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<SEC-DOCUMENT>0000892569-06-000772.txt : 20060607
<SEC-HEADER>0000892569-06-000772.hdr.sgml : 20060607
<ACCEPTANCE-DATETIME>20060606193556
ACCESSION NUMBER:		0000892569-06-000772
CONFORMED SUBMISSION TYPE:	10KSB
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20051231
FILED AS OF DATE:		20060607
DATE AS OF CHANGE:		20060606

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			VYREX CORP
		CENTRAL INDEX KEY:			0000933972
		STANDARD INDUSTRIAL CLASSIFICATION:	PHARMACEUTICAL PREPARATIONS [2834]
		IRS NUMBER:				880271109
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10KSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-27866
		FILM NUMBER:		06890316

	BUSINESS ADDRESS:	
		STREET 1:		2159 AVENIDA DE LA PLAYA
		CITY:			LA JOLLA
		STATE:			CA
		ZIP:			92037
		BUSINESS PHONE:		6194544462

	MAIL ADDRESS:	
		STREET 1:		2159 AVENIDA DE LA PLAYA
		CITY:			LA JOLLA
		STATE:			CA
		ZIP:			92037
</SEC-HEADER>
<DOCUMENT>
<TYPE>10KSB
<SEQUENCE>1
<FILENAME>a21081e10ksb.htm
<DESCRIPTION>FORM 10-KSB
<TEXT>
<HTML>
<HEAD>
<TITLE>e10ksb</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>United States<BR>
Securities and Exchange Commission</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>Form&nbsp;10-KSB</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>Annual Report Pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of
1934</B></TD>
</TR>
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>For the Fiscal Year ended December&nbsp;31, 2005</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>Transition report pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>For the transition period from &#95;&#95;&#95;to &#95;&#95;&#95;.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Commission file number: 000-27866</B>
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>Vyrex Corporation</B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Name of small business issuer as specified in its charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Delaware</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>88-0271109</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">(State or other jurisdiction of<BR>
corporation or organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(IRS Employer Identification No.)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>2159 Avenida de la Playa, La Jolla, California 92037</B><BR>
(Address of principal executive offices)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>(858)&nbsp;454-4446</B><BR>
(Issuer&#146;s telephone number including area code)
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="43%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Securities registered pursuant to Section&nbsp;12(b) of the Act:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">None</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">Securities registered pursuant to Section&nbsp;12(g) of the Act:</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Common Stock, Par Value $.0001</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Warrants</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(Title of Class)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Check whether the issuer (1)&nbsp;filed all reports required to be filed by Section&nbsp;13 or 15(d) of the
Exchange Act during the past 12&nbsp;months (or for shorter period that the registrant was required to
file such reports), and (2)&nbsp;has been subject to such filing requirements for the past 90&nbsp;days.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes <FONT face="Wingdings">&#254;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No <FONT face="Wingdings">&#111;</FONT></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Check if there is no disclosure of delinquent filers in response to Item&nbsp;405 of Regulation&nbsp;S-B
contained in this form, and no disclosure will be contained, to the best of registrant&#146;s knowledge,
in definitive proxy or information statements incorporated by reference in Part&nbsp;III of this Form
10-K SB or any amendment to this Form 10-K SB. <FONT face="Wingdings">&#254;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is
a shell company (as defined in rule 12a-2 of the Exchange Act).&nbsp;&nbsp;Yes <FONT face="Wingdings">&#111;</FONT> &nbsp;&nbsp;&nbsp;&nbsp;No <FONT face="Wingdings">&#254;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">State issuer&#146;s revenues for its most recent year: $97,500
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">State the aggregate market value of the voting and non-voting common equity held by non affiliates
of the registrant computed by reference to the price at which the stock was sold, or the average
bid and ask prices of such stock equity, as of a date within the past 60&nbsp;days: $679,429 based on
trading value as of April&nbsp;15, 2006 as adjusted for a twelve for one hundred reverse stock split.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">State the number of shares outstanding of each of the issuer&#146;s classes of common equity, as of
latest practicable date:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Common Stock &#151; 1,019,144 as of April&nbsp;15, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Warrants to purchase common stock &#151; 12,000 as of April&nbsp;15, 2006.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">DOCUMENTS INCORPORATED BY REFERENCE
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The issuer&#146;s definitive Proxy Statement for its Annual Meeting of Shareholders to be submitted to
the commission on or before May&nbsp;31, 2006 is incorporated by reference into Part&nbsp;III hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Transitional Small Business Disclosure Format
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes <FONT face="Wingdings">&#111;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No <FONT face="Wingdings">&#254;</FONT></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD></TD><TD colspan="8"><A HREF="#000">PART I</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#001"><U>Item&nbsp;1.</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>BUSINESS</U></A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#002"><u>Item&nbsp;2.</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>PROPERTY</u></A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#003"><U>Item&nbsp;3.</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>LEGAL PROCEEDINGS</U></A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#004"><U>Item&nbsp;4.</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</U></A></TD></TR>
<TR><TD colspan="9"><A HREF="#005">PART II</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#006"><U>Item&nbsp;5.</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS</U></A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#007">Item&nbsp;7. FINANCIAL STATEMENTS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#008">Item&nbsp;7a. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#009">Item&nbsp;8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#010"> Item&nbsp;8a. CONTROLS AND PROCEDURES.</A></TD></TR>
<TR><TD colspan="9"><A HREF="#011">PART III</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#012"> Item&nbsp;9. DIRECTORS AND EXECUTIVE OFFICERS, OF THE REGISTRANT.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#013">Item&nbsp;10. EXECUTIVE COMPENSATION.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#014">Item&nbsp;11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#015">Item&nbsp;12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#016">Item&nbsp;13. EXHIBITS, LIST AND REPORTS ON FORM 8-K</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#017">Item&nbsp;14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.</A></TD></TR>
<TR><TD colspan="9"><A HREF="#018">SIGNATURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#019"> Exhibit&nbsp;Index</A></TD></TR>
<TR><TD colspan="9"><A HREF="a21081exv31w1.htm">EXHIBIT 31.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="a21081exv32w1.htm">EXHIBIT 32.1</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<!-- link2 "PART I" -->
<DIV align="left"><A NAME="000"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>PART I</B>
</DIV>

<!-- link2 "<U>Item&nbsp;1.</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>BUSINESS</U>" -->
<DIV align="left"><A NAME="001"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Item&nbsp;1.</B></U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U><B>BUSINESS</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>General</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain statements in this Form 10-K SB regarding future expectations and financial
performance may be regarded as &#147;forward-looking statements&#148; within the meaning of the U.S.
Securities Litigation Reform Act. They are subject to various risks and uncertainties, such as
those described in the Risk Factors section, and elsewhere, in this Form 10-K SB, and in the
Company&#146;s Securities and Exchange Commission filings. Actual results may vary materially.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>The Company</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vyrex Corporation (the &#147;Company&#148;) is a Delaware Corporation formed in 1991. The Company is a
research and development stage company seeking to discover and develop pharmaceuticals,
nutraceuticals and cosmeceuticals for the treatment and prevention of respiratory, cardiovascular
and neurodegenerative diseases and conditions associated with aging. The Company&#146;s research has
been focused on targeted antioxidant therapeutics for respiratory, neurological and cardiovascular
diseases and the development of nutraceuticals and cosmeceuticals to aid in the support of certain
age-related conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Pharmaceutical Drug Program. </I></B>The Company&#146;s pharmaceutical technology is currently focused on
three proprietary formulations, Propofol Phosphate, Vantox<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and Panavir<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Propofol Phosphate is a water soluble pro-drug of propofol, the most widely used general
anesthetic agent in the world. The compound is covered by U.S. Patent No.&nbsp;6,254,853 B1 issued on
July&nbsp;3, 2001. The patent contains several claims covering pharmaceutically acceptable
formulations, methods of delivery and a variety of clinical applications. These applications
encompass treatments for disease states and conditions associated with the central or peripheral
nervous system, including induction and maintenance of anesthesia and sedation, migraine headaches,
inflammation, arthritis, neurodegenerative diseases, CNS trauma, pathologic respiratory conditions,
nausea, convulsive disorders and cancer. Propofol Phosphate eliminates many of the disadvantages
associated with propofol itself. Propofol Phosphate is formulated in a clear aqueous solution that
does not contain a lipid emulsion nor does it contain any preservative. Propofol Phosphate can be
synthesized easily from inexpensive starting materials in high yield and on a large scale.
Propofol Phosphate is stable in solution and has demonstrated anesthetic and sedative activity in
animal models following administration by intravenous, intra-muscular, intra-peritoneal,
subcutaneous, intra-dermal and oral routes. Propofol Phosphate is ready for clinical development
and could be tested in any of the indications listed above. The Company is currently seeking
partners to aid in further development and commercialization of this unique propriety compound.
Because this compound is the pro-drug of a proven product, the risk to reward ratio is
substantially reduced. Additionally, U.S. Patent No.&nbsp;6,362,234 was awarded to the Company on March
26, 2002 for all claims of its U.S. Patent application for Water Soluble Pro-Drugs of Propofol for
the specific Treatment of Migraine, adding to the estate of patents that Vyrex holds on water
soluble derivatives of propofol as well as propofol itself. To date, the Company has not received
a commitment from any potential partners. There can be no assurance the Company will be successful
in funding the further development of Propofol Phosphate,<SUP style="font-size: 85%; vertical-align: text-top"> </SUP>or that pre-clinical trials
will be completed, or that clinical trials will be initiated, or if they are initiated that the
trials will be completed and the Company&#146;s claims confirmed. Even if confirmed there is no
assurance that it will result in the production or marketing of an FDA approved drug. The Company
holds two patents in connection with Propofol Phosphate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vantox<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> studies indicate it may have usefulness in the treatment of asthma, ARDS, cystic
fibrosis, oxygen toxicity, smoke inhalation and other respiratory diseases and conditions. Vantox<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>
is an inhaled antioxidant intended to be used in vapor form. The Company believes certain
mechanisms in the inflammatory cascade which lead to tissue damage may be mediated by free
radicals. Free radicals are a by-product of oxidation, which can be damaging at high levels.
Vantox<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> has been shown in laboratory tests to be a free radical scavenger, or &#147;antioxidant&#148;. The
Company has demonstrated Vantox<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>&#146;s effects in preventing and treating oxidative lung damage in three
different animal models. The models evaluated protection from lung damage induced by oxygen,
paraquat and ozone.
Vantox<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> showed protective effects in all three models. Based on this data and growing evidence that oxidative stress and inflammation may be central to the
pathogenesis of asthma and other respiratory conditions, the Company believes Vantox<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> is an
appropriate drug candidate to take forward into clinical trials.
</DIV>

<P align="center" style="font-size: 10pt">2
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Before initiating Phase I clinical trials, the Company must complete toxicology and pharmacokinetic
studies and submit an Investigational New Drug (IND)&nbsp;application with the U.S. Food and Drug
Administration. Due to the expense of completing pre-clinical trials and conducting clinical
trials, the Company is unable to fund any additional development and is seeking a joint venture
with a pharmaceutical company to provide the necessary funding for further clinical development.
Preliminary pre-clinical data was provided to several pharmaceutical companies to review, pursuant
to confidentiality and non&#151;disclosure agreements. To date, the Company has not received a
commitment from any potential partners. There can be no assurance the Company will be successful
in funding the further development of Vantox<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, or that pre-clinical trials will be
completed, or that clinical trials will be initiated, or if they are initiated that the trials will
be completed and the Company&#146;s claims confirmed. Even if confirmed there is no assurance that it
will result in the production or marketing of an FDA approved drug. The Company holds two patents
in connection with Vantox<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Panavir<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> is an antioxidant drug candidate the Company believes may inhibit HIV
proliferation and may target the events leading to the slow progressive deterioration of the immune
system. The Company believes Panavir<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> directly inhibits HIV-1 in part by interfering with the
attachment of the virus to cells and also by inhibiting the syncytia-inducing strains of HIV-1.
Many scientists today believe the most pathogenic strains of HIV-1 are those that lead to the
formation of multinucleated giant cells called syncytia.
Panavir<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> may also prevent
activation of HIV-1 in latently and chronically infected cells, which is an activity not shown by
the approved reverse transcriptase inhibitors or protease inhibitors. The Company believes the
inhibition of viral activation in latently infected cells may be one of the most desirable
attributes of an anti-HIV/AIDS drug.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company believes the activation of HIV infection from the latent state is associated with
increased intracellular levels of oxygen free radicals. In laboratory tests the antioxidant and
free radical scavenging activity of
Panavir<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> inhibited activation of HIV-1 in latently
infected cells. Chronic and inappropriate activation of immune cells in HIV infection has been
linked to abnormal secretion of certain immunological hormone-like substances called cytokines.
Certain cytokines appear to be associated with increased production of oxygen free radicals. Based
on the results of preliminary tests completed to date, Panavir<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> appears to inhibit the activity of
certain of these cytokines, including interleukin-1 and tumor necrosis factor alpha. The Company
hopes
Panavir<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> may allow HIV positive individuals to remain healthy by preventing
latently infected cells from reactivating, as well as interfering with viral replication and
transmission to other cells when infected cells are activated by certain processes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May of 1992, the Company received an Investigational New Drug allowance from the FDA for a
Phase I/II human clinical trial using Panavir<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> to treat patients infected with the HIV
virus. This phase of the Panavir<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> study began in July of 1992 and was completed in October of 1995.
This trial examined safety, bioavailability and pharmacokinetics in a small group of patients.
Results indicated that Panavir<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> was well tolerated and achieved targeted serum levels. CD4 counts,
which normally decline in untreated AIDS patients, were stabilized, but did not show a significant
increase. During 1996 and 1997, the Company synthesized new Panavir<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> analogs and pro-drugs in an
effort to improve bioavailability and the Company&#146;s proprietary position. These compounds have
undergone initial pharmacologic testing and have exhibited antioxidant activity, but will require
additional testing. The Company has, to date, been unable to obtain a collaborative partner or
partners to continue the development and clinical program involving Panavir<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ultimately, further trials will be required involving the treatment of at least several
hundred patients with Panavir<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> alone, or in combination with approved drugs. There can be no
assurance that funding will be secured or such tests will be undertaken or completed, or that any
form of Panavir<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> will be developed as a marketable product.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Nutraceuticals. </I></B>The Company was awarded U.S. Patent No.&nbsp;6,071,545 on June&nbsp;6, 2000 for novel
metallic oligopeptide complexes. This patent covers a wide array of novel mineral complexes,
including complexes of magnesium, calcium, chromium, zinc, copper and vanadium. The metallic
oligopeptide complexes were designed specifically to increase mineral availability and
effectiveness, as well as to be non-toxic. The public is becoming ever more aware of the
importance of minerals for the maintenance of good health and this is reflected in the increasing
sales of minerals in the form of dietary supplements, as well as in functional foods and functional
drinks. This trend is expected to continue for a long time and therefore, the Company is poised to
be a leader in this ever important market. The Company&#146;s novel metallic oligopeptide complexes
address health issues affecting all of the systems of the body, including the cardiovascular
system, the nervous system, the musculoskeletal system and the gastrointestinal system. A specific
complex covered by the patent is chromium carnosinate. Chromium appears to play an important role
in sugar and lipid metabolism. Carnosine is a dipeptide that occurs naturally in muscle and nervous
tissue, including the brain. Carnosine has antioxidant, anti-inflammatory and anti-glycation
</DIV>

<P align="center" style="font-size: 10pt">3

</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">activity. Carnosine is also thought to have anti-aging activity. The Company believes that
carnosine is a superior form for chromium delivery and if positioned correctly, can become a major,
if not the major form of chromium supplementation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Based on an Agreement between the Company and Dusan Miljkovic, Ph.D., Dr.&nbsp;Miljkovic granted the
Company an exclusive license to develop, manufacture and sell certain carbohydrate complexes of
boron nutraceutical compounds covered by US Patent No.&nbsp;5,962,049. In August&nbsp;2000 the Company
entered into an agreement sublicensing the boron complex patent to FutureCeuticals, a division of
Van Drunen Farms. FutureCeuticals formulated, tested, manufactured and is currently selling boron
complexes, under the trade name FruiteX-B&#153; to manufactures and distributors of nutritional
supplements. The agreement for the boron complex technology remains in effect. Although the
Company continues to seek partners to aid in the development of nutritional mineral products
covered by its patent for novel metallic oligopeptide complexes there can be no assurance that the
Company will be successful in funding further development and commercialization of these compounds.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Cosmeceuticals. </I></B>On April&nbsp;1, 2003 Vyrex Corporation was awarded U.S. Patent Number 6,541,613
entitled Isoflavone Derivatives. This is a significant patent that covers a number of isoflavone
derivatives with potential pharmaceutical, nutraceutical and cosmeceutical applications.
Additional proprietary protection is provided by U.S. Patent Application Number 20030212009 and WO
99/63995. Isoflavones are a group of naturally occurring plant compounds (phytochemicals)&nbsp;found in
various edible beans, particularly in soy. Isoflavones possess a number of important biological
activities, including antioxidant, anti-inflammatory, estrogenic (phytoestrogens), antiatherogenic,
anticarcinogenic and antiosteoporotic activities. Recently, some isoflavones have been shown to be
protective against ionizing radiation (radioprotectants). Radioprotectants have applications in
oncology, space travel and in radiological terrorism. Clinical studies on plant-derived
isoflavones have produced variable results. This variability is attributed to their erratic
absorption and bioavailability. Vyrex, using its expertise in the development of novel
antioxidant/anti-inflammatory molecules and prodrugs has synthesized isoflavone derivatives that
are stable and provide consistent bioavailability.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>CosmoFlavone </I></B>is a proprietary cosmeceutical agent that Vyrex is developing out of its
isoflavone derivative technology as a protector of the skin against aging. Isoflavones
particularly have demonstrated biochemical and physiological activities indicating that these
substances would make important skin care products. These activities include phytoestrogenic,
antioxidant, anti-inflammatory, antiangiogenic, radioprotective and ultraviolet protective actions.
Such activities would be protective against common skin cancers and aging of the skin in general.
Recently, negative results have been published regarding hormone replacement (estrogen and
progesterone) use in postmenopausal women. As a result, many postmenopausal women have stopped the
use of estrogens and those who are entering menopause have decided not to start its use. Estrogen
counteracts many of the aging changes that skin undergoes. CosmoFlavone, which possesses
phytoestrogenic activity, is expected to, as well. Vyrex has synthesized and is studying a number
of compounds designed to take advantage of the many activities of isoflavones that would aid in
protecting the skin against aging. According to the Freedonia Group an industry market research
group, the cosmeceutical industry grossed $3.4&nbsp;billion in 2002 and is expected to hit $5.1&nbsp;billion
in 2007. There can be no assurance that the Company will be successful in funding further
development and commercialization of these compounds.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B>Radioprotgective Agents</B></U> Certain isoflavones have been shown to be protective against
ionizing radiation (radioprotectants). Radioprotectants have applications in oncology, space
travel and of major importance, as an agent against nuclear/radiologic terrorism. Vyrex initiated
research to develop radioprotective agents against nuclear/radiologic terrorism after being
contacted by a division of the Department of Defense expressing an interest in Vyrex&#146;s technologies
as potential radioprotectants. Vyrex used its antioxidant and prodrug technologies to develop its
first radioprotective agent, GEN-VYX1-2004. GYN-VYX1-2004 has been synthesized, has undergone
initial animal toxicity studies and has been found to be non-toxic. This represents a significant
first step. The timing of the development of this project is important based on the recent passage
of the Government&#146;s Project BioShield. This bill allocates six billion dollars over the next ten
years for development of effective drugs and vaccines to protect against the attack by biological,
chemical, nuclear and radiological agents. There can be no assurance that the Company will be
successful in funding further development and commercialization of these compounds.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Research Collaborations and Licensing Agreements</B><BR>
As part of its strategy for developing and commercializing certain potential products the
Company has entered into research collaborations and licensing agreements. There can be no
assurance the Company will enter into additional collaborative, license or similar agreements, or
that its existing agreements will result in development or successful
</DIV>

<P align="center" style="font-size: 10pt">4
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">commercialization of any potential product. Some of the agreements that the Company has entered
into are summarized below:
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Dusan Miljkovic, Ph.D. </B>In October&nbsp;1997, the Company entered into a License Agreement with Dusan
Miljkovic, Ph.D. (&#147;Miljkovic Agreement&#148;) pursuant to which Dr.&nbsp;Miljkovic granted the Company an
exclusive worldwide license to develop, manufacture and sell certain carbohydrate complexes of
boron nutraceutical compounds. Dr.&nbsp;Miljkovic originally filed a provisional patent application
covering the compounds, and subsequently filed a further United States patent application. Pursuant
to the agreement, the Company is responsible for all costs and expenses in connection with
obtaining patent protection. US Patent Number 5,962,049 Boron Carbohydrate Complexes and Uses
Thereof was issued October&nbsp;5, 1999. In the case of licensed products sold as bulk compounds or
stand-alone supplements, Dr.&nbsp;Miljkovic will receive royalties in the amount of 2.5% of gross
proceeds up to $1&nbsp;million; 1.75% of gross proceeds of between $1.0&nbsp;million and $5.0&nbsp;million and 1%
of gross proceeds in excess of $5&nbsp;million. In the case of licensed products sold as a component of
a supplement formulation, Dr.&nbsp;Miljkovic will receive royalties according to the preceding schedule
based on a factor of 34% of gross revenues. The License Agreement may be terminated by Dr.
Miljkovic or the Company under certain circumstances. In addition, there can be no assurance that
the Company will be in a position to meet its annual minimum license fee of $7,500 and thereby
maintain any rights to the covered compound. In August&nbsp;2000 the Company entered into a license
agreement with FutureCeuticals, a division of Van Drunen Farms, to further develop and market
compounds covered by the boron patent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>FutureCeuticals. </B>The Company licensed a natural form of boron covered by US Patent No.: 5,962,049
and was issued US Patent No.: 6,071,545 for novel Metallic Oligopeptide Complexes on June&nbsp;6, 2000
covering several mineral complexes for both nutritional and pharmaceutical applications. The
patent covers a novel chromium complex, chromium carnosinate, which the Company feels is superior
to the other forms of chromium supplements currently on the market. In August&nbsp;2000 the Company
entered into an agreement sublicensing the boron complex patent and licensing the chromium mineral
complex covered by the Metallic Oligopeptide Complexes Patent with FutureCeuticals, a division of
Van Drunen Farms, to develop and market these proprietary nutraceutical compounds. The agreement
included an up front license fee of $25,000 and an additional license fee of $75,000 upon
attaining $75,000 in initial sales of products developed and commercialized that are covered by the
licensed technology. After meeting certain development, approval and commercialization criteria
the licensee shall pay the Company the greater of an escalating minimum monthly royalty payment or
a total gross royalty of 30% of gross revenue from the sale of licensed products. Of the 30% gross
royalty, licensee shall credit and allocate 5% to further research and development of the products
and pay the remaining 25% to the Company. FutureCeuticals reached $75,000 in sales in December
2002 allowing the remaining license fee balance of $75,000 to be posted to accounts receivable in
2002. The cash payment was received and deposited in January&nbsp;2003. FutureCeuticals formulated,
tested, manufactured and is currently selling boron and chromium complexes as raw materials to
manufactures and distributors of nutritional supplements. Boron is marketed under the trade name
FruiteX-B&#153; and Chromium under the trade name CarnoChrome&#153;. FutureCeuticals has conducted a number
of studies reflecting the primary activities and benefits of both products. In order to allocate
additional funds to conduct new scientific studies designed to prove the superiority of
CarnoChrome&#153; and FruiteX-B&#153; over competitive products, hire a proven product manager to
specifically oversee the marketing and sales of CarnoChrome&#153; and FruiteX-B&#153; and fund the
development of new products based on technology licensed from the Company the agreement between
FutureCeuticals and the Company was amended on February&nbsp;17, 2003. Under the terms of the amended
agreement the Company will receive a 15% royalty on gross sales of licensed product in a calendar
year less than $3,000,000 three million dollars and 20% of gross sales equal to or in excess of
$3,000,000 three million dollars. There is a minimum guaranteed royalty payment of $90,000 in
2003, $150,000 in 2004 and $180,000 in 2005. Based on the terms of the agreement FuutureCeuticals
has elected to cancel the license for the chromium carnosinate technology effective March&nbsp;24, 2004.
The agreement for the boron complex technology remains in effect. The cancellation of the chromium
portion of the license agreement affects the minimum royalty payment. Based on the agreement the
minimum payment for 2004 is $90,000 and 2005 is $112,500. In December of 2004 the agreement was
amended to change the minimum payment for 2005 from $112.500 to $97,500. In January of 2006 the
Agreement was further amended. The licensee will make a final minimum royalty payment of twenty
two thousand five hundred dollars ($22,500.00) on April&nbsp;01, 2006. From April&nbsp;01, 2006 forward and
throughout the life of the Agreement the licensee shall pay Vyrex a flat quarterly royalty of five
percent (5%) of the gross sales of the boron licensed product. Additionally, on April&nbsp;01, 2006 and
thereafter annually on every subsequent April&nbsp;01, throughout the lifetime of the Agreement the
licensee will pay Vyrex an additional seven thousand dollars ($7,500.00). There can be no
a
ssurance that a significant market will develop for the boron product or that any products will
continue to produce revenue for the Company.
</DIV>


<P align="center" style="font-size: 10pt">5
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Patents and Proprietary Technology</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A United States Patent was issued in 1991 for methods of inhibiting viral and retroviral
infections via the use of various antioxidants corresponding to the formulae set forth in the
subject patent. The patent has been assigned to the Company and describes the primary proprietary
technology underlying the Company&#146;s proposed Panavir<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> products. A United States Patent
was issued in 1992 for methods of inhibiting viral and retroviral replication and for treating
viral and retroviral infections via the administration of compositions containing tocopherol, or a
tocopherol derivative, or a pharmaceutically effective product thereof..
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A United States Patent was issued in 1994 directed to certain preparations and methods for
dilipidation of skin or hair through the use of cyclodextrin and cyclodextrin derivative
preparations such as hydroxypropyl cyclodextrin. This patent also is directed to cerumen removal
methods involving introduction of cyclodextrin preparations to the ear canal, resulting in the
removal of ear wax and related substances. This patent has been assigned to the Company. This
patent describes the proprietary technology of the Company underlying its proposed Cerex<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A United States Patent was issued in 1995 directed to certain methods for delipidation of skin
or hair through the use of cyclodextrin and cyclodextrin derivative preparations such as
hydroxypropyl cyclodextrin. This patent is also directed to cerumen removal methods involving
introduction of cyclodextrins to the ear canal resulting in the removal of ear wax and related
substances. This patent has been assigned to the Company. This patent describes the proprietary
technology of the Company underlying its proposed Cerex<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A United States Patent was issued in 1995 directed to certain methods for the prevention and
treatment of poison ivy and poison oak dermatitis through the use of cyclodextrins in applications
to complex urushiols. This patent is also directed to methods of desensitizing against urushiol -
induced dermatitis through cyclodextrin &#151; urushiol complexes. This patent has been assigned to the
Company and describes the technology underlying the Company&#146;s proposed Vyderm&#153; products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A United States Patent was issued in 1995 involving airborne protectants against oxidative
tissue damage. This patent is also directed to methods for preventing free radical-induced
oxidative damage and inflammatory response in biological tissue through vapor-phase, phenolic
antioxidants, such as vaporized 2,6-diisopropylpheno.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A United States Patent was issued in 1996 directed to a certain delivery formulation for
Probucol, related to the Company&#146;s Panavir<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> product.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A United States Patent was issued in 1998 directed to the use of cyclodextrins to complex
urushiols to protect against and to treat irritation arising from exposure to urushiols. This
patent has been assigned to the Company and relates to the proposed Vyderm&#153; products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A United States Patent was issued in 1999 relating to compounds, compositions, uses and
methods for inhibiting viral and retroviral replication and for treating viral and retroviral
infections via the administration of various compounds, including antioxidants. This patent has
been assigned to the Company and relates to the proposed Panavir<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A United States Patent was issued in 1999 and covers compounds and compositions for use as
microbicides, specifically against viruses and retroviruses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A United States Patent was issued in 2000 relating to Metallic Oligopeptide Complexes as
nutritional supplements, in particular metals of nutritional or therapeutic value in mixed
complexes of oligopeptides.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A United States Patent was issued in 2001 for claims covering Water Soluble Pro-Drugs of
Propofol. These claims cover treatment of diseases, states or conditions associated with the
nervous system, cardiovascular system and respiratory system, including but not limited to
anesthesia, trauma of the nervous system, Alzheimer&#146;s disease, Parkinson&#146;s disease and migraine
headache.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A United States Patent was issued in 2002 for claims covering water soluble Pro-drugs of
Propofol for the Treatment of Migraine.
</DIV>

<P align="center" style="font-size: 10pt">6
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A United States Patent was issued in 2003 covering novel isoflavone derivatives, their uses
and their enhanced bioavailability. Isoflavones possess a number of important biological
activities, including antioxidant, anti-inflammatory, estrogenic and antiangiogenic activities and
have nutraceutical, cosmeceutical and pharmaceutical potential.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has patent applications pending in the United States and Internationally.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The protection of proprietary rights relating to the Company&#146;s proposed products, processes
and know-how is critical for the Company&#146;s business. The Company intends to file patent
applications to protect technology, inventions and improvements that are considered important to
the development of its business. The Company also intends to rely on unpatented trade secrets for a
part of its intellectual property and property rights, and there can be no assurance others will
not independently develop substantially equivalent proprietary information and techniques, or
otherwise gain access to the Company&#146;s trade secrets or disclose such technology, or that the
Company can meaningfully protect its rights to any patented or unpatented technology.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although the Company seeks patent protection for its proprietary technology and potential
products in the United States and in foreign countries, the patent positions of biotechnology and
pharmaceutical firms, including the Company, are generally uncertain and involve complex legal and
factual questions. Consequently, the Company does not know whether any of the patent applications
pending, or the unfiled patent applications which it is considering will result in the issuance of
any patents, whether the patents which it owns will provide significant proprietary protection, or
whether they will be circumvented or invalidated. Since patent applications in the United States
are maintained in secrecy until patents issue, and publication of discoveries in the scientific or
patent literature tend to lag behind actual discoveries by several months, at the time of filing a
patent application or during the research phase prior to application the Company can not be certain
it will be deemed the first creator of inventions covered by any future patent applications or that
it will be deemed the first to file patent applications for such inventions. There can be no
assurance all United States or foreign patents that may pose a risk of infringement can or will be
identified. If the Company is unable to obtain a license(s) where it may have infringed on other
patents, it could encounter delays in product market introductions while it attempts to design
around such intellectual property rights, or could find that the development, manufacture or sale
of potential products requiring such licenses could be prevented. In addition, the Company could
incur substantial costs in defending against suits brought against it in connection with such
intellectual property rights or prosecuting suits which the Company may bring against other parties
to protect its intellectual property rights. Competitors or potential competitors may have filed
applications for, or have received patents and may obtain additional patents and proprietary rights
relating to, compounds or processes competitive with those of the Company. See &#147;Business
Competition.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The prosecution and maintenance of U.S. and foreign patent matters is expensive and may
require the commitment of significant funds to maintain its existing patents and patent
applications or prosecute, or file, new patent applications. The Company can make no assurance
that it will be able to maintain existing patents and patent applications or prosecute new patent
applications unless it is able to obtain significant funding in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company will generally require all or certain of its employees, consultants and advisors
to execute a confidentiality agreement either upon the commencement of an employment or consulting
relationship with the Company or at a later time. There can be no assurance these agreements will
provide meaningful protection for the Company&#146;s trade secrets in the event of unauthorized use or
disclosure of such information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The protection of intellectual properties owned by technology firms, including the Company is
subject to uncertainty and involves complex legal and factual questions. The degree of future
protection for the Company&#146;s proprietary technology rights is therefore uncertain. There can be no
assurance the Company&#146;s efforts to protect its intellectual property will prove to be adequate. See
&#147;Risk Factors Patents and Proprietary Rights.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Trademarks</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company owns trademarks registered with the United States Patent and Trademark Office
(USPTO)&nbsp;for the names Panavir<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>, Vantox<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>, and its logo in connection with the
name Vyrex. Federally registered trademarks have a perpetual life, as long as they are renewed on
a timely basis, subject to the rights of third parties to seek cancellation of the marks. The
Company may claim common law trade name rights as to other potential products, and anticipates
filing additional trademark applications in the future.
</DIV>

<P align="center" style="font-size: 10pt">7
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The prosecution and maintenance of trademark matters is expensive and may require the
commitment of significant funds to maintain its existing trademarks, or prosecute, or file, new
trademark applications. The Company can make no assurance that it will be able to maintain
existing trademarks or prosecute new trademark applications unless it is able to obtain significant
funding in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Employees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;31, 2000, the Company employed three individuals, two in executive positions and
one in administration. In an effort to reduce operating expenses as well as terminating its
clinical and gene discovery programs the Company either eliminated or did not replace certain
positions in the Company. None of its employees are currently represented by a union or any other
form of collective bargaining unit. The Company is not contemplating, but may hire an undetermined
number of new employees over the next 12 to 24&nbsp;months, should the Company obtain additional funding
and expand its activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Government Regulation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The research and development, manufacture and marketing of the Company&#146;s potential products
may be subject to extensive regulation by the FDA and by other federal, state, local and foreign
entities, which regulate, among other things, research and development activities and the testing,
manufacture, labeling, storage, record keeping, safety, advertising and promotion of pharmaceutical
products. Governmental review of new drugs, devices or biologicals is an uncertain, costly and
lengthy process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Federal Food, Drug and Cosmetic Act, the Public Health Services Act, the Controlled
Substances Act and other federal statutes and regulations govern or influence all aspects of the
Company&#146;s business. Noncompliance with applicable requirements can result in fines and other
judicially imposed sanctions, including product seizures, injunction actions and criminal
prosecutions. In addition, administrative remedies can involve voluntary recall of products, and
the total or partial suspension of products as well as the refusal of the government to approve
pending applications or supplements to approved applications. The FDA also has the authority to
withdraw approval of drugs in accordance with statutory due process procedures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ongoing compliance with these requirements can require the expenditure of substantial
resources. Any failure by the Company, or possible licensees to obtain, or any delay in obtaining
required regulatory approvals would adversely affect the planned marketing of the Company&#146;s
proposed products and the Company&#146;s ability to derive product or royalty revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The FDA&#146;s regulatory system requires an initial determination of whether a subsequent filing
by the Company for that product will be classified by the FDA as a drug, device or biological. The
FDA has different approval procedures for drugs, devices and biologicals. The Company believes
most, if not all, of its currently proposed products will be classified as drugs, although the
Company may develop proposed new potential products or potential therapeutic agents in the future
which are considered devices or biologicals. If the Company is required to submit any application
to the FDA as a biological, or device, the application process may be significantly longer, more
expensive and certain different compliance procedures would apply than those for a drug as
described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The steps required by the FDA before a new drug may be marketed in the United States include:
(a)&nbsp;preclinical studies; (b)&nbsp;submission to the FDA of a request for authorization to conduct human
clinical trials in an Investigational New Drug &#147;IND&#148; application, which includes the test data of
the preclinical studies and the proposed protocols (study designs) for clinical trials (an IND
allows evaluation of the new drug in controlled clinical studies); (c)&nbsp;adequate and well controlled
human clinical trials to establish the safety and effectiveness of the drug for its intended use;
(d)&nbsp;submission to the FDA of a New Drug Application (&#147;NDA&#148;); and (e)&nbsp;review and approval of the NDA
by the FDA before the drug may be shipped or sold commercially.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to obtaining the FDA&#146;s approval of an NDA for each of a Company&#146;s proposed
products, each manufacturing establishment for new drugs must receive some form of approval by the
FDA. Among the conditions for such approval is the requirement that the prospective manufacturer&#146;s
quality control and manufacturing procedures conform to the FDA&#146;s Good Manufacturing Practices
regulations, which must be followed at all times. In complying with standards set forth in these
regulations, manufacturers must continue to expend time, monies and effort in the area of
production and quality control to ensure full technical compliance. Manufacturing establishments,
both foreign and domestic, also are subject to inspections by or under the authority of the FDA and
by other federal, state or local agencies.
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, the clinical testing for new compounds required by the FDA is an extremely costly,
ongoing, multi-year project. The FDA itself estimates clinical drug development time requirements
average five years, but range from two to ten years. Finally, the Company or the FDA may suspend
clinical trials at any time if it is felt that the subjects or patients are being exposed to an
unacceptable health risk. Other competitors of the Company have had their proposed pharmaceutical
clinical trials halted due to safety concerns.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The process of completing clinical testing and obtaining FDA approval of a NDA is likely to
take a number of years and require the expenditure of substantial resources. If an application is
submitted, there can be no assurance the FDA will review and approve the NDA in a timely manner if
at all. Even after initial FDA approval of the NDA has been obtained, further studies, including
post-market studies, may be required to provide additional data on safety or effectiveness and will
be required to gain approval for the use of a potential product as a treatment for clinical
indications other than those for which the potential product was initially tested. Also, the FDA
will require post-market reporting and may require surveillance programs to monitor the side
effects of the drug. Results of post-marketing programs may limit or expand the further marketing
of the potential products. Further, if there are any modifications to the drug, including changes
in indication, manufacturing process, labeling, or a change in manufacturing facility, an NDA
supplement may be required to be submitted to the FDA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Whether or not FDA approval has been obtained, approval of a potential product by regulatory
authorities in foreign countries must be obtained prior to the commencement of marketing of the
product in such countries. The requirements governing the conduct of clinical trials and product
approvals vary widely from country to country, and the time required for approval may be longer or
shorter than that required for FDA approval. Although there are some procedures for unified filings
for certain European countries, in general, each country at this time has its own procedures and
requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Establishments handling controlled substances must be licensed by the United States Drug
Enforcement Administration. In addition to the regulatory framework for potential product
approvals, the Company is and may be subject to regulation under state and federal law, including
requirements regarding occupational safety, laboratory practices, environmental protection and
hazardous substance control, and may be subject to other present and possible future local, state,
federal and foreign regulation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Sources of Supply</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The principal raw materials used in the Company&#146;s proposed products, have been obtained from
several large chemical suppliers. If and when the Company begins production on a commercial scale,
its use of raw materials will significantly increase. The Company could experience raw material
shortages which, in turn, could affect its ability to produce products. The Company may, from time
to time, rely on a single supplier for one or more of the raw materials and may represent a
significant portion of any such supplier&#146;s total output. Although the Company believes there are
and will continue to be alternative sources for each of its anticipated raw materials, there can be
no assurance this will be the case or that the qualification of additional vendors will not delay
the Company&#146;s ability to manufacture products. The Company does not have any contracts with any
suppliers of the raw materials used in the development of its proposed products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Competition</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The biotechnology and pharmaceutical industries are intensely competitive. There are many
pharmaceutical companies, biotechnology companies, public and private universities and research
organizations actively engaged in research and development of pharmaceutical products. Most of the
Company&#146;s existing or potential competitors have substantially greater financial, human and other
resources than the Company and may be better equipped to develop, manufacture and market products.
In addition, many of these companies have extensive experience in preclinical testing and human
clinical trials. These companies may develop and introduce products and processes competitive with
or superior to those of the Company, and many of these companies may be further along in the
product development and approval process for their potential products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s competition will be determined in part by the potential indications for which
the Company&#146;s proposed products are developed and ultimately approved, if at all, by regulatory
authorities. For most, if not all, of the Company&#146;s potential products, an important factor in
competition will be the timing of market introduction of competitive products. Accordingly, the
relative speed with which the Company can develop potential products, complete the clinical trials
and approval processes and supply commercial quantities of the products to the market are expected
to be important competitive
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">factors. The Company expects competition among products approved for sale will be based, among
other things, on product effectiveness, safety, reliability, availability, price and the strength
of the patents on which such products are based. The Company&#146;s competitive position also depends
upon its ability to attract and retain qualified personnel, obtain patent protection or otherwise
develop proprietary products or processes and secure sufficient capital resources for the very
substantial period between technological conception and any commercial sales, which may develop.
There can be no assurance the Company will be able to compete successfully.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>Risk Factors</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>This report contains, in addition to historical information, forward-looking statements that
involve risks and uncertainties. The Company&#146;s actual results could differ materially from the
results discussed in the forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below as well as those discussed elsewhere in this report.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Early Stage of Development; Absence of Products</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is in the development stage. Most of the Company&#146;s proposed pharmaceutical
products will require significant additional research and development, including extensive
preclinical and clinical testing, before the Company will be able to apply for FDA approval. There
can be no assurance the Company can initiate or sustain any significant research and development
efforts, and that such efforts, if undertaken, will be successful, that any of the Company&#146;s
potential pharmaceutical products under development will prove to be safe and effective in clinical
trials, that the Company will be able to obtain FDA approval for any of its proposed pharmaceutical
products, that any such proposed pharmaceutical products can be manufactured at acceptable cost and
with appropriate quality, or that any such proposed products, if they do receive regulatory
approval, can be successfully marketed. The Company cannot predict when, if ever, it will begin to
market any proposed pharmaceutical products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>No Significant Operating Revenues; Accumulated Deficit; Expectation of Future Losses</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has experienced significant operating losses since its inception in 1991. As of
December&nbsp;31, 2005, the Company had a deficit accumulated in the development stage of $13,440,508.
The Company expects operating losses to increase substantially in the future only if the Company
decides to restart its research and development and clinical trials internally. The Company has
generated no significant revenues from operations. The development of the Company&#146;s proposed
pharmaceutical products will require the commitment of substantial resources to prepare and submit
applications to the FDA, and to conduct research, preclinical and clinical trials, and for both its
proposed pharmaceutical and nutraceutical products the Company must either establish commercial
scale manufacturing processes and facilities or contract for such manufacturing facilities, and to
establish additional quality control, regulatory, marketing, sales and administrative capabilities.
There can be no assurance the Company will be successful in these endeavors or will continue as a
going concern, especially in light of the high failure rate of development stage pharmaceutical and
nutrition companies with limited resources. There can be no assurance the Company will not incur substantial and continuing net
losses beyond the next several years or that the Company will ever reach profitability.
Furthermore, there can be no assurance the Company will apply for or obtain regulatory approvals,
enter into arrangements with third parties for product development and commercialization, or
successfully market or license any additional products. To achieve profitable operations, the
Company, alone or with others, must successfully identify, develop, manufacture and market its
proprietary products or technologies. There can be no assurance the Company will be able to
accomplish these tasks. Significant delays in any of these matters could materially adversely
impact the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Future Capital Requirements; Uncertainty of Additional Funding</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substantial expenditures will be required to enable the Company to conduct planned product
research and development, resume the FDA application process, including conducting preclinical
studies and clinical trials, and to manufacture and market its proposed products including its
proposed nutraceutical products. The Company will need to raise substantial additional funds to
support its long-term proposed product development and commercialization programs including its
nutraceutical product development programs. The Company has no established bank financing
arrangements and it is not anticipated the Company will secure any bank financing in the
foreseeable future. Therefore, the Company will need to seek additional financing through
subsequent future public or private sales of its securities, including equity and debt securities.
</DIV>


<P align="center" style="font-size: 10pt">10
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company may also seek funding for the development and marketing of its proposed products
through strategic alliances and other arrangements with corporate partners. There can be no
assurance such collaborative arrangements or additional funds will be available when needed, or on
terms acceptable to the Company, if at all. Any such additional financing may result in
significant dilution to existing stockholders. If adequate funds are not available, the Company
may be required to halt operations, or obtain funds through arrangements with collaborative
partners or others that may require the Company to relinquish rights to certain of its
technologies, potential product candidates or potential products the Company would not otherwise
relinquish. In an effort to conserve funds, the Company has curtailed its internal research
efforts and is dependent on its licensees and collaborations for continued studies and clinical
trials. The Company&#146;s future cash requirements will be affected by the degree to which the Company
is able to resume operations in the future, as well as future results of research and development,
preclinical studies and clinical trials, nutraceuticals product development and marketing costs,
relationships with corporate partners, changes in the focus and direction of the Company&#146;s research
and development programs, competitive and technological advances, the regulatory approval process
and other factors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Intense Competition and Rapid Technological Change</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is engaged in rapidly evolving and highly competitive fields and competition is
expected to increase. There are many companies, including large pharmaceutical, chemical, and
vitamin and nutrition supplement companies, engaged in developing, manufacturing and marketing
products similar to those proposed to be developed by the Company, many of which have established a
significant presence in the markets which the Company&#146;s proposed products are designed to address.
Virtually all of these companies have substantially greater capital resources, research and
development staffs, facilities and experience in obtaining regulatory approvals, as well as in the
manufacturing, marketing and distribution of products, than the Company. There can be no assurance
the Company&#146;s competitors will not succeed in developing technologies and products that are more
effective and less costly than any potential products under research and development by the Company
or which could render the Company&#146;s proposed products or technology obsolete.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Dependence Upon Key Personnel</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has reduced its staff to three people, and is dependent on its licensees and its
scientific collaborations for the bulk of its continuing research and development activities.
Consequently, further successful development of the Company&#146;s proprietary technology is dependent
on the ability of the research and development efforts of its licensees and scientific
collaborations. Directing these efforts is Dr.&nbsp;Sheldon S. Hendler, Chairman of the Company&#146;s Board
of Directors and the owner of approximately 18% of the outstanding Common Stock of the Company.
The ability to retain the services of Dr.&nbsp;Hendler is important to the success of the Company. The
Company does not currently have an employment contract with Dr.&nbsp;Hendler, does not pay or accrue
compensation to him, nor does it maintain insurance on Dr.&nbsp;Hendler&#146;s life. Even if the Company
succeeded in obtaining financing necessary to fund internal research and development, it would
continue its efforts to expand its research and development externally by means of outsourcing and
expanding collaborations with current or new scientific partners.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Reliance on Collaborative Partners</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company licensed a natural form of boron covered by US Patent No.: 5,962,049 and was
issued US Patent No.: 6,071,545 for novel Metallic Oligopeptide Complexes June&nbsp;6, 2000 covering
several mineral complexes for both nutritional and pharmaceutical applications. The patent covers
a novel chromium complex, chromium carnosinate, which the Company feels is superior to the other
forms of chromium supplements currently on the market. In August&nbsp;2000 the Company entered into an
agreement sublicensing the boron complex patent and licensing the chromium mineral complex covered
by the Metallic Oligopeptide Complexes Patent with FutureCeuticals, a division of Van Drunen Farms,
to develop and market these proprietary nutraceutical compounds. The agreement included an up front
license fee of $25,000 and an additional license fee of $75,000 upon attaining $75,000 in initial
sales of products developed and commercialized that are covered by the licensed technology. After
meeting certain development, approval and commercialization criteria the licensee shall pay the
Company the greater of an escalating minimum monthly royalty payment or a total gross royalty of
30% of gross revenue from the sale of licensed products. Of the 30% gross royalty, licensee shall
credit and allocate 5% to further research and development of the products and pay the remaining
25% to the Company. FutureCeuticals reached $75,000 in sales in December&nbsp;2002 allowing the
remaining license fee balance of $75,000 to be posted to accounts receivable in 2002. The cash
payment was received and deposited in January&nbsp;2003. FutureCeuticals formulated, tested,
manufactured and is currently selling boron and chromium complexes as raw materials to manufactures
and distributors of nutritional supplements. Boron is marketed under the trade name FruiteX-B&#153; and
Chromium under the trade name CarnoChrome&#153;. FutureCeuticals has conducted a number
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">of studies reflecting the primary activities and benefits of both products. In order to allocate
additional funds to conduct new scientific studies designed to prove the superiority of
CarnoChrome&#153; and FruiteX-B&#153; over competitive products, hire a proven product manager to
specifically oversee the marketing and sales of CarnoChrome&#153; and FruiteX-B&#153; and fund the
development of new products based on technology licensed from the Company the agreement between
FutureCeuticals and the Company was amended on February&nbsp;17, 2003. Under the terms of the amended
agreement the Company will receive a 15% royalty on gross sales of licensed product in a calendar
year less than $3,000,000 three million dollars and 20% of gross sales equal to or in excess of
$3,000,000 three million dollars. There is a minimum guaranteed royalty payment of $90,000 in
2003, $150,000 in 2004 and $180,000 in 2005. Based on the terms of the agreement FuutureCeuticals
has elected to cancel the license for the chromium carnosinate technology effective March&nbsp;24, 2004.
The agreement for the boron complex technology remains in effect. The cancellation of the chromium
portion of the license agreement effects the minimum royalty payment. Based on the agreement the
minimum payment for 2004 is $90,000 and 2005 is $112,500. In December of 2004 the agreement was
amended to change the minimum payment for 2005 from $112,500 to $97,500. There can be no assurance
that a significant market will develop for the boron product or that any products will continue to
produce revenue for the Company. In January of 2006 the Agreement was further amended. The
licensee will make a final minimum royalty payment of twenty two thousand five hundred dollars
($22,500.00) on April&nbsp;01, 2006. From April&nbsp;01, 2006 forward and throughout the life of the
Agreement the licensee shall pay Vyrex a flat quarterly royalty of five percent (5%) of the gross
sales of the boron licensed product. Additionally, on April&nbsp;01, 2006 and thereafter annually on
every subsequent April&nbsp;01, throughout the lifetime of the Agreement the licensee will pay Vyrex an
additional seven thousand five hundred dollars ($7,500.00).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There can be no assurance the Company will be able to negotiate acceptable collaborative
arrangements in the future, or that any collaborative arrangements will be successful. In
addition, there can be no assurance the Company&#146;s collaborative partners will not pursue
alternative technologies or develop alternative compounds either on their own or in collaboration
with others, including the Company&#146;s competitors, as a means of developing treatments for the
diseases targeted by the collaborative programs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Patents and Proprietary Rights</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s success will depend in large part on its ability to obtain patent protection for
its proposed products, both in the United States and other countries. The patent position of
biotechnology and pharmaceutical companies is highly uncertain and involves complex legal and
factual questions. There is no consistent policy regarding the breadth of claims allowed in
biotechnology and pharmaceutical patents. The Company currently has fifteen patents issued. There
have been foreign counterparts of certain of these applications filed in other countries on behalf
of the Company. The Company intends to file additional applications as appropriate for patents
covering both its proposed products and processes. There can be no assurance patents will issue
from any of the pending applications, or for patents that have been issued or may be issued, the
claims allowed will be sufficiently broad to protect the Company&#146;s technology. In addition, there
can be no assurance any patents issued to the Company will not be challenged, invalidated or
circumvented, or the rights granted there under will provide proprietary protection to the Company.
In addition, any patents obtained by the Company will be of limited duration. All United States
patents issuing from patent applications applied for June&nbsp;8, 1995 or thereafter will have a term of
20&nbsp;years from the date of filing. All United States patents in force before June&nbsp;8, 1995 will have
a term of the longer of: (1)&nbsp;17&nbsp;years from the date of issuance; or (2)&nbsp;20&nbsp;years from the date of
filing. All United States patents issuing from patent applications applied for before June&nbsp;8, 1995
will have a term of the longer of (1)&nbsp;17&nbsp;years from the date of issuance; or (2)&nbsp;20&nbsp;years from the
date of filing. The commercial success of the Company will also depend in part on the Company&#146;s
neither infringing patents issued to competitors nor breaching the technology licenses upon which
the Company&#146;s proposed products might be based.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It may become necessary for the Company to obtain licenses of potential products or other
proprietary rights or trade secrets from other parties. Failure by the Company to obtain such
licenses may have a material adverse impact on the Company. Litigation, which could result in
substantial costs to the Company, may also be necessary to enforce any patents issued to the
Company or to determine the scope and validity of others&#146; proprietary rights. In addition, the
Company may have to participate in interference proceedings declared by the U.S. Patent and
Trademark Office to determine the priority of inventions which could result in substantial costs to
the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company also attempts to protect its proprietary technology and processes by seeking to
obtain confidentiality agreements with its contractors, consultants, employees, potential
collaborative partners, licensees, licensors and others. There can be no assurance these agreements
will adequately protect the Company, that these agreements will not be breached, or the Company
will have adequate remedies for any breach, or that the Company&#146;s trade secrets will not otherwise
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">become known or be independently discovered by competitors. In addition the Company does not
generally require its principal scientific advisors to enter into confidentiality agreements, and
to the extent there is collaboration between any of the scientific advisors and the Company, the
aspects of such collaboration will not necessarily remain the trade secrets of the Company. This
approach could increase the risk to the Company that it may not be able to protect its proprietary
information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There can be no assurance others will not independently develop similar or more advanced
technologies or design around aspects of the Company&#146;s technology which may be patented, or
duplicate the Company&#146;s trade secrets. In some cases, the Company may rely on trade secrets to
protect its innovations. There can be no assurance trade secrets will be established, or secrecy
obligations will be honored, or that others will not independently develop similar or superior
technology. To the extent consultants, key employees or other third parties apply technological
information independently developed by them or by others to Company projects, disputes may arise as
to the proprietary rights to such information which may not be resolved in favor of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Governmental Regulation and Uncertainty of Product Approvals</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The production and marketing of the Company&#146;s proposed products are subject to strict
regulation by federal and state governmental authorities in the United States and in foreign
countries where such potential products may be produced and marketed. In the United States, the FDA
regulates, where applicable, development, testing, labeling, manufacturing, registration,
notification, clearance or approval, marketing, distribution, record keeping and reporting
requirements for human and animal drugs, medical devices, biologics, cosmetics and food additives.
Most, if not all, of the Company&#146;s proposed products, including its proposed Panavir, Vantox, and
other products may require FDA clearance prior to marketing. The Federal Environmental Protection
Agency (&#147;EPA&#148;) has regulations covering certain areas for some of the Company&#146;s proposed products.
Comparable state and local agencies may have similar regulations. The FDA and EPA regulatory
approval processes may take a number of years and both FDA and EPA regulatory approval may require
the expenditure of substantial resources. The processing, formulation, packaging, labeling and
advertising of the Company&#146;s proposed nutraceutical products is subject to regulation by one or
more federal agencies, including the FDA, the Federal Trade Commission (the &#147;FTC&#148;), the Consumer
Product Safety Commission, the United States Department of Agriculture and the Environmental
Protection Agency. These activities are also regulated by various agencies of the state and
localities in which the Company&#146;s nutraceutical products may be sold, including without limitation
the California Department of Health and Human Services, Food and Drug branch. The Nutrition
Labeling and Education Act and the Dietary Supplement Act provide regulations which require that
vitamin, mineral and dietary supplements labels have to provide the same basic nutritional
information found on the labels on most conventional foods. The regulations also require that
health claims made for vitamins, minerals and dietary supplements be scientifically valid, and
mandate nutrition information found on the label to state the nutrition content per serving.
Compliance with these regulations could adversely affect the Company&#146;s operations and its financial
condition. There can be no assurance the production and marketing of the Company&#146;s proposed
products or other potential products which may be developed by the Company in the future, if any,
will satisfy then current requirements of the FDA, EPA, FTC, or comparable state, local and foreign
authorities. Delays in receiving or failure to receive governmental approvals may have a material
adverse impact on the Company. In addition, there can be no assurance that government regulations
applicable to the Company or its proposed products or the interpretation thereof will not change
and thereby prevent the Company from marketing some or all of its potential products for a period
of time or permanently, or otherwise materially and adversely affect the Company. Moreover, if
regulatory approval of a drug is granted, such approval may entail limitations on the indicated
uses for which the drug may be marketed. Even if such regulatory approval is obtained, a marketed
drug, its manufacturer and the facilities in which the drug is manufactured are subject to
continual review and periodic inspections. Later discovery of previously unknown problems with a
product, manufacturer or facility may result in restrictions on such product or manufacturer,
including withdrawal of the potential product from the market, product seizures, a halt in
operation and other materially adverse consequences. The Company is unable to predict the extent
of adverse governmental regulation which might arise from future federal, state or foreign
legislative or administrative action, or the extent of the impact of such legislative changes on
the business of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Debt Service</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During March&nbsp;2003, the Company obtained a note from a private investor to loan the Company
$200,000 in the form of a convertible note at an interest rate of 10% per annum. Interest is to
be paid quarterly with the principal due and payable at the end of the third year. The note is
collateralized by substantially all of the assets of the Company. The investor has the option to
convert the principal amount into Vyrex common shares at a price of $2.08 during the first year,
$4.17 the second year and $6.25 the third year. Further in connection with the Promissory Note,
the investor was issued warrants, exercisable
</DIV>

<P align="center" style="font-size: 10pt">13
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">within three years from the date of issuance, entitling the investor to purchase Vyrex Corporation
common shares in the amount of twelve thousand 12,000 shares at an exercise price of $0.917 per
share. The warrants had a fair value of $6,000 as of the date of issuance; accordingly, the Company
discounted the note by $6,000 which was added to additional paid-in capital. The Company has been
accreting the discount on a straight-line basis over the term of the note and has recognized $2,000
additional interest expense for the period ended December&nbsp;31, 2005. On August&nbsp;24, 2004 the Company
obtained an additional note from the same private investor in the amount of $7,500. The principal
amount plus 10% interest was paid March&nbsp;29, 2005. As further consideration for the $7,500 loan,
the Company agreed to amend the strike price terms of the right to convert the principal amount of
the $200,000 note into Vyrex common shares from $4.17 to $2.08 the second year and from $6.25 to
$4.17 the third year. In March of 2006 the private investor agreed to extend the note an
additional six months to September&nbsp;2006. The right to convert the principal amount into Vyrex
Common Shares at a strike price of $4.17 in the third year was extended to September of 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Dilutive and Other Adverse Effects of Outstanding Options and Warrants</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the terms of existing options issued under the Company&#146;s stock option plan and other
outstanding options, the holders thereof are given an opportunity to profit from a rise in the
market price of the Common Stock with a resulting dilution in the interests of the other
stockholders. The terms on which the Company may obtain additional financing may be adversely
affected by the existence of such options. The holders of the options may exercise them at a time
when the Company might be able to obtain additional capital through a new offering of securities on
terms more favorable than those provided by the options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Possible Depressive Effect on Price of Securities of Future Sales of Common Stock</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Actual sales or the prospect of sales of Common Stock under Rule&nbsp;144 or otherwise in the
future may depress the prices of the Company&#146;s securities or any market that may develop in the
future. There are options outstanding both pursuant to the Company&#146;s Stock Option Plan and options
not pursuant to any plan which are exercisable for up to 311,471 shares of Common Stock. All of
these options are currently exercisable; 14% are exercisable at a price range of $47.92 to $62.50,
8% at a price of $25.00, and 78% are exercisable at a price range of $2.08 to $4.67. Exercise of
any of these options would result in additional dilution to the purchaser of the shares offered
herein, and exercise of any significant amount of these options will result in substantial
additional dilution. Resale of shares acquired upon the exercise of these options may depress the
prices of the Company&#146;s securities or make them more difficult to sell by the investors herein. The
sale or availability for sale of substantial amounts of Common Stock in the public market after
this offering could adversely affect the prevailing market prices of the Company&#146;s securities and
could impair the Company&#146;s ability to raise additional capital through the sale of its equity
securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Possible Adverse Effects of Authorization and Issuance of Preferred Stock</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s Board of Directors is authorized to issue up to 50,000,000 shares of preferred
stock. The Board of Directors has the power to establish the dividend rates, liquidation
preferences, voting rights, redemption and conversion terms and privileges with respect to any
series of preferred stock. The issuance of any series of preferred stock having rights superior to
those of the common stock may result in a decrease in the value or market price of the common stock
and could further be used by the Board as a device to prevent a change in control favorable to the
Company. Holders of preferred stock to be issued in the future may have the right to receive
dividends and certain preferences in liquidation and conversion rights. The issuance of such
preferred stock could make the possible takeover of the Company or the removal of management of the
Company more difficult, and adversely affect the voting and other rights of the holder of the
common stock, or depress the market price of the Common Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Delisting From NASDAQ Stock Market</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company was notified that it had been delisted from the NASDAQ SmallCap Market effective
with the close of business October&nbsp;21, 1998. As of October&nbsp;22, 1998, the Company&#146;s securities
commenced trading over the counter under the symbols OTC:BB &#151; VYRX and OTC:BB &#151; VYRXW. As a
result, investors may find it more difficult to dispose of, or to obtain accurate quotations as to
the value of, the Company&#146;s securities.
</DIV>

<P align="center" style="font-size: 10pt">14
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Volatility of Stock Price</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market prices for securities of emerging and development stage companies such as Vyrex
have historically been highly volatile. Future announcements concerning the Company or its
competitors, including the results of testing, technological innovations or new commercial
products, government regulations, developments concerning proprietary rights, litigation or public
concern as to safety of potential products developed by the Company or others, may have a
significant impact on the market price of the Company&#146;s securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Disclosures Relating to Low Priced Stocks; Restrictions on Resale of Low Price Stocks and on
Broker-Deal Sale; Possible Adverse Effect of &#147;Penny Stock&#148; Rules on Liquidity for the Company&#146;s
Securities</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since the Company&#146;s securities were delisted from the NASDAQ SmallCap Market and the Company
has net tangible assets of less than $1,000,000<B><I>, </I></B>transactions in the Company&#146;s securities are
subject to Rule&nbsp;15g-9 under the Exchange Act which imposes additional sales practice requirements
on broker-dealers who sell such securities to persons other than established customers and
&#147;accredited investors&#148; (generally, individuals with a net worth in excess of $1,000,000 or annual
incomes exceeding $200,000 or $300,000 together with their spouses). For transactions covered by
this Rule, a broker-dealer must make a special suitability determination for the purchaser and have
received the purchaser&#146;s written consent to the transaction prior to the sale. Consequently, this
Rule may affect the ability of broker-dealers to sell the Company&#146;s securities, and may affect the
ability of Shareholders to sell any of the Company&#146;s securities in the secondary market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Commission has adopted regulations which generally define a &#147;penny stock&#148; to be any
non-NASDAQ equity security of a small Company that has a market price (as therein defined) less
than $5.00 per share, or with an exercise price of less than $5.00 per share subject to certain
exceptions, and which is not traded on any exchange or quoted on NASDAQ. For any transaction by
broker-dealers involving a penny stock (unless exempt), the rules require delivery, prior to a
transaction in a penny stock, of a risk disclosure document relating to the penny stock market.
Disclosure is also required to be made about compensation payable to both the broker-dealer and the
registered representative and current quotations for the securities. Finally, monthly statements
are required to be sent disclosing recent price information for the penny stock held in an account
and information on the limited market in penny stocks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Control by Present Stockholders; Possible Depressive Effect on the Company&#146;s Securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The current officers and directors of the Company own 28% of the outstanding Common Stock of
the Company. Dr.&nbsp;Hendler individually owns approximately 17% of the outstanding Common Stock.
This concentration of ownership could have an influence over the election of directors and could
exert influence or control over the Company&#146;s operations. This may discourage potential purchasers
from seeking control of the Company through purchase of Common Stock and this possibility could
have a depressive effect on the price of the Company&#146;s securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Anti-Takeover Provisions &#151; Limitation on Voting Rights</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s Articles of Incorporation and Bylaws contain provisions that may make it more
difficult to acquire control of the Company by means of tender offer, over-the-counter purchases, a
proxy fight, or otherwise. The Articles of Incorporation also include provisions restricting
stockholder voting rights. The Company&#146;s Articles of Incorporation include a provision that
requires that any action required by the stockholders may not be affected by a written consent, and
that special meetings of the stockholders may only be called by the Board of Directors. This
provision makes it difficult for stockholders to pass any resolution not supported by the Board of
Directors except at a regularly called meeting. The Company&#146;s Articles of Incorporation provide for
a staggered term of the Board of Directors, thus eliminating the ability to elect all of the
directors in any one year. This provision may make the implementation of a change in management a
process requiring more than one year even if supported by a majority of the stockholders. The
Company&#146;s Articles of Incorporation provide that directors may only be removed for cause and a vote
of 70% of the shareholders. Certain provisions of the Articles of Incorporation may only be amended
by a vote of 70% of the stockholders. As a result of the number of shares currently owned by
management, this provision may for some time have the effect of indirectly eliminating any
possibility stockholders could pass a resolution unless approved by management, in connection with
any question submitted or required to be submitted to a vote of the stockholders. The Company&#146;s
Articles of Incorporation also require that stockholders give advance notice to the Company of any
directorship nominations or other business to be brought by the stockholders at any stockholder&#146;s
meeting. This provision makes it more difficult for stockholders to nominate candidates for the
Board of Directors who are not supported by management. In addition, the Articles of Incorporation
require advance notice for stockholder proposals to be brought before the annual meeting. The
requirements include that the notice must specify certain information regarding the stockholder and
the meeting. This provision to implement stockholder proposals makes it more
</DIV>

<P align="center" style="font-size: 10pt">15
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">difficult even if a majority of stockholders are in support thereof. The Company is also
subject to certain provisions of California law if more than 50% of its outstanding securities are
held of record by persons with addresses in California, and if more than 50% of its property,
payroll and sales are from California. These provisions of California law will control the
operations of the Company with respect to certain of the anti-takeover provisions discussed herein,
until such time as either (i)&nbsp;the Company is listed on the New York or American Stock Exchange or
the National Market System of Nasdaq, and it has 800 stockholders; or (ii)&nbsp;the Company no longer
has either more than 50% of its outstanding securities held by persons with addresses in
California, or less than 50% of its property, payroll and sales are in California. Each of these
provisions may also have the effect of deterring hostile take-overs or delaying changes in control
or management of the Company. In addition, the indemnification provisions of the Company&#146;s Bylaws
and Articles of Incorporation may represent a conflict of interest with the stockholders since
officers and directors may be indemnified prior to any judicial determinations as to their conduct.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Warrants</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company entered into a consulting agreement with an individual to provide consulting
services to the Company on matters pertaining to the development and marketing of the Company&#146;s
intellectual property. In April&nbsp;2002, the individual was issued a warrant to purchase an aggregate
of 2,400 shares of common stock at a price of $3.083 per share exercisable until March&nbsp;31, 2005.
These warrants expired March&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To assist in the marketing of Vyrex&#146;s Vantox<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and its water soluble pro-drug form of propofol,
the Company entered into a consulting agreement with Sagitta Corporation. The Consultant has
contacts in Japan that are potential candidates to license certain of the Company&#146;s intellectual
property. In December&nbsp;2002, Sagitta Corporation was issued a warrant to purchase an aggregate of
600 shares of common stock at a price of $1.25 per share exercisable until December&nbsp;5, 2005. These
warrants expired December&nbsp;4, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company issued Warrants in March&nbsp;2003 in connection with entering into a loan transaction
with a single entity with a principal amount of $200,000. Warrants were issued entitling the
lender to purchase 12,000 shares of stock at an exercise price equal to $0.917 per share
exercisable until March&nbsp;9, 2006. The exercisable date has been extended until September&nbsp;9, 2006 in
conjunction with renegotiating the promissory note.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Lack of Marketing Experience; Dependence on Outside Parties for Marketing and Distribution;
Uncertainty of Market Acceptance of Proposed Products</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If successfully developed and approved by applicable regulatory agencies, the Company intends
to market its proposed products currently under development through contractual arrangements with
others such as joint venture, licensing or similar collaborative agreements and distribution
agreements. This may result in a lack of control by the Company over some or all of the marketing
and distribution of such potential products. There can be no assurance the Company will be able to
enter into any marketing arrangements on terms acceptable to the Company or that any marketing
efforts undertaken on behalf of the Company will be successful. The Company may, in the future,
determine to directly market certain of its proposed products. The Company has limited marketing
experience and significant additional capital expenditures and management resources would be
required to develop a direct sales force. In the event the Company elects to engage in direct
marketing activities, there can be no assurance the Company would be able to obtain the requisite
funds or attract and retain the human resources necessary to successfully market any of its
potential products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s future growth and profitability will depend, in large part, on the success of
its personnel and others conducting marketing efforts on behalf of the Company in fostering
acceptance among the various markets of the use of the Company&#146;s potential products as an
alternative to other available products or otherwise. The Company&#146;s success in marketing its
potential products will be substantially dependent on educating its targeted markets as to the
distinctive characteristics and perceived benefits of the Company&#146;s potential products. There can
be no assurance that the Company&#146;s efforts or the efforts of others will be successful or that any
of the Company&#146;s proposed products will be favorably accepted among the targeted markets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Lack of Manufacturing Capability; Dependence on Outside Parties for Manufacturing of Proposed
Products</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has no manufacturing facilities or expertise, and does not intend to manufacture
any potential product or products. The Company initially intends to enter into arrangements with
others to manufacture all of its proposed products and has done so with respect to its
nutraceutical products. The Company does not have any contracts or agreements obligating any party
to manufacture any quantity of nutraceuticals for any price. Failure to secure such contracts or
</DIV>

<P align="center" style="font-size: 10pt">16
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">agreements could have a material adverse impact on the business and operations of the Company.
There can be no assurance the Company will be able to enter into satisfactory arrangements for the
manufacture of its proposed products with manufacturers whose facilities and procedures comply with
FDA or other regulatory requirements, that the manufacturers will continue to comply with such
standards, or that such manufacturers will be able to adequately supply the Company with its
product needs. The Company&#146;s dependence on third parties for manufacturing may adversely affect the
Company&#146;s ability to develop and deliver products on a timely and competitive basis. The Company
may in the future undertake to manufacture some or all of its proposed products directly. The
Company has no experience with the manufacture of any of its proposed products under development.
In the event the Company were to undertake to manufacture any of its proposed products, the Company
would be required to finance considerable additional capital expenditures, attract and retain
experienced personnel, develop a manufacturing capability, and comply with extensive government
regulations with respect to its facilities, including among others, FDA manufacturing requirements.
The Company would not be able to develop any reasonable manufacturing capability without obtaining
significant capital in excess of the funds anticipated from this offering. There can be no
assurance the Company would be able to successfully establish manufacturing operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Dependence on Suppliers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The materials used in the Company&#146;s potential products are currently available only from a
limited number of suppliers. The Company anticipates there will continue to be a limited number of
suppliers for its proposed products. In the event the Company could not obtain adequate quantities
of necessary materials from its existing suppliers, there can be no assurance the Company would be
able to access alternative sources of supply within a reasonable period of time or at commercially
reasonable rates. Regulatory requirements applicable to pharmaceutical products tend to make the
substitution of suppliers costly and time-consuming. The Company does not have any contracts or
agreements with any of its raw material suppliers for its proposed nutraceutical products to
provide quantities of raw materials at specific prices. The Company believes there are numerous
suppliers of its raw materials for its proposed nutraceutical products. There can be no assurance
adequate suppliers will be available or that the lack of such contracts or agreements will not have
a material adverse impact on the business and operations of the Company. The unavailability of
adequate commercial quantities, the inability to develop alternative sources, a reduction or
interruption in supply or a significant increase in the price of materials could have a material
adverse effect on the Company&#146;s ability to manufacture and market its proposed products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Product Liability; Availability of Insurance</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The design, development and manufacture of the Company&#146;s proposed products involve an inherent
risk of product liability claims and associated adverse publicity. The Company obtained clinical
trial product liability insurance for its Panavir Phase I human clinical trial and intends to
obtain insurance for future clinical trials of Panavir, Vantox, and other potential products under
development, and for potential product liability associated with the commercial sale of the
Company&#146;s proposed products. There can be no assurance the Company will be able to obtain or
maintain insurance for any of its clinical trials or proposed commercial products. Such insurance
is expensive, difficult to obtain and may not be available in the future on acceptable terms or at
all. The Company is also exposed to product liability claims in the event the use of its proposed
products result in injury.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Hazardous Material; Environmental Matters</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company presently contracts with outside vendors to manufacture its proposed products.
However, the Company&#146;s research and development processes at times involve the controlled use of
hazardous materials, chemicals, viruses and various radioactive compounds. In addition, various of
such materials, chemicals, viruses and compounds may be used by the Company in the future to the
extent Vyrex undertakes to perform its own manufacturing. To the extent certain such materials,
chemicals, viruses and compounds are or will be used by the Company, Vyrex will be subject to
federal, state and local laws and regulations governing the use, manufacture, storage, handling and
disposal of certain materials and waste products. Although the Company believes its safety
procedures for handling and disposing of materials would comply with the standards prescribed by
such laws and regulations, the risk of accidental contamination or injury from these materials
cannot be completely eliminated. In the event of such an accident, the Company could be held liable
for any damages that result, and any such liability could exceed the resources of the Company.
There can be no assurance the Company will not be required to incur significant costs to comply
with environmental laws and regulations in the future, or that the operations, business or assets
of the Company will not be affected adversely or materially by current or future environmental laws
or regulations.
</DIV>

<P align="center" style="font-size: 10pt">17
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Health Care Reform</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Political, economic and regulatory influences are subjecting the health care industry in the
United States to fundamental changes. Reforms under consideration may include mandated basic health
care benefits, controls on health care spending through limitations on the growth of private health
insurance premiums and Medicare and Medicaid spending, the creation of large insurance purchasing
groups and fundamental changes to the health care delivery system. The Company anticipates Congress
and certain state legislatures will continue to review and assess alternative health care delivery
systems and payment methods and public debate of these issues will likely continue in the future.
Due to uncertainties regarding the ultimate features of reform initiatives and their enactment and
implementation, the Company cannot predict which, if any, of such reform proposals will be adopted,
when they may be adopted or what impact they may have on the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Uncertainty of Health Care Reimbursement</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vyrex&#146;s ability to commercialize its proposed products successfully may depend in part on the
extent to which reimbursement for the cost of such proposed products and related treatment will be
available from government health administration authorities, private health insurers and other
organizations. Third-party payers are increasingly challenging the price of medical products and
services. Significant uncertainty exists as to the reimbursement status of newly approved health
care products, and there can be no assurance adequate third-party coverage will be available to
enable Vyrex to maintain price levels sufficient to realize an appropriate return on its investment
in product development.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Forward-Looking Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prospective investors are cautioned that the statements in this Prospectus that are not
descriptions of historical facts may be forward-looking statements that are subject to risks and
uncertainties. Actual results could differ materially from those currently anticipated due to a
number of factors, including those identified under &#147;Risk Factors&#148; and elsewhere in this report or
documents incorporated by reference herein.
</DIV>
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<DIV align="left"><A NAME="002"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><u><B>Item&nbsp;2.</B></u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><B>PROPERTY</B></u>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Vyrex Corporation rents an 800 square foot administrative facility located in La Jolla,
California and off site file storage units. Current monthly rental on all facilities is
approximately $1,300.
</DIV>
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<DIV align="left"><A NAME="003"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;3.</B></U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B>LEGAL PROCEEDINGS</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">None
</DIV>

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<DIV align="left"><A NAME="004"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Item&nbsp;4.</B></U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B>SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">None
</DIV>

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<DIV align="left"><A NAME="005"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II</B>
</DIV>

<!-- link2 "<U>Item&nbsp;5.</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS</U>" -->
<DIV align="left"><A NAME="006"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;5.</B></U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B>MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s Common Stock began trading on the Over-The-Counter Bulletin Board on October&nbsp;22,
1998 under the symbol &#147;VYRX&#148;. The over-the-counter market quotations provided reflect inter-dealer
prices, without retail mark-ups, mark-down or commission and may not represent actual transactions.
The following table sets forth the range of high and low sales prices as adjusted for a twelve for
one hundred reverse stock split for the Common Stock on the Nasdaq Small Capitalization Market for
the periods indicated:
</DIV>

<P align="center" style="font-size: 10pt">18
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="22%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">January&nbsp;1, 2004
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">March&nbsp;30, 2004
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">2.25</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">1.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">April&nbsp;1, 2004
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June&nbsp;30, 2004
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">1.58</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.92</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">July&nbsp;1, 2004
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September&nbsp;30, 2004
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">1.75</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.42</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">October&nbsp;1, 2004
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">December&nbsp;31, 2004
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">1.33</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.67</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">January&nbsp;1, 2005
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">March&nbsp;31, 2005
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">1.17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.83</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">April&nbsp;1, 2005
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June&nbsp;30, 2005
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">1.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.50</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">July&nbsp;1, 2005
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September&nbsp;30, 2005
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.92</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.33</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">October&nbsp;1, 2005
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">December&nbsp;31, 2005
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">1.17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.42</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of April&nbsp;15, 2006, the Company&#146;s Common Stock was held by approximately 600 stockholders of
record. The Company has never paid cash dividends and does not anticipate paying any cash
dividends in the foreseeable future.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Item&nbsp;6.</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><u><B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND</B></u></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><u><B>RESULTS OF OPERATIONS AND PLAN OF OPERATION</B></u></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The following discussion and analysis should be read in conjunction with the financial statements
and notes theretoappearing elsewhere herein.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Critical Accounting Policies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial statements of Vyrex Corporation are prepared in conformity with accounting
principles generally accepted in the United States of America (&#147;GAAP&#148;). The preparation of these
financial statements requires our management to make estimates and assumptions about future events
that effect the amounts reported in the financial statements and related notes. Future events and
their effects cannot be determined with absolute certainty. Therefore, the determination of
estimates requires the exercise of judgment. The Company believes the following critical accounting
policies affect its more significant judgments and estimates used in the preparation of financial
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Revenue Recognition</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Licensing and royalty revenue from royalty agreements is recognized in accordance with the
terms of the specific agreement, which generally includes a quarterly minimum payment by the
licensee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stock Options and Warrants</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Statement of Financial Accounting Standards No.&nbsp;123, &#147;Accounting for Stock-Based Compensation&#148;
(&#147;SFAS 123&#148;), provides for use of a fair value based method of accounting for employee stock
compensation. However, SFAS 123 also allows an entity to continue to measure compensation cost for
stock options granted to employees using the intrinsic value method of accounting prescribed by
Accounting Principles Board Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to Employees&#148; (&#147;APB 25&#148;),
which only requires charges to compensation expense for the excess, if any, of the fair value of
the underlying stock at the date a stock option is granted (or at an appropriate subsequent
measurement date) over the amount the employee must pay to acquire the stock, if such amounts
differ materially from the historical amounts. The Company has elected to continue to account for
employee stock options using the intrinsic value method under APB 25. By making that election, it
is required by SFAS 123 and Statement of Financial Accounting Standards No.&nbsp;148, &#147;Accounting for
Stock-Based Compensation &#151; Transition and Disclosure&#148; to provide pro forma disclosures of net
income and earnings per share as if a fair value based method of accounting had been applied.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Options and warrants granted to consultants and other non-employees are valued based on the
fair value of the consideration received or the fair value of the equity instruments issued,
whichever is more reliably measurable, and expensed over the term of the consulting or other
agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Recent Accounting Developments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2004, the FASB issued SFAS No.&nbsp;150 (SFAS 150), &#147;Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity,&#148; which establishes standards for
how an issuer classifies and measures in its
</DIV>

<P align="center" style="font-size: 10pt">19
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">statement of financial position certain financial
instruments with characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an asset in some
circumstances) because that financial instrument embodies an obligation of the issuer. The Company
does not expect SFAS 150 to have a material impact on the Company&#146;s consolidated financial
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2004 the FASB issued SFAS No.&nbsp;151, Inventory Costs. SFAS No.151 amends the
guidance in Accounting Research Bulletin 43, Inventory Pricing, to clarify the accounting for
abnormal amounts of idle facility expenses, freight, handling costs and wasted material
(spoilage)&nbsp;cost. SFAS No.&nbsp;151 requires those items to be excluded from the cost of inventory
and expensed when incurred. It also requires the allocation of fixed production overheads to
the costs of conversion be based on the normal capacity of the production facilities. SFAS No.
151 is effective for fiscal years beginning after June&nbsp;15, 2005. We are still evaluating the
impact of adopting SFAS No 151, but we do not expect it to have a material impact on our
results of operations or financial position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2004, the FASB issued SFAS No.&nbsp;123R, &#147;Accounting for Stock-Based
Compensation&#148;. This statement is a revision to SFAS No.&nbsp;123, &#147;Accounting for Stock-Based
Compensation&#148; and supersedes APB Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to Employees.&#148; This
statement requires a public entity to measure the cost of employee services received in
exchange for an award of equity instruments based on the grant-date fair value of the award (with
limited exceptions). That cost will be recognized over the period during which an employee is
required to provide service, the requisite service period (usually the vesting period). The
grant-date fair value of employee share options and similar instruments will be estimated
using option-pricing models.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, a public entity is required to measure the cost of employee services received
in exchange for an award of liability instruments based on its current fair value. The fair value
of that award will be remeasured subsequently at each reporting date through the settlement date.
Changes in fair value during the requisite service period will be recognized as compensation
cost over that period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For public entities that file as small business issuers, this statement is effective as of
the beginning of the first interim or annual reporting period that begins after December&nbsp;15,
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2004, the FASB issued SFAS No.&nbsp;153, &#147;Exchanges of Nonmonetary Assets &#151; an
amendment of APB Opinion No.&nbsp;29.&#148; SFAS No.&nbsp;153 addresses the measurement of exchanges of
nonmonetary assets. It eliminates the exception from fair value measurement for nonmonetary
exchanges of similar productive assets in paragraph 21(b) of APB Opinion No.&nbsp;29 &#147;Accounting for
Nonmonetary Transactions&#148; and replaces it with an exception for exchanges that do not have
commercial substance. A nonmonetary exchange has commercial substance if the future cash
flows of the entity are expected to change significantly as a result of the exchange. As required
by SFAS No.&nbsp;153, the Company will adopt this new accounting standard effective July&nbsp;1, 2005.
The adoption of SFAS No.&nbsp;153 is not expected to have a material impact on the Company&#146;s
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2005, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No.&nbsp;154, &#147;Accounting Changes and Error Corrections&#148;, a replacement of
APB Opinion No.&nbsp;20 and FASB Statement No.&nbsp;3. This Statement provides guidance on accounting
for reporting of accounting changes and error corrections. This statement is effective for
accounting changes and corrections of errors made in fiscal years beginning after
December&nbsp;15, 2005. The Company does not expect the statement to have a material effect on its
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Overview</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since its inception in January&nbsp;1991, the Company has devoted substantially all of its efforts
and resources to research and development related to the study of biological oxidation and
antioxidation directed to the development of potential therapeutic products for the treatment of
various diseases and conditions. Currently the Company&#146;s research focuses mainly on targeted
antioxidant therapeutics and nutraceuticals. The Company is a development stage company, has never
generated any substantial revenue from product sales and has relied primarily on equity financing,
licensing revenues, and various debt instruments for its working capital. The Company has been
unprofitable since its inception.
</DIV>


<P align="center" style="font-size: 10pt">20
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With the ever increasing difficulty of biotechnology companies being able to raise funds in
the capital markets, the Company has and is continuing to seek collaborative partners to license
its existing technology with a view to raise funding. In addition, the Company&#146;s short-term
strategy will be to continue efforts to commercialize existing technology and to selectively defer
research and development activity until such time as the Company has adequate operating funds.
During 2005, operating expenses for the Company increased $35,000 primarily due to auditing and
financial expenses incurred in the filing of Form 8-K to change the Company&#146;s domicile from the
State of Nevada to the State of Delaware. Royalty revenue amounted to $98,000 for 2005 compared to
$90,000 in 2004. The net loss for 2005 was $69,000 compared to $38,000 in 2004. As of December
31, 2005, the Company&#146;s accumulated deficit was approximately $13,441,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s business is subject to significant risks, including the risks inherent in its
research and development efforts, uncertainties associated with obtaining and enforcing patents,
the lengthy and expensive regulatory approval process and competition from other biotechnology
companies. See &#147;Risk Factors.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Results of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Years ended December&nbsp;31, 2005 and 2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since January&nbsp;2005, the Company&#146;s major activities consisted of seeking additional licensing
opportunities for its intellectual properties and joint ventures to market its nutraceutical
products and initiating the research necessary to take its drug candidates forward into clinical
trials. To supplement its existing resources, the Company will require additional capital from the
sale of debt or equity. There can be no assurance that such capital will be available on favorable
terms, or at all, and if additional funds are raised by issuing equity securities, dilution to
existing stockholders is likely to result.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development expenses decreased $7,000 to a total of $8,000 compared to $15,000 in
2004. Expenses were limited to the licensing fee for the Boron compound.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses increased $42,000 to $137,000 in 2005 compared to $95,000
in 2004. This increase was due, in part, to auditing and financial expenses incurred in the filing
of Form 8-K to change the Company&#146;s domicile from the State of Nevada to the State of Delaware.
Other expenses were limited to patent fees and general office expenses such as rent, accounting
services, telephone expenses, utility expenses and postage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss increased $31,000 to $69,000 in 2005 compared to $38,000 in 2004. Basic and diluted
loss per share increased to $0.07 in 2005 compared to $0.04 in 2004. The higher net loss per
common share is principally due to the increase in the net loss.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><U>Liquidity and Capital Resources</U></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has financed its operations since inception through the sale of debt and equity
securities. As of December&nbsp;31, 2005, the Company had a working capital deficit of $310,000
compared to a working capital deficit of $47,000 at December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December&nbsp;31, 2005, the Company used $7,000 of cash in operating activities,
compared to $15,000 during 2004. Current employees are not receiving salaries in order to conserve
cash for critical operating activities. Salaries will be resumed when the Company can sufficiently
fund payroll.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2004, management discovered it currently owns equity securities in which it previously
held an old insurance policy in 1997 and 1998 that was then converted into equity securities on
April&nbsp;21, 1999. The Company is considering liquidating these securities which have a current value
of approximately $22,000 to further reduce outstanding obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While the Company may have revenues during 2006, it is not anticipated that they will be
significant and therefore without additional financing it is uncertain whether the Company can
continue as a going concern. The Company is actively pursuing collaborations with potential
partners in both the pharmaceutical and nutraceutical divisions with the objective of raising
financing to enable the Company to continue operations. The Company does not currently have any
commitments for financing.
</DIV>

<P align="center" style="font-size: 10pt">21
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;10, 2003, the Company obtained a commitment from a private investor to loan the
Company $200,000 in
the form of a three year convertible note at an interest rate of 10% per annum. The interest is to
be paid semiannually with the principal due and payable at the end of the third year. The note is
collateralized by substantially all of the assets of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management anticipates, but cannot assure, the minimum guaranteed royalty payments of $97,500
based on the FutureCeuticals license agreement, will provide the Company with the funds necessary
to continue operations through 2006. The Company does not have any lease or other commitments.
The Company does not have an existing bank line of credit or other form of revolving or renewable
credit facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><U>Plan of Operation</U></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company will continue to work with FutureCeuticals to develop new studies designed to help
increase the market share of its licensed product FruiteX-B. In addition to working with our
existing strategic partners, the Company will continue to focus its efforts and resources on
developing new strategic relationships concerning the development, manufacturing and marketing of
additional antioxidant pharmaceutical and nutraceutical compounds.
</DIV>
<!-- link2 "Item&nbsp;7. FINANCIAL STATEMENTS" -->
<DIV align="left"><A NAME="007"></A></DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B><U>Item&nbsp;7.</U></B></TD>
    <TD>&nbsp;</TD>
    <TD><B><U>FINANCIAL STATEMENTS</U></B></TD>
</TR>
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The financial statements of the Company and other information required by this item are set
forth herein in a separate section beginning with the Index to the Financial Statements on page
F-1.
</DIV>


<P align="center" style="font-size: 10pt">22
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<!-- link2 "Item&nbsp;7a. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK." -->
<DIV align="left"><A NAME="008"></A></DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B><U>Item&nbsp;7a.</U></B></TD>
    <TD>&nbsp;</TD>
    <TD><B><U>QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.</U></B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Not applicable

</DIV>
<!-- link2 "Item&nbsp;8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE." -->
<DIV align="left"><A NAME="009"></A></DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B><u>Item&nbsp;8.</u></B></TD>
    <TD>&nbsp;</TD>
    <TD><B><u>CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.</u></B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">None

</DIV>
<!-- link2 " Item&nbsp;8a. CONTROLS AND PROCEDURES." -->
<DIV align="left"><A NAME="010"></A></DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B><u>Item&nbsp;8a.</u></B></TD>
    <TD>&nbsp;</TD>
    <TD><B><u>CONTROLS AND PROCEDURES.</u></B></TD>
</TR>
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company carried out an evaluation, under the supervision and with the participation of the
Company&#146;s management, including the Company&#146;s Chief Executive Officer and President, of the
effectiveness of the design and operation of the Company&#146;s disclosure controls and procedures as of
December&nbsp;31, 2004 pursuant to Rule&nbsp;13a-14 of the Securities Exchange Act of 1934. Based upon that
evaluation, the principal executive officer concluded that the Company&#146;s disclosure controls and
procedures are effective in timely alerting them to material information relating to the Company,
required to be included in the Company&#146;s periodic SEC filings. Such evaluation did not identify any
change in the Company&#146;s internal control over financial reporting that occurred during the year
ended December&nbsp;31, 2005 that has materially affected, or is reasonably likely to materially affect,
the Company&#146;s internal control over financial reporting.
</DIV>

<!-- link1 "PART III" -->
<DIV align="left"><A NAME="011"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART III</B>
</DIV>

<!-- link2 " Item&nbsp;9. DIRECTORS AND EXECUTIVE OFFICERS, OF THE REGISTRANT." -->
<DIV align="left"><A NAME="012"></A></DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B><u>Item&nbsp;9.</u></B></TD>
    <TD>&nbsp;</TD>
    <TD><B><u>DIRECTORS AND EXECUTIVE OFFICERS, OF THE REGISTRANT.</u></B></TD>
</TR>
</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Sheldon S. Hendler, Ph.D., M.D (68)</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Director since 1991</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Chairman of the Board and Director of Scientific Affairs since 2000. Previous Chief Executive
Officer of the Company. Dr.&nbsp;Hendler was a founder of the Company and has served as Chairman of the
Board of Directors since its inception in 1991. Dr.&nbsp;Hendler has written books on human aging and
has published widely in biochemistry, virology, immunology, nutrition and cancer. Dr.&nbsp;Hendler is
Clinical Professor of Medicine in the School of Medicine at the University of California, San Diego
and an Attending Physician at Scripps Mercy Hospital in San Diego. He received his Ph.D. in
Biochemistry from Columbia University and his M.D. from the University of California, San Diego.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>G. Dale Garlow (63)</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Director since 2000</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">President and Chief Executive Officer. Mr.&nbsp;Garlow has 35&nbsp;years of experience in the pharmaceutical
and biotech industry. He comes from Integra, LLC a company involved in the sales and marketing of
pharmaceuticals, over-the-counter products, nutritionals, and medical devices. He currently serves
on the Board of Directors of Nucleic Assays Corporation. Prior key executive positions include
President and CEO of FHC Corporation, President and CEO of Whiteworth/Towne Paulsen, and Regional
Director of Administration and Distribution of the Upjohn Company.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Richard G. McKee, Jr. (48)</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Director since 2000</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Managing General Partner of Dynamic Value Partners, Ltd., a Florida investment partnership
specializing in
</DIV>


<P align="center" style="font-size: 10pt">23
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">small-cap stocks. Previously he served as a director and portfolio manager at Fundamental
Management Corporation in Miami, Florida and as Vice President of First Equity Corporation of
Florida, a regional investment-banking firm.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Tom K. Larson, Jr. (69</B>)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Director since 2000</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">President and CEO of Accelerated Capital Funding, a start up company involved in raising capital
for housing for Native Americans, Handicapped and Elderly Individuals. Previously Vice President,
Finance and Administration and CFO of INAMED Corporation, a global surgical and medical device
company. Previous positions included Vice President, Finance and CFO of a privately held specialty
bed manufacturer, Vice President, Finance and CFO Revell Corporation, and held a number of key
executive financial and administrative positions at Xerox Corporation. In addition he was an
Equity Owner and Operation Officer of four separate corporations and is experienced in turnaround
situations.
</DIV>


<P align="center" style="font-size: 10pt">24
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Michael L. Eagle (57)</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Director since 2002</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Mr.&nbsp;Eagle recently retired as the Vice President of Manufacturing for Eli Lilly and Company. He
was with Eli Lilly for 18&nbsp;years beginning as the Vice President of Manufacturing for Advanced
Cardiovascular Systems, now a part of Guidant Corporation. Mr.&nbsp;Eagle currently sits on the Boards
of several medical device and equipment manufacturers and is a founding member of Barnard Life
Sciences, LLC, a firm focusing on life science businesses. Prior key executive positions include;
Senior Vice President of Operations for Advanced Cardiovascular Systems, President and CEO of IVAC
Corporation (another Eli Lilly subsidiary) and Vice President of the Medical Device and Diagnostics
Division of Eli Lilly with responsibility for all vascular, surgical and medical device businesses
as well as Japan.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES AND EXCHANGE ACT OF 1934</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the securities laws of the United States, the Company&#146;s directors, executive officers
and any persons holding more than 10% of the Company&#146;s Common Stock are required to report their
initial ownership of the Company&#146;s Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these reports have been established and
the Company is required to identify in this Proxy Statement those persons who failed to timely file
these reports. All of the filing requirements were satisfied in 2005. In making this disclosure,
the Company has relied solely on written representations of its directors and executive officers
and copies of the reports that have been filed with the Commission.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CODE OF ETHICS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has not adopted a code of ethics for its management because of the costs involved
and the Company&#146;s lack of resources and limited operations.
</DIV>
<!-- link2 "Item&nbsp;10. EXECUTIVE COMPENSATION." -->
<DIV align="left"><A NAME="013"></A></DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B><U>Item&nbsp;10.</U></B></TD>
    <TD>&nbsp;</TD>
    <TD><B><U>EXECUTIVE COMPENSATION.</U></B></TD>
</TR>
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The following table sets forth the compensation for services to the Company in all capacities
for the fiscal year ended December&nbsp;31, 2005 by those persons who were, respectively, at December
31, 2005 the Company&#146;s Chairman and the Company&#146;s Chief Executive Officer (the &#147;Named Officers&#148;).</I>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Summary Compensation Table</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="12%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Long-Term</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000"><B>Annual Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Comp.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Awards</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Restricted</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Annual</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>LTIP</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>All Other</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name and Principal Position</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Salary ($)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Bonus ($)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Comp.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Awards</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Options (#)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Payouts</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Comp.</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sheldon S. Hendler</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
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    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
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    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
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    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
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</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chairman</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
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    <TD align="right">&#151;</TD>
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    <TD align="right">&#151;</TD>
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    <TD align="right">&#151;</TD>
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    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">G. Dale Garlow</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chief Executive Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">25
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<!-- link2 "Item&nbsp;11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS." -->
<DIV align="left"><A NAME="014"></A></DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B><u>Item&nbsp;11.</u></B></TD>
    <TD>&nbsp;</TD>
    <TD><B><u>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.</u></B></TD>
</TR>
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table sets forth information as of May&nbsp;31, 2006 as to shares of Common Stock
beneficially owned by (i)&nbsp;each of the Company&#146;s directors and nominees for director, (ii)&nbsp;the
Company&#146;s executive officers named in the Summary Compensation Table set forth herein, (iii)&nbsp;the
Company&#146;s directors and executive officers as a group and (iv)&nbsp;each person known by the Company to
be the beneficial owner of more than 5% of the outstanding shares of the Common Stock of the
Company. Except as otherwise indicated and subject to applicable community property laws, each
person has sole investment and voting power with respect to the shares shown. Ownership
information is based upon information furnished to or filed with the Securities and Exchange
Commission, by the respective individuals or entities, as the case may be. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange Commission and generally
includes voting and investment power with respect to securities. Shares of Common Stock subject to
options or warrants currently exercisable or exercisable within 60&nbsp;days are deemed to be
beneficially owned by the person holding such options or warrant for computing the percentage
ownership of such person, but are not treated as outstanding for computing the percentage of any
other person.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name and address of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Beneficial owner</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>of class</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Sheldon S. Hendler, Ph.D., M.D. (1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,904,003</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16.7</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2159 Avenida de la Playa</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">La Jolla, CA 92037</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">G. Dale Garlow (2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">775,833</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.8</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Richard G. McKee, Jr. (3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">376,734</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.3</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Tom K. Larson, Jr. (4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">105,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.9</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Michael L. Eagle (5)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">75,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.7</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Directors and Executive Officers as a Group (5)&nbsp;persons)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3,236,570</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">28.4</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">1.</TD>
    <TD>&nbsp;</TD>
    <TD>Includes options to purchase 355,000 shares of common stock.<BR></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">2.</TD>
    <TD>&nbsp;</TD>
    <TD>Includes options to purchase 625,000 shares of common stock.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">3.</TD>
    <TD>&nbsp;</TD>
    <TD>Includes options to purchase 100,000 shares of common stock, 10,000 shares beneficially owned
by Wendy J. McKee and voting rights of 75,973 shares controlled by Dynamic Value Partners,
Ltd.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">4.</TD>
    <TD>&nbsp;</TD>
    <TD>Includes options to purchase 75,000 shares of common stock.<BR></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">5.</TD>
    <TD>&nbsp;</TD>
    <TD>Includes options to purchase 75,000 shares of common stock</TD>
</TR>

</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There are no arrangements known to the Company that may result in a change of control.
</DIV>

<!-- link2 "Item&nbsp;12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS." -->
<DIV align="left"><A NAME="015"></A></DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B><U>Item&nbsp;12.</U></B></TD>
    <TD>&nbsp;</TD>
    <TD><B><U>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.</U></B></TD>
</TR>
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">None
</DIV>


<P align="center" style="font-size: 10pt">26
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<!-- link2 "Item&nbsp;13. EXHIBITS, LIST AND REPORTS ON FORM 8-K" -->
<DIV align="left"><A NAME="016"></A></DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B><U>Item&nbsp;13.</U></B></TD>
    <TD>&nbsp;</TD>
    <TD><B><U>EXHIBITS, LIST AND REPORTS ON FORM 8-K</U></B></TD>
</TR>
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">See exhibit list below. On October&nbsp;21, 2005, the Company filed a report on Form 8-K disclosing
the Company&#146;s October&nbsp;17, 2005, reincorporation in Delaware.
</DIV>

<!-- link2 "Item&nbsp;14. PRINCIPAL ACCOUNTANT FEES AND SERVICES." -->
<DIV align="left"><A NAME="017"></A></DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B><U>Item&nbsp;14.</U></B></TD>
    <TD>&nbsp;</TD>
    <TD><B><U>PRINCIPAL ACCOUNTANT FEES AND SERVICES.</U></B></TD>
</TR>
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The firm of Berenfeld, Spritzer, Shechter, and Sheer was designated by our Board of Directors
to audit the financial statements of our Company for the fiscal year ended December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Audit Committee pre-approves the engagement of Berenfeld, Spritzer, Shechter, and Sheer for all
professional services. The pre-approval process generally involves the full Audit Committee
evaluating and approving the particular engagement prior to the commencement of services.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Audit Fees</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The aggregate fees billed by Berenfeld, Spritzer, Shechter, and Sheer for professional services
rendered for the fiscal year ended 2005 and by J.H Cohn for the fiscal year ended 2004, including
fees associated with the annual audit, the reviews of the consolidated financial statements
included in our Forms 10-KSB, the reviews of the quarterly reports on Form 10-QSB, fees related to
filing with the Securities and Exchange Commission and consultations on accounting issues and the
application on new accounting pronouncements were approximately $20,000 and $21,000, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Tax Fees</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The aggregate fees billed by J.H Cohn LLP for tax compliance, tax advice and tax planning rendered
to the Company for the fiscal years ended December&nbsp;31, 2005 and 2004 were approximately $1,700 for
both years.
</DIV>



<P align="center" style="font-size: 10pt">27
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Vyrex Corporation<BR>
Annual Report on Form&nbsp;10-KSB<BR>
Year Ended December&nbsp;31, 2005<BR>
Exhibit&nbsp;Index</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Exhibit Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><B>2.1</B>&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Agreement and Plan of Merger
dated as of October&nbsp;17, 2005 by and between Vyrex Corporation and
Vyrex (Delaware) Corporation (incorporated by reference to the Form&nbsp;8-K filed with the SEC on<BR>
October&nbsp;17, 2005)</B></DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><B>3(i)</B>&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Certificate of Incorporation
of Vyrex (Delaware) Corporation as filed with the Delaware Secretary of
State on September&nbsp;8, 2005 (incorporated by reference to the Form&nbsp;8-K filed with the SEC on<BR>
October&nbsp;17, 2005)</B></DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><B>3(ii)</B>&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Bylaws of Vyrex (Delaware)
Corporation dated as of September&nbsp;9, 2005 (incorporated by reference to
the Form&nbsp;8-K filed with the SEC on October&nbsp;17, 2005)</B></DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><B>16</B>&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Change in Registrant&#146;s
certifying Accountants: A letter from J.H. Cohn LLP (incorporated by reference
to the Form&nbsp;8-K filed with the SEC on February&nbsp;28, 2006)</B></DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><B>31.1</B>&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Certification of the chief Executive Officer under Section&nbsp;302 of the Sarbanes-Oxley Act of
2002</B></DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><B>32.1</B>&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Certification of the chief Executive Officer under Section&nbsp;906 of the Sarbanes-Oxley Act of
2002</B></DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">28
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- link1 "SIGNATURES" -->
<DIV align="left"><A NAME="018"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with Section&nbsp;13 or 15(d) of the Exchange Act, the Registrant has duly
caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">VYREX CORPORATION<BR>
Registrant<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ G. Dale Garlow
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">G. Dale Garlow&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Executive Officer,&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with the Exchange Act, this Report has been <I>signed </I>by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Signature</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Title</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Date</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" nowrap valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1em">
    <TD align="left" nowrap valign="top"><I>/S/Sheldon S. Hendler</I>
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">May 31, 2006</TD>
</TR>
<TR valign="bottom" style="padding-top: 1em">
    <TD align="center" nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1em">
    <TD align="left" nowrap valign="top"><I>/S/G. Dale Garlow</I>
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">May 31, 2006</TD>
</TR>
<TR valign="bottom" style="padding-top: 1em">
    <TD align="center" nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1em">
    <TD align="left" nowrap valign="top"><I>/S/Richard G. McKee, Jr.</I>
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">May 31, 2006</TD>
</TR>
<TR valign="bottom" style="padding-top: 1em">
    <TD align="center" nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1em">
    <TD align="left" nowrap valign="top"><I>/S/Tom K. Larson, Jr.</I>
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">May 31, 2006</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">29
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Vyrex Corporation<BR>
Annual Report on Form&nbsp;10-KSB<BR>
Year Ended December&nbsp;31, 2005</B>
</DIV>

<!-- link1 " Exhibit&nbsp;Index" -->
<DIV align="left"><A NAME="019"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Exhibit&nbsp;Index</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Exhibit Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><B>2.1</B>&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Agreement and Plan of Merger
dated as of October&nbsp;17, 2005 by and between Vyrex Corporation and
Vyrex (Delaware) Corporation (incorporated by reference to the Form&nbsp;8-K filed with the SEC on<BR>
October&nbsp;17, 2005)</B></DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><B>3(i)</B>&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Certificate of Incorporation
of Vyrex (Delaware) Corporation as filed with the Delaware Secretary of
State on September&nbsp;8, 2005 (incorporated by reference to the Form&nbsp;8-K filed with the SEC on<BR>
October&nbsp;17, 2005)</B></DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><B>3(ii)</B>&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Bylaws of Vyrex (Delaware)
Corporation dated as of September&nbsp;9, 2005 (incorporated by reference to
the Form&nbsp;8-K filed with the SEC on October&nbsp;17, 2005)</B></DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><B>16</B>&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Change in Registrant&#146;s
certifying Accountants: A letter from J.H. Cohn LLP (incorporated by reference
to the Form&nbsp;8-K filed with the SEC on February&nbsp;28, 2006)</B></DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><B>31.1</B>&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Certification of the chief Executive Officer under Section&nbsp;302 of the Sarbanes-Oxley Act of
2002</B></DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><B>32.1</B>&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Certification of the chief Executive Officer under Section&nbsp;906 of the Sarbanes-Oxley Act of
2002</B></DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">30
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Vyrex Corporation<BR>
(a development stage enterprise)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Index to Financial Statements
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reports of Berenfeld, Spritzer, Shechter &#038; Sheer,
CPA&#146;s, and J.H. Cohn LLP Independent Registered
Public Accounting Firms </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">F-2-3</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance Sheets </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">F-4</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statements of Operations </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">F-5</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statements of Stockholders&#146; Equity (Deficiency) </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">F-5-8</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statements of Cash Flows </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">F-9</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes to Financial Statements </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">F-10-16</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">F-1
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the Audit Committee, Board of Directors<BR>
and Stockholders<BR>
Vyrex Corporation

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have audited the accompanying balance sheets of Vyrex Corporation (a development stage
enterprise) as of December&nbsp;31, 2005, and the related statements of operations, stockholders&#146; equity
(deficiency)&nbsp;and cash flows for the year then ended, and for the period from January&nbsp;2, 1991 (date
of inception) through December&nbsp;31, 2005. These financial statements are the responsibility of the
Company&#146;s management. Our responsibility is to express an opinion on these financial statements
based on our audits. The financial statements for the year ended December&nbsp;31, 2004, and the
statements of operations, stockholders&#146; equity (deficiency)&nbsp;and cash flows for the period from
January&nbsp;2, 1991 (inception)&nbsp;through December&nbsp;31, 2004, were audited by other auditors whose reports
dated February&nbsp;8, 2005, March&nbsp;15, 1999 (except as to Note 10 to the 1998 financial statements for
which the date was March&nbsp;29, 1999) and February&nbsp;12, 1998, expressed unqualified opinions and
included explanatory paragraphs discussing substantial doubt regarding Vyrex Corporation&#146;s ability
to continue as a going concern. Total revenues and net losses for the period from January&nbsp;2, 1991
(inception)&nbsp;through December&nbsp;31, 2004 were $755,699 and $13,371,388, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We conducted our audits in accordance with standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit and the reports of other auditors provide a reasonable
basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, based on our audits and the reports of other auditors, the financial statements
referred to above present fairly, in all material respects, the financial position of Vyrex
Corporation (a development stage enterprise) at December&nbsp;31, 2005, and its results of operations
and cash flows for the year then ended and for the period from January&nbsp;2, 1991 (date of inception)
through December&nbsp;31, 2005, in conformity with accounting principles generally accepted in the
United States of America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying financial statements have been prepared assuming that the Company will continue as
a going concern. As more fully described in Note 1, the Company has incurred recurring operating
losses, has a working capital deficiency and a net capital deficiency. These conditions raise
substantial doubt about the Company&#146;s ability to continue as a going concern. Management&#146;s plans in
regard to these matters are also described in Note 1. The financial statements do not include any
adjustments that may result from the outcome of this uncertainty.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">/s/ Berenfeld, Spritzer, Shechter &#038; Sheer, CPA&#146;s
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Coral
Gable, Florida<BR>
May&nbsp;24, 2006

</DIV>

<P align="center" style="font-size: 10pt">F- 2
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the Board of Directors and Stockholders<BR>
Vyrex Corporation

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have audited the accompanying balance sheet of Vyrex Corporation (a development stage
enterprise) as of December&nbsp;31, 2004, and the related statements of operations, stockholders&#146;
deficiency and cash flows for the year then ended, and for the period from January&nbsp;2, 1991 (date of
inception) through December&nbsp;31, 2004. These financial statements are the responsibility of the
Company&#146;s management. Our responsibility is to express an opinion on these financial statements
based on our audit. The financial statements for the years ended December&nbsp;31, 1998, 1997 and 1996
were audited by other auditors whose reports dated March&nbsp;15, 1999 (except as to Note 10 to the 1998
financial statements for which the date was March&nbsp;29, 1999) and February&nbsp;12, 1998, expressed
unqualified opinions and included explanatory paragraphs discussing substantial doubt regarding
Vyrex Corporation&#146;s ability to continue as a going concern. Total revenues and net losses for the
three years ended December&nbsp;31, 1998, 1997 and 1996 were $1,600 and $8,504,866, respectively. Our
opinion on the statements of operations, stockholders&#146; deficiency and cash flows for the period
from January&nbsp;2, 1991 (inception)&nbsp;through December&nbsp;31, 2004, insofar as it relates to amounts for
the years ended December&nbsp;31, 1998, 1997 and 1996, is based solely on the reports of other auditors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We conducted our audit in accordance with standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit and the reports of other auditors provide a reasonable
basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, based on our audit and the reports of other auditors, the financial statements
referred to above present fairly, in all material respects, the financial position of Vyrex
Corporation (a development stage enterprise) at December&nbsp;31, 2004, and its results of operations
and cash flows for the year then ended and for the period from January&nbsp;2, 1991 (date of inception)
through December&nbsp;31, 2004, in conformity with accounting principles generally accepted in the
United States of America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying financial statements have been prepared assuming that the Company will continue as
a going concern. As more fully described in Note 1, the Company has incurred recurring operating
losses, has a working capital deficiency and a net capital deficiency. These conditions raise
substantial doubt about the Company&#146;s ability to continue as a going concern. Management&#146;s plans in
regard to these matters are also described in Note 1. The financial statements do not include any
adjustments that may result from the outcome of this uncertainty.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">/s/ J.H. Cohn LLP
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">San Diego, California<BR>
February&nbsp;8, 2005

</DIV>

<P align="center" style="font-size: 10pt">F- 3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Vyrex Corporation<BR>
(a development stage enterprise)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Balance Sheets
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>December 31</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,174</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investment in available-for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,665</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">44,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">42,339</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Liabilities and stockholders&#146; deficiency</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">89,735</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36,958</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued liabilities and accrued vacation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,812</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued payroll</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,637</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current portion of notes payable, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">355,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,907</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes payable, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">355,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">286,907</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commitments and contingencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; deficiency:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Preferred stock, $.0001 par value; 50,000,000
shares authorized; none issued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock, $.0001 par value; 200,000,000 shares
authorized; 1,019,144 issued and outstanding (as
adjusted for a twelve for one
reverse split)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,114,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,114,487</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,231</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deficit accumulated during the development stage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,440,508</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,371,388</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total stockholders&#146; deficiency</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(310,173</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(244,568</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total liabilities and stockholders&#146; deficiency</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">44,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">42,339</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>The accompanying notes are an integral part of these financial statements.</I>
</DIV>



<P align="center" style="font-size: 10pt">F- 4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Vyrex Corporation<BR>
(a development stage enterprise)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Statements of Operations
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Years ended December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Cumulative from</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Inception</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Licensing and royalty revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">97,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">90,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">853,199</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,595</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,478,753</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Marketing and selling</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">438,664</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,328,670</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss on disposal of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,664</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,259,751</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(47,257</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,138</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,406,552</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income (expense):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">476,044</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,434</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22,181</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22,322</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(164,534</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Charge from issuance of stock options
for bridge financing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,349,900</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total other expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,863</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,662</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,033,956</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(69,120</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(37,800</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(13,440,508</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss per share &#151; basic and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.07</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.04</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average common shares outstanding
(as adjusted for a twelve for one hundred
reverse split) &#151; basic and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,019,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,019,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>The accompanying notes are an integral part of these financial statements.</I>
</DIV>


<P align="center" style="font-size: 10pt">F- 5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Vyrex Corporation<BR>
(a development stage enterprise)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Statements of Stockholders&#146; Equity (Deficiency)
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Deficit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>during the</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>stockholders&#146;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Common stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>development</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>equity</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>stage</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(deficiency)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance (at $.02 per share) for acquisition of technology retroactively
reduced for 18,000 shares returned and retired on October&nbsp;1, 1995</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">402,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance (at $.02 per share) for cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance (at $8.33 per share) for cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">799,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">800,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance as compensation (at $8.33 per share)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance (at $16.67 per share) upon conversion of note payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance (at $25.00 per share) for cash, net of issuance costs of $4,086</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,914</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,085,932</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,085,932</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 1993</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">577,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,135,056</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,085,932</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,182</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance (at $25.00 per share) for cash, net of issuance costs of $21,000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">275,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">276,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance (at $25.00 per share) in lieu of finder&#146;s fee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance (at $25.00 per share) in lieu of finder&#146;s fee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance (at $25.00 per share) for cash, net of issuance costs of $41,844</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,126</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(467,683</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(467,683</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 1994</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">594,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,480,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,553,615</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(73,375</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance (at $25.00 per share) for cash, net of issuance costs of $46,976</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">402,842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">402,844</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance (at $25.00 per share) in settlement of account payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,123</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance (at par value) as compensation for services related to prior
issuances of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance (at $25.00 per share) as compensation for services related to
offering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,002</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance (at $25.00 per share) of options for 54,000 shares as
compensation for arranging bridge financing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,349,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,349,900</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,854,584</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,854,584</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 1995</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">624,456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,291,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,408,199</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(117,090</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from initial public offering (at $54.17 per unit), net of
issuance costs of $1,135,453</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,735,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,735,677</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Sale of option to purchase 36,000 shares (at $25.00 per share)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercise of stock options (at $25.00 per share) for cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">899,996</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">900,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Conversion of notes payable and related accrued interest (at $25.00 per
share)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">258,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">258,045</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercise of stock options (at $.0019 per share) for cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of units as compensation for legal services (at $37.92 per share)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,529</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,820,614</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,820,614</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 1996</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">854,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,345,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,228,813</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,116,647</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>(Continued)</I>
</DIV>



<P align="center" style="font-size: 10pt">F- 6
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Vyrex Corporation<BR>
(a development stage enterprise)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Statements of Stockholders&#146; Equity (Deficiency)
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Deficit accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>during the</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>stockholders&#146;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Common stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>development</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>equity</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>stage</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(deficiency)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 1996</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">854,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,345,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5,228,813</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,116,647</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercise of warrants, 24 shares at $66.67 per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Warrants issued in conjunction with debenture offering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,220</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,295,840</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,295,840</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 1997</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">854,569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,409,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,524,653</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,884,627</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of stock as partial consideration for placement of debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of stock on conversion of debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">807,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">807,641</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of shares upon cashless exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">396,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">396,580</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of 45,000 stock options for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,388,412</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,388,412</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 1998</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">890,815</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,750,412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,913,065</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(162,564</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance (at $2.83 per share) for cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,599</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of 5,640 stock options for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,580</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of 30,000 warrants for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(788,548</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(788,548</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 1999</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">905,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,828,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,701,613</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(873,432</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Forgiveness of accrued compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">422,559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">422,559</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance (at $7.50 per share) for cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">269,996</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercise of stock options (at $.83 per share) for cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercise of warrants (at $.83 per share) for cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance (at $8.33 per share) for cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Reduction of exercise price for options and warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">148,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">148,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(335,487</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(335,487</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,001,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,853,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,037,100</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(183,360</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of 6,000 stock options for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of 24,000 warrants for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(202,185</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(202,185</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at December&nbsp;31, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,001,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,922,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,239,285</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(317,045</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>(Continued)</I>
</DIV>


<P align="center" style="font-size: 10pt">F-7
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Vyrex Corporation<BR>
(a development stage enterprise)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Statements of Stockholders&#146; Equity (Deficiency)
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Deficit accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>during the</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>stockholders&#146;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Common stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>other comprehensive</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>development</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>equity</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>income</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>stage</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(deficiency)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,001,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,922,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(13,239,285</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(317,045</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Modification of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Issuance of stock upon exercise of warrants at $.83 per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Forgiveness of accrued compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,978</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Issuance of 2,400 warrants for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Issuance of 600 warrants for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,763</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,763</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,019,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,082,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,243,048</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(160,530</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Issuance of 12,000 warrants in connection with debt issuance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90,540</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90,540</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,019,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,088,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,333,588</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(245,070</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Forgiveness of accrued compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,071</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(37,800</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(37,800</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Effect of change in fair value of available-for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,231</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Comprehensive loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25,569</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,019,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,114,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,371,388</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(244,568</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(69,120</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(69,120</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Effect of change in fair value of available-for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,515</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,515</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Comprehensive loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(65,605</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,019,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,114,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(13,440,508</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(310,173</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>The accompanying notes are an integral part of these financial statements..</I>
</DIV>



<P align="center" style="font-size: 10pt">F-8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Vyrex Corporation<BR>
(a development stage enterprise)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Statements of Cash Flows
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Cumulative</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Years ended December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>from</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Inception</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(69,120</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(37,800</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(13,440,508</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation, amortization and impairment charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">336,329</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accretion of debt discount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,506</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss on disposal of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,664</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of compensatory notes, stock, stock options
and warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,302,512</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,434</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4.434</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Changes in operating assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts receivable and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,771</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">653,756</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used in) operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,463</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,051,675</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Investing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,440,442</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sale of short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,467,931</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchases of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(209,595</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds on sale of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Patent, trademark and copyright costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(133,519</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets, including notes receivable from related
parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,202</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(309,827</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Financing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net proceeds from issuance of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,889,808</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of stock options and sale of options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">975,100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from short-term loan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">875,230</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">791,114</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repayment of notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,500</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(192,500</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances from potential investors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repayment of advances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used in) financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,500</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,363,752</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net increase (decrease)&nbsp;in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(924</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,963</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Supplemental cash flow information</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forgiveness of debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">26,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">589 608</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of notes payable and related accrued interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">258,045</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of stock as consideration for conversion of
debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">857,641</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of stock upon cashless exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">396,580</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warrants issued in connection with convertible
debentures and notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">68,220</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>See accompanying notes.</I>
</DIV>

<P align="center" style="font-size: 10pt">F-9
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>1. Basis of Presentation and the Company</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Basis of Presentation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America which contemplate continuation of Vyrex
Corporation (the &#147;Company&#148;) as a going concern and the realization of the Company&#146;s assets and the
satisfaction of its liabilities in the normal course of business. As of December&nbsp;31, 2005, the
Company has an accumulated deficit of $13,440,508 and stockholders&#146; deficiency of $310,173. Due to
the Company&#146;s recurring losses and stockholders&#146; deficiency, there can be no assurance that the
Company will be able to obtain additional operating capital, which may impact the Company&#146;s ability
to continue as a going concern. The accompanying financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the potential
inability of the Company to continue as a going concern.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company continues to seek collaborative or other arrangements with pharmaceutical and
nutraceutical companies, under which such companies would provide additional capital to the Company
in exchange for exclusive or non-exclusive licenses or other rights to certain of the technologies
and products the Company has developed. In addition, the Company is seeking merger opportunities
with companies with an interest in continuing the development of the Company&#146;s proprietary
technology and/or interested in the Company&#146;s public status. There can be no assurance that an
agreement will be reached in a timely manner, or at all, or that any agreement that may be reached
will successfully reduce the Company&#146;s short-term or long-term funding requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s major activities through December&nbsp;31, 2005 have been limited to out-sourcing research
and development related to its proposed products and raising funds for such activities. These
activities have not generated any significant revenues; accordingly, the Company has been in the
development stage since its inception. Successful completion of the Company&#146;s development program
and its transition, ultimately, to attaining profitable operations is dependent upon obtaining
additional financing adequate to fulfill its research and development activities, and achieving a
level of revenue adequate to support the Company&#146;s cost structure. There can be no assurance that
the Company will be successful in these areas. To supplement its existing resources, the Company
will require additional capital through the sale of debt or equity. There can be no assurance that
such capital will be available on favorable terms, or at all, and if additional funds are raised by
issuing equity securities, dilution to existing stockholders is likely to result.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The Company</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company was incorporated in Nevada on January&nbsp;2, 1991. The Company&#146;s primary focus is to seek
collaborative relationships to aid in the continued discovery and development of its proprietary
technology designed for the treatment of various disorders including AIDS, respiratory diseases,
cancer and aging. Management expects to continue to need outside collaborations to aid in the
development of its technology until such time, if ever, it has sufficient resources to conduct such
activities on its own.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A special meeting of the duly elected and qualified members of the Board of Directors of Vyrex
Corporation was held by telecommunication on Wednesday, August&nbsp;3, 2005. The Board discussed the
current status of the Company&#146;s business and its financial condition. The Board discussed the
desirability of reorganizing the Company as a Delaware corporation to make it a more attractive
merger or acquisition candidate. The Board discussed and considered the terms of such a
reorganization and recapitalization. The Board discussed the timing of a special meeting of
stockholders for the purpose of approving a reorganization and recapitalization of the Company.
After further discussion and upon motion made, seconded and approved,
</DIV>
<P align="center" style="font-size: 10pt">F-10
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the Company adopted resolutions that: Approved the reincorporation of the Company&#146;s domicile from
Nevada to Delaware; organized the Delaware Company with an authorized capitalization of 250,000,000
shares of capital stock, consisting of 200,000,000 shares of common stock, $0.0001 par value per
share, and 50,000 shares of preferred stock, $0.0001 par value per share; the merger agreement
provide that the Delaware Company shall issue 12/100 <SUP style="font-size: 85%; vertical-align: text-top">th </SUP> of a share of common
stock of the Delaware Company for each share of common stock of the Company outstanding as of the
date of the merger and that the Delaware Company be the surviving corporation of the merger with
the same board members as the Company; that a Special Meeting of Shareholders be held on September
21, 2005 or on such other date and at such time and location as shall be determined by the officer
of the Company; and that the close of business on September&nbsp;2, 2005 is designated as the record
date for determination of the stockholders entitled to notice of and to vote at the Special Meeting
of Stockholders. The date of the Special Meeting of Stockholders was changed to September&nbsp;23, 2005.
On September&nbsp;23, 2005, the stockholders voted in favor of changing the Company&#146;s state of
incorporation from the State of Nevada to the State of Delaware; and authorized the
recapitalization of the share of capital stock. The Company was reincorporated in the State of
Delaware on October&nbsp;17, 2005. To date the changes in the Company&#146;s state of incorporation and
recapitalization have not resulted in a definitive merger or acquisition. All share and per share
data has been adjusted where appropriate to reflect this revenue stock split. In addition, the par
value of the Company&#146;s common stock was changed from $0.001 to $0.0001 per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company increased the authorized capital stock of the Registrant from 60,000,000 (50,000,000 of
common stock and 10,000,000 of preferred stock) to 250,000,000 (200,000,000 of common stock and
50,000,000 of preferred stock), and the par value of the Registrant&#146;s capital stock changed from
$0.001 per share to $0.0001 per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company believes but cannot assure that its current cash reserves and other resources will fund
the business through at least December&nbsp;31, 2005. The Company cannot assure that it will be able to
continue the business through December&nbsp;31, 2006 unless additional funds are received, or the terms
of the note for $200,000 due March&nbsp;2006 are renegotiated.
</DIV>



<P align="center" style="font-size: 10pt">F-11
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. Summary of Significant Accounting Policies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Cash and Cash Equivalents</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cash and cash equivalents consists of cash and highly-liquid U.S. Government securities with
maturities of three months or less when acquired.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stock Options and Warrants</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Statement of Financial Accounting Standards No.&nbsp;123<I>, </I>&#147;Accounting for Stock-Based Compensation&#148;
(&#147;SFAS 123&#148;), provides for use of a fair value based method of accounting for employee stock
compensation. However, SFAS 123 also allows an entity to continue to measure compensation cost for
stock options granted to employees using the intrinsic value method of accounting prescribed by
Accounting Principles Board Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to Employees&#148; (&#147;APB 25&#148;),
which only requires charges to compensation expense for the excess, if any, of the fair value of
the underlying stock at the date a stock option is granted (or at an appropriate subsequent
measurement date) over the amount the employee must pay to acquire the stock, if such amounts
differ materially from the historical amounts. The Company has elected to continue to account for
employee stock options using the intrinsic value method under APB 25. By making that election, it
is required by SFAS 123 and Statement of Financial Accounting Standards No.&nbsp;148, &#147;Accounting for
Stock-Based Compensation &#151; Transition and Disclosure&#148; to provide pro forma disclosures of net
income and earnings per share as if a fair value based method of accounting had been applied.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under APB 25, because the exercise price of the Company&#146;s employee stock options equals the market
price of the underlying stock on the date of the grant, no compensation expense is recognized. Pro
forma information regarding net loss and loss per share is required by SFAS 123, and has been
determined as if the Company had accounted for its employee stock options under the fair value
method of SFAS 123. The fair value for these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average assumptions: risk-free
interest rate of 4.00% dividend yield of 0%; the volatility factor of the expected market price of
the Company&#146;s common stock of 100% in 2003 and a weighted-average expected life of the options of
120&nbsp;months. No options were issued in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Options and warrants granted to consultants and other non-employees are valued based on the fair
value of the consideration received or the fair value of the equity instruments issued, whichever
is more reliably measurable, and expensed over the term of the consulting or other agreements.
</DIV>

<P align="center" style="font-size: 10pt">F-12
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For purposes of pro forma disclosures, the estimated fair value of the options is amortized to
expense over the options&#146; vesting period. The Company&#146;s pro forma information follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss &#151; as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(69,120</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(37,800</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock-based employee compensation expense
assuming a fair value based method had been
used for all awards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss &#151; pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(69,120</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(53,800</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic loss per share &#151; as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.07</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.04</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic loss per share &#151; pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.07</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Revenue Recognition</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Licensing and royalty revenue from royalty agreements is recognized in accordance with the terms of
the specific agreement, which generally includes a quarterly minimum payment by the licensee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Income taxes</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company accounts for income taxes pursuant to the asset and liability method which requires
deferred income tax assets and liabilities to be computed for temporary differences between the
financial statement and tax bases of assets and liabilities that will result in taxable or
deductible amounts in future periods based on enacted laws and rates applicable to the periods in
which the temporary differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected to be realized. The
income tax provision is the tax payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Net Loss Per Share</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Basic net loss per share is computed using the weighted-average number of common shares outstanding
during the periods presented. Diluted earnings per share have not been presented because the
assumed conversion of convertible notes payable and the exercise of the Company&#146;s outstanding
options and warrants would have been antidilutive. Options and warrants will have a dilutive effect
only when the average market price of the common stock during the period exceeds the exercise price
of the options or warrants. The number of shares potentially issuable at December&nbsp;31, 2005 and 2004
upon the conversion or exercise that were not included in the computation of net loss per share
totaled 323,471 and 349,471, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Use of Estimates</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly, actual results could differ from those
estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Investments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to Statement of Financial Accounting Standards No.&nbsp;115, ACCOUNTING FOR CERTAIN INVESTMENTS
IN
</DIV>

<P align="center" style="font-size: 10pt">F-13
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">DEBT AND EQUITY SECURITIES, the Company&#146;s investments in marketable equity securities have been
classified as available-for-sale securities and, accordingly, are valued at fair value at the end
of each period. Any material unrealized holding gains and losses arising from such valuation are
excluded from net income and reported, net of applicable income taxes, in other comprehensive
income. Accumulated net unrealized holding gains and losses are included at the end of each year in
accumulated other comprehensive income which is a separate component of stockholders&#146; equity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Recent Accounting Developments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In May&nbsp;2004, the FASB issued SFAS No.&nbsp;150 (SFAS 150), &#147;Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity,&#148; which establishes standards for how an issuer
classifies and measures in its statement of financial position certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some circumstances) because that
financial instrument embodies an obligation of the issuer. The Company does not expect SFAS 150 to
have a material impact on the Company&#146;s consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In November&nbsp;2004 the FASB issued SFAS No.&nbsp;151, Inventory Costs. SFAS No.151 amends the guidance
in Accounting Research Bulletin 43, Inventory Pricing, to clarify the accounting for abnormal
amounts of idle facility expenses, freight, handling costs and wasted material (spoilage)&nbsp;cost.
SFAS No.&nbsp;151 requires those items to be excluded from the cost of inventory and expensed when
incurred. It also requires the allocation of fixed production overheads to the costs of
conversion be based on the normal capacity of the production facilities. SFAS No.&nbsp;151 is
effective for fiscal years beginning after June&nbsp;15, 2005. We are still evaluating the impact of
adopting SFAS No 151, but we do not expect it to have a material impact on our results of
operations or financial position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2004, the FASB issued SFAS No.&nbsp;123R, &#147;Accounting for Stock-Based
Compensation&#148;. This statement is a revision to SFAS No.&nbsp;123, &#147;Accounting for Stock-Based
Compensation&#148; and supersedes APB Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to Employees.&#148; This
statement requires a public entity to measure the cost of employee services received in
exchange for an award of equity instruments based on the grant-date fair value of the award (with
limited exceptions). That cost will be recognized over the period during which an employee is
required to provide service, the requisite service period (usually the vesting period). The
grant-date fair value of employee share options and similar instruments will be estimated
using option-pricing models.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, a public entity is required to measure the cost of employee services received in
exchange for an award of liability instruments based on its current fair value. The fair value of
that award will be remeasured subsequently at each reporting date through the settlement date.
Changes in fair value during the requisite service period will be recognized as compensation
cost over that period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For public entities that file as small business issuers, this statement is effective as of the
beginning of the first interim or annual reporting period that begins after December&nbsp;15, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2004, the FASB issued SFAS No.&nbsp;153, &#147;Exchanges of Nonmonetary Assets &#151; an amendment of
APB Opinion No.&nbsp;29.&#148; SFAS No.&nbsp;153 addresses the measurement of exchanges of nonmonetary
assets. It eliminates the exception from fair value measurement for nonmonetary exchanges of
similar productive assets in paragraph 21(b) of APB Opinion No.&nbsp;29 &#147;Accounting for Nonmonetary
Transactions&#148; and replaces it with an exception for exchanges that do not have commercial
substance. A nonmonetary exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the exchange. As required by SFAS No.
153, the Company will adopt this new accounting standard effective July&nbsp;1, 2005. The
adoption of SFAS No.&nbsp;153 is not expected to have a material impact on the Company&#146;s financial
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In May&nbsp;2005, the Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No.&nbsp;154, &#147;Accounting Changes and Error Corrections&#148;, a replacement of APB Opinion
No.&nbsp;20 and FASB Statement No.&nbsp;3. This Statement provides guidance on accounting for
reporting of accounting changes and error corrections. This statement is effective for accounting
changes and corrections of errors made in fiscal years beginning after December&nbsp;15,
2005. The Company does not expect the statement to have a material effect on its financial
statements.
</DIV>

<P align="center" style="font-size: 10pt">F-14
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3. Warrants</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Activity with respect to warrants for the purchase of the Company&#146;s common stock is summarized as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Warrants</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Outstanding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Exercise Price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Price</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at January&nbsp;1, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD nowrap align="right">0.92 - $3.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.03</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD nowrap align="right">0.92 - $3.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD nowrap align="right">1.25 - $3.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.72</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.92</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The warrants outstanding at December&nbsp;31, 2005 will expire on September&nbsp;10, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4. License and Collaboration Agreements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company licensed a natural form of boron covered by US Patent No.: 5,962,049 and was issued US
Patent No.: 6,071,545 for novel Metallic Oligopeptide Complexes June&nbsp;6, 2000 covering several
mineral complexes for both nutritional and pharmaceutical applications. The patent covers a novel
chromium complex, chromium carnosinate, which the Company feels is superior to the other forms of
chromium supplements currently on the market. In August&nbsp;2000 the Company entered into an agreement
sublicensing the boron complex patent and licensing the chromium mineral complex covered by the
Metallic Oligopeptide Complexes Patent with FutureCeuticals, a division of Van Drunen Farms, to
develop and market these proprietary nutraceutical compounds. The agreement included an up front
license fee of $25,000 and an additional license fee of $75,000 upon attaining $75,000 in initial
sales of products developed and commercialized that are covered by the licensed technology. After
meeting certain development, approval and commercialization criteria the licensee shall pay the
Company the greater of an escalating minimum monthly royalty payment or a total gross royalty of
30% of gross revenue from the sale of licensed products. Of the 30% gross royalty, licensee shall
credit and allocate 5% to further research and development of the products and pay the remaining
25% to the Company. FutureCeuticals reached $75,000 in sales in December&nbsp;2002 allowing the
remaining license fee balance of $75,000 to be posted to accounts receivable in 2002. The cash
payment was received and deposited in January&nbsp;2003. FutureCeuticals formulated, tested,
manufactured and is currently selling boron and chromium complexes as raw materials to manufactures
and distributors of nutritional supplements. Boron is marketed under the trade name FruiteX-B&#153; and
Chromium under the trade name CarnoChrome&#153;. FutureCeuticals has conducted a number of studies
reflecting the primary activities and benefits of both products. In order to allocate additional
funds to conduct new scientific studies designed to prove the superiority of CarnoChrome&#153; and
FruiteX-B&#153; over competitive products, hire a proven product manager to specifically oversee the
marketing and sales of CarnoChrome&#153; and FruiteX-B&#153; and fund the development of new products based
on technology licensed from the Company the agreement between FutureCeuticals and the Company was
amended on February&nbsp;17, 2003. Under the terms of the amended agreement the Company will receive a
15% royalty on gross sales of licensed product in a calendar year less than $3,000,000 three
million dollars and 20% of gross sales equal to or in excess of $3,000,000 three million dollars.
There is a minimum guaranteed royalty payment of $90,000 in 2003, $150,000 in 2004 and $180,000 in
2005. Based on the terms of the agreement FuutureCeuticals has elected to cancel the license for
the chromium carnosinate technology effective March&nbsp;24, 2004. The agreement for the boron complex
technology remains in effect. The cancellation of the chromium portion of the license agreement
effects the minimum royalty payment. Based on the agreement the minimum payment for 2004 is $90,000
and 2005 is $112,500. In December of 2004 the agreement was amended to change the minimum payment
for 2005 from $112.500 to $97,500. In January of 2006 the Agreement was further amended. The
licensee will make a final minimum royalty payment of twenty two thousand five hundred dollars
($22,500.00) on April&nbsp;01, 2006. From April&nbsp;01, 2006 forward and throughout the life of the
Agreement the licensee shall pay Vyrex a flat quarterly royalty of five percent (5%) of the gross
sales of the boron licensed product. Additionally, on April&nbsp;01, 2006 and thereafter annually on
every subsequent April&nbsp;01,
</DIV>

<P align="center" style="font-size: 10pt">F-15
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">throughout the lifetime of the Agreement the licensee will pay Vyrex an additional seven thousand
five hundred dollars ($7,500.00). There can be no assurance that a significant market will develop
for the boron product or that any products will continue to produce revenue for the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5. Concentration of Credit Risk</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company maintains its cash and cash equivalent balances primarily in one financial institution.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Concentrations of credit risk with respect to accounts receivable are significant due to the
Company only having one customer, although the payment terms are generally short. On a periodic
basis, the Company evaluates its trade accounts receivable and establishes an allowance for
doubtful accounts, based on a history of past write-offs, which have been nil and collections.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>6. Income Taxes</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2005, the Company had net operating loss carryforwards available to reduce future
taxable income, if any, of approximately $16,080,000 and $7,080,000 for Federal and California
income tax purposes, respectively. The Federal net operating loss begins to expire in 2006. The
remaining California net operating losses have been suspended for two years and will begin to
expire in 2007. The difference between the Federal and California tax loss carryforwards is
primarily related to the expiration of California loss carryforwards. At December&nbsp;31, 2005, the
Company also had research and development credit carryforwards of approximately $486,000 and
$250,000 for Federal and state income tax reporting purposes, respectively. Pursuant to Internal
Revenue Code Sections&nbsp;382 and 383, use of the Company&#146;s net operating loss and credit carryforwards
may be limited if a cumulative change in ownership of more than 50% occurs within a three year
period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes (the loss and tax credit
carryforwards described above) give rise to the Company&#146;s deferred income taxes. The components of
the Company&#146;s deferred tax assets as of December&nbsp;31, 2005 and 2004 are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net operating loss carryforwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,093,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,086,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development credit carryforwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">648,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">648,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,838,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,854,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,838,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,854,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As the ultimate realization of the potential benefits of the Company&#146;s net operating loss
carryforwards is considered unlikely by management, the Company has offset the deferred tax assets
attributable to those potential benefits through valuation allowances in 2005 and 2004 and,
accordingly, the Company did not recognize any benefit from income taxes in the accompanying
statements of operations to offset its pre-tax losses. The valuation allowance decreased by $16,000
in 2005 and increased by $27,000 in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>7. Stock Option Plan</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s 1993 Stock Option Plan (the &#147;Plan&#148;) was adopted by the Board of Directors in February
1994. Pursuant to
</DIV>

<P align="center" style="font-size: 10pt">F-16
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the Plan, the Company may grant both incentive stock options and nonqualified stock options.
Incentive stock options may be granted only to employees, while consultants, employees, officers
and directors are eligible for the grant of nonqualified options. The total number of shares of
common stock of the Company reserved and available for grant under the Plan is 465,000 shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The maximum term of stock options granted under the Plan is ten years, but if the optionee at the
time of the grant has voting power over more than 10% of the Company&#146;s outstanding capital stock,
the maximum term is five years. The exercise price of incentive stock options granted under the
Plan must be at least equal to the fair market value of such shares on the date of grant. The
exercise price of nonqualified stock options granted under the Plan must be at least 85%, or 110%
with respect to holders of 10% of the voting power of the Company&#146;s outstanding capital stock, of
the fair market value of the stock subject to the option on the date of the grant. At December&nbsp;31,
2005, a total of 311,471 stock options are exercisable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Activity with respect to the stock option plan is summarized as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted-</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Option</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Average</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Price</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Price</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at January&nbsp;1, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">356,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11.86</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,840</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4.67</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">334,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12.04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">311,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11.04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shares available for grant
at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">153,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Following is a further breakdown of the options outstanding as of December&nbsp;31, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted-Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted-Average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Range of Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Remaining Life in</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted-Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise Price of</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Prices</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Outstanding Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Years</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Exercise Price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Options Exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Options Exercisable</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$2.08 &#151; $4.67
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">244,200</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.41</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">2.93</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">244,200</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">2.93</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$25.00
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">24,840</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.89</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">25.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">24,840</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">25.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$47.92 &#151; $62.50
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">42,431</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">194</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">49.49</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">42431</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">49.49</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">311,471</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.96</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11.04</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">311,471</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11.04</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" nowrap valign="top" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>8. Notes Payable and Related Conversion and Stock Options</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2005, the Company has an outstanding note payable with a principal balance of
$200,000 and bears interest at an annual rate of 10%. The note is collateralized by substantially
all of the assets of the Company and is due on March&nbsp;10, 2006. The investor has the option to
convert the principal amount into Vyrex common shares at a price of $2.08 during the first year,
$4.17 the second year and $6.25 the third year. Further in connection with the Promissory Note, the
investor was issued warrants, exercisable within three years from the date of issuance, entitling
the investor to purchase 12,000 Vyrex
</DIV>

<P align="center" style="font-size: 10pt">F-17
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">common shares at an exercise price of $0.917 per share. The Company determined the fair market
value of these warrants were $0.50 per warrant utilizing the Black-Scholes option pricing model.
The $6,000 was treated as a discount to the note and is being accreted over the term of the loan.
As further consideration for the loan the Company agreed to amend the strike price terms of the
right to convert the principal amount of the Promissory Note into Vyrex common shares from $4.17 to
$2.08 the second year and from $6.25 to $4.17 the third year. In March of 2006 the private
investor agreed to extend the note an additional six months to September&nbsp;2006. The right to convert
the principal amount into Vyrex Common Shares at a strike price of $4.17 in the third year was
extended to September of 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On August&nbsp;24, 2004, the Company obtained an additional note from the same private investor in the
amount of $7,500. The principal amount plus 10% interest was paid in full on March&nbsp;29, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>9. Contingencies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Due to cash constraints, the Company has been unable to remain current in the payment of insurance
premiums. As a result, no insurance coverage is in effect for the Company at December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>10. Available-for-sale securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2004, management discovered it had an investment in equity securities derived from its
ownership of an old insurance policy that was converted into equity securities on April&nbsp;21, 1999.
The Company has determined the affect of the omission to be immaterial to the financial statements
through December&nbsp;31, 2003. The impact of the adjustment to the net loss of $788,548 for the year
ended December&nbsp;31, 1999 would have been a reduction of the net loss by approximately $4,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The unrealized holding gains of approximately $16,000 as of December&nbsp;31, 2005 have been reflected
as a separate component of stockholders&#146; deficiency. Total comprehensive loss for the year ended
December&nbsp;31, 2005 amounted to approximately $66,000.
</DIV>

<P align="center" style="font-size: 10pt">F-18
</DIV>

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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>a21081exv31w1.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: Helvetica,Arial,sans-serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT 31.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION PURSUANT TO<BR>
18 USC, SECTION 1350, AS ADOPTED PURSUANT TO<BR>
SECTIONS 302 AND 906 OF THE SARBANES-OXLEY ACT OF 2002</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the Annual Report of Vyrex Corporation (the &#147;Company&#148;) on Form 10-KSB for
the period ended December&nbsp;31, 2005, as filed with the Securities and Exchange Commission on the
date hereof (the &#147;Report&#148;), I, G. Dale Garlow, President and Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Sections&nbsp;302 and 906
of the Sarbanes-Oxley Act of 2002, that:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed the report;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To the best of my knowledge, the Report does not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements made, in light
of the circumstances under which such statements were made, not misleading:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(3)&nbsp;To the best of my knowledge, the financial statements, and other financial information included
in the Report, fairly present in all material respects the financial condition and results of
operations of the Company as of, and for, the periods presented in the Report;
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;am responsible for establishing internal controls;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(b)&nbsp;have designed such internal controls to ensure that material information relating to the
Company is made known to me, particularly during the period of January&nbsp;1, 2005 through December&nbsp;31,
2005;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(c)&nbsp;have evaluated the effectiveness of the Company&#146;s internal controls as of the end of the period
covered by this report based on such evaluation; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(d)&nbsp;have presented in the Report my conclusions about the effectiveness of my internal controls
based on my evaluation of that date;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(5)&nbsp;I have disclosed to the Company&#146;s auditors and the board of directors:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;all significant deficiencies in the design or operation of internal controls which could
adversely affect the Company&#146;s ability to record, process, summarize, and report financial data and
have identified for the Company&#146;s auditors any material weaknesses in internal controls; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(b)&nbsp;any fraud, whether or not material, that involves management or other employees who have a
significant role in the Company&#146;s internal controls;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(6)&nbsp;I have indicated in the Report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls subsequent to the
date of my evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(7)&nbsp;The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Date:
June&nbsp;6, 2006

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ G. Dale Garlow
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ G. Dale Garlow<BR></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">G. Dale Garlow, President
</DIV></TD>
    <TD>&nbsp;</TD>

<TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G. Dale Garlow, Chief Executive Officer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>3
<FILENAME>a21081exv32w1.htm
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT 32.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the Annual Report of Vyrex Corporation (the &#147;Company&#148;) on Form 10-KSB for
the period ended December&nbsp;31, 2005 as filed with the Securities and Exchange Commission on the date
hereof (the &#147;Report&#148;), I, G. Dale Garlow, Chief Executive Officer of the Company, certify, pursuant
to 18 U.S.C. &#167;1350, as adopted pursuant to &#167;906 of the Sarbanes-Oxley Act of 2002, that:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ <I>G. Dale Garlow</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">G. Dale Garlow,<BR>
Chief Executive Officer<BR>
June&nbsp;6, 2006

</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>


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