8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

July 18, 2003

Date of Report (Date of earliest event reported)

ESSENTIAL THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in Charter)

Delaware	0-28006	94-3186021
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

78 Fourth Avenue, Waltham, MA 02451

(Address of Principal Executive Offices) (Zip Code)

(781) 647-5554

(Registrant’s telephone number, including area code)

Item 7. Financial Statements and Exhibits

(c) Exhibits.

Exhibit No.	Description
99.1	Monthly Operating Report of Essential Therapeutics, Inc. for the period commencing on June 1, 2003 and ending on June 30, 2003.

Item 9. Regulation FD Disclosure

As previously reported, on May 1, 2003, Essential Therapeutics, Inc., a Delaware company (the “Company”), and the Company’s wholly owned subsidiaries, Maret Corporation and The Althexis Company, Inc., filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (Case Nos. 03-11317(MFW), 03-11318(MFW) and 03-11319(MFW)).

On July 18, 2003, Bankruptcy Judge Walrath, in open court, directed the office of the United States Trustee to appoint an equity security holders committee, charged with representing the interests of the holders of Common Stock of the Company. The docket of the chapter 11 cases does not yet reflect the formal entry of such order.

On July 18, 2003, the Company filed its monthly operating report (the “Monthly Operating Report”) for the month of June 2003 with the U.S. Bankruptcy Court. A copy of this report is attached hereto as Exhibit 99.1.

In accordance with General Instruction B.2 of Form 8-K, the information in Exhibit 99.1 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall such information and exhibit be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), except as shall be expressly set forth by specific reference in such a filing. This report (including the exhibit hereto) will not be deemed an admission as to the materiality of any information required to be disclosed solely to satisfy the requirements of Regulation FD.

The Monthly Operating Report attached as an exhibit hereto contains financial statements and other financial information that has not been audited or reviewed by independent accountants and may be subject to future reconciliation and adjustments. The Monthly Operating Report is in a format prescribed by the Office of the United States Trustee and is not a complete set of financial statements prepared in accordance with generally accepted accounting principles. The Monthly Operating Report contains information for periods different from those required in the Company’s reports pursuant to the Exchange Act. The information in the Monthly Operating Report might not be indicative of the Company’s financial condition or operating results for the periods that would be reflected in the Company’s financial statements or in its reports pursuant to the Exchange Act. The information set forth in the Monthly Operating Report should not be viewed as indicative of future results and should not be used for investment purposes.

The Company filed a plan of reorganization with the U.S. Bankruptcy Court. The Company does not expect that any such plan, if and when confirmed by the Court, would include a capital structure in which existing common equity would retain any value.

Forward-Looking Statements

This Form 8-K, including the exhibit attached hereto, contains statements that are forward-looking within the meaning of Section 27a of the Securities Act and Section 21e of the Exchange Act. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and that actual results could differ materially as a result of known and unknown risks and uncertainties, including: various regulatory issues, the outcome of the Company’s chapter 11 proceeding, the results of the Company’s in-licensing efforts, general economic conditions, future trends, and other risks, uncertainties and factors disclosed in the Company’s most recent Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: July 25, 2003	ESSENTIAL THERAPEUTICS, INC.
	(Debtor and Debtor-In-Possession)
	(Registrant)
	By:	/s/    ELIZABETH GRAMMER
		Elizabeth Grammer,
		Vice President and General Counsel

EX-99.1

Exhibit 99.1

UNITED STATES BANKRUPTCY COURT

DISTRICT OF DELAWARE

In re: Essential Therapeutics, Inc., et al	Case No. 03-11317 (MFW)
	Reporting Period: June 1, 2003 through June 30, 2003

MONTHLY OPERATING REPORT

File with Court and submit copy to United States Trustee within 20 days after end of month

Submit copy of report to any official committee appointed in the case.

REQUIRED DOCUMENTS	Form No.	Document Attached	Explanation Attached
Schedule of Cash Receipts and Disbursements	MOR-1	Yes
Bank Reconciliation (or copies of debtor's bank reconciliations)	MOR-1 (CON'T)	Yes
Copies of bank statements
Cash disbursements journals
Statement of Operations	MOR-2	Yes
Balance Sheet	MOR-3	Yes
Status of Postpetition Taxes	MOR-4	Yes
Copies of IRS Form 6123 or payment receipt
Copies of tax returns filed during reporting period
Summary of Unpaid Postpetition Debts	MOR-4	Yes
Listing of aged accounts payable
Accounts Receivable Reconciliation and Aging	MOR-5	Yes
Debtor Questionnaire	MOR-5	Yes

I declare under penalty of perjury (28 U.S.C. Section 1746) that this report and the attached documents are true and correct to the best of my knowledge and belief.

Signature of Debtor	Date
Signature of Joint Debtor	Date
Signature of Authorized Individual*	Date
Printed Name of Authorized Individual	Title of Authorized Individual

*Authorized individual must be an officer, director or shareholder if debtor is a corporation; a partner if debtor is a partnership; a manager or member if debtor is a limited liability company.

FORM MOR

(9/99)

In re: Essential Therapeutics, Inc., et al	Case No. 03-11317 (MFW)
Debtor	Reporting Period: June 1, 2003 through June 30, 2003
SCHEDULE OF CASH RECEIPTS AND DISBURSEMENTS Amounts reported should be per the debtor’s books, not the bank statement. The beginning cash should be the ending cash from the prior month or, if this is the first report, the amount should be the balance on the date the petition was filed. The amounts reported in the “CURRENT MONTH—ACTUAL” column must equal the sum of the four bank account columns. The amounts reported in the “PROJECTED” columns should be taken from the SMALL BUSINESS INITIAL REPORT (FORM IR-1). Attach copies of the bank statements and the cash disbursements journal. The total disbursements listed in the disbursements journal must equal the total disbursements reported on this page. A bank reconciliation must be attached for each account. [See MOR-1 (CON’T)]

	BANK ACCOUNTS									CURRENT MONTH				CUMULATIVE FILING TO DATE
	OPER.			PAYROLL		TAX	PETTY CASH	RESTRICTED	INVESTMENT	ACTUAL		PROJECTED		ACTUAL		PROJECTED
CASH BEGINNING OF MONTH		2,310,928.54		134,405.40		—	667.24	1,571,644.66	14,541,632.84	18,559,278.68		18,137,591.00		18,481,113.62			18,481,113.62
RECEIPTS
CASH SALES		—		—		—	—	—	—	—		—		—			—
ACCOUNTS RECEIVABLE		—		—		—	—	—	—	—		—		—			—
LOANS AND ADVANCES		—		—		—	—	—	—	—		20,625.00		100,466.00			121,090.78
SALE OF ASSETS	$	18,713.66		—		—	175.00	—	—	18,888.66		540,000.00		55,910.66			577,021.54
OTHER (ATTACH LIST)		349,261.63		252.51		—	—	—	37,980.09	387,494.23		391,385.00		984,375.36			932,045.60
TRANSFERS (FROM DIP ACCTS)		—		275,000.00		—	—	—	—	275,000.00		—		555,375.34			—
TOTAL RECEIPTS		367,975.29		275,252.51		—	175.00	—	37,980.09	681,382.89		952,010.00		1,696,127.36			1,630,157.92
DISBURSEMENTS
GROSS PAYROLL		218,139.90		114,296.09						332,435.99		230,202.00		626,891.57			556,830.00
PAYROLL TAXES		—								—		34,530.00		—			83,524.00
SALES, USE, & OTHER TAXES		25.00								25.00		—		294.15			10,000.00
INVENTORY PURCHASES		—								—		—		—			—
SECURED/ RENTAL/ LEASES		136,269.31								136,269.31		57,750.00		141,394.22			115,500.00
INSURANCE		—								—		—		—			—
ADMINISTRATIVE		18,848.75					13.65		2,349.43	21,211.83		13,500.00		27,216.47			27,000.00
SELLING		—								—		—		—			—
OTHER (ATTACH LIST)		287,760.18		190,858.31					13,106.78	491,725.27		503,765.00		842,075.06			872,423.00
OWNER DRAW *		—								—		—		—			—
TRANSFERS (TO DIP ACCTS)		275,000.00								275,000.00		—		555,375.34			—
										—		—		—			—
PROFESSIONAL FEES		—								—		200,000.00		—			400,000.00
U.S. TRUSTEE QUARTERLY FEES		—								—		—		—			—
COURT COSTS		—		—		—	—	—	—	—		—		—			—
TOTAL DISBURSEMENTS		936,043.14		305,154.40		—	13.65	—	15,456.21	1,256,667.40		1,039,747.00		2,193,246.81			2,065,277.00
NET CASH FLOW		(568,067.85	)	(29,901.89	)	—	161.35	—	22,523.88	(575,284.51	)	(87,737.00	)	(497,119.45	)		(435,119.08	)
(RECEIPTS LESS DISBURSEMENTS)
CASH—END OF MONTH		1,742,860.69		104,503.51		—	828.59	1,571,644.66	14,564,156.72	17,983,994.17		18,049,854.00		17,983,994.17			18,045,994.54
*  COMPENSATION TO SOLE PROPRIETORS FOR SERVICES RENDERED TO BANKRUPTCY ESTATE
THE FOLLOWING SECTION MUST BE COMPLETED
DISBURSEMENTS FOR CALCULATING U.S. TRUSTEE QUARTERLY FEES: (FROM CURRENT MONTH ACTUAL COLUMN)
TOTAL DISBURSEMENTS																$	1,256,667.40
LESS: TRANSFERS TO DEBTOR IN POSSESSION ACCOUNTS																$	275,000.00
PLUS: ESTATE DISBURSEMENTS MADE BY OUTSIDE SOURCES (i.e. from escrow accounts)																$	—
TOTAL DISBURSEMENTS FOR CALCULATING U.S. TRUSTEE QUARTERLY FEES																$	981,667.40

FORM MOR-1

(9/99)

In re: Essential Therapeutics, Inc., et al

Continuation Sheet for Initial MOR-1

Other Receipts

	Operating Jun-03		Investment		Payroll		Total
Other Receipts
Investment income	$	—	$	37,980.09	$	—	$	37,980.09
Cobra insurance reimbursement	$	4,378.77	$	—	$	—	$	4,378.77
Interest income	$	110.39	$	—	$	252.51	$	362.90
IR expense reimbursement	$	1,025.00	$	—	$	—	$	1,025.00
Refund of operating charges for Maret property	$	2,302.10	$	—	$	—	$	2,302.10
Refund for conference	$	470.00	$	—	$	—	$	470.00
Sublease income-Naxcor	$	50,358.95	$	—	$	—	$	50,358.95
Fujisawa R&D reimbursement	$	245,000.00	$	—	$	—	$	245,000.00
Pfizer Patent reimbursement	$	45,616.42	$	—	$	—	$	45,616.42
Total Other Receipts	$	349,261.63	$	37,980.09	$	252.51	$	387,494.23

In re: Essential Therapeutics, Inc., et al

Continuation Sheet for Initial MOR-1

Other Disbursements

	Operating Jun-03		Payroll		Investment		Total
Other Disbursements
Change in value of investments	$	—	$	—	$	13,106.78	$	13,106.78
Severance	$	98,466.67	$	190,858.31	$	—	$	289,324.98
Consultants/Temporary Help	$	62,881.15	$	—	$	—	$	62,881.15
Decontamination Costs	$	6,329.00	$	—	$	—	$	6,329.00
Contract Services	$	24,682.17	$	—	$	—	$	24,682.17
R&D and Facility costs	$	61,970.97	$	—	$	—	$	61,970.97
Travel expenses	$	33,430.22	$	—	$	—	$	33,430.22
Total Other Disbursements	$	287,760.18	$	190,858.31	$	13,106.78	$	491,725.27

UNITED STATES BANKRUPTCY COURT	Case No. 03-11317 (MFW)
DISTRICT OF DELAWARE	Chapter: 11

In re: Essential Therapeutics, Inc., et al.                               Debtor
	Balance as of June 30, 2003
Fleet Bank
Account Number: 9429246901	$	1,645,069.46
Fleet Bank
Account Number: 9427759535	$	36,334.16
Fleet Bank
Account Number: 9412142452	$	—
Fleet Bank
Account Number: 9429240139	$	61,457.07
Silicon Valley Bank
Account Number: 05027950-71	$	101,424.98
Silicon Valley Bank
Account Number: 05027950-72	$	3,078.53
Fleet Investment Account
Account Number: 0006537770	$	14,570,156.72
Restricted Cash
Fleet Bank CD—912833FS4-3	$	100,000.00
Fleet Bank CD—000880693	$	1,100,000.00
Silicon Valley Bank CD—8800056672	$	371,644.66
Total Restricted Cash	$	1,571,644.66
Petty Cash		828.59

Account detail availale upon request

In re: Essential Therapeutics, Inc., et al	Case No. 03-11317 (MFW)
Debtor	Reporting Period: June 1, 2003 through June 30, 2003

STATEMENT OF OPERATIONS

(Income Statement)

The Statement of Operations is to be prepared on an accrual basis. The accrual basis of accounting recognizes revenue when it is realized and expenses when they are incurred, regardless of when cash is actually received or paid.

	June 2003			May 2003			Cumulative Filing to Date
REVENUES
Gross Revenues	$	464,904.46		$	231,204.00		$	696,108.46
Less: Returns and Allowances		—			—			—
Net Revenue		464,904.46			231,204.00			696,108.46
OPERATING EXPENSES
Payroll Costs
Salaries & Wages		344,577.34			329,834.15			674,411.49
Payroll Taxes		15,861.61			18,983.11			34,844.72
Employee Insurance Benefits		44,708.10			27,201.27			71,909.37
Other Employee Benefits		6,389.11			5,226.11			11,615.22
Stock Compensation Exp—EE		49,550.51			49,550.51			99,101.02
Management Incentive Bonus		46,358.97			(10,370.65	)		35,988.32
Total Payroll Costs		507,445.64			420,424.50			927,870.14
Operational Costs
Office Supplies		1,116.60			—			1,116.60
Software/Comp Supls (-$2.5K)		—			576.45			576.45
Printing & Reproduction		92.97			247.30			340.27
Laboratory Supplies		3,313.14			1,978.11			5,291.25
Chemicals		991.33			2,153.16			3,144.49
Postage & Freight		1,106.93			1,939.06			3,045.99
Depreciation—Furniture/Fixtures		2,202.42			2,202.42			4,404.84
Depreciation—Computer Equip		4,094.90			4,126.42			8,221.32
Depreciation—Software		121.74			121.74			243.48
Depreciation—Equipment		369.77			369.77			739.54
Amortization—L/H Improvements		27,447.29			27,447.29			54,894.58
Sales Tax on Capital Lease		—			288.71			288.71
Furniture/Equipment Rental		627.96			1,136.79			1,764.75
Business Travel		18,289.27			12,249.07			30,538.34
Meals & Entertainment		1,081.32			854.48			1,935.80
Other G&A Expenses		291.67			291.67			583.34
Conference, Seminar & Training		123.06			2,585.00			2,708.06
Total Operating Costs		61,270.37			58,567.44			119,837.81
Outside Services
Consultants & Honoraria		22,331.37			55,400.54			77,731.91
Contract Services		16,631.27			81,323.70			97,954.97
Deferred Comp—Consultants		1,832.00			1,832.00			3,664.00
Investor Relations		—			2,696.75			2,696.75
Insurance—D&O		36,812.17			26,458.17			63,270.34
Dues & Subscriptions		4,242.33			6,221.01			10,463.34
Books		—			(74.25	)		(74.25	)
Clinical Development Insurance		1,026.42			1,026.42			2,052.84
Legal—Corporate		100,000.00			100,000.00			200,000.00
Legal—Patent		31,189.83			60,000.00			91,189.83
Temporary Help		9,326.38			1,000.00			10,326.38
Information Services		1,051.00			—			1,051.00
Bank Charges/Payroll Fees		3,407.17			2,618.60			6,025.77
Total Outside Services		227,849.94			338,502.94			566,352.88
Facilities
Rent		216,512.32			205,184.76			421,697.08
Utilities		106,415.68			17,714.11			124,129.79
Property & Occupancy Taxes		(12,725.09	)		6,607.67			(6,117.42	)
Business Insurance		23,914.40			23,912.03			47,826.43
Business Taxes		25.00			269.15			294.15
Telephone/Fax/Networking		12,481.66			10,164.26			22,645.92
Janitorial		7,063.00			9,029.10			16,092.10
Safety/Hazardous Mat’l Monitor		1,541.00			707.00			2,248.00
Repair & Maint—Bldg		1,363.85			2,654.63			4,018.48
Repair & Maint—Equipment		240.00			714.87			954.87
Software License & Maint		2,701.24			2,701.35			5,402.59
Total Facilities		359,533.06			279,658.93			639,191.99
Restructuring Expenses		144,173.68			206,355.74			350,529.42
TOTAL OPERATING EXPENSES		1,300,272.69			1,303,509.55			2,603,782.24
OPERATING INCOME		(835,368.23	)		(1,072,305.55	)		(1,907,673.78	)
Other Income/Expenses
Interest Income		37,851.52			40,827.24			78,678.76
Interest Expense		(4,698.08	)		(7,014.34	)		(11,712.42	)
Gain/(Loss) on FA Disposals		271,255.10			2,034.67			273,289.77
Other Expense		(82,500.00	)		0.13			(82,499.87	)
Total Other Income and Expenses		221,908.54			35,847.70			257,756.24
NET INCOME BEFORE TAXES		(613,459.69	)		(1,036,457.85	)		(1,649,917.54	)
Income Tax Provision		—			—			—
Income Tax Provision		—			—			—
NET INCOME	$	(613,459.69	)	$	(1,036,457.85	)	$	(1,649,917.54	)

In re: Essential Therapeutics, Inc., et al	Case No. 03-11317 (MFW)
Debtor	Reporting Period: June 1, 2003 through June 30, 2003

BALANCE SHEET

The Balance Sheet is to be completed on an accrual basis only. Pre-petition liabilities must be classified separately from postpetition obligations.

	BOOK VALUE AT END OF June 30, 2003			BOOK VALUE AT PETITION DATE OF May 1, 2003
ASSETS
Current Assets
Cash, Cash Equivalents & Investments
Petty Cash	$	828.59		$	667.24
Operating Cash		1,640,174.47			1,854,762.68
Cash—Money Market		102,686.22			498,923.25
Cash—Payroll		101,424.98			47,271.56
Sect 125 & FSA		3,078.53			8,976.61
Cash Equivalents		296,634.83			175,618.31
Short Term Investments		7,265,366.87			5,751,826.08
Long Term Investments		7,002,155.02			8,575,282.93
Total Cash, Cash Equivalents & Investments		16,412,349.51			16,913,328.66
Accounts Receivable
Accounts Receivable—Trade		300,409.88			586,327.80
Accounts Receivable—Other		1,180,100.58			2,666.67
Total Receivables		1,480,510.46			588,994.47
Prepaid Expenses
Prepaid Consulting		503.75			503.75
Prepaid Property Insurance		43,359.82			91,186.25
Prepaid Medical Insurance		—			48,075.33
Prepaid Workers Compensation		5,224.04			15,653.22
Prepaid Clinical Trial Insurance		4,618.85			6,671.69
Prepaid Life Insurance		—			1,290.71
Prepaid Dir & Off Insurance		1,237,893.94			1,301,164.28
Prepaid Contracts—Software		17,728.27			23,130.86
Prepaid Subscriptions & Dues		16,794.77			24,343.16
Prepaid Rent		157,219.05			523,229.00
Prepaid Expenses—Other		442,986.45			495,173.92
Prepaid Property Tax		—			13,215.34
Total Prepaid Expenses		1,926,328.94			2,543,637.51
Other Current Assets		215,388.00			5,018.71
Assets Held For Sale		220,514.47			760,514.47
Total Current Assets		20,255,091.38			20,811,493.82
Fixed Assets
Furniture and Fixtures		132,234.91			132,234.91
Computer Equipment		276,103.22			274,607.61
Software		4,361.99			4,361.99
Equipment		660,210.62			8,271,446.09
L/H Improvements		3,046,223.03			3,046,223.03
Total Capital Expenditures		4,119,133.77			11,728,873.63
Accumulated Depreciation
Accum Depr—Furniture & Fixtures		(13,854.43	)		(9,449.59	)
Accum Depr—Computers		(182,975.59	)		(174,754.27	)
Accum Depr—Software		(304.35	)		(60.87	)
Accum Depr—Equipment		(165,387.29	)		(6,901,873.76	)
Accum Depr—L/H Improvements		(158,954.75	)		(104,060.17	)
Total Accumulated Depreciation		(521,476.41	)		(7,190,198.66	)
Assets Held for Sale—Contra		(220,514.47	)		(760,514.47	)
Total Net Fixed Assets		3,377,142.89			3,778,160.50
Deposits		—			279,740.82
Restricted Cash—Long Term		1,571,644.66			1,571,644.66
Other Non-Current Assets
Employee Loans—Long Term		92,000.00			797,499.96
Goodwill		1,526,216.88			1,526,216.88
Total Other Non-Current Assets		1,618,216.88			2,323,716.84
TOTAL ASSETS	$	26,822,095.81		$	28,764,756.64

In re: Essential Therapeutics, Inc., et al	Case No. 03-11317 (MFW)
Debtor	Reporting Period: June 1, 2003 through June 30, 2003

BALANCE SHEET

The Balance Sheet is to be completed on an accrual basis only. Pre-petition liabilities must be classified separately from postpetition obligations.

	BOOK VALUE AT END OF June 30, 2003			BOOK VALUE AT PETITION DATE OF May 1, 2003
ASSETS
LIABILITIES & STOCKHOLDERS’ EQUITY
Liabilities
Current Liabilities
Accounts Payable-Prepetition	$	321,366.94		$	239,077.04
Accounts Payable-Postpetition		73,560.78			—
Total Accounts Payable		394,927.72			239,077.04
Accrued Compensation
Accrued Salaries & P/R Taxes		11,700.08			7,517.30
Accrued Vacation & Sick Time		94,952.65			141,124.06
Accrued Sect 125 & FSA Deduction		2,631.79			1,809.36
Accrued Bonus & Incentive Compensation		191,044.50			166,140.75
Total Accrued Compensation		300,329.02			316,591.47
Accrued Restructuring 02—S/T		643,818.33			644,503.33
Accrued Restructuring 03—S/T		488,590.93			944,998.32
Deferred Revenue		83,328.67			249,996.67
Other Current Liabilities
Accrued Curr Liab—Other		175,075.20			174,156.66
Accured Legal—General		195,380.93			—
Accrued Legal—Patents		101,072.58			46,358.70
Accrued Investor Relations		64,986.01			108,700.76
Accrued Property Taxes		48,387.27			67,982.22
Accrued Sales & Use Tax—CA		4,056.87			195.41
Current Portion—Capital Leases		53,378.90			45,146.03
Current Portion—Notes Payable		178,001.83			179,902.33
Total Other Current Liabilities		820,339.59			622,442.11
Total Current Liabilities		2,731,334.26			3,017,608.94
Long-term Liabilities
Long Term Portion—Capital Leases		118,720.79			130,600.47
Long Term Portion—Notes Payable		295,637.65			434,572.97
Accrued Rent-Long Term		416,985.69			372,778.56
Total Long-Term Liabilities		831,344.13			937,952.00
Total Liabilities		3,562,678.39			3,955,560.94
Convert Redeem PS-Series B		54,327,579.00			53,902,147.00
Stockholders' Equity
Common Stock		18,939.94			18,939.94
Additional Paid-In Capital		103,858,072.89			104,286,042.89
Notes Receivable from Stockholders		(145,943.97	)		(155,545.09	)
Unrealized Gain/(Loss) Mkt Sec		247,614.35			259,841.23
Deferred Compensation		(1,052,067.37	)		(1,157,370.39	)
Retained Earnings—Prior Yrs		(132,344,859.88	)		(122,314,980.85	)
Retained Earnings—Current Yr		(1,649,917.54	)		(10,029,879.03	)
Total Stockholders' Equity		(31,068,161.58	)		(29,092,951.30	)
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	26,822,095.81		$	28,764,756.64
	$	—		$	—

In re: Essential Therapeutics, Inc., et al	Case No. 03-11317 (MFW)
Debtor	Reporting Period: June 1, 2003 through June 30, 2003

Essential Therapeutics—Consolidated

Balance Sheet—Detail

Financial Stmts—By Business Unit

For the Period from June 1, 2003 to June 30, 2003

	Essential		Althexis		Maret	Eliminations		Grand Total
Current Assets
Cash, Cash Equivalents & Investments
Petty Cash	578.59		250.00		—	—		828.59
Operating Cash	1,645,069.46		(66,352.06	)	61,457.07	—		1,640,174.47
Cash—Money Market	—		102,686.22		—	—		102,686.22
Cash—Payroll	101,424.98		—		—	—		101,424.98
Sect 125 & FSA	3,078.53		—		—	—		3,078.53
Cash Equivalents	290,634.83		6,000.00		—	—		296,634.83
Short Term Investments	7,265,366.87		—		—	—		7,265,366.87
Long Term Investments	7,002,155.02		—		—	—		7,002,155.02
Total Cash, Cash Equivalents & Investments	16,308,308.28		42,584.16		61,457.07	—		16,412,349.51
Accounts Receivable
Accounts Receivable—Trade	300,409.88		—		—	—		300,409.88
Accounts Receivable—Other	1,180,100.58		—		—	—		1,180,100.58
Intercompany Receivable	24,337,468.97		516,692.34		209,947.60	(25,064,108.91	)	—
Total Receivables	25,817,979.43		516,692.34		209,947.60	(25,064,108.91	)	1,480,510.46
Prepaid Expenses
Prepaid Consulting	503.75		—		—	—		503.75
Prepaid Property Insurance	1,736.48		41,623.34		—	—		43,359.82
Prepaid Workers Compensation	4,789.74		434.30		—	—		5,224.04
Prepaid Clinical Trial Insurance	—		—		4,618.85	—		4,618.85
Prepaid Dir & Off Insurance	—		1,237,893.94		—	—		1,237,893.94
Prepaid Contracts—Software	16,437.73		1,290.54		—	—		17,728.27
Prepaid Subscriptions & Dues	—		16,794.77		—	—		16,794.77
Prepaid Rent	84,733.34		72,485.71		—	—		157,219.05
Prepaid Expenses—Other	374,320.83		30,010.69		38,654.93	—		442,986.45
Total Prepaid Expenses	482,521.87		1,400,533.29		43,273.78	—		1,926,328.94
Other Current Assets	215,318.00		70.00		—	—		215,388.00
Assets Held For Sale	—		220,514.47		—	—		220,514.47
Total Current Assets	42,824,127.58		2,180,394.26		314,678.45	(25,064,108.91	)	20,255,091.38
Fixed Assets
Furniture and Fixtures	—		132,234.91		—	—		132,234.91
Computer Equipment	119,870.40		156,232.82		—	—		276,103.22
Software	—		4,361.99		—	—		4,361.99
Equipment	—		660,210.62		—	—		660,210.62
L/H Improvements—	—		3,046,223.03		—	—		3,046,223.03
Total Capital Expenditures	119,870.40		3,999,263.37		—	—		4,119,133.77
Accumulated Depreciation
Accum Depr—Furniture & Fixtures	—		(13,854.43	)	—	—		(13,854.43	)
Accum Depr—Computers	(95,375.08	)	(87,600.51	)	—	—		(182,975.59	)
Accum Depr—Software	—		(304.35	)	—	—		(304.35	)
Accum Depr—Equipment	—		(165,387.29	)	—	—		(165,387.29	)
Accum Depr—L/H Improvements	—		(158,954.75	)	—	—		(158,954.75	)
Total Accumulated Depreciation	(95,375.08	)	(426,101.33	)	—	—		(521,476.41	)
Assets Held for Sale—Contra	—		(220,514.47	)	—	—		(220,514.47	)
Total Net Fixed Assets	24,495.32		3,352,647.57		—	—		3,377,142.89
Deposits	—		—		—	—		—
Restricted Cash—Long Term	1,471,644.66		100,000.00		—	—		1,571,644.66
Other Non-Current Assets
Notes Receivable	—		145,943.97		—	(145,943.97	)	—
Employee Loans—Long Term	92,000.00		—		—	—		92,000.00
Goodwill	1,526,216.88		—		—	—		1,526,216.88
Investment in Althexis	228,862.60		—		—	(228,862.60	)	—
Investment in Maret	(1,951,323.00	)	—		—	1,951,323.00		—
Total Other Non-Current Assets	(104,243.52	)	145,943.97		—	1,576,516.43		1,618,216.88
TOTAL ASSETS	44,216,024.04		5,778,985.80		314,678.45	(23,487,592.48	)	26,822,095.81

LIABILITIES & STOCKHOLDERS’ EQUITY

In re: Essential Therapeutics, Inc., et al	Case No. 03-11317 (MFW)
Debtor	Reporting Period: June 1, 2003 through June 30, 2003

Essential Therapeutics—Consolidated

Balance Sheet—Detail

Financial Stmts—By Business Unit

For the Period from June 1, 2003 to June 30, 2003

	Essential		Althexis		Maret		Eliminations		Grand Total
Liabilities
Current Liabilities
Accounts Payable-Prepetition	164,846.86		57,209.79		99,310.29		—		321,366.94
Accounts Payable-Postpetition	34,443.08		26,143.70		12,974.00		—		73,560.78
Total Accounts Payable	199,289.94		83,353.49		112,284.29		—		394,927.72
Accrued Compensation
Accrued Salaries & P/R Taxes	2,100.20		9,599.88		—		—		11,700.08
Accrued Vacation & Sick Time	49,412.95		45,539.70		—		—		94,952.65
Accrued Sect 125 & FSA Deduction	2,631.79		—		—		—		2,631.79
Accrued Bonus & Incentive Compensation	—		191,044.50		—		—		191,044.50
Total Accrued Compensation	54,144.94		246,184.08		—		—		300,329.02
Accrued Restructuring 02—S/T	—		643,818.33		—		—		643,818.33
Accrued Restructuring 03—S/T	491,780.27		(3,189.34	)	—		—		488,590.93
Deferred Revenue	83,328.67		—		—		—		83,328.67
Other Current Liabilities
Accrued Curr Liab—Other	—		173,575.20		1,500.00		—		175,075.20
Accured Legal—General	—		195,380.93		—		—		195,380.93
Accrued Legal—Patents	90,000.00		5,000.00		6,072.58		—		101,072.58
Accrued Investor Relations	—		64,986.01		—		—		64,986.01
Accrued Property Taxes	48,387.27		—		—		—		48,387.27
Accrued Sales & Use—TaxCA	3,857.46		—		199.41		—		4,056.87
Current Portion—Capital Leases	53,378.90		—		—		—		53,378.90
Current Portion—Notes Payable	—		178,001.83		—		—		178,001.83
Total Other Current Liabilities	195,623.63		616,943.97		7,771.99		—		820,339.59
Total Current Liabilities	1,024,167.45		1,587,110.53		120,056.28		—		2,731,334.26
Long-term Liabilities
Long Term Portion—Capital Leases	118,720.79		—		—		—		118,720.79
Long Term Portion—Notes Payable	—		295,637.65		—		—		295,637.65
Accrued Rent—Long Term	—		416,985.69		—		—		416,985.69
Intercompany Payable	—		18,553,299.85		6,510,809.06		(25,064,108.91	)	—
Total Long-Term Liabilities	118,720.79		19,265,923.19		6,510,809.06		(25,064,108.91	)	831,344.13
Total Liabilities	1,142,888.24		20,853,033.72		6,630,865.34		(25,064,108.91	)	3,562,678.39
Convert Redeem PS-Series B	54,327,579.00		—		—		—		54,327,579.00
Stockholders’ Equity
Common Stock	18,939.94		—		—		—		18,939.94
Additional Paid-In Capital	103,858,072.89		—		—		—		103,858,072.89
Net Equity at Acquisition	—		228,862.60		(1,951,323.00	)	1,722,460.40		—
Notes Receivable from Stockholders	—		—		—		(145,943.97	)	(145,943.97	)
Unrealized Gain/(Loss) Mkt Sec	247,614.35		—		—		—		247,614.35
Deferred Compensation	(1,052,067.37	)	—		—		—		(1,052,067.37	)
Retained Earnings—Prior Yrs	(114,034,956.15	)	(14,083,604.95	)	(4,226,298.78	)	—		(132,344,859.88	)
Retained Earnings—Current Yr	(292,046.86	)	(1,219,305.57	)	(138,565.11	)	—		(1,649,917.54	)
Total Stockholders’ Equity	(11,254,443.20	)	(15,074,047.92	)	(6,316,186.89	)	1,576,516.43		(31,068,161.58	)
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY	44,216,024.04		5,778,985.80		314,678.45		(23,487,592.48	)	26,822,095.81

In re: Essential Therapeutics, Inc., et al	Case No. 03-11317 (MFW)
Debtor	Reporting Period: June 1, 2003 through June 30, 2003

STATUS OF POSTPETITION TAXES

The beginning tax liability should be the ending liability from the prior month or, if this is the first report, the amount should be zero. Attach photocopies of IRS Form 6123 or payment receipt to verify payment or deposit of federal payroll taxes. Attach photocopies of any tax returns filed during the reporting period.

	Beginning Tax Liability	Amount Withheld or Accrued	Amount Paid	Date Paid	Check No. or EFT	Ending Tax Liability
Federal
Withholding	—
FICA-Employee	—
FICA-Employer	—
Unemployment	—
Income	—
Other:	—
Total Federal Taxes	—
State and Local
Withholding	—
Sales	—
Excise	—
Unemployment	—
Real Property	—
Personal Property	—
Other:	—
Total State and Local	—
Total Taxes	—

Essential Therapeutics, Inc. and its subsidiaries The Althexis Company, Inc. and Maret Corporation attest that they are compliant with the payment all of taxes as of June 30, 2003.

SUMMARY OF UNPAID POSTPETITION DEBTS

Attach aged listing of accounts payable.

			Number of Days Past Due
	Current		0-30	31-60	61-90	Over 90	Total
Accounts Payable	$	73,560.78	See attachment for details
Wages Payable
Taxes Payable
Rent/Leases-Building
Rent/Leases-Equipment
Secured Debt/Adequate Protection Payments
Professional Fees
Amounts Due to Insiders*
Other:
Other:
Total Postpetition Debts

Explain how and when the Debtor intends to pay any past-due postpetition debts.

All items will be paid within our normal terms of 30 days from date of invoice.

*“Insider”is defined in 11 U.S.C. Section 101(31).	FORM MOR-4
	(9/99)

In re: Essential Therapeutics, Inc., et al	Case No. 03-11317 (MFW)
Debtor	Reporting Period: June 1, 2003 through June 30, 2003

The Althexis Company Inc.
American Express	$	8,135.70
AT&T	$	421.95
AT&T Global	$	221.65
AT&T Wireless	$	69.85
B&B Cleaning	$	1,430.00
Martha Carter	$	623.98
CHB Consulting	$	2,990.00
City of Waltham	$	518.90
Cityside Limo	$	681.00
Joe Davis	$	3,189.34
Foley Food and Vending	$	55.75
Jennifer Power	$	445.99
Liz Grammer	$	1,900.52
Manuel Navia	$	260.52
The New York Times	$	23.00
Tim Noyes	$	404.73
Pitney Bowes Credit Corp	$	203.70
Premiere Conferencing	$	863.89
Primus Telecommunications	$	22.00
R.B. Allen Co., Inc.	$	900.00
RR Donnelley Receivables	$	755.00
UPS	$	290.13
Verizon	$	1,571.38
Xerox Corporation	$	164.72
	$	26,143.70
Maret Corporation
The Research Foundation of SUNY	$	5,974.00
Synergee LLC	$	7,000.00
	$	12,974.00
Essential Therapeutics, Inc.
American Society for Microbiologists	$	152.00
City of Mountain View	$	1,823.01
Elisa Kung	$	520.00
Envectra	$	1,400.00
Iron Mountain	$	1,051.00
Kate Young	$	1,722.06
LabWorks Equipment Service, Inc.	$	2,077.82
Michael Perez	$	304.38
Pacific Bell	$	5,388.33
PG&E	$	5,850.05
Peninsula Security Services	$	535.00
Town & Country	$	12,245.00
VWR Scientific	$	140.43
Western-Allied Service Company	$	1,234.00
	$	34,443.08
Total outstanding AP	$	73,560.78

In re: Essential Therapeutics, Inc., et al	Case No. 03-11317 (MFW)
Debtor	Reporting Period: June 1, 2003 through June 30, 2003

ACCOUNTS RECEIVABLE RECONCILIATION AND AGING
Accounts Receivable Reconciliation	Amount
Total Accounts Receivable at the beginning of the reporting period	$	221,026.30
+ Amounts billed during the period	$	200,000.00
- Amounts collected during the period	$	(120,616.42	)
Total Accounts Receivable at the end of the reporting period	$	300,409.88
Accounts Receivable Aging	Amount
0 – 30 days old	$	125,000.00
31 – 60 days old	$	175,409.88
61 – 90 days old	$	—
91 + days old	$	—
Total Accounts Receivable	$	300,409.88
Amount considered uncollectible (Bad Debt)	$	—
Accounts Receivable (Net)	$	300,409.88

DEBTOR QUESTIONNAIRE
Must be completed each month	Yes	No
1.      Have any assets been sold or transferred outside the normal course of business this reporting period? If yes, provide an explanation below.	X
2.      Have any funds been disbursed from any account other than a debtor in possession account this reporting period? If yes, provide an explanation below.		X
3.      Have all postpetition tax returns been timely filed? If no, provide an explanation below.	X
4.      Are workers compensation, general liability and other necessary insurance coverages in effect? If no, provide an explanation below.	X

FORM MOR-5

(9/99)