandard No. 123, *Accounting for Stock-Based Compensation*(SFAS 123”).  As provided for by SFAS123, the Company had elected to record compensation expense to the extent ofemployee or director services rendered based on the fair value of stock optionsgranted under the plan.  The Companyestimated the fair value of stock options and warrants utilizing the Black-Scholesoption-pricing model and common stock utilizing its market value.

Because the Company hadpreviously adopted FAS 123, recording stock based compensation at fair value,there was no effect upon the results of operations for the three and six monthsended October 31, 2006 for the adoption of SFAS 123R.  The remaining unrecognized compensation costrelated to non-vested share-based compensation arrangements for all employeestock options outstanding at October 31, 2006, as measured at the date of grant,was approximately $276,000.  This amountis being expensed over the remaining requisite service period of the relatedoptions, which averages twenty-one months.

In connection with theadoption of SFAS 123R on May 1, 2006, the balance of deferred unamortized stockbased compensation of $308,615 as of April 30, 2006 has been eliminated againstthe appropriate equity accounts.

The risk-free interestrate assumption is based upon observed interest rates appropriate for the expectedterm of the Company’s employee stock options. The expected volatility is based on the historical volatility of thestock of comparable companies.  TheCompany has not paid any dividends on common stock since its inception and doesnot anticipate paying dividends on its common stock in the foreseeablefuture.  The computation of the expectedoption term is based on expectations regarding future exercises of optionswhich generally vest over three years and have a ten year life.

The assumptions made in calculatingthe fair values of all options are as follows:
| ** **               | ** ** | **Three months ended  October 31,** | ** ** | **Six months ended  October 31,** | ** ** |
|--------------------------|------------|-----------------------------------------------|------------|---------------------------------------------|------------|
| ** **               | ** ** | **2006**                                      | ** ** | **2005**                                    | ** ** | **2006** | ** ** | **2005** | ** ** |
| Risk free  interest rate |       | 4.55                                          | %          | 4.15                                        | %          | 4.55 | % | 4.15 | % |
| Dividend yield           |       | 0.0                                           | %          | 0.0                                         | %          | 0.0 | % | 0.0 | % |
| Volatility               |       | 70                                            | %          | 80                                          | %          | 70 | % | 80 | % |
| Expected Life            |       | 10 years                                      |       | 10 years                                    |       | 10 years |   | 4.5 to 10 years |   |

 

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SFAS 123R requiresforfeitures to be estimated at the time of grant and revised, if necessary, insubsequent periods if actual forfeitures differ from those estimates.  Based on very limited historical experiencethe Company has assumed no forfeitures in the determination of stock-basedcompensation expense under SFAS 123R.

The Company’sdetermination of fair value is affected by the Company’ stock price as well asthe assumptions discussed above which require judgment.

A summary of the changesin options outstanding during the six months ended October 31, 2006 is asfollows:
| ** **                                                                                   | ** ** | **Number of  Shares** | ** ** | **Weighted  Average Price  Per Share** | ** ** | **Weighted  Average  Remaining  Contractual  Term (Years)** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
|----------------------------------------------------------------------------------------------|------------|----------------------------|------------|--------------------------------------------------|------------|------------------------------------------------------------------|------------|---------------------------------|------------|
| Outstanding at  April 30, 2006                                                               |       | 2,248,000                  |       | $                                                | 0.97       |                                                             | 9.0        |                            | $          | 288,200 |   |
| Granted                                                                                      |       | 45,000                     |       | 1.05                                             |       | 9.9                                                              |       | —                          |       |
| Exercised                                                                                    |       | —                     |       |                                             |       |                                                             |       |                            |       |
| Terminated                                                                                   |       | —                     |       |                                             |       |                                                             |       |                            |       |
| Outstanding at  October 31, 2006                                                             |       | 2,293,000                  |       | $                                                | 0.97       |                                                             | 8.5        |                            | $          | 315,000 |   |
|                                                                                         |       |                       |       |                                             |       |                                                             |       |                            |       |
| Options  exercisable at October 31, 2006                                                     |       | 1,361,666                  |       | $                                                | 0.86       |                                                             | 8.3        |                            | $          | 315,000 |   |
|                                                                                         |       |                       |       |                                             |       |                                                             |       |                            |       |
| Weighted-average fair  value of options granted during the six months ended October 31, 2006 |       | $                          | 0.70       |                                             |       |                                                             |       |                            |       |   |
|                                                                                              |            |                            |            |                                                  |            |                                                                  |            |                                 |            |  |  |  |

 

**8)            Repurchase Agreements With Founders**

Effective March 16, 2006,a founder of FermaVir Research, Inc. who owns 1,029,100 shares of the Company,granted to the Company an irrevocable, exclusive option to repurchase 926,100of

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those shares for $114,000for a period of one hundred twenty days (the “Company Option”) after the soonerof:

a)                                      TheCompany’s abandonment of the development of the technology licensed fromUniversity College Cardiff Consultants Limited on February 2, 2005 as describedin Note 5 to these financial statements (the “Licensed Subject Matter”), or

b)                                     December31, 2006, unless on or before such date, Phase I Clinical Trials have commencedfor a product utilizing the Licensed Subject Matter.

Effective March 16, 2006,two additional founders of FermaVir Research, Inc. who collectively ownfully-vested options to purchase 1,050,100 shares of the Company at $0.75 per share,have entered into agreements with the Company whereby upon exercise of theCompany Option, the Company may cancel options to purchase 945,000 shares uponpayment of $100,000.

Additionally, effectiveMarch 16, 2006, the three founders referred to in the preceding paragraphs,entered into an agreement with the Company pursuant to which, upon exercise ofthe Company Option, the founders have the option to acquire for nominalconsideration for a period of thirty days all the rights related to the LicensedSubject Matter.

As of December 20, 2006,the Company Option has not been triggered.

**9)            Subsequent Events**

On November 9, 2006, theCompany entered into an Amendment Agreement (the “Agreement”) with certaininvestors (the “Investors”) who participated in a private placement of theCompany’s $400,000 principal amount 8% notes due January 1, 2008, the PriorWarrants, and the 2014 New Warrants in June, July and September 2006. Pursuantto the Agreement, the Investors agreed to amend the Prior Warrants and the 2014New Warrants by extending the term of the warrants to December 31, 2016, addingin a anti-dilution clause for issuances or sales of common stock or commonstock equivalents below the exercise price of the Prior Warrants and the 2014New Warrants and adding a covenant that the Company will use “Best Efforts” tofile a registration statement by January 31, 2007.

On November 15,2006, the Company entered into a Debt Conversion Agreement with certaincreditors, including a related party, pursuant to which such creditors agreedto convert an aggregate $1,082,541 of debt, including $13,541 of accruedinterest, into an aggregate 1,443,389 shares of common stock and 721,965warrants to purchase common stock. The debt to the related party arose from theCompany’s failure to make payments pursuant to a consulting agreement. Thewarrants have an exercise price of $1.00 per share and are exercisable untilDecember 31, 2016. The conversion of this debt will result in a charge toexpense on the Statement of Operations during the quarter endedJanuary 31, 2007 for the value of the common stock and warrants in excessof the debt and accrued interest.

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**Item 2:   Management’s Discussion and Analysis or Plan of Operation**

The following discussionshould be read in conjunction with our condensed consolidated financialstatements and notes to those statements included elsewhere in this report. Inaddition to historical information, the following discussion and other parts ofthis report contain forward-looking information that involves risks anduncertainties.

**Overview**

Since inception onNovember 15, 2002 through October 31, 2006, we have sustained cumulative netlosses of $6,648,513.  Our losses haveresulted primarily from research and development expenses, patent costs andlegal and accounting expenses.  Frominception through October 31, 2006, we have not generated any revenue fromoperations.  We expect to incuradditional losses to perform further research and development activities.  We do not currently have any commercialproducts and we do not expect to have any for the foreseeable future.  Our product development efforts are in theirearly stages and we cannot make estimates of the costs or the time it will taketo complete.  The risk of completion of anyprogram is high because of the long duration of clinical testing, regulatoryapproval and review cycles and uncertainty of the costs.  Net cash inflows from any products developedmay take several years to achieve.

Management plans tocontinue financing the operations with a combination of equity issuances anddebt arrangements.  If adequate funds arenot available, we may be required to delay, reduce the scope of, or eliminateour research or development programs, or cease operations. The financialstatements do not include any adjustments that might result from the outcome ofthis uncertainty.

**Plan of Operation**

We are a developmentstage biotechnology company that has licensed patents for a series of compoundsfor the treatment of viral diseases including compounds for the treatment ofvaricella zoster virus, or VZV, the causative agent for shingles and chickenpoxand human cytomegalovirus, or CMV, a member of the herpes virus group whichincludes the viruses that cause chickenpox, mononucleosis, herpes labialis(cold sores) and genitalis (genital herpes).

We have performedpreclinical studies on a series of our compounds and have selected FV-100,prodrug of CF-1743 for development for the treatment of shingles.  A prodrug is a drug which is administered ina form which enhances the pharmacology of the active compound and onceadministered, is metabolized in the body into an active compound.  Our clinical candidate, FV-100, is currentlyundergoing extensive preclinical testing. We are contracting and supervising the pharmacology and safety studiesof our clinical candidate in order to file an Investigational New DrugApplication (IND) with the Food and Drug Administration (FDA).

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Upon acceptance of theIND, we intend to commence Phase I safety studies of our clinical candidate forthe treatment of shingles in humans.  Inaddition, we intend to identify a clinical candidate for the treatment of CMVinfections in transplant patients from our proprietary anti-viralcompounds.  We are also currently seekingother opportunities and technologies for in-licensing from academia, researchinstitutions and commercial sources which would complement and enhance ourbusiness.

On November 30, 2005, wesubmitted a pre-IND submission to the FDA requesting a consultation on ourproposed plan for development of CF-1743 for the treatment of shingles.  In January 2006, we received a response fromthe FDA on our pre-IND submission.  TheFDA provided guidance on our preclinical and early stage clinical plans.  We also filed a pre-IND submission to the FDAfor FV-100 in April 2006 and received a response from the FDA in June.  We are using the FDA’s guidance from bothpre-IND responses in preparing an IND for our shingles drug candidate, FV-100.

On December 12, 2005, weentered into a marketing and public relations service agreement with TrilogyCapital Partners, Inc.  Under the termsof the agreement, Trilogy will be paid $12,500 per month and was issuedwarrants to purchase 1,000,000 shares of our common stock at an exercise priceof $1.50 per share which are exercisable for a period of three years.  This agreement was terminated effective June3, 2006

**Results of Operations**

**Three Months Ended October 31,2006 Compared To The Three Months Ended October 31, 2005**

During the three monthsended October 31, 2006 and 2005, we had no revenue.  We do not expect to have revenues relating toour product candidates in development for several years, if at all.  Research and development activities have beencurtailed during the three months ended October 31, 2006 due to limitedfinancial resources.

Research and developmentexpense for the three months ended October 31, 2006 was $141,176 as compared to$291,272 for the comparable period in 2005. This decrease is due to the reduced levels of performance of preclinicalstudies for development of a treatment for shingles during 2006.

Estimated charge foracquired in-process research and development for the three months ended October31, 2006 was zero as compared to $2,695,054 for the comparable period in2005.  This decrease is due to theabsence of acquisition activity during 2006.

General andadministrative expense for the three months ended October 31, 2006 was $210,365as compared to $206,544 for the comparable period in 2005.  This increase is due to the establishment ofoperations and consists of payroll and benefits, marketing expenses, legal andaccounting fees, occupancy expenses, directors’ fees, and general operatingexpenses.

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Other expense, whichconsists primarily of interest expense, for the three months ended October 31,2006, was $221,791 as compared to $2,507 for the comparable period in2005.  This increase is attributable tofinancing costs related to notes payable issued during 2006.

Net loss for the threemonths ended October 31, 2006 was $573,332 as compared to a net loss of$3,195,377 for the comparable period in 2005. This decrease in net loss is attributable to the net effect of adecrease in research and development expenses of $150,096, a decrease in thecharge for acquired in-process research and development of $2,695,054, an increasein general and administrative expenses of $3,821, and an increase in otherexpense of $219,284 primarily consisting of interest expense.

**Six Months Ended October 31, 2006Compared To The Six Months Ended October 31, 2005**

During the six months endedOctober 31, 2006 and 2005, we had no revenue. We do not expect to have revenues relating to our product candidates indevelopment for several years, if at all.

Research and developmentexpense for the six months ended October 31, 2006 was $303,124 as compared to$291,272 for the comparable period in 2005. This increase is due to the performance of preclinical studies fordevelopment of a treatment for shingles.

Estimated charge foracquired in-process research and development for the six months ended October31, 2006 was zero as compared to $2,695,054 for the comparable period in2005.  This decrease is due to theabsence of acquisition activity during 2006.

General andadministrative expense for the six months ended October 31, 2006 was $515,751as compared to $206,768 for the comparable period in 2005.  This increase is due to the establishment ofoperations and consists of payroll and benefits, marketing expenses, legal andaccounting fees, occupancy expenses, directors’ fees, and general operatingexpenses.

Other expense, whichconsists primarily of interest expense, for the six months ended October 31,2006 was $247,751 as compared to $2,507 for the comparable period in 2005.  This increase is attributable to financingcosts related to notes payable issued during 2006.

Net loss for the sixmonths ended October 31, 2006 was $1,066,626 as compared to a net loss of$3,195,601 for the comparable period in 2005. This decrease in net loss is attributable to the net effect of anincrease in research and development expenses of $11,852, a decrease in thecharge for acquired in-process research and development of $2,695,054, anincrease in general and administrative expenses of $308,983, and an increase inother expense of $245,244 primarily consisting of interest expense.

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**Liquidity and Capital Resources**

From November 15, 2002(Inception) to October 31, 2006, our operations have been financed through thesale of common stock and we have accumulated a deficit during the developmentstage of $6,648,513.  This loss wasincurred through a combination of research and development activities, expensessupporting those activities, and a charge to expense for acquired in processresearch and development.  We expect tocontinue to incur additional losses and negative cash flows from operatingactivities for the foreseeable future.

On September 22, 2006, we entered into anagreement with an investor under which the investor agreed to purchase $75,000principal amount of 8% notes due January 1, 2008 (the “New Notes”) and112,500 warrants to purchase shares of the Company’s common stock for $1.00 pershare until June 30, 2014 (the “2014 New Warrants”).

On September 22, 2006, weentered into a Letter Agreement and Amendment Agreement (the “Amendment”) withcertain investors (the “Prior Investors”) who participated in a privateplacement of the Company’s $325,000 principal amount 12% notes due January 1,2007 (the “Prior Notes”) and warrants (the “Prior Warrants”) in June and July2006 (the “Prior Placement”). Pursuant to the Letter Agreement, the Investorsagreed to amend the Prior Notes by (i) extending the maturity date of the PriorNotes to January 1, 2008 (the “Maturity Date”), (ii) lowering the interest rateaccruing on the principal amount of the Prior Notes from 12% per annum to 8%commencing as of September 1, 2006, (iii) increasing the financing triggerrequiring mandatory redemption of the Prior Notes from two to three times theoutstanding principal of the Prior Notes and (iv) lowering the optional redemptionprice of 106% of the principal amount of the Prior Notes, plus accrued interestto 103% of the principal for the period from July 1, 2007 to the Maturity Date.In addition, pursuant to the Amendment, the Investors agreed to amend the PriorWarrants by extending the expiration date of the Prior Warrants from June 30,2012 to June 20, 2014. The Amendment essentially changed the terms of the PriorNotes and Prior Warrants to be equivalent to the New Notes and New Warrants,including extending the maturity date of the Prior Notes from January 1,2007 to January 1, 2008. In exchange for the Investors entering into theAmendment, we issued to each Investor 12.5 shares of common stock and 50 NewWarrants for each $100 principal amount of Prior Notes acquired. 

On November 9, 2006, theCompany entered into an Amendment Agreement (the “Agreement”) with certaininvestors (the “Investors”) who participated in a private placement of theCompany’s $400,000 principal amount 8% notes due January 1, 2008, the PriorWarrants, and the 2014 New Warrants in June, July and September 2006. Pursuantto the Agreement, the Investors agreed to amend the Prior Warrants and the 2014New Warrants by extending the term of the warrants to December 31, 2016, addingin a anti-dilution clause for issuances or sales of common stock or commonstock equivalents below the exercise price of the Prior Warrants and the 2014New Warrants and adding a covenant that the Company will use “Best Efforts” tofile a registration statement by January 31, 2007.

On November 15,2006, the Company entered into a Debt Conversion Agreement with certaincreditors, including a related party, pursuant to which such creditors agreedto convert an aggregate $1,082,541 of debt, including $13,541 of accruedinterest, into an aggregate 1,443,389 shares of common stock and 721,965warrants to purchase common stock. The debt to the related party arose from theCompany’s failure to make payments pursuant to a consulting agreement. Thewarrants have an exercise price of $1.00 per share and are exercisable untilDecember 31, 2016. The conversion of this debt will result in a charge toexpense on the Statement of Operations during the quarter endedJanuary 31, 2007 for the value of the common stock and warrants in excessof the debt and accrued interest.

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Our cash position was$47,386 as of October 31, 2006 compared to $127,121 as of April 30, 2006.  The net decrease during that period isattributable to proceeds of $339,500 from the issuance of notes payable net ofoperating and other expenses of $419,235.

Our current liabilitiestotaled $1,141,043 ($902,690 reported on the balance sheet plus $238,353 ofnote discounts) as of October 31, 2006 compared to $401,743 as of April 30,2006.  The net increase during thatperiod is attributable to proceeds from the issuance of notes payable with anet carrying value of $161,647 and increases in accounts payable and accruedexpenses of $364,302.

We had a working capitaldeficit of $1,046,733 ($808,380 reported on the balance sheet plus $238,353 ofnote discounts) as of October 31, 2006 compared to a working capital deficit of$257,183 as of April 30, 2006.

Our available workingcapital and capital requirements will depend upon numerous factors, includingprogress of our research and development programs, our progress in and the costof pre-clinical and clinical testing, the timing and cost of obtainingregulatory approvals, the cost of filing and prosecuting patent claims andother intellectual property rights, competing technological and marketdevelopments, current and future licensing relationships, the status of ourcompetitors, and our ability to establish collaborative arrangements with otherorganizations.

Our continued operationswill depend on whether we are able to raise additional funds through variouspotential sources, such as equity and debt financing, collaborative andlicensing agreements, strategic alliances, and our ability to realize the fullpotential of our technology in development. Such additional funds may not become available on acceptable terms, ifat all, and there can be no assurance that any additional funding that we doobtain will be sufficient to meet our needs in the long term.  Through October 31, 2006, virtually all ofour financing has been through private placements of common stock andwarrants.  We intend to continue to fundoperations from cash on-hand and through the similar sources of capital previouslydescribed for the foreseeable future.  Wecan give no assurances that any additional capital that we are able to obtainwill be sufficient to meet our needs.  Webelieve that we will continue to incur net losses and negative cash flows fromoperating activities for the foreseeable future.  Based on the resources available to us atOctober 31, 2006, we will need additional equity or debt financing to sustainour operations through the balance of 2006 and we will need additionalfinancing thereafter until we can achieve profitability, if ever.  These matters raise substantial doubt aboutour ability to continue as a going concern.

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**CriticalAccounting Policies**

Our financialstatements are prepared in accordance with accounting principles generallyaccepted in the United States of America, which requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period. Actual results could differ from those estimates.

The followingaccounting policies are critical in fully understanding and evaluating ourreported financial results:

a)**                                      Accountingfor Research and Developments Costs**

We account for our research and development costs inaccordance with Statement of Financial Accounting Standards No. 2 “Accountingfor Research and Development Costs”. Accordingly, research and development costs are expensed as incurred.

b)**                                     Accountingfor Acquisitions**

We account for our acquisitions utilizing the purchasemethod in accordance with Statement of Financial Accounting Standards No. 141 “BusinessCombinations”.  Under the purchasemethod, assets acquired and liabilities assumed by the Company are recorded attheir estimated fair values as of the date of acquisition and the results ofoperations of the acquired company are consolidated with those of the Companyfrom the date of acquisition.

c)**                                      Accountingfor Stock-Based Compensation**

We account for our stock options and warrants usingthe fair value method promulgated by Statement of Financial AccountingStandards No. 123R *Share-Based Payments*(“SFAS 123R”) which addresses the accounting for transactions in which anentity exchanges its equity instruments for goods or services. SFAS 123Rrequires a public entity to measure the cost of employee services received inexchange for the award of equity instruments based on the fair value of theaward at the date of grant.  The expenseis to be recognized over the period during which an employee is required toprovide services in exchange for the award. SFAS 123R is effective as of the beginning of the first interim orannual reporting period that begins after December 15, 2005 and, accordingly,the Company adopted this standard on May 1, 2006.

Priorto May 1, 2006, the Company had employed the principles of Statement ofFinancial Accounting Standards No. 123, *Accounting for Stock-BasedCompensation* (“SFAS 123”).  Asprovided for by SFAS 123, the Company had elected to record compensationexpense to the extent of employee or director services rendered based on thefair value of stock options granted under the plan.  The Company estimated the fair value of stockoptions and warrants utilizing the Black-Scholes option-pricing model andcommon stock utilizing its market value. Therefore, our results include non-cashcompensation expense as a result of the issuance of stock options and warrantsand we expect to record additional non-cash compensation expense in the future.

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**Item 3:   Controls and Procedures**

**A. Evaluation ofDisclosure Controls and Procedures:**

The Company’smanagement with the participation of the Company’s chief executive officer and chieffinancial officer have evaluated the effectiveness of the Company’s disclosurecontrols and procedures (as such term is defined in Rule 13a-15(e) and15d-15(e) under the Securities Exchange Act) as of the end of the period coveredby this report. Based on such evaluation, the Company’s chief executive officerand chief financial officer have concluded that, as of the end of such period,the Company’s disclosure controls and procedures were not effective due tomaterial weaknesses in the internal control over financial reporting describedbelow.

·                  thelack of sufficient internal accounting personnel necessary to meet thereporting requirements of a public company;

·                  insufficientwritten policies and procedures for accounting and financial reporting withrespect to the current requirements and application of US GAAP and SECdisclosure requirements; and

·                  segregationof duties, in that we had only one person performing all accounting-relatedduties.

Notwithstandingthe existence of this material weakness in our internal control over financialreporting, our management believes, including our Chief Executive Officer andChief Financial Officer that the condensed consolidated financial statementsincluded in this report fairly preset in all material respects our financialcondition, results of operations and cash flows for the periods presented.

**B. Changes inInternal Control over Financial Reporting:**

In the process ofconducting their review for the three and six months ended October 31, 2006,J.H. Cohn LLP, our independent registered public accounting firm (“JHC”),identified material weaknesses in the processes and procedures with ouraccounting and financial reporting function which were addressed as part of thecommunications by JHC with our audit committee. JHC informed the auditcommittee that these deficiencies constituted a material weakness understandards established by the Public Company Accounting Oversight Board.

Except asdescribed above, there has been no change in our internal control overfinancial reporting that has materially affected, or is reasonably likely to materiallyaffect, our internal control over financial reporting during the quarter endedOctober 31, 2006.

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**PART II -OTHER INFORMATION**

**Item 6:****          Exhibits**
| 31.1   | Certification of Chief Executive Officer Pursuant to  Rule 13a-14(a) and Rule 15d-14(a) under the Exchange Act.                                     |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                |
| 31.2   | Certification of Chief Financial Officer Pursuant to  Rule 13a-14(a) and Rule 15d-14(a) under the Exchange Act.                                     |
|   |                                                                                                                                                |
| 32.1   | Certification of Chief Executive Officer pursuant to  18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002. |
|   |                                                                                                                                                |
| 32.2   | Certification of Chief Financial Officer pursuant to  18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002. |

 

**SIGNATURE**

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has causedthis report to be signed on its behalf by the undersigned thereunto dulyauthorized.
| Dated:   December 29,  2006 | FERMAVIR PHARMACEUTICALS, INC. |
|---------------------------------------|--------------------------------|
|                                  |                           |   |
|                                  | By:                            | /s/ Geoffrey W. Henson |
|                                  |                           | Geoffrey W. Henson, Chief Executive Officer |
|                                  |                           |   |
|                                  | By:                            | /s/ Frederick Larcombe |
|                                  |                           | Frederick  Larcombe, Chief Financial Officer |
|                                  |                           | (Principal  Financial and Accounting Officer) |

 

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