**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-KSB/A**

 

**(AmendmentNo. 1)**

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

 

**For fiscalyear ended December 31, 2005**

**CommissionFile Number:  0-22743**

 

**iVOW, INC.**

(Exact name of Registrant asspecified in its charter)

 

| **DELAWARE**                                                     | ** ** | **94-3184035**                         |
|------------------------------------------------------------------|------------|----------------------------------------|
| (State or  other jurisdiction of  incorporation or organization) |       | (I.R.S.  Employer  Identification No.) |

 

**11455 ElCamino Real, Suite 140 San Diego, California 92130**

(Address of principal executiveoffices)

 

**(858)703-2820**

(Registrant’s telephone number, including area code)

 

Securities registered pursuantto Section 12(b) of the Act:  **None**

 

Securities registered pursuantto Section 12(g)  of the Act:  **Common Stock, par value $.01 per share**

 

Check whetherthe issuer is not required to file reports pursuant to Section 13 or 15(d) ofthe Exchange Act. o

 

Check whether the issuer:  (1) filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934during the past 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes  ý    No  o

 

Check if there is no disclosure of delinquentfilers pursuant to Item 405 of Regulation S-B contained in this form, and nodisclosure will be contained, to the best of registrant’s knowledge, indefinitive proxy or information statements incorporated by reference in Part IIIof this Form 10-KSB or any amendment to this Form 10-KSB. o

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act). o

 

The issuer’s revenues for the fiscal year ended December 31, 2005were $1,287,848.

 

The aggregate market value of the voting andnon-voting common equity held by non-affiliates of the registrant as of****February 28, 2006 was approximately$11,900,000. For the purposes of this calculation, shares owned by officers,directors and 10% stockholders known to the registrant have been deemed to beowned by affiliates. This determination of affiliate status is not necessarilya conclusive determination for other purposes.

 

The number of shares outstanding of theregistrant’s Common Stock as of February 28, 2006 was 2,657,663.

 

**DOCUMENTSINCORPORATED BY REFERENCE**

 

Certain exhibits filed with the Registrant’sprior registration statements and Forms 10-Q,10-QSB, 10-KSB and 8-K areincorporated herein by reference into Part III of this Report.

 

TransitionalSmall Business Disclosure Format (Check one): Yes  o    No  ý

 

**EXPLANATORYNOTE**

 

Our Annual Report on Form 10-KSB for thefiscal year ended December 31, 2005 filed with the Securities and ExchangeCommission on March 31, 2006 (the “Report”) contemplated that theinformation to be included in Items 9, 10, 11, 12 and 14 of Part III ofthe Report would be incorporated into the Report by reference to our ProxyStatement to be filed in anticipation of our 2006 annual meeting ofstockholders. We do not anticipate filing our Proxy Statement within the timeperiod required for such incorporation by reference to be effective, so we areamending the Report solely for the purpose of providing the informationrequired in Items 9, 10, 11, 12 and 14 of Part III of the Report. Inaddition, Item 13 of Part III of the Report is being updated hereby solelyto reflect the inclusion with this amendment of the certifications required by Section 302of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. Section 1350.

 

Unless otherwise expressly stated, thisamendment to the Report does not reflect events occurring after the filing ofthe original Report and, other than as described above, does not modify orupdate in any way disclosures contained in the original Report.

 

 

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**iVOW, Inc.**

 

**Form 10-KSB/A(Amendment No. 1) For the Fiscal Year Ended December 31, 2005**

 

**TABLE OFCONTENTS**

 
| Part III |                                                                                                                       |   |
|---------------|----------------------------------------------------------------------------------------------------------------------------|--------|
| Item 9.       | Directors, Executive Officers, Promoters and Control Persons,  Compliance with Section 16(a) of the Exchange Act |   |
| Item 10.      | Executive Compensation                                                                                                     |   |
| Item 11.      | Security Ownership of Certain Beneficial Owners and Management and  Related Stockholder Matters                            |   |
| Item 12.      | Certain Relationships and Related Transactions                                                                             |   |
| Item 13       | Exhibits                                                                                                                   |   |
| Item 14.      | Principal Accountant Fees and Services                                                                                     |   |
|          |                                                                                                                       |   |
|          | Signatures                                                                                                                 |   |
|          |                                                                                                                       |   |

 

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**PART III**

 

**Item 9.****                            DIRECTORS,EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE WITH SECTION 16(a) OFTHE EXCHANGE ACT**

 

**Identification of Directors and Executive Officers**

 

Our Board of Directors is divided into threeclasses with staggered terms, each class serving three years. George B.DeHuff, James D. Durham and Michael H. Owens, M.D. will continue to serve untilthe 2006 annual meeting of stockholders, or until their respective successorshave been duly elected and qualified. John R. Lyon and William J. Nydam willcontinue to serve until the 2007 annual meeting of stockholders, or until theirrespective successors have been duly elected and qualified. Scott R. Pancoastand C. Fred Toney will continue to serve until the 2008 annual meeting ofstockholders, or until their respective successors have been duly elected andqualified.

 

The name, age and position of each member ofour Board of Directors and each of our executive officers is set forth below:

 
| **Name**                | ** ** | **Age** | ** ** | **Position**                                                      |
|-------------------------|------------|---------|------------|-------------------------------------------------------------------|
| George B. DeHuff(2)(3)  |       | 52      |       | Director                                                          |
| James D. Durham(1)(2)   |       | 59      |       | Director                                                          |
| Richard M. Gomberg      |       | 42      |       | Vice President of Finance, Chief Financial  Officer and Secretary |
| John R. Lyon            |       | 60      |       | Chairman of the Board                                             |
| William J. Nydam(1)     |       | 56      |       | Director                                                          |
| Michael H. Owens, M.D.  |       | 54      |       | President, Chief Executive Officer and  Director                  |
| Scott R. Pancoast(1)(3) |       | 47      |       | Director                                                          |
| C. Fred Toney           |       | 40      |       | Director                                                          |
|                    |       |    |       |                                                              |

 

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(1) Member of the Audit Committee.(2) Member of the Compensation Committee.(3) Member of the Nominating/Corporate Governance Committee.

 

***GEORGE B. DEHUFF***.Mr. DeHuff has served as a Director of the Company since June 2001. Mr. DeHuffwas appointed President and Chief Executive Officer of BI Incorporated in May 2001.Prior to BI, Mr. DeHuff was President and Chief Executive Officer ofDavita Inc. (formerly Total Renal Care) from 1999. From 1994 to 1999, Mr. DeHuffserved in various senior executive capacities with American Medical Response,including President and Chief Executive Officer from 1997. From 1991 to 1994, Mr. DeHuffwas President and Chief Executive Officer of LifeFleet, Inc. Mr. DeHuffalso serves on the board of directors of a private company. Mr. DeHuffholds an MBA from the University of Michigan-Ann Arbor.

 

***JAMES D. DURHAM***.Mr. Durham has served as a Director of the Company since August 2004.Mr. Durham has over 35 years experience in the creation and management oftechnology and service companies, primarily in the healthcare industry. Hecurrently serves as Chairman and Chief Executive Officer of CrdentiaCorporation, a public company, which he founded in 2002 to provide temporarynurse staffing to hospitals. In 1993, Mr. Durham founded QuadraMedCorporation, a company providing a suite of software products andservices, which he took public in 1996. In 1999, Mr. Durham foundedChartOne Corporation to offer secure web-based storage and retrievalcapabilities for medical records, which has grown to have more than 1,000hospital customers. Mr. Durham is a graduate of the University of Floridain industrial engineering, holds an MBA from UCLA and is a Certified PublicAccountant licensed in Illinois.

 

***RICHARD M. GOMBERG.***Mr. Gomberg has served as the Company Chief Financial Officer andSecretary since February 2006. Prior to joining iVOW, Mr. Gomberg wasthe Director of Corporate Services for PRACS Institute, Ltd. from June 2004to September 2005 where he was directly responsible for the transition ofits San Diego operations along with its financial reporting and facilitiesmanagement into its headquarters in North Dakota. Immediately preceding thisassignment, he was Vice President and CFO of DermTech International from April 2002to June 2004 and Vice President and CFO of EPIC Solutions, Inc from 1995 to2001. From 1991 to 1995, Mr. Gomberg held various financial positions fortwo San Diego based companies. Prior to that, Mr. Gomberg was an auditorfor Deloitte and Touche in Chicago. Mr. Gomberg received his BA inEconomics from the University of Illinois and is a California certified publicaccountant.

 

***JOHN R. LYON***.Mr. Lyon has served as a Director of the Company since July 1995. Mr. Lyonis currently an independent consultant in the healthcare industry. From April 2005to April 2006, Mr. Lyon served as President and Chief 

 

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Executive Officer of Leptos Biomedical, Inc., an early stagecompany developing a neurostimulation therapy for obesity. Mr. Lyonco-founded iVOW in July 1993 and served as President from July 1993until February 2005 and as Chief Executive Officer from December 1996until March 2005. Prior to co-founding iVOW, Mr. Lyon served withCooper Companies, as President of the International Division within Cooper’sHealth Care Group from January 1991 through December 1992, and asPresident of Cooper Surgical, a manufacturer and distributor of minimallyinvasive surgical products, from January 1992 through January 1993. Mr. Lyonserves on the board of directors of L-Path, Inc. Mr. Lyon holds aB.A. from the University of Durham, United Kingdom.

 

***WILLIAM J. NYDAM***.Mr. Nydam has served as a Director of the Company since November 2005.Since March 2003, Mr. Nydam has served as President and ChiefOperating Officer of Endocare, Inc., a publicly traded medical devicecompany focused on the design, development, manufacturing and marketing ofminimally invasive technologies for tissue and tumor ablation. Prior to joiningEndocare, Mr. Nydam was President and Chief Executive Officer of PulseMetric, Inc., a cardiovascular device company, from September 2001 toDecember 2002. Mr. Nydam previously served as Senior Vice Presidentfor Science Applications International Corporation, an employee-owned researchand engineering firm, from September 1999 to August 2001. Prior tothat time, Mr. Nydam worked for Premier, Inc., a national alliance ofhealthcare providers, where he serves as Executive Vice President from April 1996to August 1999, Chief Operating Officer from May 1992 to March 1996and Senior Vice President and Chief Financial Officer from January 1986 toApril 1992. Mr. Nydam also currently is a board member and theChairman of the Audit Committee of Crdentia Corp. Mr. Nydam is a member ofthe American Institute of Certified Public Accountants. He holds an MBA andBachelor of Science degree in Accounting from the University of California atBerkeley.

 

***MICHAEL H. OWENS, M.D***.Dr. Owens began his employment with iVOW as the Chief Medical Officer in September 2003and has served as President since February 2005, as Chief ExecutiveOfficer since April 2005 and as a Director of the Company since September 2003.Dr. Owens is a physician executive with over 20 years of executivehealthcare, managed care, physician practice management, marketing andstrategic planning experience, as well as 15 years of clinical practiceexperience. Prior to joining iVOW, Dr. Owens was President of ImhotepHealth Systems, Inc., a healthcare and managed care consulting firmspecializing in strategic business and clinical resource planning andimplementation, from 1996 to 2003. His previous experience includes seniormanagement roles with CIGNA HealthCare, the Watts Health Foundation and theU.S. Public Health Service. His professional certifications and membershipsinclude Fellow, American College of Physician Executives; Diplomat, AmericanCollege of Physician Executives; Diplomat, American Board of Quality Assuranceand Utilization Review; and, Diplomat, American Board of Internal Medicine. Heearned his MD degree from Yale University School of Medicine, his MPH inHospital Administration from Yale University School of Public Health and his ABdegree Cum Laude with a major in Chemistry from Bowdoin College, Brunswick, ME.Dr. Owens completed his Hospital Administration Residency at MontefioreHospital, in Bronx, NY, and his Internal Medicine Residency at the Universityof Washington in Seattle.

 

***SCOTT R. PANCOAST***.Mr. Pancoast has served as a Director of the Company since March 2003.Mr. Pancoast has served as the President and Chief Executive Officer ofLpath, Inc., a biotechnology company, since March 2005, and as adirector of Lpath since 1998. Prior to joining Lpath, from 1994 to 2005 Mr. Pancoastwas the Executive Vice President of Western States Investment Corporation (“WSIC”),a private San Diego venture capital fund. From 1986 to 1994 Mr. Pancoastwas with National Sanitary Supply Company, where he was a member of the Boardof Directors and served in various management positions including Senior VicePresident – Operations and Chief Financial Officer. Mr. Pancoast alsoserves on the board of directors of eleven private companies and one non-profitorganization. Mr. Pancoast holds a B.A. in Economics from the Universityof Virginia and an MBA from Harvard Business School.

 

***C. FRED TONEY***.Mr. Toney has served as a Director of the Company since August 2004.Since December 2001, Mr. Toney has served as a managing member ofMedCap Management &Research, LLC, the general partner of MedCapPartners L.P. and MedCap Offshore Partners Offshore, Ltd. MedCap Management &ResearchLLC is an investment advisory firm specializing in healthcare, life sciencesand medical technology and devices. From February 2001 to November 2001,Mr. Toney served as President and Chief Executive Officer of HealthCentral.com, Inc.,a provider of healthcare e-commerce to consumers, through the sale of its fiveprimary operating divisions, and from July 1999 to February 2001 asExecutive Vice President and Chief Financial Officer. Mr. Toney previouslyserved as senior managing partner, director of research and research analyst atPacific Growth Equities, Inc., an investment banking and institutionalbrokerage firm. Mr. Toney previously served as research analyst orassociate at Volpe, Welty &Company, an investment banking firm; RCMCapital Management, an investment management firm; Donaldson, Lufkin &JenretteSecurities Corporation, an investment banking and institutional brokerage firm;and Phamavite Pharmaceuticals Corporation, a pharmaceutical manufacturing firm.Mr. Toney also serves on the board of directors of Crdentia Corporation, aprovider of temporary nurse staffing to hospitals. Mr. Toney received aBachelor of Arts degree in economics and English from the University ofCalifornia at Davis.

 

4

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**Audit Committee**

 

The Audit Committee of the Board of Directorscurrently consists of Messrs. Pancoast, Nydam and Durham. The Board hasdetermined that all members of the Audit Committee are independent directorsunder the rules of the Nasdaq Stock Market and each of them is able toread and understand fundamental financial statements, and that Mr. Nydamqualifies as an “audit committee financial expert” as that term is defined inItem 401(h) of Regulation S-K. The purpose of the Audit Committee is tooversee our accounting and financial reporting processes and audits of ourfinancial statements. The responsibilities of the Audit Committee includeappointing and providing the compensation of the independent accountants to conductthe annual audit of our accounts, reviewing the scope and results of theindependent audits, reviewing and evaluating internal accounting policies, andapproving all professional services to be provided to the Company by itsindependent accountants. The Board of Directors has adopted a formal writtencharter for the Audit Committee.

 

**Family Relationships**

 

There are no family relationships among anyof our directors or executive officers.

 

**Involvement in Certain Legal Proceedings**

 

Mr. Toney served as President and ChiefExecutive Officer of HealthCentral.com, Inc., a provider of healthcare e-commerceto consumers, from February 2001 to November 2001 and served asExecutive Vice President and Chief Financial Officer from July 1999 to February 2001.HealthCentral.com, Inc. filed a petition for Chapter 11 reorganizationunder the federal bankruptcy code in October 2001.

 

Mr. Gomberg served as Vice President andChief Financial Officer of EPIC Solutions, Inc., a provider of informationmanagement systems to the public safety sector, from 1995 to 2001. EPICSolutions, Inc. filed a petition for Chapter 11 reorganization under thefederal bankruptcy code in June 2001.

 

**Code of Ethics**

 

We have adopted a code of ethics that appliesto all officers and employees, including our principal executive officer andprincipal financial officer. This code of ethics is available on our website athttp: //www.ivow.com. We have also adopted a whistleblower policy that isavailable for review upon written request to us at 11455 El Camino Real, Suite 140,San Diego, California 92130, Attn: Chief Financial Officer.

 

**Compliance with Section 16(a) ofthe Exchange Act**

 

The members of the Board of Directors, ourexecutive officers and persons who hold more than 10% of our outstanding commonstock are subject to the reporting requirements of Section 16(a) ofthe Securities Exchange Act of 1934 which require them to file reports withrespect to their ownership of the common stock and their transactions in suchcommon stock. Based on a review of the copies of such reports furnished to us,or representations regarding the necessity to file such reports, we haveidentified the following failures to file reports: Messrs. DeHuff,Hornthal, Durham, Lyon and Pancoast each missed the filing deadline for areport on Form 4 related to stock option grants they received inconnection with their service as directors of the Company. In addition, Dr. Owensmissed the filing deadline for a report on Form 4 related to a stockoption grant he received in connection with his service as President and ChiefExecutive Officer of the Company and Mr. Pancoast missed the filingdeadline for a report on Form 4 related to an exchange of his outstandingshares of Series A Preferred Stock into Common Stock and Units consistingof Common Stock and warrants to purchase Common Stock. Each of theseindividuals has now filed the required reports on Form 4.

 

**Item 10****.****                     EXECUTIVECOMPENSATION**

 

The following table provides summaryinformation concerning the compensation earned by our Chief Executive Officer,our Chief Financial Officer and two of our former executive officers, whoearned more than $100,000 for services rendered in all capacities for thefiscal year ended December 31, 2005. No executive officers who would haveotherwise been included in such table on the basis of salary and bonus earnedfor the 2005 fiscal year has been excluded by reason of his or her terminationof employment or change in executive status during that year. The listedindividuals shall be hereinafter referred to as the “Named Executive Officers”in this report.

 

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**SUMMARY COMPENSATION TABLE(1)**

** **
| ** **                                                                                                   | ** ** | ** **       | ** ** | ** **                   | ** **                 | ** **               | ** **               | **Long-Term Compensation Awards** | ** **               |
|--------------------------------------------------------------------------------------------------------------|------------|------------------|------------|------------------------------|----------------------------|--------------------------|--------------------------|---------------------------------------------|--------------------------|
| ** **                                                                                                   | ** ** | ** **       | ** ** | ** **                   | ** **                 | ** **               | ** **               | **Securities**                              | ** **               | ** ** | ** ** |
| ** **                                                                                                   | ** ** | ** **       | ** ** | ** **                   | ** **                 | ** **               | ** **               | **Underlying**                              | ** **               | ** ** | ** ** |
| ** **                                                                                                   | ** ** | ** **       | ** ** | **Annual Compensation** | ** **                 | **Options/SARS **   | ** **               | **All Other **                    | ** **               |
| **Name and Principal Position**                                                               | ** ** | **Year**         | ** ** | **Salary (1)**          | ** **                 | **Bonus(2)**             | ** **               | **(#)**                                     | ** **               | **Compensations** | ** ** |
| John R.  Lyon(3) 

Chairman of  Board                                                              |       | 2003

2004

2005 |       | $  $  $                      | 214,446   214,446   79,716 |                     | $

 

         | 45,000   — 

—                    |                     | — 

5,000 

1,000 |   | — 

— 

— |   |
| Michael H.  Owens, M.D. 

President,  Chief Executive Officer and Director                              |       | 2003

2004

2005 |       | $  $  $                      | 64,904   225,000   225,000 |                     | $                        | 30,000

—

—                      |                     | 6,000 

5,750 

22,149 |   | — 

— 

— |   |
| Howard  Sampson(4)(5)                                                                                   |       | 2003             |       | —                       |                       | —                   |                     | —                                      |                     | — |   |
| former Vice  President of Finance,                                                                           |       | 2004             |       | $                            | 108,853                    |                     | —                   |                                        | 6,500                    |   | $ | 51,363 |   |
| Chief  Financial Officer and Secretary                                                                       |       | 2005             |       | $                            | 145,067                    |                     | —                   |                                        | 6,500                    |   | $ | 16,667 |   |
| J. Bradford  Hanson(4)(6) 

former Vice  President of Finance, 

Chief  Financial Officer and Secretary |       | 2003

2004

2005 |       |  

$                    | —

—

63,327     |                     | — 

— 

— |                                        | — 

— 

15,000 |   | —  — 

— |   |
| Richard M.  Gomberg(6) 

Vice  President of Finance, Chief 

Financial  Officer and Secretary           |       | 2003

2004

2005 |       | — 

— 

—     |                       | — 

— 

— |                     | — 

— 

—                    |                     | — 

— 

— |   |
|                                                                                                              |            |                  |            |                              |                            |                          |                          |                                             |                          |  |  |  |  |  |  |

 

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(1)                                  Includesamounts deferred pursuant to our 401(k) Plan.

(2)                                  2005bonus payment awarded pursuant to annual incentive compensation.

(3)                                  Mr. Lyonserved as our Chief Executive Officer until April 1, 2005.

(4)                                  EffectiveAugust 15, 2005, Mr. Sampson terminated his employment with theCompany and Mr. Hanson began serving as the Company’s Vice President ofFinance, Chief Financial Officer and Secretary.

(5)                                  2004Other compensation represents payments for consulting services rendered by Mr. Sampsonto the Company prior to his employment on June 1, 2004. 2005 Othercompensation represents one month severance.

(6)                                  EffectiveFebruary 28, 2006, Mr. Hanson terminated his employment with theCompany and, effective February 13, 2006, Mr. Gomberg began servingas the Company’s Chief Financial Officer and Secretary.

 

**Stock Options and StockAppreciation Rights**

 

The following table sets forth informationconcerning stock option grants made to each of the Named Executive Officers forthe 2005 fiscal year, and the potential realizable value of those grants (on apre-tax basis) determined in accordance with SEC rules. The information in thistable shows how much the Named Executive Officers may eventually realizein future dollars under two hypothetical situations: if the price of the commonstock increases 5% or 10% in value per year, compounded over the life of theoptions. These amounts represent assumed rates of appreciation, and are notintended to forecast future appreciation of the common stock.

 

The Company granted no stock appreciationrights (“SARs”) to Named Executive Officers during 2005.

 

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**OPTION GRANTS IN LAST FISCAL YEAR**

** **
| ** **                   | ** ** | **Individual Grants** | ** ** | **Potential Realizable ** | ** ** |
|------------------------------|------------|----------------------------|------------|-------------------------------------|------------|
| ** **                   | ** ** | ** **                 | ** ** | **% of Total **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                   | ** ** | **Number of **   | ** ** | **Options **                   | ** ** | ** ** | ** ** | ** ** | ** ** | **Value at Assumed ** | ** ** |
| ** **                   | ** ** | **Securities**             | ** ** | **Granted to **           | ** ** | ** ** | ** ** | ** ** | ** ** | **Annual Rates of Stock ** | ** ** |
| ** **                   | ** ** | **Underlying**             | ** ** | **Employees **                 | ** ** | **Exercise** | ** ** | ** ** | ** ** | **Price Appreciation for ** | ** ** |
| ** **                   | ** ** | **Options**                | ** ** | **in Fiscal **            | ** ** | **Price Per ** | ** ** | **Expiration ** | ** ** | **Option Term(2)** | ** ** |
| **Name**                     | ** ** | **Granted (3)**       | ** ** | **Year**                            | ** ** | **Share (1)** | ** ** | **Date** | ** ** | **5%** | ** ** | **10%** | ** ** |
| John R. Lyon                 |       | 3,500                      |       | 3                                   | %          | $ | 10.30 |   | 01/04/2015 |   | $ | 22,673 |   | $ | 57,456 |   |
| Michael H.  Owens, M.D. |       | 10,000                     |       | 10                                  | %          | $ | 9.20 |   | 03/23/2015 |   | $ | 57,858 |   | $ | 146,624 |   |
| Michael H.  Owens, M.D. |       | 12,149                     |       | 12                                  | %          | $ | 10.30 |   | 01/04/2015 |   | $ | 78,696 |   | $ | 199,431 |   |
| Howard  Sampson              |       | 6,500                      |       | 6                                   | %          | $ | 10.30 |   | 01/04/2015 |   | $ | 42,105 |   | $ | 106,702 |   |
| Howard  Sampson              |       | 3,500                      |       | 3                                   | %          | $ | 3.00 |   | 08/26/2015 |   | $ | 6,605 |   | $ | 16,735 |   |
| J. Bradford  Hanson          |       | 15,000                     |       | 15                                  | %          | $ | 4.20 |   | 08/15/2015 |   | $ | 39,621 |   | $ | 100,406 |   |
| Richard M.  Gomberg          |       | —                     |       | —                              |       | — |   | — |   | — |   | — |   |

 

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(1)                                  Theexercise price per share of options granted represented the fair market valueof the underlying shares of common stock on the dates the respective optionswere granted as determined by the Board in accordance with certain provisionsof the 1997 Stock Option/Stock Issuance Plan based on the closing selling priceper share of a share of common stock on the date in question as reported by theNasdaq Capital Market. The exercise price may be paid in cash or in sharesof common stock valued at fair market value on the exercise date or may bepaid with the proceeds from a same-day sale of the purchased shares. We alsohave authority to finance the optionee’s exercise of the option by loaning suchindividual, on a full-recourse basis, sufficient funds to cover the exerciseprice for the purchased shares, together with any federal and state withholdingtax liability incurred by the optionee in connection with the option purchase.

 

(2)                                  The 5% and 10% assumed annual rates ofcompounded stock price appreciation are mandated by rules of theCommission. The price used for computing this appreciation is the exerciseprice of the options. There is no assurance provided to any executive officeror any other holder of our securities that the actual stock price appreciationover the 10-year option term will be at the assumed 5% or 10% levels or at any otherdefined level.

 

(3)                                  Eachof the options granted have a maximum term of ten years measured from theapplicable grant date, subject to earlier termination in the event of theoptionee’s cessation of service with us. Each of the options granted will becomeexercisable in equal monthly installments over the next 36 months of servicethereafter. However, each of the options will immediately become exercisablefor all of the option shares in the event we are acquired by a merger or assetsale, unless the options are assumed by the acquiring entity, or in the eventthere is a hostile change in control or ownership.

 

**Option Exercises and Holdings**

 

The following table provides informationconcerning option exercises during 2005 by the Named Executive Officers and thevalue of unexercised options held by each of the Named Executive Officers as ofDecember 31, 2005. No SARs were exercised during 2005 or outstanding as ofDecember 31, 2005.

 

**AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCALYEAR-END OPTION VALUES**

** **
| ** **                   | ** ** | **Shares   Acquired   on Exercise** | ** ** | **Value ** | ** ** | **Number of Securities   Underlying Unexercised Options  at December 31, 2005** | ** ** | **Value of Unexercised In-The-  Money Options At December 31,  2005(2)** | ** ** |
|------------------------------|------------|----------------------------------------------------|------------|-----------------|------------|--------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------|------------|
| **Name**                     | ** ** | **(#)**                                            | ** ** | **Realized(1)** | ** ** | **Exercisable**                                                                                                    | ** ** | **Unexercisable**                                                                                           | ** ** | **Exercisable** | ** ** | **Unexercisable** | ** ** |
| John R. Lyon            |       | —                                             |       | —          |       | 16,013                                                                                                             |       | 3,886                                                                                                       |       | $ | — |   | $ | — |   |
| Michael H.  Owens, M.D. |       | —                                             |       | —          |       | 14,679                                                                                                             |       | 19,220                                                                                                      |       | — |   | — |   |
| Howard  Sampson              |       | —                                             |       | —          |       | —                                                                                                             |       | 3,500                                                                                                       |       | — |   | $ | 7,315 |   |
| J. Bradford  Hanson          |       | —                                             |       | —          |       | —                                                                                                             |       | 15,000                                                                                                      |       | — |   | $ | 13,350 |   |
| Richard M.  Gomberg          |       | —                                             |       | —          |       | —                                                                                                             |       | —                                                                                                      |       | — |   | — |   |
|                              |            |                                                    |            |                 |            |                                                                                                                    |            |                                                                                                             |            |  |  |  |  |  |  |

 

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(1)                                  “Valuerealized” is calculated on the basis of the fair market value of the commonstock on the date of exercise minus the exercise price and does not necessarilyindicate that the optionee sold such stock.

(2)                                  “Value”is defined as fair market price of the common stock at fiscal year-end ($5.09)less exercise price.

 

**Compensation of Directors**

 

The Company reimburses its directors for allreasonable and necessary travel and other incidental expenses incurred inconnection with their attendance at meetings of the Board. The Company alsocompensates its outside directors $1,000 per month for their services asdirectors, $1,500 for each board meeting that they attend in person, $250 foreach telephonic meeting and $500 for each committee meeting they participatein.

 

Under the Company’s 1997 StockOption/Issuance Plan, as amended, on the date of each annual meeting ofstockholders, option grants shall be made to (i) each new director who iselected to the Board at that particular annual meeting and (ii) eachcontinuing director. Each director shall be granted an option to purchase 4,000shares of common stock at the annual meeting at which he or she is firstelected to the Board and an option to purchase 1,000 shares of common stock ateach annual meeting thereafter. In addition, each new director who is electedto the Board at a time other than an annual meeting shall be granted an optionto purchase 4,000 shares of common stock and shall thereafter be eligible forthe regular 1,000 share grants described above. The grant of 4,000 shares shallvest as follows:  50% upon completion ofone year of Service and 25% upon completion of each of the second and thirdyears of service. Each 1,000 share option grant shall vest upon completion ofone year of service from the date of grant. No portion of the automatic optiongrant shall vest after the optionee has ceased to be a member of the Board.However, the shares will immediately vest in full upon changes in control orownership or upon the optionee’s death or disability. Following the optionee’scessation of Board service for any reason, each outstanding automatic optionremains exercisable for a 30-month period and may be exercised during thattime for any or all shares in which the optionee is vested at the time of suchcessation of Board service.

 

We have proposed an amendment to the 1997Stock Option/Issuance Plan, which, if approved by the Company’s stockholders atour 2006 Annual Meeting of Stockholders, will increase the automatic grantprogram under the 1997 Stock Option/Stock Issuance Plan to increase the size ofthe initial and annual stock option grants to non-employee members of the Boardto 12,500 shares and 7,500 shares, respectively. Other than increasing the sizeof initial and annual grants, the other terms and conditions of the automaticgrant program shall remain unchanged.

 

Mr. Toney waived his right to receiveannual option grants under the automatic grant program for fiscal years 2005and 2006.

 

**Indemnification Obligations**

 

We have entered into indemnificationagreements with our directors and executive officers. Such agreements requireus, among other things, to indemnify our officers and directors, other than forliabilities arising from willful misconduct of a culpable nature, and toadvance their expenses incurred as a result of any proceedings against them asto which they could be indemnified.

 

Our Second Restated Certificate ofIncorporation eliminates, subject to certain exceptions, directors’ personalliability to us or our stockholders for monetary damages for breaches offiduciary duties. The Second Restated Certificate of Incorporation does not,however, eliminate or limit the personal liability of a director for (i) anybreach of the director’s duty of loyalty to us or our stockholders, (ii) actsor omissions not in good faith or which involve intentional misconduct or aknowing violation of law, (iii) unlawful payments of dividends or unlawfulstock repurchases or redemptions as provided in Section 174 of theDelaware General Corporation Law or (iv) any transaction from which thedirector derived an improper personal benefit.

 

Our Restated Bylaws provide that we shallindemnify our directors and executive officers to the fullest extent permittedunder the Delaware General Corporation Law and may indemnify our otherofficers, employees and other agents as set forth in the Delaware GeneralCorporation Law.

 

We believe that these provisions andagreements are necessary to attract and retain qualified directors andofficers. We have obtained an insurance policy covering directors and officersfor claims that such directors and officers may otherwise be required topay or for which we are required to indemnify them, subject to certainexclusions.

 

8

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**Change of Control Provisions**

 

Fifty percent of certain unvested sharessubject to options outstanding to our executive officers will immediately vestif we are acquired by a merger or asset sale, unless our repurchase rights withrespect to those shares are transferred to the acquiring entity. The otherfifty percent of these shares vest if the employee is terminated without causewithin two years of the merger or asset sale.

 

**Compensation Committee Interlocksand Insider Participation**

 

The Compensation Committee currently consistsof Messrs. DeHuff and Durham. The Compensation Committee administers theCompany’s benefit plans, reviews and administers all compensation arrangementsfor executive officers, and establishes and reviews general policies relatingto the compensation and benefits of our officers and employees. There are nointerlocking relationships between any of our executive officers and members ofthe Compensation Committee, on the one hand, and the executive officers andcompensation committee of any other company, on the other hand, nor has anysuch interlocking relationship existed during the 2005 fiscal year.

 

**Compensation Committee Report onExecutive Compensation**

 

It is the duty of the Compensation Committeeto review and determine the salaries and bonuses of executive officers of theCompany, including the Chief Executive Officer, and to establish the generalcompensation policies for such individuals. The Compensation Committee also hasthe sole and exclusive authority to make discretionary option grants to theCompany’s executive officers under the Company’s 1997 Stock Option/StockIssuance Plan.

 

The Compensation Committee believes that thecompensation programs for the Company’s executive officers should reflect theCompany’s performance and the value created for the Company’s stockholders. Inaddition, the compensation programs should support the short-term and long-termstrategic goals and values of the Company and should reward individualcontribution to the Company’s success. The Company is engaged in a verycompetitive industry, and the Company’s success depends upon its ability toattract and retain qualified executives through the competitive compensationpackages it offers to such individuals.

 

**GENERAL COMPENSATION POLICY**.The Compensation Committee’s policy is to provide the Company’s executiveofficers with compensation opportunities that are based upon their personalperformance, the financial performance of the Company and their contribution tothat performance and which are competitive enough to attract and retain highlyskilled individuals. Each executive officer’s compensation package is comprisedof three elements: (i) base salary that is competitive with the market andreflects individual performance; (ii) annual variable performance awardspayable in cash and tied to the Company’s achievement of performance goals and (iii) long-termstock- based incentive awards designed to strengthen the mutuality of interestsbetween the executive officers and the Company’s stockholders.

 

**FACTORS**. Theprincipal factors that were taken into account in establishing each executiveofficer’s compensation package for the 2005 fiscal year are described below.However, the Compensation Committee may in its discretion apply entirelydifferent factors, such as different measures of financial performance, forfuture fiscal years.

 

**BASE SALARY**. Insetting base salaries, the Compensation Committee reviewed published compensationsurvey data for its industry. The Committee also identified a group ofcompanies for comparative compensation purposes for which it reviewed detailedcompensation data incorporated into their proxy statements. The base salary foreach officer reflects the salary levels for comparable positions in thepublished surveys and the comparative group of companies, as well as theindividual’s personal performance and internal alignment considerations. Eachexecutive officer’s base salary is adjusted each year on the basis of (i) theCompensation Committee’s evaluation of the officer’s personal performance forthe year and (ii) the competitive marketplace for persons in comparablepositions. The Company’s performance and profitability may also be afactor in determining the base salaries of executive officers.

 

**ANNUAL INCENTIVES**.Annual incentives in the form of cash bonuses are awarded by theCompensation Committee based upon its evaluation of the performance of eachexecutive officer and the achievement of the Company’s performance goals duringthe year, which included revenue growth, operating income, earnings per shareand product commercialization. In 2005 there was an annual incentivecompensation award of $30,000 paid to Dr. Owens.

 

**LONG TERM INCENTIVES**.Generally, stock option grants are made annually by the Compensation Committeeto each of the Company’s executive officers. Each grant is designed to alignthe interests of the executive officer with those of the stockholders andprovide each individual with a significant incentive to manage the Company fromthe perspective of 

 

9

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an owner with an equity stake in the business. Each grant allows theofficer to acquire shares of the Company’s Common stock at a fixed price pershare (the market price on the grant date) over a specified period of time (upto 10 years). Each option becomes exercisable in a series of installmentsover a three to five-year period, contingent upon the officer’s continuedemployment with the Company. Accordingly, the option will provide a return tothe executive officer only if he or she remains employed by the Company duringthe vesting period, and then only if the market price of the shares appreciatesover the option term.

 

The size of the option grant to eachexecutive officer is set by the Compensation Committee at a level that isintended to create a meaningful opportunity for stock ownership based upon theindividual’s current position with the Company, the individual’s personal performancein recent periods and his or her potential for future responsibility andpromotion over the option term. The relevant weight given to each of thesefactors varies from individual to individual. The Compensation Committee hasestablished certain guidelines with respect to the option grants made to theexecutive officers, but has the flexibility to make adjustments to thoseguidelines at its discretion.

 

**CEO COMPENSATION**. Insetting the total compensation payable to Dr. Owens, the Company’sPresident and Chief Executive Officer from April 1 through December 31,2005, the Compensation Committee sought to make that compensation competitivewith the compensation paid to the chief executive officers of the companies inthe surveyed group, while at the same time assuring that a significantpercentage of compensation was tied to Company performance and achievement ofits goals.

 

On April 19, 2006, following arecommendation by the Compensation Committee, the Board approved a newcompensation arrangement for Michael H. Owens, M.D., the Company’s Presidentand Chief Executive Officer, including an annual base salary of $250,000 andannual bonus eligibility of up to $100,000. The Committee also approved aretention agreement under which terms Dr. Owens is entitled to receive upto one year salary severance and COBRA coverage in the event his employment isterminated under certain defined circumstances following a change of control ofthe Company and up to six months salary severance and COBRA coverage in the eventhis employment is terminated under certain defined circumstances prior to achange of control of the Company. The Board also approved a proposed optiongrant to Dr. Owens consisting of 210,389 shares of Common Stock,contingent upon stockholder approval of an increase to the shares authorized for grant under the Company’s 1997Stock Option/Stock Issuance Plan, which the Company intends to submit to itsstockholders at the 2006 Annual Meeting of Stockholders. If the Company’sstockholders do not approve this proposed amendment at the 2006 Annual Meetingof Stockholders, Dr. Owens will be granted 70,130 shares of restrictedstock. These shares of restricted stock will be subject to a repurchase rightin favor of the Company, which right will terminate over a four-year period as Dr. Owenscontinues to provide services to the Company.

 

The Compensation Committee did not adjust Mr. Lyon’sbase salary for the 2005 fiscal year over the 2004 fiscal year level. Mr. Lyonserved as the Company’s Chief Executive Officer until April 1, 2005.

 

**COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)**.The Compensation Committee has considered the potential impact of Section 162(m)of the Internal Revenue Code adopted under the Federal Revenue ReconciliationAct of 1993. Section 162(m) disallows a tax deduction for anypublicly-held corporation for individual compensation exceeding $1 million inany taxable year for any of the Named Executive Officers, unless compensationis performance based. Since the targeted cash compensation of each of the NamedExecutive Officers is well below the $1 million threshold and the CompensationCommittee believes that any options granted under the Company’s stock optionplan will meet the requirement of being performance based under the transitionprovisions provided in the regulations under Section 162(m), theCompensation Committee believes that Section 162(m) will not reduce thetax deduction available to the Company. The Company’s policy is to qualify tothe extent reasonable its executive officers’ compensation for deductibilityunder applicable tax laws.

 

It is the opinion of the CompensationCommittee that the executive compensation policies and plans provide thenecessary total remuneration program to properly align the Company’s performanceand the interests of the Company’s stockholders through the use of competitiveand equitable executive compensation in a balanced and reasonable manner, forboth the short and long-term.

 

Submitted by the Compensation Committee ofthe Company’s Board of Directors.

 

Mr. DeHuff

Mr. Durham

 

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**Item 11.****                     SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS**

 

**Security Ownership of CertainBeneficial Owners and Management**

 

The following table sets forth certaininformation known to us with respect to the beneficial ownership of our commonstock as of March 31, 2006, by (i) all persons who are beneficialowners of five percent (5%) or more of our common stock, (ii) each director,(iii) the Named Executive Officers and (iv) all directors and NamedExecutive Officers as a group.

 

Except as indicated in the footnotes to thistable, the persons named in the table have sole voting and investment powerwith respect to all shares of common stock shown as beneficially owned by them,subject to community property laws, where applicable. Share ownership in eachcase includes shares issuable upon exercise of certain outstanding options asdescribed in the footnotes below. The address for those individuals for whichan address is not otherwise indicated is: 11455 El Camino Real, Suite 140,San Diego, California 92130.

 
| **Name and Address of Beneficial Owner** | ** ** | **Number of  Shares** | ** ** | **Percentage   Beneficially   Owned(1)** | ** ** |
|-------------------------------------------------------------------|------------|----------------------------|------------|----------------------------------------------------|------------|
| **5% of  Greater Stockholders**                                   |       |                       |       |                                               |       |
| MedCap  Partners L.P.(2)                                          |       | 817,413                    |       | 27.0                                               | %          |
| 500 Third  Street, Suite 535                                 |       |                       |       |                                               |       |
| San  Francisco, CA 94107                                          |       |                       |       |                                               |       |
| Whalehaven  Capital Fund Limited(3)                               |       | 323,778                    |       | 11.5                                               | %          |
| 3rd  Floor, 14 Par-Laville Road                                   |       |                       |       |                                               |       |
| Hamilton,  Bermuda HM08                                           |       |                       |       |                                               |       |
| C. Glen  Dugdale(4)                                               |       | 225,550                    |       | 8.2                                                | %          |
| 3609  Centerville Road                                            |       |                       |       |                                               |       |
| Greenville,  DE 19807                                             |       |                       |       |                                               |       |
| Scott R.  Pancoast(5)                                             |       | 194,263                    |       | 7.1                                                | %          |
| 6335 Ferris  Square, Suite A                                 |       |                       |       |                                               |       |
| San Diego,  CA 92121                                              |       |                       |       |                                               |       |
| **Directors  and Named Executive Officers**                       |       |                       |       |                                               |       |
| C. Fred  Toney(2)                                                 |       | 817,413                    |       | 27.0                                               | %          |
| Scott R.  Pancoast(5)                                             |       | 194,263                    |       | 7.1                                                | %          |
| Michael H.  Owens, M.D.(6)                                        |       | 73,504                     |       | 2.7                                                | %          |
| John R.  Lyon(7)                                                  |       | 23,671                     |       |                                               | *          |
| George B.  DeHuff(8)                                              |       | 3,250                      |       |                                               | *          |
| James D. Durham(9)                                                |       | 2,000                      |       |                                               | *          |
| William J.  Nydam                                                 |       | —                     |       | —                                             |       |
| Richard M.  Gomberg                                               |       | —                     |       | —                                             |       |
| All directors  and executive officers as a group (10 persons)(10) |       | 1,114,101                  |       | 35.1                                               | %          |

 

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*                                         Lessthan 1%

 

(1)                                  Percentageof ownership is based on 2,665,996 shares of common stock outstanding on March 31,2006. Shares of common stock subject to stock options and warrants which arecurrently exercisable or will become exercisable within 60 days after March 31,2006, are deemed outstanding for computing the percentage of the person orgroup holding such options or warrants, but are not deemed outstanding forcomputing the percentage of any other person or group.

 

(2)                                  Includes321,387 shares beneficially owned by MedCap Partners L.P. and 227,360 sharesissuable upon exercise of warrants and 133,333 shares beneficially owned byMedCap Master Fund, L.P. and 133,333 shares issuable upon exercise of warrantsand 2,000 shares issuable upon exercise of options within 60 days of March 31,2006. C. Fred Toney, one of our directors, is a Managing Member of MedCapManagement & Research LLC, which is the General Partner of MedCapPartners L.P. Mr. Toney disclaims beneficial ownership of the shares ownedby these entities, except to the extent of his proportionate pecuniary interesttherein.

 

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(3)                                  Includes186,087 shares beneficially owned by Whalehaven Capital Fund Limited and137,691 shares issuable upon exercise of warrants. Arthur Jones, Jennifer Kellyand Derek Wood, directors of Whalehaven Capital Fund Limited, hold voting andinvestment power over all of the shares.

 

(4)                                  Includesthe following shares and shares issuable upon exercise of warrants beneficiallyowned or deemed beneficially owned by C. Glen Dugdale, including 25,000 sharesand a warrant for 25,000 shares held by C. Glen Dugdale Tr M B DugdaleMarital Trust UA 07/19/03, 18,200 shares and a warrant for 14,100 shares heldby C Glen Dugdale + Joan Dugdale Jt Ten, 12,200 shares and a warrant for 17,100shares held by Beadenkopf/Dugdale Trust UA 2/10/56 Fbo C. Glen Dugdale, 12,000shares held by C. Glen Dugdale TR Beadenkopf/Dugdale Trust UA 02/10/56, 4,400shares and a warrant for 2,200 shares held by Joan O. Dugdale, 15,200 sharesand a warrant for 12,600 shares held by C. Glen Dugdale Tr Martha B. DugdaleGeneration Skipping Trust UA 03/25/91, 13,500 shares and a warrant for 11,750shares held by Matthew J. Yaahovian Tr C G & J. O. Dugdale CharitableRemainder Trust UA 01/17/96, 3,000 shares held by C. Glen Dugdale Tr Martha B.Dugdale Generation Skipping Trust UA 03/25/91, 4,800 shares held by Joan O.Dugdale - IRA, 10,000 shares held by Glen Dugdale - IRA, 14,500 shares held byGlen Dugdale, and 10,000 shares held by Matthew J. Yaahovian Tr C. G. &J. O. Dugdale Charitable Remainder Trust UA 01/17/96.

 

(5)                                  Includes2,375 shares issuable upon exercise of options exercisable within 60 days of March 31,2006 and 82,553 shares issuable upon exercise of warrants.

 

(6)                                  Includes19,842 shares issuable upon exercise of options exercisable within 60 days of March 31,2006 and 20,000 shares issuable upon exercise of warrants.

 

(7)                                  Includes17,285 shares issuable upon exercise of options exercisable within 60 days of March 31,2006.

 

(8)                                  Includes3,250 shares issuable upon exercise of options exercisable within 60 days of March 31,2006.

 

(9)                                  Consistsof 2,000 shares issuable upon exercise of options exercisable within 60 days ofMarch 31, 2006.

 

(10)                            Includes46,752 shares issuable upon exercise of options exercisable within 60 days of March 31,2006 and 463,246 shares issuable upon exercise of warrants. See alsofootnotes 2, 5 and 6.

 

**Securities Authorized forIssuance Under Equity Compensation Plans**

 

**EQUITYCOMPENSATION PLAN INFORMATION**

 

The following tablecontains aggregated information regarding our equity compensation plans as of December 31,2005.

 
| **Plan Category**                                      | ** ** | **Number of securities to  be issued upon exercise  of outstanding options,  warrants and rights (#)** | ** ** | **Weighted average   exercise price of   outstanding options,  warrants and rights   ($ )/sh.** | ** ** | **Number of securities  remaining available for  future issuance under  equity compensation  plans (excluding  securities reflected in  column (a)) (#)** | ** ** |
|-------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                  | ** ** | **(a)**                                                                                                                                                       | ** ** | **(b)**                                                                                                                                           | ** ** | **(c)**                                                                                                                                                                                                               | ** ** |
| Equity  compensation plans approved by security holders(1)  |       | 174,481                                                                                                                                                       |       | $11.86                                                                                                                                            |       | 211,121(2)                                                                                                                                                                                                            |       |
| Equity  compensation plans not approved by security holders |       | None                                                                                                                                                          |       | None                                                                                                                                              |       | None                                                                                                                                                                                                                  |       |
| Total                                                       |       | 174,481                                                                                                                                                       |       | $11.86                                                                                                                                            |       | 211,121                                                                                                                                                                                                               |       |

 

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(1)                                  Equitycompensation plans approved by our security holders include our 1997 StockOption/Stock Issuance Plan and our 1997 Employee Stock Purchase Plan.

 

(2)                                 The1997 Stock Option/Stock Issuance Plan contains a provision for an automaticincrease in the number of shares available for grant each January 1 forthe life of the plan by a number of shares equal to the least of: (i) 2%of the number of shares of our common stock issued and outstanding on theimmediately preceding December 31, (ii) 1,500,000 shares, or (iii) anumber of shares set by our Board of Directors.

 

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**Item 12.****                     CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS**

 

**Reverse Stock Split**

 

On July 19, 2005, the stockholders ofthe Company voted to grant authority to the Board to file an amendment to theCompany’s Second Restated Certificate of Incorporation to effect, at thediscretion of the Board, a reverse stock split of the issued and outstandingcommon stock in a ratio for such split that was not less than 1:2 nor greaterthan 1:10. On October 6, 2005, the Board acted on its authority to effectthe reverse split of all common stock issued and outstanding (the “ReverseSplit”) at a rate of 1:10. As a result of the Reverse Split, all common sharesand per share prices for common stock below have been retroactively adjusted.

 

**Series A Financing**

 

In March 2003, we authorized and issued1,000,000 shares of Series A Convertible Preferred Stock (the “Series AShares”), which were created pursuant to the terms of a Certificate ofDesignations, for an aggregate of $950,000 in cash (the “Series AFinancing”). In connection with the Series A Financing, the purchasers of Series AShares were granted several significant rights senior to the rights of holdersof our common stock. Among other rights, in the event of a liquidation,dissolution or winding up of our Company (including consolidations, mergers orother sales), holders of Series A Shares were entitled to receive $3.80 pershare, in preference to any distribution to the holders of common stock. Also,pursuant to the Certificate of Designations, we were required to obtain theconsent of the holders of at least two-thirds of the outstanding Series AShares in order to undertake certain actions, including significant capitalexpenditures and the issuance of equity securities. Additionally, for as longas Series A Shares remained outstanding beyond April 2004, theholders of Series A Shares were entitled to elect the greater of (i) twomembers of our Board of Directors or (ii) 25% of the total members of ourBoard of Directors.

 

In June 2004, we amended the Series ACertificate of Designations to allow us the right to issue equity securitiesfor less than $2.00 per share. For that right, the Series A holdersreceived 1,400,000 shares of Viking common stock valued at $28,000, and weredeemed 85,000 Series A Shares for $200,000. In addition, we obtained theright to redeem an additional 300,000 Series A Shares at any time on orbefore January 15, 2006 for $500,000. The holders of the outstanding Series AShares had the right to one vote for each share of common stock into which suchSeries A Shares could then be converted, and with respect to such vote,such holder had full voting rights and powers equal to the voting rights andpowers of the holders of common stock.

 

The holders of Series A Shares were entitledto receive dividends, out of any assets legally available therefore, prior andin preference to any declaration or payment of any cash dividend on the commonstock, at the rate of $0.1425 per share per annum.

 

In connection with the private placementclosed on July 26, 2005, we completed an exchange with the holders of theoutstanding Series A Shares. In this transaction, the holders of Series AShares exchanged their 826,447 shares of Series A Shares for 124,608Units, 52,644 shares of common stock and $126,174 in cash. Each unit wasidentical to the units sold in the private placement described below andaccordingly, we issued 177,252 shares of common stock and warrants to purchase124,608 shares of common stock in the exchange. As a result of this exchange,there was $306,511 in previously accreted dividends reversed against net lossavailable to common stockholders. The value of the consideration paidapproximated the fair value of the preferred stock surrendered, includingaccreted but unpaid dividends and therefore no gain or loss was recorded.Following this exchange, we have no outstanding Series A Shares.

 

Mr. Pancoast, one of our directors,participated in the Series A Financing by purchasing 447,368 Series AShares of which 38,026 were converted to common stock in June 2004. Mr. Pancoastexchanged his remaining 409,342 Series A Shares for 26,075 shares ofcommon stock and 82,550 units that were issued in the July 26, 2005private placement.

 

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**2004 Common Stock and WarrantFinancing**

 

In May 2004, we sold to a group ofaccredited investors 545,454 units of our securities for $8.50 per unit, eachunit consisting of one share of common stock and one warrant to purchaseone-half share of common stock, for aggregate gross proceeds of approximately$4.6 million, or $4.1 million net of expenses. The 272,727 warrant shares are exercisableat a price of $9.50 per share and expire in May 2009. As part of the May 2004unit sale, we issued warrants to the placement agent to purchase up to 81,817shares of our common stock of which 54,545 of these warrants are exercisable ata price of $10.20 per share and the remaining 27,272 warrants are exercisableat a price of $9.50 per share and expire in May 2009.

 

Mr. Toney, one of our directors, is aManaging Member of MedCap Management &Research LLC, which is theGeneral Partner of MedCap Partners L.P. MedCap Partners L.P. purchased a totalof 188,054 units in the common stock and warrant financing. In addition, inconnection with such financing, MedCap Partners L.P. nominated two of thedirectors currently serving on our Board of Directors, James D. Durham and C.Fred Toney. Mr. Durham has investments in MedCap Partners L.P.

 

**2005 Common Stock and WarrantFinancing / Series A Exchange**

 

In July 2005, we sold to a group ofaccredited investors 833,328 units of our securities for $3.00 per unit, eachunit consisting of one share of common stock and one warrant to purchase oneshare of common stock, for aggregate gross proceeds of approximately $2.2million net of expenses. The warrants are exercisable at a price of $3.00 pershare and expire in July 2010. Under the terms of the private placement,the Company and the holders of the Company’s Series A Shares converted the826,447 outstanding shares of Series A Shares into 124,608 Units, 52,644shares of common stock and $126,174 in cash. As part of the July 2005unit sale, we issued warrants to the placement agent to purchase up to 83,332shares of our common stock exercisable at $3.00 per share.

 

MedCap Partners L.P. and MedCap Master Fund,L.P. purchased an aggregate of 266,666 units ($800,000). Michael H. Owens,M.D., the Company’s President and Chief Executive Officer, purchased 20,000units ($60,000).

 

**Item 13.****                     EXHIBITS**

 

The following exhibits are filed herewith:

 
| **NUMBER   EXHIBIT** | ** ** | **DESCRIPTION**                                                                                                      |
|----------------------|------------|----------------------------------------------------------------------------------------------------------------------|
|                 |       |                                                                                                                 |
| 31.1                 |       | Certification of Principal Executive  Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002         |
| 31.2                 |       | Certification of Principal Financial  Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002         |
| 32.1                 |       | Certification pursuant to 18 U.S.C. 1350,  as adapted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

 

**Item 14.****                     PRINCIPAL ACCOUNTANT FEES AND SERVICES**

 

Our Board of Directors appointed J. H. CohnLLP on September 27, 2004 as our independent registered public accountantsfor the fiscal year ended December 1, 2004. Ernst & Young LLPserved as our independent registered public accountants until October 1,2004. The following table shows the fees paid or accrued by us for the auditand other services provided by J. H. Cohn LLP during fiscal year 2005 and byJ.H. Cohn LLP and Ernst & Young LLP during fiscal 2004.

 
| ** **          | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------|------------|----------|------------|----------|------------|
| Audit  Fees(1)      |       | $        | 185,720    |     | $          | 218,018 |   |
| Audit-Related  Fees |       | —   |       | —   |       |
| Tax Fees(2)         |       | 5,000    |       | 17,250   |       |
| All other  Fees     |       | —   |       | —   |       |
| Total               |       | $        | 190,720    |     | $          | 235,266 |   |

 

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(1)                                  Auditfees represent fees for professional services provided in connection with theaudit of our annual financial statements and review of our quarterly financialstatements and audit services provided in connection with other statutory orregulatory filings.

 

(2)                                  Forfiscal 2005 and 2004, respectively, tax fees principally included taxcompliance fees of $5,000 and $15,000, and tax advice and tax planning fees of$0 and $2,250.

 

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**Audit Committee Pre-ApprovalPolicy**

 

As discussed in the Audit Committee Charter,the Audit Committee of the Board of Directors requires pre-approval of anyaudit or non-audit engagement of our independent registered public accountants.For 2005, all audit and non-audit services were approved by the Audit Committeeprior to the commencement of such work.

 

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**SIGNATURES**

 

In accordance with Section 13 or 15(d) ofthe Securities Exchange Act of 1934, the registrant caused this report to besigned on its behalf by the undersigned, thereunto duly authorized.

 
|                   | iVOW, INC. |
|------------------------|-----------------|
|                   |            |
|                   |            |
| Date: May 1, 2006 | By:             | /s/ Michael H. Owens |   |
|                   |            | Michael H. Owens |
|                   |            | President and Chief Executive Officer |

 

In accordance with the Securities ExchangeAct of 1934, this report has been signed below by the following persons onbehalf of the registrant in the capacities and on the dates indicated.

 
| **SIGNATURE**                                     | ** ** | **TITLE**                                                             | ** **                                       | **DATE** |
|---------------------------------------------------|------------|-----------------------------------------------------------------------|--------------------------------------------------|----------|
|                                              |       |                                                                  |                                             |     |
| /s/ Michael H. Owens                              |       |                                                                  | President, Chief Executive Officer and  Director |     | May 1, 2006 |
|     (Michael H. Owens,  M.D.) |       | (Principal  Executive Officer)                                        |                                             |     |
|                                              |       |                                                                  |                                             |     |
| /s/ Richard M. Gomberg                            |       |                                                                  | Vice President of Finance and                    |     | May 1, 2006 |
|     (Richard M.  Gomberg)     |       | Chief Financial Officer  (Principal Financial and Accounting Officer) |                                             |     |
|                                              |       |                                                                  |                                             |     |
| *                                                 |       |                                                                  | Director                                         |     |   |
|     (George B. DeHuff)        |       |                                                                  |                                             |     |
|                                              |       |                                                                  |                                             |     |
| *                                                 |       |                                                                  | Director and Chairman of the Board               |     |   |
|     (John R. Lyon)            |       |                                                                  |                                             |     |
|                                              |       |                                                                  |                                             |     |
| *                                                 |       |                                                                  | Director                                         |     |   |
|     (James D. Durham)         |       |                                                                  |                                             |     |
|                                              |       |                                                                  |                                             |     |
| *                                                 |       |                                                                  | Director                                         |     |   |
|     (William J. Nydam)        |       |                                                                  |                                             |     |
|                                              |       |                                                                  |                                             |     |
| *                                                 |       |                                                                  | Director                                         |     |   |
|     (Scott R. Pancoast)       |       |                                                                  |                                             |     |
|                                              |       |                                                                  |                                             |     |
| *                                                 |       |                                                                  | Director                                         |     |   |
|     (C. Fred Toney)           |       |                                                                  |                                             |     |

 
|   |                   |   |
|--------|------------------------|--------|
| *By:   | /s/ Richard M. Gomberg |   | May 1, 2006 |
|   | Richard M. Gomberg     |
|   | Attorney-in-Fact       |
|        |                        |        |  |

 

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