##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2005
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 0-21214
 ORTHOLOGIC CORP.
 
  Delaware
    
    86-0585310(State or other jurisdiction of incorporation or organization)
    
    (IRS Employer Identification No.)
 1275 W. Washington Street, Tempe, Arizona
    
    85281(Address of principal executive offices)
    
    (Zip Code)
  
  
   þ o
  þ o
  o þ




---



Page No.Part I Financial InformationItem 1. Financial Statements (Unaudited)Condensed Balance Sheets as of September 30, 2005 and December 31, 2004
    
    
    3Condensed Statements of Operations for the three and nine months ended September 30, 2005 and September 30, 2004
    
    
    4Condensed Statements of Cash Flows for the nine months ended September 30, 2005 and September 30, 2004
    
    
    5Notes to Unaudited Condensed Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    30Item 4. Controls and Procedures
    
    
    31Part II Other InformationItem 6. Exhibits
    
    
    31EX-31.1EX-31.2EX-32
  2




---



##### Table of Contents



PART I  Financial Information
 
 Item 1. Financial Statements.
 
 
  (in thousands)
 September 30,
    
    December 31,2005
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    29,744
    
    
    $
    38,377Short-term investments
    
    
    51,175
    
    
    
    53,642Prepaids and other current assets
    
    
    1,068
    
    
    
    1,053Escrow receivable, net
    
    
    6,942
    
    
    
    Total current assets
    
    
    88,929
    
    
    
    93,072Furniture and equipment, net
    
    
    551
    
    
    
    478Escrow receivable, net
    
    
    
    
    
    
    6,828Long-term investments
    
    
    2,623
    
    
    
    11,558Deferred
income taxes  non-current
    
    
    1,106
    
    
    
    1,106Trademarks and patents
    
    
    2,288
    
    
    
    2,142Total assets
    
    $
    95,497
    
    
    $
    115,184LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,315
    
    
    $
    833Accrued compensation
    
    
    659
    
    
    
    648Accrued property taxes
    
    
    174
    
    
    
    114Excess space reserve
    
    
    99
    
    
    
    559Accrued clinical
    
    
    765
    
    
    
    1,236Other accrued liabilities
    
    
    982
    
    
    
    727Total current liabilities
    
    
    3,994
    
    
    
    4,117Deferred rent and capital lease obligation
    
    
    83
    
    
    
    137Non-current portion of excess space reserve
    
    
    111
    
    
    
    Other non-current liabilities
    
    
    37
    
    
    
    Total liabilities
    
    
    4,225
    
    
    
    4,254Stockholders EquityCommon stock, $.0005 par value; 100,000,000
and 50,000,000 shares authorized; 38,024,742 and 38,011,642 shares issued and outstanding
    
    
    19
    
    
    
    19Additional paid-in capital
    
    
    170,949
    
    
    
    170,905Accumulated deficit
    
    
    (79,696
    )
    
    
    (59,994
    )Total stockholders equity
    
    
    91,272
    
    
    
    110,930Total liabilities and stockholders equity
    
    $
    95,497
    
    
    $
    115,184
 See notes to the condensed financial statements
 3




---



##### Table of Contents



(in thousands, except per share data)
 As a DevelopmentThree months ended September 30,
    
    Nine months ended September 30,
    
    Stage Company2005
    
    2004
    
    2005
    
    2004
    
    8/5/2004 - 9/30/2005OPERATING EXPENSESGeneral and administrative
    
    $
    1,027
    
    
    $
    1,226
    
    
    $
    3,210
    
    
    $
    2,397
    
    
    $
    5,088Research and development
    
    
    7,266
    
    
    
    4,803
    
    
    
    18,660
    
    
    
    12,163
    
    
    
    26,740CPM divestiture and related gains
    
    
    
    
    
    
    (79
    )
    
    
    (250
    )
    
    
    (272
    )
    
    
    (375
    )CBI in process research and development
    
    
    0
    
    
    
    25,840
    
    
    
    
    
    
    
    25,840
    
    
    
    25,840Total operating expenses
    
    
    8,293
    
    
    
    31,790
    
    
    
    21,620
    
    
    
    40,128
    
    
    
    57,293Other income, net
    
    
    700
    
    
    
    344
    
    
    
    1,906
    
    
    
    950
    
    
    
    2,657Loss from continuing operations
    
    
    (7,593
    )
    
    
    (31,446
    )
    
    
    (19,714
    )
    
    
    (39,178
    )
    
    
    (54,636
    )Income tax benefit
    
    
    0
    
    
    
    (411
    )
    
    
    (12
    )
    
    
    (705
    )
    
    
    (654
    )Net loss from continuing operations
    
    
    (7,593
    )
    
    
    (31,035
    )
    
    
    (19,702
    )
    
    
    (38,473
    )
    
    
    (53,982
    )Discontinued operationsNet gain on the sale of the bone device
business, net of taxes of $0, $0, $0, $0,
($363), respectively
    
    
    
    
    
    
    1,685
    
    
    
    
    
    
    
    1,685
    
    
    
    2,048Net income from discontinued operations
    
    
    
    
    
    
    1,685
    
    
    
    
    
    
    
    1,685
    
    
    
    2,048NET LOSS
    
    $
    (7,593
    )
    
    $
    (29,350
    )
    
    $
    (19,702
    )
    
    $
    (36,788
    )
    
    $
    (51,934
    )Per Share Information:Net loss from continuing operationsBasic
    
    ($
    0.20
    )
    
    ($
    0.85
    )
    
    ($
    0.52
    )
    
    ($
    1.09
    )Diluted
    
    ($
    0.20
    )
    
    ($
    0.85
    )
    
    ($
    0.52
    )
    
    ($
    1.09
    )Net income from discontinued operationsBasic
    
    $
    0.00
    
    
    $
    0.05
    
    
    $
    0.00
    
    
    $
    0.05Diluted
    
    $
    0.00
    
    
    $
    0.05
    
    
    $
    0.00
    
    
    $
    0.05Net lossBasic
    
    ($
    0.20
    )
    
    ($
    0.80
    )
    
    ($
    0.52
    )
    
    ($
    1.04
    )Diluted
    
    ($
    0.20
    )
    
    ($
    0.80
    )
    
    ($
    0.52
    )
    
    ($
    1.04
    )Weighted average basic and diluted shares
outstanding
    
    
    38,025
    
    
    
    36,726
    
    
    
    38,019
    
    
    
    35,281
 See notes to the condensed financial statements
 4




---



##### Table of Contents



As a DevelopmentNine months ended September 30,
    
    Stage Company2005
    
    2004
    
    8/5/2004 - 9/30/2005OPERATING ACTIVITIESNet loss
    
    $
    (19,702
    )
    
    $
    (36,788
    )
    
    $
    (51,934
    )Non Cash items:Depreciation and amortization
    
    
    410
    
    
    
    152
    
    
    
    469Escrow account amortization
    
    
    (114
    )
    
    
    20
    
    
    
    (133
    )Deferred tax asset
    
    
    
    
    
    
    (31
    )
    
    
    (336
    )Gain on sale of bone device business
    
    
    
    
    
    
    (1,685
    )
    
    
    (2,048
    )CBI In process R&D
    
    
    
    
    
    
    25,840
    
    
    
    25,840Net change in other operating items:
    
    
    
    
    
    
    
    
    
    
    Prepaids and other current assets
    
    
    (15
    )
    
    
    926
    
    
    
    414Accounts payable
    
    
    482
    
    
    
    506
    
    
    
    595Accrued liabilities
    
    
    (512
    )
    
    
    (2,066
    )
    
    
    271Cash flows used in operating activities
    
    
    (19,451
    )
    
    
    (13,126
    )
    
    
    (26,862
    )INVESTING ACTIVITIESExpenditures for equipment and furniture, net
    
    
    (229
    )
    
    
    (68
    )
    
    
    (280
    )Cash paid for assets of CBI
    
    
    
    
    
    
    (3,668
    )
    
    
    (3,668
    )Cash paid for patent assignment rights
    
    
    (400
    )
    
    
    
    
    
    
    (400
    )Purchases of investments
    
    
    (35,514
    )
    
    
    (67,316
    )
    
    
    (80,080
    )Maturities of investments
    
    
    46,917
    
    
    
    37,628
    
    
    
    84,221Cash flows provided by (used in) investing activities
    
    
    10,774
    
    
    
    (33,424
    )
    
    
    (207
    )FINANCING ACTIVITIESNet proceeds from stock option exercises
    
    
    44
    
    
    
    5,204
    
    
    
    1,406Cash flows provided by financing activities
    
    
    44
    
    
    
    5,204
    
    
    
    1,406NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (8,633
    )
    
    
    (41,346
    )
    
    
    (25,663
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    38,377
    
    
    
    84,357
    
    
    
    55,407CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    29,744
    
    
    $
    43,011
    
    
    $
    29,744Supplemental Disclosure of Non-Cash Investing ActivitiesCash paid during period for Interest
    
    $
    
    
    
    $
    4
    
    
    $
    Cash paid during period for Income taxes
    
    $
    
    
    
    $
    2,679
    
    
    $
    CBI AcquisitionCurrent assets acquired
    
    
    
    
    
    
    29
    
    
    
    29Trademarks and Patents acquired
    
    
    
    
    
    
    2,142
    
    
    
    2,142Liabilities acquired
    
    
    
    
    
    
    (140
    )
    
    
    (140
    )Original investment reversal
    
    
    
    
    
    
    (750
    )
    
    
    (750
    )In-process R&D acquired
    
    
    
    
    
    
    25,840
    
    
    
    25,840Common stock issued for acquisition
    
    
    
    
    
    
    (23,453
    )
    
    
    (23,453
    )Cash paid for CBI acquisition
    
    
    
    
    
    
    3,668
    
    
    
    3,668
 See notes to the condensed financial statements
 5




---



##### Table of Contents



ORTHOLOGIC
CORP.
(A Development Stage Company)
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Description of the business.
     6




---



##### Table of Contents



Financial Statement Presentation
  Development stage.
 Use of estimates.
 A. Cash and cash equivalents.
 7




---



##### Table of Contents



B. Furniture and equipment.
 C. Excess space reserve.
 D. Income taxes.
 E. Research and development.
 F. Accrued Clinical.
 G. Stock-based compensation.
  8




---



##### Table of Contents



Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,2005
    
    2004
    
    2005
    
    2004Estimated weighted-average fair value
of options granted during the period
    
    $
    None
    
    $
    2.74
    
    
    $
    3.36
    
    
    $
    2.32Net loss attributable to common
stockholders:As reported
    
    $
    (7,593
    )
    
    $
    (29,350
    )
    
    $
    (19,702
    )
    
    $
    (36,788
    )Stock based compensation expense
    
    
    (392
    )
    
    
    (45
    )
    
    
    (1,044
    )
    
    
    (597
    )Pro forma
    
    $
    (7,985
    )
    
    $
    (29,395
    )
    
    $
    (20,746
    )
    
    $
    (37,385
    )Basic net loss per share:As reported
    
    $
    (0.20
    )
    
    $
    (0.80
    )
    
    $
    (0.52
    )
    
    $
    (1.04
    )Pro forma
    
    $
    (0.21
    )
    
    $
    (0.80
    )
    
    $
    (0.55
    )
    
    $
    (1.06
    )Diluted net loss per share:As reported
    
    $
    (0.20
    )
    
    $
    (0.80
    )
    
    $
    (0.52
    )
    
    $
    (1.04
    )Pro forma
    
    $
    (0.21
    )
    
    $
    (0.80
    )
    
    $
    (0.55
    )
    
    $
    (1.06
    )Black Scholes model assumptions:Risk free interest rate
    
    
    4.2
    %
    
    
    3.1
    %
    
    
    4.2
    %
    
    
    3.1
    %Expected volatility
    
    
    30
    %
    
    
    41
    %
    
    
    55
    %
    
    
    44
    %Expected term
    
    2.4 Years
    
    2.7 Years
    
    2.4 Years
    
    2.7 YearsDividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
  H. Loss per common share.
 9




---



##### Table of Contents



I. Discontinued operations.
 J. Recognition of escrow receivable and indemnification.
 K. New accounting pronouncements.
 L. Certain reclassifications.
 10




---



##### Table of Contents



2.
    
    ASSET ACQUISITION OF CHRYSALIS BIOTECHNOLOGY, INC.
    3.
    
    INVESTMENTS AND FAIR VALUE DISCLOSURES
  11




---



##### Table of Contents



September 30,
    
    
    December 31,Investments with maturities  short-term
    
    2005
    
    
    2004Amortized cost
    
    $
    51,175
    
    
    $
    53,642Gross unrealized loss
    
    
    (188
    )
    
    
    (110
    )Fair value
    
    $
    50,987
    
    
    $
    53,532
 September 30,
    
    
    December 31,Investments with maturities  long-term
    
    2005
    
    
    2004Amortized cost
    
    $
    2,623
    
    
    $
    11,558Gross unrealized loss
    
    
    (3
    )
    
    
    (74
    )Fair value
    
    $
    2,620
    
    
    $
    11,484
   4.
    
    LITIGATION
 OrthoLogic Corp. v. Maricopa County
 12




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
   Overview
   13




---



##### Table of Contents




    
    fracture repair;
    
    diabetic ulcer healing; and
    
    cartilage defect repair.
  Research and Development of the Chrysalin Product Platform
      14




---



##### Table of Contents



The Regulatory Approval Process
   Outlook
  15




---



##### Table of Contents



Critical Accounting Policies and Estimates
 Income Taxes:
 Discontinued Operations
 Liability for Representations and Warranties Made in Conjunction with the Sale of the Bone
Device Business
 16




---



##### Table of Contents



Excess Space Reserve
 Accrued Clinical
 Results of Operations Comparing Three-Month Period Ended September 30, 2005 to the Corresponding
Period in 2004.
 Revenues, Cost of Revenues and Gross Profits
 General and Administrative (G&A) Expenses
 17




---



##### Table of Contents



Research and Development Expenses
 CPM Divestiture and Change in Estimated Collectibility of CPM Receivables
 CBI in Process Research and Development
 Other Income, Net
 Net Loss
 18




---



##### Table of Contents



Results of Operations Comparing Nine-Month Period Ended September 30, 2005 to the Corresponding
Period in 2004.
 Revenues, Cost of Revenues and Gross Profits
 General and Administrative (G&A) Expenses
 Research and Development Expenses .
 CPM Divestiture and Change in Estimated Collectibility of CPM Receivables
 CBI in Process Research and Development:
 19




---



##### Table of Contents



Other Income, Net
 Net Loss
 Liquidity and Capital Resources
    20




---



##### Table of Contents



Special Note Regarding Forward Looking Statements
  
    
    unfavorable results of our product candidate development efforts;
    
    unfavorable results of our pre-clinical or clinical testing;
    
    delays in obtaining, or failure to obtain FDA approvals;
    
    increased regulation by the FDA and other agencies;
    
    the introduction of competitive products;
    
    impairment of license, patent or other proprietary rights;
    
    failure to achieve market acceptance of our products;
    
    the impact of present and future collaborative agreements; and
    
    failure to successfully implement our drug development strategy.
 21




---



##### Table of Contents



RISK FACTORS
 Risks of our Business
 We are a biopharmaceutical company with no revenue generating operations and high investment costs.
   22




---



##### Table of Contents



Our product candidates are in various stages of development and may not be successfully developed
or commercialized.
  
    
    Acceleration of Fracture Repair
    
    Phase 3 human clinical trials
    
    Dermal Wound Healing
    
    Phase 1/2 human clinical trials
    
    Cartilage Defect Repair
    
    Late stage pre-clinical trials
    
    Cardiovascular Repair
    
    Pre-clinical trials
  
    
    some or all of our product candidates are determined to be ineffective or unsafe;
    
    we do not receive necessary regulatory approvals;
    
    we are unable to get some or all of our product candidates to market in a
timely manner;
    
    we are not able to produce our product candidates in commercial quantities at
reasonable costs;
    
    our products undergo post-market evaluations resulting in marketing
restrictions or withdrawal of our products; or
    
    patients, health insurance and/or physicians do not accept our products.
  
    
    adverse or ambiguous results;
    
    undesirable side effects which delay or extend the trials;
    
    inability to locate, recruit, qualify and retain a sufficient number of
patients for our trials;
    
    regulatory delays or other regulatory actions;
    
    difficulties in obtaining sufficient quantities of the particular product
candidate or any other components needed for our pre-clinical testing or clinical trials;
    
    change in the focus of our development efforts; and
    
    re-evaluation of our clinical development strategy.
  23




---



##### Table of Contents



Our product candidates are all based on the same peptide, Chrysalin. If one of our product
candidates reveals safety or fundamental inefficacy issues in clinical trials, it could impact the
development path for all our other current product candidates.
   A portion of our rights to Chrysalin are sublicensed and if the license is invalid or
unenforceable, we may lose our rights to use the Chrysalin technology, which would ultimately
prevent us from commercializing and selling any Chrysalin-based products.
  If we cannot protect the Chrysalin patents or our intellectual property generally, our ability to
develop and commercialize our products will be severely limited.
   24




---



##### Table of Contents



Our success also depends on our ability to operate and commercialize products without infringing on
the patents or proprietary rights of others.
  
    
    pay substantial damages;
    
    stop using our technologies;
    
    stop certain research and development efforts;
    
    develop non-infringing products or methods; and
    
    obtain one or more licenses from third parties.
  The loss of our key management and scientific personnel may hinder our ability to execute our
business plan.
 25




---



##### Table of Contents



We face an inherent risk of liability in the event that the use or misuse of our products results
in personal injury or death.
  Our stock price is volatile and fluctuates due to a variety of factors.
  
    
    announcement of the results of, or delays in, preclinical and clinical studies;
    
    fluctuations in our operating results;
    
    developments in litigation to which we or a competitor is subject;
    
    announcements and timing of potential acquisitions, divestitures, capital
raising activities and conversions of preferred stock;
    
    announcements of technological innovations or new products by us or our competitors;
    
    FDA and other regulatory actions;
    
    developments with respect to our or our competitors patents or proprietary rights;
    
    public concern as to the safety of products developed by us or others; and
    
    changes in stock market analyst recommendations regarding us, other drug
development companies or the pharmaceutical industry generally.
  26




---



##### Table of Contents



Risks of our Industry
 The pharmaceutical industry is subject to stringent regulation, and failure to obtain regulatory
approval will prevent commercialization of our products.
   
    
    negative or ambiguous pre-clinical or clinical trial results;
    
    changes in regulations or the adoption of new regulations;
    
    unexpected technological developments; and
    
    developments by our competitors that are more effective than our product candidates.
    27




---



##### Table of Contents



The results of our late stage clinical trials may be insufficient to obtain FDA approval, which
could result in a substantial delay in our ability to generate revenue.
   Patients may discontinue their participation in our clinical studies, which may negatively impact
the results of these studies and extend the timeline for completion of our development programs.
   
    
    the size of the patient population;
    
    the nature of the clinical protocol requirements;
    
    the diversion of patients to other trials or marketed therapies;
    
    our ability to recruit and manage clinical centers and associated trials;
    
    the proximity of patients to clinical sites; and
 28




---



##### Table of Contents




    
    the patient eligibility criteria for the study.
 Even if we obtain marketing approval, our products will be subject to ongoing regulatory oversight,
which may affect our ability to successfully commercialize any products we may develop.
   If our competitors develop and market products that are more effective than ours, or obtain
marketing approval before we do, our commercial opportunities will be reduced or eliminated.
  
    
    Acceleration of Fracture Repair:While there is currently no drug product
approved by the FDA for acceleration of fracture repair, at least one large pharmaceutical
company, Pfizer, Inc., received FDA clearance to begin human clinical trials in the United
States for this indication.
    
    Diabetic Ulcer Healing:To our knowledge, there are two corporate sponsored
clinical trials underway on new drug substances for diabetic ulcer healing. These early
stage clinical trials are being conducted by Genentech on recombinant human vascular
endothelial growth factor, and by King Pharmaceuticals on an adenosine A2A receptor
agonist. One gene therapy company, Selective Genetics, has initiated an early stage human
clinical trial in the United States on platelet derived growth factors for the diabetic
ulcer indication.
    
    Cartilage Defect Repair:Several products with bioactive components are in
the development stage for this indication, including Bone Morphegenic Proteins (BMPs).
 29




---



##### Table of Contents



Healthcare reform and restrictions on reimbursements may limit our financial returns.
    
 Item 3. Quantitative and Qualitative Disclosures about Market Risk.
    30




---



##### Table of Contents



Item 4. Controls and Procedures.
 Disclosure Controls and Procedures
  Internal Control Over Financial Reporting
  
 Part II  Other Information
 
 Item 6. Exhibits
  31




---



##### Table of Contents



SIGNATURES
  ORTHOLOGIC CORP.(Registrant)
 Signature
    
    Title
    
    Date/s/ James M. Pusey

James M. Pusey
    
    President and Chief Executive Officer
(Principal Executive Officer)
    
    November 7, 2005/s/ Sherry A. Sturman

Sherry A. Sturman
    
    Senior Vice-President and Chief
Financial Officer
(Principal Financial and Accounting
Officer)
    
    November 7, 2005
 32




---



##### Table of Contents



OrthoLogic Corp.
Exhibit Index to Quarterly Report on Form 10-Q
For the Quarterly Period Ended September 30, 2005
 ExhibitNo.
    
    Description
    
    Incorporated by Reference To:
    
    Filed Herewith3.1
    
    Restated Certificate
of Incorporation,
executed April 15,
2005
    
    Exhibit 3.1 to the Companys Form
10-Q for the quarter ended March
31, 2005, filed with the SEC on May
10, 2005 (March 2005 10-Q)3.2
    
    Amended Certificate
of Designation of
Series A Preferred
Stock, executed
April 15, 2005
    
    Exhibit 3.2 to the March 2005 10-Q3.3
    
    Bylaws of the Company
    
    Exhibit 3.4 to the Companys
Amendment No. 2 to Registration
Statement on Form S-1 (No.
33-47569) filed with the SEC on
January 25, 19934.1
    
    Rights Agreement
dated as of March 4,
1997, between the
Company and Bank of
New York, and
Exhibits A, B and C
thereto
    
    Exhibit 4.1 to the Companys
Registration Statement on Form 8-A
filed with the SEC on March 6, 19974.2
    
    First Amendatory
Agreement to March
4, 1997 Rights
Agreement
    
    Exhibit 10.1 to the
Companys Form 8-K filed August 24, 19994.3
    
    Amendment No. 2 to
March 4, 1997 Rights
Agreement
    
    Exhibit 4.1 to the Companys Form
8-K filed October 20, 20034.4
    
    1987 Stock Option
Plan of the Company,
as amended and approved by
stockholders
    
    Exhibit 4.4 to the Companys Form
10-Q for the quarter ended June 30,
19974.5
    
    1997 Stock Option
Plan of the Company,
as amended and
approved by the
stockholders
    
    Exhibit 4.3 to the Companys
Registration Statement on Form S-8,
filed with the SEC on March 2, 200510.1
    
    Employment Agreement
between the Company
and Dr. James M.
Pusey, dated March
3, 2005
    
    Exhibit 10.1 to the Companys Form
8-K, filed with the SEC on March 4,
2005 (the March 4th 8-K)10.2
    
    Form of Confidential
Information and
Assignment of
Inventions
Agreement*
    
    Exhibit 10.2 to the March 4th 8-K10.3
    
    Letter of Stock
Option Grant to Dr.
James M. Pusey for
200,000 shares of
the Companys common
stock, dated March
3, 2005
    
    Exhibit 10.3 to the March 4th 8-K10.4
    
    Letter of Stock
Option Grant to Dr.
James M. Pusey for
300,000 shares of
the Companys common
stock, dated March
3, 2005
    
    Exhibit 10.4 to the March 4th 8-K10.5
    
    Letter of Restricted
Stock Grant to Dr.
James M. Pusey,
dated March 3, 2005
    
    Exhibit 10.5 to the March 4th 8-K10.6
    
    Actions by the Board
related to the base
salary compensation
of Sherry A. Sturman
    
    Exhibit 10.1 to the
Companys Form 8-K,
 filed with the SEC on June 16,
200510.7
    
    Patent Assignment Agreement dated
June 28, 2005, between the
    
    Exhibit 10.3 to the Companys Form
10-Q for the quarterly period ended
June 30,
 33




---



##### Table of Contents



ExhibitNo.
    
    Description
    
    Incorporated by Reference To:
    
    Filed HerewithCompany and the
University of Texas
    
    2005, filed with the SEC
on August 9, 2005 (the June 2005 10-Q)10.8
    
    Amendment No. 1 to
the Employment
Agreement between
the Company and Dr.
James M. Pusey,
dated August 8, 2005
    
    Exhibit 10.4 to the Companys June
2005 10-Q10.9
    
    Amendment No. 1 to
the Third Amended
and Restated
Employment Agreement
between the Company
and Sherry A.
Sturman, dated
August 7, 2005
    
    Exhibit 10.5 to the June 2005 10-Q31.1
    
    Certification of Chief
Executive Officer Pursuant
to Securities Exchange
Act Rule 13a-14
    
    
    
    X31.2
    
    Certification of Chief
Financial Officer Pursuant
to Securities Exchange Act
Rule 13a-14
    
    
    
    X32
    
    Certification of Chief
Executive Officer and Chief
Financial Officer Pursuant to
18 U.S.C. Section 1350**
 
   34