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| DELAWARE                                                            |                                                        | 41-1505029                                   |
|---------------------------------------------------------------------|-------------------------------------------------------------|----------------------------------------------|
| (State      or other jurisdiction of incorporation or organization) |                                                        | (I.R.S.      Employer Identification Number) |
|                                                                |                                                        |                                         |
| 850      Bear Tavern Road, Suite 201Ewing,      NJ                  |                                                        | 08628                                        |
| (Address      of principal executive offices)                       |                                                        | (Zip      Code)                              |
|                                                                | (609)      538-8200                                         |                                         |
|                                                                | (Issuer’s      telephone number, including area code) |                                         |

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Tableof Contents 

| Item                |          Description                                                                                                                                                                                                  | Page  |
|---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       |
| Part      I         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       |
|  1.            |  Description      of Business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  1    |
|                |  Risk      Factors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  17   |
|  2.            |  Description      of Property.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  23   |
|  3.            |  Legal      Proceedings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  23   |
|  4.            |  Submission      of Matters to a Vote of Security Holders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  23   |
|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       |
| Part      II   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       |
| 5.             |  Market      for Common Equity and Related Stockholder Matters and Small Business      Issuer Purchases of Equity Securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  24   |
| 6.             |  Management's      Discussion and Analysis or Plan of Operation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  25   |
|                |  Critical      Accounting Policies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  26   |
|                |  Material      Changes in Results of Operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  27   |
|                |  Financial      Condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  27   |
|  7.            |  Financial      Statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  30   |
|  8.            |  Changes      and Disagreements with Accountants on Accounting and Financial      Disclosure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  30   |
|  8A.           |  Controls      and Procedures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  30   |
|  8B.           |  Other      Information.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 30         |
|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       |
|  Part      III |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       |
|  9.            |  Directors,      Executive Officers, Promoters and Control Persons; Compiance with Section      16 (a) of the Exchnage Act.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  31   |
|  10.           |  Executive      Compensation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  32   |
|  11.           |  Security      Ownership of Certain Beneficial Owners and Management and Related      Stockholder Matters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  35   |
|  12.           |  Certain      Relationships and Related Transactions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  36   |
|  13.           |  Exhibits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  37   |
| 14.                 |  Principal      Accountant Fees and Services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  38   |
|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       |
|                |  Consolidated      Financial Statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  39   |
|                |  Report      of Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  40   |

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| A.              | Overview |
|----------------------------------------------------------------------------------|----------|

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| B.              | BioTherapeutics      Division |
|----------------------------------------------------------------------------------|-------------------------------|

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|                                              | Phase      3 trial      | Phase      2 trial           |
|---------------------------------------------------|------------------------------|------------------------------|
|                                              | orBec®                  | Placebo                      | orBec® | Placebo |
|  Number      of patients randomized          |  62                     |  67                     |  31 |  29 |
|  Number      (%) who died                    |  5      (8%)            |  16      (24%)          |  3      (10%) |  6      (21%) |
|  Hazard      ratio (95% confidence interval) |  0.33      (0.12, 0.89) |  0.47      (0.12, 1.87) |
|  Death      with infection*                  |  3      (5%)            |  9      (13%)           |  2      (6%) |  5      (17%) |
|  Death      with relapse*                    |  3      (5%)            |  9      (13%)           |  1      (3%) |  4      (14%) |

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| C.              | BioDefense      Programs |
|----------------------------------------------------------------------------------|--------------------------|

| 1.   | RiVaxTM -      Ricin Toxin Vaccine |
|----------------|------------------------------------|

 BARDA managesProject BioShield to procure countermeasures and vaccines and is the agency nowresponsible for advanced development of medical countermeasures for chemical,biological, radiological, and nuclear agents. The purpose of BARDA is to takeover where NIH has left off in the transition from research and development toadvanced development and clinical testing. In addition, BARDA is responsible forestablishing priorities for civilian biodefense. BARDA has placed a priority onstability and a rapid onset of immunity in no more than two vaccine doses as thestability and efficacy targets for vaccines under development for both categoryA and category B vaccines. BARDA has recently issued an RFP, entitled“Biodefense Vaccine Enhancement,” to which we have submitted an application forRiVaxTM. Weexpect to continue to respond to RFPs that may arise within BARDA and otherbranches of the government.

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| 2.   | BT-VACCTM -      Botulinum Toxin Vaccine |
|----------------|------------------------------------------|

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| 3.   | Strategy      for development of BioDefenseproducts |
|----------------|-----------------------------------------------------|

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| D.              | Summary      of Our Products inDevelopment |
|----------------------------------------------------------------------------------|--------------------------------------------|

| Product                           | Therapeutic      Indication                                | Stage      of Development                                                                                 |
|-----------------------------------|------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------|
|                              |                                                       |                                                                                                      |
| orBec®                       | Treatment      of Acute GI GVHD                            | Phase      3 confirmatory trial to be initiated in 2008.  MAA filed and      under review  |
| orBec®                       | Prevention      of Acute GVHD                              | Phase      2 trial enrolling                                                                         |
| orBec®                       | Treatment      of Chronic GI GVHD                          | Phase      2 to be initiated in 2008                                                                 |
| Oral      BDP                     | Radiation      Enteritis and Radiation Exposure            | Phase      2 to be initiated in 2008                                                                 |
| LPMTM –      Leuprolide     | Endometriosis      and Prostate Cancer                     | Phase      1 to be initiated in 2008                                                                 |
| OraprineTM                        | Oral      lesions resulting from Graft-versus-Host Disease | Phase      1/2 ro be initiated in 2009                                                          |
| LPETM      and PLPTM      Systems | Delivery      of Water-Insoluble Drugs                     | Pre-Clinical                                                                                         |

| Select      Agent    | Currently      Available Countermeasure            | DOR      Biodefense Product                                                           |
|----------------------|----------------------------------------------------|---------------------------------------------------------------------------------------|
|                 |                                               |                                                                                  |
| Ricin      Toxin     | No      vaccine or antidote currently FDA approved | Injectable      Ricin VaccinePhase      1 Clinical Trial Successfully Completed  |
| Botulinum      Toxin | No      vaccine or antidote currently FDA approved | Oral/Nasal      Botulinum Vaccine                                                |

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| E.              | The      Drug Approval Process |
|----------------------------------------------------------------------------------|--------------------------------|

| 1.   | General |
|----------------|---------|

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| 2.   | Marketing      Strategies |
|----------------|---------------------------|

| 3.   | Competition |
|----------------|-------------|

| A.   | Biodefense      Vaccine Competition |
|----------------|-------------------------------------|

| B.   | orBec®      Competition |
|----------------|------------------------------|

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| 4.   | Patents and Other Proprietary      Rights |
|----------------|-------------------------------------------|

| 5.   | orBec® License      Agreement |
|----------------|------------------------------------|

| 6.   | Ricin Vaccine Intellectual      Property |
|----------------|------------------------------------------|

| 7.   | Botulinum Toxin Vaccine      Intellectual Property |
|----------------|----------------------------------------------------|

| 8.   | Employees        |
|----------------|-----------------------|

| 9.   | Research and Development      Spending   |
|----------------|-----------------------------------------------|

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Cautionary

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| ·   | we      will not be able to maintain our current research and development      schedules; |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | we      may be unsuccessful in our efforts to secure profitable procurement      contracts from the U.S. government or others for our biodefense      products; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | we      will encounter problems in clinical trials;or |
|--------------------|-------------------------------------------------------|

| ·   | the      technology or product will be found to be ineffective or      unsafe. |
|--------------------|--------------------------------------------------------------------------------|

| ·   | it      is uneconomical or the market for the product does not develop or      diminishes; |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | we      are not able to enter into arrangements or collaborations to manufacture      and/or market the product; |
|--------------------|------------------------------------------------------------------------------------------------------------------|

| ·   | the      product is not eligible for third-party reimbursement from government or      private insurers; |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | others      hold proprietary rights that preclude us from commercializing the      product; |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | others      have brought to market similar or superior products;  or |
|--------------------|----------------------------------------------------------------------|

| ·   | the      product has undesirable or unintended side effects that prevent or limit      its commercial use. |
|--------------------|------------------------------------------------------------------------------------------------------------|

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| ·   | announcements      of technological innovations, more important bio-threats or new commercial      therapeutic products by us, our collaborative partners or our present or      potential competitors; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | our      quarterly operating results andperformance; |
|--------------------|------------------------------------------------------|

| ·   | announcements      by us or others of results of pre-clinical testing and clinical      trials; |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | developments      or disputes concerning patents or other proprietary  rights; |
|--------------------|--------------------------------------------------------------------------------|

| ·   | acquisitions; |
|--------------------|---------------|

| ·   | litigation      and government proceedings; |
|--------------------|---------------------------------------------|

| ·   | adverse      legislation; |
|--------------------|---------------------------|

| ·   | changes      in government regulations; |
|--------------------|-----------------------------------------|

| ·   | economic      and other external factors; and |
|--------------------|-----------------------------------------------|

| ·   | general      market conditions. |
|--------------------|---------------------------------|

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| ·   | warrants      to purchase a total of approximately 30,900,000 shares of our common stock      at a current weighted average exercise price of approximately      $0.67; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | anti-dilution      rights associated with a small portion of the above warrants which can      permit purchase of additional shares and/or lower exercise prices under      certain circumstances; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | options      to purchase approximately 10,250,000 shares of our common stock of a      current weighted average exercise price of approximately      $0.44. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Item 2

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Item 5.

| Period                                    | Price Range |
|-------------------------------------------|------------------|
| High                                      | Low              |
| Fiscal      Year Ended December 31, 2006: |             |   |
| First      Quarter                        | $0.69            | $0.26 |
| Second      Quarter                       | $0.40            | $0.23 |
| Third      Quarter                        | $0.33            | $0.20 |
| Fourth      Quarter                       | $0.30            | $0.21 |
|                                      |             |   |
| Fiscal      Year Ended December 31, 2007: |             |   |
| First      Quarter                        | $0.71            | $0.23 |
| Second      Quarter                       | $0.95            | $0.20 |
| Third      Quarter                        | $0.40            | $0.26 |
| Fourth      Quarter                       | $0.61            | $0.15 |

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Item 6

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Critical

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Material

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|                                                | 2007                                                                                                                                   | 2006                                                                                                                       |
|-----------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------|
| Program      - Research & Development Expenses  |                                                                                                                                   |                                                                                                                       |
| orBec®                                         | $     2,288,615                                                                                               | $     3,060,778                                                                                   |
| RiVax™                                        | 452,894                                                                                                                                | 274,635                                                                                                                    |
| BT-VACC™                                      | 315,082                                                                                                                                | 290,405                                                                                                                    |
| Oraprine™                                     | 5,100                                                                                                                                  | 6,996                                                                                                                      |
| LPMTM-Leuprolide                                    | 38,254                                                                                                                                 | 5,679                                                                                                                      |
|   Research      & Development Expense | $     3,099,945                                                                                               | $     3,638,493                                                                                   |
|                                                |                                                                                                                                   |                                                                                                                       |
| Program      - Reimbursed under Grants              |                                                                                                                                   |                                                                                                                       |
| orBec®                                         | $                                - | $                    - |
| RiVax™                                        | 897,470                                                                                                                                | 1,961,074                                                                                                                  |
| BT-VACC™                                      | 45,915                                                                                                                                 | 4,000                                                                                                                      |
| Oraprine™                                     | -                                                                                                                                      | -                                                                                                                          |
| LPMTM-Leuprolide                                    | -                                                                                                                                      | -                                                                                                                          |
|   Reimbursed      under Grant             | $        943,385                                                                               | $    1,965,074                                                                                         |
|                                                |                                                                                                                                   |                                                                                                                       |
| TOTAL                                               | $          4,043,330                                                                                               | $    5,603,567                                                                                         |

| Contractual      Obligation        | Year2008                              | Year2009       | Year2010                                     |
|------------------------------------|---------------------------------------|----------------|----------------------------------------------|
| Non-cancelable      obligation (1) | $          54,000 | $  - |     $   - |
| TOTALS                             | $   54,000             | $       - | $   -                         |

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Off-

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Item 9.

| Name                                           | Age | Position                                              |
|------------------------------------------------|-----|-------------------------------------------------------|
|  James      S. Kuo, M.D., M.B.A.     | 43  | Chairman      of the Board                            |
|  Cyrille      F. Buhrman             | 35  | Director                                              |
|  Christopher J. Schaber,      Ph.D.  | 41  | Chief      Executive Officer, President, and Director |
|  Evan      Myrianthopoulos           | 43  | Chief      Financial Officer, and Director            |
|  James      Clavijo, C.P.A., M.A.    | 41  | Controller,      Treasurer, and Corporate Secretary   |

Audit 
Committee
Financial 
Expert

asdefined under the rules of the Securities and Exchange Commission. The board ofdirectors has also determined that the members of the Audit Committee arequalified to serve on the committee and have the experience and knowledge toperform the duties required of the committee.

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Item 10

Summary Compensation

| Name                                        | Position                                         | Year       | Salary         | Bonus                     | Option      Awards        | All      Other Compensation                                                      | Total          |
|---------------------------------------------|--------------------------------------------------|------------|----------------|---------------------------|---------------------------|----------------------------------------------------------------------------------|----------------|
|  Christopher      J. Schaber (1)  |  CEO      & President                   |  2006 |  $104,700 |  $      33,333       |  $185,403            |  $16,895                                                                    |  $340,331 |
|                                   |                                             | 2007       | $300,000       | $100,000                  | $155,409                  | $28,798                                                                          | $584,207       |
|  Evan      Myrianthopoulos (2)    |  CFO                                        |  2006 |  $195,724 |  $ 55,000       |  $103,064            |  $49,257                                                                    |  $398,045 |
|                                   |                                             | 2007       | $200,000       | $  50,000       | $146,938                  | $27,786                                                                          | $324,724       |
|  James      Clavijo (3)                |  Controller,      Treasurer & Secretary |  2006 |  $144,999 |  $  40,000 |  $  42,836 |  $              -                   |  $222,835 |
|                              |                                             | 2007       | $155,000       | $  35,000       | $  53,115       |        $                - | $243,115  |

Employment and Severance Agreements

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| Name                                       | Number      of SecuritiesUnderlying      UnexercisedOptions      (#)                              | Equity      Incentive Plan Awards: Number of Securities Underlying Unexercised      Unearned Options  (#)                         | Option      Exercise Price ($)                                                                                                                    | Option      Expiration Date |
|--------------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------|
| Exercisable                                | Unexercisable                                                                                     |
|  Christopher      J. Schaber(1)  | 1,527,783                                                                                         | 972,217                                                                                                                                     | 972,217                                                                                                                                           | $0.27                       | 8/28/2016 |
|                                  | 281,250                                                                                           | 618,750                                                                                                                                     | 618,750                                                                                                                                           | $0.47                       | 8/29/2017 |
| Evan      Myrianthopoulos             |                150,000 |                        - |                         - |  $0.35                 | 11/14/2012 |
|                                  |            50,000                          |                        - |                         - |  $0.90                 | 9/15/2013 |
|                                  |            50,000                          |                       -       |                         - |  $0.58                 | 6/11/2014 |
|                                  |          150,000                                     |                       -       |                         - |  $0.47                 | 11/10/2014 |
|                                  |          500,000                                     |            -                                                                         |                -                                                       |  $0.49                 | 12/13/2014 |
|                                  |          275,000                                     |            125,000                                                                   |                125,000                                                 |  $0.35                 | 5/10/2016 |
|                                  |          171,875                                     |            378,125                                                                   |                378,125                                                 |  $0.47                 | 8/29/2017 |
| James      Clavijo                    |          100,000                                     |              -                                                             |                  -                                           |  $0.45                 | 10/22/2014 |
|                                  |          141,663                                     |              8,337                                                         |                  8,337                                       |  $0.45                 | 2/22/2015 |
|                                  |          125,000                                     |            75,000                                                                    |                75,000                                                  |  $0.33                 | 5/10/2016 |
|                                  |          93,750                                      |            206,250                                                                   |                206,250                                                 |  $0.47                 | 8/29/2017 |

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| Name                                      | Fees      Earned of Paid in Cash ($) (1) | Option      Awards ($) (2) | Total      ($) |
|-------------------------------------------|------------------------------------------|----------------------------|----------------|
|  Steve      H. Kanzer (3)  | $23,000                                  | $14,200                    | $37,200        |
|  James      S. Kuo              | $34,000                                  | $94,630                    | $128,630       |
|  Cyrille      F. Buhrman        | $8,000                                   | $54,050                    | $62,050        |

| (1)   | Directors      who are compensated as full-time employees receive no additional      compensation for service on our Board of Directors or its committees. Each      director who is not a full-time employee is paid $2,000 for each board or      committee meeting attended ($1,000 if such meeting was attended      telephonically). |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | We      maintain a stock option grant program pursuant to the nonqualified stock      option plan, whereby members of our Board of Directors who are not      full-time employees receive an initial grant of fully vested options to      purchase 150,000 shares of common stock, and subsequent annual grants of      fully vested options to purchase 75,000 shares of common stock after      re-election to our Board of Directors.  Option Awards include      the value of stock option awards of vested shares of Common Stock as      required by FASB No. 123R. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Mr.      Kanzer resigned from our Board of Directors on May 28,    2007. |
|-----------------|--------------------------------------------------------------------------|

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Item 11. 

| Name      of Beneficial Owner                                                | Shares      of Common Stock Beneficially Owned | Percent      of Class |
|------------------------------------------------------------------------------|------------------------------------------------|-----------------------|
|  Cyrille      F. Buhrman (1)                                       | 5,125,020                                      | 5.2%                  |
|  Christopher      J. Schaber (2)                                   | 2,453,189                                      | 2.4%                  |
|  Evan      Myrianthopoulos (3)                                     | 1,780,625                                      | 1.7%                  |
|  James      S. Kuo (4)                                             | 630,000                                        | *                     |
|  James      Clavijo (5)                                            | 619,441                                        | *                     |
|  All      directors and executive officers as a group (5 persons)  | 10,608,275                                     | 10.1%                 |

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| Plan      Category                                                    | Number      of Securities to be issued upon exercise of outstanding options, warrants      and rights                     | Weighted-Average      Exercise Price Outstanding options, warrants and rights                           | Number      of Securities Remaining Available for Future Issuance Under Equity      Compensation Plans (excluding securities reflected in the first      column) |
|-----------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Equity      compensation plans approved by security holders (1)       | 10,349,839                                                                                                                | $      0.44                                                                                             | 10,612,961                                                                                                                                                       |
|  Equity      compensation plans not approved by security holders |                          - |                       - |                           -    |
|                                                                  |                                                                                                                      |                                                                                                    |                                                                                                                                                             |
| TOTAL                                                                 | 10,349,839                                                                                                                | $0.44                                                                                                   | 10,612,961                                                                                                                                                       |

Item 12.

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Item 13

|   | 2.1        | Agreement      and Plan of Merger, dated May 10, 2006 by and among the Company, Corporate      Technology Development, Inc., Enteron Pharmaceuticals, Inc. and CTD      Acquisition, Inc (incorporated by reference to Exhibit 2.1 included in our      Registration Statement on Form SB-2 (File No. 333-133975) filed on May 10,      2006).                       |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 3.1        | Amended      and Restated Certificate of Incorporation (incorporated by reference to      Exhibit 3.1 included in our Quarterly Report on Form 10-QSB, as amended,      for the fiscal quarter ended September 30, 2003).                                                                                                                                            |
|   | 3.2        | Certificate      of Amendment to Amended and Restated Certificate of Incorporation      (incorporated by reference to Exhibit 4.2 included in our Registration      Statement on Form S-8 (File No. 333-130801) filed on December 30,      2005).                                                                                                                    |
|   | 3.3        | Certificate      of Amendment to Amended and Restated Certificate of Incorporation      (incorporated by reference to Annex A to our Proxy Statement filed      December 12, 2006).                                                                                                                                                                                  |
|   | 3.4        | By-laws      (incorporated by reference to Exhibit 3.1 included in our Quarterly      Report on Form 10-QSB, as amended, for the fiscal quarter ended June 30,      2003).                                                                                                                                                                                      |
|   | 3.5        | Certificate      of Designations of Series A Junior Participating Preferred Stock      (incorporated by reference to Exhibit 3.1 included in our current      report on Form 8-K filed on June 22, 2007).                                                                                                                                                       |
|   | 4.1        | Form      of Investor Warrant issued to each investor dated as of April 12, 2000      (incorporated by reference to Exhibit 4.4 included in our Registration      Statement on Form S-3 (File No. 333- 36950), as amended on December 29,      2000).                                                                                                                |
|   | 4.2        | Finder      Warrant issued to Paramount Capital, Inc. dated as of April 12, 2000      (incorporated by reference to Exhibit 4.5 included in our Registration      Statement on Form S-3 (File No. 333- 36950), as amended on December 29,      2000).                                                                                                                |
|   | 4.3        | Warrant      issued to Aries Fund dated as of May 19, 1997 (incorporated by reference      to Exhibit 4.6 included in our Registration Statement on Form S-3 (File      No. 333- 36950), as amended on December 29, 2000).                                                                                                                                           |
|   | 4.4        | Warrant      issued to Aries Domestic Fund, L.P. dated as of May 19, 1997 (incorporated      by reference to Exhibit 4.7 included in our Registration Statement on Form      S-3 (File No. 333- 36950), as amended on December 29, 2000).                                                                                                                            |
|   | 4.5        | Warrant      issued to Paramount Capital, Inc. dated as of October 16, 1997      (incorporated by reference to Exhibit 4(i)(c) included in our Quarterly      Report on Form 10-QSB, as amended, for the fiscal quarter ended September      30, 1997).                                                                                                              |
|   |  4.6  | Warrant      issued to Paramount Capital, Inc. dated as of October 16, 1997      (incorporated by reference to Exhibit 4(i)(d) included in our Quarterly      Report on Form 10-QSB, as amended, for the fiscal quarter ended September      30, 1997).                                                                                                              |
|   | 4.7        | Warrant      issued to Élan International Services, Ltd. Dated January 21, 1998      (incorporated by reference to Exhibit 4.4 included in our Annual Report on      Form 10-KSB, as amended, for the fiscal year ended December 31,      1997).                                                                                                                |
|   | 4.8        | Form      of Warrant to be issued to CTD warrant holders (incorporated by reference      to Exhibit 4.12 include in our Registration Statement on Form S-4 filed on      October 2, 2001).                                                                                                                                                                           |
|   | 4.9        | Form      of Warrant issued to each investor in the December 2002 private placement      (incorporated by reference to Exhibit 4.9 included in our Annual Report on      Form 10-KSB, as amended, for the fiscal year ended December 31,      2003).                                                                                                                 |
|   | 4.10       | Form      of Warrant issued to each investor in the September 2003 private placement      (incorporated by reference to Exhibit 99.4 included in our current report      on Form 8-K filed on July 18, 2003).                                                                                                                                                        |
|   | 4.11       | Form      of Warrant issued to each investor in the March 2004 private placement      (incorporated by reference to Exhibit 99.4 included in our current report      on Form 8-K filed on March 4, 2004).                                                                                                                                                            |
|   | 4.12       | Form      of Warrant issued to each investor in the February 2005 private placement      (incorporated by reference to Exhibit 10.2 included in our current      report on Form 8-K filed on February 3, 2005).                                                                                                                                                 |
|   | 4.13       | Form      of Warrant issued to each investor in the April 2006 private placement      (incorporated by reference to Exhibit 10.2 included in our current      report on Form 8-K filed on April 7, 2006).                                                                                                                                                       |
|   | 4.14       | Form      of Warrant issued to finders in connection with the February 2007 private      placement. (incorporated by reference to Exhibit 4.14 included in our      registration statement on Form SB-2 filed on April 16, 2007).                                                                                                                                    |
|   | 4.15       | Rights      Agreement dated June 22, 2007, between the Company and  American      Stock Transfer & Trust Company, as Rights Agent (incorporated by      reference to Exhibit 4.1 included in our current report on Form 8-K      filed on June 22, 2007).                                                                                         |
|   | 4.16       | Form      of Right Certificate (incorporated by reference to Exhibit 4.2 included      in our current report on Form 8-K filed on June 22,      2007).                                                                                                                                                                                                          |
|   | 4.17       | Warrant      dated February 14, 2008, issued to Fusion Capital Fund II, LLC (incorporated by reference to Exhibit 4.17      included in our Registration Statement on Form S-1 (File No. 333-149239)      filed on February 14, 2008).                                                                                                                               |
|   | 4.18  | Form      of Warrant issued to each investor in the February 2008 private      placement.*                                                                                                                                                                                                                                                                           |
|   | 10.1       | Amended      and Restated 1995 Omnibus Incentive Plan (incorporated by reference to      Exhibit 10.1 included in our Quarterly Report on Form 10-QSB, as amended,      for the fiscal quarter ended September 30, 2003).                                                                                                                                            |
|   | 10.2       | Form      of Affiliate Agreement dated as of August 15, 2001 by and between the      Company and the affiliates of CTD (incorporated by reference to Exhibit      10.3 included in our current report on Form 8-K filed on December 14,      2001).                                                                                                                  |
|   | 10.3       | Noncompetition      and Nonsolicitation Agreement entered into by and among the Company, CTD      and Steve H. Kanzer dated as of November 29, 2001 (incorporated by      reference to Exhibit 10.30 included in our Annual Report on Form 10-KSB as      amended for the fiscal year ended December 31, 2002).                                                      |
|   | 10.4       | Termination      of the Endorex Newco joint venture between the Company, Élan Corporation,      Élan International Services, and Elan Pharmaceutical Investments dated      December 12, 2002 (incorporated by reference to Exhibit 10.37 included in      our Annual Report on Form 10-KSB as amended for the fiscal year ended      December 31, 2002).  |
|   | 10.5       | Option      Agreement with General Alexander M. Haig Jr. (incorporated by reference to      Exhibit 10.39 included in our Annual Report on Form 10-KSB as amended for      the fiscal year ended December 31, 2002).                                                                                                                                                 |
|   | 10.6       | Separation      agreement and General Release between the Company and Ralph Ellison dated      July 9, 2004 (incorporated by reference to Exhibit 10.7 included in our      Annual Report on Form 10-KSB, as amended, for the fiscal year ended      December 31, 2004).                                                                                             |
|   | 10.7       | License      Agreement between the Company and the University of Texas Southwestern      Medical Center (incorporated by reference to Exhibit 10.8 included in our      Annual Report on Form 10-KSB, as amended, for the fiscal year ended      December 31, 2004).                                                                                                 |
|   | 10.8       | License      Agreement between the Company and Thomas Jefferson University      (incorporated by reference to Exhibit 10.9 included in our Annual Report      on Form 10-KSB, as amended, for the fiscal year ended December 31,      2004).                                                                                                                         |
|   | 10.9       | License      Agreement between the Company and the University of Texas Medical Branch      (incorporated by reference to Exhibit 10.10 included in our Annual Report      on Form 10-KSB, as amended, for the fiscal year ended December 31,      2004).                                                                                                             |
|   | 10.10      | Consulting      Agreement between the Company and Lance Simpson of Thomas Jefferson      University. (incorporated by reference to Exhibit 10.43 included in our      Annual Report on Form 10-KSB as amended for the fiscal year ended December      31, 2002).                                                                                                     |
|   | 10.11      | Form      of Subscription Agreement between the Company and each investor dated July      18, 2003 (incorporated by reference to Exhibit 99.3 included in our      current report on Form 8-K filed on July 18, 2003).                                                                                                                                               |
|   | 10.12      | Form      of Securities Purchase Agreement between the Company and each investor      dated March 4, 2004 (incorporated by reference to Exhibit 99.3 included in      our current report on Form 8-K filed on March 4, 2004).                                                                                                                                        |
|   | 10.13      | Employment      agreement between the Company and Mike Sember dated December 7, 2004      (incorporated by reference to Exhibit 10.16 included in our Annual Report      on Form 10-KSB, as amended, for the fiscal year ended December 31,      2004).                                                                                                              |
|   | 10.14      | Employment      agreement between the Company and Evan Myrianthopoulos dated December 7,      2004 (incorporated by reference to Exhibit 10.17 included in our Annual      Report on Form 10-KSB, as amended, for the fiscal year ended December 31,      2004).                                                                                                     |
|   | 10.15      | Employment      agreement between the Company and James Clavijo dated February 18, 2005      (incorporated by reference to Exhibit 10.18 included in our Annual Report      on Form 10-KSB, as amended, for the fiscal year ended December 31,      2004).                                                                                                           |
|   | 10.16      | Form      of Securities Purchase Agreement between the Company and each investor      dated February 1, 2005 (incorporated by reference to Exhibit 10.1 included      in our current report on Form 8-K filed on February 3,      2005).                                                                                                                        |
|   | 10.17      | Amendment      No. 1 dated February 17, 2005 to the Securities Purchase Agreement between      the Company and each investor dated February 1, 2005 (incorporated by      reference to Exhibit 10.20 included in our Annual Report on Form 10-KSB,      as amended, for the fiscal year ended December 31, 2004).                                                    |
|   | 10.18      | Form      Registration Rights agreement between the Company and each investor dated      February 1, 2005 (incorporated by reference to Exhibit 10.3 included      in our current report on Form 8-K filed on February 3,      2005).                                                                                                                           |
|   | 10.19      | 2005      Equity Incentive Plan (incorporated by reference to Appendix D to our      Proxy Statement filed December 12, 2005).                                                                                                                                                                                                                                       |
|   | 10.20      | Form      S-8 Registration of Stock Options Plan dated December 30, 2005      (incorporated by reference to our registration statement on Form S-8 filed      on December 30, 2005).                                                                                                                                                                                 |
|   | 10.21      | Form      of Securities Purchase Agreement between the Company and each investor      dated January 17, 2006 (incorporated by reference to Exhibit 10.1 included      in our current report on Form 8-K filed on January 20, 2006)                                                                                                                                   |
|   | 10.22      | Form      of Registration Rights agreement between the Company and each investor      dated January 17, 2006 (incorporated by reference to Exhibit 4.1 included      in our current report on Form 8-K filed on January 20,      2006).                                                                                                                         |
|   | 10.23      | Securities      Purchase Agreement dated as of April 6, 2006 among the Company and the      investors named therein (incorporated by reference to Exhibit 10.1      included in our current report on Form 8-K filed on April 7,      2006).                                                                                                                    |
|   | 10.24      | Registration      Rights Agreement dated as of April 6, 2006 among the Company and the      investors named therein (incorporated by reference to Exhibit 10.3      included in our current report on Form 8-K filed on April 7,      2006).                                                                                                                    |
|   | 10.25      | Employment      Agreement, dated as of August 29, 2006, between Christopher J. Schaber,      Ph.D., and the Company (incorporated by reference to Exhibit 10.1 included      in our current report on Form 8-K filed on August 30,      2006).                                                                                                                  |
|   | 10.26      | Letter      of Intent dated January 3, 2007 by and between DOR BioPharma, Inc. and      Sigma-Tau Pharmaceuticals, Inc (incorporated by reference to Exhibit 10.1      included in our current report on Form 8-K filed on January 4,      2007).                                                                                                               |
|   | 10.27      | January      17, 2007 letter from Cell Therapeutics, Inc. to DOR BioPharma, Inc      (incorporated by reference to Exhibit 10.1 included in our current      report on Form 8-K filed on January 19, 2007).                                                                                                                                                     |
|   | 10.28      | Securities      Purchase Agreement dated February 7, 2007 by and among the Company and the      investors named therein (incorporated by reference to Exhibit 10.1      included in our current report on Form 8-K filed on February 12,      2007).                                                                                                            |
|   | 10.29      | Registration      Rights Agreement dated February 7, 2007 by among the Company and the      investors named therein (incorporated by reference to Exhibit 10.2      included in our current report on Form 8-K filed on February 12,      2007).                                                                                                                |
|   | 10.30      | Letter      from Sigma-Tau Pharmaceuticals, Inc. dated February 21, 2007 (incorporated      by reference to Exhibit 10.1 included in our current report on Form 8-K      filed on February 23, 2007).                                                                                                                                                                |
|   | 10.31      | Letter      dated May 3, 2007 between the Company and Sigma-Tau Pharmaceuticals, Inc.      (incorporated by reference to Exhibit 10.1 included in our current      report on Form 8-K filed on May 4, 2007).                                                                                                                                                    |
|   | 10.32      | Employment      Agreement dated December 27, 2007, between Christopher      J.  Schaber, PhD and the Company (incorporated by reference to      Exhibit 10.1 included in our current report on Form 8-K filed on      December 28, 2007).                                                                                                             |
|   | 10.33      | Employment      Agreement dated December 27, 2007, between Evan Myrianthopoulos and the      Company (incorporated by reference to Exhibit 10.2 included in our      current report on Form 8-K filed on December 28, 2007).                                                                                                                                    |
|   | 10.34      | Employment      Agreement dated December 27, 2007, between James Clavijo, CPA and the      Company (incorporated by reference to Exhibit 10.3 included in our      current report on Form 8-K filed on December 28, 2007).                                                                                                                                      |
|   | 10.35      | Common      Stock Purchase Agreement dated February 14, 2008, between the Company and      Fusion Capital Fund II, LLC. (incorporated by reference to Exhibit 10.35 included      in our Registration Statement on Form S-1 (File No. 333-149239) filed on      February 14, 2008).                                                                                  |
|   | 10.36      |     Registration      Rights Agreement dated February 14, 2008, between the Company and Fusion      Capital Fund II, LLC. (incorporated by      reference to Exhibit 10.36 included    in our Registration      Statement on Form S-1 (File No. 333-149239) filed on February 14,      2008).                           |
|   | 10.37      | Form      of Securities Purchase agreement between the Company and each investor      dated February 14, 2008.*                                                                                                                                                                                                                                                      |
|   | 10.38      |          Form of Registration Rights agreement between the Company and each      investor dated February 14, 2008.*                                                                                                                                                                                                                                   |
|   | 21.1  |          Subsidiaries of the Company.*                                                                                                                                                                                                                                                                                                                |
|   | 31.1       |     Certification      of the Chief Executive Officer pursuant to Section 302 of the      Sarbanes Oxley Act of 2002.*                                                                                                                                                                                                                      |
|   | 31.2  |          Certification of the Chief Financial Officer pursuant to Section 302 of      the Sarbanes Oxley Act of 2002.*                                                                                                                                                                                                                                |
|   | 32.1  |          Certification      of the Chief Executive Officer pursuant to Section 906 of the Sarbanes      Oxley Act of 2002. Filed therewith.*                                                                                                                                                                                                          |
|   | 32.2  |          Certification      of the Chief Financial Officer pursuant to Section 906 of the Sarbanes      Oxley Act of 2002. Filed therewith.*                                                                                                                                                                                                          |

----

| * | Filed      Herewith. |
|---|----------------------|

Table of Contents

----

Item 14

|                    |                                  |   |   |                             |   |   |
|-------------------------|---------------------------------------|--------|--------|----------------------------------|--------|--------|
|                    | 2007                                  |   |   | 2006                        |   |   |   |   |
|                    |                                  |   |   |                             |   |   |   |   |
| Audit      fees         | $     82,311 |   |   | $    112,695 |   |   |   |   |
| Audit      related fees |    4,000               |   |   | 19,590                           |   |   |   |   |
| Tax      fees           | 10,202                                |   |   | 14,292                           |   |   |   |   |
| Total                   | $     96,513 |   |   | $    146,577 |   |   |   |   |

Table of Contents

----

INDEX 

Report of Independent Registered Public Accounting Firm                     40

BalanceSheets as of December 31, 2007 and 2006                       41

Statementsof Operations for the years ended December 31, 2007 and 2006           42

Statements of Changes in Shareholders’ Equity (Deficiency) forthe years ended

  December31, 2007 and 2006                                          43

Statementsof Cash Flows for the years ended December 31, 2007 and2006                         44

Notesto FinancialStatements                                                                                                        45

Table of Contents

----

REPORT

Table of Contents

----

DOR

|                                                                                                                                                         |   |   | 2007              |    |   |   |   |   | 2006              |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------------|---------|--------|--------|--------|--------|-------------------|---------|
| AssetsCurrent      assets:                                                                                                                                   |   |   |              |    |   |   |   |   |              |    |
|         Cash                                                                                                         |   | $      | 2,220,128         |    |   |   |   | $      | 119,636           |    |
|         Grants      receivable                                                                                       |   |   | 97,845            |    |   |   |   |   | 89,933            |    |
|         Prepaid      expenses                                                                                        |   |   | 119,178           |    |   |   |   |   | 94,470            |    |
| Total      current assets                                                                                                                                    |   |   | 2,437,151         |    |   |   |   |   | 304,039           |    |
|                                                                                                                                                         |   |   |              |    |   |   |   |   |              |    |
| Office      and laboratory equipment, net                                                                                                                    |   |   | 25,941            |    |   |   |   |   | 29,692            |    |
| Intangible      assets, net                                                                                                                                  |   |   | 1,320,787         |    |   |   |   |   | 1,073,239         |    |
| Total      assets                                                                                                                                            |   | $      | 3,783,879         |    |   |   |   | $      | 1,406,970         |    |
|                                                                                                                                                         |   |   |              |    |   |   |   |   |              |    |
| Liabilities and shareholders’ equity      (deficiency)                                                                                                 |   |   |              |    |   |   |   |   |              |    |
| Current      liabilities:                                                                                                                                    |   |   |              |    |   |   |   |   |              |    |
|         Accounts      payable                                                                                        |   | $      | 847,610           |    |   |   |   | $      | 2,112,479         |    |
|         Accrued      compensation                                                                                    |   |   | 345,903           |    |   |   |   |   | 402,947           |    |
|  Total      current liabilities                                                                                                                         |   |   | 1,193,513         |    |   |   |   |   | 2,515,426         |    |
|                                                                                                                                                         |   |   |              |    |   |   |   |   |              |    |
| Shareholders’      equity (deficiency):                                                                                                                |   |   |              |    |   |   |   |   |              |    |
|         Common      stock, $.001 par value. Authorized 250,000,000                                                   |   |   |              |    |   |   |   |   |              |    |
|              shares;      94,996,547 and 68,855,794, respectively issued and    outstanding |   |   | 94,996            |    |   |   |   |   |  68,855      |    |
|         Additional      paid-in capital                                                                              |   |   | 101,391,090       |    |   |   |   |   |  91,553,766  |    |
|         Accumulated      deficit                                                                                     |   |   | (      98,895,720 |  ) |   |   |   |   | (      92,731,077 | )  |
|                                                                                                                                                         |   |   |              |    |   |   |   |   |              |    |
| Total      shareholders’ equity (deficiency)                                                                                                           |   |   | 2,590,366         |    |   |   |   |   | (      1,108,456  | )  |
|                                                                                                                                                         |   |   |              |    |   |   |   |   |              |    |
| Total      liabilities and shareholders’ equity (deficiency)                                                                                           |   | $      | 3,783,879         |    |   |   |   |   |  1,406,970   |    |
|                                                                                                                                                         |   |   |              |    |   |   |   |   |              |    |

Table of Contents

----

DOR 

|                                                                               |   |    | 2007         |    |    | 2006             |          |
|------------------------------------------------------------------------------------|--------|---------|------------------------------------------------------|---------|---------|------------------|--------------------|
|                                                                               |   |    |                                                 |    |    |             |               |
| Revenues                                                                           |   | $       | 1,258,017                                            |    | $       | 2,313,020        |               |
| Cost      of revenues                                                              |   |    | (      943,385                                       | )       |    | (      1,965,074 | )                  |
|            Gross profit                                   |   |    | 314,632                                              |    |    | 347,946          |               |
|                                                                               |   |    |                                                 |    |    |             |               |
| Operating      expenses:                                                           |   |    |                                                 |    |    |             |               |
|        Research and development                                               |   |    | 3,099,944                                            |    |    | 3,638,493        |               |
|        General and administrative                                             |   |    |  2,864,370                                      |    |    |  2,553,700  |               |
|        Stock based compensation research and development                 |   |    |  230,668                                        |    |    |  219,895    |               |
|        Stock based compensation general and administrative               |   |    |  446,733                                        |    |    |  337,287    |               |
|        In-process research and development                                    |   |    | -                                                    |    |    | 981,819          |               |
|        Impairment of intangible assets                                        |   |    | -                                                    |    |    | 816,300          |               |
|            Total operating expenses                       |   |    | 6,641,715                                            |    |    | 8,547,494        |               |
|                                                                               |   |    |                                                 |    |    |             |               |
| Loss      from operations                                                          |   |    | (      6,327,083                                     | )       |    | (      8,199,548 | )                  |
|                                                                               |   |    |                                                 |    |    |             |               |
| Other      income (expense):                                                       |   |    |                                                 |    |    |             |               |
|        Interest income                                                        |   |    | 164,847                                              |    |    | 41,510           |               |
|        Interest (expense)                                                     |   |    |  (      1,020                                   | )  |    | (      5,308     | )             |
|        Other (expense)                                                   |   |    | (      1,387                                         | )  |    | -                |               |
|            Total other income (expense)                   |   |    | 162,440                                              |    |    | 36,202           |               |
|                                                                               |   |    |                                                 |    |    |             |               |
| Net      loss                                                                      |   |  $ | (      6,164,643                                     | )       |  $ | (      8,163,346 | )                  |
|                                                                               |   |    |                                                 |    |    |             |               |
| BasicnBasic      and diluted net loss per share                               |   | $       | (      0.07                                          | )       | $       | (      0.13      | )                  |
|                                                                               |   |    |                                                 |    |    |             |               |
| Basic  Basic      and diluted weighted average common shares outstanding |   |    | 90,687,677                                           |    |    | 63,759,092       |               |

Table of Contents

----

DOR 

|                                                                   |   | Common      Stock | Additional      Paid-In capital | AccumulatedDeficit |
|------------------------------------------------------------------------|--------|-------------------|---------------------------------|--------------------|
|                                                                   |   |              | Shares                          |               |   | Par      Value |   |   |   |   |   |   |   |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |
| Balance,January      1, 2006                                           |   |              | 50,612,504                      |               |   | $50,612 |   |   | $86,045,192 |   |   | (      $84,567,731 | ) |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock                                          |   |              | 13,429,504                      |               |   | 13,430 |   |   | 3,521,570 |   |   | - |   |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock for exercise of options                  |   |              | 504,100                         |               |   | 504 |   |   | 112,816 |   |   | - |   |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock to vendors                               |   |              | 506,942                    |               |   | 507  |   |   | 134,171  |   |   | -  |   |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |
| Issuance      of warrants to vendors                                   |   |              | -                          |               |   | -  |   |   | 121,965  |   |   | -  |   |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock for an equity commitment fee             |   |              | 512,500                    |               |   | 512  |   |   | (      512  | )  |   | -  |   |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock to employees                        |   |              | 222,061                    |               |   | 222  |   |   | 82,632 |   |   | -  |   |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock to minority shareholders            |   |              | 3,068,183                  |               |   | 3,068  |   |   | 978,750  |   |   | -  |   |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |
| Stock      option expense                                              |   |              | -                               |               |   | - |   |   | 557,182 |   |   | - |   |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |
| Net      loss                                                          |   |              | -                               |               |   | - |   |   | - |   |   | (      8,163,346 | ) |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |
| Balance,December      31, 2006                                         |   |              | 68,855,794                      |               |   | 68,855 |   |   | 91,553,766 |   |   | (      92,731,077 | ) |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock                                          |   |              | 15,745,891                      |               |   | 15,746 |   |   | 6,219,658 |   |   | - |   |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock for exercise of options and warrants     |   |              | 8,195,487                       |               |   | 8,195 |   |   | 2,128,088 |   |   | - |   |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock to vendors                               |   |              | 829,821                         |               |   | 830 |   |   | 329,670 |   |   | - |   |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |
| Issuance      of stock to investors by contract as dilution protection |   |              | 995,947                         |               |   | 996 |   |   | 307,747 |   |   | - |   |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock to employees                             |   |              | 373,607                         |               |   | 374 |   |   | 84,759 |   |   | - |   |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |
| Stock      option expense                                              |   |              | -                               |               |   | - |   |   | 677,401 |   |   | - |   |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |
| Net      loss                                                          |   |              | -                               |               |   | - |   |   | - |   |   | (      6,164,643 | ) |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |
| Balance,December      31, 2007                                         |   |              | 94,996,547                      |               |   | $94,996 |   |   | $101,391,090 |   |   | (      $98,895,720 | ) |
|                                                                   |   |              |                            |               |   |   |   |   |   |   |   |   |   |

Table of Contents

----

DOR 

|                                                                                      |   | 2007          |                | 2006    |    |
|-------------------------------------------------------------------------------------------|--------|---------------|---------------------|---------|---------|
| Operating      activities                                                                 |   |          |                |    |    |   |   |
|         Net loss                                                                |   | $             | (      6,164,643    | )       | $       | (      8,163,346 | ) |
|                                                                                      |   |          |                |    |    |   |   |
| Adjustments      to reconcile net loss to net cash used by operating      activities:     |   |          |                |    |    |   |   |
|          Amortization and depreciation                                     |   |          | 119,565             |    |    | 137,044 |   |
|          Non-cash stock compensation                                       |   |          | 1,401,777           |    |    | 896,680 |   |
|          Non-cash stock purchase of in-process research and    development |   |          | -                   |    |    | 981,819 |   |
|          Impairment expense for intangibles                                |   |          | -                   |    |    | 816,300 |   |
|                                                                                      |   |          |                |    |    |   |   |
| Change      in operating assets and liabilities:                                          |   |          |                |    |    |   |   |
|          Grants receivable                                                 |   |          | (      7,912        | )  |    | 474,397 |   |
|          Prepaid expenses                                                  |   |          |  (      24,708 | )  |    | 44,324 |   |
|          Accounts payable                                                  |   |          | (      1,264,868    | )  |    | 476,605 |   |
|          Accrued compensation                                              |   |          | (57,044             | )  |    | 254,347 |   |
|          Accrued royalties                                                 |   |          | -                   |    |    | (      60,000 | )  |
| Total      adjustments                                                                    |   |          | 166,810             |    |    | 4,021,516 |   |
|                                                                                      |   |          |                |    |    |   |   |
|          Net cash used by operating activities                             |   |          | (      5,997,833    | )       |    | (      4,141,830 | ) |
|                                                                                      |   |          |                |    |    |   |   |
| Investing      activities:                                                                |   |          |                |    |    |   |   |
|  Purchases      of office and laboratory equipment                                   |   |          | (      7,170        | )       |    | (      2,552 | ) |
|  Acquisition      of intangible assets                                               |   |          | (      356,192      | )       |    | (      206,004 | ) |
|          Net cash used by investing activities                             |   |          | (      363,362      | )       |    | (      208,556 | ) |
|                                                                                      |   |          |                |    |    |   |   |
| Financing      activities:                                                                |   |          |                |    |    |   |   |
|  Net      proceeds from issuance of common stock                                     |   |          | 6,235,404           |    |    | 3,535,000 |   |
|  Proceeds      from exercise of warrants                                             |   |          | 1,592,263           |    |    | - |   |
|  Proceeds      from exercise of stock options                                        |   |          | 634,020             |    |    | 113,320 |   |
|          Net cash provided by financing activities                         |   |          | 8,461,687           |    |    | 3,648,320 |   |
|                                                                                      |   |          |                |    |    |   |   |
| Net      increase (decrease) in cash and cash equivalents                                 |   |          | 2,100,492           |    |    | (      702,066 | ) |
|          Cash and cash equivalents at beginning of period                  |   |          | 119,636             |    |    | 821,702 |   |
|          Cash and cash equivalents at end of period                        |   | $             | 2,220,128           |    | $       | 119,636 |   |
|                                                                                      |   |          |                |    |    |   |   |
| Supplemental      disclosure of cash flow:                                                |   |          |                |    |    |   |   |
|          Cash paid for interest                                            |   | $             | 1,020               |    | $       | 3,170 |   |
| Non-cash      transactions:                                                               |   |          |                |    |    |   |   |
|          Non-cash payment to an institutional investor                     |   |        $ | -                   |    | $  | 220,374 |   |

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| ·   | The      Company secured a new $8,000,000 equity line from Fusion Capital and the      Company expects that the registration statement supporting this facility      will become effective by April2008. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      Company will manage its expenditures very closely and proceed with      Clinical programs with the use of the equity  facility. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      Company plans to continue seeking grant funds and responding to requests      for proposals from governmentalsources. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      Company will utilize Named Patient Sales (Compassionate Use programs)      wherever possible in countries outside the United States to generate      revenues from orBec®.       The Company already has letters of intent for Named Patient programs in      place in South Korea, Australia, New Zealand and South Africa and expects      to receive modest revenues from these programs in the second half of      2008. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      Company is exploring outlicensing opportunities for orBec®      and for its BioDefense programs both in the US and  Europe. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      Company has engaged Investment Bankers to assist  in exploring      mergers and acquisitionsopportunities. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------|

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|           |          2007           |   |   |                                              | 2006    |   |
|--------------------------------------------------------|------------------------------------------------------------|--------|--------|---------------------------------------------------|------------------------|--------|
|                                                   |                                                       |   |   |                                              |                   |
| Office      equipment                                  | $     125,328                     |   |   | $     117,660            |                   |
| Laboratory      equipment                              |    23,212                                   |   |   |    23,212                          |                   |
| Total                                                  |    148,540                                  |   |   |    140,872                         |                   |
| Accumulated      depreciation                          | ( 122,599                                             | )      |   | ( 111,180                                    | )                      |
|                                                   | $            25,941          |   |   | $            29,692 |                   |

|                         | Weighted      Average Amortization period      (years) |   Cost                 |   |  AccumulatedAmortization               |   |   Net Book Value             |
|------------------------------|--------------------------------------------------------|----------------------------------|--------|---------------------------------------------|--------|----------------------------------------|
| December      31, 2007       |                                                   |                             |   |                                        |   |                                   |
| Licenses                     | 12.7                                                   | $         462,234 |   | $   115,681                  |   | $         346,553       |
| Patents                      | 9.7                                                    |    1,633,490      |   |    659,256                   |   |    974,234              |
| Total                        | 10.4                                                   | $      2,095,724                 |   | $        774,937                  |   | $      1,320,787                       |
|  December      31, 2006 |                                                   |                             |   |                                        |   |                                   |
| Licenses                     | 13.7                                                   | $         462,234 |   | $           88,443 |   | $     373,791 |
| Patents                      | 8.8                                                    |    1,277,157      |   |    577,709                   |   |    699,448              |
| Total                        | 10.1                                                   | $      1,739,391                 |   | $         666,152            |   | $      1,073,239                       |

| Year | Amortization Amount                   |
|------|---------------------------------------|
| 2008 | $   125,000            |
| 2009 |      126,000 |
| 2010 |      127,000 |
| 2011 |      128,000 |
| 2012 |      129,000 |

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|                                                 | 2007                                           | 2006   |   |
|------------------------------------------------------|------------------------------------------------|--------|--------|
|                                                 |                                           |   |   |   |   |
| Shares      available for grant at beginning of year | 3,236,032                                      |   |   | 7,000,000 |   |
| Increase      in shares available                    | 10,000,000                                     |   |   | - |   |
| Options      granted                                 | ( 3,375,000                               | )      |   | ( 4,360,000 | ) |
| Options      forfeited or expired                    | 1,140,000                                      |   |   | 1,325,000 |   |
| Common      stock payment for services               | ( 388,071                                 | )      |   | ( 728,968 | ) |
| Shares      available for grant at end of year       |       10,612,961 |   |   |       3,236,032 |   |

|                              |   Options | Weighted      AverageOptions Exercise Price |   |
|-----------------------------------|---------------------|---------------------------------------------|--------|
| Balance      at January 1, 2006   | 10,014,339          |                                        |   |          $   0.59 |   |   |
|   Granted               | 4,360,000           |                                        |   | 0.30 |   |   |
|   Forfeited             | ( 2,230,900    | )                                           |   | 0.83 |   |   |
|   Exercised             | ( 504,100      | )                                           |   | 0.22 |   |   |
| Balance      at December 31, 2006 | 11,639,339          |                                        |   | 0.59 |   |   |
|   Granted               | 3,375,000           |                                        |   | 0.46 |   |   |
|   Forfeited             | ( 2,927,300    | )                                           |   | 0.73 |   |   |
|   Exercised             | ( 1,737,200    | )                                           |   | 0.36 |   |   |
| Balance      at December 31, 2007 | 10,349,839          |                                        |   | $   0.44 |   |   |

| PriceRange  |   | Weighted      Average RemainingContractual Life in Years |   | Outstanding Options |   | Exercisable      Options |   |
|-------------|--------|----------------------------------------------------------|--------|--------------------------|--------|--------------------------|--------|
| $0.20-$0.50 |   | 8.12                                                     |   | 9,020,000                |   | 5,884,756                |   |
| $0.51-$1.00 |   | 2.69                                                     |   | 962,839                  |   | 962,839                  |   |
| $1.01-$6.00 |   | 3.17                                                     |   | 367,000                  |   | 367,000                  |   |
| Total       |   | 7.53                                                     |   | 10,349,839               |   | 7,214,595                |   |

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|                              | Warrants         | Weighted      AverageWarrant Exercise Price |   |
|-----------------------------------|------------------|---------------------------------------------|--------|
| Balance      at January 1, 2006   | 22,167,118       |                                        |   |          $   0.92 |   |   |
|   Granted               | 14,961,672       |                                        |   | 0.25 |   |   |
| Balance      at December 31, 2006 | 37,128,790       |                                        |   | 0.65 |   |   |
|   Granted               | 560,106          |                                        |   | 0.59 |   |   |
|   Expired               | (      2,178,909 |  )                                     |   | 1.90 |   |   |
|   Exercised             | (      6,458,287 |  )                                |   | 0.25 |   |   |
| Balance      at December 31, 2007 | 29,051,700       |                                        |   | $   0.70 |   |   |

| PriceRange   |   | Weighted      Average RemainingContractual Life in Years |   | Outstanding Warrants |   | Exercisable      Warrants |   |
|--------------|--------|----------------------------------------------------------|--------|---------------------------|--------|---------------------------|--------|
| $0.24-$0.50  |   | 1.23                                                     |   | 8,503,386                 |   | 8,503,386                 |   |
| $0.505-$1.00 |   | 1.67                                                     |   | 18,328,622                |   | 18,328,622                |   |
| $1.01-$2.00  |   | 0.29                                                     |   | 2,012,622                 |   | 2,012,622                 |   |
| $8.11        |   | 0.86                                                     |   | 207,070                   |   | 207,070                   |   |
| Total        |   | 1.44                                                     |   | 29,051,700                |   | 29,051,700                |   |

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|                                                                |                                            2007 |    |                                                                                                                                               |    |                    2006 |   |   |   |
|---------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------|---------|------------------------------------------------------------------------------------------|--------|--------|--------|
| Deferred tax assets:                                                |                                                                                                                                                                                                                                     |    |                                                                                                                                               |    |                                                                                     |   |   |   |
| Net      operating loss carry forwards                              | $      25,000,000                                                                                                                                                                                                                        |    | $25,000,000                                                                                                                                   |    |                                                                                     |   |
| Orphan      drug and research and development credit carry forwards | 2,000,000                                                                                                                                                                                                                                |    | 3,000,000                                                                                                                                          |    |                                                                                     |   |
| Other                                                               | 3,000,000                                                                                                                                                                                                                                |    | 3,000,000                                                                                                                                          |    |                                                                                     |   |
| Total                                                               |   30,000,000                                                                                                                                                                                                                   |    |   31,000,000                                                                                                                             |    |                                                                                     |   |
| Valuation      allowance                                            | ( 30,000,000                                                                                                                                                                                                                        |  ) | ( 31,000,000                                                                                                                                  |  ) |                                                                                     |   |
| Net      deferred tax assets                                        |              $                       -                                             |    |        $                 - |    |                                                                                     |   |

| 2008 | $        910,000 |
|------|----------------------------------------------------------|
| 2009 | 1,330,000                                                |
| 2010 | 1,410,000                                                |
| 2011 | 870,000                                                  |
| 2012 | 3,870,000                                                |

|                                                                                                                    |            2007                                   |   |              2006                       |
|-------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------|
|                                                                                                                    |                                                                                                     |   |                                                                                                     |
| Income      tax loss at federal statutory rate                                                                     |                      (34.00)% |   |                      (34.00)% |
| State      taxes, net of federal benefit                                                                           |               (4.29)               |   |               (3.63)               |
| Permanent      differences, principally purchased     in-process      research and development |              -                          |   |              3.30                       |
|  Valuation      allowance                                                                                     |                    38.29                |   |               34.33                |
| Provision      for income taxes (benefit)                                                                          |               -      %             |   |                -      %       |

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|                                       |   | December      31, |             |
|--------------------------------------------|--------|-------------------|------------------|
|                                       |   | 2007              |             | 2006 |   |
| Net      Revenues                          |   |              |             |   |   |   |   |
| BioDefense                                 |   | $                 | 2,173,128        |   | $ | 2,896,878 |   |
| BioTherapeutics                            |   |              | 139,892          |   |   | 178,858 |   |
|        Total                          |   | $                 | 2,313,020        |   | $ | 3,075,736 |   |
|                                       |   |              |             |   |   |   |   |
| Loss      from Operations                  |   |              |             |   |   |   |   |
| BioDefense                                 |   | $                 | (      1,943,732 | ) | $ | (      847,830 | ) |
| BioTherapeutics                            |   |              | (      5,061,664 | ) |   | (      1,665,812 | ) |
| Corporate                                  |   |              | (      1,164,152 | ) |   | (      2,321,409 | ) |
|        Total                          |   | $                 | (      8,199,548 | ) | $ | (      4,835,051 | ) |
|                                       |   |              |             |   |   |   |   |
| Identifiable      Assets                   |   |              |             |   |   |   |   |
| BioDefense                                 |   | $                 | 849,295          |   | $ | 2,189,216 |   |
| BioTherapeutics                            |   |              | 343,876          |   |   | 420,250 |   |
| Corporate                                  |   |              | 213,799          |   |   | 763,108 |   |
|        Total                          |   | $                 | 1,406,970        |   | $ | 3,372,574 |   |
|                                       |   |              |             |   |   |   |   |
| Amortization      and Depreciation Expense |   |              |             |   |   |   |   |
| BioDefense                                 |   | $                 | 103,855          |   | $ | 63,212 |   |
| BioTherapeutics                            |   |              | 24,395           |   |   | 118,351 |   |
| Corporate                                  |   |              | 8,794            |   |   | 12,721 |   |
|        Total                          |   | $                 | 137,044          |   | $ | 194,284 |   |
|                                       |   |              |             |   |   |   |   |
| Interest      Income                  |   |              |             |   |   |   |   |
| Corporate                             |   |  $           | 164,847     |   |  $ | 41,510  |   |
|         Total                    |   |  $           | 164,847     |   |  $ | 41,510  |   |
|                                       |   |              |             |   |   |   |   |
| Stock      Option Compensation             |   |              |             |   |   |   |   |
| BioDefense                                 |   |  $           | 69,591      |   |  $ | 98,937 |   |
| BioTherapeutic                        |   |              | 161,077     |   |   |  120,958 |   |
| Corporate                             |   |              | 446,733     |   |   |  337,287 |   |
|         Total               |   |  $           | 677,401     |   |  $ | 557,182  |   |
|                                       |   |              |             |   |   |   |   |

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| Signature                                                                                                                                                                                                                                                                                                                                                                                                 |   | Title                                                                                          |   | Date                            |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------|--------|---------------------------------|
|  /s/      Christopher J.      Schaber                                                      Christopher      J. Schaber |   |  Director,      President and Chief Executive Officer (Principal Executive      Officer)  |   |  March      25, 2008       |
|  /s/ Evan Myrianthopoulos                                                      Evan      Myrianthopoulos               |   |  Director,      Chief Financial Officer (Principal Financial and Accounting      Officer) |   |  March      25, 2008       |
|  /s/      James      S.      Kuo                                           James      S. Kuo                                                                                  |   |  Chairman      of the Board                                                               |   |  March      25, 2008       |
|  /s/ Cyrille      F. Buhrman                                           Cyrille      F. Buhrman                                                                                |   |  Director                                                                                 |   |  March      25, 2008       |
|  /s/ James      ClavijoJames Clavijo                                                                                                                                                                                                                                                                                                                                                                 |   |  Controller,      Treasurer, and Corporate Secretary                                      |   |        March      25, 2008 |

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