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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q







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

For the quarterly period ended March 31, 2011

OR



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

For the transition period from  to
.

Commission File Number
000-51383





ACCENTIA BIOPHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Florida                                                        |  | 04-3639490                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)

324 South Hyde Park Ave., Suite
350

Tampa, Florida 33606

(Address of principal executive offices) (Zip Code)

(813) 864-2554

(Registrants telephone number, including area code)





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.    Yes  x    No   ̈

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

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



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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ̈    No  x

Indicate
by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a Bankruptcy Plan confirmed by
the Bankruptcy Court:    Yes  x    No   ̈

As of April 30, 2011, there were 71,310,708 shares of the registrants Common Stock outstanding.









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Forward-Looking Statements

Statements in this Quarterly Report on Form 10-Q that are not strictly historical in nature are forward-looking statements. These statements may include, but are not limited to, statements about: the
timing of the commencement, enrollment, and completion of our clinical trials for our product candidates; the progress or success of our product development programs; the status of regulatory approvals for our product candidates; the timing of
product launches; our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others; and our estimates for future performance, anticipated operating losses, future revenues,
capital requirements, and our needs for additional financing. In some cases, you can identify forward-looking statements by terms such as anticipates, believes, could, estimates, expects,
intends, may, plans, potential, predicts, projects, should, will, would, goal, or other variations of these terms (including
their use in the negative) or by discussions of strategies, plans or intentions. These statements are only predictions based on current information and expectations and involve a number of risks and uncertainties. The underlying information and
expectations are likely to change over time. Actual events or results may differ materially from those projected in the forward-looking statements due to various factors, including, but not limited to, those set forth in ITEM 1A. RISK
FACTORS of our Annual Report on Form 10-K for the fiscal year ended September 30, 2010 and those set forth in our other filings with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.



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INDEX

ACCENTIA BIOPHARMACEUTICALS, INC.



|           |  |                                                                                                                         |    |      |    | 
|---------- |  | ----------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|           |  |                                                                                                                         |    | Page |   
|PART I.    |  | FINANCIAL INFORMATION                                                                                                   |    |      |    | 
|ITEM 1.    |  | Financial Statements                                                                                                    |    |      |    | 
|           |  | Condensed Consolidated Balance Sheets as of March 31, 2011 (unaudited) and September 30,
2010                           |    |      | 2  | 
|           |  | Condensed Consolidated Statements of Operations for the Three and Six Months Ended March 
31, 2011 and 2010 (unaudited) |    |      | 4  | 
|           |  | Condensed Consolidated Statement of Stockholders Deficit for the Six Months Ended March 
31, 2011 (unaudited)          |    |      | 6  | 
|           |  | Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 
31, 2011 and 2010 (unaudited)           |    |      | 8  | 
|           |  | Notes to Condensed Consolidated Financial Statements                                                                    |    |      | 10 | 
|ITEM 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                   |    |      | 37 | 
|ITEM 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                                                              |    |      | 48 | 
|ITEM 4.    |  | Controls and Procedures                                                                                                 |    |      | 48 | 
|           |  |                                                                                                                        
|PART II.   |  | OTHER INFORMATION                                                                                                       |    |      |    | 
|ITEM 1.    |  | Legal Proceedings                                                                                                       |    |      | 49 | 
|ITEM 1A.   |  | Risk Factors                                                                                                            |    |      | 49 | 
|ITEM 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                             |    |      | 49 | 
|ITEM 3.    |  | Defaults Upon Senior Securities                                                                                         |    |      | 50 | 
|ITEM 4.    |  | (Removed and Reserved)                                                                                                  |    |      | 50 | 
|ITEM 5.    |  | Other Information                                                                                                       |    |      | 50 | 
|ITEM 6.    |  | Exhibits                                                                                                                |    |      | 50 | 
|Signatures |  |                                                                                                                         | 51 |     



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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS



|                                                                                                 |  |                           |           |  |                   |   |           | 
|------------------------------------------------------------------------------------------------ |  | ------------------------- | --------- |  | ----------------- | - | --------- | 
|                                                                                                 |  | March 31, 2011(Unaudited) |           |  | September 30,2010 |  
|ASSETS                                                                                           |  |                           |           |  |                   |   |           | 
|Current assets:                                                                                  |  |                           |           |  |                   |   |           | 
|Cash and cash equivalents                                                                        |  | $                         | 2,529,265 |  |                   | $ | 558,452   | 
|Accounts receivable:                                                                             |  |                           |           |  |                   |   |           | 
|Trade, net of allowance for doubtful accounts of $7,587 at March 31, 2011 and September 30, 2010 |  |                           | 716,708   |  |                   |   | 1,287,363 | 
|Inventories                                                                                      |  |                           | 432,382   |  |                   |   | 417,087   | 
|Unbilled receivables                                                                             |  |                           | 535,195   |  |                   |   | 151,303   | 
|Deferred finance costs                                                                           |  |                           | 161,631   |  |                   |   | 16,077    | 
|Prepaid expenses and other current assets                                                        |  |                           | 290,053   |  |                   |   | 243,998   | 
|                                                                                                 |  |                           |           |  |                   |   |           | 
|Total current assets                                                                             |  |                           | 4,665,234 |  |                   |   | 2,674,280 | 
|                                                                                                 |  |                          
|Goodwill                                                                                         |  |                           | 893,000   |  |                   |   | 893,000   | 
|Intangible assets                                                                                |  |                           | 854,567   |  |                   |   | 1,083,962 | 
|Furniture, equipment and leasehold improvements, net                                             |  |                           | 250,841   |  |                   |   | 142,276   | 
|Deferred finance costs, less current portion                                                     |  |                           | 94,285    |  |                   |   | -         | 
|Other assets                                                                                     |  |                           | 742,131   |  |                   |   | 216,791   | 
|                                                                                                 |  |                           |           |  |                   |   |           | 
|TOTAL ASSETS                                                                                     |  | $                         | 7,500,058 |  |                   | $ | 5,010,309 | 
|                                                                                                 |  |                           |           |  |                   |   |           | 

(Continued)



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|                                                                                                                                                                                                                |  |                           |               |  |                   |   |               | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ------------- |  | ----------------- | - | ------------- | 
|                                                                                                                                                                                                                |  | March 31, 2011(Unaudited) |               |  | September 30,2010 |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                                                                           |  |                           |               |  |                   |   |               | 
|Liabilities not subject to compromise:                                                                                                                                                                          |  |                           |               |  |                   |   |               | 
|Current liabilities:                                                                                                                                                                                            |  |                           |               |  |                   |   |               | 
|Current maturities of long-term debt, convertible                                                                                                                                                               |  | $                         | 22,826,375    |  |                   | $ |              | 
|Accounts payable                                                                                                                                                                                                |  |                           | 939,598       |  |                   |   | 1,139,817     | 
|Accrued expenses                                                                                                                                                                                                |  |                           | 1,256,497     |  |                   |   | 1,269,395     | 
|Reserve for unresolved claims                                                                                                                                                                                   |  |                           | 6,960,503     |  |                   |   |              | 
|Due to related party                                                                                                                                                                                            |  |                           | 13,719        |  |                   |   |              | 
|Unearned revenues                                                                                                                                                                                               |  |                           | 229,002       |  |                   |   | 263,778       | 
|Note payable                                                                                                                                                                                                    |  |                           | 122,142       |  |                   |   |              | 
|Notes payable, related parties                                                                                                                                                                                  |  |                           |              |  |                   |   | 2,041,005     | 
|Customer deposits                                                                                                                                                                                               |  |                           | 113,940       |  |                   |   | 134,613       | 
|Derivative liabilities                                                                                                                                                                                          |  |                           | 4,128,663     |  |                   |   | 1,844,200     | 
|                                                                                                                                                                                                                |  |                           |               |  |                   |   |               | 
|Total current liabilities                                                                                                                                                                                       |  |                           | 36,590,439    |  |                   |   | 6,692,808     | 
|                                                                                                                                                                                                                |  |                           |               |  |                   |   |               | 
|Long-term debt, net of current maturities                                                                                                                                                                       |  |                           |               |  |                   |   |               | 
|Convertible promissory notes                                                                                                                                                                                    |  |                           | 10,401,092    |  |                   |   |              | 
|Convertible promissory notes, related party                                                                                                                                                                     |  |                           | 253,391       |  |                   |   |              | 
|Other long-term debt                                                                                                                                                                                            |  |                           | 45,859,965    |  |                   |   |               | 
|Long-term accrued interest                                                                                                                                                                                      |  |                           | 1,115,720     |  |                   |   |               | 
|Liabilities subject to compromise                                                                                                                                                                               |  |                           |              |  |                   |   | 143,570,128   | 
|                                                                                                                                                                                                                |  |                           |               |  |                   |   |               | 
|Total liabilities                                                                                                                                                                                               |  |                           | 94,220,607    |  |                   |   | 150,262,936   | 
|                                                                                                                                                                                                                |  |                           |               |  |                   |   |               | 
|                                                                                                                                                                                                                |  |                          
|Commitments and contingencies                                                                                                                                                                                   |  |                           |              |  |                   |   |              | 
|                                                                                                                                                                                                                |  |                          
|Series A convertible redeemable preferred stock, $1.00 par value; none as of March 31, 2011, and 8,950 shares authorized;
7,529 shares issued and outstanding at September 30, 2010                             |  |                           |              |  |                   |   | 7,528,640     | 
|                                                                                                                                                                                                                |  |                          
|Stockholders deficit:                                                                                                                                                                                          |  |                           |               |  |                   |   |               | 
|Common stock, $0.001 par value; 300,000,000 shares authorized; 71,020,209 and 58,243,115 shares issued and 69,472,073 and
58,048,208 shares outstanding at March 31, 2011, and September 30, 2010, respectively |  |                           | 71,020        |  |                   |   | 58,048        | 
|Treasury stock, 1,548,136 and 194,907 shares, March 31, 2011 and September 30, 2010, respectively                                                                                                               |  |                           | (1,496,417)   |  |                   |   | (170,057)     | 
|Additional paid-in capital                                                                                                                                                                                      |  |                           | 283,217,320   |  |                   |   | 203,828,364   | 
|Accumulated deficit                                                                                                                                                                                             |  |                           | (328,355,588) |  |                   |   | (325,882,720) | 
|                                                                                                                                                                                                                |  |                           |               |  |                   |   |               | 
|Total stockholders deficit attributable to Accentia Biopharmaceuticals, Inc.                                                                                                                                   |  |                           | (46,563,665)  |  |                   |   | (122,166,365) | 
|                                                                                                                                                                                                                |  |                          
|Non-controlling interests                                                                                                                                                                                       |  |                           | (40,156,884)  |  |                   |   | (30,614,902)  | 
|                                                                                                                                                                                                                |  |                           |               |  |                   |   |               | 
|                                                                                                                                                                                                                |  |                          
|Total stockholders deficit                                                                                                                                                                                     |  |                           | (86,720,549)  |  |                   |   | (152,781,267) | 
|                                                                                                                                                                                                                |  |                           |               |  |                   |   |               | 
|TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                                                                     |  | $                         | 7,500,058     |  |                   | $ | 5,010,309     | 
|                                                                                                                                                                                                                |  |                           |               |  |                   |   |               | 

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



3



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                                                                                                                     |  |                                     |             |  |                                    |   |              |      |  |   |              |  |  |   |              | 
|------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------- | ----------- |  | ---------------------------------- | - | ------------ | ---- |  | - | ------------ |  |  | - | ------------ | 
|                                                                                                                                     |  | For the Three Months EndedMarch 31, |             |  | For the Six Months 
EndedMarch 31, |  
|                                                                                                                                     |  | 2011                                |             |  | 2010                               |   |              | 2011 |  |   | 2010         | 
|Net Sales:                                                                                                                           |  |                                     |             |  |                                    |   |              |      |  |   |              |  |  |   |              | 
|Products                                                                                                                             |  | $                                   | 843,525     |  |                                    | $ | 1,041,512    |      |  | $ | 1,151,350    |  |  | $ | 1,960,530    | 
|Services                                                                                                                             |  |                                     | 1,472,114   |  |                                    |   | 1,066,394    |      |  |   | 2,906,442    |  |  |   | 3,833,350    | 
|Grant revenue                                                                                                                        |  |                                     |            |  |                                    |   |             |      |  |   | 319,667      |  |  |   |             | 
|                                                                                                                                     |  |                                     |             |  |                                    |   |              |      |  |   |              |  |  |   |              | 
|                                                                                                                                     |  |                                     |             | 
|Total net sales                                                                                                                      |  |                                     | 2,315,639   |  |                                    |   | 2,107,906    |      |  |   | 4,377,459    |  |  |   | 5,793,880    | 
|                                                                                                                                     |  |                                     |             |  |                                    |   |              |      |  |   |              |  |  |   |              | 
|Cost of sales:                                                                                                                       |  |                                     |             |  |                                    |   |              |      |  |   |              |  |  |   |              | 
|Products                                                                                                                             |  |                                     | 406,279     |  |                                    |   | 455,944      |      |  |   | 651,767      |  |  |   | 868,637      | 
|Services                                                                                                                             |  |                                     | 1,125,962   |  |                                    |   | 1,093,542    |      |  |   | 2,188,531    |  |  |   | 3,110,058    | 
|Grants                                                                                                                               |  |                                     |            |  |                                    |   |             |      |  |   | 72,011       |  |  |   |             | 
|                                                                                                                                     |  |                                     |             |  |                                    |   |              |      |  |   |              |  |  |   |              | 
|                                                                                                                                     |  |                                     |             | 
|Total cost of sales (exclusive of amortization of acquired product rights)                                                           |  |                                     | 1,532,241   |  |                                    |   | 1,549,486    |      |  |   | 2,912,309    |  |  |   | 3,978,695    | 
|                                                                                                                                     |  |                                     |             |  |                                    |   |              |      |  |   |              |  |  |   |              | 
|Gross margin                                                                                                                         |  |                                     | 783,398     |  |                                    |   | 558,420      |      |  |   | 1,465,150    |  |  |   | 1,815,185    | 
|                                                                                                                                     |  |                                     |             |  |                                    |   |              |      |  |   |              |  |  |   |              | 
|                                                                                                                                     |  |                                     |             | 
|Operating expenses:                                                                                                                  |  |                                     |             |  |                                    |   |              |      |  |   |              |  |  |   |              | 
|Research and development                                                                                                             |  |                                     | 417,848     |  |                                    |   | 334,839      |      |  |   | 711,647      |  |  |   | 625,543      | 
|Sales and marketing                                                                                                                  |  |                                     | 28,720      |  |                                    |   | 26,029       |      |  |   | 54,703       |  |  |   | 54,654       | 
|Royalties                                                                                                                            |  |                                     | 30,000      |  |                                    |   |             |      |  |   | 30,000       |  |  |   |             | 
|General and administrative                                                                                                           |  |                                     | 3,906,491   |  |                                    |   | 1,246,029    |      |  |   | 16,292,197   |  |  |   | 2,789,824    | 
|Impairment of intangible assets                                                                                                      |  |                                     |            |  |                                    |   | 394,570      |      |  |   |             |  |  |   | 394,570      | 
|                                                                                                                                     |  |                                     |             |  |                                    |   |              |      |  |   |              |  |  |   |              | 
|                                                                                                                                     |  |                                     |             | 
|Total operating expenses                                                                                                             |  |                                     | 4,383,059   |  |                                    |   | 2,001,467    |      |  |   | 17,088,547   |  |  |   | 3,864,591    | 
|                                                                                                                                     |  |                                     |             |  |                                    |   |              |      |  |   |              |  |  |   |              | 
|                                                                                                                                     |  |                                     |             | 
|Operating loss                                                                                                                       |  |                                     | (3,599,661) |  |                                    |   | (1,443,047)  |      |  |   | (15,623,397) |  |  |   | (2,049,406)  | 
|Other (expense) income:                                                                                                              |  |                                     |             |  |                                    |   |              |      |  |   |              |  |  |   |              | 
|Interest expense, including change in fair market value of convertible debentures                                                    |  |                                     | (2,055,161) |  |                                    |   | (8,739,779)  |      |  |   | (4,446,932)  |  |  |   | (12,107,014) | 
|Derivative gain (loss)                                                                                                               |  |                                     | 3,838,972   |  |                                    |   | (36,514,314) |      |  |   | (234,408)    |  |  |   | (36,543,128) | 
|Loss on deconsolidation of insolvent subsidiary                                                                                      |  |                                     |            |  |                                    |   | (845,314)    |      |  |   |             |  |  |   | (845,314)    | 
|Other income                                                                                                                         |  |                                     | 17,117      |  |                                    |   | 552,231      |      |  |   | 27,161       |  |  |   | 592,330      | 
|                                                                                                                                     |  |                                     |             |  |                                    |   |              |      |  |   |              |  |  |   |              | 
|                                                                                                                                     |  |                                     |             | 
|Loss before reorganization items, non-controlling interest from variable interest entities, discontinued operations and income
taxes |  |                                     | (1,798,733) |  |                                    |   | (46,990,223) |      |  |   | (20,277,576) |  |  |   | (50,952,532) | 
|Reorganization items:                                                                                                                |  |                                     |             |  |                                    |   |              |      |  |   |              |  |  |   |              | 
|Gain on reorganization                                                                                                               |  |                                     | 770,912     |  |                                    |   |             |      |  |   | 12,146,442   |  |  |   |             | 
|Professional fees                                                                                                                    |  |                                     |            |  |                                    |   | (189,074)    |      |  |   | (357,059)    |  |  |   | (471,074)    | 
|Gain for provision for indemnity agreements                                                                                          |  |                                     |            |  |                                    |   | 1,374,546    |      |  |   |             |  |  |   | 2,061,818    | 
|                                                                                                                                     |  |                                     |             |  |                                    |   |              |      |  |   |              |  |  |   |              | 
|                                                                                                                                     |  |                                     | 770,912     |  |                                    |   | 1,185,472    |      |  |   | 11,789,383   |  |  |   | 1,590,744    | 
|Loss before income taxes and non-controlling interest                                                                                |  |                                     | (1,027,821) |  |                                    |   | (45,804,751) |      |  |   | (8,488,193)  |  |  |   | (49,361,788) | 
|Income taxes                                                                                                                         |  |                                     |            |  |                                    |   |             |      |  |   |             |  |  |   | (4,556)      | 
|                                                                                                                                     |  |                                     |             |  |                                    |   |              |      |  |   |              |  |  |   |              | 
|                                                                                                                                     |  |                                     |             | 
|Net loss                                                                                                                             |  |                                     | (1,027,821) |  |                                    |   | (45,804,751) |      |  |   | (8,488,193)  |  |  |   | (49,366,344) | 

(Continued)



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##### Table of Contents

|                                                                        |  |                                     |             |  |                                    |   |              |      |  |   |             |  |  |   |              | 
|----------------------------------------------------------------------- |  | ----------------------------------- | ----------- |  | ---------------------------------- | - | ------------ | ---- |  | - | ----------- |  |  | - | ------------ | 
|                                                                        |  | For the Three Months EndedMarch 31, |             |  | For the Six Months 
EndedMarch 31, |  
|                                                                        |  | 2011                                |             |  | 2010                               |   |              | 2011 |  |   | 2010        | 
|                                                                        |  |                                     |             | 
|Non-controlling interest from variable interest entities and subsidiary |  |                                     | (30,054)    |  |                                    |   | 3,443,243    |      |  |   | 2,449,783   |  |  |   | 3,469,632    | 
|                                                                        |  |                                     |             |  |                                    |   |              |      |  |   |             |  |  |   |              | 
|Net loss attributable to Accentia Biopharmaceuticals, Inc.              |  | $                                   | (1,057,875) |  |                                    | $ | (42,361,508) |      |  | $ | (6,038,410) |  |  |   | (45,896,712) | 
|Preferred stock dividend                                                |  |                                     |            |  |                                    |   | (699,739)    |      |  |   |            |  |  |   | (1,399,498)  | 
|Loss attributable to common shareholders                                |  | $                                   | (1,057,875) |  |                                    | $ | (43,061,247) |      |  | $ | (6,038,410) |  |  | $ | (47,296,210) | 
|                                                                        |  |                                     |             |  |                                    |   |              |      |  |   |             |  |  |   |              | 
|                                                                        |  |                                     |             | 
|Weighted average shares outstanding, basic and diluted                  |  |                                     | 68,775,500  |  |                                    |   | 58,048,208   |      |  |   | 65,844,315  |  |  |   | 58,048,208   | 
|                                                                        |  |                                     |             |  |                                    |   |              |      |  |   |             |  |  |   |              | 
|                                                                        |  |                                     |             | 
|Per share amounts, basic and diluted:                                   |  |                                     |             |  |                                    |   |              |      |  |   |             |  |  |   |              | 
|Loss attributable to common stockholders per common share               |  | $                                   | (0.02)      |  |                                    | $ | (0.74)       |      |  | $ | (0.09)      |  |  | $ | (0.81)       | 
|                                                                        |  |                                     |             |  |                                    |   |              |      |  |   |             |  |  |   |              | 

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



5



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS DEFICIT

(Unaudited)



|                                                                     |  |              |            |  |        |   |        |                          |  |   |               |  |  |                    |             |  |                          |   |               |       |  |   |              |  |  |   |               | 
|-------------------------------------------------------------------- |  | ------------ | ---------- |  | ------ | - | ------ | ------------------------ |  | - | ------------- |  |  | ------------------ | ----------- |  | ------------------------ | - | ------------- | ----- |  | - | ------------ |  |  | - | ------------- | 
|                                                                     |  | Common Stock |            |  |        |   |        |                          |  |   |               |  |  |                    |             |  |                          |  
|                                                                     |  | Shares       |            |  | Amount |   |        | AdditionalPaidIn Capital |  |   | TreasuryStock |  |  | AccumulatedDeficit |             |  | Non-ControllingInterests |   |               | Total | 
|Balances, October 1, 2010                                            |  |              | 58,048,208 |  |        | $ | 58,048 |                          |  | $ | 203,828,364   |  |  | $                  | (170,057)   |  |                          | $ | (325,882,720) |       |  | $ | (30,614,902) |  |  | $ | (152,781,267) | 
|Reclassification upon dissolution of variable interest entities      |  |              |           |  |        |   |       |                          |  |   |              |  |  |                    |            |  |                          |   | 3,565,534     |       |  |   | (3,565,534)  |  |  |   |              | 
|Share-based compensation                                             |  |              | 1,566,000  |  |        |   | 1,566  |                          |  |   | 14,233,630    |  |  |                    |            |  |                          |   |              |       |  |   |             |  |  |   | 14,235,196    | 
|Reclassification of derivative liability to equity                   |  |              |           |  |        |   |       |                          |  |   | 35,204,931    |  |  |                    |            |  |                          |   |              |       |  |   |             |  |  |   | 35,204,931    | 
|Accentia shares issued on effective date upon the conversion of debt |  |              | 10,072,644 |  |        |   | 10,073 |                          |  |   | 13,698,945    |  |  |                    |            |  |                          |   |              |       |  |   |             |  |  |   | 13,709,018    | 
|Accentia shares issued upon the conversion of promissory notes       |  |              | 470,264    |  |        |   | 470    |                          |  |   | 463,731       |  |  |                    |            |  |                          |   |              |       |  |   |             |  |  |   | 464,201       | 
|Accentia shares issued for services                                  |  |              | 56,250     |  |        |   | 56     |                          |  |   | 40,444        |  |  |                    |            |  |                          |   |              |       |  |   |             |  |  |   | 40,500        | 
|Accentia shares issued in resolution of disputed claims              |  |              | 806,843    |  |        |   | 807    |                          |  |   | 419,834       |  |  |                    |            |  |                          |   |              |       |  |   |             |  |  |   | 420,641       | 
|Treasury shares received on effective date                           |  |              |           |  |        |   |       |                          |  |   |              |  |  |                    | (1,326,360) |  |                          |   | 8             |       |  |   |             |  |  |   | (1,326,352)   | 

(Continued)



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##### Table of Contents

|                                                                                                        |  |              |            |  |        |   |        |                          |  |   |               |  |  |                    |             |  |                          |   |               |       |  |   |              |  |  |   |              | 
|------------------------------------------------------------------------------------------------------- |  | ------------ | ---------- |  | ------ | - | ------ | ------------------------ |  | - | ------------- |  |  | ------------------ | ----------- |  | ------------------------ | - | ------------- | ----- |  | - | ------------ |  |  | - | ------------ | 
|                                                                                                        |  | Common Stock |            |  |        |   |        |                          |  |   |               |  |  |                    |             |  |                          |  
|                                                                                                        |  | Shares       |            |  | Amount |   |        | AdditionalPaidIn Capital |  |   | TreasuryStock |  |  | AccumulatedDeficit |             |  | Non-ControllingInterests |   |               | Total | 
|Biovest warrants issued                                                                                 |  |              |           |  |        |   |       |                          |  |   | 1,247,582     |  |  |                    |            |  |                          |   |              |       |  |   |             |  |  |   | 1,247,582    | 
|Biovest shares issued on effective date for conversion of debt                                          |  |              |           |  |        |   |       |                          |  |   | 6,631,156     |  |  |                    |            |  |                          |   |              |       |  |   |             |  |  |   | 6,631,156    | 
|Reclassification of Biovest beneficial conversion feature to equity                                     |  |              |           |  |        |   |       |                          |  |   | 2,138,789     |  |  |                    |            |  |                          |   |              |       |  |   |             |  |  |   | 2,138,789    | 
|Biovest shares issued upon conversion of debt                                                           |  |              |           |  |        |   |       |                          |  |   | 566,835       |  |  |                    |            |  |                          |   |              |       |  |   |             |  |  |   | 566,835      | 
|Biovest shares issued for interest                                                                      |  |              |           |  |        |   |       |                          |  |   | 360,481       |  |  |                    |            |  |                          |   |              |       |  |   |             |  |  |   | 360,481      | 
|Biovest shares issued upon the conversion of employee stock options                                     |  |              |           |  |        |   |       |                          |  |   | 6,000         |  |  |                    |            |  |                          |   |              |       |  |   |             |  |  |   | 6,000        | 
|Accentia owned Biovest shares tendered in payment of Accentia debt                                      |  |              |           |  |        |   |       |                          |  |   | 849,933       |  |  |                    |            |  |                          |   |              |       |  |   |             |  |  |   | 849,933      | 
|Adjustment to non-controlling interests for change in ownership percentage of majority-owned subsidiary |  |              |           |  |        |   |       |                          |  |   | 3,526,665     |  |  |                    |            |  |                          |   |              |       |  |   | (3,526,665)  |  |  |   |             | 
|Net loss for the period                                                                                 |  |              |           |  |        |   |       |                          |  |   |              |  |  |                    |            |  |                          |   | (6,038,410)   |       |  |   | (2,449,783)  |  |  |   | (8,488,193)  | 
|                                                                                                        |  |              |            |  |        |   |        |                          |  |   |               |  |  |                    |             |  |                          |   |               |       |  |   |              |  |  |   |              | 
|Balances, March 31, 2011                                                                                |  |              | 71,020,209 |  |        | $ | 71,020 |                          |  | $ | 283,217,320   |  |  | $                  | (1,496,417) |  |                          | $ | (328,355,588) |       |  | $ | (40,156,884) |  |  | $ | (86,720,549) | 
|                                                                                                        |  |              |            |  |        |   |        |                          |  |   |               |  |  |                    |             |  |                          |   |               |       |  |   |              |  |  |   |              | 

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



7



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##### Table of Contents

ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                               |  |                                     |              |  |      |   |              | 
|------------------------------------------------------------------------------ |  | ----------------------------------- | ------------ |  | ---- | - | ------------ | 
|                                                                               |  | For the Six Months 
EndingMarch 31, |             
|                                                                               |  | 2011                                |              |  | 2010 |  
|Cash flows from operating activities:                                          |  |                                     |              |  |      |   |              | 
|Net loss                                                                       |  | $                                   | (8,488,193)  |  |      | $ | (49,366,344) | 
|Adjustments to reconcile net loss to net cash flows from operating activities: |  |                                     |              |  |      |   |              | 
|Change in fair market value adjustment of convertible debentures               |  |                                     |             |  |      |   | 4,224,415    | 
|Depreciation                                                                   |  |                                     | 41,237       |  |      |   | 189,537      | 
|Amortization                                                                   |  |                                     | 229,395      |  |      |   | 49,566       | 
|Share-based compensation                                                       |  |                                     | 14,235,196   |  |      |   | 417,875      | 
|Accretion of capitalized finance costs                                         |  |                                     | 937,795      |  |      |   | 683,448      | 
|Accretion of debt discounts                                                    |  |                                     | 949,937      |  |      |   | 4,049,594    | 
|Accretion of royalty liability                                                 |  |                                     |             |  |      |   | 300,904      | 
|Derivative loss (gain)                                                         |  |                                     | 234,408      |  |      |   | 36,543,128   | 
|Impairment of intangible assets                                                |  |                                     |             |  |      |   | 394,570      | 
|Issuance of common stock shares for interest expense                           |  |                                     | 360,481      |  |      |   |             | 
|Issuance of common stock warrants for finance costs                            |  |                                     | 1,247,582    |  |      |   |             | 
|Issuance of common stock shares for services                                   |  |                                     | 40,500       |  |      |   |             | 
|Gain on settlement                                                             |  |                                     | (827,196)    |  |      |   | (342,001)    | 
|Cash proceeds from settlement                                                  |  |                                     |             |  |      |   | 2,500,000    | 
|Increase (decrease) in cash resulting from changes in:                         |  |                                     |              |  |      |   |              | 
|Accounts receivable                                                            |  |                                     | 570,655      |  |      |   | 458,806      | 
|Inventories                                                                    |  |                                     | (15,295)     |  |      |   | (68,524)     | 
|Unbilled receivables                                                           |  |                                     | (383,892)    |  |      |   | 1,205,689    | 
|Prepaid expenses and other current assets                                      |  |                                     | (46,055)     |  |      |   | 61,410       | 
|Other assets                                                                   |  |                                     | (525,340)    |  |      |   | 43,453       | 
|Accounts payable                                                               |  |                                     | 556,480      |  |      |   | (958,263)    | 
|Accrued expenses                                                               |  |                                     | 929,193      |  |      |   | 3,789,295    | 
|Unearned revenues                                                              |  |                                     | (34,776)     |  |      |   | (771,000)    | 
|Customer deposits                                                              |  |                                     | (20,673)     |  |      |   | 128,125      | 
|                                                                               |  |                                     |              |  |      |   |              | 
|Net cash flows from operating activities before reorganization items           |  |                                     | 9,991,439    |  |      |   | 3,533,683    | 
|                                                                               |  |                                    
|Reorganization items:                                                          |  |                                     |              |  |      |   |              | 
|Gain on reorganization plan                                                    |  |                                     | (12,146,442) |  |      |   |             | 
|Decrease in accrued professional fees                                          |  |                                     | (325,333)    |  |      |   | 304,021      | 
|Decrease in provision for indemnity agreement                                  |  |                                     |             |  |      |   | (2,061,818)  | 
|                                                                               |  |                                     |              |  |      |   |              | 
|Net cash flows from reorganization items                                       |  |                                     | (12,471,775) |  |      |   | (1,757,797)  | 
|                                                                               |  |                                     |              |  |      |   |              | 
|                                                                               |  |                                    
|Net cash flows from operating activities                                       |  |                                     | (2,480,336)  |  |      |   | 1,775,806    | 
|                                                                               |  |                                    
|Cash flows from investing activities:                                          |  |                                     |              |  |      |   |              | 
|Acquisition of property, plant and equipment                                   |  |                                     | (149,802)    |  |      |   |             | 
|                                                                               |  |                                     |              |  |      |   |              | 
|Net cash flows from investing activities                                       |  | $                                   | (149,802)    |  |      |   |             | 
|                                                                               |  |                                     |              |  |      |   |              | 

(Continued)



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##### Table of Contents

|                                                                           |  |                                     |             |  |      |   |           | 
|-------------------------------------------------------------------------- |  | ----------------------------------- | ----------- |  | ---- | - | --------- | 
|                                                                           |  | For the Six Months 
EndingMarch 31, |            
|                                                                           |  | 2011                                |             |  | 2010 |  
|Cash flows from financing activities:                                      |  |                                     |             |  |      |   |           | 
|Proceeds from long-term convertible notes                                  |  | $                                   | 7,000,000   |  |      | $ |          | 
|Proceeds from the exercise of stock options                                |  |                                     | 6,000       |  |      |   |          | 
|Payments on notes payable and long-term debt                               |  |                                     | (1,460,675) |  |      |   |          | 
|Payment of deferred financing costs                                        |  |                                     | (1,177,634) |  |      |   | (40,000)  | 
|Proceeds from notes payable, related party                                 |  |                                     | 250,000     |  |      |   | 140,000   | 
|Payments made from related party, net                                      |  |                                     | (16,740)    |  |      |   | 91,266    | 
|                                                                           |  |                                     |             |  |      |   |           | 
|Net cash flows from financing activities                                   |  |                                     | 4,600,951   |  |      |   | 191,266   | 
|                                                                           |  |                                     |             |  |      |   |           | 
|Net change in cash and cash equivalents                                    |  |                                     | 1,970,813   |  |      |   | 1,967,152 | 
|                                                                           |  |                                     |             |  |      |   |           | 
|Cash and cash equivalents at beginning of period                           |  |                                     | 558,452     |  |      |   | 325,350   | 
|                                                                           |  |                                     |             |  |      |   |           | 
|Cash and cash equivalents at end of period                                 |  | $                                   | 2,529,265   |  |      | $ | 2,292,502 | 
|                                                                           |  |                                     |             |  |      |   |           | 
|                                                                           |  |                                    
|Supplemental cash flow information:                                        |  |                                     |             |  |      |   |           | 
|Cash paid for:                                                             |  |                                     |             |  |      |   |           | 
|Interest                                                                   |  | $                                   |            |  |      | $ | 60,000    | 
|Income taxes                                                               |  |                                     |            |  |      |   |          | 
|                                                                           |  |                                    
|Supplemental disclosure of non-cash financing activity:                    |  |                                     |             |  |      |   |           | 
|Reclassification of derivative to equity                                   |  | $                                   | 35,204,931  |  |      | $ | 2,906,786 | 
|Accentia common stock issued on effective date upon the conversion of debt |  |                                     | 13,709,018  |  |      |   |          | 
|Accentia common stock issued for services                                  |  |                                     | 40,500      |  |      |   |          | 
|Accentia common stock issued upon the conversion of promissory notes       |  |                                     | 464,201     |  |      |   |          | 
|Accentia common stock issued in resolution of disputed claims              |  |                                     | 420,641     |  |      |   |          | 
|Accentia owned Biovest shares tendered in payment of Accentia debt         |  |                                     | 849,933     |  |      |   |          | 
|Biovest common stock issued on effective date upon the conversion of debt  |  |                                     | 6,631,156   |  |      |   |          | 
|Reclassification of Biovest beneficial conversion feature to equity        |  |                                     | 2,138,789   |  |      |   |          | 
|Biovest shares for interest                                                |  |                                     | 360,481     |  |      |   |          | 
|Biovest shares issued upon the conversion of Biovest debt                  |  |                                     | 566,835     |  |      |   |          | 

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



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##### Table of Contents

ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010

1. Description of the company:

Headquartered in Tampa, Florida, Accentia Biopharmaceuticals, Inc. (OTCQB: ABPI) is a biotechnology company that is
developing Revimmune as a comprehensive system of care for the treatment of autoimmune diseases. Additionally, through the Companys majority-owned subsidiary, Biovest International, Inc., (OTCQB: BVTI) (Biovest),
the Company is developing BiovaxID® as a therapeutic cancer vaccine for treatment of follicular
non-Hodgkins lymphoma (FL) and mantle cell lymphoma (MCL). Through the Companys wholly-owned subsidiary, Analytica International, Inc. (Analytica), the Company conducts a health economics research and
consulting business which Analytica markets to the pharmaceutical and biotechnology industries, using Analyticas operating cash flow to support the Companys corporate administration and product development activities.

Revimmune is being developed under a license with Johns Hopkins University as a treatment for various autoimmune diseases. The approximately 80
known autoimmune diseases generally arise from an overactive immune response against substances and/or tissue normally present in the body. As a system of care, Revimmune consists of administering high, pulsed doses of an FDA-approved drug,
cyclophosphamide, over a four-day interval as part of an integrated risk management system including a panel of preventive tests, monitoring and medications which are intended to minimize risks while seeking to maximize the clinical benefit.

Through a collaboration with the National Cancer Institute (NCI), Biovest has developed a
patient-specific cancer vaccine, BiovaxID®, which has demonstrated statistically significant Phase 3 clinical
benefit by prolonging disease-free survival in FL patients treated with BiovaxID. As of March 31, 2011, Biovest is a 63% owned subsidiary of Accentia Biopharmaceuticals, Inc.

Additionally, through the Companys wholly-owned subsidiary, Analytica, a Florida corporation with its offices located in New York City, the Company conducts a global research and strategy
consulting business that provides professional services to the pharmaceutical and biotechnology industries. Since 1997, Analytica has expertly directed research studies and projects, including traditional health economic modeling projects, database
studies, structured reviews, health technology assessments, reimbursement analyses, and value dossiers.

2. Chapter 11 Reorganization:

On November 10, 2008, the Company and its wholly-owned subsidiaries, Analytica, TEAMM Pharmaceuticals, Inc. d/b/a Accentia
Pharmaceuticals (TEAMM or Accentia Pharmaceuticals), AccentRx, Inc. (AccentRx), and Accentia Specialty Pharmacy (ASP) (collectively, the Debtors) filed voluntary petitions for
reorganization under Chapter 11 in the Bankruptcy Court. During the pendency of the Chapter 11 proceedings, the Company operated its business as a debtor-in-possession in accordance with the provisions of Chapter 11, and was subject to the
jurisdiction of the Bankruptcy Court. On August 16, 2010, the Company filed its First Amended Joint Plan of Reorganization, and, on October 25, 2010, the Company filed the First Modification to the First Amended Joint Plan of
Reorganization (collectively and as amended and supplemented, the Plan). On October 27, 2010, the Bankruptcy Court held a Confirmation hearing and confirmed the Plan, and, on November 2, 2010, the Bankruptcy Court entered an
Order Confirming Debtors First Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (the Confirmation Order), which approved and confirmed the Plan, as modified by the Confirmation Order. The Company emerged
from Chapter 11 protection, and the Plan became effective, on November 17, 2010 (the Effective Date).

3. Significant
accounting policies and consolidation policy:

Basis of presentation

The accompanying condensed consolidated financial statements have been derived from unaudited interim financial information prepared in accordance with the rules and regulations of the Securities and
Exchange Commission for quarterly financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have
been condensed or omitted pursuant to those rules and regulation, although the Company believes that the disclosures made are adequate so that the information presented is not misleading. The condensed consolidated financial statements of the
Company, in the opinion of management, include all normal and recurring adjustments necessary for a fair presentation of results as of the dates and for the periods covered by the condensed consolidated financial statements.



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



3. Significant accounting policies and consolidation policy (continued):



Operating results for the three and six month periods ended March 31, 2011 are not necessarily
indicative of the results that may be expected for the entire fiscal year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Companys Annual Report on Form 10-K for the fiscal year
ended September 30, 2010.

Consolidation policy:

The Company consolidates all entities controlled by ownership of a majority interest and, effective February 27, 2007, has consolidated a variable interest entity of which the Company is the primary
beneficiary. The consolidated financial statements include Accentia Biopharmaceuticals, Inc. and its wholly-owned subsidiaries, Analytica, TEAMM, AccentRx and ASP; its majority owned subsidiary, Biovest (and its consolidated entities), and
Revimmune, LLC, an entity in which the Company has a controlling financial interest and has been determined to be the primary beneficiary. All significant intercompany balances and transactions have been eliminated in consolidation.

Voluntary Petition for Bankruptcy:

ASC
Topic 852-Reorganizations, which is applicable to companies in Chapter 11, generally does not change the manner in which financial statements are prepared. However, it does require that the financial statements for periods subsequent to the
filing of the Chapter 11 petition distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Revenues, expenses, realized gains and losses, and provisions for losses
that can be directly associated with the reorganization and restructuring of the business must be reported separately as reorganization items in the statements of operations beginning in the quarter ending December 31, 2008. The balance sheet
must distinguish prepetition liabilities subject to compromise from both those prepetition liabilities that are not subject to compromise and from post-petition liabilities. Liabilities that may be affected by a plan of reorganization must be
reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. In addition, cash provided by reorganization items must be disclosed separately in the statement of cash flows. The Company became subject to ASC Topic
852 on November 10, 2008, and emerged from Chapter 11 protection on November 17, 2010. The Company has segregated those items as outlined above for all reporting periods between such dates.

Financial instruments:

Financial
instruments, as defined in ASC Topic 825, consist of cash, evidence of ownership in an entity and contracts that both (i) impose on one entity a contractual obligation to deliver cash or another financial instrument to a second entity, or to
exchange other financial instruments on potentially unfavorable terms with the second entity, and (ii) conveys to that second entity a contractual right (a) to receive cash or another financial instrument from the first entity or
(b) to exchange other financial instruments on potentially favorable terms with the first entity. Accordingly, the Companys financial instruments consist of cash, accounts receivable, accounts payable, accrued liabilities, notes payable,
long-term debt, royalty liabilities, and derivative financial instruments.

The Company carries cash, accounts receivable, accounts payable,
and accrued liabilities at historical costs of which their respective the estimated fair values of these assets and liabilities approximate carrying values due to their current nature. The Company also carries notes payable and long-term debt at
historical cost less discounts from warrants issued as loan financing costs; however, fair values of these debt instruments are estimated for disclosure purposes based upon the present value of the estimated cash flows at market interest rates
applicable to similar instruments.



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



3. Significant accounting policies and consolidation policy (continued):



Fair Value of Financial Assets and Liabilities:

The Company measures the fair value of financial assets and liabilities in accordance with GAAP which defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value measurements.

GAAP defines fair value as the exchange price that would be
received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair
value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. GAAP describes three levels of inputs that may be used to measure fair value:

Level 1  quoted prices in active markets for identical assets or liabilities

Level 2  quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3  inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

The Company generally does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, the Company and its consolidated subsidiaries have entered
into certain other financial instruments and contracts, such as debt financing arrangements and freestanding warrants with features that are either (i) not afforded equity classification, (ii) embody risks not clearly and closely related
to host contracts, or (iii) may be net-cash settled by the counterparty. These instruments are required to be carried as derivative liabilities, at fair value.

The Company estimates fair values of all derivative instruments, such as free-standing warrants, and embedded conversion features utilizing Level 2 inputs. The Company generally uses the
Black-Scholes-Merton option valuation technique because it embodies all of the requisite assumptions (including trading volatility, estimated terms and risk free rates) necessary to fair value these instruments. Estimating fair values of derivative
financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based
techniques are highly volatile and sensitive to changes in the Companys trading market price and the trading market price of various peer companies, which have historically had high volatility. Since derivative financial instruments are
initially and subsequently carried at fair value, the Companys income will reflect the volatility in these estimate and assumption changes.

The Company reports its derivative liabilities at fair value on the accompanying consolidated balance sheets as of March 31, 2011 and September 30, 2010.

Grant revenue:

Grant revenue is the
result of the Company and Biovest being awarded the Qualifying Therapeutic Discovery Program Grant from the federal government during 2010. In accordance with the terms of the Qualifying Therapeutic Discovery Program Grant, grant revenue is
recognized up to 50% of the reimbursable expenses incurred during 2010 and 2009 for Biovest and 2011 and 2010 for the Company.



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



3. Significant accounting policies and consolidation policy (continued):



Recent accounting pronouncements:

In June 2008, the FASB issued new guidance for determining whether an equity-linked financial instrument (or embedded feature) is indexed to an entitys own stock. The Company adopted this new
guidance effective October 1, 2009. Certain of the Companys outstanding warrants and convertible debt instruments contain features which fall under the scope of this guidance resulting in a decrease of $2.2 million and $0.8 million to the
October 1, 2009 balances of additional paid-in capital and accumulated deficit respectively.

In June 2009, the FASB issued new guidance
amending the existing pronouncement related to the consolidation of variable interest entities. This new guidance requires the reporting entities to evaluate former QSPEs for consolidation, changes the approach to determine a variable interest
entitys primary beneficiary from a quantitative assessment to a qualitative assessment designed to identify a controlling financial interest, and increases the frequency of required assessments to determine whether the Company is the primary
beneficiary of any variable interest entities which it is a party to. This new guidance is not effective for the Company until October 1, 2010 and earlier adoption is prohibited. This new guidance became effective for the Company on
October 1, 2010 and did not have a material impact on our consolidated financial statements.

In December 2010, the FASB issued
Accounting Standards Update (ASU) 2010-27 Fees Paid to the Federal Government by Pharmaceutical Manufacturers amending Accounting Standards Codification (ASC) 720 Other Expenses to address questions
concerning how pharmaceutical manufacturers should recognize the annual fees imposed by the Patient Protection and Affordable Care Act for each calendar year beginning January 1, 2011. The ASU requires that the liability related to the annual
fee be estimated and recorded in full upon the first qualifying sale with a corresponding deferred cost that is amortized to expense over the calendar year that it is payable. The amendment is effective commencing with the quarter ended
March 31, 2011 and did not have a significant impact on the Companys consolidated financial statements.

In December 2010, the FASB
issued ASU 2010-28 Intangibles  Goodwill and Other, which modifies the goodwill impairment test for reporting units with zero or negative carrying amounts as required by ASC Topic 350. Under the amendment, an entity with reporting
units that have carrying amounts that are zero or negative is required to assess whether it is more likely than not that the reporting units goodwill is impaired. If this determination is made, the entity should perform Step 2 of the goodwill
impairment test for those reporting unit(s). This update became effective beginning with the quarter ended March 31, 2011 and did not have a material impact on the Companys financial statements.

ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820) - Improving Disclosures About Fair Value Measurements, requires expanded
disclosures related to fair value measurements including (i) the amounts of significant transfers of assets or liabilities between Levels 1 and 2 of the fair value hierarchy and the reasons for the transfers, (ii) the reasons for transfers
of assets or liabilities in or out of Level 3 of the fair value hierarchy, with significant transfers disclosed separately, (iii) the policy for determining when transfers between levels of the fair value hierarchy are recognized and
(iv) for recurring fair value measurements of assets and liabilities in Level 3 of the fair value hierarchy, a gross presentation of information about purchases, sales, issuances and settlements. ASU 2010-06 further clarifies that (i) fair
value measurement disclosures should be provided for each class of assets and liabilities (rather than major category), which would generally be a subset of assets or liabilities within a line item in the statement of financial position and
(ii) companys should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements for each class of assets and liabilities included in Levels 2 and 3
of the fair value hierarchy. The disclosures related to the gross presentation of purchases, sales, issuances and settlements of assets and liabilities included in Level 3 of the fair value hierarchy was required for the Company beginning
January 1, 2011. The remaining disclosure requirements and clarifications made by ASU 2010-06 became effective for the Company on January 1, 2010.



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



4. Liquidity and managements plans:

During the six months ended March 31, 2011, the Company had a net loss of $8.5 million. On March 31, 2011, the Company had an accumulated
deficit of approximately $328.5 million and a working capital deficit of approximately $31.9 million. Cash and cash equivalents at March 31, 2011, was $2.5 million of which $2.3 million was attributable to Biovest. The Companys
independent registered public accounting firms report included a going concern qualification on the financial statements for the year ended September 30, 2010, citing significant losses and working capital deficits at that
date, which raised substantial doubt about the Companys ability to continue as a going concern.

Regulatory strategy and
commercialization expenditures:

While there have been a number of published reports of High-Dose Pulsed Cyclophosphamide as a potential
therapy for certain autoimmune diseases, cyclophosphamide is not currently FDA-approved for the treatment of any autoimmune diseases. These prior studies of High-Dose Pulsed Cyclophosphamide in the United States have been conducted at a limited
number of large academic research hospitals and have featured non-uniform inclusion criteria and/or administration schedules. It is generally recognized that there may be significant potential risks of infection or other side effects when High-Dose
Pulsed Cyclophosphamide is not administered by highly-qualified personnel in a controlled and regulated clinical setting. While the previous studies are important to the Companys Revimmune development plan, they may not sufficient to
support regulatory approval. At the core of the Companys Revimmune development plan is the expansion of the FDA approved label to include various autoimmune diseases which is anticipated to require controlled and randomized clinical trials to
demonstrate the efficacy of High-Dose Pulsed Cyclophosphamide to the satisfaction of the FDA and that safety will be an important regulatory and clinical concern which the Company believes will require an FDA approved formal Risk Evaluation and
Mitigation Strategies (REMS).

There are approximately 80 recognized autoimmune diseases. Subject to the Companys capital
availability, it plans to undertake clinical trials of Revimmune for the treatment of autoimmune diseases, which we anticipate may initially include multiple sclerosis (MS).

The Company has conducted a meeting with the Federal Food and Drug Administration (FDA) regarding its proposed design of a clinical trial for Revimmune to treat MS which the Company considered
to be constructive. The Company anticipates pursuing a 505(b)(2) regulatory pathway.

Biovest has completed its Phase 3 clinical trial of
BiovaxID for the indication of FL. Under Biovests current regulatory strategy, the Company is performing in-depth analyses of the available clinical trial data in preparation for submission of the data to the FDA and European Medicines Agency
(EMEA) to discuss next steps required for approval. Biovest has ceased enrolling new patients in its Phase 3 clinical trial and has discontinued most clinical trial activities by December 2007 which had the effect of decreasing clinical
trial expenses compared to those recorded for prior periods. Biovests ability to timely access required financing will continue to be essential to support Biovests ongoing commercialization efforts. Biovests inability to obtain
required funds or any substantial delay in obtaining required funds will have a material adverse effect on the ongoing commercialization efforts.

Additional expected financing activity:

Management intends to attempt to meet its cash
requirements through proceeds from its global research and strategy consulting business, the use of cash on hand, trade vendor credit, short-term borrowings, debt and equity financings, and strategic transactions such as collaborations and
licensing. The Companys ability to continue present operations, pay its liabilities as they become due, and meet its obligations for product development is dependent upon the Companys ability to obtain additional funding in the near
term. Additional sources of funding have not been established; however, the Company anticipates seeking additional financing potentially from a number of sources, including the sale of equity or debt securities, strategic collaborations and
recognized research funding programs. There can be no assurance that the Company will be successful in securing such financing at acceptable terms, if at all. Accordingly, the Companys ability to continue present operations, pay its existing
liabilities as they become due is dependent upon the Companys ability to obtain significant external funding, which raises substantial doubt about the Companys ability to continue as a going concern. If adequate funds are not available
from the foregoing sources when required, or if the Company determines it to otherwise be in the Companys best interest, the Company may consider additional strategic financing options, including sales of assets, or the Company may be required
to delay, reduce the scope of, or eliminate one or more of its research or development programs or curtail some or all of its commercialization efforts.



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



5. Inventories:

Inventories consist of the following:



|                |  |                           |         |  |                   |   |         | 
|--------------- |  | ------------------------- | ------- |  | ----------------- | - | ------- | 
|                |  | March 31, 2011(Unaudited) |         |  | September 30,2010 |  
|Finished goods  |  | $                         | 104,408 |  |                   | $ | 104,155 | 
|Work-in-process |  |                           | 56,665  |  |                   |   |        | 
|Raw materials   |  |                           | 271,309 |  |                   |   | 312,932 | 
|                |  |                           |         |  |                   |   |         | 
|                |  | $                         | 432,382 |  |                   | $ | 417,087 | 
|                |  |                           |         |  |                   |   |         | 

6. Intangible assets:

Intangible assets consist of the following:



|                                 |  |                               |             |  |                   |   |             |                                   |  |  |            | 
|-------------------------------- |  | ----------------------------- | ----------- |  | ----------------- | - | ----------- | --------------------------------- |  |  | ---------- | 
|                                 |  | March 31, 2011    (Unaudited) |             |  | September 30,2010 |   |             | WeightedAverageAmortizationPeriod | 
|                                 |  |                               |            
|Amortizable intangible assets:   |  |                               |             |  |                   |   |             |                                   |  |  |            | 
|Noncompete agreements            |  | $                             | 2,104,000   |  |                   | $ | 2,104,000   |                                   |  |  | 3.5 years  | 
|Patents                          |  |                               | 103,244     |  |                   |   | 103,244     |                                   |  |  | 3.0 years  | 
|Purchased customer relationships |  |                               | 666,463     |  |                   |   | 666,463     |                                   |  |  | 10.0 years | 
|Product rights                   |  |                               | 28,321      |  |                   |   | 28,321      |                                   |  |  | 18.4 years | 
|Software                         |  |                               | 438,329     |  |                   |   | 438,329     |                                   |  |  | 3.5 years  | 
|Trademarks                       |  |                               | 1,285,960   |  |                   |   | 1,285,960   |                                   |  |  | 3.0 years  | 
|                                 |  |                               |             |  |                   |   |             |                                   |  |  |            | 
|                                 |  |                               | 4,626,317   |  |                   |   | 4,626,317   |                                   |  |  |            | 
|Less accumulated amortization    |  |                               | (3,771,750) |  |                   |   | (3,542,355) |                                   |  |  |            | 
|                                 |  |                               |             |  |                   |   |             |                                   |  |  |            | 
|Total intangible assets          |  | $                             | 854,567     |  |                   | $ | 1,083,962   |                                   |  |  |            | 
|                                 |  |                               |             |  |                   |   |             |                                   |  |  |            | 

7. Reserve for unresolved claims:

Reserve for unresolved claims consists of disputed amounts in the Companys Plan (Note 2). These claims remain outstanding before the Bankruptcy Court, and the Company anticipates each claim will be
resolved during the current fiscal year.

8. Notes payable:

Notes payable of approximately $0.1 million consists primarily of priority and convenience claims to be paid within six months of the Effective Date. All notes payable at September 30, 2010, had been
classified as Liabilities subject to compromise in the Companys condensed consolidated balance sheet as of September 30, 2010, as a result of the Companys Chapter 11 filings on November 10, 2008 (Note 2).



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



9. Convertible long-term debt:

Convertible promissory notes consist of the following:



|                                         |  |                |          |  |                    |   |   | 
|---------------------------------------- |  | -------------- | -------- |  | ------------------ | - | - | 
|in thousands                             |  |                |          |  |                    |  
|                                         |  |               
|                                         |  | March 31, 2011 |          |  | September 30, 2010 |  
|Accentia Class 3 Plan Notes              |  | $              | 3,361    |  |                    | $ |  | 
|Accentia Class 5 Plan Debentures         |  |                | 705      |  |                    |   |  | 
|Accentia Class 6 Plan Debentures         |  |                | 6,860    |  |                    |   |  | 
|Accentia Class 9 Plan Debentures         |  |                | 16,577   |  |                    |   |  | 
|Accentia Class 13 Plan Notes             |  |                | 4,145    |  |                    |   |  | 
|Biovest Class 8 Option C Promissory Note |  |                | 1,520    |  |                    |   |  | 
|Biovest Empery Promissory Notes          |  |                | 59       |  |                    |   |  | 
|                                         |  |                |          |  |                    |   |   | 
|                                         |  |                | 33,227   |  |                    |   |  | 
|Less current maturities                  |  |                | (22,826) |  |                    |   |  | 
|                                         |  |                |          |  |                    |   |   | 
|                                         |  | $              | 10,401   |  |                    | $ |  | 
|                                         |  |                |          |  |                    |   |   | 

Accentia Class 3 Plan Note:

Effective as of November 17, 2010, the effective date of the Companys Plan (the Effective Date), the Company issued, a new promissory note in an original principal amount of
$4,483,284 (the Class 3 Plan Note) to Dennis Ryll, the holder by assignment of the Companys previously-issued secured note to Southwest Bank, and as payment of the Companys obligation to Southwest Bank prior to the Effective
Date. The Company is not obligated to pay the Class 3 Plan Note in cash, and instead may pay through quarterly conversions into shares of the Companys common stock or, subject to certain conditions, by exchanging the quarterly conversion
amounts into shares of Biovest common stock owned by the Company. The following are the material terms and conditions of the Class 3 Plan Note:



| |  |  | the Class 3 Plan Note matures on November 17, 2012;
| | - |  | ---------------------------------------------------



| |  |  | interest accrues and is payable on the outstanding principal balance of the Class 3 Plan Note from time to time (the Class 3
Interest) at a fixed rate of six percent (6%) per annum;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | on November 17, 2010 and on each of the following seven (7) quarterly anniversaries of the Effective Date (each, a Class 3
Automatic Conversion Date), provided that the average of the trading price of the Companys common stock (as determined in accordance with the Class 3 Plan Note and the Plan) for the ten (10) consecutive trading days ending on the
trading day that is immediately preceding the then applicable Class 3 Automatic Conversion Date (the Class 3 Automatic Conversion Price) is at least $1.00 per share, one-eighth (1/8th) of the original principal balance of the
Class 3 Plan Note plus the Class 3 Interest as of the Class 3 Automatic Conversion Date (the Class 3 Automatic Conversion Amount) will be automatically converted into shares of the Companys common stock at a conversion rate equal
to the Class 3 Automatic Conversion Price per share of the Companys common stock;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Class 3 Plan Note is secured by a lien on 15 million shares of Biovest common stock owned by the Company (the Class 3 Pledged
Shares), subject to the incremental release of a designated portion of such security upon each quarterly payment under the Class 3 Plan Note; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



9. Convertible long-term debt (continued):



Accentia Class 3 Plan Note (continued):



| |  |  | if, on any Class 3 Automatic Conversion Date, the Class 3 Automatic Conversion Price is less than $1.00 per share, Dennis Ryll may, at his election,
either:
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | convert the Class 3 Automatic Conversion Amount into shares of the Companys common stock at a conversion rate equal to $1.00 per share of the
Companys common stock; or
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | liquidate that number of the Class 3 Pledged Shares which equals the Class 3 Automatic Conversion Amount using a conversion rate for the Class 3
Pledged Shares equal to the average of the trading price of shares of Biovest common stock (as determined in accordance with the Class 3 Plan Note and the Plan) for the ten (10) consecutive trading days ending on the trading day that is
immediately preceding the then applicable Class 3 Automatic Conversion Date.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On the Effective Date, the first quarterly
installment in the amount of approximately $0.56 million was converted into shares of the Companys common stock at a conversion rate equal to $1.36 per share, resulting in the issuance of 412,067 shares of the Companys common stock. On
February 17, 2011, the second quarterly installment in the amount of approximately $0.56 million in principal and $0.06 million in accrued interest was converted into 869,686 shares of Class 3 Pledged Shares (Biovest common stock) at a
conversion price of $0.71 per Biovest common share. The principal balance at March 31, 2011 was $3,362,463.

Accentia Class 5 Plan
Debenture and Warrants:

On the Effective Date, the Company issued, in satisfaction of the secured debentures dated September 29,
2006, outstanding prior to the Effective Date, new debentures (the Class 5 Plan Debentures) in the original principal amount of $3,109,880. The Company is not obligated to pay the Class 5 Plan Debentures in cash, and instead may pay
through the conversion by the holders into shares of the Companys common stock or, subject to certain conditions, by exchanging the Class 5 Plan Debentures for shares of Biovest common stock owned by the Company during the term of the Class 5
Plan Debentures which mature on May 17, 2012.

The following are the material terms and conditions of the Class 5 Plan
Debentures:



| |  |  | the Class 5 Plan Debentures mature on May 17, 2012 (provided, however, in the event that the average of the trading price of shares of Biovest
common stock (as determined in accordance with the Class 5 Plan Debentures and the Plan) for the ten (10) consecutive trading days ending on the trading day that is immediately preceding such maturity date is below $0.75, then the maturity date
will automatically be extended for an additional twelve (12) months [May 17, 2013]), and the outstanding principal together with all accrued but unpaid interest is due on such maturity date;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | interest accrues and is payable on the outstanding principal amount under the Class 5 Plan Debentures at a fixed rate of eight and one-half percent
(8.50%) per annum;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | each of the Class 5 Plan Debentures is secured by a lien on certain shares of Biovest common stock owned by the Company;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | at the option of a holder of Class 5 Plan Debentures, all or any portion of the then outstanding balance of such holders Class 5 Plan Debentures
may be converted into shares of the Companys common stock or exchanged for shares of Biovest common stock at the applicable conversion or exchange rate set forth in such holders Class 5 Plan Debenture;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | commencing on August 15, 2011, if the trading price of the Companys common stock (determined in accordance with the Class 5 Plan Debentures
and the Plan) is at least 150% of the fixed conversion price for a holder of Class 5 Plan Debentures for any ten (10) consecutive trading days (in the case of a conversion into the Companys common stock), or the trading price of shares of
Biovest common stock (determined in accordance with the Class 5 Plan Debentures and the Plan) is at least $1.25 for any ten (10) consecutive trading days (in the case of an exchange for shares of Biovest common stock), the Company, at its
option, may (a) convert the then outstanding balance of all of the Class 5 Plan Debentures into shares of the Companys common stock at a conversion rate equal to the fixed conversion price for each holder of Class 5 Plan Debentures, or
(b) exchange the then outstanding balance of all of the Class 5 Plan Debentures into shares of Biovest common stock owned by the Company at a rate equal to $0.75 per share of Biovest common stock (with certain exceptions set forth in the Class
5 Plan Debentures and the Plan); and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



9. Convertible long-term debt (continued):



Accentia Class 5 Plan Debenture and Warrants (continued):



| |  |  | in the event a holder of Class 5 Plan Debentures elects to receive shares of Biovest common stock during the period of November 17, 2010 through
February 17, 2011, then such holder was subject to certain restrictions set forth in the Class 5 Plan Debentures and the Plan regarding the shares of Biovest common stock.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On the Effective Date, the Company executed and delivered the following warrants (the Class 5 Plan Warrants) to purchase up to 2,508,960
shares of the Companys common stock or up to 14.4 million shares of Biovest common stock owned by the Company. The Class 5 Plan Warrants (a) have an exercise price of $1.50 per share with a expiration date of November 17, 2013,
(b) can only be exercised for cash (no cashless exercise), and (c) are subject to certain call provisions set forth in the Class 5 Plan Warrants and the Plan.

As of March 31, 2011, $877,144 in Class 5 Plan Debentures principal and $18,636 in accrued interest had been converted into Biovest common stock at a conversion price equal to $0.75 per share,
resulting in the delivery of 1,198,184 shares of Biovest common stock owned by the Company to certain Class 5 Plan Debenture holders. The principal balance at March 31, 2011 was $2,232,737, net of a discount of $1,527,395.

Accentia Class 6 Plan Debentures and Warrants:

On the Effective Date, the Company issued, in satisfaction of the secured debentures dated June 17, 2008, outstanding prior to the Effective Date, new debentures (the Class 6 Plan
Debentures) in the original principal amount of $9,730,459. The Class 6 Plan Debentures mature on November 17, 2013, and the outstanding principal together with all accrued but unpaid interest is due in cash on such date.

The following are the material terms and conditions of the Class 6 Plan Debentures:



| |  |  | interest accrues and is payable on the outstanding principal under the Class 6 Plan Debentures at a fixed rate of eight and one-half percent
(8.50%) per annum and each of the Class 6 Plan Debentures is secured by a lien on certain assets of the Company;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | at the option of a holder of Class 6 Plan Debentures, such holder may elect to convert all of the then outstanding balance of its Class 6 Plan
Debentures into shares of the Companys common stock at a conversion rate equal to $1.10 per share of the Companys common stock; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | commencing on May 15, 2011, if the trading price of the Companys common stock (as determined in accordance with the Class 6 Plan Debentures
and the Plan) is at least 150% of $1.10 per share for any ten (10) consecutive trading days, the Company, at its option, may convert the then outstanding balance of all of the Class 6 Plan Debentures into shares of the Companys common
stock at a conversion rate equal to $1.10 per share of the Companys common stock.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On the Effective Date, the Company
executed and delivered the following warrants (the Class 6 Plan Warrants) to purchase up to 2,979,496 shares of the Companys common stock. The Class 6 Plan Warrants (a) have an exercise price of $1.50 per share with a
expiration date of November 17, 2013, (b) can only be exercised for cash (no cashless exercise), and (c) are subject to certain call provisions set forth in the Class 6 Plan Warrants and the Plan.

As of March 31, 2011, approximately $2.8 million in Class 6 Plan Debentures had been converted into the Companys common stock at a conversion
price equal to $1.10 per share, resulting in the issuance of approximately 2.5 million shares of the Companys common stock. The principal balance at March 31, 2011 was approximately $6.9 million.



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



Accentia Class 9 Plan Debentures and Warrants:

On the Effective Date, the Company issued, in satisfaction of the debentures dated, February 28, 2007, outstanding prior to the Effective Date, new
debentures (the Class 9 Plan Debentures) in the original principal amount of $19,109,554. The Company is not obligated to pay the Class 9 Plan Debentures in cash, and instead may pay through the conversion by the holders into shares of
the Companys common stock. The Class 9 Plan Debentures mature on November 17, 2012 (the Class 9 Plan Debenture Maturity Date) and no interest will accrue on the outstanding principal balance of the Class 9 Plan Debentures.

The following are the material terms and conditions of the Class 9 Plan Debentures:



| |  |  | on the Effective Date and on each of the following seven (7) quarterly anniversaries of the Effective Date (each, a Class 9 Automatic
Conversion Date), provided that the average of the trading price of the Companys common stock (as determined in accordance with the Class 9 Plan Debentures and the Plan) for the ten (10) consecutive trading days ending on the
trading day that is immediately preceding the then applicable Class 9 Automatic Conversion Date (the Class 9 Automatic Conversion Price) is at least $1.00 per share, one-eighth (1/8th) of the original principal balance of the
Class 9 Plan Debentures (the Class 9 Automatic Conversion Amount) will be automatically converted into shares of the Companys common stock at a conversion rate equal to the lesser of $1.25 per share or the Class 9
Automatic Conversion Price per share. k;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if, on any Class 9 Automatic Conversion Date, the Class 9 Automatic Conversion Price is less than $1.00 per share and therefore the automatic
conversion described above does not occur, a holder of Class 9 Plan Debentures may elect to convert the Class 9 Automatic Conversion Amount into shares of the Companys common stock at a conversion rate equal to $1.00 per share;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any principal amount outstanding under the Class 9 Plan Debentures at the Class 9 Plan Debenture Maturity Date will be due and payable in full, at the
election of the Company, in either cash or in shares of the Companys common stock at a conversion rate equal to the average trading price of the Companys common stock (as determined in accordance with the Class 9 Plan Debentures and
the Plan) for the ten (10) consecutive trading days ending on the trading day that is immediately preceding the Class 9 Plan Debenture Maturity Date (provided that the average trading price for such period is at least $.50 per share);
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if, at any time during the term of the Class 9 Plan Debentures, the trading price of the Companys common stock (as determined in accordance with
the Class 9 Plan Debentures and the Plan) is at least $1.50 per share for ten (10) consecutive trading days, a holder of the Class 9 Debentures, at its option, may convert any or all of the then outstanding principal balance of its Class 9 Plan
Debenture into shares of the Companys common stock at a conversion rate equal to the Class 9 Automatic Conversion Price used for the initial conversion on the Effective Date but not to exceed $1.25 per share; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if, at any time during the term of the Class 9 Plan Debentures, the trading price of the Companys common stock (as determined in accordance with
the Class 9 Plan Debentures and the Plan) is at least $1.88 per share for thirty (30) consecutive trading days, the Company, at its option, may require the conversion of up to $5.0 million of the then aggregate outstanding principal
balance of the Class 9 Plan Debentures at a conversion rate equal to the Class 9 Automatic Conversion Price used for the initial conversion on the Effective Date but not to exceed $1.25 per share.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On the Effective Date, the Company executed and delivered the following warrants (the Class 9 Plan Warrants) to purchase up to 3,154,612
shares of the Companys common stock. The Class 9 Plan Warrants (a) have an exercise price of $1.50 per share with a expiration date of November 17, 2013, (b) can only be exercised for cash (no cashless exercise), and
(c) are subject to certain call provisions set forth in the Class 9 Plan Warrants and the Plan.

As of March 31, 2011, a total of
approximately $2.5 million of the original principal amount of the Class 9 Plan Debentures had been converted into Company common stock at an average conversion price of $1.23 per share, resulting in the issuance of approximately 2.1 million
shares of the Companys common stock. The principal balance at March 31, 2011 was approximately $16.6 million.



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



Accentia Class 13 Plan Note and Warrants:

On the Effective Date, the Company issued, in satisfaction of the convertible Preferred Stock outstanding prior to the Effective Date of the Plan, new
promissory notes (the Class 13 Plan Notes) in the original principal amount of $4,903,644. The Class 13 Plan Notes mature on November 17, 2012 (the Class 13 Plan Notes Maturity Date), and no interest will accrue on the
outstanding principal balance of the Class 13 Plan Notes. The Company has no obligation to pay the Class 13 Plan Notes in cash at maturity, and instead may pay through the conversions by the holders into shares of the Companys common
stock.

The following are the material terms and conditions of the Class 13 Plan Notes:



| |  |  | on the Effective Date and on each of the following seven (7) quarterly anniversaries of the Effective Date (each, a Class 13 Automatic
Conversion Date), provided that the average of the trading price of the Companys common stock (as determined in accordance with the Class 13 Plan Notes and the Plan) for the ten (10) consecutive trading days ending on the trading
day that is immediately preceding the then applicable Class 13 Automatic Conversion Date (the Class 13 Automatic Conversion Price) is at least $1.00 per share, one-eighth ( 1/8th) of the original balance of the Class 13
Plan Notes (the Class 13 Automatic Conversion Amount) will be automatically converted into shares of the Companys common stock at a conversion rate equal to the Class 13 Automatic Conversion Price per share;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if, on any Class 13 Automatic Conversion Date, the Class 13 Automatic Conversion Price is less than $1.00 per share and therefore the automatic
conversion described above does not occur, a holder of Class 13 Plan Notes may elect to convert the Class 13 Automatic Conversion Amount into shares of the Companys common stock at a conversion rate equal to $1.00 per share;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any principal amount outstanding under the Class 13 Plan Notes at the Class 13 Plan Note Maturity Date will be due and payable in full, at the election
of the Company, in either cash or in shares of the Companys common stock at a conversion rate equal to the greater of the average of the trading price of the Companys common stock (as determined in accordance with the Class 13 Plan Notes
and the Plan) for the ten (10) consecutive trading days ending on the trading day that is immediately preceding the Class 13 Plan Notes Maturity Date or $1.00;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if, at any time during the term of the Class 13 Plan Notes, the trading price of the Companys common stock (as determined in accordance with
the Class 13 Plan Notes and the Plan) is at least 125% of $1.25 per share for ten (10) consecutive trading days, a holder of Class 13 Plan Notes, at its option, may convert any or all of the then outstanding principal balance of its Class 13
Plan Notes into shares of the Companys common stock at a conversion rate equal to the Class 13 Automatic Conversion Price used for the initial conversion on the Effective Date; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if, at any time during the term of the Class 13 Plan Notes, the trading price of the Companys common stock (as determined in accordance with
the Class 13 Plan Notes and the Plan) is at least 150% of $1.25 per share for thirty (30) consecutive trading days, the Company, at its option, may require the conversion of all or any portion of the then aggregate outstanding principal balance
of the Class 13 Plan Notes at a conversion rate equal to the Class 13 Automatic Conversion Price used for the initial conversion on the Effective Date.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On the Effective Date, the Company executed and delivered the following warrants (the Class 13 Plan Warrants) to purchase up to 1,072,840 shares of the Companys common stock. The Class
13 Plan Warrants (a) have an exercise price of $1.50 per share with a expiration date of November 17, 2013, (b) can only be exercised for cash (no cashless exercise), and (c) are subject to certain call provisions set forth in
the Class 13 Plan Warrants and the Plan.

As of March 31, 2011, a total of approximately $0.8 million of the outstanding principal amount
of the Class 13 Plan Notes had been converted into the Companys common stock at an average conversion price of $1.27 per share, resulting in the issuance of approximately 0.6 million shares of the Companys common stock.



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



Biovest Class 8 Option C Note:

On November 17, 2010, the effective date (the Biovest Effective Date) of Biovests First Amended Plan of Reorganization (the Biovest Plan) Biovest became obligated to
certain of its unsecured creditors in the principal amount of approximately $2.0 million. Each such unsecured creditor received an amount equal to 100% of such unsecured creditors allowed Class 8 unsecured claim (including post-petition
interest under the Biovest Plan at the rate of three percent (3%) per annum) in a combination of debt and equity resulting in the issuance of a total of $1.8 million in new notes (the Option C Notes), as well as, 0.2 million
shares of Biovest common stock, using an effective conversion rate equal to $1.66 per share. The Option C Notes bear interest at seven percent (7%) and are convertible into shares of Biovest common stock in seven (7) quarterly installments
beginning on February 17, 2011 as follows:



| |  |  | provided that the average of the volume weighted average prices for shares of Biovest common stock for the ten (10) consecutive trading days
immediately preceding each quarterly conversion date (Ten Day VWAP) is at least $1.00 per share, one-eighth
(1/8th) of the Option C Notes plus accrued interest
will be automatically converted into shares of Biovest common stock at a conversion rate equal to the Ten Day VWAP;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if the Ten Day VWAP is less than $1.00 per share, the Option C Notes will not automatically convert into shares of Biovest common stock, but will
instead become payable at maturity (August 17, 2012), unless an Option C Note holder elects to convert one-eighth
(1/8th) of its Option C Notes plus accrued interest
into shares of Biovest common stock at a conversion rate equal to $1.00 per share;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any portion of the Option C Notes and any Option C interest that are outstanding at maturity (August 17, 2012) will be due and payable in full, at
Biovests election, in either cash or in shares of Biovest common stock at a conversion rate equal to the Ten Day VWAP;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if, at any time prior to August 17, 2012, the Ten Day VWAP is at least $1.50 per share, an Option C Notes holder, at its option, may convert any
or all of its Option C Notes, plus the then accrued and unpaid interest into shares of Biovest common stock at a conversion rate equal to the Ten Day VWAP used for the initial conversion on the Effective Date ($1.66 per share); and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if, at any time prior to August 17, 2012, the volume weighted average price for Biovest common stock is at least $1.88 per share for thirty
(30) consecutive trading days, Biovest, at its option, may require the conversion of the then aggregate outstanding balance of the Option C Notes plus the then accrued and unpaid Option C interest at a conversion rate equal to the Ten Day VWAP
used for the initial conversion on the Effective Date ($1.66 per share).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On February 17, 2011, with the Ten Day VWAP
at less than $1.00 per share, the Option C Note holder elected to convert one-eighth of the Option C Notes plus accrued interest into shares of Biovest common stock at a conversion rate equal to $1.00 per share, resulting in the issuance of 391,980
common shares.

Biovest Exit Financing and Warrant Transaction:

On October 19, 2010, Biovest completed a financing as part of the Biovest Plan (the Exit Financing). Pursuant to the Exit Financing, Biovest issued an aggregate of $7.0 million in
principal amount of Debtor-In-Possession Secured Convertible Notes (the Initial Notes) and warrants to purchase shares of Biovest common stock (the Initial Warrants) to twelve (12) accredited investors (the
Buyers). Pursuant to the transaction, Biovest issued two separate types of Initial Warrants to the Buyers, Series A Warrants (the Initial Series A Warrants) and Series B Warrants (the Initial Series B Warrants).

On the Biovest Effective Date: (a) the Initial Notes were exchanged pursuant to the terms of the Biovest Plan for new unsecured notes
(the Exchange Notes) in the aggregate principal amount of $7.04 million, (b) the Initial Series A Warrants were exchanged pursuant to the terms of the Biovest Plan for new warrants to purchase a like number of shares of Biovest
common stock (the Series A Exchange Warrants), and (c) the Initial Series B Warrants were exchanged pursuant to the terms of the Biovest Plan for new warrants to purchase a like number of shares of Biovest common stock (the
Series B Exchange Warrants).



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



9. Convertible long-term debt (continued):



Biovest Exit Financing and Warrant Transaction (continued):



The following are the material terms and conditions of the Exchange Notes:



| |  |  | the Exchange Notes mature on November 17, 2012, and all principal and accrued but unpaid interest is due on such date;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | interest accrues and is payable on the outstanding principal amount of the Exchange Notes at a fixed rate of seven percent (7%) per annum (with a
fifteen percent (15%) per annum default rate), and is payable monthly in arrears. The first interest payment was paid on December 1, 2010;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | interest payments are payable at Biovests election in either cash or subject to certain specified conditions, in shares of Biovest common stock;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Biovest may from time to time, subject to certain conditions, redeem all or any portion of the outstanding principal amount of the Exchange Notes for
an amount, in cash, equal to 110% of the sum of the principal amount being redeemed and certain make-whole interest payments;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the holders of the Exchange Notes may convert all or a portion of the outstanding balance of the Exchange Notes into shares of Biovest common stock at
a conversion rate of $0.91 per share, subject to anti-dilution adjustments in certain circumstances; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in the event that the average of the daily volume weighted average price of Biovest common stock is at least 150% of the then-effective conversion
price for any ten (10) consecutive trading days, Biovest, at its option, may upon written notice to the holders of the Exchange Notes, convert the then outstanding balance of the Exchange Notes into shares of Biovest common stock at the
conversion price then in effect under the Exchange Notes.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following are the material terms and conditions of the Series
A Exchange Warrants:



| |  |  | the Series A Exchange Warrants give the Buyers the right to purchase an aggregate of 8,733,096 shares of Biovest common stock (the Series A
Warrant Shares);
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Series A Exchange Warrants have an exercise price of $1.20 per share and expire on November 17, 2017; and
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | if Biovest issues or sells any options or convertible securities after the issuance of the Series A Exchange Warrants that are convertible into or
exchangeable or exercisable for shares of common stock at a price which varies or may vary with the market price of the shares of Biovest common stock, including by way of one or more reset(s) to a fixed price, the Buyers have the right to
substitute any of the applicable variable price formulations for the exercise price upon exercise of the warrants held.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On
December 22, 2010, the Series B Exchange Warrants were exercised by a cashless exercise and 1,075,622 shares of Biovest common stock were issued to the Buyers.

As of March 31, 2011, a total of $5.1 million in principal on the Exchange Notes had been converted to common stock, resulting in the issuance to the Buyers of 6.0 million shares of the Biovest
common stock. The remaining principal balance outstanding on the Exchange Notes is $1.9 million as of March 31, 2011.

The Exchange Notes
and Warrants contain conversion and adjustment features required to be classified as derivative instruments and recorded at fair value. As a result, the Exchange Notes have been recorded at a discount which will be amortized to interest expense over
two years.

Future maturities of convertible debt are as follows:



|                           |  |   |         | 
|-------------------------- |  | - | ------- | 
|12 Months ending March 31, | 
|2012                       |  | $ | 24,354  | 
|2013                       |  |   | 12,276  | 
|                           |  |   |         | 
|Total maturities           |  |   | 36,630  | 
|Less unamortized discount: |  |   | (3,403) | 
|                           |  |   |         | 
|                           |  | $ | 33,227  | 
|                           |  |   |         | 



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



10. Other long-term debt:

Other long-term debt consists of the following:



|                                         |  |                |        |  |                    |   |   | 
|---------------------------------------- |  | -------------- | ------ |  | ------------------ | - | - | 
|in thousands                             |  |                |        |  |                    |  
|                                         |  | March 31, 2011 |        |  | September 30, 2010 |  
|Accentia Class 2 Laurus/Valens Term Note |  | $              | 8,800  |  |                    | $ |  | 
|Accentia Class 4 Promissory Note         |  |                | 4,343  |  |                    |   |  | 
|Accentia Class 10 Plan Distributions     |  |                | 2,379  |  |                    |   |  | 
|Biovest Laurus/Valens Term Notes         |  |                | 27,627 |  |                    |   |  | 
|Biovest Class 8 Plan Distributions       |  |                | 2,711  |  |                    |   |  | 
|                                         |  |                |        |  |                    |   |   | 
|                                         |  |                | 45,860 |  |                    |   |  | 
|Less current maturities                  |  |                | -      |  |                    |   |  | 
|                                         |  |                |        |  |                    |   |   | 
|                                         |  | $              | 45,860 |  |                    | $ |  | 
|                                         |  |                |        |  |                    |   |   | 

Accentia Class 2 Laurus/Valens Term Note:

On the Effective Date, the Company issued security agreements and term notes to Laurus Master Fund, Ltd. (in liquidation), PSource Structured Debt Limited, Valens Offshore SPV I, Ltd., Valens Offshore SPV
II, Corp., Valens U.S. SPV I, LLC, and LV Administrative Services, Inc. (Laurus/Valens), in the original principal amount of $8.8 million (the Laurus/Valens Term Notes) in satisfaction of allowed claims prior to the Effective
Date. The following are the material terms and conditions of the Laurus/Valens Term Notes:



| |  |  | the Laurus/Valens Term Notes mature on November 17, 2012 and may be prepaid at any time without penalty;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | interest accrues on the Laurus/Valens Term Notes at the rate of eight and one-half percent (8.5%) per annum (with a twelve and one-half percent
(12.5%) per annum default rate), and is payable at the time of any principal payment or prepayment of principal;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Company is required to make mandatory prepayments under the Laurus/Valens Term Notes as follows:
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | on May 17, 2012, a payment of principal, in cash, in the amount of $4.4 million, less the amount of any prior optional prepayments of principal by
the Company and the amount of any other mandatory prepayments of principal under the Laurus/Valens Term Notes; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a prepayment equal to thirty percent (30%) of the net proceeds (i.e., the gross proceeds received less any investment banking or similar fees and
commissions and legal costs and expenses incurred by the Company) of certain capital raising transactions (with certain exclusions);
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Laurus/Valens Term Notes are secured by:
| | - |  | --------------------------------------------



| |  |  | a first lien on all of the assets of the Company, junior only to the liens granted under the Plan to holders of the Class 6 Plan Debentures, in the
original aggregate principal amount of $8,906,098 and certain permitted liens;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a pledge by the Company to Laurus/Valens of (a) all of the Companys equity interests in Analytica, and (b) 20,115,818 shares of Biovest
common stock owned by the Company;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | all of the assets of Analytica, which secure a guaranty of Analytica as to the entire indebtedness under the Laurus/Valens Term Notes;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------

and



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



10. Other long-term debt (continued):



Accentia Class 2 Laurus/Valens Term Note (continued):



| |  |  | with the prior written consent of Laurus/Valens, the Company may convert all or any portion of the outstanding principal and accrued interest under the
Laurus/Valens Term Notes into a number of shares of the Companys common stock (the Laurus/Valens Conversion Shares) equal to (a) the aggregate portion of the principal and accrued but unpaid interest outstanding under the
Laurus/Valens Term Note being converted, divided by (b) ninety percent (90%) of the average closing price publicly reported for the Companys common stock for the ten (10) trading days immediately preceding the date of the notice
of conversion.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Accentia Class 4 Promissory Note:

On the Effective Date, the Company issued, a new promissory note in the original principal amount of $4,342,771 to McKesson Corporation (McKesson) (the Class 4 Plan Note) in
satisfaction of McKessons approved pre-Effective Date secured claims. The Class 4 Plan Note is payable in cash in one installment on March 17, 2014 (unless earlier accelerated), and the outstanding principal together with all accrued but
unpaid interest is due on such date. The following are the material terms and conditions of the Class 4 Plan Note:



| |  |  | interest accrues and is payable on the outstanding principal amount under the Class 4 Plan Note at a fixed rate of five percent (5%) per annum
(with a ten percent (10%) per annum default rate);
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Company may prepay all or any portion of the Class 4 Plan Note, without penalty, at any time; and
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | the Class 4 Plan Note is secured by a lien on 6,102,408 shares of Biovest common stock owned by the Company.
| | - |  | ------------------------------------------------------------------------------------------------------------

Accentia Class 10 Plan Distributions:

On the Effective Date, the Company became obligated required to pay approximately $2.4 million in cash on March 17, 2014, to unsecured creditors holding Class 10 claims under the Plan (the
Class 10 Plan Distributions).

The Class 10 Plan Distributions mature on March 17, 2014, and the outstanding principal
together with all accrued but unpaid interest is due on such date. Interest accrues and is payable on the outstanding principal amount under the Class 10 Plan Distributions at a fixed rate of five percent (5%) per annum.

Unsecured creditors holding an aggregate total of $3,287,695 in Class 10 claims elected to convert those Class 10 claims into shares of the
Companys common stock valued at the average market price for the Companys common stock over the ten (10) trading days preceding the Effective Date.

As of March 31, 2011, , the Company had issued approximately 2.4 million shares of the Companys common stock to these Class 10 unsecured creditors at a conversion price equal to $1.36 per
share.

Biovest Laurus/Valens Term Notes:

On the Biovest Effective Date and pursuant to the Biovest Plan, Biovest issued two new types of notes (the Laurus/Valens Term A Notes and the Laurus/Valens Term B Notes) in the
aggregate original principal amount of $29.06 million to Laurus/Valens in compromise, and satisfaction of secured claims prior to the Effective Date.

The following are the material terms and conditions of the Laurus/Valens Term A Notes:



| |  |  | the original principal amount of the Laurus/Valens Term A Notes was $24.9 million;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | the Laurus/Valens Term A Notes are due in one installment of principal and interest due at maturity on November 17, 2012;
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | interest accrues at the rate of eight percent per annum (with a twelve percent per annum default rate), and is payable at the time of any principal
payment or prepayment of principal;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Biovest may prepay the Laurus/Valens Term A Notes, without penalty, at any time; and
| | - |  | ------------------------------------------------------------------------------------



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



10. Other long-term debt (continued):



Biovest Laurus/Valens Term Notes (continued):



| |  |  | Biovest is required to make mandatory prepayments under the Laurus/Valens Term A Notes as follows:
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | a prepayment equal to thirty percent (30%) of the net proceeds (i.e., the gross proceeds received less any investment banking or similar fees and
commissions and legal costs and expenses incurred by Biovest) of certain capital raising transactions (with certain exclusions), but only up to the then outstanding principal and accrued interest under the Laurus/Valens Term A Notes;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | from any intercompany funding by the Company to Biovest (with certain exceptions and conditions); and
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | a prepayment equal to fifty percent (50%) of the positive net cash flow of Biovest for each fiscal quarter after the Effective Date, less the
amount of certain capital expenditures on certain biopharmaceutical products of Biovest made during such fiscal quarter or during any prior fiscal quarter ending after November 17, 2010.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On November 18, 2010, Biovest prepaid the Laurus/Valens Term A Notes in an amount equal to $1.4 million from the proceeds received in the
Biovest Exit Financing.

The following are the material terms and conditions of the Laurus/Valens Term B Notes:



| |  |  | The original principal amount of the Laurus/Valens Term B Notes was $4.16 million;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | the Laurus/Valens Term B Notes mature on November 17, 2013;
| | - |  | -----------------------------------------------------------



| |  |  | interest accrues at the rate of eight percent (8%) per annum (with a twelve percent (12%) per annum default rate), and is payable at the time of any
principal payment or prepayment of principal;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Biovest may prepay the Laurus/Valens Term B Notes, without penalty, at any time; and
| | - |  | ------------------------------------------------------------------------------------



| |  |  | provided that the Laurus/Valens Term A Notes have been paid in full, Biovest is required to make mandatory prepayments under the Laurus/Valens Term B
Notes from any intercompany funding by the Company to Biovest (with certain exceptions and conditions), but only up to the amount of the outstanding principal and accrued interest under the Laurus/Valens Term B Notes.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

With the prior written consent of Laurus/Valens, Biovest may convert all or any portion of the outstanding principal and accrued interest under either the
Laurus/Valens Term A Notes or the Laurus/Valens Term B Notes into shares of Biovest common stock. The number of shares of Biovest common stock issuable on such a conversion (the Laurus/Valens Conversion Shares) is equal to (a) an
amount equal to the aggregate portion of the principal and accrued and unpaid interest thereon outstanding under the applicable Laurus/Valens Term A Notes or the Laurus/Valens Term B Notes being converted, divided by (b) ninety percent
(90%) of the average closing price publicly reported (or reported by Pink Sheets, LLC) for shares of Biovest common stock for the ten (10) trading days immediately preceding the date of the notice of conversion.

The Laurus/Valens Term A Notes and the Laurus/Valens Term B Notes are secured by a first lien on all of the assets of Biovest and its subsidiaries, junior
only to the lien granted to Corp Real and to certain permitted liens. The Laurus/Valens Term A Notes and the Laurus/Valens Term B Notes are guaranteed by the Company (the Accentia Guaranty), up to a maximum amount of $4,991,360. The
Accentia Guaranty is secured by a pledge by the Company of 20,115,818 shares of Biovest common stock owned by the Company and by the assets of the Companys subsidiary, Analytica.



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



10. Other long-term debt (continued):



Biovest Laurus/Valens Term Notes (continued):



The Laurus/Valens Term A and the Laurus/Valens Term B Notes have replaced the following obligations due
to Laurus and its affiliates:



| |  |  | the $7.799 million note payable to Laurus originated in March 2006;
| | - |  | -------------------------------------------------------------------



| |  |  | the $0.250 million note payable to Valens Offshore SPV II, Corp originated in October 2007;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | the $0.245 million note payable to Valens U.S. SPV I, LLC originated in October 2007;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | the $3.6 million note payable to Valens Offshore SPV II, Corp originated in December 2007;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | the $4.9 million note payable to Valens U.S. SPV I, LLC originated in December 2007;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | the $7.5 million minimum royalty due on sales of AutovaxID instrumentation originated in April 2007; and
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | the $4.4 million loan modification fee, originated in July 2008, in consideration for modifying the terms of all the then outstanding debt due to
Laurus/Valens.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

The fair value of the Laurus/Valens Term A and the Laurus/Valens Term B Notes was recorded against the
combined carrying value of the obligations listed above resulting in a $6.7 million gain on reorganization for the six months ended March 31, 2011.

Biovest Class 8 Option A Obligations:

On the Biovest Effective Date and under the
Biovest Plan, Biovest became obligated to pay to the Biovest unsecured creditors approximately $2.7 million in cash together with interest at five percent (5%) per annum to be paid in one installment on March 27, 2014. These unsecured
claims include, but is not limited to the Pulaski Bank notes, the Southwest Bank note, and the guarantor indemnities. The fair value of the Option A Obligations was recorded against the carrying value of each claim holder electing an Option A
distribution as of the Effective Date, resulting in a $0.5 million gain on reorganization for the six months ended March 31, 2011.

Future maturities of other long-term debt are as follows:



|                           |  |   |        | 
|-------------------------- |  | - | ------ | 
|12 Months ending March 31, |  |   |       
|2012                       |  | $ |       | 
|2013                       |  |   | 32,267 | 
|2014                       |  |   | 13,593 | 
|                           |  |   |        | 
|                           |  | $ | 45,860 | 
|                           |  |   |        | 



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



11. Derivative Liabilities:

The following tabular presentation reflects the components of derivative financial instruments:



|                                              |  |                           |           |  |                       |   |            | 
|--------------------------------------------- |  | ------------------------- | --------- |  | --------------------- | - | ---------- | 
|                                              |  | March 31, 2011(unaudited) |           |  | September 30, 2010(1) |  
|Embedded derivative instruments, bifurcated   |  | $                         |          |  |                       | $ | 18,224,001 | 
|Freestanding derivatives:                     |  |                           |           |  |                       |   |            | 
|Warrants issued with convertible debt         |  |                           |          |  |                       |   | 10,020,236 | 
|Warrants issued with note payable             |  |                           |          |  |                       |   | 7,594,600  | 
|Warrants issued with preferred stock          |  |                           |          |  |                       |   | 1,077,118  | 
|Warrants issued with other debt               |  |                           |          |  |                       |   | 467,564    | 
|Warrants issued with settlement               |  |                           | 704,140   |  |                       |   | 1,844,200  | 
|Default and investment put options, Biovest   |  |                           |          |  |                       |   | 219,700    | 
|Investment put option, Accentia               |  |                           |          |  |                       |   | 2,928,838  | 
|Biovest investor share distribution           |  |                           | 239,250   |  |                       |   |           | 
|Biovest warrants issued with convertible debt |  |                           | 3,140,421 |  |                       |   |           | 
|Biovest debt conversion option                |  |                           | 44,852    |  |                       |   |           | 
|                                              |  |                           |           |  |                       |   |            | 
|                                              |  | $                         | 4,128,663 |  |                       | $ | 42,376,257 | 
|                                              |  |                           |           |  |                       |   |            | 



| | (1) | As a result of the Companys Chapter 11 proceedings, some derivative liabilities listed in the table above became prepetition indebtedness under the Plan.
Accordingly, these obligations have been classified as Liabilities subject to compromise in the Companys condensed consolidated balance sheet at September 30, 2010. Only warrants issued with settlement were classified as
derivative liabilities at September 30, 2010.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Derivative gains (losses) in the accompanying statements of operations
relate to the individual derivatives as follows:



|                                            |  |                             |            |   |                |   |             |  
|------------------------------------------- |  | --------------------------- | ---------- | - | -------------- | - | ----------- | -
|                                            |  | March 31, 2011  (unaudited) |            |   | March 31, 2010 |  
|Embedded derivative instruments, bifurcated |  | $                           | (3,022,590 | ) |                | $ | (15,868,969 | )
|Freestanding derivatives:                   |  |                             |            |   |                |   |             |  
|Warrants issued with convertible debentures |  |                             | 2,824,489  |   |                |   | (7,808,937  | )
|Warrants issued with term note payable      |  |                             | (1,583,088 | ) |                |   | (9,539,501  | )
|Warrants issued with preferred stock        |  |                             |           |   |                |   | (1,000,538  | )
|Warrants issued with other debt             |  |                             |           |   |                |   | (1,388,409  | )
|Default and investment put options, Biovest |  |                             | (3,030     | ) |                |   | (11,083     | )
|Investment put option, Accentia             |  |                             |           |   |                |   | 1,177,309   |  
|Investor share distribution, Biovest        |  |                             | 409,751    |   |                |   |            |  
|Warrants issued for settlement              |  |                             | 1,140,060  |   |                |   | (2,103,000  | )
|                                            |  |                             |            |   |                |   |             |  
|                                            |  | $                           | (234,408   | ) |                | $ | (36,543,128 | )
|                                            |  |                             |            |   |                |   |             |  

The following table summarizes assets and liabilities measured at fair value on a recurring basis for the periods presented:



|                         |  |                           |         |  |                    |  |             |  |  |  |         |  |  |  |            |  |  |  |         |  |  |  |              |  |  |  |         |  |  |  |              | 
|------------------------ |  | ------------------------- | ------- |  | ------------------ |  | ----------- |  |  |  | ------- |  |  |  | ---------- |  |  |  | ------- |  |  |  | ------------ |  |  |  | ------- |  |  |  | ------------ | 
|                         |  | March 31, 2011(unaudited) |         |  | September 30, 2010 | 
|                         |  |                           |         |  |                    |  |             | 
|Fair value measurements: |  |                           | Level 1 |  |                    |  | Level 2     |  |  |  | Level 3 |  |  |  | Total      |  |  |  | Level 1 |  |  |  | Level 2      |  |  |  | Level 3 |  |  |  | Total        | 
|                         |  |                           |         |  |                    |  |             | 
|Liabilities              |  |                           |         |  |                    |  |             |  |  |  |         |  |  |  |            |  |  |  |         |  |  |  |              |  |  |  |         |  |  |  |              | 
|                         |  |                           |         |  |                    |  |             | 
|Derivative liabilities   |  |                           | $      |  |                    |  | $ 4,128,663 |  |  |  | $      |  |  |  | $4,128,663 |  |  |  | $      |  |  |  | $ 42,376,257 |  |  |  | $      |  |  |  | $ 42,376,257 | 



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



12. Related party transactions:

Biovest Claims of Ronald E. Osman:

On the Biovest Effective Date, the holder of
Biovests May 9, 2008 promissory note, Ronald E. Osman, a director of Biovest, elected to convert the entire outstanding principal balance under the note (approximately $1.0 million) plus accrued interest into shares of Biovest common
stock at a conversion rate equal to $1.66 per share, resulting in the issuance of 608,224 shares of Biovest common stock.

Biovest DIP
Lender Plan Note:

On the Biovest Effective Date, pursuant to the Biovest Plan, Biovest executed and delivered in favor of Corps Real, LLC,
an Illinois limited liability company (Corps Real), the members of which are directors of or are affiliated with directors of Biovest and the Company, a secured convertible promissory note (the DIP Lender Plan Note), in an
original principal amount equal to $2,291,560 and allows Biovest to draw up to an additional $0.9 million on the note. The DIP Lender Plan Note replaces the $3.0 million secured line of credit promissory note dated December 22, 2008, which was
previously executed in favor of Corps Real. The DIP Lender Plan Note matures on November 17, 2012 and all principal and accrued but unpaid interest is payable in cash on such date. Interest accrues and is payable on the outstanding principal
amount of the DIP Lender Plan Note at a fixed rate of sixteen percent (16%) per annum, with interest in the amount of ten percent (10%) to be paid monthly and interest in the amount of six percent (6%) to accrue and be paid on the
maturity date. Biovest may prepay the DIP Lender Plan Note in full, without penalty, at any time, and Corps Real may convert all or a portion of the outstanding balance of the DIP Lender Plan Note into shares of Biovest common stock at a conversion
rate of $0.75 per share of Biovest common stock. The DIP Lender Plan Note is secured by a first priority lien on all of Biovests assets.

BDSI/Arius Settlement:

On February 17, 2010, the Bankruptcy Court entered an Order
approving an Emezine Settlement Agreement (the Settlement Agreement) between the Company and BioDelivery Sciences International, Inc. (BDSI), entered into as of December 30, 2009. Parties to the Settlement Agreement
are the Company, the Companys wholly-owned subsidiary, TEAMM, BDSI, and BDSIs wholly-owned subsidiary, Arius Pharmaceuticals, Inc. (Arius).

The purpose of the Settlement Agreement is to memorialize the terms and conditions of a settlement, between the Company and BDSI regarding claims relating to a Distribution Agreement dated March 12,
2004 between Arius and TEAMM (the Distribution Agreement) related to the marketing and distribution of Emezine, a product licensed by Arius from Reckitt Benckiser Healthcare (UK) Limited. Following the issuance in February 2006 by
the FDA of a non-approvable letter with respect to the NDA for Emezine, BDSI ceased its Emezine-related development efforts and on December 17, 2008, the Distribution Agreement was terminated. The Settlement Agreement resolves the
Companys claims against BDSI under the terminated Distribution Agreement.

The Settlement Agreement provides that the parties mutually
release all claims that either may have against each other and, in connection therewith, the Company:



| | (a) | received $2.5 million from BDSI (the $2.5 Million Payment); and
| | --- | -----------------------------------------------------------------



| | (b) | received the following royalty rights (the Product Rights) from BDSI with respect to BDSIs BEMA Granisetron product candidate (BEMA
Granisetron) (or in the event it is not BEMA Granisetron, the third BDSI product candidate, excluding BEMA Bupremorphine, as to which BDSI files an NDA, which, together with BEMA Granisetron, shall be referred to hereinafter as the
Product):
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (i) | 70/30 split (BDSI/Company) of royalty received if a third party sells the Product and85/15 split on net sales if BDSI sells the Product; and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | BDSI will, from the sale of the Product, fully recover amounts equal to (1) all internal and external worldwide development costs of the Product
(Costs) plus interest (measured on weighted average prime interest rate from first dollar spent until Product launch) and (2) the $2.5 Million Payment plus interest (measured on weighted average prime interest rate from the time of
payment until Product launch) before the Company begins to receive its split as described in (b) (i) above; and
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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12. Related party transactions (continued):



BDSI/Arius Settlement (continued):



| | (c) | issued to BDSI a warrant (Warrant) to purchase two (2) million shares of Biovest common stock held by the Company, with an exercise price of $0.84 and
an expiration date of March 4, 2017. During the initial two (2) year exercise period, any exercise of the Warrant by BDSI will be subject to approval by Biovest.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In the event that BDSI receives any sublicensing or milestone payments associated with the Product up to and including the NDA approval, BDSI will apply 30% of such payments toward payback of the Costs of
the Product plus interest and the $2.5 Million Payment plus the interest.

In the event of a proposed sale of BDSI or its assets, BDSI
has the right to terminate its Product Right payment obligations to the Company under the Settlement Agreement upon the payment to the Company of an amount equal to the greater of: (i) $4.5 million; or (ii) the fair market value of the
Product Rights as determined by an independent third party appraiser. Further, if the Product Right is terminated, the Warrant described above will be terminated if not already exercised, and, if exercised, an amount equal to the strike price will,
in addition to the amount in (i) or (ii) above, be paid to the Company.

The fair value of the warrant issued to BDSI was estimated
on the date of grant using the Black-Scholes-Merton valuation model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. The value included in derivative liability is adjusted quarterly
and the change is recorded to derivative gain or loss. The value on the grant date was approximately $1.0 million. The value at the end of current period was approximately $0.7 million, resulting in a derivative gain for the six months ended
March 31, 2011 of approximately $1.1 million. The fair value is recorded as a derivative liability as of March 31, 2011 on accompanying balance sheet.

13. Liabilities subject to compromise:

As a result of the Companys Chapter 11
filings, the payment of prepetition indebtedness was subject to compromise or other treatment under the Plan prior to the Effective Date. ASC Topic 852 requires prepetition liabilities that are subject to compromise to be reported at the amounts
expected to be allowed, even if they may be settled for lesser amounts.

The following table reflects liabilities subject to compromise prior
to November 17, 2010:



|                                                                         |  |                    |                   | 
|------------------------------------------------------------------------ |  | ------------------ | ----------------- | 
|                                                                         |  | September 30, 2010 |                  
|Accounts payable and accrued expenses                                    |  |                    | $      15,232,863 | 
|Hybrid financial instrument                                              |  |                    | 3,608,674         | 
|Convertible debentures                                                   |  |                    | 28,626,149        | 
|Laurus term note                                                         |  |                    | 8,800,000         | 
|Valens 15% convertible note, Biovest                                     |  |                    | 926,300           | 
|Secured promissory notes payable to Laurus and the Valens Funds, Biovest |  |                    | 28,522,108        | 
|Unsecured promissory notes payable to Pulaski Bank and Trust Company     |  |                    | 1,161,900         | 
|Unsecured promissory note payable to Southwest Bank of St. Louis         |  |                    | 228,330           | 
|Southwest line of credit                                                 |  |                    | 4,000,000         | 
|Notes payable, related parties                                           |  |                    | 2,313,623         | 
|Other notes payable                                                      |  |                    | 610,683           | 
|Minimum royalty due to Laurus on net sales of AutovaxID instrumentation  |  |                    | 6,318,233         | 
|Derivative liabilities                                                   |  |                    | 40,532,057        | 
|Dividend payable                                                         |  |                    | 479,452           | 
|Other                                                                    |  |                    | 2,209,756         | 
|                                                                         |  |                    |                   | 
|                                                                         |  |                    | $    143,570,128  | 
|                                                                         |  |                    |                   | 



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



14. Stockholders equity:

Stock options and warrants

The fair value of each option award is estimated on the date of
grant using the Black-Scholes-Merton valuation model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. Expected volatilities are based on historical volatility of a peer companys
stock and other factors estimated over the expected term of the options. The expected term of options granted is derived using the simplified method which computes expected term as the average of the sum of the vesting term plus the
contract term. This method is used because the Company does not currently have adequate historical option exercise or forfeiture information as a basis to determine expected term. The risk-free rate is based on the U.S. Treasury yield curve in
effect at the time of grant for the period of the expected term. Company does not currently have adequate historical option exercise or forfeiture information as a basis to determine expected term. The Company has also issued performance based
awards, the vesting of which are tied to Companys achievement of specific pre-defined goals. The Company estimates the likelihood of success at time of grant to determine inputs to the Black-Scholes-Merton valuation model. The risk-free rate
is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term.

Stock options and warrants
issued, terminated/forfeited and outstanding as of March 31, 2011 are as follows:



|                             |  |        |             |  |                                 |   |      | 
|---------------------------- |  | ------ | ----------- |  | ------------------------------- | - | ---- | 
|                             |  | Shares |             |  | Average ExercisePrice Per Share |  
|Options:                     |  |        |             |  |                                 |   |      | 
|Outstanding, October 1, 2010 |  |        | 24,255,580  |  |                                 | $ | 0.81 | 
|Granted                      |  |        | 885,000     |  |                                 |   | 0.77 | 
|Terminated or forfeited      |  |        | (38,480)    |  |                                 |   | 2.16 | 
|Exercised                    |  |        |            |  |                                 |   |     | 
|                             |  |        |             |  |                                 |   |      | 
|Outstanding March 31, 2011   |  |        | 25,102,100  |  |                                 | $ | 0.81 | 
|                             |  |        |             |  |                                 |   |      | 
|Warrants:                    |  |        |             |  |                                 |   |      | 
|Outstanding, October 1, 2010 |  |        | 20,280,800  |  |                                 | $ | 2.51 | 
|Granted                      |  |        |            |  |                                 |   |     | 
|Terminated or forfeited      |  |        | (5,213,436) |  |                                 |   | 2.68 | 
|Exercised                    |  |        |            |  |                                 |   |     | 
|                             |  |        |             |  |                                 |   |      | 
|Outstanding March 31, 2011   |  |        | 15,067,364  |  |                                 | $ | 2.45 | 
|                             |  |        |             |  |                                 |   |      | 

A summary of the status of the Companys nonvested stock options as of March 31, 2011, and changes
during the six months then ended, is summarized as follows:



|                                |  |        |             |  |                                        |   |      |                |  |   |           | 
|------------------------------- |  | ------ | ----------- |  | -------------------------------------- | - | ---- | -------------- |  | - | --------- | 
|Nonvested Shares                |  | Shares |             |  | Weighted-Average Grant-Date Fair Value |   |      | IntrinsicValue | 
|Nonvested at September 30, 2010 |  |        | 20,897,833  |  |                                        |   |      |                |  |   |           | 
|Granted                         |  |        | 885,000     |  |                                        |   |      |                |  |   |           | 
|Vested                          |  |        | (4,776,887) |  |                                        |   |      |                |  |   |           | 
|Forfeited                       |  |        | (32,814)    |  |                                        |   |      |                |  |   |           | 
|                                |  |        |             |  |                                        |   |      |                |  |   |           | 
|Nonvested at March 31, 2011     |  |        | 16,973,132  |  |                                        | $ | 0.40 |                |  | $ | 1,151,913 | 
|                                |  |        |             |  |                                        |   |      |                |  |   |           | 

Stock compensation expense was $14.2 million for the six months ended March 31, 2011 and $3.8 million for the quarter
ended March 31, 2011. Approximately $2.3 million in stock compensation expense will be recognized over the next four (4) quarters, as a result of the vesting of shares.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



15. Segment information:

During 2004, the Company through its subsidiary, Analytica, made an insignificant acquisition of a foreign entity, IMOR. This subsidiary ceased operations during the quarter ended March 31, 2010.
Therefore, segment information on a geographic basis is only presented below for the six months ended March 31, 2010:



|                  |  |                                  |             |   |                       |   |          |       |  |   |             |  
|----------------- |  | -------------------------------- | ----------- | - | --------------------- | - | -------- | ----- |  | - | ----------- | -
|                  |  | Six months ended 
March 31, 2010 |            
|                  |  | Domestic                         |             |   | International(Europe) |   |          | Total | 
|Net sales         |  | $                                | 4,850,626   |   |                       | $ | 943,254  |       |  | $ | 5,793,880   |  
|Net (loss) income |  |                                  | (45,588,733 | ) |                       |   | (307,979 | )     |  |   | (45,896,712 | )
|Total Assets      |  |                                  | 7,580,141   |   |                       |   |         |       |  |   | 7,580,141   |  
|Goodwill          |  |                                  | 893,000     |   |                       |   |         |       |  |   | 893.000     |  

16. Commitments and
contingencies:

Legal proceedings:

Bankruptcy proceedings:

On November 10, 2008, the Company filed a voluntary petition
for reorganization under Chapter 11 of the United States Bankruptcy Code (Chapter 11) in the U.S. Bankruptcy Court for the Middle District of Florida, Tampa Division (the Bankruptcy Court). During the pendency of the
Chapter 11 proceedings, the Company operated its business as a debtor-in-possession in accordance with the provisions of Chapter 11 and subject to the jurisdiction of the Bankruptcy Court. On August 16, 2010, the Company filed its First Amended
Joint Plan of Reorganization. Subsequent to the filing of this report, on October 25, 2010, the Company filed the First Modification to the First Amended Joint Plan of Reorganization (collectively and as amended and supplemented, the
Plan). On October 27, 2010, the Bankruptcy Court held a confirmation hearing and confirmed the Plan, and, on November 2, 2010, the Bankruptcy Court entered an Order Confirming Debtors First Amended Joint Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code (the Confirmation Order), which approved and confirmed the Plan, as modified by the Confirmation Order. The Company emerged from Chapter 11 protection, and the Plan became effective,
on November 17, 2010 (the Effective Date).

Notwithstanding the effectiveness of the Plan, the Bankruptcy Court retains
jurisdiction to adjudicate any remaining issues regarding, inter alia, the validity, amount, and method of payment of claims filed in connection with the Companys Chapter 11 proceeding. Accordingly, the Company anticipates that
there may be ongoing proceedings before the Bankruptcy Court to resolve any filed objections or disputes as to claims filed in the Chapter 11 proceeding.

Biovest litigation:

On August 4, 2008, the Companys majority-owned subsidiary,
Biovest was served with a summons and complaint filed in California Superior Court on behalf of Clinstar LLC for breach of contract for non-payment of certain fees for clinical trial studies and pass-through expenses in the amount of $385,000.
Biovest intends to seek the dismissal of this litigation and plan to defend these claims vigorously. Upon the filing of Biovests Chapter 11 petition on November 10, 2008, this litigation was automatically stayed pursuant to provisions of
federal bankruptcy law. The Company anticipates that the claims involved in this litigation will be contested and resolved by the Bankruptcy Court as part of an objection to claim which the Company expects to file shortly.

Other proceedings:

Further, from time
to time the Company is subject to various legal proceedings in the normal course of business, some of which are covered by insurance.



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SIX MONTHS ENDED MARCH 31, 2011 AND 2010



16. Commitments and contingencies (continued):



Cooperative Research and Development Agreement:

In September 2001, Biovest entered into a definitive Cooperative Research and Development Agreement (CRADA) with the NCI for the development
and ultimate commercialization of patient-specific vaccines for the treatment of non-Hodgkins low-grade follicular lymphoma. The terms of the CRADA, as amended, included, among other things, a requirement to pay $0.5 million quarterly to NCI
for expenses incurred in connection with the ongoing Phase 3 clinical trials. Since the transfer to Biovest of the investigational new drug application for development of this vaccine, which occurred in April 2004, these payments to NCI have been
reduced to a small fraction of this original obligation (approximately $0.2 million per year). On September 25, 2006, Biovest provided written notice to the NCI in accordance with the terms of the CRADA to terminate the CRADA at the end of the
sixty (60) day notice period. Under the terms of the CRADA, Biovest is obligated to continue to provide vaccine to the NCI at no charge for purposes of the NCIs studies that are within the scope of the CRADA if the Company were to abandon
work on the vaccine.

Employment agreements:

The Company has no employment agreements with officers and executives as of March 31, 2011.

Food and Drug Administration:

The FDA
has extensive regulatory authority over biopharmaceutical products (drugs and biological products), manufacturing protocols and procedures and the facilities in which mammalian proteins will be manufactured. Any new bioproduct intended for use in
humans (including, to a somewhat lesser degree, in vivo biodiagnostic products), is subject to rigorous testing requirements imposed by the FDA with respect to product efficacy and safety, possible toxicity and side effects. FDA approval for the use
of new bioproducts (which can never be assured) requires several rounds of extensive preclinical testing and clinical investigations conducted by the sponsoring pharmaceutical company prior to sale and use of the product. At each stage, the
approvals granted by the FDA include the manufacturing process utilized to produce the product. Accordingly, Biovests cell culture systems used for the production of therapeutic or biotherapeutic products are subject to significant regulation
by the FDA under the Federal Food, Drug and Cosmetic Act, as amended (the FD&C Act).

Product liability:

The contract production services for therapeutic products offered exposes an inherent risk of liability as the proteins or other substances manufactured,
at the request and to the specifications of customers, could foreseeably cause adverse effects. The Company obtains agreements from contract production customers indemnifying and defending the Company from any potential liability arising from such
risk. There can be no assurance, however, that the Company will be successful in obtaining such agreements in the future or that such indemnification agreements will adequately protect the Company against potential claims relating to such contract
production services. The Company may also be exposed to potential product liability claims by users of its products. A successful partial or completely uninsured claim against the Company could have a material adverse effect on the Companys
operations.



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16. Commitments and contingencies (continued):



Royalty agreements:



| |  |  | Cancellation and Reduction of Royalty Interests: On the Effective Date, the Company, Biovest, and Laurus/Valens entered into several agreements
(the Laurus/Valens Royalty Termination Agreements) terminating the following royalties pursuant to the Plan. As a result of the foregoing agreements, the aggregate royalty obligation on BiovaxID® and Biovests other biologic
products was reduced from 35.25% to 6.30%. Additionally, the aggregate royalty obligation on the AutovaxID instrument was reduced from 3.0% to no obligation, including the elimination of the $7.5 million minimum royalty obligation.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Below is the detail of the royalty obligations following the Effective Date:



| |  |  | BiovaxID® and other biologic products
| | - |  | -------------------------------------



| |  |  | Accentia. The Royalty Agreement by and between Biovest and the Company, dated as of October 31, 2006, as amended, was terminated, which
resulted in the cancellation of all royalty interest of the Company in Biovests biologic products. Under the Royalty Agreement, the Company had a 15.5% royalty interest in the gross revenue of Biovests biologic products including
BiovaxID, as defined in the agreement after allowing for the 4.00% royalty assigned by the Company to Laurus/Valens pursuant to the four (4) separate Assignment of Rights Under Royalty Agreements, each dated as of June 18, 2008, by and
among the Company, Biovest, Erato Corp., Valens U.S., Valens I, and PSource, as amended, modified or supplemented thereafter in accordance with their terms; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Laurus/Valens. (i) The Royalty Agreement by and between Biovest and Valens II dated October 30, 2007; (ii) the Royalty Agreement
by and between Biovest and Valens II dated December 10, 2007, as amended by a letter agreement dated May 30, 2008, and as further amended, modified or supplemented thereafter in accordance with their terms); (iii) the Royalty
Agreement by and between Biovest and Valens U.S. dated October 30, 2007; and (iv) the Royalty Agreement by and between Biovest and Valens U.S. dated December 10, 2007, and as amended, modified or supplemented thereafter in accordance
with their terms), were all terminated.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | AutovaxID
| | - |  | ----------



| |  |  | The previously granted royalty equal to three percent (3%) of world-wide net sales (i.e., gross receipts from the world-wide sales of the
automated cell and biologic production instrument known as AutovaxID manufactured by Biovest (the AutovaxID Instruments) less any rebates, returns and discounts) of AutovaxID Instruments for a period of five (5) years through
May 31, 2012, granted to Laurus by Biovest and AutovaxID, Inc. in a letter agreement dated March 19, 2007, was terminated (including the guaranteed minimum royalty in the amount of $7.5 million remaining under such royalty).
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Stanford University agreement:

In September 2004, Biovest entered into an agreement with Stanford University (Stanford) granting to Biovest worldwide rights to use two proprietary hybridoma cell lines that are used in the
production of BiovaxID. Under the agreement with Stanford, Biovest is obligated to pay a yearly maintenance fee of $10,000 per year. The agreement also provides that Biovest will pay Stanford $0.1 million within one year following FDA approval of
BiovaxID or five (5) years following the agreement date (whichever occurs first), and following approval Biovest is required to pay Stanford a running royalty of the higher of $50.00 per patient or 0.05% of revenues received by Biovest for each
BiovaxID patient treated using this cell line. This running royalty will be creditable against the yearly maintenance fee. Biovests agreement with Stanford obligates Biovest to diligently develop, manufacture, market, and sell BiovaxID and to
provide progress reports to Stanford regarding these activities. Biovest can terminate this agreement at any time upon 30 days prior written notice, and Stanford can terminate the agreement upon a breach of the agreement by Biovest that
remains uncured for 30 days after written notice of the breach from Stanford.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



16. Commitments and contingencies (continued):



Sublicense agreements with related parties

On February 27, 2007, the Company entered into a sublicense agreement (the Accentia Sublicense) with Revimmune, LLC under which the
Company was granted the exclusive worldwide rights to Revimmune. Revimmune, LLCs manager is a director of the Company. The perpetual sublicense allows the Company to develop and market a patent pending treatment for autoimmune diseases.
The Accentia Sublicense covers the potential treatment of all autoimmune diseases including but not limited to multiple sclerosis.

Other
material terms and conditions of the Accentia Sublicense are as follows:



| |  |  | The Company assumed certain future development, milestone and minimum royalty obligations of Revimmune, LLC under its license with Johns Hopkins
University (JHU). In connection with the Accentia Sublicense, the Company did not pay an upfront fee or reimbursement of expenses. The Company also agreed to pay to Revimmune, LLC a royalty of 4% on net sales, and in the event of a
sublicense, to pay 10% of net proceeds received from any such sublicense to Revimmune, LLC.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Upon the approval of the sublicensed treatment in the U.S. for each autoimmune disease, the Company is required to issue to Revimmune, LLC vested
warrants to purchase 0.8 million shares of the Companys common stock. The warrant which will be granted at the approval of the first sublicensed product will have an exercise price of $8 per share and any subsequent warrant to be issued
will have an exercise price equal to the average of the volume weighted average closing prices of the Companys common stock during the ten (10) trading days immediately prior to the grant of such warrant.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company will be responsible, at its sole cost and expense, for the development, clinical trial(s), promotion, marketing, sales and
commercialization of the licensed products.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company has assumed the cost and responsibility for patent prosecution as provided in the license between Revimmune, LLC and JHU to the extent that
the claims actually and directly relate to sublicensed products.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Baxter Corporation Agreement

Effective on November 29, 2010, the Company and Baxter Healthcare Corporation (Baxter) entered into an agreement
making Baxter, the Companys exclusive source of cyclophosphamide under an agreed-upon price structure (the Agreement). The Agreement provides the Company with the exclusive, worldwide right to purchase Baxters
cyclophosphamide, which is marketed under the brand name Cytoxan®, for the treatment of certain designated
autoimmune diseases, including but not limited to autoimmune hemolytic anemia, systemic sclerosis and multiple sclerosis. Cyclophosphamide is the active drug used in Revimmune therapy, the Companys proprietary system-of-care being
developed for the treatment of a broad range of autoimmune diseases. The Agreement requires the Company to make defined quarterly payments to Baxter in connection with net sales of products for the designated autoimmune indications, including
without limitation any sales by subdistributors. Such quarterly payments will be calculated as a defined percentage of sales of products sold by Company incorporating cyclophosphamide. The Agreement also secures for the Company the exclusive right,
in connection with the designated autoimmune disease indications, to reference Baxters proprietary, historical data related to cyclophosphamide as part of Accentias planned clinical and regulatory development of Revimmune. The Agreement
designates Baxter as Accentias sole source of supply of cyclophosphamide for Revimmune. The Agreement is subject to early termination prior to its defined expiration date by Baxter for various reasons, including a material breach of the
Agreement by the Company, a change in control of the Company, the failure of the Company to file an IND within 24 months of the date of the Agreement for a product within the scope of the Companys exclusivity under the Agreement, or the
Company does not make its first commercial sale of such a product within six years of the date the first clinical trial patient is dosed with the product.



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



17. Variable Interest Entities:

Revimmune, LLC

Although the Company does not have an equity interest in Revimmune, LLC,
the Company has the controlling financial interest of Revimmune, LLC, because of the sublicense agreement between the parties and is considered the primary beneficiary, and therefore, the financial statements of Revimmune, LLC have been consolidated
with the Company as of February 27, 2007 and through December 31, 2010. As of December 31, 2010, Revimmune, LLCs assets and equity were approximately $28,321. The Company had no non-controlling interest in earnings from
Revimmune, LLC for the six (6) months ended March 31, 2011.

18. Effective Date (November 17, 2010) of Bankruptcy Plan:

Plan of Reorganization

On August 16, 2010, the Company and its subsidiaries (collectively, the Debtors) filed their First Amended Joint Plan of Reorganization, and, on October 25, 2010, the Debtors filed
the First Modification to the First Amended Joint Plan of Reorganization (collectively and as amended and supplemented, the Plan). On October 27, 2010, the United States Bankruptcy Court for the Middle District of Florida, Tampa
Division (the Bankruptcy Court) held a Confirmation hearing and confirmed the Plan, and, on November 2, 2010, the Bankruptcy Court entered an Order Confirming Debtors First Amended Joint Plan of Reorganization Under
Chapter 11 of the Bankruptcy Code (the Confirmation Order), which approved and confirmed the Plan, as modified by the Confirmation Order. In connection with the confirmation hearing all creditor classes deemed impaired
pursuant to the Bankruptcy Code voted to support the Plan. The Debtors emerged from Chapter 11 protection, and the Plan became effective, on November 17, 2010 (the Effective Date). Pursuant to the Plan, the date on which a claim in
any Class listed in the Plan became an allowed claim by order of the Bankruptcy Court or by agreement between Debtors and the claimant is the Determination Date.

Equity Interests (Class 15)

Each of the Companys common stockholder on the
Effective Date was deemed to receive one (1) share of Reorganized Accentia Common Stock (the Class 15 Plan Shares) for each share of the Companys existing common stock held by such stockholder as of the Effective Date. The
Companys Class 15 Plan Shares shall be deemed issued pursuant to Section 1145 of the Bankruptcy Code and shall not have any legend restricting the sale thereof under federal securities laws.

April 2006 NMTC Transaction

Biovest and certain of its affiliates entered into an agreement in July 2010 (the Worcester Restructuring Agreement) with Telesis CDE
Corporation and Telesis CDE Two, LLC (collectively, Telesis), contingent upon submission to and approval by the Bankruptcy Court. The Worcester Restructuring Agreement effectively terminates all agreements and obligations of all parties
pursuant to the April 2006 New Market Tax Credit transaction (the April 2006 NMTC Transaction), in consideration of retention by Telesis of an unsecured claim in Biovests Chapter 11 proceeding in the amount of $0.3 million
along with a settlement payment in the amount of $85,000 to defray certain legal and administrative expenses incurred by Telesis. The Worcester Restructuring Agreement and the compromise of the outstanding claims against Biovest and its affiliates
in connection with the April 2006 NMTC Transaction was approved by the Bankruptcy Court in an Order entered on December 1, 2010. As a result, the Companys guaranty, Biovests guaranty, and all of Biovests subsidiary guaranties
from affiliates and third parties and all other obligations of all parties to the April 2006 NMTC Transaction were terminated. Biovest has ceased all activities under the April 2006 NMTC Transaction and Biovest has liquidated the subsidiaries
created specifically to conduct activities under the April 2006 NMTC transaction.



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ACCENTIA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2011 AND 2010



18. Effective Date (November 17, 2010) of Bankruptcy Plan (continued):



December 2006 NMTC Transaction

Biovest and certain of its affiliates entered into an agreement in July 2010 (the St. Louis Restructuring Agreement) with St. Louis Development Corporation and Saint Louis New Markets Tax
Credit Fund II, LLC (collectively SLDC), contingent upon submission to and approval by the Bankruptcy Court. The St. Louis Restructuring Agreement effectively terminates all agreements and obligations of all parties pursuant to the
December 2006 New Market Tax Credit transaction (the December 2006 NMTC Transaction), in consideration of retention by SLDC of an unsecured claim in Biovests Chapter 11 proceeding in the amount of $160,000 along with a
settlement payment in the amount of $62,000, to defray certain legal and administrative expenses incurred by SLDC. This St. Louis Restructuring Agreement and the compromise of the outstanding claims against Biovest in connection with the December
2006 NMTC Transaction was approved by the Bankruptcy Court in an Order entered on December 1, 2010. As a result, the Companys guaranty, Biovests guaranty, and all of the subsidiary guaranties from affiliates and third parties and
all other obligations of all parties to the December 2006 NMTC Transaction were terminated. Biovest has ceased all activities under the December 2006 NMTC Transaction and Biovest has liquidated the subsidiaries created specifically to conduct
activities under the December 2006 NMTC Transaction.

Termination of Warrants

On the Effective Date, all of the following warrants were terminated and cancelled:



| |  |  | the common stock purchase warrant dated August 16, 2005, issued by the Company to Laurus for the purchase of up to 1,000,000 shares of the
Companys common stock at an exercise price of $2.67 per share;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the common stock purchase warrant dated September 29, 2006, issued by the Company to Laurus for the purchase of up to 627,240 shares of the
Companys common stock at an exercise price of $2.75 per share;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the common stock purchase warrant dated October 31, 2007, issued by the Company to Laurus for the purchase of up to 4,024,398 shares of the
Companys common stock at an exercise price of $2.67 per share;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the common stock purchase warrant dated January 18, 2008, issued by the Company to Valens Offshore, for the purchase of up to 365,169 shares of
the Companys common stock at an exercise price of $2.67 per share; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the common stock purchase warrant dated January 18, 2008, issued by the Company to Valens, for the purchase of up to 196,629 shares of the
Companys common stock at an exercise price of $2.67 per share.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Termination of Material Agreements

On the Effective Date all of the following documents were terminated:



| |  |  | all documents evidencing or relating to loans made by Laurus/Valens to the Company prior to the Effective Date;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | certain revolving credit agreement between Southwest Bank and the Company dated as of December 30, 2005, certain stock pledge agreement by and
between the Company and Southwest Bank dated as of June 16, 2008, and all other documents executed in connection therewith;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | all documents evidencing or relating to loans made by McKesson to the Company prior to the Effective Date (with certain exceptions set forth in the
Plan);
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | all documents evidencing or relating to the 8% secured convertible debentures due September 29, 2010, issued, by the Company in September 2006, in
the original aggregate principal amount of $25 million;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | all documents evidencing or relating to the 8% original issue discount secured convertible debentures due June 19, 2011, issued, by the Company in
June 2008, in the original aggregate principal amount of $8,906,098.00;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | all documents evidencing or relating to the 8% convertible debentures due February 28, 2011, issued, by the Company in February 2007, in the
original aggregate principal amount of $24,940,000.00; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | all documents evidencing or relating to the Companys Series A-1 convertible preferred stock, par value $1.00 per share.
| | - |  | ------------------------------------------------------------------------------------------------------------------------



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

When you read this section of this Quarterly Report on Form 10-Q, it is important that you also read the
financial statements and related notes included elsewhere in this Form 10-Q. This section of this Quarterly Report contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations,
and intentions. We use words such as anticipate, estimate, plan, project, continuing, ongoing, expect, believe, intend, may,
will, should, could, and similar expressions to identify forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons,
including the matters discussed under the caption Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended September 30, 2010 and other risks and uncertainties discussed in our other filings with the
Securities and Exchange Commission.

General

Headquartered in Tampa, Florida, Accentia Biopharmaceuticals, Inc. (Other OTC: ABPI) is a biotechnology company that is developing Revimmune as a comprehensive system of care for the
treatment of autoimmune diseases. Additionally, through our, majority-owned subsidiary, Biovest International, Inc. (OTCQB: BVTI) (Biovest), we are developing BiovaxID® as a therapeutic cancer vaccine for treatment of follicular non-Hodgkins lymphoma (FL) and mantle cell lymphoma (MCL). Through our
wholly-owned subsidiary, Analytica International, Inc. (Analytica), we conduct a health economics research and consulting business which we market to the pharmaceutical and biotechnology industries, using our operating cash flow to
support our corporate administration and product development activities.

Revimmune is being developed as a treatment for various
autoimmune diseases. The approximately 80 known autoimmune diseases generally arise from an overactive immune response against substances and/or tissue normally present in the body. As a system of care, Revimmune consists of administering high,
pulsed doses of an FDA-approved drug, cyclophosphamide, over a four-day interval as part of an integrated risk management system including a panel of preventive tests, monitoring and medications which are intended to minimize risks while seeking to
maximize the clinical benefit.

Through a collaboration with the National Cancer Institute (NCI), Biovest has
developed a patient-specific cancer vaccine, BiovaxID®, which has demonstrated statistically significant Phase 3
clinical benefit by prolonging disease-free survival in FL patients treated with BiovaxID.

Additionally, through Analytica, a Florida
corporation based in New York City, we conduct a global research and strategy consulting business that provides professional services to the pharmaceutical and biotechnology industries. Since 1997, Analytica has expertly directed research studies
and projects, including traditional health economic modeling projects, database studies, structured reviews, health technology assessments, reimbursement analyses, and value dossiers.

Corporate Overview

We were organized in 2002 to develop and commercialize
biopharmaceutical products.

We commenced business in April 2002 with the acquisition of Analytica, a provider of analytical and
consulting services to the biopharmaceuticals industry, including clinical trial services, pricing and market assessment and outcomes research. We acquired Analytica in a merger transaction for $3.7 million cash, $1.2 million of convertible
promissory notes, and the issuance of 8.1 million shares of Series B preferred stock. Analytica, which was founded in 1997, has offices in New York and Germany.

In June 2003, we acquired an 81% interest in Biovest, for an investment of $20.0 million in Biovest pursuant to an investment agreement. Biovest is a biologics company that is developing our BiovaxID
patient-specific vaccine for the treatment of FL. As of March 31, 2011, we owned of record approximately 63% of the outstanding common stock of Biovest with the minority interest being held by approximately 400 shareholders of record.
Biovests common stock is registered under Section 12(g) of the Securities Exchange Act of 1934, and Biovest therefore files periodic and other reports with the SEC.



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Reorganization

On November 10, 2008, we, along with all of our subsidiaries, filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code (Chapter 11) in the
U.S. Bankruptcy Court for the Middle District of Florida, Tampa Division (the Bankruptcy Court) under Case No. 8:08-bk-17795-KRM (the Chapter 11). On August 16, 2010, we filed our First Amended Joint Plan of
Reorganization, and, on October 25, 2010, we filed the First Modification to the First Amended Joint Plan of Reorganization (collectively and as amended and supplemented, the Plan). On October 27, 2010, the Bankruptcy Court
held a Confirmation hearing and confirmed the Plan, and, on November 2, 2010, the Bankruptcy Court entered an Order Confirming Debtors First Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (the
Confirmation Order), which approved and confirmed the Plan, as modified by the Confirmation Order. We emerged from Chapter 11 protection, and the Plan became effective, on November 17, 2010 (the Effective Date).

Results of Operations

Net Sales.Our net sales for the six months ended March 31, 2011 were approximately $4.4 million compared to net sales of
$5.8 million for the six months ended March 31, 2010, a decrease of approximately 24%. Sales from both Biovests instrumentation segment and Biovests cell culture contract segment have decreased year over year. Prior year
instrument sales included approximately $0.6 million from a total $1.5 million contract with the U.S. Department of Defense Naval Health Research Center (NHRC) to supply AutovaxID bioreactors to evaluate the
instruments suitability to produce cell-culture based anti-viral vaccines. The current fiscal year includes revenues of $0.3 million on this contract and the contract has been closed with the final milestone having been completed in January
2011.

Analyticas sales decreased 28% to $2.2 million compared to the same six month period in the previous fiscal year primarily
due to the cessation of the clinical trial services business of our German subsidiary which accounted for $0.9 million of revenue for the six months ended March 31, 2010.

Research and Development Expenses.Our research and development costs were approximately $0.7 million for the six months ended March 31, 2011 and $0.6 million for the six months ended
March 31, 2010. Research and development costs consist primarily of salaries and research facility costs.

General and
Administrative Expenses.Our general and administrative expenses were approximately $16.3 million for the six months ended March 31, 2011; an increase of $13.5 million over the six months ended March 31, 2010. This increase is
primarily due to an increase in share-based compensation of $13.8 million. This increase is attributable to the expense related to options granted during our bankruptcy with vesting contingent upon our emergence from bankruptcy in addition to the
market value of 1.5 million shares issued to executives on the Effective Date. The remainder of the increase is primarily due to an increase in professional fees in conjunction with our resumption of financial statement audits associated with
our filings with the Securities and Exchange Commission (SEC).

Derivative loss.Derivative loss was approximately
$0.2 million for the six months ended March 31, 2011 as compared to a loss of $36.5 million for the six months ended March 31, 2010. This decrease is primarily related to derivative instruments issued in conjunction with our various
financings, and was offset by the decrease in our common stock price and Biovests common stock price, on which the derivative liabilities are based, during the six months ended March 31, 2011.

Gain on reorganization. The gain on reorganization was recognized on November 17, 2010, the Effective Date of our Plan. The gain is
primarily a result of settling claims with cash or stock at amounts less than the recorded value. Additional gain or loss may be recognized depending on the final disposition of certain unresolved claims.

Liquidity and Capital Resources

Sources of Liquidity

Since our
inception, we have funded our operations primarily through public and private placements of our capital stock, debt financing, and financing transactions with our strategic partners. These transactions are described throughout the following pages.

We have historically had significant losses from operations. On March 31, 2011, we had an accumulated deficit of approximately $328.4
million and a working capital deficit of approximately $31.9 million. Cash and cash equivalents at March 31, 2011 was approximately $2.5 million, of which $2.3 million was attributable to Biovest.



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We intend to attempt to meet our cash requirements through proceeds from our cell
culture and instrument manufacturing activities from our Biovest subsidiary, income from our Analytica subsidiary, and the use of cash on hand, trade-vendor credit, and short-term borrowings. Additionally, we may seek public or private equity
investment, short or long term debt financing or strategic relationships such as investments or licenses. Our ability to continue present operations and to continue our product development efforts are dependent upon our ability to successfully
execute the obligations under our Plan and to obtain significant external funding, which raises substantial doubt about our ability to continue as a going concern. The need for funds is expected to grow as we continue our efforts to commercialize
Revimmune, BiovaxID®, and AutovaxID.

Capital Raised through Equity Issuances

We have received funding from our initial public
offering, private placements of our common and preferred stock, the issuance of convertible debentures and the exercise of warrants and options to purchase capital stock.

Corps Real, LLC-Biovest

On November 17, 2010, (the effective date of the
Biovest Plan (the Biovest Effective Date)), in accordance with the terms of Biovests First Amended Plan of Reorganization, Biovest executed and delivered in favor of Corps Real, LLC, an Illinois limited liability company
(Corps Real), the members of which are directors of, or are affiliated with Biovest and our directors Biovest, a secured convertible promissory note (the DIP Lender Plan Note) in an original principal amount of $2,291,560.
The DIP Lender Plan Note amends and restates the $3.0 million secured line of credit promissory note dated December 22, 2008, which was previously executed by Biovest in favor of Corps Real. The DIP Lender Plan Note matures on
November 17, 2012, and all principal and accrued but unpaid interest is due on such date. Interest accrues and is payable on the outstanding principal amount of the DIP Lender Plan Note at a fixed rate of sixteen percent (16%) per annum,
with interest in the amount of ten percent (10%) to be paid monthly and interest in the amount of six percent (6%) to accrue and be paid on the maturity date. Biovest may prepay the DIP Lender Plan Note in full, without penalty, at any
time, and Corps Real may convert all or a portion of the outstanding balance of the DIP Lender Plan Note into shares of Biovest common stock at a conversion rate of $0.75 per share of Biovest common stock. The DIP Lender Plan Note is secured by a
first priority lien on all of Biovests assets. As of March 31, 2011, the outstanding principal amount of the DIP Lender Plan Note, as issued, on the Effective Date has remained unchanged.

Exit Financing-Biovest

On
October 19, 2010, Biovest completed a financing as part of the Biovest Plan (the Exit Financing). Pursuant to the Exit Financing, Biovest issued an aggregate of $7.0 million in principal amount of Debtor-In-Possession Secured
Convertible Notes (the Initial Notes) and warrants to purchase shares of Biovest common stock (the Initial Warrants) to a total of twelve (12) accredited investors (the Buyers). Pursuant to the Exit
Financing, Biovest issued the Initial Notes and the Initial Warrants to the Buyers. Pursuant to the Purchase Agreement, Biovest issued two separate types of Initial Warrants to the Buyers, Series A Warrants (the Initial Series A
Warrants) and Series B Warrants (the Initial Series B Warrants).

On the Biovest Effective Date: (a) the Initial
Notes were exchanged pursuant to the terms of the Biovest Plan for new unsecured notes (the Exchange Notes) in the aggregate principal amount of $7.04 million, (b) the Initial Series A Warrants were exchanged pursuant to the terms
of the Biovest Plan for new warrants to purchase a like number of shares of Biovest common stock (the Series A Exchange Warrants), and (c) the Initial Series B Warrants were exchanged pursuant to the terms of the Biovest Plan
for new warrants to purchase a like number of shares of Biovest common stock (the Series B Exchange Warrants).

The following are
the material terms and conditions of the Exchange Notes:



| |  |  | the Exchange Notes mature on November 17, 2012, and all principal and accrued but unpaid interest is due on such date;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | interest accrues and is payable on the outstanding principal amount of the Exchange Notes at a fixed rate of seven percent (7%) per annum (with a
fifteen percent (15%) per annum default rate), and is payable monthly in arrears. The first interest payment was paid on December 1, 2010;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | interest payments are payable at Biovests election in either cash or subject to certain specified conditions, in shares of Biovest common stock;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Biovest may from time to time, subject to certain conditions, redeem all or any portion of the outstanding principal amount of the Exchange Notes for
an amount, in cash, equal to 110% of the sum of the principal amount being redeemed and certain make-whole interest payments;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | the holders of the Exchange Notes may convert all or a portion of the outstanding balance of the Exchange Notes into shares of Biovest common stock at
a conversion rate of $0.91 per share of Biovest common stock, subject to anti-dilution adjustments in certain circumstances; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in the event that the average of the daily volume weighted average price of Biovest common stock is at least 150% of the then-effective conversion
price for any ten (10) consecutive trading days, Biovest, at its option, may upon written notice to the holders of the Exchange Notes, convert the then outstanding balance of the Exchange Notes into shares of Biovest common stock at the
conversion price then in effect under the Exchange Notes.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following are the material terms and conditions of the Series
A Exchange Warrants:



| |  |  | the Series A Exchange Warrants give the Buyers the right to purchase an aggregate of 8,733,096 shares of Biovest common stock (the Series A
Warrant Shares);
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Series A Exchange Warrants have an exercise price of $1.20 per share and expire on November 17, 2017; and
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | if Biovest issues or sells any options or convertible securities after the issuance of the Series A Exchange Warrants that are convertible into or
exchangeable or exercisable for shares of common stock at a price which varies or may vary with the market price of the shares of Biovest common stock, including by way of one or more reset(s) to a fixed price, the Buyers have the right to
substitute any of the applicable variable price formulation for the exercise price upon exercise of the warrants held.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On
December 22, 2010, the Series B Exchange Warrants were exercised by a cashless exercise and 1,075,622 shares of Biovest common stock were issued to the Buyers.

As of March 31, 2011, a total of $5.1 million in principal on the Exchange Notes had been converted into shares of Biovest common stock, resulting in the issuance to the Buyers of 6.0 million
shares of Biovest common stock. The remaining principal balance outstanding on the Exchange Notes was $1.9 million as of March 31, 2011.

Debt Financing

Credit Facility
with Laurus Master Fund, Ltd.

On the Effective Date, we issued, to Laurus Master Fund, Ltd. (in liquidation) (Laurus),
PSource Structured Debt Limited (PSource), Valens Offshore SPV I, Ltd., Valens Offshore SPV II, Corp., Valens U.S. SPV I, LLC, (collectively, Valens) and LV Administrative Services, Inc., as administrative and collateral
agent for Laurus, PSource, and Valens (LV and together with Laurus, PSource, Valens, and each of their respective affiliates, Laurus/Valens), security agreements and term notes in the original principal amount of $8.8 million
(the Laurus/Valens Term Notes) in satisfaction of allowed claims prior to the Effective Date. The following are the material terms and conditions of the Laurus/Valens Term Notes:



| |  |  | the Laurus/Valens Term Notes mature on November 17, 2012 and may be prepaid at any time without penalty;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | interest accrues on the Laurus/Valens Term Notes at the rate of eight and one-half percent (8.5%) per annum (with a twelve and one-half percent
(12.5%) per annum default rate), and is payable at the time of any principal payment or prepayment of principal;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we are required to make mandatory prepayments under the Laurus/Valens Term Notes as follows:
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | on May 17, 2012, a payment of principal, in cash, in the amount of $4.4 million, less the amount of any prior optional prepayments of principal by
us and the amount of any other mandatory prepayments of principal under the Laurus/Valens Term Notes; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a prepayment equal to thirty percent (30%) of the net proceeds (i.e., the gross proceeds received less any investment banking or similar fees and
commissions and legal costs and expenses incurred by us) of certain capital raising transactions (with certain exclusions);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Laurus/Valens Term Notes are secured by:
| | - |  | --------------------------------------------



| |  |  | a first lien on all of our assets, junior only to the liens granted under the Plan to holders of the Class 6 Plan Debentures, in the original aggregate
principal amount of $8,906,098 and certain permitted liens;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a pledge by us to Laurus/Valens of (a) all of our equity interests in Analytica, and (b) 20,115,818 shares of Biovest common stock owned by
us;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | all of the assets of Analytica, which secure a guaranty of Analytica as to the entire indebtedness under the Laurus/Valens Term Notes;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------

and



| |  |  | with the prior written consent of Laurus/Valens, we may convert all or any portion of the outstanding principal and accrued interest under the
Laurus/Valens Term Notes into a number of shares of our common stock equal to (a) the aggregate portion of the principal and accrued but unpaid interest outstanding under the Laurus/Valens Term Note being converted, divided by (b) ninety
percent (90%) of the average closing price publicly reported for our common stock for the ten (10) trading days immediately preceding the date of the notice of conversion.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On the Effective Date, 2,236,848 shares of our common stock were issued to Laurus/Valens for payment of Laurus/Valens Class 5 and Class 13 claims
under the Plan aggregating approximately $6.0 million at a conversion rate equal to $2.67 per share. As of March 31, 2011, the outstanding principal amounts of the Laurus/Valens Term Notes, as issued on the Effective Date, have remained
unchanged.

Laurus Master Fund, Ltd. and the Valens Funds - Biovest

On the Biovest Effective Date, Biovest issued two new types of notes (the Laurus/Valens Term A Notes and the Laurus/Valens Term B Notes) in the aggregate original principal amount
of $29.06 million to Laurus/Valens in compromise, and satisfaction of secured claims prior to the Effective Date. The following are the material terms and conditions of the Laurus/Valens Term A Notes:



| |  |  | the original principal amount of the Laurus/Valens Term A Notes was $24.9 million;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | the Laurus/Valens Term A Notes mature on November 17, 2012;
| | - |  | -----------------------------------------------------------



| |  |  | interest accrues on the Laurus/Valens Term A Notes at the rate of eight percent (8%) per annum (with a twelve percent (12%) per annum default
rate), and is payable at the time of any principal payment or prepayment of principal;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Biovest may prepay the Laurus/Valens Term A Notes, without penalty, at any time; and
| | - |  | ------------------------------------------------------------------------------------



| |  |  | Biovest is required to make mandatory prepayments under the Laurus/Valens Term A Notes as follows:
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | a prepayment equal to thirty percent (30%) of the net proceeds (i.e., the gross proceeds received less any investment banking or similar fees and
commissions and legal costs and expenses incurred by Biovest) of certain capital raising transactions (with certain exclusions), but only up to the amount of the then outstanding principal and accrued interest under the Laurus/Valens Term A Notes;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | from any intercompany funding by us to Biovest (with certain exceptions and conditions); and
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | a prepayment equal to fifty percent (50%) of the positive net cash flow of Biovest for each fiscal quarter after November 17, 2010, less the
amount of certain capital expenditures on certain biopharmaceutical products of Biovest made during such fiscal quarter or during any prior fiscal quarter ending after the Effective Date.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On November 18, 2010, Biovest prepaid the Laurus/Valens Term A Notes in an amount equal to $1.4 million from the proceeds received in the Exit
Financing. Accordingly, as of March 31, 2011, Biovests indebtedness under the Laurus/Valens Term A Notes was $23.5 million.

The
following are the material terms and conditions of the Laurus/Valens Term B Notes:



| |  |  | the original principal amount of the Laurus/Valens Term B Notes was $4.16 million;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | the Laurus/Valens Term B Notes mature on November 17, 2013;
| | - |  | -----------------------------------------------------------



| |  |  | interest accrues on the Laurus/Valens Term B Notes at the rate of eight percent (8%) per annum (with a twelve percent (12%) per annum default
rate), and is payable at the time of any principal payment or prepayment of principal;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Biovest may prepay the Laurus/Valens Term B Notes, without penalty, at any time; and
| | - |  | ------------------------------------------------------------------------------------



| |  |  | provided that the Laurus/Valens Term A Notes have been paid in full, Biovest is required to make mandatory prepayments under the Laurus/Valens Term B
Notes from any intercompany funding by us to Biovest (with certain exceptions and conditions), but only up to the amount of the outstanding principal and accrued interest under the Laurus/Valens Term B Notes.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

As of March 31, 2011, the outstanding principal amounts of the Laurus/Valens Term B Notes, as issued on
the Effective Date, have remained unchanged.

With the prior written consent of Laurus/Valens, Biovest may convert all or any portion of the
outstanding principal and accrued interest under either the Laurus/Valens Term A Notes or the Laurus/Valens Term B Notes into shares of Biovest common stock. The number of shares of Biovest common stock issuable on such a conversion (the
Laurus/Valens Conversion Shares) is equal to (a) an amount equal to the aggregate portion of the principal and accrued and unpaid interest thereon outstanding under the applicable Laurus/Valens Term A Notes or the Laurus/Valens Term
B Notes being converted, divided by (b) ninety percent (90%) of the average closing price publicly reported (or reported by Pink Sheets, LLC) for Biovest common stock for the ten (10) trading days immediately preceding the date of the
notice of conversion.

The Laurus/Valens Term A Notes and the Laurus/Valens Term B Notes are secured by a first lien on all of the assets of
Biovest and its subsidiaries, junior only to the lien granted to Corps Real and to certain permitted liens. The Laurus/Valens Term A Notes and the Laurus/Valens Term B Notes will also be guaranteed by us (the Accentia Guaranty), up to a
maximum amount of $4,991,360.00. The Accentia Guaranty will be secured by our pledge of 20,115,818 shares of Biovest common stock owned by us and by the assets of our subsidiary, Analytica.

McKesson Corporation

On the Effective Date, we issued, a new promissory note in
the original amount of $4,342,771 to McKesson Corporation (McKesson) (the Class 4 Plan Note) in satisfaction of McKessons approved pre-Effective Date secured claims. The Class 4 Plan Note is payable in cash in one
installment on March 17, 2014 (unless earlier accelerated), and the outstanding principal together with all accrued but unpaid interest is due on such date. As of March 31, 2011, the outstanding principal amount of the Class 4 Plan Note,
as issued on the Effective Date, has remained unchanged.

The following are the material terms and conditions of the Class 4 Plan Note:



| |  |  | interest accrues and is payable on the outstanding principal amount under the Class 4 Plan Note at a fixed rate of five percent (5%) per annum
(with a ten percent (10%) per annum default rate);
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may prepay all or any portion of the Class 4 Plan Note, without penalty, at any time; and
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | the Class 4 Plan Note is secured by a lien on 6,102,408 shares of Biovests common stock owned by us.
| | - |  | -----------------------------------------------------------------------------------------------------

Credit Facility with Southwest Bank of St. Louis f/k/a Missouri State Bank

On the Effective Date, we issued a new promissory note in an original principal amount of $4,483,284 (the Class 3 Plan Note) to Dennis Ryll, the holder by assignment of our previously-issued
secured note to Southwest Bank, as payment of our obligation to Southwest Bank prior to the Effective Date. We are not obligated to pay the Class 3 Plan Note in cash, and instead may pay through quarterly conversions into shares of our common stock
or, subject to certain conditions, by exchanging the quarterly conversion amounts into shares of Biovest common stock owned by us. The following are the material terms and conditions of the Class 3 Plan Note:



| |  |  | the Class 3 Plan Note matures on November 17, 2012;
| | - |  | ---------------------------------------------------



| |  |  | interest accrues and is payable on the outstanding principal balance of the Class 3 Plan Note from time to time (the Class 3
Interest) at a fixed rate of six percent (6%) per annum;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | on November 17, 2010 and on each of the following seven (7) quarterly anniversaries thereof (each, a Class 3 Automatic Conversion
Date), provided that the average of the trading price of our common stock (as determined in accordance with the Class 3 Plan Note) for the ten (10) consecutive trading days ending on the trading day that is immediately preceding the then
applicable Class 3 Automatic Conversion Date (the Class 3 Automatic Conversion Price) is at least $1.00 per share, one-eighth (1/8th) of the original principal balance of the Class 3 Plan Note plus the Class 3 Interest as of the
Class 3 Automatic Conversion Date (the Class 3 Automatic Conversion Amount) will be automatically converted into shares of our common stock at a conversion rate equal to the Class 3 Automatic Conversion Price per share of our common
stock.;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Class 3 Plan Note is secured by a lien on 15.0 million shares of Biovest common stock owned by us (the Class 3 Pledged Shares),
subject to the incremental release of a designated portion of such security upon each quarterly payment under the Class 3 Plan Note; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | if, on any Class 3 Automatic Conversion Date, the Class 3 Automatic Conversion Price is less than $1.00 per share, Dennis Ryll may, at his election,
either:
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | convert the Class 3 Automatic Conversion Amount into shares of our common stock at a conversion rate equal to $1.00 per share of our common stock; or
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | liquidate that number of the Class 3 Pledged Shares which equals the Class 3 Automatic Conversion Amount using a conversion rate for the Class 3
Pledged Shares equal to the average of the trading price of Biovest common stock (as determined in accordance with the Class 3 Plan Note and the Plan) for the ten (10) consecutive trading days ending on the trading day that is immediately
preceding the then applicable Class 3 Automatic Conversion Date.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of March 31, 2011, the outstanding principal
amount of the Class 3 Plan Note was $3,362,463.

September 2006 Debentures and Warrants (Class 5)

On the Effective Date, we issued, in satisfaction of the secured debentures dated September 29, 2006, outstanding prior to the Effective Date, new
debentures (the Class 5 Plan Debentures) in the original principal amount of $3,109,880. We are not obligated to pay the Class 5 Plan Debentures in cash, and instead may pay through the conversion by the holders into shares of our common
stock or, subject to certain conditions, by exchanging the Class 5 Plan Debentures for shares of Biovest common stock owned by us during the term of the Class 5 Plan Debentures which mature on May 17, 2012.

The following are the material terms and conditions of the Class 5 Plan Debentures:



| |  |  | the Class 5 Plan Debentures mature on May 17, 2012 (provided, however, in the event that the average of the trading price of Biovest common stock
(as determined in accordance with the Class 5 Plan Debentures and the Plan) for the ten (10) consecutive trading days ending on the trading day that is immediately preceding such maturity date is below $0.75, then the maturity date will
automatically be extended for an additional twelve (12) months), and the outstanding principal together with all accrued but unpaid interest is due on such maturity date; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | interest accrues and is payable on the outstanding principal amount under the Class 5 Plan Debentures at a fixed rate of eight and one-half percent
(8.50%) per annum;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | each of the Class 5 Plan Debentures is secured by a lien on certain shares of Biovest common stock owned by us;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | at the option of a holder of Class 5 Plan Debentures, all or any portion of the then outstanding balance of such holders Class 5 Plan Debentures
may be converted into shares of our common stock or exchanged for shares of Biovest common stock owned by us at the applicable conversion or exchange rate set forth in such Class 5 Plan Debentures;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | commencing on August 17, 2011, if the trading price of our common stock (determined in accordance with the Class 5 Plan Debentures and the Plan)
is at least 150% of the fixed conversion price for a holder of Class 5 Plan Debentures for any ten (10) consecutive trading days (in the case of a conversion into our common stock), or the trading price of Biovests common stock
(determined in accordance with the Class 5 Plan Debentures and the Plan) is at least $1.25 for any ten (10) consecutive trading days (in the case of an exchange for shares of Biovest common stock), at our option, we may (a) convert the
then outstanding balance of all of the Class 5 Plan Debentures into shares of our common stock at a conversion rate equal to the fixed conversion price for each holder of Class 5 Plan Debentures, or (b) exchange the then outstanding balance of
all of the Class 5 Plan Debentures into shares of Biovest common stock owned by us at a rate equal to $0.75 per share of Biovest common stock (with certain exceptions set forth in the Class 5 Plan Debentures and the Plan); and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in the event a holder of Class 5 Plan Debentures elects to receive shares of Biovest common stock during the period of November 17, 2010 through
February 17, 2011, then such holder was subjected to certain restrictions set forth in the Class 5 Plan Debentures regarding such shares of Biovest common stock.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of March 31, 2011, the aggregate outstanding principal amount of the Class 5 Plan Debentures was approximately $2.2 million.

On the Effective Date, we executed and delivered warrants (the Class 5 Plan Warrants) to purchase up to 2,508,960 shares of our common stock or up to 14.4 million shares of Biovest common
stock owned by us. The Class 5 Plan Warrants (a) have an exercise price of $1.50 per share and a term of three (3) years from November 17, 2010, (b) can only be exercised for cash (no cashless exercise), and (c) are subject
to certain call provisions set forth in the Class 5 Plan Warrants.



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##### Table of Contents

February 2007 Notes and Warrants (Class 9)

On the Effective Date, we issued, in satisfaction of the debentures dated February 28, 2007, outstanding prior to the Effective Date, new debentures
(the Class 9 Plan Debentures) in the original principal amount of $19,109,554. We not obligated to pay the Class 9 Plan Debentures in cash, and instead may pay through the conversion by the holders into shares of our common stock. The
Class 9 Plan Debentures mature on November 17, 2012 (the Class 9 Plan Debenture Maturity Date) and no interest will accrue on the outstanding principal balance of the Class 9 Plan Debentures.

The following are the material terms and conditions of the Class 9 Plan Debentures:



| |  |  | on November 17, 2010 and on each of the following seven (7) quarterly anniversaries thereof (each, a Class 9 Automatic Conversion
Date) provided that the average of the trading price of our common stock (as determined in accordance with the Class 9 Plan Debentures and the Plan) for the ten (10) consecutive trading days ending on the trading day that is immediately
preceding the then applicable Class 9 Automatic Conversion Date (the Class 9 Automatic Conversion Price) is at least $1.00 per share, one-eighth (1/8th) of the original principal balance of the Class 9 Plan Debentures
(the Class 9 Automatic Conversion Amount) will be automatically converted into shares of our common stock at a conversion rate equal to the lesser of $1.25 per share or the Class 9 Automatic Conversion Price per share.;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if, on any Class 9 Automatic Conversion Date, the Class 9 Automatic Conversion Price is less than $1.00 per share and therefore the automatic
conversion described above does not occur, a holder of Class 9 Plan Debentures may elect to convert the Class 9 Automatic Conversion Amount into shares of our common stock at a conversion rate equal to $1.00 per share;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any principal amount outstanding under the Class 9 Plan Debentures at the Class 9 Plan Debenture Maturity Date will be due and payable in full, at our
election, in either cash or in shares of our common stock at a conversion rate equal to the average trading price of our common stock (as determined in accordance with the Class 9 Plan Debentures and the Plan) for the ten (10) consecutive
trading days ending on the trading day that is immediately preceding the Class 9 Plan Debenture Maturity Date (provided that the average trading price for such period is at least $.50 per share);
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if, at any time during the term of the Class 9 Plan Debentures, the trading price of our common stock (as determined in accordance with the Class 9
Plan Debentures and the Plan) is at least $1.50 per share for ten (10) consecutive trading days, a holder of the Class 9 Debentures, at its option, may convert any or all of the then outstanding principal balance of its Class 9 Plan Debenture
into shares of our common stock at a conversion rate equal to the Class 9 Automatic Conversion Price used for the initial conversion on November 17, 2010 but not to exceed $1.25 per share; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if, at any time during the term of the Class 9 Plan Debentures, the trading price of our common stock (as determined in accordance with the Class 9
Plan Debentures and the Plan) is at least $1.88 per share for thirty (30) consecutive trading days, at our option, we may require the conversion of up to $5.0 million of the then aggregate outstanding principal balance of the Class 9 Plan
Debentures at a conversion rate equal to the Class 9 Automatic Conversion Price used for the initial conversion on November 17, 2010 but not to exceed $1.25 per share.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of March 31, 2011, the aggregate outstanding principal amount of the Class 9 Plan Debentures was $16,576,642.

On the Effective Date, we executed and delivered warrants (the Class 9 Plan Warrants) to purchase up to 3,154,612 shares of our common stock. The Class 9 Plan Warrants (a) have an
exercise price of $1.50 per share and a term of three (3) years from the Effective Date, (b) can only be exercised for cash (no cashless exercise), and (c) are subject to certain call provisions set forth in the Class 9 Plan Warrants
and the Plan.



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##### Table of Contents

January 2008 Notes and Warrants (Class 13)

On the Effective Date, we issued, in satisfaction of the convertible Preferred Stock outstanding prior to the Effective Date of the Plan, new promissory
notes (the Class 13 Plan Notes) in the original principal amount of $4,903,644. The Class 13 Plan Notes mature on November 17, 2012 (the Class 13 Plan Notes Maturity Date), and no interest will accrue on the outstanding
principal balance of the Class 13 Plan Notes. We have the option, but have no obligation to pay the Class 13 Plan Notes in cash at maturity and instead may pay through the conversion by the holders into shares of our common stock.

The following are the material terms and conditions of the Class 13 Plan Notes:



| |  |  | on November 17, 2010 and on each of the following seven (7) quarterly anniversaries thereof (each, a Class 13 Automatic Conversion
Date), provided that the average of the trading price of our common stock (as determined in accordance with the Class 13 Plan Notes and the Plan) for the ten (10) consecutive trading days ending on the trading day that is immediately
preceding the then applicable Class 13 Automatic Conversion Date (the Class 13 Automatic Conversion Price) is at least $1.00 per share, one-eighth ( 1/8th) of the original balance of the Class 13 Plan Notes
(the Class 13 Automatic Conversion Amount) will be automatically converted into shares of our common stock at a conversion rate equal to the Class 13 Automatic Conversion Price per share;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if, on any Class 13 Automatic Conversion Date, the Class 13 Automatic Conversion Price is less than $1.00 per share and therefore the automatic
conversion described above does not occur, a holder of Class 13 Plan Notes may elect to convert the Class 13 Automatic Conversion Amount into shares of our common stock at a conversion rate equal to $1.00 per share;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any principal amount outstanding under the Class 13 Plan Notes at the Class 13 Plan Notes Maturity Date will be due and payable in full, at our
election, in either cash or in shares of our common stock at a conversion rate equal to the greater of the average of the trading price of our common stock (as determined in accordance with the Class 13 Plan Notes and the Plan) for the ten
(10) consecutive trading days ending on the trading day that is immediately preceding the Class 13 Plan Notes Maturity Date or $1.00;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if, at any time during the term of the Class 13 Plan Notes, the trading price of our common stock (as determined in accordance with the Class 13 Plan
Notes and the Plan) is at least 125% of $1.25 per share for ten (10) consecutive trading days, a holder of Class 13 Plan Notes, at its option, may convert any or all of the then outstanding principal balance of its Class 13 Plan Notes into
shares of our common stock at a conversion rate equal to the Class 13 Automatic Conversion Price used for the initial conversion on November 17, 2010; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if, at any time during the term of the Class 13 Plan Notes, the trading price of our common stock (as determined in accordance with the Class 13 Plan
Notes and the Plan) is at least 150% of $1.25 per share for thirty (30) consecutive trading days, at our option, we may require the conversion of all or any portion of the then aggregate outstanding principal balance of the Class 13 Plan Notes
at a conversion rate equal to the Class 13 Automatic Conversion Price used for the initial conversion on November 17, 2010.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of March 31, 2011, the aggregate outstanding principal amount of the Class 13 Plan Notes was approximately $4.1 million.

On the Effective Date, we executed and delivered warrants (the Class 13 Plan Warrants) to purchase up to 1,072,840 shares of our common stock. The Class 13 Plan Warrants (a) have an
exercise price of $1.50 per share and a term of three (3) years from November 17, 2010, (b) can only be exercised for cash (no cashless exercise), and (c) are subject to certain call provisions set forth in the Class 13 Plan
Warrants and the Plan.



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##### Table of Contents

June 2008 Debentures and Warrants (Class 6)

On the Effective Date, we issued in satisfaction of the secured debentures dated June 17, 2008 outstanding prior to the Effective Date, new
debentures (the Class 6 Plan Debentures) in the original principal amount of $9,730,459. The Class 6 Plan Debentures mature on November 17, 2013, and the outstanding principal together with all accrued but unpaid interest is due in
cash on such date.

The following are the material terms and conditions of the Class 6 Plan Debentures:



| |  |  | interest accrues and is payable on the outstanding principal under the Class 6 Plan Debentures at a fixed rate of eight and one-half percent
(8.50%) per annum and each of the Class 6 Plan Debentures is secured by a lien on certain of our assets;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | at the option of a holder of Class 6 Plan Debentures, such holder may elect to convert all of the then outstanding balance of its Class 6 Plan
Debentures into shares of our common stock at a conversion rate equal to $1.10 per share of our common stock; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | commencing on May 15, 2011, if the trading price of our common stock (as determined in accordance with the Class 6 Plan Debentures and the Plan)
is at least 150% of $1.10 per share for any ten (10) consecutive trading days, at our option, we may convert the then outstanding balance of all of the Class 6 Plan Debentures into shares of our common stock at a conversion rate equal to $1.10
per share of our common stock.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On the Effective Date, we executed and delivered warrants (the Class 6 Plan
Warrants) to purchase up to 2,979,496 shares of our common stock. The Class 6 Plan Warrants (a) have an exercise price of $1.50 per share and an expiration date of November 17, 2013, (b) can only be exercised for cash (no
cashless exercise), and (c) are subject to certain call provisions set forth in the Class 6 Plan Warrants and the Plan.

During the
period ended March 31, 2011, $2,772,548 in Class 6 Plan Debentures were converted into our common stock at a conversion price equal to $1.10 per share, resulting in the issuance of 2,520,496 shares of our common stock. As of March 31,
2011, the aggregate total outstanding principal amount of the Class 6 Plan Debentures was approximately $6.9 million.

Accentia Class 10
Plan Distributions

On the Effective Date, we became obligated to pay approximately $2.4 million in cash on March 17, 2014, to
unsecured creditors holding Class 10 claims under the Plan (the Class 10 Plan Distributions).

The Class 10 Plan Distributions
mature on March 17, 2014, and the outstanding principal together with all accrued but unpaid interest is due on such date. Interest accrues and is payable on the outstanding principal amount under the Class 10 Plan Distributions at a fixed rate
of five percent (5%) per annum.

Unsecured creditors holding an aggregate total of $3,287,695 in Class 10 claims elected to convert those
Class 10 claims into our common stock valued at the average market price for our common stock over the ten trading days preceding the Effective Date. On the Effective Date, we issued 2,417,431 shares of our common stock to these Class 10 unsecured
creditors at a conversion price equal to $1.36 per share.

As of March 31, 2011, the aggregate outstanding principal amount of the Class
10 Plan Distributions as issued on the Effective Date has remained unchanged.

Accentia Promissory Demand Notes:

On the Effective Date, under the Biovest Plan, our entire pre-petition claim due from Biovest in the amount of $13,444,290 was converted into shares of
Biovest common stock at a conversion rate equal to $0.75 per share, resulting in the issuance to us of 17,925,720 shares of Biovest common stock.



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##### Table of Contents

Biovest Class 8 Option A Obligations

On the Biovest Effective Date and under the Biovest Plan, Biovest became obligated to pay to the Biovest unsecured creditors approximately $2.7 million in cash together with interest at five percent
(5%) per annum to be paid in one installment on March 17, 2014 (the Option A Obligations). These unsecured claims include, but are not limited to the Pulaski Bank notes, the Southwest Bank note, and the guarantor indemnities.
As of March 31, 2011, the aggregate outstanding principal amount of the Option A Obligations as issued on the Effective Date has remained unchanged.

Biovest Class 8 Option C Promissory Note

On the Biovest Effective Date and under
the Biovest Plan, Biovest became obligated to certain of its unsecured creditors in the principal amount of approximately $2.0 million. Each such unsecured creditor received an amount equal to 100% of such unsecured creditors allowed Class 8
unsecured claim (including post-petition interest under the Biovest Plan at a rate of three percent (3%) per annum) in combination of debt and equity resulting in the issuance of a total of $1.8 million in new notes (the Option C
Notes), as well as, 0.2 million shares of Biovest common stock, using an effective conversion rate equal to $1.66 per share. The Option C Notes bear interest at seven percent (7%) and are convertible into shares of Biovest common
stock in seven quarterly installments beginning on February 17, 2011 as follows:



| |  |  | provided that the average of the volume weighted average prices for shares of Biovest common stock for the ten consecutive trading days immediately
preceding each quarterly conversion date (Ten Day VWAP) is at least $1.00 per share, one-eighth
(1/8th) of the Option C Notes plus accrued interest
will be automatically converted into shares of Biovest common stock at a conversion rate equal to the Ten Day VWAP
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if the Ten Day VWAP is less than $1.00 per share, the Option C Notes will not automatically convert into shares of Biovest common stock, but will
instead become payable at maturity (August 17, 2012), unless an Option C Notes holder elects to convert one-eighth
(1/8th) of its Option C Notes plus accrued interest
into shares of Biovest common stock at a conversion rate equal to $1.00 per share;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any portion of the Option C Notes and any Option C interest that are outstanding at the maturity (August 17, 2012) will be due and payable in
full, at Biovests election, in either cash or in shares of Biovest common stock at a conversion rate equal to the Ten Day VWAP;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if, at any time prior to August 17, 2012, the Ten Day VWAP is at least $1.50 per share, an Option C Note holder, at its option, may convert any or
all of its Option C Notes, plus the then accrued and unpaid interest into shares of Biovest common stock at a conversion rate equal to the Ten Day VWAP used for the initial conversion on the Effective Date ($1.66 per share); and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if, at any time prior to August 17, 2012, the volume weighted average price for Biovest common stock is at least $1.88 per share for thirty
(30) consecutive trading days, Biovest, at its option, may require the conversion of the then aggregate outstanding balance of the Option C Notes plus the then accrued and unpaid Option C interest at a conversion rate equal to the Ten Day VWAP
used for the initial conversion on the Effective Date ($1.66 per share).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of March 31, 2011, the aggregate
outstanding principal amount of the Option C Notes was approximately $1.5 million.

April 2006 NMTC Transaction

Biovest and certain of its affiliates entered into an agreement in July 2010 (the Worcester Restructuring Agreement) with Telesis CDE
Corporation and Telesis CDE Two, LLC (collectively, Telesis), contingent upon submission to and approval by the Bankruptcy Court. The Worcester Restructuring Agreement effectively terminates all agreements and obligations of all parties
pursuant to the April 2006 New Market Tax Credit transaction (the April 2006 NMTC Transaction), in consideration of retention by Telesis of an unsecured claim in Biovests Chapter 11 proceeding in the amount of $0.3 million
along with a settlement payment in the amount of $85,000 to defray certain legal and administrative expenses incurred by Telesis. The Worcester Restructuring Agreement and the compromise of the outstanding claims against Biovest and its affiliates
in connection with the April 2006 NMTC Transaction was approved by the Bankruptcy Court in an Order entered on December 1, 2010. As a result, the Companys guaranty, Biovests guaranty, and all of Biovests subsidiary guaranties
from affiliates and third parties and all other obligations of all parties to Transaction I were terminated. Biovest has ceased all activities under the April 2006 NMTC Transaction and Biovest has liquidated the subsidiaries created specifically to
conduct activities under the April 2006 NMTC transaction.



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##### Table of Contents

December 2006 NMTC Transaction

Biovest and certain of its affiliates entered into an agreement in July 2010 (the St. Louis Restructuring Agreement) with St. Louis Development Corporation and Saint Louis New Markets Tax
Credit Fund II, LLC (collectively SLDC), contingent upon submission to and approval by the Bankruptcy Court. The St. Louis Restructuring Agreement effectively terminates all agreements and obligations of all parties pursuant to the
December 2006 New Market Tax Credit transaction (the December 2006 NMTC Transaction), in consideration of retention by SLDC of an unsecured claim in Biovests Chapter 11 proceeding in the amount of $160,000 along with a
settlement payment in the amount of $62,000, to defray certain legal and administrative expenses incurred by SLDC. This St. Louis Restructuring Agreement and the compromise of the outstanding claims against Biovest in connection with the December
2006 NMTC Transaction was approved by the Bankruptcy Court in an Order entered on December 1, 2010. As a result, the Companys guaranty, Biovests guaranty, and all of the subsidiary guaranties from affiliates and third parties and
all other obligations of all parties to the December 2006 NMTC Transaction were terminated. Biovest has ceased all activities under the December 2006 NMTC Transaction and Biovest has liquidated the subsidiaries created specifically to conduct
activities under the December 2006 NMTC Transaction.

Cash Flows for the Six Months Ended March 31, 2011

For the six months ended March 31, 2011, our cash increased by approximately $2.0 million. Net cash flow from operating activities was approximately
$2.5 million. The use for operating activities included a net loss of $8.5 million and additions of $14.6 million for share-based compensation. There was also an adjustment of $13.3 million for the gain on reorganization.

Net cash outflow from investing activities for the six months ended March 31, 2011, was approximately $0.1 million for the acquisition of property,
plant and equipment.

We had net cash flows from financing activities of $4.6 million for the six months ended March 31, 2011. Proceeds
from notes payable, related party were approximately $0.3 million, in addition to the $7.0 million proceeds from Biovests convertible note.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our chief executive officer (principal executive officer) and our acting chief financial officer (principal
financial officer), we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based
on this evaluation, our chief executive officer (principal executive officer) and our acting chief financial officer (principal financial officer) concluded that our disclosure controls and procedures were effective as of the end of the
period covered by this Quarterly Report on Form 10-Q to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods
specified in the SECs rules and forms. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit is accumulated and communicated
our management, including our chief executive officer (principal executive officer) and our acting chief financial officer (principal financial officer), as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with this evaluation that occurred during the quarter ended March 31, 2011 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Bankruptcy proceedings:

On November 10, 2008, we, along with our subsidiaries, filed
a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code (Chapter 11) in the U.S. Bankruptcy Court for the Middle District of Florida, Tampa Division (the Bankruptcy Court). During
the pendency of the Chapter 11 proceedings, we operated our business as a debtor-in-possession in accordance with the provisions of Chapter 11 and subject to the jurisdiction of the Bankruptcy Court. On August 16, 2010, we filed our First
Amended Joint Plan of Reorganization, and, on October 25, 2010, we filed the First Modification to the First Amended Joint Plan of Reorganization (collectively and as amended and supplemented, the Plan). On October 27, 2010,
the Bankruptcy Court held a confirmation hearing and confirmed the Plan, and, on November 2, 2010, the Bankruptcy Court entered an Order Confirming Debtors First Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code
(the Confirmation Order), which approved and confirmed the Plan, as modified by the Confirmation Order. We emerged from Chapter 11 protection, and the Plan became effective, on November 17, 2010 (the Effective
Date).

Notwithstanding the effectiveness of our Plan, the Bankruptcy Court retains jurisdiction to adjudicate any remaining issues
regarding, inter alia, the validity, amount, and method of payment of claims filed in connection with our Chapter 11 proceeding. Accordingly, we anticipate that there may be ongoing proceedings before the Bankruptcy Court to resolve any filed
objections or disputes as to claims filed in the Chapter 11 proceeding.

Biovest litigation:

On August 4, 2008, Biovest was served with a summons and complaint filed in California Superior Court on behalf of Clinstar LLC for breach of
contract for non-payment of certain fees for clinical trial studies and pass-through expenses in the amount of $385,000. Biovest intends to seek the dismissal of this litigation and plans to defend these claims vigorously. Upon the filing of
Biovests Chapter 11 petition on November 10, 2008, this litigation was automatically stayed pursuant to provisions of federal bankruptcy law. Biovest anticipates that the claims involved in this litigation will be contested and resolved
by the Bankruptcy Court as part of an objection to claim which Biovest expects to file shortly.

Other proceedings:

Further, from time to time we are subject to various legal proceedings in the normal course of business, some of which are covered by insurance.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors disclosed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended September 30, 2010.

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

During the period covered by this Quarterly Report on Form 10-Q, we issued the following securities, which were not registered under the Securities Act of
1933, as amended (the Securities Act):



| | 1. | On January 1, 2011, we issued incentive stock option award (Employee Option Awards) to our employees under our 2010 Equity Incentive Plan. The Employee
Option Awards granted an options to purchase an aggregate of 785,000 shares of our common stock at an exercise price of $0.80 per share.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | On January 10, 2011, we issued 66,000 shares of our common stock to Alan M. Pearce pursuant to the December 31, 2010 Resignation Settlement between us and
Mr. Pearce. These shares were issued consideration of the settlement of all claims by Mr. Pearce, including but not limited to claims under or arising out of Mr. Pearces Employment Agreement with us.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | On February 1, 2011, we issued an incentive stock option award (Reardan Option Award) to Dayton Reardan pursuant to the February 1, 2011
Consultant Agreement between us and Mr. Reardan. The Reardan Option Award granted an option to purchase 100,000 shares of our common stock at an exercise price of $0.60 per share.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | During the three months ended March 31, 2011, pursuant to our Plan (with an Effective Date of November 17, 2010) and Section 1145 of the United States
Bankruptcy Code, we issued 1,186,199 shares of our common stock in satisfaction of allowed claims under our Plan, with conversion prices ranging from $1.00 to $1.84 per share.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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We claimed exemption from registration under the Securities Act for the sales and issuances of securities in
the transactions described in paragraphs 1 and 3 by virtue of Section 4(2) of the Securities Act and by virtue of Rule 701 promulgated under the Securities Act, in that they were offered and sold either pursuant to written compensatory plans or
pursuant to a written contract relating to compensation, as provided by Rule 701. Such sales and issuances did not involve any public offering, were made without general solicitation or advertising, and each purchaser represented its intention to
acquire the securities for investment only and not with view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates and instruments issued in such transactions. All recipients had
adequate access, through their relationships with us, to information about us.

We claimed exemption from registration under the Securities
Act for the sale and issuance of securities in the transaction described in paragraph 2 above by virtue of Section 4(2) of the Securities Act in that such sale and issuance did not involve a public offering. The recipient of the securities
represented his intention to acquire the securities for investment only and not with view to or for sale in connection with any distribution thereof. Appropriate legends were affixed to the share certificates and instruments issued. The recipient
had adequate access, through his relationships with us, to information about us.

We claimed exemption from registration under the Securities
Act for the issuances of securities in the transactions described in paragraph 4 above by virtue of Section 1145(a) of the United States Bankruptcy Code in that such issuances were made under our Plan in exchange for claims against, or
interests in, our company.

No underwriters were employed in any of the above transactions.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. (Removed and Reserved)

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following exhibits are filed as part of, or are incorporated by reference into, this Quarterly Report on Form 10-Q:



|               |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Document                                                                                                                                                                                                                                                                                                                                                                               
|               | 
|10.1           |  | Agreement between Accentia Biopharmaceuticals, Inc. and Baxter Healthcare Corporation effective on November 29, 2010 (this exhibit supersedes Exhibit 10.1 filed with Accentias
Form 8-K dated December 3, 2010). Portions of this exhibit have been omitted pursuant to a confidential treatment request. Omitted information has been filed separately with the Securities and Exchange Commission.
|               | 
|10.2           |  | Lease between Biovest International, Inc. and JMS Holdings, LLC dated, December 2, 2010 (filed as Exhibit 10.212 to the Registration Statement on Form S-1 filed on
February 18, 2011 (Registration No. 333-172353) and incorporated herein by reference).                                                                                                                                            
|               | 
|31.1           |  | Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer (Principal Executive Officer).                                                                                                                                                                                                                                                                                                     
|               | 
|31.2           |  | Rule 13a-14(a)/15d-14(a) Certifications of Acting Chief Financial Officer (Principal Financial Officer).                                                                                                                                                                                                                                                                                              
|               | 
|32.1           |  | 18 U.S.C. Section 1350 Certifications of Chief Executive Officer.                                                                                                                                                                                                                                                                                                                                     
|               | 
|32.2           |  | 18 U.S.C. Section 1350 Certifications of Acting Chief Financial Officer.                                                                                                                                                                                                                                                                                                                              



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SIGNATURES

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



|                   |  |                                                               
|------------------ |  | --------------------------------------------------------------
|                   |  | ACCENTIA BIOPHARMACEUTICALS, INC. (Registrant)                
|                   | 
|Date: May 13, 2011 |  | /s/ Francis E. ODonnell, Jr.                                 
|                   |  | Francis E. ODonnell, Jr., M.D.                               
|                   |  | Chief Executive Officer; Chairman of the Board; Director      
|                   |  | (Principal Executive Officer)                                 
|                   | 
|Date: May 13, 2011 |  | /s/ Garrison J. Hasara                                        
|                   |  | Garrison J. Hasara, CPA                                       
|                   |  | Acting Chief Financial Officer; Controller                    
|                   |  | (Principal Financial Officer and Principal Accounting Officer)



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