LIQUIDITY

The Company had net income of $298,105 and negative cash flows from operating activities of $166,388 for the nine month period ended September 30, 2011. Net income for the nine month period ended September 30, 2011 includes a $4,517,488 gain on settlement with Nordic Biotech Ventures II K/S of which $4,017,488 was non cash and a loss on the early extinguishment of debt of $1,225,912 as a result of the conversion of 12% secured notes and interest thereon (see Note 9). The net loss applicable to common shares from date of inception, August 6, 2001, to September 30, 2011 amounts to $61,011,685.

During the nine months ended September 30, 2011 the Company received approximately $0.5 million from the Nordic Settlement (see Note 6) and $244,479 from a grant receivable, and repaid $100,000 of principal on the ICON note payable (see Note 9).

During the nine months ended September 30, 2010 the Company received approximately $2.2 million from an equity financing transaction (see Note 7) and approximately $40,000 from Ariston Pharmaceuticals, Inc. in exchange for a note. In addition, approximately $422,000 of notes payable and interest payable thereon was converted in this equity transaction. The Company repaid the $40,000 received from Ariston in the first quarter of 2010 and the $27,000 received from Ariston in the fourth quarter of 2009 together with interest thereon prior to the Merger.

Management believes that the Company will continue to incur net losses through at least September 30, 2012 and for the foreseeable future. Based on the resources of the Company available at September 30, 2011, management believes that the Company has sufficient capital to fund its operations through the end of 2011. Management believes that the Company will need additional equity or debt financing or generate revenues through licensing of its products or entering into strategic alliances to be able to sustain its operations into 2012. Furthermore, the Company will need additional financing thereafter to complete development and commercialization of its products. There can be no assurances that we can successfully complete development and commercialization of our products. In addition, $250,000 of debt matures in October 2011, the Company is currently negotiating an extension of the maturity of this debt, and $1,725,000 principal amount of debt plus interest thereon that was to mature in December 2011 converted into equity during the quarter ended September 30, 2011 (see Note 9).

The Company’s continued operation will depend on its ability to raise additional funds through various potential sources such as equity and debt financing, collaborative agreements, strategic alliances and its ability to realize the full potential of its technology in development. Additional funds may not become available on acceptable terms, and there can be no assurance that any additional funding that the Company does obtain will be sufficient to meet the Company’s needs in the long-term.

These matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.