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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 10-Q

|(Mark One)                                                    |                                                                                         
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 26, 2007            
|OR                                                           
|o                                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|FOR THE TRANSITION PERIOD
FROM                             TO

Commission File Number 0-24320

TAPESTRY PHARMACEUTICALS, INC.(Exact name of Registrant as specified in its charter)

|Delaware                                                                                                              |  | 84-1187753                          
|--------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of
incorporation or organization)                                                        |  | (I.R.S. Employer
Identification No.)
|4840 Pearl East Circle, Suite 300W
Boulder, Colorado 80301(Address of principal executive office, including zip code)
|(303) 516-8500(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 ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

See
definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large
accelerated filer o                Accelerated Filer o                Non-accelerated
filer ý

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

As of November 1, 2007, the registrant had 16,629,861 shares of common stock, $0.0075 par value, outstanding.



---



Tapestry Pharmaceuticals, Inc. and Subsidiaries

Table of Contents



|Part I     |  | Financial Information
|---------- |  | ---------------------
|           |  | Item 1               
|           |  | Item 2               
|           |  | Item 3               
|           |  | Item 4               
|Part II    |  | Other Information    
|           |  | Item 1               
|           |  | Item 1A              
|           |  | Item 2               
|           |  | Item 3               
|           |  | Item 4               
|           |  | Item 5               
|           |  | Item 6               
|Signatures

2

---





Part IFinancial Information

Item 1.    Financial Statements

Tapestry Pharmaceuticals, Inc. and Subsidiaries        Consolidated Balance Sheets        (In thousands, except share data)

|                                           |                                                                                                                                                                                   | September 26,
2007 |        | December 27,
2006 |  
|------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ------ | ----------------- | -
|
|ASSETS                                     |                                                                                                                                                                                   |                    |        |                   |  
|Current assets:                            |                                                                                                                                                                                   |                    |        |                   |  
|                                           | Cash and cash equivalents                                                                                                                                                         |                    | $      | 5,577             |  
|                                           | Short-term investments                                                                                                                                                            |                    |        | 3,781             |  
|Prepaid expense and other current assets   |                                                                                                                                                                                   |                    | 351    |                   |  
|                                           |                                                                                                                                                                                   |                    |        |                   |  
|Total current assets                       |                                                                                                                                                                                   |                    | 9,709  |                   |  
|Property, plant and equipment, net         |                                                                                                                                                                                   |                    | 707    |                   |  
|Investment in ChromaDex, Inc.              |                                                                                                                                                                                   |                    | 459    |                   |  
|Other assets                               |                                                                                                                                                                                   |                    | 1,013  |                   |  
|                                           |                                                                                                                                                                                   |                    |        |                   |  
|Total assets                               |                                                                                                                                                                                   | $                  | 11,888 |                   | $
|                                           |                                                                                                                                                                                   |                    |        |                   |  
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                                                                                                                                                   |                    |        |                   |  
|Current liabilities:                       |                                                                                                                                                                                   |                    |        |                   |  
|                                           | Accounts payable and accrued liabilities                                                                                                                                          |                    | $      | 2,100             |  
|                                           | Accrued payroll and payroll taxes                                                                                                                                                 |                    |        | 1,428             |  
|                                           | Notes payablecurrent portion, net                                                                                                                                                |                    |        | 121               |  
|                                           |                                                                                                                                                                                   |                    |        |                   |  
|Total current liabilities                  |                                                                                                                                                                                   |                    | 3,649  |                   |  
|Notes payablelong term, net               |                                                                                                                                                                                   |                    | 22     |                   |  
|Commitments and contingencies              |                                                                                                                                                                                   |                    |        |                   |  
|Stockholders' equity                       |                                                                                                                                                                                   |                    |        |                   |  
|                                           | Preferred stock, $.001 par value; 2,000,000 shares authorized; none issued                                                                                                        |                    |        |                  |  
|                                           | Common stock, $.0075 par value; 100,000,000 shares authorized; 16,629,859 and 16,374,395 shares issued and outstanding at September 26, 2007 and December 27, 2006, respectively. |                    |        | 125               |  
|                                           | Additional paid in capital                                                                                                                                                        |                    |        | 148,706           |  
|                                           | Accumulated deficit                                                                                                                                                               |                    |        | (140,595          | )
|                                           | Accumulated other comprehensive loss                                                                                                                                              |                    |        | (19               | )
|                                           |                                                                                                                                                                                   |                    |        |                   |  
|Total stockholders' equity                 |                                                                                                                                                                                   |                    | 8,217  |                   |  
|                                           |                                                                                                                                                                                   |                    |        |                   |  
|Total liabilities and stockholders' equity |                                                                                                                                                                                   | $                  | 11,888 |                   | $
|                                           |                                                                                                                                                                                   |                    |        |                   |  

See
accompanying notes to Consolidated Financial Statements.

3

---



Tapestry Pharmaceuticals, Inc. and Subsidiaries        Consolidated Statements of Operations        (In thousands, except per share data)        (Unaudited)

|                                                              |                            | Three-Months Ended |        | Nine-Months Ended |  
|------------------------------------------------------------- | -------------------------- | ------------------ | ------ | ----------------- | -
|
|Operating expenses:                                           |                            |                    |        |                   |  
|                                                              | Research and development   |                    | $      | 4,526             |  
|                                                              | General and administrative |                    |        | 1,737             |  
|                                                              |                            |                    |        |                   |  
|Operating loss                                                |                            |                    | 6,263  |                   |  
|Other income (expense):                                       |                            |                    |        |                   |  
|                                                              | Interest and other income  |                    |        | 169               |  
|                                                              | Interest and other expense |                    |        | (6                | )
|                                                              |                            |                    |        |                   |  
|Loss from continuing operations                               |                            |                    | (6,100 | )                 |  
|Loss from discontinued operations                             |                            |                    |       |                   |  
|                                                              |                            |                    |        |                   |  
|Net loss                                                      |                            | $                  | (6,100 | )                 | $
|                                                              |                            |                    |        |                   |  
|Basic and diluted loss per share from continuing operations   |                            | $                  | (0.37  | )                 | $
|                                                              |                            |                    |        |                   |  
|Basic and diluted loss per share from discontinued operations |                            | $                  |       |                   | $
|                                                              |                            |                    |        |                   |  
|Basic and diluted loss per share                              |                            | $                  | (0.37  | )                 | $
|                                                              |                            |                    |        |                   |  
|Basic and diluted weighted average shares outstanding         |                            |                    | 16,600 |                   |  
|                                                              |                            |                    |        |                   |  

See
accompanying notes to Consolidated Financial Statements.

4

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Tapestry Pharmaceuticals, Inc. and Subsidiaries        Consolidated Statements of Cash Flows        (In thousands)        (Unaudited)

|                                                                            |                                                                  | Nine-Months Ended                        |        
|--------------------------------------------------------------------------- | ---------------------------------------------------------------- | ---------------------------------------- | -------
|
|Operating activities:                                                       |                                                                  |                                          |        
|Net loss                                                                    |                                                                  | $                                        | (16,681
|Adjustments to reconcile net loss to net cash used in operating activities: |                                                                  |                                          |        
|                                                                            | Depreciation and amortization                                    |                                          |        
|                                                                            | Amortization of debt discount                                    |                                          |        
|                                                                            | Amortization of investment discount                              |                                          |        
|                                                                            | Compensation paid with common stock                              |                                          |        
|                                                                            | Retirement contributions paid with common stock                  |                                          |        
|                                                                            | Loss on disposal of assets                                       |                                          |        
|                                                                            | Changes in operating assets and liabilities:                     |                                          |        
|                                                                            |                                                                  | Prepaid expense and other assets         |        
|                                                                            |                                                                  | Accounts payable and accrued liabilities |        
|                                                                            |                                                                  | Accrued payroll and payroll taxes        |        
|                                                                            |                                                                  |                                          |        
|Net cash used in operating activities                                       |                                                                  |                                          | (12,851
|Investing activities:                                                       |                                                                  |                                          |        
|                                                                            | Additions to property, plant and equipment                       |                                          |        
|                                                                            | Proceeds from sale of investments                                |                                          |        
|                                                                            | Purchases of investments                                         |                                          |        
|                                                                            |                                                                  |                                          |        
|Net cash provided by (used in) investing activities                         |                                                                  |                                          | 18,345 
|Financing activities:                                                       |                                                                  |                                          |        
|                                                                            | Proceeds from the sale of common stock, net of issuance costs    |                                          |        
|                                                                            | Repayment of debt                                                |                                          |        
|                                                                            |                                                                  |                                          |        
|Net cash (used in) provided by financing activities                         |                                                                  |                                          | (97    
|                                                                            |                                                                  |                                          |        
|Net increase in cash and cash equivalents                                   |                                                                  |                                          | 5,397  
|Cash and cash equivalents at beginning of period                            |                                                                  |                                          | 180    
|                                                                            |                                                                  |                                          |        
|Cash and cash equivalents at end of period                                  |                                                                  | $                                        | 5,577  
|                                                                            |                                                                  |                                          |        
|Non-cash investing and financing activities:                                |                                                                  |                                          |        
|                                                                            | Issuance of common stock to prepay retirement plan contributions |                                          | $      
|                                                                            |                                                                  |                                          |        

See
accompanying notes to Consolidated Financial Statements.

5

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Tapestry Pharmaceuticals, Inc. and Subsidiaries        Notes to Consolidated Financial Statements        September 26, 2007        (Unaudited)

Note 1. Basis of Presentation and Summary of Significant Accounting Policies

In the opinion of management, the accompanying unaudited consolidated balance sheets, statements of operations and statements of cash flows contain all
adjustments, consisting of only normal, recurring adjustments, necessary to present fairly the financial position of Tapestry Pharmaceuticals, Inc. and its wholly owned subsidiaries ("we," "us"
or the "Company") at September 26, 2007 and December 27, 2006, the results of its operations for the three and nine-months ended September 26, 2007 and
September 27, 2006, and cash flows for the nine-months ended September 26, 2007 and September 27, 2006.

The
unaudited consolidated financial statements presented herein have been prepared in accordance with the instructions to Form 10-Q and do not include all the
information and note disclosures required by accounting principles generally accepted in the United States. The consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 27, 2006, filed with the Securities and
Exchange Commission (the "SEC") on March 7, 2007 as well as an amendment thereto on Form 10-K/A filed with the SEC on April 26, 2007.

LIQUIDITYThe Company has no revenue and has incurred losses of approximately $6.1 million and $16.7 million for
the three and nine-months ended September 26, 2007, respectively and a loss of approximately $16.7 million for the year ended December 27, 2006. The Company has an
accumulated deficit of $140.6 million as of September 26, 2007. As of September 26, 2007, the Company had a working capital balance of $6.1 million compared to a working
capital balance of $20.2 million at December 27, 2006. As of September 26, 2007, the Company had cash and cash equivalents and short-term investments totaling
$9.4 million. Through September 26, 2007, the Company has funded its capital requirements primarily with the net proceeds of public offerings of common stock and private placements of
equity securities, with proceeds from the exercise of warrants and options and with debt. The Company has also funded its capital requirements with the gross proceeds of approximately
$71.7 million related to the sale of its paclitaxel business to Mayne Pharma (USA) Inc. (acquired by Hospira on February 1, 2007) on December 12, 2003.

The
Company's capital requirements have been and will continue to be significant. The Company expects research and development expenses to increase in connection with its ongoing
activities, particularly as it continues the development of TPI 287. If the Company in-licenses or acquires additional product candidates, its research and clinical development
expenses will increase further. In addition, subject to obtaining regulatory approval of TPI 287 or any other product candidate, the Company expects to incur significant commercialization
expenses for product sales, marketing, securing commercial quantities of product from third-party manufacturers and distribution. The Company will need substantial additional funding and may be unable
to raise capital when needed or on attractive terms, which would force the Company to delay, reduce or eliminate research and development programs or commercialization efforts.

The
Company believes that the existing cash and cash equivalents and short-term investments are not sufficient to enable the Company to fund its operating expenses and
capital expenditures for the next twelve months. On October 23, 2007, our Board of Directors authorized a reduction in the Company's operations. As a result, the Company has eliminated 14
positions (28% of its work force),

6

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including
executive and non-executive positions in all areas of operations. In conjunction with this reduction in operations, the Company incurred one time severance costs of $470,000. The
Company took such action to preserve cash and to focus all of its resources on advancing the Company's leading drug candidate in on-going and future clinical trials (See Note 15).
In addition, the Company will be required to raise additional capital through public or private equity offerings and debt financings, corporate collaborations, licensing arrangements or other means.
Should the Company be unable to raise the needed capital, it may be required to slowdown, further curtail or cease operations. The accompanying consolidated financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a going concern.

ESTIMATES AND ASSUMPTIONSThe preparation of the Company's consolidated financial statements in conformity with accounting
principles generally accepted in the United States requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates are used when determining useful lives for depreciation and amortization,
assessing the need for impairment charges, accounting for income taxes, estimating the value of employee stock options, and various others items. The Company evaluates these estimates and assumptions
on an ongoing basis and bases its estimates on historical experience, current conditions and various other assumptions that are believed to be reasonable under the circumstances. The results of these
estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and
contingencies. Actual results may differ materially from these estimates.

SHARE BASED COMPENSATIONAs of September 26, 2007, the Company had five equity incentive plans (the "Plans"): the 1994
Long-Term Performance Incentive Plan, the 1998 Stock Incentive Plan, the 2004 Equity Incentive Plan, the 2004 Non-Employee Director's Stock Option Plan and the 2006 Equity
Incentive Plan, which was approved by the Company's stockholders on April 4, 2006. As a result of the approval of the 2006 Equity Incentive Plan, all prior plans were suspended and no
additional grants shall be made under these plans.

The
Company follows the fair value method of accounting for share-based compensation arrangements in accordance with Financial Accounting Standards Board ("FASB") Statement of Financial
Accounting Standards ("SFAS") No. 123 (revised 2004),Share-Based Payment("SFAS 123(R)"). The Company adopted SFAS 123(R) using
the modified prospective transition method, which required the application of the accounting standard as of December 29, 2005, the first day of the Company's 2006 fiscal year. Under the
modified prospective method of transition, compensation expense is recognized beginning with the effective date of adoption of SFAS 123(R) for all share-based payments (i) granted after
the effective date of adoption and (ii) granted prior to the effective date of adoption and that remain unvested on the date of adoption.

Under
SFAS 123(R), the estimated fair value of share-based-compensation, including stock options granted under the Plans, is recognized as compensation expense on a
straight-line basis over the expected term of the grant.

7

---



The
Company recorded share-based compensation expense of $869,000 ($0.05 per share) and $615,000 ($0.04 per share) for the three-months ended September 26, 2007 and
September 27, 2006, respectively. The Company recorded share-based compensation expense of $2.6 million ($0.16 per share) and $2.5 million ($0.22 per share) for the
nine-months ended September 26, 2007 and September 27, 2006, respectively. These non-cash charges had no impact on the Company's reported cash flows.

Amounts
recognized in the financial statements related to share-based compensation, by category, were as follows (in thousands):

Three-Months Ended,

Nine-Months Ended,September 26,
2007

September 27,
2006

September 26,
2007

September 27,
2006Research and development

$
332

$
259

$
1,029

$
1,084General and administrative


537


356


1,561


1,369Discontinued operations











86$
869

$
615

$
2,590

$
2,539


For
purposes of the disclosure in the foregoing table and for purposes of determining estimated fair value under SFAS 123(R), the Company has computed the estimated fair values of
all share-based compensation using the Black-Scholes option pricing model and has applied the assumptions set forth in the following table. The Company calculated the estimated life of each stock
option granted in fiscal 2007 and 2006 based on the average life of the option estimated by reference to the historical average lives of options issued by the Company since its initial public offering
in 1994. The risk free rate of return and the historical volatility were also based on the average life of the option estimated by reference to the historical average lives of options issued by the
Company since inception. As SFAS 123(R) requires that share-based compensation expense be based on awards that are ultimately expected to vest, share-based compensation has been reduced for
estimated forfeitures. When
estimating forfeitures, the Company takes into consideration both voluntary and involuntary terminations, as well as trends of actual forfeitures.

Risk-Free
Interest Rate

Dividend
Yield

Volatility
Factor

Weighted-
Average
Option
Life (Years)Fiscal Year 2007

4.48%-5.04%

0
%
92.33%-113.64%

3.35-5.78Fiscal Year 2006

4.66%-5.18%

0
%
108.82%-121.86%

3.35-5.78


The
Black-Scholes option-pricing model requires the input of subjective assumptions. Stock options have characteristics significantly different from those of traded options, and changes
in the subjective input assumptions can materially affect the fair value estimate. Management will continue to assess the assumptions and methodologies used to calculate estimated fair value of
share-based compensation. Circumstances may change and additional data may become available over time, thereby resulting in

8

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changes
to these assumptions and methodologies. These changes could materially impact the Company's fair value determination.

A
summary of option activity under the Plans as of September 26, 2007 and changes during the nine-months then ended is presented below:

Summary Details for Plan Share Options

|                                            |  | Nine-Months Ended,
September 26, 2007
|------------------------------------------- |  | -------------------------------------
|
|
|Outstanding balance, December 27, 2006      |  | 5,805,293                            
|Granted                                     |  | 968,456                              
|Forfeited or expired                        |  | (229,972                             
|                                            |  |                                      
|Outstanding balance, September 26, 2007     |  | 6,543,777                            
|                                            |  |                                      
|Exercisable shares as of September 26, 2007 |  | 626,771                              
|                                            |  |                                      

A
summary of the status of the Company's unvested shares as of September 26, 2007, and changes during the three and nine-months then ended is presented below:

Unvested Shares Issued Under the Plan

Three-Months Ended,
September 26, 2007

Nine-Months Ended,
September 26, 2007Unvested
Shares

Weighted-
Average
Grant-Date
Fair Value

Unvested
Shares

Weighted-
Average
Grant-Date
Fair ValueBeginning unvested balance

5,912,977

$
2.58

5,207,628

$
2.79Granted

63,000

$
0.84

968,456

$
1.45Vested

(9,702
)
$
12.22

(99,047
)
$
4.25Forfeited

(49,269
)
$
5.40

(160,031
)
$
3.95Ending unvested balance

5,917,006

$
2.51

5,917,006

$
2.51


As
of September 26, 2007, there was $10.8 million of total unrecognized compensation expense related to unvested share-based compensation arrangements granted under the
Plans. Total

9

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unrecognized
compensation expense will be recognized over a weighted-average period of approximately 3.5 years.

DERIVATIVE INSTRUMENTSCompanies are required to recognize all of their derivative instruments as either assets or liabilities
on the balance sheet at fair value. The accounting for changes in the fair value (i.e. gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a
hedging relationship and further, on the type of hedging relationship. For derivative instruments not designated as hedging instruments, the gain or loss is recognized in current earnings during the
period of change. As described in "Note 6. Stockholders' Equity," the Company currently has one derivative instrument that is assessed on a quarterly basis, and any changes in fair value will
be recognized in current earnings in the period of change.

RECENT ACCOUNTING PRONOUNCEMENTSOn December 28, 2006, the Company adopted the provisions of FASB Interpretation
No. 48,"Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement No. 109"("FIN 48"). FIN 48 clarifies
the accounting for uncertainty of income taxes by prescribing a minimum recognition threshold for a tax position taken or expected to be taken in a tax return that is required to be met before being
recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition.
As of the date of adoption, the Company did not identify any unrecognized tax benefits and there was no cumulative effect on retained earnings of adopting FIN 48. The Company recognizes interest and
penalties related to its tax contingencies as income tax expense.

In
September 2006, the FASB issued SFAS No. 157,"Fair Value Measurements."This standard defines fair value, establishes a
framework for measuring fair value in accounting principles generally accepted in the United States of America, and expands disclosure about fair value measurements. This pronouncement applies to
other accounting standards that require or permit fair value measurements. Accordingly, this statement does not require any new fair value measurement. This statement is effective for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal years. The Company will be required to adopt SFAS No. 157 in the first quarter of fiscal year 2008. Management
has not yet determined the impact of adopting this statement.

In
June, 2007 the FASB issued EITF 07-3, "Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities," EITF
07-3 clarifies the accounting for non-refundable advance payments made for future research and development activities. This issue is effective for fiscal years beginning after
December 15, 2007, including interim periods within those fiscal years. The cumulative effect of applying EITF 07-3 will be reported as a change in accounting principle through an
adjustment to retained earnings as of the beginning of the period in which it is adopted. Management has not yet determined the impact of adopting this statement.

Note 2. Reverse Stock Split and NASDAQ Listing

On February 25, 2005, the Company received notice from The NASDAQ Stock Market, Inc. that its common stock had not met the $1.00 per share minimum
bid price requirement for 30 consecutive business days and that, if the Company was unable to demonstrate compliance with this requirement

10

---



during
the applicable grace periods, its common stock would be delisted after that time. On February 6, 2006, the Company effected a one for ten reverse stock split to regain compliance with
this listing requirement. Since the reverse stock split was effected, the closing bid price of its common stock has remained above $1.00 in compliance with the minimum bid price requirement. Unless
otherwise noted, all information in these unaudited consolidated financial statements reflects this reverse stock split.

Note 3. Discontinued Operations

In 2004 and prior years, the Company discontinued research on its various genomics programs, other than the Huntington's Disease program. It ceased the
Huntington's Disease program in 2006.

The
Company had a loss of $0 and $88,000 related to the Genomics division for the three and nine-months ended September 27, 2006. No material revenue has been
recognized in this division. There were no assets held for sale at September 26, 2007 and December 27, 2006 that relate to the discontinued operations of the genomics business.

Note 4. Investments

Short-term investments consist of investment grade government agency, auction rate securities, commercial paper and corporate debt securities due
within one year. The Company's investments in auction rate securities are recorded at cost, which approximates fair market value. In accordance with ARB 43, "Restatement and
Revision of Accounting Research Bulletins," despite the long-term nature of their stated contractual maturities, the Company has the ability and intent to liquidate
investments in auction rate securities within six months and therefore has classified these investments as short-term. All investments are classified as
available-for-sale and are recorded at market value. Unrealized gains and losses are treated as a separate component of stockholders' equity until the security is sold or until
a decline in fair value is determined to be other than temporary.

Included
within our investment portfolio are AA and AAA rated investments in auction rate securities. As a result of the uncertainty in the credit markets in the second half of 2007,
auctions for $3.8 million of our investments in auction rate securities failed. The failure resulted in the interest rate on these investments resetting at Libor plus 100 basis points. While we
now earn a premium interest rate on the investments, the investments are not as liquid. In the event we need to access these funds, we may not be able to access them until a future auction on these
investments is successful. If the issuers are unable to successfully close future auctions and their credit ratings deteriorate, we may be required to adjust the carrying value of these investments
through an impairment charge. Based on our ability to access our cash and cash equivalents, we do not currently anticipate the lack of liquidity on these investments will affect our ability to operate
our business as usual.

11

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As
of September 26, 2007 and December 27, 2006, the amortized cost basis, unrealized loss and fair value by major security type classified as
available-for-sale are as follows (in thousands):

Security Type

Amortized
Cost

Unrealized
Loss

Fair
ValueSeptember 26, 2007Auction rate securities

$
3,800

$
(19
)
$
3,781Total investments

$
3,800

$
(19
)
$
3,781December 27, 2006Auction rate securities

$
9,000

$


$
9,000Commercial Paper


1,977





1,977Corporate debt securities


5,100





5,100Government agencies


6,200





6,200Total investments

$
22,277

$


$
22,277


Comprehensive
loss for the Company consists of net loss and unrealized holding gains and losses on available-for-sale investments as presented below (in
thousands):

|                                                        |  | Three-Months Ended, |        | Nine-Months Ended, |  
|------------------------------------------------------- |  | ------------------- | ------ | ------------------ | -
|
|Net loss, as reported                                   |  | $                   | (6,100 | )                  | $
|Unrealized gain (loss) on available-for-sale securities |  |                     | (19    | )                  |  
|                                                        |  |                     |        |                    |  
|Comprehensive net loss                                  |  | $                   | (6,119 | )                  | $
|                                                        |  |                     |        |                    |  

Note 5. Debt, Current and Long-Term

On November 17, 2006, the Company repurchased two non-interest bearing promissory notes issued by it to TL Ventures V L.P. and TL Ventures V
Interfund L.P. in February 2005. These promissory notes had an outstanding principal amount of $3.0 million, and the Company repurchased the notes for an aggregate payment of
$2.7 million in cash. The repurchase of these notes did not have a material impact on the Company's financial results.

The
Company leases equipment under a capital lease. The capital lease does not bear interest and is payable in monthly installments of $11,000 in 2007 and 2008. The Company recorded a
discount on the capital lease attributable to the fair value of interest in the amount of $23,000 and the discount is allocated between the current and long-term portions of the lease. An
interest rate of 11.5% was used to impute the discount.

12

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Note 6. Stockholders' Equity

Restricted Stock

In September 2005, the Company initiated a retention incentive program for non-executive employees that consisted of a grant of approximately
43,814 restricted shares of the Company's common stock under its equity incentive plans to vest at future dates, as well as a cash component related to the individual tax effects of the program. The
stock component of the program included 18,463 shares that vested on September 6, 2006 and 19,143 additional shares that vested on September 6, 2007, contingent upon participants being
employed by the Company on that date. Under the program, 6,208 shares were surrendered due to termination of employment with the Company. The total value of the Company's common stock subject to the
program, net of shares surrendered due to terminations, is $132,000 based on the value of the underlying common stock at the date of grant. During the three-months ended September 26, 2007 and
September 27, 2006 and nine-months ended September 26, 2007 and September 27, 2006, $6,000, $20,000, $24,000 and $69,000, respectively, of expense related to the
program was recognized.

In
June 2007, the Company granted 44,700 restricted shares of the Company's common stock to non-executive employees under its equity incentive plans to vest at future
dates, as well as a cash component related to the individual tax effects of the program. The stock component of the grant includes 21,850 shares that vest on June 26, 2008 and 21,850 shares
that vest on June 26, 2009, contingent upon participants being employed with the Company on those dates. Under the program, 1,000 shares were surrendered due to termination of employment with
the Company. The total value of the Company's common stock subject to this program is $83,000 based on the value of the underlying common stock at the date of grant. During the three and
nine-months ended September 26, 2007, $9,000, respectively, of expense related to the program was recognized.

Private Placement

On April 6, 2006, the Company sold an aggregate of 12,750,000 shares of common stock and warrants to purchase up to 12,750,000 shares of common stock in a
private placement (the "Private Placement") for a total of $25.5 million (excluding any proceeds that might be received upon exercise of the warrants). The Company received approximately
$23.8 million net of the placement agent fees and other expenses in the Private Placement. The purchase price was $2.00 per share of common stock, and each warrant to purchase common stock has
an exercise price of $2.40 per share. The Company may call up to 20% of the outstanding warrants at a redemption price of $.0075 per share of common stock underlying the warrants during any three
month period if certain conditions are satisfied, including the trading price of its common stock exceeding $4.80 for 20 consecutive trading days, upon 30 days prior notice. During the notice
period, the holders of the warrant would be entitled to exercise the warrants or any portion of them. Up to half of the warrants may be exercised on a cashless or net exercise basis. There can be no
assurance, however, that the Company will receive funds from the exercise of warrants.

In
addition, the Company issued warrants to purchase 50,000 shares of common stock to a financial advisor and issued warrants to purchase 100,000 shares of common stock to an outside
consultant as a finders' fee on substantially similar terms as the warrants issued in the Private

13

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Placement.
The value of these warrants of $472,000 was determined using the Black-Scholes model and is considered a non-cash private placement expense.

Pursuant
to the terms of a registration rights agreement entered into by the Company at the closing of the Private Placement, the Company filed with the SEC a registration statement on
Form S-3 covering the resale of the common stock sold to investors in the Private Placement. The registration rights agreement provides, among other things, that the Company will
use commercially reasonable efforts to effect the registration of the securities within 90 days of closing, and to continuously maintain effectiveness. If sales cannot be made under the
registration statement (other than for certain periods when the Company is permitted under the agreement to suspend use of the registration statement when it has delayed disclosure of material
nonpublic information) then the Company is obligated to pay each investor liquidated damages, in cash, equal to 1.5% per 30 day period (or pro rata for a portion thereof) of the amount invested
by such investor. The SEC declared the Company's Form S-3 effective on May 18, 2006, which was within 90 days of closing.

The
Company views the registration rights agreement containing the liquidated damages provision as a separate freestanding contract as discussed in Emerging Issues Task Force ("EITF")
Issue No. 05-4, "The Effect of a Liquidated Damages Clause on a Freestanding Financial Instrument Subject to EITF Issue No. 00-19,
Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock,"and that the
registration rights agreement has nominal value. Under this approach, the registration rights agreement is
accounted for separately from the financial instrument in accordance with SFAS No. 133"Accounting for Derivative Instruments and Hedging
Activities."Accordingly, the classification of the warrants has been determined under EITF 00-19,"Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company's Own Stock,"and the warrants have been accounted for as permanent equity.

The
Company has valued the liquidated damages provision of the registration rights agreement at nominal value. In determining this as the fair value, the Company considered the following
factors. The agreement provides that there was a 90-day period to have the registration statement declared effective before liquidated damages apply. The Company believed at the closing of
the Private Placement it was probable the registration statement would be declared effective within the 90-day period. The registration statement was declared effective in less than
90 days and in the same fiscal quarter as the closing of the Private Placement, and therefore the Company was aware that there was no value to the liquidated damages provision for the initial
90 day period. The liquidated damages provision would only have value in the future if sales may not be made thereunder for periods other than as permitted thereunder. The Company believes the
events that would lead to sales being unable to be made under the registration statement for periods other than as permitted are unlikely to occur. In future periods, should the Company conclude that
it is probable, as defined in SFAS No. 5,"Accounting for Contingencies,"that a liability for liquidated damages will occur, the Company will
record the estimated cash value of the liquidated damages liability at that time.

14

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Note 7. Equity Incentive Plans

As of September 26, 2007, the Company had five equity incentive plans; the 1994 Long-Term Performance Incentive Plan, the 1998 Stock Incentive
Plan, the 2004 Equity Incentive Plan, the 2004 Non-Employee Director's Stock Option Plan and the 2006 Equity Incentive Plan, which was approved by shareholders on April 4, 2006. As
a result of the approval of the 2006 Equity Incentive Plan, all prior plans were suspended and no additional grants shall be made under these plans.

As
of September 26, 2007, the total number of shares of the Company's common stock authorized for issuance related to grants under all of the Plans was 7,551,160, of which
6,543,777 remain outstanding and 783,988 shares remain reserved for future grants.

2006 Equity Incentive Plan

During 2006, the Company's Board of Directors adopted and its stockholders approved the Company's 2006 Equity Incentive Plan, which initially reserved 6,577,106
shares of common stock for issuance thereunder. Immediately following any issuance of common stock by the Company during the three year period ending April 4, 2009, other than issuances of
common stock upon exercise of the warrants issued to the investors in the Private Placement, the number of shares available for issuance under the 2006 Equity Incentive Plan will be increased to 20%
of the number of fully diluted shares of the Company's common stock immediately after such issuance, including all shares of common stock issuable upon exercise of then outstanding options or
warrants, and options forfeited in other plans, less the number of shares of common stock subject to existing options under the Plans, up to a maximum of 8,177,106 shares. As a result of common stock
issuances during 2006 and 2007, the number of shares available under the 2006 Equity Incentive Plan increased to 6,774,428.

Repricing of Stock Options

On February 8, 2006, the Board of Directors of the Company approved, subject to stockholder approval, the modification of certain outstanding options to
purchase shares of common stock under the Company's existing equity incentive plans, including certain stock options granted to the Company's directors and executive officers. The Company received
stockholder approval of these modifications on April 4, 2006 and the exercise price of each such modified option was reduced to $4.02 per share as of such date. As of the date of the action by
the Company's Board of Directors, stock options for approximately 696,253 shares were outstanding under all of the Plans, of which options to purchase approximately 626,568 shares of common stock,
having exercise prices ranging from $4.20 to $112.50, were modified. As a result of the modification of vested stock options, in accordance with SFAS 123(R), the Company recorded a $381,000
one-time non-cash fixed period charge in the second quarter of 2006.

Note 8. Income Taxes

As of December 27, 2006, the Company had available net operating loss ("NOLs") and research and development credit carryforwards of $113.7 million
and $4.2 million, respectively, to offset future taxable income. The Internal Revenue Code contains provisions that may limit the use of NOLs and tax credits available for use in any given year
upon the occurrence of certain events, including

15

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significant
changes in ownership interest. A change in ownership of a company within a three-year period results in an annual limitation on the company's ability to utilize its NOLs and
tax credit carryforwards from tax periods prior to the ownership change. As a result of the Private Placement, which is considered to be a change in ownership for tax purposes, the Company's NOL and
tax credit carryforwards as of December 27, 2006 are subject to significant limitations. The Company believes that it will not be able to use a significant portion of its NOL and tax credits to
offset its income or taxes due in the future.

Note 9. Net Income (Loss) Per Share

Basic earnings (loss) per share is measured as net income or loss divided by the weighted average outstanding common shares for the period. Diluted earnings per
share is similar to basic earnings per share but presents the dilutive effect on a per share basis of potential common shares (e.g. stock options, warrants and convertible securities) as if they had
been converted at the beginning of the periods presented. Potential common shares that could potentially dilute basic earnings per share that were not included in the computation of diluted earnings
per share because to do so would be antidilutive, amounted to 19,443,777 shares and 17,137,518 shares at September 26, 2007 and September 27, 2006, respectively.

Note 10. Settlement Agreement

On March 22, 2006 the Company and Dr. Patricia Pilia entered into a Settlement Agreement (the "Settlement Agreement") in connection with
Dr. Pilia's termination of employment by the Company without cause on February 23, 2006. Dr. Pilia was a member of the Company's Board of Directors and previously served as
Executive Vice President and Secretary of the Company and was party to an employment agreement with the Company. In connection with the Settlement Agreement, the Company recorded an obligation of
$646,000 for termination benefits at March 29, 2006 that was paid in the third quarter of 2006.

Note 11. Employment Agreement

On March 28, 2007, the Company entered into an amended employment agreement with its Chief Operating Officer ("COO") that amended certain provisions of the
employment agreement, including the definition for termination for good reason, which allows for the COO to terminate his employment at any time on or after December 31, 2008. This termination
would entitle the COO to the receipt of the full severance benefits under the employment agreement, including accelerating the vesting of certain outstanding stock options.

As
a result, the Company will recognize the termination benefit of the COO as an expense in the amount of $270,000, ratably over the period March 28, 2007 through
December 31, 2008. The acceleration of vesting of certain outstanding stock options, which modified the vesting terms of certain outstanding stock options, did not have a material impact on the
Company's financial statements as of September 26, 2007.

16

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Note 12. Legal Proceedings

The Company agreed to employ Donald H. Picker, Ph.D., as our president in December 2006. Prior to joining our company, Dr. Picker had served as
Executive Vice President of Research and Development of Callisto Pharmaceuticals, Inc. In December 2006, Callisto filed a complaint in the Supreme Court of New York, County of New York,
relating to its employment of Dr. Picker. The suit originally named Tapestry and two of our officers, Leonard Shaykin and Kai Larson, as defendants. Leonard Shaykin and Kai Larson have
subsequently been dismissed from this suit. In its complaint, Callisto alleges breaches of a confidentiality agreement between Callisto and Tapestry and interference with Dr. Picker's
contractual relationship with Callisto. Callisto seeks unspecified actual and punitive damages. The Company believes these claims are without merit and the Company is vigorously defending against
them. The Company has incurred legal fees of $436,000 and $1.3 million for the three and nine-months ended September 26, 2007, respectively.

Note 13. Operating Leases

In February 2007, the Company leased 2,300 square feet of office space in Roseland, New Jersey to support its clinical development activities. The lease
was amended in October 2007 and increased the
amount of square feet leased to 4,000. The lease has been extended to July 31, 2009 and requires monthly rental payments of $7,800.

In
March 2007, the Company entered into a five year lease covering approximately 29,000 square feet of office and laboratory space in Boulder, Colorado. The Company plans to
consolidate much of its Colorado-based administrative and research and development facilities into this space. The Company plans to take possession of this space in November 2007 to make the
necessary renovations. The Company made a $375,000 deposit related to this facility and is included in other assets. This deposit will decrease by $60,000 per year, capped after four years to a
minimum balance of $135,000 until termination.

As
of September 26, 2007, future minimum lease payments under noncancelable operating lease agreements are as follows (in thousands):

Remaining in 2007

$
652008


5322009


4972010


4332011


4252012


440$
2,392


Note 14. Registration Statement

On April 23, 2007, the Company filed a registration statement on Form S-1 with the Securities and Exchange Commission for a proposed
public offering of up to $40.0 million of its common stock.

17

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On
June 12, 2007, the Company withdrew the registration statement on Form S-1 due to market conditions. As a result of this withdrawal, the Company expensed the
costs incurred in the amount of $452,000 and $20,000 in the second quarter and third quarters of 2007, respectively.

Note 15. Subsequent Event

On October 23, 2007, our Board of Directors authorized a reduction in the Company's operations. As a result, the Company has eliminated 14 positions (28%
of its work force), including executive and non-executive positions in all areas of operations. In conjunction with this reduction in operations, the Company incurred one time severance
costs of $470,000, $170,000 of which will be paid in the fourth quarter. Approximately $300,000 of the total severance costs will be paid to its terminated President in the second quarter of 2008 in
accordance with the terms of his employment agreement. The Company took such action to preserve cash and to focus all of its resources on advancing the Company's leading drug candidate in
on-going and future clinical trials.

18

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Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations contains information that management believes is relevant to an
assessment and understanding of our results of operations. You should read this discussion in conjunction with the Financial Statements and Notes included elsewhere in this report and with
Management's Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 27, 2006 contained in our 2006 Annual Report on Form 10-K,
filed with the Securities and Exchange Commission (the "SEC") on March 7, 2007 as well as an amendment thereto on Form 10-K/A filed with the SEC on April 26, 2007.
Certain statements set forth below constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. See "Special Note Regarding Forward-Looking Statements" and "Risk Factors" appearing elsewhere in this Report. References to "Tapestry," the "Company," "we," "us" and
"our" refer to Tapestry Pharmaceuticals, Inc. and its subsidiaries.

General

We are a biopharmaceutical company focused on the development of proprietary therapies for the treatment of cancer. Our core capabilities are deriving and
developing drug candidates from natural products. We are currently devoting substantially all of our efforts to the development of TPI 287, a proprietary next generation taxane for the
treatment of multiple cancer indications. We hold all worldwide commercial rights for TPI 287. Taxanes comprise a class of drugs derived from natural products that are used in the treatment of
various forms of cancer.

We
completed dosing in a Phase 1 clinical trial of TPI 287 and expect to complete dosing in another Phase 1 clinical trial during the fourth quarter of 2007. In
addition, in May, 2007 we commenced enrollment in a Phase 2 clinical trial of TPI 287 in patients with an advanced form of prostate cancer called hormone refractory prostate cancer, or
HRPC. On October 3, 2007, we commenced enrollment in a Phase 2 open-label, multi-center study of TPI 287 in patients with advanced pancreatic cancer.

These
two Phase 2 clinical trials are the first of three planned Phase 2 clinical trials of TPI 287 in different cancer indications. In our clinical trials to date,
we have evaluated intravenous, or IV,
formulations of TPI 287. We plan to use an IV formulation in our currently planned Phase 2 clinical trials. We also are developing an oral formulation of TPI 287 and plan to
initiate a Phase 1b/2 pharmacokinetic clinical trial of TPI 287. In this study, we plan to orally administer TPI 287 to evaluate the drug's activity and oral bioavailability in
humans. Assuming feasibility of oral dosing from this study, we may initiate a Phase 1b/2 study of the combination of escalating doses of TPI 287 and temozolomide, both orally
administered, in tumors of the central nervous system.

We
may expand our product pipeline through strategically in-licensing or acquiring product candidates that complement our business. This could involve the examination of
individual molecules, classes of compounds or technologies in cancer as well as other therapeutic areas. Our acquisitions of new product candidates or technologies may also involve the acquisition of,
or merger with, other companies.

We
have incurred significant operating losses since our inception in 1991. Our net loss was $6.1 million and $16.7 million for the three and nine-months ended
September 26, 2007, respectively and $16.7 million for the year ended December 27, 2006. We had an accumulated deficit of $140.6 million as of September 26, 2007. We
expect to incur significant and increasing operating losses for at least the next several years, until such time, if ever, as we are able to generate sufficient sales to support our development
operations, including the research and development activity discussed above.

19

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To
become profitable, we must succeed in developing and eventually commercializing drugs with significant market potential. This will require us to be successful in a range of
challenging activities, including discovering, in-licensing or acquiring product candidates, successfully completing preclinical testing and clinical trials of our product candidates,
obtaining regulatory approval for these product candidates and manufacturing, marketing and selling those products for which we obtain regulatory approval. We are only in the preliminary stages of
development of TPI 287, our only current product candidate. We may never succeed in these activities and may never generate revenues that are significant enough to achieve profitability.

Registration Statement

On April 23, 2007, we filed a registration statement on Form S-1 with the Securities and Exchange Commission (the "SEC") for a proposed
public offering of up to $40.0 million of our common stock. On June 12, 2007, we withdrew the registration statement on Form S-1 with the SEC. As a result of the
withdrawal, we expensed costs incurred in the amount of $452,000 and $20,000 in the second and third quarters of 2007, respectively.

Private Placement

On April 5, 2006 we sold an aggregate of 12,750,000 shares of our common stock and warrants to purchase up to 12,750,000 shares of our common stock in a
private placement for a total of $25.5 million, not including any proceeds that might be received upon exercise of the warrants. We received approximately $23.8 million net of the
placement agent fees and other expenses in this private placement. The warrants currently have an exercise price of $2.40 per share. Under the terms of these warrants, the exercise price may be
reduced if we issue shares of common stock or certain options or rights to acquire common stock for no consideration or for consideration per share less than the exercise price of the warrants in
effect immediately prior to the time of such issue or sale. The warrants specify a formula for a weighted average adjustment in the exercise price that takes into account the number of shares of
common stock outstanding, the number of shares issued below the exercise price and the aggregate consideration received upon such issuance.

We
may call up to 20% of the outstanding warrants at a redemption price of $0.0075 per share of common stock underlying the warrants during any three month period if certain conditions
are satisfied, including the trading price of our common stock exceeding $4.80 for 20 consecutive trading days, upon 30 days prior notice. During the notice period, the holders would be
entitled to exercise the warrant or any portion of it. Up to half of these warrants may be exercised on a cashless or net exercise basis. There can be no assurance, however, that we will receive any
funds from the exercise of warrants.

In
addition, we issued warrants to purchase 50,000 shares of common stock to a financial advisor and issued warrants to purchase 100,000 shares of common stock to an outside consultant
as a finders' fee on substantially similar terms as the warrants issued in this private placement.

In
connection with this private placement, we entered into a registration rights agreement in which we agreed to make the requisite filings with the Securities and Exchange Commission to
achieve and substantially maintain the effectiveness of a registration statement covering shares sold in the private placement, as well as shares underlying warrants issued in this private placement.
If we fail to maintain effectiveness of that registration statement through as late as April 6, 2013, subject to our right to suspend use of the registration statement in certain circumstances,
we will have to pay liquidated damages to investors in an amount equal to 1.5% of the amount invested by them for each 30 day period during which the registration statement should have been
effective.

We
are required to use the net proceeds from this private placement to fund the development of TPI 287 in accordance with a budget for calendar years 2006 and 2007 that was
adopted by our Board

20

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of
Directors before the closing of the private placement. Any change to this budget will require the approval of a majority of the independent members of our Board of Directors.

In
connection with this private placement we granted preemptive rights to investors who continue to hold at least 50% of the shares of common stock held by such investors in the private
placement. The preemptive rights apply to certain issuances for cash of common stock or securities convertible or exchangeable for common stock.

Research and Development

Our current business is focused on research and development of proprietary therapies for the treatment of cancer. We were previously engaged in development
activities related to our paclitaxel business, which we sold to Mayne Pharma (USA) Inc. in 2003 (acquired by Hospira on February 1, 2007), genomic technologies, which we discontinued in
2004, and Huntington's Disease, which we ceased in 2006. Costs relating to genomic technologies, excluding our Huntington's Disease program, and the paclitaxel business are aggregated in discontinued
operations. We have incurred the following expenses related to research and development projects:

Three-Months Ended,

Nine-Months Ended,September 26,
2007

September 27,
2006

September 26,
2007

September 27,
2006Oncology

$
4,526

$
2,259

$
11,414

$
7,554Huntington's Disease











(90
)Discontinued operations











88$
4,526

$
2,259

$
11,414

$
7,552


We
expect research and development, which includes the cost of our clinical development of TPI 287, to continue to be the most significant expense of our business for the
foreseeable future. Our research and development activity is subject to change as we develop a better understanding of our projects and their prospects.

We
completed dosing in a Phase 1 clinical trial of TPI 287 and expect to complete dosing in another Phase 1 clinical trial during the fourth quarter of 2007. In
addition, we recently commenced enrollment in a Phase 2 clinical trial of TPI 287 in patients with an advanced form of prostate cancer called hormone refractory prostate cancer, or HRPC.
On October 3, 2007, we commenced enrollment in a Phase 2 open-label, multi-center study of TPI 287 in patients with advanced pancreatic cancer.

These
two Phase 2 clinical trials are the first of three planned Phase 2 clinical trials of TPI 287 in different cancer indications. In our clinical trials to date,
we have evaluated intravenous, or IV, formulations of TPI 287. We plan to use an IV formulation in our currently planned Phase 2 clinical trials. We also are developing an oral
formulation of TPI 287 and plan to initiate a Phase 1b/2 pharmacokinetic clinical trial of TPI 287. In this study, we plan to orally administer TPI 287 to evaluate the
drug's activity and oral bioavailability in humans. Assuming feasibility of oral dosing from this study, we may initiate a Phase 1b/2 study of the combination of escalating doses of
TPI 287 and temozolomide, both orally administered, in tumors of the central nervous system.

21

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The
following table summarizes key information about our additional ongoing and planned clinical development efforts relating to TPI 287:

|INDICATION          |                                    | STATUS |                                                                       | TIMING
|------------------- | ---------------------------------- | ------ | --------------------------------------------------------------------- | ------
|IV Administration   |                                    |        |                                                                       |       
|                    | Hormone refractory prostate cancer |        | Phase 2 clinical trial in process                                     |       
|                    | Pancreatic cancer                  |        | Phase 2 clinical trial in process                                     |       
|                    | Glioblastoma multiforme            |        | Phase 2 clinical trial planned                                        |       
|Oral Administration |                                    |        |                                                                       |       
|                    | Multiple cancers                   |        | Phase 1 pharmacokinetic clinical trial of oral administration planned |       

We
cannot be sure that we will be able to achieve our goals relating to these programs. We also cannot estimate the cost necessary to complete these programs, the timing of material net
cash inflows from these programs, or whether we will ever recognize revenues from these programs. Continued development of these programs is dependent upon raising additional capital. We cannot be
certain that we will be able to obtain capital on acceptable terms, or at all.

Results of Operations

Three-Months Ended September 26, 2007 Compared to the Three-Months Ended September 27, 2006

Research and Development Expense.Research and development expense for the third quarter of 2007 was $4.5 million, as
compared to $2.3 million in the third quarter of 2006, an increase of $2.2 million.

The
increase was primarily due to an increase in compensation related expenses of $711,000, an increase in outside consulting fees of $922,000, an increase in legal fees of $397,000, an
increase in clinical outside service expenses of $148,000 and an increase in manufacturing expenses of $340,000 offset by a decrease in supplies expense of $307,000.

The
increase in compensation expense in the third quarter of 2007 was primarily related to an increase in headcount during the first and second quarters of 2007, including two officers
as well as an increase in non-cash equity compensation of $150,000. The increase in legal expense is primarily the result of outside legal fees incurred as a result of litigation with
another pharmaceutical company. We expect our oncology related expenses to increase in future quarters in connection with our ongoing and planned Phase 1 and Phase 2 clinical trials of
TPI 287.

General and Administrative Expense.General and administrative expense for the third quarter of 2007 was $1.7 million,
an increase of $162,000 from the third quarter of 2006. This increase was primarily due to an increase in consulting services of $52,000 and an increase in legal expense of $66,000.

Interest and Other Income.Interest and other income of $169,000 for the third quarter of 2007 decreased by $231,000 from
$400,000 for the third quarter of 2006. This decrease was primarily attributable to lower investment balances in the third quarter of 2007 compared to the third quarter of 2006.

Interest and Other Expense.Interest and other expense of $6,000 for the third quarter of 2007 decreased by $118,000 from
$124,000 for the third quarter of 2006. This decrease was attributable to

22

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our
repurchase of two non-interest bearing promissory notes payable to TL Ventures V L.P. and TL Ventures V Interfund L.P. in November 2006.

Nine-Months Ended September 26, 2007 Compared to the Nine-Months Ended September 27, 2006

Research and Development Expense.Research and development expense from continuing operations for the nine-months
ended September 26, 2007 was $11.4 million, as compared to $7.5 million for the nine-months ended September 27, 2006, an increase of $3.9 million.
Oncology related research and development expenditures increased by $3.9 million to $11.4 million for the nine-months ended September 26, 2007. In 2006, we ceased our
Huntington's Disease research. As a result, there were no expenses in the nine-months ended September 26, 2007 for Huntington's Disease, as compared to a credit of $90,000 in 2006,
which was a result of a reversal of laboratory fees owed to a research university. We do not expect to incur expenses related to this program in the future.

The
increase in oncology related expenses was primarily due to an increase in legal fees of $1.4 million, an increase in outside consulting fees of $1.2 million, an
increase in compensation related expenses of $777,000, and an increase in outside clinical trial costs of $330,000. We expect our oncology related expenses to increase in future quarters in connection
with our ongoing and planned Phase 1 and Phase 2 clinical trials of TPI 287.

The
increase in legal fees is primarily the result of outside legal fees incurred as a result of litigation with another pharmaceutical company. The increase in compensation expense was
primarily related to an increase in headcount during the first and second quarters of 2007, including two officers as well as an increase in non-cash equity compensation of $92,000.

General and Administrative Expense.General and administrative expense from continuing operations for the
nine-months ended September 26, 2007 was $5.9 million, an increase of $841,000 from the nine-months ended September 27, 2006. This increase was primarily
due an increase in legal expense of $514,000, an increase in consulting fees of $194,000 and an increase in compensation related costs of $148,000.

The
increase in legal fees was primarily due to the write-off of capitalized legal fees related to a registration statement that was withdrawn from the SEC in the second
quarter of 2007.

Interest and Other Income.Interest and other income of $662,000 for the nine-months ended September 26,
2007 decreased by $274,000 from $936,000 for the nine-months ended September 27, 2006. This decrease was primarily attributable to lower investment balances in the
nine-months ended September 26, 2007 compared to the nine-months ended September 27, 2006.

Interest and Other Expense.Interest and other expense of $18,000 for the nine-months ended September 26,
2007 decreased by $409,000 from $427,000 for the nine-months ended September 27, 2006. This decrease was attributable to our repurchase of two non-interest bearing
promissory notes payable to TL Ventures V L.P. and TL Ventures V Interfund L.P. in November 2006.

Discontinued Operations.There was no loss from discontinued operations recognized in the nine-months ended
September 26, 2007 as compared to $88,000 for the nine-months ended September 27, 2006. This decrease is a result of there being no activity in the discontinued Genomics
business in the nine-months ended September 26, 2007. The expense in the nine-months ended September 27, 2006 represented non-cash equity compensation
expense in the amount of $86,000 as a result of the implementation of SFAS 123(R) in 2006.

Share Based Compensation.We follow the fair value method of accounting for share-based compensation arrangements in
accordance with Financial Accounting Standards Board ("FASB"), Statement of Financial Accounting Standards ("SFAS") No. 123 (revised 2004),Share-Based
Payment("SFAS 123(R)"). We adopted SFAS 123(R) effective December 29, 2005 using the modified

23

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prospective
method of transition. For the three-months ended September 26, 2007 and September 27, 2006, we recorded share-based compensation expense of $869,000 ($0.05 per share) and
$615,000 ($0.04 per share), respectively. For the nine-months ended September 26, 2007 and September 27, 2006, we recorded share-based compensation expense of
$2.6 million ($0.16 per share) and $2.5 million ($0.22 per share), respectively. Share-based compensation expense is allocated among research and development expenses and general and
administrative expenses based on the function of the related employee. These non-cash charges had no impact on our cash flows for the periods presented. For more information about
SFAS 123(R), see "Note 1. Basis of Presentation and Summary of Significant Accounting PoliciesShare-Based Compensation" in the Unaudited Notes to Consolidated Financial
Statements included in this Form 10-Q.

Callisto Litigation.We agreed to employ Donald H. Picker, Ph.D., as our president in December 2006.
Prior to joining our company, Dr. Picker had served as Executive Vice President of Research and Development of Callisto Pharmaceuticals, Inc. In December 2006, Callisto filed a
complaint in the Supreme Court of New York, County of New York, relating to our employment of Dr. Picker. The suit originally named Tapestry and two of our officers, Leonard Shaykin and Kai
Larson, as defendants. Leonard Shaykin and Kai Larson have subsequently been dismissed from this suit. In its complaint, Callisto alleges breaches of a confidentiality agreement between Callisto and
Tapestry and interference with Dr. Picker's contractual relationship with Callisto. Callisto seeks unspecified actual and punitive damages. We believe these claims are without merit and we are
vigorously defending against them. We have incurred legal fees of $436,000 and $1.3 million for the three and nine-months ended September 26, 2007, respectively.

Liquidity and Capital Resources

Our capital requirements for operations have been, and will continue to be, significant. As of September 26, 2007, we had a working capital balance of
$6.1 million, as compared to a working capital balance of $20.2 million as of December 27, 2006. To date, we have financed our operations primarily with the net proceeds of public
offerings of common stock and private placements of equity securities, with proceeds from the exercise of warrants and options and with debt. We also have funded our capital requirements with the
gross proceeds of approximately $71.7 million related to the sale of our paclitaxel business to Mayne Pharma (USA) Inc. in 2003.

On
October 23, 2007, our Board of Directors authorized a reduction in our operations. As a result, we have eliminated 14 positions (28% of its work force), including executive and
non-executive positions in all areas of operations. In conjunction with this reduction in operations, we incurred one time severance costs of $470,000, $170,000 of which will be paid in
the fourth quarter. Approximately $300,000 of the total severance costs will be paid to our terminated President in the second quarter of 2008 in accordance with the terms of his employment agreement.
We took such action to preserve cash and to focus our resources on advancing TPI 287's on-going and future clinical trials.

We
expect our capital needs to remain flat in 2007 as compared to 2006 due, in part, to our reduced operations as discussed above.

Going Concern.We have no revenue and we have incurred significant operating losses since our inception. Our net loss was
$6.1 million for the three-months ended September 26, 2007 and $16.7 million for nine-months ended September 27, 2006, and $16.7 million for the year
ended December 27, 2006. We had an accumulated deficit of $140.6 million as of September 26, 2007. As of September 26, 2007, we had cash and cash equivalents and
short-term investments totaling approximately $9.4 million. Our capital requirements for research and development, including the cost of clinical trials, have been and will continue
to be significant.

We
expect research and development expenses to increase in connection with our ongoing activities, particularly as we continue the development of TPI 287. If we
in-license or acquire additional

24

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product
candidates, our research and development expenses will increase further. In addition, subject to obtaining regulatory approval of TPI 287 or any other product candidate, we expect to
incur significant commercialization expenses for product sales, marketing, securing commercial quantities of product from third-party manufacturers and distribution. We will need substantial
additional funding and may be unable to raise capital when needed or on attractive terms, which would force us to delay, reduce or eliminate research and development programs or commercialization
efforts.

We
believe that the existing cash and cash equivalents and short-term investments are not sufficient to enable us to fund our operating expenses and capital expenditures for
the next twelve months. On October 23, 2007, our Board of Directors authorized a reduction in the Company's operations. As a result, we have eliminated 14 positions (28% of its work force),
including executive and non-executive positions in all areas of operations. In conjunction with this reduction in operations, we incurred one time severance costs of $470,000. We will be
required to raise additional capital through public or private equity offerings and debt financings, corporate collaborations or licensing arrangements. Should we be unable to raise the needed
capital, we may be required to slowdown, further curtail or cease operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable
to continue as a going concern. See "Risk FactorsRisks Related to Our Business."

Working Capital and Cash Flow.Cash and cash equivalents and short-term investments decreased
$13.1 million to $9.4 million at September 26, 2007 from $22.5 million at December 27, 2006. This decrease was primarily due to cash used in operating activities of
$12.9 million. Our cash used in operating activities was primarily used to advance our product development efforts and for general corporate purposes. The majority of our future cash
expenditures are expected to continue to be used to advance our product development programs including clinical trials of TPI 287 and for working capital and other general corporate purposes.

Reverse Stock Split and NASDAQ Listing.Our common stock is listed on the NASDAQ Capital Market. In order to maintain that
listing, we must satisfy minimum financial and other requirements. On February 25, 2005, we received notice from the NASDAQ Stock Market, Inc. that our common stock had not met the $1.00
per share minimum bid price requirement for 30 consecutive business days and that, if we were unable to demonstrate compliance with this requirement during the applicable grace periods, our common
stock would be delisted after that time. On February 6, 2006, we effected a one for ten reverse stock split of our common stock to regain compliance with this listing requirement. Since this
time, the closing bid price of our common stock has remained above $1.00 in compliance with the minimum bid price requirement.

Notes Payable.On November 17, 2006, we repurchased two non-interest bearing promissory notes issued by us
to TL Ventures V L.P. and TL Ventures V Interfund L.P. in February 2005. These promissory notes had an outstanding principal balance of $3.0 million, and we repurchased
them for an aggregate payment of $2.7 million in cash. The repurchase of these notes did not have a material impact on our financial results.

Private Placement.On April 5, 2006, we sold an aggregate of 12,750,000 shares of our common stock and warrants to
purchase up to 12,750,000 shares of our common stock in a private placement for a total of $25.5 million, not including any proceeds that might be received upon exercise of the warrants. We
received approximately $23.8 million net of the placement agent fees and other expenses in this private placement. The warrants currently have an exercise price of $2.40 per share. We may call
up to 20% of the outstanding warrants at a redemption price of $0.0075 per share of common stock underlying the warrants during any three-month period if certain conditions are satisfied, including
the trading price of our common stock exceeding $4.80 for 20 consecutive trading days, upon 30 days prior notice. During the notice period, the holders would be entitled to exercise the
warrants or any portion

25

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of
them. Up to half of the warrants may be exercised on a cashless or net exercise basis. There can be no assurance, however, that we will receive any funds from the exercise of warrants.

Future Contractual Obligations

The table below summarizes our future contractual obligations as of September 26, 2007 (in thousands):

Total

Remaining
in 2007

1-3 years

4-5 years

After
5 yearsOperating leases

$
2,392

$
65

$
1,462

$
865

$
Capital lease


143


33


110





Total

$
2,535

$
98

$
1,572

$
865

$



In
February 2007, we leased 2,300 square feet of office space in Roseland, New Jersey to support our clinical development activities. The lease was amended in October 2007
and increased the amount of square feet leased to 4,000. The lease has been extended to July 31, 2009 and requires monthly rental payments of $7,800.

In
March 2007, we entered into a five year lease covering approximately 29,000 square feet of office and laboratory space in Boulder, Colorado. We plan to consolidate much of our
Colorado-based administrative and research and development facilities into this space. We plan to take possession of this space in November 2007 to make the necessary renovations.

We
have employment agreements with a number of key employees. These employment agreements contain provisions regarding the termination of employment including termination of employment
associated with a change in control. These termination benefits range from 100% to 300% of the employee's base salary for the 12-month period immediately preceding the termination date,
payment of any accrued but unpaid salary, bonus and vacation and payment of up to 100% of the prior year bonus or 75% of base salary for the 12-month period immediately preceding the
termination date.

As
described above, on October 23, 2007, our Board of Directors authorized a reduction in our operations. As a result, one of the positions eliminated was the President of the
Company. In accordance with the terms of his employment agreement, we have recorded an obligation of $300,000 for terminated benefits in the fourth quarter of 2007 which will be paid in the second
quarter of fiscal 2008.

Impact of Recent Accounting Pronouncements

On December 28, 2006, we adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income
Taxesan Interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 clarifies the accounting for uncertainty of income taxes by prescribing a
minimum recognition threshold for a tax position taken or expected to be taken in a tax return that is required to be met before being recognized in the financial statements. FIN 48 also
provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. As of the date of adoption, we did not identify any
unrecognized tax benefits and there was no cumulative effect on retained earnings of adopting FIN 48. We recognize interest and penalties related to our tax contingencies as income tax expense.

In
September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." This standard defines fair value, establishes a
framework for measuring fair value in accounting principles generally accepted in the United States and expands disclosure about fair value measurements. This pronouncement applies to other accounting
standards that require or permit fair value measurements. Accordingly, this statement does not require any new fair value measurement. This statement is effective for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal

26

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years.
We will be required to adopt SFAS No. 157 in the first quarter of fiscal year 2008. Management has not yet determined the impact of adopting this statement.

In
June, 2007 the FASB issued EITF 07-3, "Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development
Activities". EITF 07-3 clarifies the accounting for non-refundable advance payments made for future research and development activities. This issue is effective for
fiscal years beginning after December 15, 2007, including interim periods within those fiscal years. The cumulative effect of applying EITF 07-3 will be reported as a change
in accounting principle through an adjustment to retaining earnings as of the beginning of the period in which it is adopted. Management has not yet determined the impact of adopting this statement.

Special Note Regarding Forward-Looking Statements

Some of the statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Risk Factors," and elsewhere in this report
constitute forward-looking statements. In some cases, you can identify forward-looking statements by the following words: "may," "will," "could," "would," "should," "expect," "intend," "plan,"
"anticipate," "believe," "estimate," "predict," "project," "potential," "continue," "ongoing" or the negative of these terms or other
comparable terminology, although not all forward-looking statements contain these words. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. While we believe that we have a
reasonable basis for each forward-looking statement contained in this report, we caution you that these statements are based on a combination of facts and factors currently known by us and our
projections of the future, about which we cannot be certain. Many important factors affect our ability to achieve our objectives, including:



In
addition, you should refer to the "Risk Factors" section of this report for a discussion of other important factors that may cause our actual results to differ materially from those
expressed or implied

27

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by
our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate. Furthermore, if our forward-looking
statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a
representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all.

We
qualify all the forward-looking statements contained in this report by the foregoing cautionary statements. We may not update these forward-looking statements even though our
situation may change in the future.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

We currently invest our excess cash balances in money market accounts and short-term investments that are subject to interest rate risk. The amount of
interest income we earn on these funds will change as interest rates in general change. Our investments are subject to a loss of principal if market interest rates increase and the investments are
sold prior to maturity. However, due to the short-term nature of the majority of our investments, the high credit quality of our portfolio and our ability to hold our investments until
maturity, an immediate 1% change in interest rates would not have a material impact on our financial position, results of operations or cash flows.

Item 4.    Controls and Procedures

The Company maintains a system of disclosure controls and procedures. The term "disclosure controls and procedures," as defined by regulations of the SEC, means
controls and other procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits to the SEC under the Securities Exchange Act of
1934, as amended (the "Act"), is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.

Disclosure
controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it
files or submits to the SEC under the Act is accumulated and communicated to the Company's management, including its Principal Executive Officer and its Principal Financial Officer, as appropriate to
allow timely decisions to be made regarding required disclosure. The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the
Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of September 26, 2007.
Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to
material information relating to the Company required to be included in the Company's periodic SEC filings.

Changes in Internal Control

There were no changes in the Company's internal control over financial reporting during the quarter ended September 26, 2007 that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.

Any
system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of
any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that
any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

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Part IIOther Information

Item 1.    Legal Proceedings

There have been no material developments in legal proceedings affecting the Company during the quarter.

Item 1A.    Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all
of the other information included in this report, before deciding whether to invest in our common stock. The occurrence of any of the following risks could harm our business, financial condition or
results of operations. In such case, the trading price of our common stock could decline and you may lose all or part of your investment.

Risks Related to Our Business

We will need substantial additional funding and may be unable to raise capital when needed, which would force us to discontinue, shutdown or cease
operations. The existence of preemptive rights held by certain of our stockholders may complicate any sale of common stock or securities convertible or exchangeable for common stock and could limit
the possible investors in our common stock.

We expect to have significant research and development expenses as we continue the clinical development of TPI 287. If we in-license or acquire
additional product candidates, our research and development expenses will increase further. In addition, subject to obtaining regulatory approval of TPI 287 or any other product candidate, we
expect to incur significant commercialization expenses for product sales, marketing, securing commercial quantities of product from our manufacturers and distribution. We will need substantial
additional funding and may be unable to raise capital when needed or on attractive terms, which would force us to delay, further curtail or eliminate our research and development programs or
commercialization efforts.

We
believe that our existing cash and cash equivalents and short-term investments are not sufficient to enable us to fund our operating expenses and capital expenditures for
the next twelve months without significantly curtailing our operations in addition to that already effected. Therefore, we will be required to raise additional capital through public or private equity
offerings or debt financings, corporate collaboration and licensing arrangements. If we raise additional funds by issuing equity securities, our stockholders will experience dilution.

Any
financing involving our issuance for cash of common stock or securities convertible or exchangeable for common stock could be significantly complicated or delayed as a result of
preemptive rights held by certain existing stockholders who acquired shares of common stock and warrants in our private placement in April 2006, the holdings of which currently represent more
than 50% of our outstanding common shares. Moreover, the existence of those preemptive rights could limit the possible investors in our common stock and make more likely a funding by the holders of
those preemptive rights on terms that may be less favorable than available otherwise.

Debt
financing, if available, may involve agreements that include covenants restricting our ability to take specific actions, such as incurring additional debt, making capital
expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences, that are not favorable to us or our
stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue
streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.

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Our
future capital requirements will depend on many factors, including:



Should
we be unable to raise the needed capital, we may be required to discontinue, shutdown or cease operations.

We are currently devoting substantially all of our efforts to the development of one product candidate, TPI 287, which is in an early stage of
clinical development. If we are unable to successfully develop and commercialize TPI 287, or experience significant delays in doing so, our business, financial condition and results of
operations will be materially harmed.

We are currently devoting substantially all of our efforts to the development of TPI 287. Our ability to generate product revenues, which we do not expect
for at least the next several years, if ever, depends on the successful development and eventual commercialization of TPI 287. However, TPI 287 is in an early stage of clinical
development. We recently completed dosing in a Phase 1 clinical trial of TPI 287 and expect to complete dosing in another Phase 1 clinical trial during the fourth quarter of 2007. In addition,
in May, 2007 we commenced enrollment in a Phase 2 clinical trial of TPI 287 in patients with an advanced form of prostate cancer called hormone refractory prostate cancer, or HRPC. On
October 3, 2007, we commenced enrollment in a Phase 2 open-label, multi-center study of TPI 287 in patients with advanced pancreatic cancer.

These
two Phase 2 clinical trials are the first of several planned Phase 2 clinical trials of TPI 287 in multiple cancer indications. In our clinical trials to date, we have
evaluated intravenous, or IV, formulations of TPI 287. We plan to use an IV formulation in our currently planned Phase 2 clinical trials. We also are developing an oral formulation of
TPI 287 and plan to initiate a Phase 1b/2 pharmacokinetic clinical trial of TPI 287. In this clinical trial, we plan to orally administer an IV formulation of TPI 287 to evaluate
the drug's activity and oral bioavailability in humans. Assuming feasibility of oral dosing from this study, we may initiate a Phase 1b/2 study of the combination of escalating doses of TPI 287
and temozolomide, both orally administered, in tumors of the central nervous system. The success of TPI 287 will depend on several factors, including the following:



30

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Because
of our focus on one product candidate, if TPI 287 does not prove successful in clinical trials or is not commercialized because we have insufficient resources for
continued development or for any other reason, we may be required to suspend or discontinue our operations and you could lose your entire investment.

We have incurred significant losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain
profitability.

We have incurred significant operating losses since our inception in 1991. Our net loss from continuing operations was $6.1 million and
$16.7 million for the three and nine-months ended September 26, 2007, $16.6 million in 2006, $17.2 million in 2005 and $21.6 million in 2004. We have an
accumulated deficit of $140.6 million as of September 26, 2007. To date, we have financed our operations primarily with the net proceeds of public offerings of common stock and private
placements of equity securities, with proceeds from the exercise of warrants and options and with debt. We also have funded our capital requirements with the proceeds of the sale of our paclitaxel
business to Mayne Pharma (USA) Inc. (acquired by Hospira on February 1, 2007) in December 2003.

Since
we sold our paclitaxel business to Mayne Pharma, we have devoted substantially all of our efforts to research and development activities, including clinical trials. We have not
completed development of any drugs. We expect to continue to incur significant and increasing operating losses for at least the next several years. We anticipate that our expenses will increase
substantially as we:



To
become and remain profitable, we must succeed in developing and eventually commercializing drugs with significant market potential. This will require us to be successful in a range of
challenging activities, including discovering, in-licensing or acquiring product candidates, successfully completing preclinical testing and clinical trials of our product candidates,
obtaining regulatory approval for these product candidates and manufacturing, marketing and selling those products for which we may obtain regulatory approval. We are only in the preliminary stages of
development of TPI 287, our only current product candidate. We may never succeed in these activities and may never generate revenues that are significant enough to achieve profitability. Even
if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the market price of
our common stock and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations. A decline in the market price of our common stock could
also cause you to lose all or a part of your investment.

31

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Our short history as a drug development company may make it difficult to evaluate the success of our business to date and to assess our future
viability.

We are an early stage drug development company. Since we sold our paclitaxel business to Mayne Pharma in 2003, our operations have been limited to undertaking
preclinical studies and limited clinical
trials of our product candidates. Since we began devoting substantially all of our efforts to the development of TPI 287, we have not demonstrated our ability to successfully complete
large-scale clinical trials, obtain regulatory approvals, manufacture a commercial scale product or arrange for a third party to do so on our behalf, or conduct sales and marketing activities
necessary for successful product commercialization. Consequently, any predictions about our future success or viability may not be as accurate as they could be if we had a longer history as a drug
development company.

In
addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition from having a
development focus to becoming capable of supporting commercial activities. We may not be successful in such a transition.

If we are not successful in establishing and maintaining development and commercialization collaborations for our product candidates, we may have to
reduce or delay our product development and commercialization efforts and increase our expenditures.

For each of our product candidates, we plan to evaluate the merits of retaining commercialization rights for ourselves or selectively entering into strategic
alliances with leading pharmaceutical and biotechnology companies to assist us in advancing our development programs. Other than arrangements with academic scientists and institutions that have
provided us basic scientific research capabilities, we have not entered into any such arrangements to date.

If
we enter into any of these strategic alliances, they may provide us with access to the therapeutic area expertise and the development and commercialization resources of our
collaborators, as well as augment our financial resources.

We
may not be able to negotiate collaboration or other alternative arrangements with these other companies for the development or commercialization of our product candidates on
acceptable terms, or at all. We face, and will continue to face, significant competition in seeking appropriate collaborators. Moreover, collaboration arrangements are complex and time consuming to
negotiate, document and implement. We may not be successful in our efforts, if any, to establish and implement collaborations or other alternative arrangements. The terms of any collaborations or
other arrangements that we establish may not be favorable to us. If we are not able to establish collaboration arrangements, we may have to reduce or delay further development of some of our programs,
increase our planned expenditures and undertake development and commercialization activities at our own expense.

Any
collaboration that we enter into may not be successful. The success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators. It is
likely that our collaborators will have significant discretion in determining the efforts and resources that they will apply to these collaborations. For example, it is possible that:



32

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We
also expect to be subject to additional risks in future collaboration agreements we may enter into, including the following:



Collaborations
with pharmaceutical companies and other third parties often are terminated or allowed to expire by the other party. Such terminations or expirations would adversely affect
us financially and could harm our business reputation.

The results of preclinical studies and early stage clinical trials do not ensure success in later stage clinical trials, the results of clinical trials
of a product candidate for particular indications are not necessarily indicative of the results of clinical trials of the product candidate in other indications and interim results from a clinical
trial are not necessarily indicative of the successful outcome of that trial.

We do not currently have any products that have received regulatory approval, and our product development efforts are at an early stage. The outcome of
preclinical studies and early clinical trials may not accurately predict the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. For
example, the results that we observed in our preclinical studies of TPI 287 may not be indicative of successful results in our ongoing and planned Phase 1 and Phase 2 clinical trials of
TPI 287 in multiple cancer indications. Many drug candidates have failed to show efficacy or safety in humans even after promising preclinical study results.

Even
if our early phase clinical trials are successful, we will need to conduct additional clinical trials in a larger number of patients taking the drug for longer periods before we are
able to seek approvals from the FDA and similar regulatory authorities outside the United States to market and sell a product candidate. Similarly, even if clinical trials of a product candidate are
successful in one indication, clinical trials of that product candidate for other indications may be unsuccessful. For example, we plan to conduct clinical trials of TPI 287 for tumors of the
central nervous system, prostate and pancreatic cancer. As such, the results from these Phase 2 clinical trials of TPI 287 may not necessarily be indicative of the results we may obtain in
future clinical trials of TPI 287 in other cancer indications. Furthermore, even if clinical trials of one formulation of a drug are successful, clinical trials for other formulations may be
unsuccessful. For example, the results from our planned Phase 2 clinical trials of an IV formulation of TPI 287 may not accurately predict the results we obtain in future clinical trials of an
oral formulation of TPI 287. If we are not successful in commercializing TPI 287 in any of the cancers that we are investigating or as an oral formulation, or are significantly delayed
in doing so, our business will be materially harmed and our stock price may decline.

33

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If our preclinical studies do not produce positive results or if our clinical trials do not demonstrate safety and efficacy in humans, we may experience
delays, incur additional costs and ultimately be unable to commercialize our product candidates.

Before obtaining regulatory approval for the sale of our product candidates, we must conduct, at our own expense, extensive preclinical tests to demonstrate the
safety of our product candidates in animals and clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Preclinical and clinical testing is expensive, difficult to
design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more of our clinical trials can occur at any stage of testing. We may experience numerous
unforeseen events during, or as a result of, preclinical testing and the clinical trial process that could delay or prevent our ability to receive regulatory approval or commercialize our product
candidates, including:



If
we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete
our clinical trials
or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:



34

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Our
product development costs also will increase if we experience delays in testing or approvals. We do not know whether any preclinical studies or clinical trials will begin as planned,
will need to be restructured or will be completed on schedule, if at all. Significant preclinical or clinical trial delays also could shorten the patent protection period during which we may have the
exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to commercialize our products or product candidates.

If we observe serious adverse events or identify inappropriate side effects during the development of our product candidates, we may need to abandon or
delay our development of the applicable product candidate.

Our product candidates may produce serious unforeseen adverse events, have undesirable side effects or have other characteristics that are unexpected. As a
result, we might need to interrupt, delay or halt clinical trials of our product candidates. We may suspend or terminate clinical trials at any time. Regulators or institutional review boards may
require that we hold, suspend or terminate clinical trials for various reasons, including a finding that participants are being exposed to unacceptable health risks. In addition, if other
pharmaceutical companies announce that they have observed frequent unforeseen adverse events or safety issues in their trials involving products or product candidates similar to, or competitive with,
our product candidates, we could encounter delays in the timing of our clinical trials
or difficulties in obtaining the approval of our product candidates. The public perception of our product candidates might also be adversely affected, which could adversely affect our business,
financial condition and results of operations, even if the concern relates to another company's product or product candidate.

The commercial success of TPI 287 or any other product candidates that we may develop will depend upon the degree of market acceptance by
physicians, patients, healthcare payors and others in the medical community.

Any products that we bring to the market, including TPI 287 if it receives marketing approval, may not gain market acceptance by physicians, patients,
healthcare payors and others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become
profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:



If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we
may be unable to generate product revenues.

We do not have a sales or marketing organization and have no experience in the sale, marketing or distribution of pharmaceutical products. To achieve commercial
success for any approved product, we must either develop a sales and marketing organization or outsource these functions to third parties. We plan to retain United States marketing and sales rights or
co-promotion rights for our product candidates for which we receive regulatory approval in markets in which we believe it is possible to

35

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gain
access through a focused, specialized sales force. For markets in which we believe a large sales force is required to gain access, and for markets outside the United States, we plan to
commercialize products for which we obtain regulatory approval through a variety of collaboration and distribution arrangements with other pharmaceutical and biotechnology companies.

There
are risks involved with establishing our own sales and marketing capabilities, as well as in entering into arrangements with third parties to perform these services. For example,
developing a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing
capabilities is delayed or prohibited as a result of FDA requirements or other reasons, we would incur related expenses too early relative to the product launch. This may be costly, and our investment
would be lost if we cannot retain our sales and marketing personnel. In addition, even if we establish our own sales force and marketing capabilities, our sales force and marketing teams may not be
successful in commercializing our products.

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

The development and commercialization of new drugs is highly competitive. We face competition with respect to TPI 287 and any products we may seek to
develop or commercialize in the future from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide.

If
TPI 287 is approved for the cancer indications that we are currently investigating, it will compete principally with the following:



Potential
competitors also include academic institutions, government agencies and other private and public research organizations that conduct research, seek patent protection and
establish collaborative arrangements for research, product development, manufacturing and commercialization.

Our
commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer or more effective, have fewer side effects, are more
convenient or are less expensive than any products that we may develop. Our competitors may also obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for
ours. In addition, our ability to compete may be negatively affected because in some cases insurers or third party payors seek to encourage the use of generic products. This may make branded products
less attractive to buyers due to higher costs.

We
believe that many competitors are attempting to develop therapeutics for many of our target indications, including academic institutions, government agencies, public and private
research organizations, large pharmaceutical companies and smaller more focused companies. We are aware of numerous product candidates in clinical development for each of the cancer indications that
we are investigating.

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Many of our competitors may have significantly greater financial resources and expertise than we do in the following:



Smaller
and other early stage development companies may also prove to be significant competitors, particularly through collaborative arrangements with large pharmaceutical companies or
other organizations. In addition, other companies and institutions compete with us in recruiting and retaining highly qualified scientific and management personnel and in establishing clinical trial
sites and patient registration for clinical trials, as well as in acquiring technologies complementary to or necessary for our programs or advantageous to our business.

If we are unable to obtain adequate reimbursement from governments or third party payors for any products that we may develop or if we are unable to
obtain acceptable prices for those products, our revenues and prospects for profitability will suffer.

Our revenues and profits will depend heavily upon the availability of adequate reimbursement for the use of our approved product candidates from governmental and
other third party payors, both in the United States and in other markets. Reimbursement by a third party payor may depend upon a number of factors, including the third party payor's determination that
use of a product is:



Obtaining
reimbursement approval for a product from each government or other third party payor is a time consuming and costly process that could require us to provide supporting
scientific, clinical and cost-effectiveness data for the use of our products to each payor. We may not be able to provide data sufficient to gain acceptance with respect to reimbursement.
Even when a payor determines that a product is eligible for reimbursement, the payor may impose coverage limitations that preclude payment for some uses that are approved by the FDA or comparable
authorities. In addition, there is a risk that full reimbursement may not be available for high priced products. Moreover, eligibility for coverage does not imply that any product will be reimbursed
in all cases or at a rate that allows us to make a profit or even cover our costs. Interim payments for new products, if applicable, may also not be sufficient to cover our costs and may not be made
permanent. A primary trend in the United States healthcare industry and elsewhere is toward cost containment.

We
expect recent changes in the Medicare program and increasing emphasis on managed care to continue to put pressure on pharmaceutical product pricing. In 2003, the U.S. government
enacted legislation providing a partial prescription drug benefit for Medicare recipients, which became effective at the beginning of 2006. However, to obtain payments under this program, we will be
required to sell products to Medicare recipients through drug procurement organizations operating pursuant to this legislation. These organizations will negotiate prices for our products, which are
likely to be lower than those we might otherwise obtain. Federal, state and local governments in the United States continue to

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consider
legislation to limit the growth of healthcare costs, including the cost of prescription drugs. Future legislation could limit payments for the product candidates that we are developing.

Recent proposed legislation may permit re-importation of drugs from foreign countries into the United States, including foreign countries
where the drugs are sold at lower prices than in the United States, which could force us to lower the prices at which we sell our products and impair our ability to derive revenues from these
products.

Legislation has been introduced in the U.S. Congress that, if enacted, would permit more widespread re-importation of drugs from foreign countries
into the United States. This could include re-importation from foreign countries where the drugs are sold at lower prices than in the United States. Such legislation, or similar regulatory
changes, could lead to a decrease in the price we receive for any approved products, which, in turn, could impair our ability to generate revenues. Alternatively, in response to legislation such as
this, we might elect not to seek approval for or market our products in foreign jurisdictions in order to minimize the risk of re-importation, which could also reduce the revenue we
generate from our product sales.

Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.

In some countries, particularly the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these
countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product.

To
obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to
other
available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be adversely affected.

Risks Related to Our Dependence on Third Parties

Use of third parties to manufacture our product candidates may increase the risk that we will not have sufficient quantities of our product candidates
or be able to obtain such quantities at an acceptable cost, and clinical development and commercialization of our product candidates could be delayed, prevented or impaired.

We do not currently own or operate manufacturing facilities for the production of clinical or commercial quantities of our product candidates. We have limited
personnel with experience in drug manufacturing and we lack the resources and the capabilities to manufacture any of our product candidates on a clinical or commercial scale.

We
currently rely, and expect to continue to rely, on third parties for the manufacture of our product candidates and any products that we may develop, other than small amounts of
compounds that we synthesize for preclinical testing. To date, we have obtained our supply of the bulk drug substance for TPI 287 from one third-party manufacturer. We have engaged a second
manufacturer to provide the fill and finish services for an IV formulation of TPI 287 that we are using in our ongoing clinical trials. We do not have any agreements with third party
manufacturers for the long term commercial supply of any of our product candidates. We obtain our supplies of TPI 287 from these third party manufacturers pursuant to short term agreements that
include specific supply timelines and volume expectations. If any of these manufacturers should become unavailable to us for any reason, we may be delayed in identifying and qualifying such
replacements.

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Reliance
on third party manufacturers entails risks to which we would not be subject if we manufactured product candidates or products ourselves, including:



Our
manufacturers may not be able to comply with current good manufacturing practice, or cGMP, regulations or other regulatory requirements or similar regulatory requirements outside the
United States. We and our manufacturers are subject to unannounced inspections by the FDA, state regulators and similar regulators outside the United States. Our failure, or the failure of our third
party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, failure of regulatory authorities to grant
marketing approval of our product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and
criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates.

Our
product candidates and any products that we may develop may compete with other product candidates and products for access to manufacturing facilities. There are a limited number of
manufacturers that operate under cGMP regulations and that are both capable of manufacturing for us and willing to do so. If the third parties that we engage to manufacture product for our preclinical
tests and clinical trials should cease to continue to do so for any reason, we likely would experience delays in advancing these trials while we identify and qualify replacement suppliers and we may
be unable to obtain replacement supplies on terms that are favorable to us. In addition, if we are not able to obtain adequate supplies of our product candidates or the drug substances used to
manufacture them, it will be more difficult for us to develop our product candidates and compete effectively.

Our
current and anticipated future dependence upon others for the manufacture of our product candidates may adversely affect our future profit margins and our ability to develop product
candidates and commercialize any products that receive regulatory approval on a timely and competitive basis.

We rely on third parties to conduct our clinical trials and those third parties may not perform satisfactorily, including failing to meet established
deadlines for the completion of such trials.

We do not independently conduct clinical trials for our product candidates. We rely on third parties, such as contract research organizations, clinical data
management organizations, medical institutions and clinical investigators, to perform this function. Our reliance on these third parties for clinical development activities reduces our control over
these activities. We are responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA
requires us to comply with standards, commonly referred to as Good Clinical Practices, for conducting, recording, and reporting the results of clinical trials to assure that data and reported results
are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Our reliance on third parties that we do not control does not relieve us of these
responsibilities and requirements. Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties do not successfully
carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be
delayed in obtaining, regulatory approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates.

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We
also rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our existing or future distributors could delay
clinical development or regulatory approval of our product candidates or commercialization of our products, producing additional losses and depriving us of potential product revenue.

We may not be successful in our efforts to in-license or acquire attractive development candidates.

We may attempt to enhance our product pipeline through strategically in-licensing or acquiring product candidates that complement our business.
However, we may be unable to license or acquire suitable product candidates from third parties for a number of reasons. In particular, the licensing and acquisition of pharmaceutical products is
competitive. A number of more established companies are also pursuing strategies to license or acquire products in the cancer market. These established companies may have a competitive advantage over
us due to their size, cash resources or greater clinical development and commercialization capabilities. Other factors that may prevent us from licensing or otherwise acquiring suitable product
candidates include the following:



If we in-license product candidates in the future and fail to comply with our obligations in any such license with a third party, we could
lose license rights that are important to our business.

We expect that any licenses that we enter into the future will provide us rights to third party intellectual property that is important to our business. We expect
that future licenses will impose various development and commercialization, milestone payment, royalty, sublicensing, patent protection and maintenance, insurance and other obligations on us. If we
fail to comply with these obligations or otherwise breach the license agreement, the licensor may have the right to terminate the license in whole, terminate the exclusive nature of the license or
bring a claim against us for damages. Any such termination or claim would likely prevent or impede our ability to market any product that is covered by the licensed patents. Even if we contest any
such termination or claim and are ultimately successful, our stock price could suffer. In addition, upon any termination of a license agreement, we may be required to license to the licensor any
related intellectual property that we developed.

We may be unable to attract and retain the qualified employees we need to be successful.

We are highly dependent on members of our staff that lead or play critical roles in our research and development efforts. We require highly qualified and trained
scientists with the necessary skills to develop our product candidates. Recruiting and retaining qualified technical and managerial personnel will also be critical to our success. We face intense
competition for these professionals from other companies in our industry and the turnover rate for these professionals can be high. The loss of any of these persons, or our inability to recruit
additional personnel necessary to our business, could substantially impair our research and development efforts and impede our ability to develop and commercialize any of our products. In addition, we
rely on other consultants and advisors to assist us in formulating our research and development strategy. Some have consulting or other advisory arrangements with other entities that may conflict or
compete with their obligations to us.

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We expect to expand our development, regulatory and sales and marketing capabilities, and as a result, we may encounter difficulties in managing our
growth, which could disrupt our operations.

We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of drug development,
regulatory affairs and sales and marketing. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities
and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the inexperience of our management team in managing a company with such anticipated growth,
we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The physical expansion of our operations may lead to significant costs and
may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

Our use of hazardous materials exposes us to the risk of material environmental liabilities. We also incur substantial costs to comply with
environmental and occupational safety laws regulating the use of hazardous materials. If we violate these laws, we would be subject to significant fines, liabilities or other adverse consequences.

We use radioactive materials and other hazardous or biohazardous substances in our research and development activities. As a result, we are potentially subject to
material liabilities related to personal injuries or property damages that may be caused by the spread of radioactive contamination or by other hazardous substance releases or exposures at, or from,
our facilities. Although we believe that
our safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, we cannot completely eliminate the risk of accidental
contamination or injury from these materials. Decontamination costs associated with radioactivity releases, other clean-up cost, and related damages or liabilities could be significant and
could harm our business. The cost of this liability could exceed our resources, and we do not maintain liability insurance for these risks.

We
are required to comply with increasingly stringent laws and regulations governing environmental protection and workplace safety, including requirements governing the handling,
storage, use and disposal of radioactive and other hazardous substances and wastes, and laboratory operating and safety procedures. These laws and regulations can impose substantial fines and criminal
sanctions for violations. Maintaining compliance with these laws and regulations with regard to our operations could require substantial additional resources. These costs could limit our ability to
conduct operations in a cost-effective manner.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product
candidates.

We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and will face an even greater
risk if we commercially sell any products that we may develop. Product liability claims might be brought against us by clinical trial patients, consumers or health care providers or by pharmaceutical
companies or others selling our products. If we complete clinical testing for our product candidates and receive regulatory approval to market our products, the FDA will require us to include
extensive warnings, precautions and other risk and safety information in the label for our products that, among other things, identify the known potential adverse effects and the patients who should
not receive our product. These warnings may not be deemed adequate, and physicians and patients may not comply with these warnings.

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If
we cannot successfully defend ourselves against such claims, we may incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:



We
have product liability insurance that covers our clinical trials up to a $5.0 million annual aggregate limit and subject to a per claim deductible. We cannot predict all of the
possible harms or side effects that may result from the testing and use of our product candidates. As a result, the amount of insurance coverage we currently hold, or that we may obtain, may not be
adequate to protect us from any liabilities. We may require increased liability coverage as our product candidates advance in clinical trials. In addition, we intend to expand our insurance coverage
to include the sale of commercial products if we obtain marketing approval for any products. Further, insurance coverage is increasingly expensive, and we do not know whether we will be able to
maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. A successful product liability claim brought against us in excess of our
insurance coverage or a product recall could adversely affect our business, results of operations and financial condition.

If our internal control over financial reporting is not considered effective, our business could be materially harmed and our stock price could decline.

Beginning in 2007, Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate the effectiveness of our internal control over financial reporting
as of the end of each fiscal year and to include a management report assessing the effectiveness of our internal control over financial reporting in our annual report on Form 10-K
for that fiscal year. Beginning in 2008, Section 404 also requires our independent registered public accounting firm to attest to, and report on, management's assessment of our internal control
over financial reporting.

Any
system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of
any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that
any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. We cannot assure you that we will not identify material weaknesses in our
internal control systems in the future. If material weaknesses in our internal control systems are detected, our internal control over financial reporting may not be considered effective and we may
experience a loss of public confidence, which could have an adverse effect on our business and on the market price of our common stock.

Risks Related to Regulatory Approval of Our Product Candidates

If we are not able to obtain required regulatory approvals, we will not be able to commercialize our product candidates, and our ability to generate
revenue will be materially impaired.

Our product candidates and the activities associated with their development and commercialization, including their testing, manufacture, safety, efficacy,
recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the

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FDA
and other regulatory agencies in the United States and by comparable authorities in other countries. Failure to obtain regulatory approval for a product candidate will prevent us from
commercializing the product candidate. We have not received regulatory approval to market any of our product candidates in any jurisdiction. We have only limited experience in filing and prosecuting
the applications necessary to gain regulatory approvals and expect to rely on third party contract research organizations to assist us in this process. Securing FDA approval requires the submission of
extensive preclinical and clinical data and supporting information to the FDA for each therapeutic indication to establish the product candidate's safety and efficacy. Securing FDA approval also
requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the FDA. Our future products may not be effective, may be only
moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining regulatory approval or prevent or limit commercial
use.

The
process of obtaining regulatory approvals is expensive, often takes many years, if approval is obtained at all, and can vary substantially based upon a variety of factors, including
the type, complexity and novelty of the product candidates involved. Changes in regulatory approval policies during the
development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review criteria for each submitted product application, may cause delays in the approval
or rejection of an application. The FDA has substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and
require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent regulatory
approval of a product candidate. Any regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not
commercially viable.

Any product for which we obtain marketing approval could be subject to restrictions or withdrawal from the market and we may be subject to penalties if
we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, when and if any of them are approved.

Any product for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and
promotional activities for such product, will be subject to continual requirements of and review by the FDA and comparable regulatory authorities. These requirements include submissions of safety and
other post-marketing information and periodic reports, registration requirements, cGMP requirements relating to quality control, quality assurance and corresponding maintenance of records
and documents, requirements regarding the distribution of samples to physicians and recordkeeping. Even if regulatory approval of a product is granted, the approval may be subject to limitations on
the indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety
or efficacy of the product. Later discovery of previously unknown problems with our products, manufacturers or manufacturing processes, including new safety risks, or failure to comply with regulatory
requirements, may result in actions such as:



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Failure to obtain regulatory approval in international jurisdictions would prevent us from marketing our products abroad, and regulatory approvals in
some international jurisdictions can be conditioned on broad license grants.

We intend to have our products marketed outside the United States. With respect to some of our product candidates, we expect that a future collaborator will have
responsibility to obtain regulatory approval outside the United States, and we will rely on our collaborator to obtain these approvals. The approval procedure varies among countries and can involve
requirements for additional testing. The time required to obtain approval may differ from that required to obtain FDA approval. The regulatory approval process outside the United States may include
all of the risks associated with obtaining FDA approval, as well as risks attributable to the satisfaction of local regulation in foreign jurisdictions. In addition, in many countries outside the
United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We may not obtain approvals from regulatory authorities
outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory
authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. We and our collaborators may not be able to file for
regulatory approvals and may not receive necessary approvals to commercialize our products in any market.

Recently,
some foreign jurisdictions have required biopharmaceutical companies to grant broad licenses to domestic manufacturers as a condition to providing regulatory approval to market
and sell within the applicable jurisdiction. If we were forced to grant a broad license to our products as a condition to selling within the applicable jurisdiction, our revenues and profitability
would be materially impaired.

In
addition, we, along with our collaborators or subcontractors, may not employ, in any capacity, persons who have been debarred under the FDA's Application Integrity Policy. Employment
of such a debarred person, even if inadvertently, may result in delays in the FDA's review or approval of our product candidates or the rejection of data developed with the involvement of such person.

Risks Related to Our Intellectual Property

Our success is dependent on obtaining and defending patents and proprietary technology.

Our success in commercializing, producing and marketing products and technologies in the future depends, in large part, on our ability to obtain and maintain
proprietary protection of the intellectual property related to our technologies and products, both in the United States and other countries, and to operate without infringing the proprietary rights of
third parties. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies are covered by valid and enforceable
patents. The patent positions of biotechnology companies, including our patent positions, are generally uncertain and involve complex legal and factual questions.

We
do not know whether any of our pending or future patent applications will result in the issuance of patents. In addition, we cannot predict the breadth of claims that may be allowed
and issued to us for patents related to our technologies or products, if any. Before a patent is issued, its coverage can be significantly narrowed, either in the United States or abroad. To the
extent patents have been issued or will be issued, some of these patents are subject to further proceedings that may

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limit
their scope and once patents have been issued, we cannot predict how the claims will be construed or enforced. It is not possible to determine which patents may provide significant proprietary
protection or competitive advantage, or which patents may be circumvented or invalidated. Furthermore, patents already issued to us, or patents that may be issued on our pending applications, may
become subject to dispute, including interference proceedings in the United States to determine priority of invention. If our currently issued patents are invalidated or if the claims of those patents
are narrowed, our ability to prevent competitors from marketing products that are currently protected by those patents could be reduced or eliminated. We could then face increased competition
resulting in reduced market share, prices and profit.

In
addition, the laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and many companies have encountered significant
problems in protecting and defending their proprietary rights in foreign jurisdictions. For example, methods of treating humans are not patentable in many countries outside of the United States.

Our
patents may not afford us protection against competitors with similar technology. Because there is a lengthy time between when a patent application is filed and when it is issued,
and because publications of discoveries in the scientific literature often lag behind actual discoveries, we cannot be certain that we were the first to make the inventions claimed in our patent
applications or that we were the first to file for protection of the inventions set forth in these patent applications. We may also incur substantial costs in asserting claims against, and defending
claims asserted against us by, third parties to prevent the infringement of our patents and proprietary rights by others. Participation in such infringement proceedings may adversely affect our
business and financial condition, even if the eventual outcome is favorable.

Litigation or third party claims of intellectual property infringement could require us to spend substantial time and money defending against any such
claim and adversely affect our ability to develop and commercialize our products.

Our success also depends in part on our ability to avoid infringing patents and proprietary rights of third parties and breaching any licenses that we may enter
into with regard to any future products. There are many pharmaceutical and chemical patents and applications being filed, published, and issued frequently throughout the world. Some of these patents
and applications contain disclosures and claims that are similar to technologies and products that we are using and developing. Some of these patents and disclosures contain claims and disclosures
that are difficult to interpret. It is possible that a third party may own or control issued patents, or patent applications or in the future may file, patent applications covering technologies or
products we are developing.

If
our technology, products or activities are deemed to infringe other companies' rights, we could be subject to damages or be prevented from using the technology or selling the product
that is infringing other companies' rights, or we could be required to obtain licenses to use that technology or sell the product. If patents covering technologies required by our operations are
issued to others, we may have to rely on licenses from third parties, which may not be available on commercially reasonable terms, if at all. We could be required to pay substantial license fees or
royalties or both. Even if we are able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property. Third parties may
accuse us of employing their proprietary technology without authorization. In addition, third parties may obtain patents that relate to our technologies and claim that our use of such technologies
infringes their patents, even if we have received patent protection for our technology. These claims could require us to incur substantial costs

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and
could have a material adverse effect on us, regardless of the merit of the claims, including the following:



We may be required to obtain rights to proprietary technologies that are required to further develop our business and that may not be available or may
be costly.

Our development programs may require the use of multiple products or technologies proprietary to other parties. Third party suppliers may not be able to furnish
us with a supply of these products sufficient to satisfy our requirements. We may not be able to obtain additional licenses we may need in the future on terms acceptable to us. Our inability to obtain
any one or more of these licenses, on commercially reasonable terms, if at all, or to circumvent the need for any such license, could cause significant delays and cost increases and materially affect
our ability to develop and commercialize our product candidates. In connection with our efforts to obtain rights to these proprietary technologies, we may find it necessary to convey rights to our
technology to others. Some of our products may require the use of multiple proprietary technologies. Consequently, we may be required to make cumulative royalty payments to several third parties.
These cumulative royalties could become commercially prohibitive. We may not be able to successfully negotiate the amounts of these royalties on terms acceptable to us.

We
may rely in part on third party licenses for access to intellectual property for our product candidates. We expect that any such future licenses will impose various development and
commercialization, milestone payment, royalty, sublicensing, patent protection and maintenance, insurance and other obligations on us. If we fail to comply with these obligations or otherwise breach
the license agreement, the licensor may have the right to terminate the license in whole, terminate the exclusive nature of the license or bring a claim against us for damages. Any such termination or
claim would likely prevent or impede our ability to market any product that is covered by the licensed patents. Even if we contest any such termination or claim and are ultimately successful, our
stock price could suffer. In addition, upon any termination of a license agreement, we may be required to license to the licensor any related intellectual property that we developed.

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If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products could
be adversely affected.

In addition to patented technology, we rely upon unpatented proprietary technology, processes and know-how. We seek to protect our unpatented
proprietary information in part by confidentiality agreements with our employees, consultants and third parties. These agreements may be breached and we may not have adequate remedies for any such
breach. In addition, our trade secrets may otherwise become known or be independently developed by competitors. If we are unable to protect the confidentiality of our proprietary information and
know-how, competitors may be able to use this information to develop products that compete with our products, which could adversely impact our business.

Risks Related to Ownership of Our Common Stock

A small number of our stockholders have the ability to control all matters submitted to stockholders for approval.

A small number of investors who acquired shares of our common stock and warrants to purchase shares of our common stock in our 2006 private placement, in the
aggregate, beneficially own more than 50% of our capital stock. As a result, if these stockholders were to choose to act together, they would be able to control all matters submitted to our
stockholders for approval, as well as our management and affairs. For example, these stockholders, if they choose to act together, would control the election of directors and approval of any merger,
consolidation or sale of all or substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire. In
addition, one of these stockholders, Special Situations Fund III, L.P., has the right, which it has not exercised, to designate up to two persons for election to our Board of Directors.

The investors who acquired shares of our common stock and warrants in our 2006 private placement have contractual preemptive rights to acquire their pro
rata share of any common stock issued by us. If these stockholders do not waive their preemptive rights or do not otherwise cooperate with us in effecting future offering, it will be impractical to
effect a public offering and our ability to effect a private offering could be complicated or limited.

Under the terms of the purchase agreement for our 2006 private placement, we must first offer to sell to each investor that continues to hold at least 50% of the
shares of common stock acquired by that investor in our 2006 private placement such investor's pro rata share of any common stock or securities exercisable or exchangeable for or convertible into
common stock, such offer to remain open for a fifteen business day period, before we can sell such securities to others. An investor's pro rata share is calculated by reference to the number of shares
that continue to be held that were acquired in our 2006 private placement or upon the exercise of warrants and the number of shares of our common stock then issued and outstanding. We believe it would
be impractical to complete a public offering if we are required to comply with the preemptive rights granted to the investors under the purchase agreement. Procedures for compliance with these
contractual rights, unless waived, could complicate or limit our ability to effect a private placement of equity securities.

The warrants issued in our 2006 private placement provide for the reduction of the exercise price of the warrants if we issue common stock for a
consideration per share less than the then current exercise price of the warrants. If we issue common stock for a consideration per share less than $2.40, the exercise price of the warrants will be
reduced and the number of shares issuable upon exercise of the warrants will be increased.

Under the terms of the warrants issued in our 2006 private placement, the exercise price of the warrants is to be reduced, subject to certain exceptions, if we
issue shares of common stock or certain

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options
or rights to acquire common stock for no consideration or for consideration per share less than the exercise price of the warrants in effect immediately prior to the time of such issue or
sale. The warrants specify a formula for a weighted average adjustment in the exercise price that takes into account the number of shares of common stock outstanding, the number of shares issued below
the exercise price and the aggregate consideration received upon such issuance. Under the warrants, if the exercise price is decreased, the number of shares issuable upon exercise is correspondingly
increased. The exercise price of the warrants is currently $2.40 per share. Accordingly, in general, if we issue common stock for a consideration per share of less than $2.40, the exercise price of
the warrants will be correspondingly reduced. Any such reduction in exercise price would result in additional dilution to the holders of our common stock.

Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in
additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

We expect that significant additional capital will be required in the future to continue our research, development and clinical efforts. To the extent we raise
additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock in one or more transactions at prices and in a manner we determine from
time to time. Stockholders who hold our common stock or purchase stock in any of these offerings may be materially diluted by subsequent sales. Such sales may also result in material dilution to our
existing stockholders.

During
2006, our Board of Directors and stockholders adopted our 2006 Equity Incentive Plan, which initially reserved 6,577,106 shares of common stock for issuance thereunder.
Immediately following any issuance of common stock by us during the three year period ending April 4, 2009, other than issuances of common stock upon exercise of the warrants issued to the
investors in our 2006 private placement, the number of shares available for issuance under the 2006 Equity Incentive Plan will be increased to 20% of the number of fully diluted shares of our common
stock immediately after such issuance, including all shares of common stock issuable upon exercise of then outstanding options or warrants, less the number of shares of common stock subject to
existing options under our other stock option and equity incentive plans, up to a maximum of 8,177,106 shares. As a result of common stock issuances through September 26, 2007, the number of
shares available under our 2006 increased to 6,774,428.

Sales of a substantial number of shares in the future may impact the market price of our common stock.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through public or private equity offerings and debt
financings, corporate collaboration and licensing arrangements. Any future sales of a substantial number of shares of our common stock, either by us or by investors, or the perception that such sales
may occur, could depress the market price of our common stock. We are unable to predict the effect that future sales may have on the then prevailing market price of our common stock. Pursuant to a
registration rights agreement entered into between us and the investors in our 2006 private placement, we registered with the Securities and Exchange Commission, or SEC, the resale of shares of common
stock acquired in the private placement and shares of common stock issuable upon exercise of the warrants. We must, among other things, keep this registration statement effective with the SEC for the
resale of such shares of common stock. While we cannot determine precisely the total number of shares of common stock remaining for sale under the registration statement, we estimate based upon
publicly available information that up to approximately 23,656,559 shares remain available for sale, including shares that may be acquired upon the exercise of outstanding warrants.

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If we fail to continue to meet all applicable NASDAQ Capital Market requirements and NASDAQ determines to delist our common stock, the delisting could
adversely affect the market liquidity of our common stock and the market price of our common stock could decline.

Our common stock is listed on the NASDAQ Capital Market. In order to maintain that listing, we must satisfy minimum financial and other requirements. On
February 25, 2005, we received notice from the Nasdaq Stock Market, Inc. that our common stock had not met the $1.00 per share minimum bid price requirement for 30 consecutive business
days and that, if we were unable to demonstrate compliance with this requirement during the applicable grace periods, our common stock would be delisted after that time. On February 6, 2006, we
effected a one-for-ten reverse stock split of our common stock to regain compliance with this listing requirement. Since this time, the closing bid price of our common stock
has remained above $1.00 in compliance with the minimum bid price requirement.

It
is possible that the minimum bid price of our common stock could fall below the required level or that we would otherwise fail to satisfy another NASDAQ requirement for continued
listing of our common stock. For example, we could fail to maintain compliance with the NASDAQ Capital Market listing requirements if we did not maintain minimum stockholder equity of at least
$2.5 million as a result of continuing losses.

If
we fail to continue to meet all applicable NASDAQ Capital Market requirements in the future and NASDAQ determines to delist our common stock, the delisting could adversely affect the
market liquidity of our common stock and the market price of our common stock could decline. Such delisting could also adversely affect our ability to obtain financing for the continuation of our
operations and could result in the loss of confidence by investors, suppliers and employees.

Provisions in our charter documents and under Delaware law could discourage, delay or prevent an acquisition of us, which may be beneficial to our
stockholders, and may prevent or delay attempts by our stockholders to replace or remove our current management.

Our certificate of incorporation and bylaws provide that our Board of Directors is divided into three classes, each consisting, as nearly as possible, of
one-third of the total number of directors, with each class having a three-year term. The number of our directors may be changed only by a resolution of our Board of Directors
and directors can be removed only for cause by the vote of the holders of at least 80% of the voting power of all of our capital stock, voting together as a single class. Stockholders may take action
only at a stockholders' meeting and not by written consent. Certain provisions of our certificate of incorporation and bylaws, including the provisions providing for a classified Board of Directors,
may not be amended without the vote of at least 80% of the voting power of all of our capital stock entitled to vote generally in the election of directors, voting together as a single class. Our
bylaws provide that stockholders wishing to nominate a director at an
annual meeting or at a special meeting called for the purpose of electing directors or to bring business before any meeting of stockholders must comply with strict advance written notice provisions.
Our bylaws also provide that special meetings of stockholders may be called only by the chairman of our Board of Directors, or certain of our officers, or by resolution of our directors.

These
provisions of our certificate of incorporation and our bylaws could discourage potential acquisition proposals and could delay or prevent a change in control that stockholders may
consider favorable, including transactions in which an investor in our stock might otherwise receive a premium for shares. These provisions are intended to enhance the likelihood of continuity and
stability in the composition of our Board of Directors and in the policies formulated by our Board of Directors. We also intended these provisions to discourage certain types of transactions that may
involve an actual or threatened change of control. We designed these provisions to reduce our vulnerability to unsolicited acquisition proposals and to discourage certain tactics that may be used in
proxy contests. These

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provisions,
however, could also have the effect of discouraging others from making a tender offer for our shares. As a consequence, they also may inhibit fluctuations in the market price of our shares
that could result from actual or rumored takeover attempts. Because our Board of Directors is responsible for appointing the members of our management team, these provisions could in turn affect any
attempt by our stockholders to replace current members of our management team. We are permitted to issue shares of our preferred stock without stockholder approval upon such terms as our Board of
Directors determines. Therefore, the rights of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of our preferred stock that may be issued in
the future. In addition, the issuance of preferred stock could have a dilutive effect on the holdings of our current stockholders.

We
are also subject to provisions of Delaware law that prohibit us from engaging in any business combination with any "interested stockholder," meaning generally that a stockholder who
beneficially owns more than 15% of our outstanding voting stock cannot acquire us for a period of three years from the date of the transaction in which the person acquired more than 15% of our
outstanding voting stock, unless various conditions are met, such as approval by our Board of Directors of the transaction, pursuant to which the person became an interested stockholder.

Our stockholder rights plan could prevent a change in control of our company in instances in which some stockholders may believe a change in control is
in their best interests.

In December 2006, our Board of Directors adopted a stockholder rights plan to replace our stockholder rights plan that expired in November 2006 at
the end of its ten-year term. Our plan may have the effect of discouraging, delaying or preventing a merger or acquisition of us that is beneficial to our stockholders by diluting the
ability of a potential acquirer to acquire us. Pursuant to the terms of our plan, ten days after a person or group, except under certain circumstances, acquires 15% or more of our outstanding common
stock or 10 business days after announcement of a tender or exchange
offer for 15% or more of our outstanding common stock, the rights, other than rights held by the person or group who has acquired or announced an offer to acquire 15% or more of our outstanding common
stock, would generally become exercisable for shares of our common stock at a discount. Because the potential acquirer's rights would not become exercisable for our shares of common stock at a
discount, the potential acquirer would suffer substantial dilution and may lose its ability to acquire us. In addition, the existence of the plan itself may deter a potential acquirer from acquiring
us. As a result, either by operation of the plan or by its potential deterrent effect, mergers and acquisitions of us that our stockholders may consider in their best interests may not occur,
including transactions in which stockholders might otherwise receive a premium for their shares.

Because
the investors in our 2006 private placement own a substantial percentage of our outstanding common stock, our stockholder rights plan provides that such investors and their
respective affiliates will be exempt from the stockholder rights plan, unless an investor and its affiliates acquire, after April 4, 2006, subject to certain exceptions, more than 1% of our
then issued and outstanding common stock, not including the shares of common stock issued to such investor in the private placement or shares of common stock issued upon exercise of the warrants
issued to such investors.

Because we do not expect to pay dividends in the foreseeable future, you must rely on stock appreciation for any return on your investment.

We have paid no cash dividends on our common stock to date, and we currently intend to retain our future earnings, if any, to fund the development and growth of
our business. As a result, we do not expect to pay any cash dividends in the foreseeable future, and payment of cash dividends, if any, will also depend on our financial condition, results of
operations, capital requirements and other factors and will be at the discretion of our Board of Directors. Furthermore, we may in the future become subject to contractual restrictions on, or
prohibitions against, the payment of dividends. Accordingly,

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the
success of your investment in our common stock will likely depend entirely upon any future appreciation. There can be no assurance that our common stock will appreciate in value or even maintain
the price at which you purchased your shares, and you may not realize a return on your investment in our common stock.

If our stock price is volatile, purchasers of our common stock could incur substantial losses.

Our stock price is likely to be volatile. The stock market in general and the market for biotechnology companies in particular have experienced extreme volatility
that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able
to sell their common stock at or above the price at which they purchased their stock. The market price for our common stock may be influenced by many factors, including:



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Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.    Defaults upon Senior Securities

None.

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

None.

Item 5.    Other Information

None.

Item 6.    Exhibits

|Exhibit
Number |  | Description of Exhibit                                                                                                                                                                                                   
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1           |  | Certification of Chief Executive Officer (pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended)*                                                                                   
|31.2           |  | Certification of Chief Financial Officer (pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended)*                                                                                   
|32.1#          |  | Certification of Chief Executive Officer (pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350))
*
|32.2#          |  | Certification of Chief Financial Officer (pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350))
*

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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.

|                 |  | TAPESTRY PHARMACEUTICALS, INC.
|---------------- |  | ------------------------------
|                 |  |                               
|                 |  |                               
|November 5, 2007 |  | By:                           
|                 |  |                               
|                 |  |                               
|November 5, 2007 |  | By:                           
|                 |  |                               
|                 |  |                               
|November 5, 2007 |  | By:                           

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Index of Exhibits

|Exhibit
Number |  | Description of Exhibit                                                                                                                                                                                                   
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1           |  | Certification of Chief Executive Officer (pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended)*                                                                                   
|31.2           |  | Certification of Chief Financial Officer (pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended)*                                                                                   
|32.1#          |  | Certification of Chief Executive Officer (pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350))
*
|32.2#          |  | Certification of Chief Financial Officer (pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350))
*

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