10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 29, 2012

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to             

Commission File Number: 000-25571

Raptor Pharmaceutical Corp.

(Exact name of registrant as specified in its charter)

Delaware	86-0883978
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9 Commercial Blvd., Suite 200, Novato, CA 94949

(Address of principal executive offices) (Zip Code)

(415) 382-8111

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

There were 48,857,663 shares of the registrant’s common stock, par value $0.001, outstanding as of March 29, 2012.

RAPTOR PHARMACEUTICAL CORP.

FORM 10-Q FOR THE QUARTER ENDED FEBRUARY 29, 2012

Table of Contents

		Page
Part 1 - Financial Information
Item 1	Financial Statements
	Condensed Consolidated Balance Sheets as of February 29, 2012 (unaudited) and August 31, 2011		2
	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three month periods ended February 29, 2012 and February 28, 2011		3
	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the six month periods ended February 29, 2012 and February 28, 2011 and the cumulative period from September 8, 2005 (inception) to February 29, 2012		4
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the six month period ended February 29, 2012		5
	Unaudited Condensed Consolidated Statements of Cash Flows for the six month periods ended February 29, 2012 and February 28, 2011 and the cumulative period from September 8, 2005 (inception) to February 29, 2012		6
	Notes to Condensed Consolidated Financial Statements		7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		35
Item 3	Quantitative and Qualitative Disclosures About Market Risk		57
Item 4	Controls and Procedures		58
Part II - Other Information
Item 1	Legal Proceedings		58
Item 1A	Risk Factors		59
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		62
Item 3	Defaults Upon Senior Securities		62
Item 4	Mine Safety Disclosures		62
Item 5	Other Information		62
Item 6	Exhibits		63
SIGNATURES			66

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Raptor Pharmaceutical Corp.

(A Development Stage Company)

Condensed Consolidated Balance Sheets

	February 29, 2012 (unaudited)			August 31, 2011 (1)
ASSETS
Current assets:
Cash and cash equivalents	$	19,689,438		$	15,172,086
Restricted cash		163,461			114,468
Short-term investments		30,241,134			—
Prepaid expenses and other		2,339,667			415,944
Total current assets		52,433,700			15,702,498
Intangible assets, net		3,177,917			3,250,917
Goodwill		3,275,403			3,275,403
Fixed assets, net		223,446			76,997
Deposits		104,906			104,906
Deferred offering costs		—			151,783
Total assets	$	59,215,372		$	22,562,504
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Liabilities
Current liabilities:
Accounts payable	$	1,087,186		$	847,137
Accrued liabilities		2,375,832			2,249,254
Common stock warrant liability		26,568,922			23,575,294
Deferred rent		25,561			24,136
Capital lease liability – current		4,069			3,953
Total current liabilities		30,061,570			26,699,774
Capital lease liability - long-term		7,714			9,778
Total liabilities		30,069,284			26,709,552
Commitments and contingencies
Stockholders’ equity (deficit):
Preferred stock, $0.001 par value, 15,000,000 shares authorized, zero shares issued and outstanding		—			—
Common stock, $0.001 par value, 150,000,000 shares authorized 48,854,168 and 35,569,188 shares issued and outstanding as at February 29, 2012, and August 31, 2011, respectively		48,854			35,569
Additional paid-in capital		132,528,834			73,817,083
Accumulated other comprehensive income (loss)		(4,979	)		1,904
Deficit accumulated during development stage		(103,426,621	)		(78,001,604	)
Total stockholders’ equity (deficit)		29,146,088			(4,147,048	)
Total liabilities and stockholders’ equity (deficit)	$	59,215,372		$	22,562,504

(1) Derived from the Company’s audited consolidated financial statements as of August 31, 2011.

The accompanying notes are an integral part of these condensed consolidated financial statements.

-2-

Raptor Pharmaceutical Corp.

(A Development Stage Company)

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

	For the three months ended
	February 29, 2012			February 28, 2011
Revenues:	$	—		$	—
Operating expenses:
General and administrative		2,452,418			1,126,512
Research and development		3,971,471			3,669,246
Total operating expenses		6,423,889			4,795,758
Loss from operations		(6,423,889	)		(4,795,758	)
Interest income		107,423			11,756
Interest expense		(212	)		(356	)
Foreign currency transaction gain (loss)		18,186			(159	)
Unrealized gain on short-term investments		120,469			—
Adjustment to fair value of common stock warrants		(7,814,136	)		1,810,223
Net loss		(13,992,159	)		(2,974,294	)
Other comprehensive income (loss)
Foreign currency translation adjustment		(1,589	)		2,038
Comprehensive loss	$	(13,993,748	)	$	(2,972,256	)
Net loss per share:
Basic and diluted	$	(0.29	)	$	(0.09	)
Weighted average shares outstanding used to compute:
Basic and diluted		47,967,393			31,778,911

The accompanying notes are an integral part of these condensed consolidated financial statements.

-3-

Raptor Pharmaceutical Corp.

(A Development Stage Company)

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

	For the six months ended						For the period from September 8, 2005 (inception) to
	February 29, 2012			February 28, 2011			February 29, 2012
Revenues:	$	—		$	—		$	—
Operating expenses:
General and administrative		4,788,706			2,832,612			21,642,729
Research and development		8,987,650			6,364,375			48,224,940
Total operating expenses		13,776,356			9,196,987			69,867,669
Loss from operations		(13,776,356	)		(9,196,987	)		(69,867,669	)
Interest income		171,592			19,232			544,032
Interest expense		(717	)		(998	)		(116,847	)
Foreign currency transaction gain		77,685			89			106,547
Unrealized gain on short-term investments		85,160			—			85,160
Adjustment to fair value of common stock warrants		(11,982,381	)		(3,916,407	)		(34,177,844	)
Net loss		(25,425,017	)		(13,095,071	)		(103,426,621	)
Other comprehensive income (loss)
Foreign currency translation adjustment		(6,883	)		5,549			(4,979	)
Comprehensive loss	$	(25,431,900	)	$	(13,089,522	)	$	(103,431,600	)
Net loss per share:
Basic and diluted	$	(0.54	)	$	(0.42	)
Weighted average shares outstanding used to compute:
Basic and diluted		46,795,022			30,999,253

The accompanying notes are an integral part of these condensed consolidated financial statements.

-4-

Raptor Pharmaceutical Corp.

(A Development Stage Company)

Condensed Consolidated Statement of Stockholders’ Equity (Deficit)

For the six months ended February 29, 2012

(Unaudited)

	Common stock				Additional paid-		Accumulated other comprehensive			Deficit accumulated during development			Total
	Shares		Amount		in capital		income (loss)			stage
Balance at August 31, 2011		35,569,188	$	35,569	$	73,817,083	$	1,904		$	(78,001,604	)	$	(4,147,048	)
Exercise of common stock warrants		1,741,367		1,741		4,775,108		—			—			4,776,849
Exercise of common stock options		43,613		44		106,149		—			—			106,193
Employee stock-based compensation expense		—		—		2,021,039		—			—			2,021,039
Reclassification of the fair value of warrant liabilities upon exercise		—		—		8,988,753		—			—			8,988,753
Issuance of common stock in a follow-on public offering at $4.00 per share purchase price, net of fundraising costs totaling $3,166,146		11,500,000		11,500		42,820,702		—			—			42,832,202
Foreign currency translation loss		—		—		—		(6,883	)		—			(6,883	)
Net loss		—		—		—		—			(25,425,017	)		(25,425,017	)
Balance at February 29, 2012		48,854,168	$	48,854	$	132,528,834	$	(4,979	)	$	(103,426,621	)	$	29,146,088

The accompanying notes are an integral part of these condensed consolidated financial statements.

-5-

Raptor Pharmaceutical Corp.

(A Development Stage Company)

Condensed Consolidated Statements of Cash Flows

(unaudited)

	For the six months ended						For the cumulative period from September 8, 2005 (inception)
	February 29, 2012			February 28, 2011			to February 29, 2012
Cash flows from operating activities:
Net loss	$	(25,425,017	)	$	(13,095,071	)	$	(103,426,621	)
Adjustments to reconcile net loss to net cash used in operating activities:
Employee stock-based compensation exp.		2,021,039			1,179,562			5,372,401
Consultant stock-based compensation exp.		—			37,010			683,322
Fair value adjustment of common stock warrants		11,982,381			3,916,407			34,177,844
Amortization of intangible assets		73,000			76,750			623,958
Depreciation of fixed assets		17,964			39,441			518,737
Unrealized gain on short-term investments		(85,160	)		—			(85,160	)
Write-off of intangible assets and other intellectual property		—			—			348,750
Amortization of capitalized finder’s fee		—			—			102,000
Capitalized acquisition costs previously expensed		—			—			38,000
Changes in assets and liabilities:
Prepaid expenses and other		(1,923,723	)		123,191			(2,240,230	)
Intangible assets		—			—			(150,000	)
Deposits		—			(2,000	)		(104,907	)
Accounts payable		240,049			77,325			1,087,186
Accrued liabilities		126,578			(16,028	)		1,695,106
Deferred rent		1,425			20,172			25,456
Net cash used in operating activities		(12,971,464	)		(7,643,241	)		(61,334,158	)
Cash flows from investing activities:
Purchase of fixed assets		(164,413	)		(25,000	)		(710,939	)
Cash acquired in 2009 Merger		—			—			581,391
Increase in restricted cash		(48,993	)		(113,748	)		(163,461	)
Purchase of short-term investments		(30,155,974	)		—			(30,155,974	)
Net cash used in investing activities		(30,369,380	)		(138,748	)		(30,448,983	)
Cash flows from financing activities:
Proceeds from the sale of common stock		46,000,000			—			85,941,278
Proceeds from the sale of common stock under an equity line		—			6,747,778			11,639,568
Proceeds from the exercise of common stock warrants		4,776,849			556,956			20,674,348
Proceeds from the exercise of common stock options		106,193			8,828			274,802
Fundraising costs		(3,016,015	)		(8,186	)		(7,342,979	)
Proceeds from the sale of common stock to initial investors		—			—			310,000
Proceeds from bridge loan		—			—			200,000
Repayment of bridge loan		—			—			(200,000	)
Principal payments on capital lease		(1,948	)		(1,862	)		(19,459	)
Net cash provided by financing activities		47,865,079			7,303,514			111,477,558
Foreign currency translation gain (loss)		(6,883	)		5,549			(4,979	)
Net increase (decrease) in cash and cash equivalents		4,517,352			(472,926	)		19,689,438
Cash and cash equivalents, beginning of period		15,172,086			16,953,524			—
Cash and cash equivalents, end of period	$	19,689,438		$	16,480,598		$	19,689,438
Supplemental disclosure of non-cash financing activities:
Warrants issued in connection with financing	$	—		$	—		$	16,310,414
Common stock issued as fee for equity line	$	—		$	—		$	208,660
Common stock and warrants issued in connection with reverse merger	$	—		$	—		$	4,417,046
Common stock issued as fee for equity line	$	—		$	352,500		$	827,637
Fair value of warrant liability reclassified to equity upon exercise	$	8,988,753		$	—		$	10,474,396
Acquisition of equipment in exchange for capital lease	$	—		$	—		$	35,134
Notes receivable issued in exchange for common stock	$	—		$	—		$	110,000
Common stock issued for a finder’s fee	$	—		$	—		$	102,000
Common stock issued in asset purchase	$	—		$	—		$	2,898,624

The accompanying notes are an integral part of these condensed consolidated financial statements.

-6-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) NATURE OF OPERATIONS AND BUSINESS RISKS

The accompanying condensed consolidated financial statements reflect the results of operations of Raptor Pharmaceutical Corp. (the “Company” or “Raptor”) and have been prepared in accordance with the accounting principles generally accepted in the United States of America. The Company’s fiscal year end is August 31.

On July 28, 2009, the Company and ECP Acquisition, Inc., a Delaware corporation, the Company’s then wholly-owned subsidiary (“merger sub”), entered into an Agreement and Plan of Merger and Reorganization (the “2009 Merger Agreement”), with Raptor Pharmaceuticals Corp., a Delaware corporation (“RPC”). On September 29, 2009, on the terms and subject to the conditions set forth in the 2009 Merger Agreement, pursuant to a stock-for-stock reverse triangular merger (the “2009 Merger”), merger sub was merged with and into RPC and RPC survived the 2009 Merger as a wholly-owned subsidiary of the Company. Immediately prior to the 2009 Merger and in connection therewith, the Company effected a 1-for-17 reverse stock split of its common stock and changed its corporate name from “TorreyPines Therapeutics, Inc.” to “Raptor Pharmaceutical Corp.”

As a result of the 2009 Merger and in accordance with the 2009 Merger Agreement, each share of RPC’s common stock outstanding immediately prior to the effective time of the 2009 Merger was converted into the right to receive 0.2331234 shares of the Company’s common stock, on a post 1-for-17 reverse-split basis. Each option and warrant to purchase RPC’s common stock outstanding immediately prior to the effective time of the 2009 Merger was assumed by the Company at the effective time of the 2009 Merger, with each share of such common stock underlying such options and warrants being converted into the right to receive 0.2331234 shares of the Company’s common stock, on a post 1-for-17 reverse split basis, rounded down to the nearest whole share of the Company’s common stock. Following the 2009 Merger, each such option or warrant has an exercise price per share of the Company’s common stock equal to the quotient obtained by dividing the per share exercise price of such common stock subject to such option or warrant by 0.2331234, rounded up to the nearest whole cent.

Immediately following the effective time of the 2009 Merger, RPC’s stockholders (as of immediately prior to the 2009 Merger) owned approximately 95% of the Company’s outstanding common stock and the Company’s stockholders (as of immediately prior to the 2009 Merger) owned approximately 5% of the Company’s outstanding common stock.

RPC, the Company’s wholly-owned subsidiary, was the “accounting acquirer,” and for accounting purposes, the Company was deemed as having been “acquired” in the 2009 Merger. The Board of Directors and officers that managed and operated RPC immediately prior to the effective time of the 2009 Merger became the Company’s Board of Directors and officers. Additionally, following the effective time of the 2009 Merger, the business conducted by RPC immediately prior to the effective time of the 2009 Merger became primarily the business conducted by the Company. In December 2011, RPC merged into Raptor Pharmaceutical Corp.

The following reflects the Company’s current, post-2009 Merger corporate structure (jurisdiction of incorporation):

Raptor Pharmaceutical Corp., formerly         TorreyPines Therapeutics, Inc. (Delaware)

                |                                                                                  |

    Raptor Therapeutics Inc. (Delaware)        Raptor Discoveries Inc. (Delaware)

                |                                     |

                |                 Raptor European Products, LLC (Delaware)

                |                                     |

        RPTP European Holdings C.V. (Netherlands)

                |

            Raptor Pharmaceuticals Europe B.V. (Netherlands)

-7-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Raptor, a publicly-traded biotechnology company, seeks to research, manufacture, and commercialize medicines that improve life for patients with severe, rare disorders. Raptor currently has product candidates in clinical development designed to potentially treat nephropathic cystinosis, Non-alcoholic Steatohepatitis (“NASH”), Huntington’s Disease (“HD”), aldehyde dehydrogenase deficiency (“ALDH2”), and thrombotic disorder. Raptor’s preclinical programs are based upon bioengineered novel drug candidates and drug-targeting platforms derived from the human receptor-associated protein and related proteins that are designed to target cancer and infectious diseases.

The Company is subject to a number of risks, including: the need to raise capital through equity and/or debt financings; the uncertainty whether the Company’s research and development efforts will result in successful commercial products; competition from larger organizations; reliance on licensing the proprietary technology of others; dependence on key personnel; uncertain patent protection; and dependence on corporate partners and collaborators. See the section titled “Factors That May Affect Future Results” included elsewhere in this Quarterly Report on Form 10-Q.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

The Company’s condensed consolidated financial statements include the accounts of the Company’s direct and indirect wholly owned subsidiaries, Raptor Discoveries Inc., Raptor Therapeutics Inc. and Raptor European Products, LLC, such subsidiaries incorporated in Delaware on September 8, 2005 (date of inception), August 1, 2007, and February 14, 2012, respectively, and Raptor Pharmaceuticals Europe B.V. and RPTP European Holdings C.V., incorporated/registered in the Netherlands on December 15, 2009 and February 16, 2012, respectively. All inter-company accounts have been eliminated. The Company’s condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Through February 29, 2012, the Company had accumulated losses of approximately $103.4 million. Management expects to incur further losses for the foreseeable future. Management believes that the Company’s cash, cash equivalents and short term investments as of February 29, 2012 of approximately $49.9 million will be sufficient to meet the Company’s obligations through the first calendar quarter of 2013. Until the Company can generate sufficient levels of cash from its operations, the Company expects to continue to finance future cash needs primarily through proceeds from equity or debt financings, loans and collaborative agreements with corporate partners or through a business combination with a company that has such financing in order to be able to sustain its operations until the Company can achieve profitability and positive cash flows, if ever. The Company cannot assure that such financing or transaction will be available on acceptable terms, or at all. The uncertainty of this situation raises substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the failure to continue as a going concern.

-8-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company’s independent registered public accounting firm has audited the Company’s consolidated financial statements for the years ended August 31, 2011 and 2010 and for the period from September 8, 2005 (inception) to August 31, 2011. The November 14, 2011 audit opinion included a paragraph indicating substantial doubt as to the Company’s ability to continue as a going concern due to the fact that the Company is in the development stage and has not generated any revenue or sustained operating profits to date.

(b) Use of Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(c) Functional Currency

The Company’s consolidated functional currency is the U.S. dollar. Raptor Pharmaceuticals Europe B.V. (“BV”), the Company’s European subsidiary, uses the European Euro as its functional currency. At each quarter end, BV’s balance sheet is translated into U.S. dollars based upon the quarter-end exchange rate, while its statement of operations is translated into U.S. dollars based upon an average of the Euro’s value between the beginning and end date of the reporting period. BV’s equity is adjusted for any translation gain or loss.

(d) Fair Value of Financial Instruments

The carrying amounts of certain of the Company’s financial instruments including cash and cash equivalents, restricted cash, prepaid expenses, accounts payable, accrued liabilities and capital lease liability approximate fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these condensed consolidated financial statements. The warrant liability is carried at fair value which is determined using the Black-Scholes option valuation model at the end of each reporting period.

-9-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(e) Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less, when purchased, to be cash equivalents. The Company maintains cash and cash equivalents, which consist principally of money market funds with high credit quality financial institutions. Such amounts exceed Federal Deposit Insurance Corporation insurance limits. Restricted cash represents compensating balances required by the Company’s U.S. and European banks as collateral for credit cards.

(f) Short-term Investments

The Company invests in short-term investments in high credit-quality funds in order to obtain higher yields on its idle cash. Short-term investments consisted of:

	February 29, 2012		August 31, 2011
Adjustable-rate government fund	$	15,126,444	$	—
Ultra short-term income fund		15,114,690		—
Total short-term investments	$	30,241,134	$	—

Such investments are not insured by the Federal Deposit Insurance Corporation. The Company completed an evaluation of its investments and determined that it did not have any other-than-temporary impairments as of February 29, 2012. The investments are placed in financial institutions with strong credit ratings and management expects full recovery of the carrying amounts.

(g) Deferred Offering Costs

Deferred offering costs represent expenses incurred to raise equity capital related to financing transactions which have not yet been completed as of the balance sheet dates.

(h) Intangible Assets

Intangible assets include the intellectual property and other rights relating to DR Cysteamine (currently developed as RP103 and RP104), to an out-license acquired in the 2009 Merger and the rights to tezampanel and NGX 426 (oral tezampanel) also acquired in the 2009 Merger (tezampanel and oral tezampanel are referred to as tezampanel hereafter). The intangible assets related to RP103/RP104 are amortized using the straight-line method over the estimated useful life of 20 years, which is the life of the intellectual property patents. The 20-year estimated useful life is also based upon the typical development, approval, marketing and life cycle management timelines of pharmaceutical drug products. The intangible assets related to the out-license will be amortized using the straight-line method over the estimated useful life of 16 years, which is the life of the intellectual property patents. The intangible assets related to tezampanel, which has been classified as in-process research and development, will not be amortized until development is completed, but will be tested annually for impairment.

(i) Goodwill

Goodwill represents the excess of the value of the purchase consideration over the identifiable assets acquired in the 2009 Merger. Goodwill is reviewed annually, or when an indication of impairment exists. An impairment analysis is performed, and if necessary, a resulting write-down in valuation is recorded.

(j) Fixed Assets

Fixed assets, which mainly consist of leasehold improvements, lab equipment, computer hardware and software and capital lease equipment, are stated at cost. Depreciation is computed using the straight-line method over the related estimated useful lives, except for leasehold improvements and capital lease equipment, which are depreciated over the shorter of the useful life of the asset or the lease term. Significant additions and improvements that have useful lives estimated at greater than one year are capitalized, while repairs and maintenance are charged to expense as incurred.

-10-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(k) Impairment of Long-Lived Assets

The Company evaluates its long-lived assets for indicators of possible impairment by comparison of the carrying amounts to future net undiscounted cash flows expected to be generated by such assets when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Should an impairment exist, the impairment loss would be measured based on the excess carrying value of the asset over the asset’s fair value or discounted estimates of future cash flows. The Company has not identified any such impairment losses to date.

(l) Common Stock Warrant Liabilities

The warrants issued by the Company in the 2010 private placement contain a cash-out provision which may be triggered upon request by the warrant holders if the Company is acquired or upon the occurrence of certain other fundamental transactions involving the Company. This provision requires these warrants to be classified as liabilities and to be marked to market at each period-end commencing on August 31, 2010. The warrants issued by the Company in its December 2009 equity financing contain a conditional obligation that may require the Company to transfer assets to repurchase the warrants upon the occurrence of potential future events. Under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity (“ASC 480”), a financial instrument that may require the issuer to settle the obligation by transferring assets is classified as a liability. Therefore, the Company has classified the warrants as liabilities and will mark them to fair value at each period-end. The common stock warrants are re-measured at the end of every reporting period with the change in value reported in the Company’s condensed consolidated statements of comprehensive loss. Warrants which are recorded as liabilities that are exercised are re-measured and marked to market the day prior to exercise. Upon exercise of such warrants, the fair value of such warrants is reclassified to equity.

(m) Income Taxes

Income taxes are recorded under the liability method, under which deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the 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.

(n) Research and Development

The Company is a development stage biotechnology company. Research and development costs are charged to expense as incurred. Research and development expenses include medical, clinical, regulatory and scientists’ salaries and benefits, lab collaborations, preclinical studies, clinical trials, clinical trial materials, commercial drug manufactured prior to obtaining marketing approval, regulatory and clinical consultants, lab supplies, lab services, lab equipment maintenance and small equipment purchased to support the research laboratory, amortization of intangible assets and allocated executive, human resources and facilities expenses. Research and development expenses are offset by contra-expenses, which are reimbursements of research and development expenses received either from research collaborators or from government grants or tax rebates.

-11-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(o) In-Process Research and Development

Prior to September 1, 2009, the Company recorded in-process research and development expense for a product candidate acquisition where there is not more than one potential product or usage for the assets being acquired. Upon the adoption of the revised guidance on business combinations, effective September 1, 2009, the fair value of acquired in-process research and development is capitalized and tested for impairment at least annually. Upon completion of the research and development activities, the intangible asset is amortized into earnings over the related product’s useful life. In-process research and development that is amortized or expensed is recorded as part of research and development expenses on the Company’s condensed consolidated statements of comprehensive loss. The Company reviews each product candidate acquisition to determine the existence of in-process research and development.

(p) Net Loss per Share

Net loss per share is calculated by dividing net loss by the weighted average shares of common stock outstanding during the period. Diluted net income per share is calculated by dividing net income by the weighted average shares of common stock outstanding and potential shares of common stock during the period. For all periods presented, potentially dilutive securities are excluded from the computation of fully diluted net loss per share as their effect is anti-dilutive. Potentially dilutive securities include:

	February 29, 2012		February 28, 2011
Warrants to purchase common stock		5,277,483		10,137,255
Options to purchase common stock		5,841,848		3,265,307
Total potentially dilutive securities		11,119,331		13,402,562

Net loss per share, basic and diluted, was $(0.29) and $(0.09) for the three month periods ended February 29, 2012 and February 28, 2011, respectively. Net loss per share, basic and diluted, was $(0.54) and $(0.42) for the six month periods ended February 29, 2012 and February 28, 2011, respectively.

Loss per share from operations, basic and diluted, was $(0.13) and $(0.15) for the three month periods ended February 29, 2012 and February 28, 2011, respectively. Loss per share from operations, basic and diluted, was $(0.29) and $(0.30) for the six month periods ended February 29, 2012 and February 28, 2011, respectively.

(q) Comprehensive Loss

Components of comprehensive loss are reported in the Company’s condensed consolidated statements of comprehensive loss in the period in which they are recognized. The components of comprehensive loss include net loss and foreign currency translation adjustments.

(r) Stock Option Plan

Effective September 1, 2006, the Company adopted the provisions of FASB ASC Topic 718, Accounting for Compensation Arrangements, (“ASC 718”) (previously listed as Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), Share-Based Payment) in accounting for its stock option plans. Under ASC 718, compensation cost is measured at the grant date based on the fair value of the equity instruments awarded and is recognized over the period during which an employee is required to provide service in exchange for the award, or the requisite service period, which is usually the vesting period. The fair value of the equity award granted is estimated on the date of the grant. The Company accounts for stock options issued to third parties, including consultants, in accordance with the provisions of the FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees, (“ASC 505-50”) (previously listed as Emerging Issues Task Force Consensus No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services). See Note 7, Stock Option Plans, for further discussion of employee stock-based compensation.

-12-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(s) Recent Accounting Pronouncements

In December 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-28, Intangibles – Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (“ASU 2010-28”). ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts and requires the company to perform Step 2 if it is more likely than not that a goodwill impairment may exist. ASU 2010-28 is effective for fiscal years and interim periods within those years, beginning after December 15, 2010. Early adoption is not permitted. The Company adopted these standards on September 1, 2011 and has determined that ASU 2010-28 had no material impact on its condensed consolidated financial statements for the three and six month periods ended February 29, 2012, because there was no requirement to perform Step 2 due to the Company’s positive carrying amount.

In December 2010, the FASB issued ASU 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations (“ASU 2010-29”). ASU 2010-29 is an update that addresses diversity in practice about the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations if the entity presents comparative financial statements and expands the required disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. This standard is effective prospectively for business combinations for which the acquisition dates are on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted. The Company adopted these standards on September 1, 2011, however since there were no business combinations during the three and six month periods ended February 29, 2012, ASU 2010-29 had no material impact on the Company’s financial disclosure, however, the provision will impact the financial disclosures of any business combinations in the future.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 is intended to result in convergence between U.S. GAAP and International Financial Reporting Standards (“IFRS”) requirements for measurement of and disclosures about fair value. The amendments are not expected to have a significant impact on companies applying U.S. GAAP. Key provisions of the amendment include: a prohibition on grouping financial instruments for purposes of determining fair value, except when an entity manages market and credit risks on the basis of the entity’s net exposure to the group; an extension of the prohibition against the use of a blockage factor to all fair value measurements (that prohibition currently applies only to financial instruments with quoted prices in active markets); and a requirement that for recurring Level 3 fair value measurements, entities disclose quantitative information about unobservable inputs, a description of the valuation process used and qualitative details about the sensitivity of the measurements. In addition, for items not carried at fair value but for which fair value is disclosed, entities will be required to disclose the level within the fair value hierarchy that applies to the fair value measurement disclosed. ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011. The Company will adopt these standards on March 1, 2012 and is currently assessing the impact on its condensed consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 will require companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. The standard does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. This standard is effective for interim and annual periods beginning after December 15, 2011. The Company early adopted these standards as of August 31, 2011. Because ASU 2011-05 impacts presentation only, it had no effect on the Company’s condensed consolidated financial statements or on its financial condition for the three and six month periods ended February 29, 2012.

In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU 2011-08”), which permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. Because the Company has only one reporting unit, which has a fair value higher than its carrying amount, adoption of ASU 2011-08 did not have a material impact on the Company’s condensed consolidated financial statements for the three and six month periods ended February 29, 2012.

-13-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(3) INTANGIBLE ASSETS AND GOODWILL

On December 14, 2007, the Company acquired the intellectual property and other rights to develop RP103/RP104 to treat various clinical indications from the University of California at San Diego (“UCSD”) by way of a merger with Encode Pharmaceuticals, Inc., a privately held development stage company (“Encode”), which held the intellectual property license with UCSD. The intangible assets acquired in the merger with Encode were recorded at approximately $2.6 million, primarily based on the value of the Company’s common stock and warrants issued to the Encode stockholders.

Intangible assets recorded as a result of the 2009 Merger were approximately $1.1 million as discussed in Note 8 below.

Summary of intangibles acquired as discussed above:

	February 29, 2012			August 31, 2011
Intangible asset (IP license for RP103/RP104) related to the Encode merger	$	2,620,000		$	2,620,000
Intangible assets (out-license) related to the 2009 Merger		240,000			240,000
In-process research and development (IP license for tezampanel) related to the 2009 Merger		900,000			900,000
Total intangible assets		3,760,000			3,760,000
Less accumulated amortization		(582,083	)		(509,083	)
Intangible assets, net	$	3,177,917		$	3,250,917

The intangible assets related to RP103/RP104 are being amortized monthly over 20 years, which are the life of the intellectual property patents and the estimated useful life. The 20 year estimated useful life is also based upon the typical development, approval, marketing and life cycle management timelines of pharmaceutical drug products. The intangible assets related to the out-license will be amortized using the straight-line method over the estimated useful life of 16 years, which is the life of the intellectual property patents. The intangible assets related to tezampanel, which has been classified as in-process research and development, will not be amortized until the product is developed. During the three month periods ended February 29, 2012 and February 28, 2011, the Company amortized $36,500 and $38,375, respectively, of intangible assets to research and development expense. During the six month periods ended February 29, 2012 and February 28, 2011 and the cumulative period from September 8, 2005 (inception) to February 29, 2012, the Company amortized $73,000, $76,750 and $623,958 (included $41,875 related to NeuroTrans™ which was written off as of August 31, 2011), respectively, of intangible assets to research and development expense.

-14-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the actual and estimated amortization expense for intangible assets for the periods indicated:

Amortization period	Amortization expense
Fiscal year ending August 31, 2012 – estimate		146,000
Fiscal year ending August 31, 2013 – estimate		146,000
Fiscal year ending August 31, 2014 – estimate		146,000
Fiscal year ending August 31, 2015 – estimate		146,000
Fiscal year ending August 31, 2016 – estimate		146,000

Goodwill of $3,275,403 represents the excess of total consideration recorded for the 2009 Merger over the value of the assets assumed. The Company tested the carrying value of goodwill for impairment as of its fiscal year ended August 31, 2011 and determined that there was no impairment. Intangibles are tested for impairment whenever events indicate that their carrying values may not be recoverable. During the year ended August 31, 2011 the NeuroTrans™ asset was written off with a carrying value of $108,250 due to the termination of a collaboration agreement.

(4) FIXED ASSETS

Fixed assets consisted of:

Category	February 29, 2012			August 31, 2011			Estimated useful lives
Leasehold improvements	$	129,762		$	124,763		Shorter of life of asset or lease term
Office furniture		3,188			3,188		7 years
Laboratory equipment		423,472			285,346		5 years
Computer hardware and software		152,517			131,229		3 years
Capital lease equipment		13,730			13,730		Shorter of life of asset or lease term
Total at cost		722,669			558,256
Less: accumulated depreciation		(499,223	)		(481,259	)
Total fixed assets, net	$	223,446		$	76,997

Depreciation expense for the three month periods ended February 29, 2012 and February 28, 2011 was $9,295 and $19,756, respectively. Depreciation expense for the six month periods ended February 29, 2012 and February 28, 2011 and the cumulative period from September 8, 2005 (inception) to February 29, 2012 was $17,964, $39,441 and $518,737, respectively. Accumulated depreciation on capital lease equipment was $2,112 and zero as of February 29, 2012 and August 31, 2011, respectively.

-15-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(5) FAIR VALUE MEASUREMENT

The Company uses a fair-value approach to value certain assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company uses a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

• Level one — Quoted market prices in active markets for identical assets or liabilities;

• Level two — Inputs other than level one inputs that are either directly or indirectly observable; and

• Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. Assets and liabilities measured at fair value on a recurring basis at February 29, 2012 and August 31, 2011 are summarized as follows:

Assets	Level 1		Level 2		Level 3		February 29, 2012
Fair value of cash equivalents	$	19,215,313	$	—	$	—	$	19,215,313
Restricted cash		—		163,461		—		163,461
Short-term investments		30,241,134		—		—		30,241,134
Total	$	49,456,447	$	163,461	$	—	$	49,619,908
Liabilities
Fair value of common stock warrants	$	—	$	—	$	26,568,922	$	26,568,922
Total	$	—	$	—	$	26,568,922	$	26,568,922
Assets	Level 1		Level 2		Level 3		August 31, 2011
Fair value of cash equivalents	$	13,855,813	$	—	$	—	$	13,855,813
Restricted cash		—		114,468		—		114,468
Total	$	13,855,813	$	114,468	$	—	$	13,970,281
Liabilities
Fair value of common stock warrants	$	—	$	—	$	23,575,294	$	23,575,294
Total	$	—	$	—	$	23,575,294	$	23,575,294

Cash equivalents and short-term investments represent the fair value of the Company’s investment in four money markets and two short-term bond funds, respectively, as of February 29, 2012 and two money market accounts as of August 31, 2011. As of February 29, 2012, the fair value of the Company’s common stock warrant liability increased resulting primarily from an increase in the Company’s common stock price compared to the stock price as of August 31, 2011.

-16-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Marked-to-Market

The common stock warrants issued in the Company’s August 2010 private placement and the Company’s December 2009 equity financing are classified as liabilities under ASC 480 and are, therefore, re-measured using the Black-Scholes option valuation model at the end of every reporting period with the change in value reported in the Company’s condensed consolidated statements of comprehensive loss.

For the three and six months ended February 29, 2012 and for the cumulative period from September 8, 2005 (inception) to February 29, 2012, as a result of the marking-to-market of the warrant liability at quarter-end and the day prior to the exercise of warrants subject to warrant liability accounting, the Company recorded losses of $7.8 million, $12.0 million and $34.2 million, respectively, in the line item adjustment to fair value of common stock warrants in its consolidated statements of comprehensive loss. See Note 9 for further discussion on the calculation of the fair value of the warrant liability. Below is the activity of the warrant liabilities (in millions):

	Six month periods ended
	February 29, 2012			February 28, 2011
Fair value of December 2009 direct offering warrants (including placement agent warrants) at beginning of the fiscal years	$	5.9		$	5.8
December 2009 direct offering warrants exercised during the six month periods ended February 29, 2012 and February 28, 2011		(3.3	)		2.3
Adjustment to mark to market common stock warrants for the six month periods ended February 29, 2012 and February 28, 2011		2.2			(1.0	)
December 2009 direct offering common stock warrant liability at fair value at February 29, 2012 and February 28, 2011		4.8			7.1
Fair value of August 2010 private placement warrants (including broker warrants) at beginning of the fiscal years		17.7			9.9
August 2010 private placement warrants exercised during the six month periods ended February 29, 2012 and February 28, 2011		(3.8	)		3.5
Adjustment to mark to market common stock warrants for the six month periods ended February 29, 2012 and February 28, 2011		7.9			(0.8	)
August 2010 private placement common stock warrant liability at fair value at February 29, 2012 and February 28, 2011		21.8			12.6
Total warrant liability at February 29, 2012 and February 28, 2011	$	26.6		$	19.7

(6) ACCRUED LIABILITIES

Accrued liabilities consisted of:

		$1,658,386		$1,658,386
	February 29, 2012		August 31, 2011
Clinical trial costs	$	1,320,554	$	1,177,859
Accrued vacation and employee benefits		293,586		142,678
Accrued bonuses		239,310		478,619
Salaries and wages		175,101		125,069
Legal fees		148,763		164,761
Consulting—general and administrative		79,534		18,085
Patent costs		34,197		2,969
Clinical trial materials		—		125,256
Other		84,787		13,958
Total accrued liabilities	$	2,375,832	$	2,249,254

-17-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(7) STOCK OPTION PLANS

Effective September 1, 2006, the Company began recording compensation expense associated with stock options and other forms of equity compensation in accordance with ASC 718. Prior to September 1, 2006, the Company accounted for stock options according to the provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, and therefore no related compensation expense was recorded for awards granted with no intrinsic value. The Company adopted the modified prospective transition method provided for under ASC 718, and consequently has not retroactively adjusted results from prior periods. Under this transition method, compensation cost associated with stock options now includes: (i) quarterly amortization related to the remaining unvested portion of all stock option awards granted prior to September 1, 2006, based on the grant date value estimated in accordance with the original provisions of ASC 718; and (ii) quarterly amortization related to all stock option awards granted subsequent to September 1, 2006, based on the grant date fair value estimated in accordance with the provisions of ASC 718. In addition, the Company records consulting expense over the vesting period of stock options granted to consultants. The compensation expense for stock-based compensation awards includes an estimate for forfeitures and is recognized over the requisite service period of the options, which is typically the period over which the options vest, using the straight-line method. Employee stock-based compensation expense for the three month periods ended February 29, 2012 and February 28, 2011 was $1,104,301 and $305,888, respectively. Employee stock-based compensation expense for the six month periods ended February 29, 2012, February 28, 2011 and for the cumulative period from September 8, 2005 (inception) to February 29, 2012 was $2,021,039, $1,179,562 and $5,372,401, respectively, of which cumulatively $4,311,183 was included in general and administrative expense and $1,061,218 was included in research and development expense. No employee stock compensation costs were recognized for the period from September 8, 2005 (inception) to August 31, 2006, which was prior to the Company’s adoption of ASC 718.

Stock-based compensation expense was based on the Black-Scholes option-pricing model assuming the following:

		170 to 240		170 to 240		170 to 240
Period*	Risk-free interest rate			Expected life of stock option	Annual volatility
September 8, 2005 (inception) to August 31, 2006**		5	%	10 years		100	%
Year ended August 31, 2007		4 to 5	%	8 years		100	%
Year ended August 31, 2008		2 to 3.75	%	8 years		109 to 128	%
Year ended August 31, 2009		1.5 to 3.2	%	7 years		170 to 240	%
Year ended August 31, 2010		2.1 to 3.1	%	6 to 7 years		55 to 245	%
Year ended August 31, 2011		1.6 to 2.4	%	6 years		88 to 116	%
Three months ended November 30, 2011		1.2	%	6 years		121	%
Three months ended February 29, 2012		1.12	%	5 years		122	%

* Dividend rate is 0% for all periods presented.

** Stock-based compensation expense was recorded on the condensed consolidated statements of operations and statements of comprehensive loss commencing on the effective date of ASC 718, September 1, 2006. Prior to September 1, 2006, stock based compensation was reflected only in the footnotes to the condensed consolidated statements of operations, with no effect on the condensed consolidated statements of operations, per the guidelines of APB Opinion No. 25. Consultant stock-based compensation expense has been recorded on the condensed consolidated statements of operations and statements of comprehensive loss since inception.

-18-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

If factors change and different assumptions are employed in the application of ASC 718, the compensation expense recorded in future periods may differ significantly from what was recorded in the current period.

The Company recognizes as an expense the fair value of options granted to persons who are neither employees nor directors. The fair value of expensed options was based on the Black-Scholes option-pricing model assuming the same factors shown in the stock-based compensation expense table above. Stock-based compensation expense for consultants for the three and six month periods ended February 29, 2012 and February 28, 2011 and for the cumulative period from September 8, 2005 (inception) to February 29, 2012 was zero, zero, $32,737, $37,010 and $683,322, respectively, of which cumulatively $147,295 was included in general and administrative expense and $536,027 was included in research and development expense.

A summary of the activity in the 2010 Equity Incentive Plan, the 2006 Equity Compensation Plan, as amended and the Company’s other stock option plans, is as follows:

	Option shares			Weighted- average exercise price		Exercisable		Weighted- average fair value of options granted
Outstanding at September 8, 2005		—		$	—		—	$	—
Granted		580,108		$	2.64		—	$	2.47
Exercised		—		$	—		—	$	—
Canceled		—		$	—		—	$	—
Outstanding at August 31, 2006		580,108		$	2.64		4,010	$	2.47
Granted		107,452		$	2.56		—	$	2.31
Exercised		(3,381	)	$	2.57		—	$	2.40
Canceled		—			—		—	$	—
Outstanding at August 31, 2007		684,179		$	2.63		273,236	$	2.45
Granted		223,439		$	2.27		—	$	2.21
Exercised		—		$	—		—	$	—
Canceled		—		$	—		—	$	—
Outstanding at August 31, 2008		907,618		$	2.54		600,837	$	2.39
Granted		81,595		$	1.13		—	$	1.04
Exercised		—		$	—		—	$	—
Canceled		—		$	—		—	$	—
Outstanding at August 31, 2009		989,213		$	2.42		826,303	$	2.40
Granted		302,772		$	2.29		160,605	$	1.24
Assumed in the 2009 Merger		161,044		$	114.12		158,475	$	2.63
Exercised		(37,881	)	$	1.69		—	$	1.49
Canceled		(23,860	)	$	142.42		—	$	2.00
Outstanding at August 31, 2010		1,391,288		$	14.25		1,089,248	$	1.87
Granted		2,231,790		$	3.39		834,624	$	2.54
Exercised		(39,302	)	$	2.44		—	$	2.02
Canceled		(3,221	)	$	1,088.33		—	$	—
Outstanding at August 31, 2011		3,580,555		$	6.64		1,881,349	$	2.30
Granted		2,119,905		$	5.13		—	$	4.45
Exercised		(17,485	)	$	2.27		—	$	1.97
Canceled		(477	)	$	15.81		—	$	0.05
Outstanding at November 30, 2011		5,682,498		$	6.09		2,051,680	$	3.14
Granted		190,000		$	6.87		—	$	5.73
Exercised		(26,128	)	$	2.55		—	$	1.96
Canceled		(4,522	)	$	429.54		—	$	—
Outstanding at February 29, 2012		5,841,848		$	5.80		2,222,773	$	3.25

-19-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The weighted average intrinsic values of stock options outstanding and expected to vest and stock options exercisable as of February 29, 2012 and February 28, 2011 were approximately $20.4 million, $9.6 million, $1.6 million and $1.0 million, respectively (representing 5.8 million, 2.2 million, 3.3 million and 1.5 million shares, respectively).

There were 1,563,508 options available for grant as of February 29, 2012 under the 2010 Equity Incentive Plan, as amended (the “Plan”), which was approved by the Company’s Board of Directors as of February 2, 2010 and approved by its stockholders on March 9, 2010. On April 7, 2011, the Company’s stockholders passed amendments to the Plan which allow for an increase of the grant pool based upon 5% of the Company’s common stock outstanding as of April 7, 2011, August 31, 2011 and August 31, 2012 up to an aggregate maximum increase of 6,000,000 shares. The April 7 and August 31, 2011, replenishments added 1,629,516 and 1,778,459 shares, respectively, available for grant under the Plan. The amendments also allow for 50% accelerated vesting of unvested stock options upon a change of control as defined in the Plan. In September 2011, the Company’s Board of Directors approved an amended and restated form of award agreement under the Plan, which will be used for awards granted on or after September 22, 2011. The amended and restated award agreement, subject to the terms of any applicable employment agreement, extends the termination date of the awards granted under the Plan that are vested as of such termination date due to (a) an employee’s or a non-employee director’s retirement at age 62 or older which employee or non-employee director has at least five (5) years of continuous service with us prior to such retirement, (b) the termination of a non-employee director’s board membership for reasons other than for cause or retirement and (c) an employee’s or a non-employee director’s death (during his or her continuous service with us or within 90 days’ of such continuous service with us) or permanent disability, to eighteen (18) months from the date of termination of continuous service with the Company. No further grants will be made under any previous or assumed stock option plans. As of February 29, 2012, the options outstanding under all of the Company’s stock option plans consisted of the following:

		1,537,404		1,537,404		1,537,404		1,537,404		1,537,404
	Options outstanding						Options exercisable
Range of exercise prices	Number of options outstanding and expected to vest (#)		Weighted- average remaining contractual life (yrs.)		Weighted- average exercise price ($)		Number of options exercisable (#)		Weighted- average exercise price ($)
$0 to $1.00		34,969		7.13		0.85		24,769		0.85
$1.01 to $2.00		84,427		7.26		1.74		68,752		1.74
$2.01 to $3.00		1,514,129		6.52		2.65		1,077,807		2.65
$3.01 to $4.00		1,766,957		8.77		3.50		880,193		3.50
$4.01 to $5.00		87,674		7.46		4.70		86,215		4.70
$5.01 to $6.00		2,119,905		9.57		5.13		41,250		5.13
$6.01 to $7.00		120,000		8.03		6.36		0		4.71
$7.01 to $8.00		70,000		9.88		7.75		0		7.75
$8.01 to $964.24		43,787		3.54		249.94		43,787		249.94
		5,841,848		8.41		5.80		2,222,773		7.92

At February 29, 2012, the total unrecognized compensation cost was approximately $11.8 million. The weighted-average period over which it is expected to be recognized is 3.25 years.

(8) ISSUANCE OF COMMON STOCK

As of February 29, 2012, there were 48,854,168 shares of the Company’s common stock outstanding.

ISSUANCE OF COMMON STOCK PURSUANT TO COMMON STOCK WARRANT EXERCISES AND STOCK OPTION EXERCISES

During the three and six month periods ended February 29, 2012, the Company received approximately $2.8 million and $4.8 million from the exercise of warrants in exchange for the issuance of 1.1 million and 1.7 million shares of the Company’s common stock respectively. During the cumulative period from September 8, 2005 (inception) through February 29, 2012, the Company received approximately $20.7 million from the exercise of warrants in exchange for the issuance of an aggregate of 8.8 million shares.

During the three and six month periods ended February 29, 2012, the Company received $0.07 million and $0.1 million from the exercise of stock options in exchange for the issuance of 26,128 and 43,613 shares of the Company’s common stock, respectively. For the cumulative period from September 8, 2005 (inception) through February 29, 2012, the Company received approximately $0.3 million from the exercise of stock options resulting in the issuance of 124,176 shares of common stock.

-20-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ISSUANCE OF COMMON STOCK PURSUANT TO AN ASSET PURCHASE AGREEMENT WITH CONVIVIA, INC.

On October 18, 2007, the Company purchased certain assets of Convivia, including intellectual property, know-how and research reports related to a product candidate targeting liver ALDH2 deficiency, a genetic metabolic disorder. The Company hired Convivia’s chief executive officer and founder, Thomas E. (Ted) Daley, as President of clinical development. In exchange for the assets related to the ALDH2 deficiency program, the Company issued to Convivia 46,625 shares of its restricted, unregistered common stock, an additional 46,625 shares of its restricted, unregistered common stock to a third party in settlement of a convertible loan between the third party and Convivia, and another 8,742 shares of restricted, unregistered common stock in settlement of other obligations of Convivia. Mr. Daley, as the former sole stockholder of Convivia (now dissolved), may earn additional shares of the Company based on certain triggering events or milestones related to the development of Convivia assets. In addition, Mr. Daley may earn cash bonuses based on the same triggering events pursuant to his employment agreement. In January 2008, Mr. Daley earned a $30,000 cash bonus pursuant to his employment agreement for executing the Patheon formulation agreement for manufacturing Convivia™. In March 2008, Mr. Daley earned a $10,000 cash bonus pursuant to his employment agreement and was issued 23,312 shares of common stock valued at $56,000 based on the execution of an agreement to supply the Company with the active pharmaceutical ingredient for Convivia™ pursuant to the asset purchase agreement.

In October 2008, Mr. Daley was issued 23,312 shares of restricted common stock valued at $27,000 and earned a $30,000 cash bonus (pursuant to Mr. Daley’s employment agreement) pursuant to the fulfillment of a clinical milestone. In July 2010, the Company issued 11,656 shares of its restricted common stock valued at $35,551 and paid a $10,000 cash bonus to Mr. Daley as a result of the execution of the license agreement with Uni Pharma for the development of Convivia™ in Taiwan. As discussed above, in aggregate, the Company has issued to Mr. Daley, 58,280 shares of Raptor’s common stock valued at $118,551 and paid $70,000 in cash bonuses related to Convivia™ milestones along with another $20,000 in cash bonuses related to employment milestones pursuant to Mr. Daley’s employment agreement. Pursuant to ASC 730, the accounting guidelines for expensing research and development costs, the Company has expensed the value of the stock issued in connection with this asset purchase (except for milestone bonuses, which are expensed as compensation expense) as in-process research and development expense under research and development expenses in the amount of $240,625 on its consolidated statement of operations for the year ended August 31, 2008.

MERGER OF RAPTOR THERAPEUTICS INC. AND ENCODE PHARMACEUTICALS, INC.

On December 14, 2007, the Company entered into a Merger Agreement (the “Encode Merger Agreement”), dated as of the same date, by and between the Company, its subsidiary, Raptor Therapeutics Inc. and Encode. Pursuant to the Encode Merger Agreement, a certificate of merger was filed with the Secretary of State of the State of Delaware and Encode was merged with and into Raptor Therapeutics Inc. The existence of Encode ceased as of the date of the Encode Merger Agreement. Pursuant to the Encode Merger Agreement and the certificate of merger, Raptor Therapeutics Inc., as the surviving corporation, continued as a wholly-owned subsidiary of the Company. Under the terms of and subject to the conditions set forth in the Encode Merger Agreement, the Company issued 802,946 shares of restricted, unregistered shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) to the stockholders of Encode (the “Encode Stockholders”), options (“Company Options”) to purchase 83,325 shares of Common Stock to the optionholders of Encode (the “Encode Optionholders”), and warrants (“Company Warrants”) to purchase 256,034 restricted, unregistered shares of Common Stock to the warrantholders of Encode (the “Encode Warrantholders”, and together with the Encode Stockholders and Encode Optionholders, the “Encode Securityholders”), as of the date of the Encode Merger Agreement. Such Common Stock, Company Options to purchase Common Stock, and Company Warrants to purchase Common Stock combine for an aggregate amount of 1,142,305 shares of Common Stock issuable to the Encode Securityholders as of the closing of the merger with Encode. The purchase price was valued at $2.6 million, which is reflected as intangible assets on the Company’s consolidated balance sheet as of August 31, 2008, primarily based on the value of the Company’s common stock and warrants issued to Encode stockholders. The Encode Securityholders are eligible to receive up to an additional 559,496 shares of Common Stock, Company Options and Company Warrants to purchase Common Stock in the aggregate based on certain triggering events related to regulatory approval of RP103/RP104, an Encode product program described below, if completed within the five year anniversary date of the Encode Merger Agreement. The Company recorded this transaction as an asset purchase rather than a business combination, as Encode had not commenced planned principal operations at the time of the merger, such as generating revenues from its drug product candidate.

-21-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As a result of the merger with Encode, the Company received the exclusive worldwide license to RP103/RP104 (the “License Agreement”), developed by clinical scientists at the UCSD, School of Medicine. RP103/RP104 is a proprietary enterically coated formulation of cysteamine bitartrate, a cystine depleting agent currently approved by the U.S. Food and Drug Administration (“FDA”). Cysteamine bitartrate is prescribed for the management of the genetic disorder known as nephropathic cystinosis (“cystinosis”), a lysosomal storage disease. The active ingredient in RP103/RP104 has also demonstrated potential in studies as a treatment for other metabolic and neurodegenerative diseases, such as Huntington’s Disease and NASH.

In consideration of the grant of the license, the Company will be obligated to pay an annual maintenance fee until it begins commercial sales of any products developed pursuant to the License Agreement. In addition to the maintenance fee, the Company will be obligated to pay during the life of the License Agreement: milestone payments ranging from $20,000 to $750,000 for orphan indications and from $80,000 to $1,500,000 for non-orphan indications upon the occurrence of certain events, if ever; royalties on commercial net sales from products developed pursuant to the License Agreement ranging from 1.75% to 5.5%; a percentage of sublicense fees ranging from 25% to 50%; a percentage of sublicense royalties; and a minimum annual royalty commencing the year the Company begins commercially selling any products pursuant to the License Agreement, if ever. Under the License Agreement, the Company is obligated to fulfill predetermined milestones within a specified number of years ranging from 0.75 to 6 years from the effective date of the License Agreement, depending on the indication. To the extent that the Company fails to perform any of the obligations, UCSD may terminate the license or otherwise cause the license to become non-exclusive. Cumulatively, Raptor has expensed $680,000 in milestone payments to UCSD based upon the initiation of clinical trials in cystinosis, Huntington’s Disease and NASH.

ISSUANCES OF COMMON STOCK AND WARRANTS IN CONNECTION WITH THE SALE OF UNITS IN A PRIVATE PLACEMENT

During the period from May 21, 2008 through June 27, 2008, Raptor entered into a Securities Purchase Agreement, as amended (the “2008 Private Placement Purchase Agreement”), with 11 investors for the private placement of units of the Company, each unit comprised of one share of Raptor’s Common Stock and one warrant to purchase one half of one share of Raptor’s Common Stock, at a purchase price of $2.14 per unit. Pursuant to the 2008 Private Placement Purchase Agreement, the Company sold an aggregate of 4,662,468 shares of Common Stock for aggregate gross proceeds of $10.0 million and issued to the investors warrants, exercisable for two years from the initial closing, which entitle the investors to purchase up to an aggregate of 2,331,234 shares of Common Stock of the Company and have an exercise price of either $3.22 or $3.86 per share, depending on when such warrants are exercised, if at all, and were valued at approximately $3.0 million (using the following Black-Scholes pricing model assumptions: risk-free interest rate 2%; expected term 2 years and annual volatility 121.45%).

In connection with the May / June 2008 private placement, the Company issued warrants and a cash fee to placement agents to compensate them for placing investors into the financing. Placement agents were issued warrants exercisable for 7% of Common Stock issued and issuable under the warrants issued to investors as part of the financing units and a cash fee based upon the proceeds of the sale of the units of the private placement. In connection with the sale of units, the Company issued placement agent warrants to purchase 489,559 shares of Raptor’s Common Stock at an exercise price of $2.36 per share for a five year term (valued at approximately $960,000 using the following Black-Scholes pricing model assumptions: risk-free interest rate 2%; expected term 5 years and annual volatility 121.45%) and cash fees to placement agents totaling $700,000. Of the placement agents compensated, Limetree Capital was issued warrants to purchase 438,890 shares of Raptor’s Common Stock and cash commission of $627,550. One of the Company’s Board members served on the board of Limetree Capital.

On April 29, 2009, in order to reflect current market prices, Raptor notified the holders of warrants purchased in the May/June 2008 private placement that the Company was offering, in exchange for such warrants, new warrants to purchase its common stock at an exercise price of $1.29 per share, but only to the extent such exchange of the original warrants and exercise of the new warrants, including the delivery of the exercise price, occurred on or prior to July 17, 2009. The new warrants were valued at approximately $2.3 million based on the following Black-Scholes pricing model assumptions: risk-free interest rate 0.55%; expected term 1 year and annual volatility 231.97%. The warrants that were not exchanged prior to or on July 17, 2009 retained their original exercise prices of $3.86 per share and original expiration date of May 21, 2010. The Company received $2,614,500 of proceeds from warrant exercises that resulted in the issuance of 2,031,670 shares of Raptor’s common stock pursuant to the exchange described above.

-22-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On August 21, 2009, Raptor entered into a securities purchase agreement with four investors for the private placement of units of the Company at a purchase price of $1.37 per unit, each unit comprised of one share of Raptor’s common stock, par value $0.001 per share and one warrant to purchase one half of one share of Raptor’s common stock. Pursuant to the securities purchase agreement, the Company sold an aggregate of 1,738,226 units to the investors for aggregate gross proceeds of $2,386,000. The 1,738,226 units are comprised of an aggregate of 1,738,226 shares of common stock and warrants to purchase up to 869,113 shares of Raptor’s common stock valued at $1.0 million (using the following Black-Scholes pricing model assumptions: risk-free interest rate 1.11%; expected term 2 years and annual volatility 240.29%). The warrants, exercisable for two years from the closing, entitle the investors to purchase, in the aggregate, up to 869,113 shares of Raptor’s common stock and have an exercise price of either $2.57 until the first anniversary of issuance or $3.22 per share after the first anniversary of issuance.

In connection with the August 2009 private placement, the Company issued warrants and a cash fee to Limetree Capital as its sole placement agent to compensate it for placing investors into the financing. Limetree Capital was issued warrants exercisable for 7% of common stock issued and issuable under the warrants issued to investors as part of the financing units and a 3.5% cash fee based upon the proceeds of the sale of the units of the August 2009 private placement. Limetree Capital was issued a five-year warrant to purchase 129,733 shares of Raptor’s Common Stock at an exercise price of $1.50 per share (valued at approximately $171,000 using the following Black-Scholes pricing model assumptions: risk-free interest rate 2.58%; expected term 5 years and annual volatility 240.29%) and cash commission of $59,360.

2009 MERGER AND NASDAQ LISTING

On September 29, 2009, the Company, formerly known as TorreyPines Therapeutics, Inc. (“TorreyPines”) and RPC completed a reverse merger. The Company changed its name to “Raptor Pharmaceutical Corp.” and commenced trading on September 30, 2009 on the NASDAQ Capital Market under the ticker symbol “RPTP.”

In connection with the exchange of shares in the merger, immediately after the effective time of such merger, RPC and the Company’s stockholders owned 95% and 5% of the outstanding shares of the combined company, respectively. RPC stockholders received (as of immediately prior to such merger) 17,881,300 shares of the combined company’s common stock in exchange for the 76,703,147 shares of RPC’s common stock outstanding immediately prior to the closing of the merger. On September 29, 2009, immediately prior to the effective time of such merger, the Company’s Board of Directors, with the consent of RPC’s Board of Directors, acted to effect a reverse stock split of the issued and outstanding shares of the Company’s common stock such that every 17 shares of the Company’s common stock outstanding immediately prior to the effective time of the merger would represent one share of the Company’s common stock. Due to the reverse stock split implemented by the Company, the 15,999,058 shares of the Company’s common stock outstanding immediately prior to the closing of the merger became 940,863 shares of the combined company’s common stock.

-23-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In connection with the merger and subject to the same conversion factor as the RPC common stock (.2331234), the combined company assumed all of RPC’s stock options and warrants outstanding at the time of the merger. The combined company also retained the Company’s stock options and warrants outstanding at the merger, subject to the same adjustment factor as described above to give effect to the 1 for 17 reverse split.

The combined company is headquartered in Novato, California and is managed by Christopher M. Starr, Ph.D., as Chief Executive Officer and director, Todd C. Zankel, Ph.D., as Chief Scientific Officer, Kim R. Tsuchimoto as Chief Financial Officer, Ted Daley, as President of clinical development and Patrice P. Rioux., M.D., Ph.D., as Chief Medical Officer of clinical development.

There were a number of factors on which RPC’s Board of Directors relied in approving the 2009 Merger. The primary reason for RPC’s Board of Directors’ decision to merge with TorreyPines was the benefit anticipated from the additional liquidity expected from having a NASDAQ trading market on which the combined company’s common stock could be listed, in addition to having access to an expanded pipeline of product candidates across a wider spectrum of diseases and markets.

The liquidity benefit is the primary factor behind the goodwill recognized in the transaction (see below). The goodwill is expected to be fully deductible for tax purposes. Below is a breakdown of the assets acquired and liabilities assumed in the merger described herein (in millions, except for %):

		(millions)			(millions)
Asset Allocation	Value (millions)			%
Cash and equivalents	$	0.58			13
Other current assets		0.10			2
Accrued liabilities		(0.68	)		(15	)
Intangible assets:
In-process research & development		0.90			20
Licenses		0.24			6
Total identifiable assets		1.14			26
Plus goodwill		3.28			74
Total net assets acquired	$	4.42			100

-24-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ISSUANCES OF COMMON STOCK AND WARRANTS IN CONNECTION WITH THE SALE OF UNITS IN A REGISTERED DIRECT OFFERING

On December 17, 2009, the Company entered into a Placement Agent Agreement with Ladenburg Thalmann & Co. Inc. as placement agent (the “2009 Placement Agent”), relating to the issuance and sale to the Direct Offering Investors (as defined below) pursuant to a registered direct offering (the “Direct Offering”) of up to 3,747,558 units (the “Units”), consisting of (i) 3,747,558 shares of the Company’s common stock, (ii) warrants to purchase an aggregate of up to 1,873,779 shares of the Company’s common stock (and the shares of common stock issuable from time to time upon exercise of such warrants) (the “Series A Warrants”), and (iii) warrants to purchase an aggregate of up to 1,873,779 shares of the Company’s common stock (and the shares of common stock issuable from time to time upon exercise of such warrants) (the “Series B Warrants,” and collectively with the Series A Warrants, the “Investor Warrants”).

The 2009 Placement Agent received a placement fee equal to 6.5% of the gross cash proceeds to the Company from the Direct Offering of the Units or $487,183 (excluding any consideration that may be paid in the future upon exercise of the Warrants), a warrant to purchase up to an aggregate of 74,951 shares of the Company’s common stock at $2.50 per share (valued at approximately $52,000 using the following Black-Scholes pricing model assumptions: risk-free interest rate 2.23%; expected term 5 years and annual volatility 49.28%) and $25,000 in out-of-pocket accountable expenses. The warrant issued to Ladenburg has the same terms and conditions as the Investor Warrants except that the exercise price is 125% of the public offering price per share or $2.50 per share, and the expiration date is five years from the effective date of the Registration Statement.

In connection with the Direct Offering, following execution of the Placement Agent Agreement, the Company also entered into a definitive securities purchase agreement (the “Direct Offering Purchase Agreement”), dated as of December 17, 2009, with 33 investors set forth on the signature pages thereto (collectively, the “Direct Offering Investors”) with respect to the Direct Offering of the Units, whereby, on an aggregate basis, the Direct Offering Investors agreed to purchase 3,747,558 Units for a negotiated purchase price of $2.00 per Unit, amounting to gross proceeds of approximately $7.5 million and net proceeds after commissions and expenses of approximately $6.2 million. Each Unit consists of one share of the Company’s common stock, one Series A Warrant exercisable for 0.5 of a share of the Company’s common stock and one Series B Warrant exercisable for 0.5 of a share of the Company’s common stock. The shares of the Company’s common stock and the Warrants were issued separately. The Series A Warrants were exercisable during the period beginning one hundred eighty (180) days after the date of issue and ending on the fifth (5th) anniversary of the date of issue. The Series B Warrants were exercisable during the period beginning one hundred eighty (180) days after the date of issue and ending on the eighteen (18) month anniversary of the date of issue. The Investor Warrants have a per share exercise price of $2.45. At closing of the financing, the Series A Warrants were valued at $1.3 million (using the following Black-Scholes pricing model assumptions: risk-free interest rate 2.23%; expected term 5 years and annual volatility 49.28%) and the Series B Warrants were valued at $0.5 million (using the following Black-Scholes pricing model assumptions: risk-free interest rate 0.56%; expected term 18 months and annual volatility 49.28%). Based on the underlying terms of the Investor Warrants and Placement Agent Warrants, the Investor Warrants and the Placement Agent Warrants are classified as a liability, as discussed further below in Note 9.

-25-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ISSUANCES OF COMMON STOCK IN CONNECTION WITH AN EQUITY LINE

On April 16, 2010, the Company signed a purchase agreement with Lincoln Park Capital Fund, LLC (“LPC”), together with a registration rights agreement, whereby LPC agreed to purchase up to $15.0 million of the Company’s common stock over a 25 month period. Under the registration rights agreement, the Company agreed to file a registration statement related to the transaction with the U.S. Securities and Exchange Commission (“SEC”) covering the shares that have been issued or may be issued to LPC under the purchase agreement. Such registration statement was declared effective by the SEC on May 7, 2010. Post-effective amendments to such registration statement were filed on November 23, 2010 and December 1, 2010, which amended registration statement was declared effective by the SEC on December 1, 2010. Post-effective amendments to such amended registration statement were filed on October 11, 2011 and October 14, 2011 on Form S-3, which amended registration statement was declared effective by the SEC on October 21, 2011. After May 7, 2010, the Company had the right over a 25-month period to sell its shares of common stock to LPC in amounts of $100,000 to up to $1 million per sale, depending on certain conditions as set forth in the purchase agreement, up to the aggregate amount of $15.0 million. The purchase agreement may be terminated by the Company at any time at its discretion without any cost to the Company.

The purchase price of the shares issued to LPC under the purchase agreement is based on the prevailing market prices of the Company’s shares at the time of sale without any fixed discount. The Company controlled the timing and amount of any sales of shares to LPC. LPC did not have the right or the obligation to purchase any shares of the Company’s common stock on any business day that the purchase price of the Company’s common stock is below $1.50 per share.

In consideration for entering into the purchase agreement (the “LPC Purchase Agreement”), the Company issued to LPC 145,033 shares of common stock valued at $246,556 (recorded as deferred offering costs on the Company’s balance sheet and amortized over the usage of the equity line) as a commitment fee and is required to issue up to an additional 217,549 shares of its common stock pro rata as LPC purchases the $15.0 million of the Company’s common stock over the 25-month period. Since inception, the Company sold 4,186,038 shares to LPC at a weighted average price of $2.78 and paid commitment fees to LPC in the form of 168,929 shares (in addition to the 145,033 shares issued as the initial commitment fee), valued at $581,081. The Company issued an aggregate of 4,500,000 shares (including shares issued to LPC as commitment fees) to LPC pursuant to the LPC Purchase Agreement and does not plan to issue or register additional shares under such agreement.

2010 PRIVATE PLACEMENT

On August 9, 2010, the Company entered into a securities purchase agreement with 23 investors set forth on the signature pages thereto (the “U.S. Investors”) and a separate securities purchase agreement with a certain Canadian investor (the “Canadian Investor”) and together with the U.S. Investors, the “2010 Private Placement Investors”) set forth on the signature pages thereto (collectively, the “2010 Private Placement Purchase Agreements”), for the private placement (the “2010 Private Placement”) of the Company’s common stock and warrants to purchase its common stock, at a purchase price of $3.075 per unit, with each unit comprised of one share of common stock and a warrant to purchase one share of common stock. JMP Securities LLC (the “2010 Placement Agent”) served as the Company’s placement agent in the 2010 Private Placement.

The closing of this private placement occurred on August 12, 2010. The Company issued and sold an aggregate of 4,897,614 units, comprised of 4,897,614 shares of common stock and warrants to purchase up to 4,897,614 shares of its common stock for gross proceeds of approximately $15.1 million. Each warrant, exercisable for 5 years from August 12, 2010, has an exercise price of $3.075 per share. At closing of the 2010 Private Placement, the warrants issued to investors were valued at approximately $7.8 million (using the following Black-Scholes pricing model assumptions: risk-free interest rate 1.74%; expected term 5 years and annual volatility 85.14%.) As the placement agent for the 2010 Private Placement, the 2010 Placement Agent was issued one warrant to purchase 97,952 shares of the Company’s common stock (valued at approximately $0.2 million, based upon the same Black-Scholes inputs as the investor warrants), paid a cash commission of $978,911 and reimbursed for certain of its expenses incurred in connection with the 2010 Private Placement.

-26-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In connection with the 2010 Private Placement, on August 12, 2010, the Company entered into a registration rights agreement with the 2010 Private Placement Investors, pursuant to which the Company filed with the SEC a registration statement related to the 2010 Private Placement covering the resale of the common stock issued to the 2010 Private Placement Investors under the 2010 Private Placement Purchase Agreements and the shares of common stock that will be issued to the 2010 Private Placement Investors upon exercise of the warrants, including the warrant issued to the 2010 Placement Agent. Such registration statement was declared effective on August 31, 2010. Post-effective amendments to such registration statement were filed on November 23, 2010 and December 1, 2010, which amended registration statement was declared effective by the SEC on December 1, 2010. A post-effective amendment to such amended registration statement was filed on October 11, 2011 on Form S-3, which amended registration statement was declared effective by the SEC on October 21, 2011.

2011 FOLLOW-ON PUBLIC OFFERING

On September 13, 2011, the Company closed an underwritten public offering of shares of the Company’s common stock at a price to the public of $4.00 per share. The shares sold in the offering included 10.0 million shares of common stock plus an additional 1.5 million shares of common stock pursuant to the exercise by the underwriters of the over-allotment option the Company granted to them. Total gross proceeds to the Company in the offering (including in connection with the sale of the shares of common stock pursuant to the exercise of the over-allotment option) totaled $46.0 million, before underwriting discounts and commissions. The offering resulted in net proceeds to the Company of approximately $42.8 million after deduction of underwriting discounts of 6% and other offering expenses paid by the Company.

The following is a summary of common stock outstanding as of February 29, 2012:

Transaction	Date of Issuance	Common Stock Issued
Founders’ shares	Sep. 2005		1,398,742
Seed round	Feb. 2006		466,247
PIPE concurrent with reverse merger	May 2006		1,942,695
Shares issued in connection with reverse merger	May 2006		3,100,541
Warrant exercises	Jan. 2007 –Feb. 2012		6,791,485
Stock option exercises	Mar. 2007 –Feb. 2012		124,176
Loan finder’s fee	Sep. 2007		46,625
Convivia asset purchase	Oct. 2007 –Jun. 2010		160,272
Encode merger RP103/RP104 asset purchase	Dec. 2007		802,946
Shares issued pursuant to consulting agreement	May 2008		2,040
2008 private placement	May/Jun. 2008		4,662,468
Warrant exercises from warrant exchange	Jun./Jul. 2009		2,031,670
2009 private placement	Aug. 2009		1,738,226
Shares issued in connection with reverse merger	Sep. 2009		940,863
2009 registered direct financing	Dec. 2009		3,747,558
Shares issued to equity line investor (incl. fee shares)	Apr. 2010 – Feb. 2011		4,500,000
2010 private placement	Aug. 2010		4,897,614
2011 follow-on public offering	Sep. 2011		11,500,000
Total shares of common stock outstanding			48,854,168

-27-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(9) WARRANTS

The table reflects the number of common stock warrants outstanding as of February 29, 2012:

	Number of shares exercisable		Exercise price			Expiration date
Issued in connection with Encode merger		233,309	$	2.87		12/13/2015
Issued to placement agents in May / June 2008		432,649	$	2.36		5/21/2013
Issued to placement agents in August 2009		65,000	$	1.50		8/21/2014
TorreyPines warrants assumed in 2009 Merger		8,140	$	80.86	*	6/11/2013-9/26/2015
Issued to registered direct investors in Dec. 2009		818,750	$	2.45		12/23/2014
Issued to private placement investors in Aug. 2010		3,621,683	$	3.075		8/11/2015
Issued to placement agent in Aug. 2010		97,952	$	3.075		8/11/2015
Total warrants outstanding		5,277,483	$	3.01	*

* Weighted average exercise price

The warrants issued by the Company in the August 2010 private placement and the December 2009 equity financing contain a conditional obligation that may require the Company to transfer assets to repurchase the warrants upon the occurrence of potential future events. Under ASC 480, a financial instrument that may require the issuer to settle the obligation by transferring assets is classified as a liability. Therefore, the Company has classified the warrants from both financings as liabilities and will mark them to fair value at each period end.

A Black-Scholes option-pricing model was used to obtain the fair value of the warrants issued in the December 2009 and August 2010 equity financings using the following assumptions at February 29, 2012 and August 31, 2011:

	December 2009 equity financing Series A						August 2010 equity financing investors and placement agent
	February 29,  2012			August 31, 2011			February 29, 2012			August 31, 2011
Fair value ($ millions)		4.7			5.9			21.8			17.7
Black-Scholes inputs:
Stock price	$	6.98		$	4.73		$	6.98		$	4.73
Exercise price	$	2.45		$	2.45		$	3.075		$	3.075
Risk free interest rate		0.43	%		0.38	%		0.65	%		0.70	%
Volatility		122.4	%		116.4	%		122.4	%		116.4	%
Expected term (years)		2.75			3.25			3.50			4.00
Dividend		0			0			0			0

-28-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three and six month periods ended February 29, 2012 and February 28, 2011, and for the cumulative period from September 8, 2005 (inception) to February 29, 2012, as a result of the marking-to-market of the warrant liability at quarter-end and the day prior to the exercise of warrants subject to warrant liability accounting, the Company recorded losses of approximately $7.8 million, $12.0 million, a gain of approximately $1.8 million, a loss of approximately $3.9 million and losses of approximately $34.2 million, respectively, in the line item adjustment to fair value of common stock warrants in its condensed consolidated statements of comprehensive loss. See Note 5 for further discussion on the marking-to-market of the warrant liability.

(10) COMMITMENTS AND CONTINGENCIES

CONTRACTUAL OBLIGATIONS WITH BIOMARIN

Pursuant to the terms of the asset purchase agreement the Company entered into with BioMarin for the purchase of intellectual property related to the Company’s receptor-associated protein (“RAP”) based technology (including NeuroTrans™), the Company is obligated to make the following milestone payments to BioMarin upon the achievement of the following events:

$50,000 (paid by the Company in June 2006) within 30 days after the Company receives total aggregate debt or equity financing of at least $2,500,000;

$100,000 (paid by the Company in June 2006) within 30 days after the Company receives total aggregate debt or equity financing of at least $5,000,000;

$500,000 upon the Company’s filing and acceptance of an investigational new drug application for a drug product candidate based on the NeuroTrans™ product candidate;

$2,500,000 upon the Company’s successful completion of a Phase 2 human clinical trial for a drug product candidate based on the NeuroTrans™ product candidate;

$5,000,000 upon on the Company’s successful completion of a Phase 3 human clinical trial for a drug product candidate based on the NeuroTrans™ product candidate;

$12,000,000 within 90 days of the Company’s obtaining marketing approval from the FDA or other similar regulatory agencies for a drug product candidate based on the NeuroTrans™ product candidate;

$5,000,000 within 90 days of the Company’s obtaining marketing approval from the FDA or other similar regulatory agencies for a second drug product candidate based on the NeuroTrans™ product candidate;

$5,000,000 within 60 days after the end of the first calendar year in which the Company’s aggregated revenues derived from drug product candidates based on the NeuroTrans™ product candidate exceed $100,000,000; and

$20,000,000 within 60 days after the end of the first calendar year in which the Company’s aggregated revenues derived from drug product candidates based on the NeuroTrans™ product candidate exceed $500,000,000.

In addition to these milestone payments, the Company is also obligated to pay BioMarin a royalty at a percentage of the Company’s aggregated revenues derived from drug product candidates based on the NeuroTrans™ product candidate. On June 9, 2006, the Company made a milestone payment in the amount of $150,000 to BioMarin because the Company raised $5,000,000 in its May 25, 2006 private placement financing. If the Company becomes insolvent or if the Company breaches its asset purchase agreement with BioMarin due to non-payment and the Company does not cure its non-payment within the stated cure period, all of the Company’s rights to the RAP technology (including NeuroTrans™) will revert back to BioMarin.

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RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONTRACTUAL OBLIGATIONS WITH THOMAS E. DALEY (ASSIGNEE OF THE DISSOLVED CONVIVIA, INC.)

Pursuant to the terms of the asset purchase agreement the Company entered into with Convivia, Inc. and Thomas E. Daley for the purchase of intellectual property related to its 4-MP product candidate program (the “Asset Purchase Agreement”), Mr. Daley will be entitled to receive the following, if at all, in such amounts and only to the extent certain future milestones are accomplished by the Company (or any of its subsidiaries thereof), as set forth below:

23,312 shares of Raptor’s restricted, unregistered Common Stock within fifteen (15) days after the Company enters into a manufacturing license or other agreement to produce any product that is predominantly based upon or derived from any assets purchased from Convivia (“Purchased Assets”) in quantity (“Product”) if such license agreement is executed within one (1) year of execution of the Asset Purchase Agreement or, if thereafter, 11,656 shares of Raptor’s restricted, unregistered Common Stock. Should the Company obtain a second such license or agreement for a Product, Mr. Daley will be entitled to receive 11,656 shares of the Company’s restricted, unregistered Common Stock within 30 days of execution of such second license or other agreement. In January 2008, Mr. Daley earned a $30,000 cash bonus pursuant to his employment agreement for executing the Patheon formulation agreement for manufacturing Convivia™. On March 31, 2008, the Company issued 23,312 shares of Raptor’s Common Stock valued at $56,000 to Mr. Daley pursuant to this milestone reflecting the execution of an agreement to supply the active pharmaceutical ingredient for Convivia™, combined with the execution of a formulation agreement to produce the oral formulation of Convivia™. In July 2010, the Company issued 11,656 shares of its restricted common stock valued at $35,551 and paid a $10,000 cash bonus to Mr. Daley as a result of the execution of the license agreement with Uni Pharma for the development of Convivia™ in Taiwan.

23,312 shares of the Company’s restricted, unregistered Common Stock within fifteen (15) days after it receives its first patent allowance on any patents which constitute part of the Purchased Assets in any one of certain predetermined countries (each, a “Major Market”).

11,656 shares of the Company’s restricted, unregistered Common Stock within fifteen (15) days after the Company receives its second patent allowance on any patents which constitute part of the Purchased Assets different from the patent referenced in the immediately preceding paragraph above in a Major Market.

23,312 shares of the Company’s restricted, unregistered Common Stock within fifteen (15) days of completing predetermined benchmarks in a Major Market by the Company or its licensee of the first Phase 2 human clinical trial for a Product (“Successful Completion”) if such Successful Completion occurs within one (1) year of execution of the Asset Purchase Agreement or, if thereafter, 11,656 shares of the Company’s restricted, unregistered Common Stock within thirty (30) days of such Successful Completion. In October 2008, the Company issued 23,312 shares of Raptor’s Common Stock valued at $27,000 and a $30,000 cash bonus (pursuant to Mr. Daley’s employment agreement) to Mr. Daley pursuant to the fulfillment of this milestone.

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RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11,656 shares of the Company’s restricted, unregistered Common Stock within fifteen (15) days of a Successful Completion in a Major Market by the Company’s or its licensee of the second Phase 2 human clinical trial for a Product (other than the Product for which a distribution is made under the immediately preceding paragraph above).

23,312 shares of the Company’s restricted, unregistered Common Stock within fifteen (15) days after the Company or its licensee applies for approval to market and sell a Product in a Major Market for the indications for which approval is sought (“Marketing Approval”).

11,656 shares of the Company’s restricted, unregistered Common Stock within fifteen (15) days after the Company or its licensee applies for Marketing Approval in a Major Market (other than the Major Market for which a distribution is made under the immediately preceding paragraph above).

46,625 shares of the Company’s restricted, unregistered Common Stock within fifteen (15) days after the Company or its licensee obtains the first Marketing Approval for a Product from the applicable regulatory agency in a Major Market.

23,312 shares of the Company’s restricted, unregistered Common Stock within fifteen (15) days after the Company or its licensee obtains Marketing Approval for a Product from the applicable regulatory agency in a Major Market (other than the Major Market for which a distribution is made under the immediately preceding paragraph above).

As discussed above, in aggregate, the Company has issued to Mr. Daley, 58,280 shares of Raptor’s common stock valued at $118,551 and paid $70,000 in cash bonuses related to Convivia™ milestones along with another $20,000 in cash bonuses related to employment milestones pursuant to Mr. Daley’s employment agreement.

CONTRACTUAL OBLIGATIONS WITH FORMER ENCODE STOCKHOLDERS AND UCSD RELATING TO THE ACQUISITION OF THE DR CYSTEAMINE (RP103 AND RP104) LICENSE

As a result of the merger between Raptor Therapeutics Inc. and Encode, as discussed in Note 8 above, the Encode Securityholders are eligible to receive up to an additional 559,496 shares of Raptor’s common stock, Company Options and Company Warrants to purchase Raptor’s common stock in the aggregate based on certain triggering events related to regulatory approval of RP103/RP104, an Encode product program, if completed within the five year anniversary date of the merger agreement.

Also as a result of the merger, the Company will be obligated to pay an annual maintenance fee to UCSD for the exclusive license to develop RP103/RP104 for certain indications of $15,000 until it begins commercial sales of any products developed pursuant to the License Agreement. In addition to the maintenance fee, the Company will be obligated to pay during the life of the License Agreement: milestone payments ranging from $20,000 to $750,000 for orphan indications and from $80,000 to $1,500,000 for non-orphan indications upon the occurrence of certain events, if ever; royalties on commercial net sales from products developed pursuant to the License Agreement ranging from 1.75% to 5.5%; a percentage of sublicense fees ranging from 25% to 50%; a percentage of sublicense royalties; and a minimum annual royalty commencing the year the Company begins commercially selling any products pursuant to the License Agreement, if ever. Under the License Agreement, the Company is obligated to fulfill predetermined milestones within a specified number of years ranging from 0.75 to 6 years from the effective date of the License Agreement, depending on the indication. In addition, the Company is obligated to, among other things, secure $1.0 million in funding prior to December 18, 2008 (which the Company has fulfilled by raising $10.0 million in its May/June 2008 private placement) and annually spend at least $200,000 for the development of products (which, as of its fiscal years ended August 31, 2011, 2010 and 2009 by spending approximately $11.3 million, $6.2 million and $4.1 million, respectively, on such programs) pursuant to the License Agreement. Cumulatively, the Company has expensed $680,000 in milestone payments to UCSD based upon the initiation of clinical trials in cystinosis, Huntington’s Disease and NASH. Subsequent to quarter end, the Company filed its Marketing Authorization Application (“MAA”) with the European Medicines Agency (“EMA”) for RP103 for the potential treatment of cystinosis, a milestone in which the Company will pay $250,000 to UCSD pursuant to this license.

To the extent that the Company fails to perform any of its obligations under the License Agreement, then UCSD may terminate the license or otherwise cause the license to become non-exclusive.

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RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

OFFICE LEASES

In March 2006, the Company entered into a lease for the Company’s executive offices and research laboratory in Novato, California and expanded the lease on January 26, 2007. Base monthly payments were subject to annual rent increase of between 3% to 5%, based on the Consumer Price Index (“CPI”) and annual adjustments to base operating expenses. In October 2010, the Company executed a lease addendum to the Novato lease for an additional 3,100 square feet ($5,309 per month) starting in April 2011. In February 2012, the Company executed a second addendum to the Novato lease for an additional 1,636 square feet ($2,879.47 per month) starting in March 2012. Effective April 1, 2010, the Company’s monthly base rent including base operating expenses was $10,826. Effective April 11, 2011, the Company’s monthly base including base operating expenses increased to $16,135 with an adjustment for CPI and operating expenses in April 2012. Effective March 1, 2012, the monthly base including base operating expenses increased to $19,014, with an adjustment for CPI. The Novato lease expires in March 2013. In January 2010, the Company entered into a one-year lease for administrative offices in San Mateo, California for $2,655 per month. The Company anticipates continuing the San Mateo lease on a monthly basis.

During the three month periods ended February 29, 2012 and February 28, 2011, the Company’s rent expense was $60,774 and $48,790, respectively. During the six month periods ended February 29, 2012 and February 28, 2011 and the cumulative period from September 8, 2005 (inception) to February 29, 2012, the Company’s rent expense was $114,506, $100,515 and $841,586, respectively.

The minimum future lease payments under this operating lease assuming a 3% CPI increase per year are as follows:

Period	Amount
March 1, 2012 to August 31, 2012	$	116,939
Fiscal year ending August 31, 2013		137,094

CAPITAL LEASE

On August 31, 2011, the Company leased a photocopier which is subject to a 39-month lease at $387 per month. The future lease payments under the capital lease are as follows:

Period	Amount
March 1, 2012 to August 31, 2012	$	2,322
Year ending August 31, 2013		4,647
Year ending August 31, 2014		4,647
Year ending August 31, 2015		1,162
Total future capital lease payments		12,778
Less interest		(995	)
Total current and long-term capital lease liability	$	11,783

Interest rate on the capital lease is 6% based on the lessor’s implicit rate of return.

-32-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONTRACT/CLINICAL RESEARCH AGREEMENTS

During the three and six months ended February 29, 2012, the Company maintained several contracts with research organizations, clinical organizations and clinical sites, primarily to assist with clinical research for its cystinosis program and its NASH clinical collaboration. The future commitments pursuant to clinical research agreements are estimated as follows:

Period	Amount
March 1, 2012 to August 31, 2012	$	3,066,373
Fiscal year ending August 31, 2013		3,507,836
Fiscal year ending August 31, 2014		1,500,000

STORAGE AND CLINICAL DISTRIBUTION AGREEMENT

During the three and six months ended February 29, 2012, the Company maintained an agreement with a company that stores and distributes clinical materials for Raptor’s cystinosis and Huntington’s Disease trials. The future commitments pursuant to this agreement are estimated as follows:

Period	Amount
March 1, 2012 to August 31, 2012	$	216,935
Fiscal year ending August 31, 2013		691,900
Fiscal year ending August 31, 2014		207,200

FORMULATION / MANUFACTURING AGREEMENTS

In April 2008, the Company executed an agreement with a contract manufacturing organization to formulate and manufacture RP103 for its cystinosis and Huntington’s Disease programs and subsequently, for its NASH program. The costs are invoiced to the Company in installments throughout the formulation and manufacturing process. In November 2010, the Company executed a supply agreement with a contract manufacturer for the active pharmaceutical ingredient of RP103. The future commitments pursuant to these contracts related to both clinical and near-term commercial manufacturing are estimated as follows:

Period	Amount
March 1, 2012 to August 31, 2012	$	5,461,003
Fiscal year ending August 31, 2013		9,490,100
Fiscal year ending August 31, 2014		10,278,200

(11) QUALIFYING THERAPEUTIC DISCOVERY PROJECT GRANT

In October 2010, the Company was awarded a tax grant under the U.S. Government’s Qualifying Therapeutic Discovery Project for five of its research programs including its cystinosis, Huntington’s Disease and NASH clinical programs and its HepTide™ and WntTide™ preclinical cancer research programs. The Company was granted an aggregate of approximately $1.1 million for all five programs of which, as of August 31, 2011, it had received approximately $874,000. The Company recorded the $194,000 and $680,000 of proceeds as a contra-research and development expense in its preclinical and clinical development division, respectively, during the first two quarters of fiscal 2011. The Company records the contra-expense upon deposit of the grant proceeds. During the three and six months ended February 29, 2012, the Company received approximately $162,000 pursuant to the government program funding guidelines and the remaining balance of approximately $36,000 was drawn but was returned to the government in March 2012 along with an additional $28,000 as recapture tax because the Company had not incurred the amount originally estimated as qualified expenses for its WntTide™ program, which was the basis for the program funding.

-33-

RAPTOR PHARMACEUTICAL CORP.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(12) SUBSEQUENT EVENTS

On March 26, 2012, the Company announced that the EMA has determined that its MAA for its investigational drug candidate, RP103 for the potential treatment of nephropathic cystinosis, submitted in early March, is valid. Validation of the MAA confirms that the submission is sufficiently complete to begin the formal review process. The Company anticipates a decision from the EMA in the first calendar quarter of 2013.

On March 28, 2012, the Company announced the appointment of Henk Doude van Troostwijk as its General Manager of European Commercial Operations, effective April 15, 2012. Mr. Doude van Troostwijk will be responsible for building and managing the Company’s commercial operations in Europe initially focusing on the potential launch and subsequent marketing of RP103 for nephropathic cystinosis in anticipation of the EMA’s approval of the Company’s MAA. The Company anticipates additional hiring in Europe as well as the U.S. over the next nine months in preparation for the potential commercialization of RP103 for the potential treatment of nephropathic cystinosis in the U.S. and Europe.

On March 30, 2012, the Company announced that it submitted a New Drug Application (“NDA”) to the U.S. Food and Drug Administration (“FDA”) seeking approval to market its investigational drug candidate, Cysteamine Bitartrate Delayed-release Capsules (RP103), for the potential treatment of nephropathic cystinosis. In its application, the Company has requested Priority Review of the NDA, which, if granted, could lead to a decision for marketing approval from the FDA of RP103 for the potential treatment of nephropathic cystinosis in the fourth calendar quarter of 2012. If Priority Review is not granted, the Company anticipates a decision by the FDA in the first calendar quarter of 2013.

-34-

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD-LOOKING STATEMENTS

In this Quarterly Report on Form 10-Q, in other filings with the Securities and Exchange Commission, or the SEC, and in press releases and other public statements by our officers throughout the year, we make or will make statements that plan for or anticipate the future. These “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995, include statements about our future business plans and strategies, as well as other statements that are not historical in nature. These forward-looking statements are based on our current expectations.

In some cases, these statements can be identified by the use of terminology such as “believes,” “expects,” “anticipates,” “plans,” “may,” “might,” “will,” “could,” “should,” “would,” “projects,” “anticipates,” “predicts,” “intends,” “continues,” “estimates,” “potential,” “opportunity” or the negative of these terms or other comparable terminology. All such statements, other than statements of historical facts, including our financial condition, future results of operations, projected revenues and expenses, business strategies, operating efficiencies or synergies, competitive positions, growth opportunities for existing intellectual properties, technologies, products, plans, and objectives of management, markets for our securities, and other matters, are about us and our industry that involve substantial risks and uncertainties and constitute forward-looking statements for the purpose of the safe harbor provided by Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Such forward-looking statements, wherever they occur, are necessarily estimates reflecting the best judgment of our senior management on the date on which they were made, or if no date is stated, as of the date of the filing made with the SEC in which such statements were made. You should not place undue reliance on these statements, which only reflect information available as of the date that they were made. Our business’ actual operations, performance, development and results might differ materially from any forward-looking statement due to various known and unknown risks, uncertainties, assumptions and contingencies, including those described in the section titled “Risk Factors That May Affect Future Results” in Part II, Item 1A of this Quarterly Report on Form 10-Q and including, but not limited to, the following:

• our need for, and our ability to obtain, additional funds;

• uncertainties relating to clinical trials and regulatory reviews;

• our dependence on a limited number of therapeutic compounds and formulations of these compounds;

• the early stage of the products we are developing;

• the acceptance of any of our future products by physicians and patients;

• competition and dependence on collaborative partners;

• loss of key management or scientific personnel;

• our ability to obtain adequate intellectual property protection and to enforce these rights;

• our ability to avoid infringement of the intellectual property rights of others; and

• the other factors and risks described under the section captioned “Risk Factors That May Affect Future Results” in Part II, Item 1A of this Quarterly Report on Form 10-Q, as well as other factors not identified therein.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, the factors discussed in this Quarterly Report on Form 10-Q, in other filings with the SEC and in press releases and other public statements by our officers throughout the year, could cause actual results or outcomes to differ materially and/or adversely from those expressed in any forward-looking statements made by us or on our behalf, and therefore we cannot guarantee future results, levels of activity, performance or achievements and you should not place undue reliance on any such forward-looking statements. We cannot give you any assurance that such forward-looking statements will prove to be accurate and such forward-looking events may not occur. In light of the significant uncertainties inherent in such forward-looking statements, you should not regard the inclusion of this information as a representation by us or any other person that the results or conditions described in those statements or our objectives and plans will be achieved.

All subsequent forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to herein. Unless required by U.S. federal securities laws and the rules and regulations of the SEC, we do not undertake any obligation and disclaim any intention to update or release publicly any revisions to these forward-looking statements after the filing of this Quarterly Report on Form 10-Q to reflect later events or circumstances or to reflect the occurrence of unanticipated events or any other reason.

-35-

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with our condensed consolidated financial statements as of February 29, 2012, and the notes to such condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. All references to “the Company”, “we”, “our” and “us” include the activities of Raptor Pharmaceutical Corp. and its wholly-owned subsidiaries, Raptor Pharmaceuticals Corp. (which was merged into us as of December 7, 2011), Raptor Discoveries Inc., or Raptor Discoveries, Raptor Therapeutics Inc., or Raptor Therapeutics, Raptor European Products, LLC, RPTP European Holdings C.V. and Raptor Pharmaceuticals Europe B.V. This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section contains forward-looking statements. Please see “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly under the heading “Risk Factors That May Affect Future Results”.

Overview

Our goal is to research, produce, and deliver medicines that improve life for patients with severe, rare disorders. Our product portfolio includes both candidates from our proprietary drug targeting platforms and in-licensed and acquired product candidates.

Our current pipeline includes three clinical development programs, which we are actively developing. We also have two other clinical-stage product candidates, one of which we are seeking additional product development partners in Asia In addition, we have three preclinical product candidates for which we are also seeking development partners.

Clinical Development Programs

Our three active clinical development programs are based on an existing therapeutic compound that we are reformulating and repurposing for potential improvement in safety and/or efficacy and for potential application in new disease indications. These clinical development programs include the following:

• DR Cysteamine, or RP103, for the potential treatment of cystinosis, a rare genetic disorder;

• RP103 for the potential treatment of Huntington’s Disease, or HD, an inherited neurodegenerative disorder; and

• RP103, for the potential treatment of non-alcoholic steatohepatitis, or NASH, a metabolic disorder of the liver.

RP103 is our proprietary delayed-release formulation of cysteamine bitartrate microbeads in capsules, which may require less frequent dosing and reduce gastro-intestinal side effects compared to the current standard of care. Our plan is to eventually develop a delayed-released formulation of cysteamine bitartrate in tablets, referred to as RP104, for NASH.

Other Clinical-Stage Product Candidates

Our other clinical-stage product candidates include:

• Convivia™ for the potential management of acetaldehyde toxicity due to alcohol consumption by individuals with aldehyde dehydrogenase, or ALDH2 deficiency, an inherited metabolic disorder; and

• Tezampanel, a glutamate receptor antagonist as a potential anti-platelet agent for use in thrombotic disorders.

Preclinical Product Candidates

Our preclinical platforms consist of targeted therapeutics for the potential treatment of multiple indications, including liver diseases, neurodegenerative diseases and breast cancer. We are seeking development partners for these programs. These preclinical programs include the following:

• Our receptor-associated protein, or RAP, platform consists of: HepTide™ for the potential treatment of primary liver cancer and other liver diseases; and NeuroTrans™ to potentially deliver therapeutics across the blood-brain barrier for treatment of a variety of neurological diseases.

• Our mesoderm development protein, or Mesd, platform consists of WntTide™ for the potential treatment of breast cancer.

-36-

Future Activities

Over the next 12 months, we plan to conduct research and development and general and administrative activities including: commercial preparation and drug supply for the potential launch of RP103 for the potential treatment of cystinosis in the U.S. and Europe; supporting our ongoing extension study of RP103 in cystinosis until patients are converted onto commercial drug; supplying clinical material for the ongoing clinical trial of RP103 in HD; funding the collaboration and supplying clinical material in the Phase 2b clinical trial of RP103 in NASH; funding a potential Phase 1 clinical trial of tezampanel as a potential anti-platelet agent; continuing business development of our preclinical product candidates; and supporting associated facilities and administrative functions. We plan to seek additional business development partners for our Convivia™ product candidate in Asia. We may also develop new preclinical opportunities, future in-licensed technologies and acquired technologies.

Clinical Development Programs

We develop clinical-stage drug product candidates which are: internally discovered therapeutic candidates based on our novel drug delivery platforms and in-licensed or purchased clinical-stage products which may be new chemical entities in mid-to-late stage clinical development, currently approved drugs with potential efficacy in additional indications, and treatments that we could repurpose or reformulate as potentially more effective or convenient treatments for a drug’s currently approved indications.

Lead Clinical Development Program: Development of RP103 for the Potential Treatment of Nephropathic Cystinosis or Cystinosis

Our RP103 product candidate is a proprietary delayed-release, enteric-coated microbead formulation of cysteamine bitartrate contained in a gelatin capsule. We are investigating RP103 for the potential treatment of cystinosis.

Immediate-release cysteamine bitartrate, a cystine-depleting agent, is currently the only U.S. Food and Drug Administration, or FDA, and the European Medicines Agency, or EMA-approved drug to treat cystinosis, a rare genetic disease. Immediate-release cysteamine has been reported to be effective at preventing or delaying kidney failure and other serious health problems in cystinosis patients. RP103 is designed to pass through the stomach and deliver the drug directly to the small intestine, where it may be more easily absorbed into the bloodstream and may result in fewer gastrointestinal side effects. Studies have shown that patient compliance is challenging due to the requirement for every six-hour dosing and gastrointestinal side effects, especially since it requires a patient to be awakened during sleep to administer the nighttime dose. RP103 for the potential treatment of cystinosis is designed to mitigate these difficulties. It is expected to be dosed twice daily, compared to the current every-six-hour dosing schedule.

In March 2012, we submitted applications for marketing approval of RP103 for the potential treatment of cystinosis with both the FDA and the EMA. We requested Priority Review of our application with the FDA, which, if granted, could lead to an FDA decision by the fourth calendar quarter of 2012. We anticipate a decision from the EMA and the FDA (if Priority Review is not granted by the FDA) in the first calendar quarter of 2013.

In anticipation of drug approval, we have begun building our commercial infrastructure both in the U.S. and in Europe so we may timely launch RP103 for the potential treatment of cystinosis.

In July 2011, we announced that our Phase 3 clinical trial of RP103 for the treatment of cystinosis, met the sole primary endpoint of non-inferiority compared to Cystagon^®, immediate-release cysteamine bitartrate. The comparison was based on white blood cell, or WBC, cystine levels, the established efficacy surrogate biomarker and sole primary endpoint in the clinical trial. There were no unexpected serious safety concerns experienced by patients in the trial attributable to RP103.

Our pivotal Phase 3 clinical trial was designed as an outpatient study of the pharmacodynamics, pharmacokinetics, safety and tolerability of RP103 compared to Cystagon^® in cystinosis patients. The clinical trial was conducted at eight clinical research centers in the U.S. and Europe.

Of 41 patients who completed the Phase 3 protocol, 38 were included in the evaluable data set, 3 were not fully compliant with the protocol due to the fact that their WBC cystine levels went above 2.0 while on Cystagon^® during the trial. The age range of study participants was 6 to 26 years old, with 87% of patients below 16 years old. On average, the peak WBC cystine level measured in patients treated with Cystagon^® was 0.54 ± 0.05 nmol 1/2 cystine/mg protein, compared to an average peak value of 0.62 ± 0.05 nmol 1/2 cystine/mg protein for patients treated with RP103. The mean difference was 0.08 nmol 1/2 cystine/mg protein, with a 95.8% confidence interval of 0.00-0.16 (one sided p=0.021). As stipulated in our Statistical Analysis Plan, the non-inferiority endpoint of the clinical trial would be achieved when the upper end of the confidence interval around the mean difference of WBC cystine levels did not exceed an absolute value of 0.3. The upper end of the confidence interval in the Phase 3 clinical trial was determined to be 0.16, thus achieving the non-inferiority endpoint.

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Additionally, the endpoint was achieved at a lower average daily dose of RP103, compared to Cystagon^®. Patients enrolled in the study were required to be “well controlled” under the existing Cystagon^® therapy. The starting dose of RP103 for patients in the Phase 3 clinical trial was initially set at 70% of their established dose of Cystagon^®. The protocol allowed for a single RP103 dose increase of 25%, based on intermediate WBC cystine level results, to reflect the current standard of care in establishing appropriate dosing of Cystagon^® in cystinosis patients. Approximately one-third of patients remained at 70% of their starting Cystagon^® dose throughout the study. The remaining two-thirds of the patients had their RP103 dose increased. On average, the total daily, steady-state dose of RP103 in patients in the Phase 3 clinical trial was 82% of their established, incoming dose of Cystagon^®.

In the course of the study, no unexpected safety issues were experienced. Seven serious adverse events, or SAEs, requiring a visit to the emergency room or hospital, were reported for seven individual patients. Of these seven SAEs, six were determined by the principal investigator to be unrelated to either RP103 or Cystagon^®. One SAE, gastric intolerance, was graded as “possibly related” to RP103 and was subsequently resolved and the patient returned on RP103 treatment. That patient completed the RP103 study and continued on the extension study described below. The most frequently reported non-serious adverse events, or AEs, in the study were gastric intolerance symptoms. Fifty-three AEs were scored as “possibly” or “probably” related to either study drug, and forty-three of fifty-three of the drug related AEs were scored as gastric intolerance symptoms. We plan to submit our Phase 3 clinical trial data for publication by the second half of calendar 2012.

We are conducting an ongoing, extension study in which all patients that completed the Phase 3 clinical trial may elect to continue on RP103 treatment and are monitored for WBC cystine levels and safety parameters. The extension study has provided six months of safety data for each patient and was submitted in our New Drug Application, or NDA, filing. Forty out of forty-one patients who completed the Phase 3 clinical trial elected to enroll in the extension study. Thirty-eight of such patients remain in the extension study. Thirty-two patients have been on RP103 in the extension study for at least nine months.

In a related clinical trial, we performed a bioequivalence study between RP103 administered as whole capsules and RP103 administered as capsule contents sprinkled onto applesauce. As a significant number of cystinosis patients are too young to take whole capsules, this result enabled us to expand enrollment in the extension study to patients who are too young to swallow whole capsules and were therefore ineligible for the pivotal Phase 3 clinical trial protocol. We have also expanded our extension study to patients who have undergone kidney transplants, thus ineligible to participate in our Phase 3 clinical trial. Enrollment of these additional patients in the extension study is ongoing. As of March 2012, we have a total of 55 patients in our ongoing extension study.

We hold an exclusive, worldwide license from UCSD to the patent, “Enterically Coated Cysteamine, Cystamine and Derivatives Thereof,” filed in 2007, which covers enteric delivery of cysteamine in cystinosis and other potential therapeutic applications. We received a formal Notice of Allowance form the U.S. Patent and Trademark Office, or USPTO, for this patent in November 2011. The patent is still in examination in Europe and other countries. The EMA and FDA granted orphan drug designation for RP103 for the treatment of cystinosis in calendar 2010 and 2006, respectively.

Development of RP103/RP104 for the Potential Treatment of Non-Alcoholic Steatohepatitis or NASH

On December 15, 2011, we executed a cooperative research and development agreement, or CRADA, with the National Institute of Diabetes and Digestive and Kidney Diseases, or NIDDK, part of the National Institutes of Health, or NIH, to conduct a Phase 2b clinical trial. The clinical trial will evaluate the safety and potential efficacy of RP103 as a potential treatment of non-alcoholic steatohepatitis, or NASH, an advanced form of non-alcoholic fatty liver disease, or NAFLD, in children. The clinical trial is expected to begin early in the second quarter of calendar 2012 with NIDDK sharing the costs with us to conduct the clinical trial.

We estimate the total cost of the one year clinical trial treatment period to be in the range of $14-$16 million. Under the CRADA agreement, we will fund a total of $6 million of the cost of the trial, in addition to providing clinical trial materials and drug manufacturing/quality support estimated at approximately $1 million. The remainder of the funding will come from NIDDK. We hold worldwide, exclusive licenses from UCSD to patents relating to use of cysteamine in NAFLD and NASH. Under this CRADA collaboration, we will retain exclusive development and commercial rights to the clinical data resulting from the clinical trial. If the clinical trial commences timely, we anticipate releasing the top-line Phase 2b data in the first half of calendar 2014.

We continue to work on the formulation of RP104, a delayed-release tablet form of RP103. RP103 will be used in the Phase 2b clinical trial in parallel to the continued formulation studies of RP104.

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In October 2008, we commenced a clinical trial in collaboration with UCSD to investigate a prototype formulation of RP103/RP104 for the treatment of NASH in juvenile patients. In May 2010, we presented positive Phase 2a clinical trial results from our pilot study of delayed-release cysteamine bitartrate in 11 adolescent patients with NASH, a progressive form of liver disease believed to affect 5% to 11% of the U.S. population. The results were presented at the Digestive Disease Week 2010 conference in New Orleans, Louisiana on May 2, 2010. Our open-label Phase 2a clinical trial was conducted under a collaboration agreement with UCSD at UCSD’s General Clinical Research Center. Eligible patients with baseline levels of the liver enzymes alanine transaminase, or ALT, and aspartate aminotransferase, or AST, that were at least twice that of normal levels, were enrolled to receive twice-daily, escalating oral doses of up to 1,000 mg of delayed-release cysteamine bitartrate (a prototype of our RP103) for six months, followed by a six-month post-treatment monitoring period.

Patients showed a marked decline in ALT levels during the treatment period with 7 of 11 patients achieving a greater than 50% reduction and 6 of 11 reduced to within normal range. AST levels also saw significant improvements with patients averaging 41% reduction by the end of the treatment phase. The reduction in liver enzymes was largely sustained during the 6 month post-treatment monitoring phase. Other important liver function markers showed positive trends. Levels of cytokeratin 18, a potential marker of disease activity in Non-alcoholic Fatty Liver Disease, or NAFLD, decreased by an average of 45%.

Adiponectin levels increased by an average of 35% during the treatment period. Reduced adiponectin levels are thought to be a marker of the pathogenesis and progression of NASH. Body Mass Index, or BMI, did not change significantly during both the treatment and post-treatment phases. Delayed-release cysteamine bitartrate demonstrated a strong, favorable safety profile, with mean gastrointestinal symptom scores of 1.1 at baseline and 0.7 after 6 months of treatment using a rating system in which the maximum score of 14 indicates most severe gastrointestinal symptoms.

There are no currently approved drug therapies for NASH, and patients are limited to lifestyle changes such as diet, exercise and weight reduction to manage the disease. RP104 may provide a potential treatment option for patients with NASH. Although NASH is most common in insulin-resistant obese adults with diabetes and abnormal serum lipid profiles, its prevalence is increasing among juveniles as obesity rates rise within this patient population. Although most patients are asymptomatic and feel healthy, NASH causes decreased liver function and can lead to cirrhosis, liver failure and end-stage liver disease.

We hold an exclusive worldwide license from UCSD for the patent, “Methods of Treating Non-Alcoholic Steatohepatitis (NASH) Using Cysteamine Products.” The patent was filed in 2010. We received a formal Notice of Allowance from USPTO for this patent in June 2011. The patent is still in examination in Europe and other countries.

Development of RP103 for the Potential Treatment of Huntington’s Disease or HD

Huntington’s Disease, or HD, is a fatal, inherited degenerative neurological disease affecting about 30,000 people in the U.S. and a comparable number of people in Europe. We are not aware of any therapeutic treatment for HD other than therapeutics that minimize symptoms such as the uncontrollable movements and mood swings resulting from HD. We are collaborating with a French institution, CHU d’ Angers, on a Phase 2 clinical trial investigating RP103 in HD patients, which began in October 2010. We are providing the clinical trial materials for the study, which is sponsored by CHU d’ Angers and funded in part by a grant from the French government. Eight clinical sites in France were set up by CHU d’ Angers for a 96 patient, placebo-controlled, 18-month trial, followed by an open-label trial with all placebo patients rolling onto RP103 and all non-placebo patients continuing on RP103 for up to another 18 months. The primary end point of the trial will be based upon the Unified Huntington’s Disease Rating Scale, or UHDRS.

We anticipate reaching full enrollment for our Phase 2 clinical trial for RP103 in patients with HD in the second quarter of calendar 2012 and we anticipate releasing the top-line Phase 2 clinical trial data in the first half of calendar 2014.

In June 2010, we acquired an exclusive worldwide license to intellectual property related to the potential treatment of HD from the Weizmann Institute of Science in Israel and Niigata University in Japan. The Weizmann and Niigata patents cover the use of transglutaminase inhibitors, a class of molecules chemically similar to cysteamine, in the potential treatment of HD and other neurological disorders. These patents add to our portfolio of intellectual property related to our programs utilizing RP103/RP104. We were granted Orphan Drug Designation in the U.S. by the FDA for cysteamine as a potential treatment for HD in 2008 and are planning to apply for Orphan Drug Designation in the E.U. once clinical data is available.

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Other Clinical-Stage Product Candidates

We have two other clinical-stage product candidates.

Convivia™ for Liver Aldehyde Dehydrogenase Deficiency

Convivia™ is our proprietary oral formulation of 4-methylpyrazole, or 4-MP, intended for the potential treatment of acetaldehyde toxicity resulting from alcohol consumption in individuals with ALDH2 deficiency, which is an inherited disorder of the body’s ability to breakdown ethanol, commonly referred to as alcohol intolerance. 4-MP is presently marketed in the U.S. and E.U. in an intravenous form as an anti-toxin. Convivia™ is designed to lower systemic levels of acetaldehyde (a carcinogen) and reduce symptoms, such as tachycardia and flushing, associated with alcohol consumption by ALDH2-deficient individuals. Convivia™ is a capsule designed to be taken approximately 30 minutes prior to consuming an alcoholic beverage.

In 2008, we completed a Phase 2a dose escalation clinical trial of oral 4-MP with ethanol in ALDH2 deficient patients. The study results demonstrated that the active ingredient in Convivia™ significantly reduced heart palpitations (tachycardia), which are commonly experienced by ALDH2 deficient people who drink, at all dose levels tested. The study also found that the 4-MP significantly reduced peak acetaldehyde levels and total acetaldehyde exposure in a subset of the study participants who possess specific genetic variants of the liver ADH and ALDH2 enzymes. We believe that this subset represents approximately one-third of East Asian populations.

In June 2010, we entered into an exclusive agreement with Uni Pharma Co., Ltd., or Uni Pharma, to commercialize Convivia™ in Taiwan. Under terms of the agreement, we will grant to Uni Pharma an exclusive license under all relevant patent applications, trademarks and future patents controlled by us to market Convivia™ in Taiwan. Uni Pharma will register Convivia™ for drug licensure for existing indications and will conduct a clinical trial and register Convivia™ for acetaldehyde toxicity resulting from ALDH2 deficiency. Uni Pharma will be responsible for marketing and sales activities for the commercialization of Convivia™ in Taiwan. We continue to seek potential partners in other Asian countries to continue clinical development of Convivia™ in those countries.

Tezampanel for Anti-Platelet Therapy

Thrombosis is a major cause of morbidity and mortality in the U.S. In addition to deep vein thrombosis and pulmonary embolus, thrombotic mechanisms predominate as the basis for both heart attack and stroke. During thrombosis, platelets become activated, a process involving a cascade of signaling factors, ultimately leading to aggregation and the formation of a solid mass, the thrombus, within blood vessels.

In addition to such well-known platelet signaling molecules as thromboxane A2 (blocked by aspirin) and adenosine diphosphate (blocked by Plavix^®), research conducted at Johns Hopkins University, or JHU, by Dr. Craig Morrell and Dr. Charles Lowenstein demonstrated the importance of glutamate release in promoting platelet activation and thrombosis. This research showed that platelets treated with an AMPA/kainate receptor antagonist such as tezampanel are more resistant to glutamate-induced aggregation than untreated platelets. Glutamate release by a platelet acts to stimulate release of glutamate from other platelets, potentiating aggregation and the formation of the thrombus. Released glutamate acts by binding cell surface glutamate receptors expressed on platelets themselves. One particular type of the glutamate receptor is important in platelet activation, the AMPA receptor. Compounds that specifically activate the AMPA receptor can increase platelet activation. Conversely, compounds that inhibit the AMPA receptor decrease platelet activation.

This identifies the AMPA/kainate receptors on platelets targeted by tezampanel as a new antithrombotic target with a different mechanism of action than Plavix^®, aspirin or tPA. Tezampanel is a molecule developed by Eli Lilly and licensed to us. Tezampanel has been shown to inhibit human platelet activation, subsequent human platelet aggregation, and thrombosis in mice. The inventors of this novel technology are Dr. Lowenstein and Dr. Morrell, currently at the University of Rochester in New York. The use of glutamate receptor antagonists as anti-platelet agents is covered by PCT/US08/00559, assigned to JHU and exclusively licensed to us.

Tezampanel has been extensively tested in Phase 1 clinical trials for safety in various indications. The drug candidate has been demonstrated to be safe over a wide range of doses, without any serious adverse events and without any major abnormal laboratory tests. Human pharmacokinetics of tezampanel are well characterized.

In collaboration with Dr. Lowenstein and Dr. Morrell, we are preparing to conduct a Phase 1 clinical trial in healthy volunteers to determine the efficacy of tezampanel in blocking platelet activation and aggregation. We anticipate this early-stage trial to commence in the second quarter of calendar 2012.

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Preclinical Product Candidates

We are also developing a drug-targeting platform based on the proprietary use of RAP and Mesd for the potential treatment of breast cancer. We believe that these proteins may have therapeutic applications in cancer, infectious diseases and neurodegenerative diseases, among others. We are currently seeking to out-license these programs.

HepTide™ for Hepatocellular Carcinoma or HCC and Other Liver Diseases

HepTide™ is a RAP peptide designed to potentially increase liver specific targeting and thereby, potentially diminish non-target tissue toxicity and increase the efficacy of therapeutic delivery to treat liver diseases. We are evaluating conjugates between HepTide™ and other molecules for testing in vitro and in appropriate preclinical models for the potential treatment of HCC and other liver diseases.

NeuroTrans™ for the Potential Treatment of Diseases Affecting the Brain

NeuroTrans™ is our proprietary RAP-based technology program to research the delivery of therapeutics across the blood-brain barrier. We believe our NeuroTrans™ platform may provide therapies that will be safer, less intrusive and more effective than current approaches in treating a wide variety of brain disorders. We are currently reviewing potential out-licensing opportunities for NeuroTrans™ and continue to maintain the program’s intellectual property portfolio.

WntTide™ for the Potential Treatment of Cancer

WntTide™ is our proprietary, Mesd-based peptide that we are developing as a potential therapeutic to inhibit the growth and metastasis of tumors over-expressing LRP5 or LRP6. We have licensed the use of Mesd from Washington University for the potential treatment of cancer and bone density disorders. We are currently evaluating WntTide™ in a preclinical breast cancer model to inhibit the Wnt-signaling pathway designed to block cancers dependent upon signaling through LRP6, as well as other IND enabling studies.

Other Development Areas

Securing Additional and Complementary Technology Licenses from Others

We plan to establish additional research collaborations with prominent universities and research labs currently working on the development of potential targeting molecules and other potential clinical applications of cysteamine bitartrate, and to secure licenses from these universities and labs for technology resulting from the collaboration. No assurances can be made regarding our ability to establish such collaborations over the next 12 months, or at all. We intend to focus our in-licensing and product candidate acquisition activities on identifying complementary therapeutics, therapeutic platforms that offer a number of therapeutic targets, and clinical-stage therapeutics based on existing approved drugs in order to create proprietary reformulations to improve safety and efficacy or to expand such drugs’ clinical indications through additional clinical trials. We may obtain these products through licenses, collaborations, joint ventures or through merger and/or acquisitions with other biotechnology companies.

Strategic Acquisitions

Reverse Merger with Raptor Pharmaceuticals Corp.

In July 2009, we, and our then wholly-owned subsidiary ECP Acquisition, Inc., a Delaware corporation, or merger sub, entered into an Agreement and Plan of Merger and Reorganization, or the 2009 Merger Agreement, with Raptor Pharmaceuticals Corp., a Delaware corporation (which merged with us on December 7, 2011). On September 29, 2009, on the terms and subject to the conditions set forth in the 2009 Merger Agreement, merger sub was merged with and into Raptor Pharmaceuticals Corp. and Raptor Pharmaceuticals Corp. survived such merger as our wholly-owned subsidiary. This merger is referred to herein as the 2009 Merger. Immediately prior to the 2009 Merger and in connection therewith, we effected a 1-for-17 reverse stock split of our common stock and changed our corporate name to “Raptor Pharmaceutical Corp.”

As of immediately following the effective time of the 2009 Merger, Raptor Pharmaceuticals Corp.’s stockholders (as of immediately prior to such 2009 Merger) owned approximately 95% of our outstanding common stock and our stockholders owned approximately 5% of our outstanding common stock, in each case without taking into account any of our or Raptor Pharmaceuticals Corp.’s shares of common stock, respectively, that were issuable pursuant to outstanding options or warrants of ours or Raptor Pharmaceuticals Corp., respectively, outstanding as of the effective time of the 2009 Merger. Although Raptor Pharmaceuticals Corp. became our wholly-owned subsidiary, Raptor Pharmaceuticals Corp. was the “accounting acquirer” in the 2009 Merger and its Board of Directors and officers manage and operate the combined company. Our common stock currently trades on the NASDAQ Capital Market under the ticker symbol, “RPTP.”

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Purchase of RP103/RP104

In December 2007, prior to the 2009 Merger, through a merger between Encode Pharmaceuticals, Inc., or Encode, and Raptor Therapeutics, Raptor Pharmaceuticals Corp. purchased certain assets, including the clinical development and commercial rights to RP103/RP104. Under the terms of and subject to the conditions set forth in the merger agreement, Raptor Pharmaceuticals Corp. issued 802,946 shares of its common stock to the stockholders of Encode, or Encode Stockholders, options, or Encode Options, to purchase up to, in the aggregate, 83,325 shares of its common stock to the optionholders of Encode, or Encode Optionholders, and warrants, or Encode Warrants, to purchase up to, in the aggregate, 256,034 shares of its common stock to the warrantholders of Encode, or Encode Warrantholders, and together with the Encode Stockholders and Encode Optionholders, referred to herein collectively as the Encode Securityholders, as of the date of such agreement. The Encode Securityholders are eligible to receive up to an additional 559,496 shares of our common stock, Encode Options and Encode Warrants to purchase our common stock in the aggregate based on certain triggering events related to regulatory approval of RP103/RP104, an Encode product program, if completed within the five year anniversary date of the merger agreement.

As a result of the Encode merger, we received the exclusive worldwide license to RP103/RP104, referred to herein as the License Agreement, developed by clinical scientists at the UCSD School of Medicine. In consideration of the grant of the license, we are obligated to pay an annual maintenance fee of $15,000 until we begin commercial sales of any products developed pursuant to the License Agreement. In addition to the maintenance fee, we are obligated to pay during the life of the License Agreement: milestone payments ranging from $20,000 to $750,000 for orphan indications and from $80,000 to $1,500,000 for non-orphan indications upon the occurrence of certain events, if ever; royalties on commercial net sales from products developed pursuant to the License Agreement ranging from 1.75% to 5.5%; a percentage of sublicense fees ranging from 25% to 50%; a percentage of sublicense royalties; and a minimum annual royalty commencing the year we begin commercially selling any products pursuant to the License Agreement, if ever. Under the License Agreement, we are obligated to fulfill predetermined milestones within a specified number of years ranging from 0.75 to 6 years from the effective date of the License Agreement, depending on the indication. In addition, we are obligated, among other things, to spend annually at least $200,000 for the development of products (which we satisfied as of August 31, 2011, 2010 and 2009 by spending approximately $11.3 million, $6.2 million and $4.1 million, respectively, on such programs) pursuant to the License Agreement. To date, we have paid $680,000 in milestone payments to UCSD based upon the initiation of clinical trials in cystinosis, HD and in NASH.

Subsequent to quarter end, we filed our Marketing Authorization Application, or MAA, with the European Medicines Agency for RP103 for the potential treatment of cystinosis, a milestone in which we will pay $250,000 to UCSD pursuant to this license.

To the extent that we fail to perform any of our obligations under the License Agreement, UCSD may terminate the license or otherwise cause the license to become non-exclusive.

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Application of Critical Accounting Policies

Our condensed consolidated financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the U.S. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our condensed consolidated financial statements is critical to an understanding of our consolidated financial position.

We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our condensed consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires our management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of our condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Functional Currency

Our consolidated functional currency is the U.S. dollar. Raptor Pharmaceuticals Europe B.V., or BV, our European subsidiary, uses the European Euro as its functional currency. At quarter end, BV’s balance sheet is translated into U.S. dollars based upon the quarter end exchange rate, while its statement of operations is translated into U.S. dollars based upon an average of the Euro’s value between the beginning and end date of the reporting period. BV’s equity is adjusted for any translation gain or loss.

Fair Value of Financial Instruments

The carrying amounts of certain of our financial instruments including cash and cash equivalents, restricted cash, prepaid expenses, accounts payable, accrued liabilities and capital lease liability approximate fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in our condensed consolidated financial statements. The warrant liability is carried at fair value which is determined using the Black-Scholes option valuation model at the end of each reporting period.

Cash and Cash Equivalents

We consider all highly liquid investments with original maturities of three months or less, when purchased, to be cash equivalents. We maintain cash and cash equivalents, which consist principally of money market funds with high credit quality financial institutions. Such amounts exceed Federal Deposit Insurance Corporation insurance limits. Restricted cash represents compensating balances required by the Company’s U.S. and European banks as collateral for credit cards.

Short-term Investments

We invest in short-term investments in high credit-quality funds in order to obtain higher yields on our idle cash. Such investments are not insured by the Federal Deposit Insurance Corporation. We completed an evaluation of our investments and determined that we did not have any other-than-temporary impairments as of February 29, 2012. The investments are placed in financial institutions with strong credit ratings and management expects full recovery of the carrying amounts.

Deferred Offering Costs

Deferred offering costs represent expenses incurred to raise equity capital related to financing transactions which have not yet been completed as of the balance sheet dates.

Intangible Assets

Intangible assets include the intellectual property and other rights relating to DR Cysteamine (currently developed as RP103 and RP104), to an out-license acquired in the 2009 Merger and the rights to tezampanel. The intangible assets related to RP103/RP104 are being amortized using the straight-line method over the estimated useful life of 20 years, which is the life of the intellectual property patents. The 20-year estimated useful life is also based upon the typical development, approval, marketing and life cycle management timelines of pharmaceutical drug products. The intangible assets related to the out-license will be amortized using the straight-line method over the estimated useful life of 16 years, which is the life of the intellectual property patents. The intangible assets related to tezampanel, which has been classified as in-process research and development, will not be amortized until development is completed, but will be tested annually for impairment.

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Goodwill

Goodwill represents the excess of the value of the purchase consideration over the identifiable assets acquired in the 2009 Merger. Goodwill is reviewed annually, or when an indication of impairment exists, to determine if any impairment analysis and resulting write-down in valuation is necessary.

Fixed Assets

Fixed assets, which mainly consist of leasehold improvements, lab equipment, computer hardware and software and capital lease equipment, are stated at cost. Depreciation is computed using the straight-line method over the related estimated useful lives, except for leasehold improvements and capital lease equipment, which are depreciated over the shorter of the useful life of the asset or the lease term. Significant additions and improvements that have useful lives estimated at greater than one year are capitalized, while repairs and maintenance are charged to expense as incurred.

Impairment of Long-Lived Assets

We evaluate our long-lived assets for indicators of possible impairment by comparison of the carrying amounts to future net undiscounted cash flows expected to be generated by such assets when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Should an impairment exist, the impairment loss would be measured based on the excess carrying value of the asset over the asset’s fair value or discounted estimates of future cash flows. We have not identified any such impairment losses to date.

Common Stock Warrant Liabilities

The warrants issued by us in the 2010 private placement contain a cash-out provision, which may be triggered upon request by the warrant holders if we are acquired or upon the occurrence of certain other fundamental transactions involving us. This provision requires these warrants to be classified as liabilities and to be marked to market at each period end commencing on August 31, 2010. The warrants issued by us in our December 2009 equity financing contain a conditional obligation that may require us to transfer assets to repurchase the warrants upon the occurrence of potential future events. Under the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 480, Distinguishing Liabilities from Equity, a financial instrument that may require the issuer to settle the obligation by transferring assets is classified as a liability. Therefore, we have classified the warrants as liabilities and will mark them to fair value at each period end. The common stock warrants are re-measured at the end of every reporting period with the change in value reported in our condensed consolidated statements of comprehensive loss. Warrants which are recorded as liabilities that are exercised are re-measured and marked to market the day prior to exercise. Upon exercise of such warrants, the fair value of such warrants is reclassified to equity.

Income Taxes

Income taxes are recorded under the liability method, under which deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the 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.

Research and Development

We are a development stage biotechnology company. Research and development costs are charged to expense as incurred. Research and development expenses include medical, clinical, regulatory and scientists’ salaries and benefits, lab collaborations, preclinical studies, clinical trials, clinical trial materials, commercial manufacturing costs prior to drug approval, regulatory and clinical consultants, lab supplies, lab services, lab equipment maintenance and small equipment purchased to support the research laboratory, amortization of intangible assets and allocated executive, human resources and facilities expenses. Research and development expenses are offset by contra-expenses, which are reimbursements of research and development expenses received either from research collaborators or from government grants or tax rebates.

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In-Process Research and Development

Prior to September 1, 2009, we recorded in-process research and development expense for a product candidate acquisition where there is not more than one potential product or usage for the assets being acquired. Upon the adoption of the revised guidance on business combinations, effective September 1, 2009, the fair value of acquired in-process research and development is capitalized and tested for impairment at least annually. Upon completion of the research and development activities, the intangible asset is amortized into earnings over the related product’s useful life. In-process research and development that is amortized or expensed is recorded as part of research and development expenses on our statements of comprehensive loss. We review each product candidate acquisition to determine the existence of in-process research and development.

Comprehensive Loss

Components of comprehensive loss are reported in our condensed consolidated statements of comprehensive loss in the period in which they are recognized. The components of comprehensive loss include net loss and foreign currency translation adjustments.

Stock-Based Compensation

In February 2010, our Board of Directors approved, and in March 2010 our stockholders approved, our 2010 Equity Incentive Plan, or the 2010 Plan, to grant up to an aggregate of 3,000,000 stock options or restricted stock or restricted stock units over the ten year life of the 2010 Plan. Our Board of Directors has determined not to make any new grants under any of our former plans, but rather under the 2010 Plan. The 2010 Plan’s term is ten years and allows for the granting of options to employees, directors and consultants. On April 7, 2011, our stockholders passed amendments to the 2010 Plan which allow for an increase of the grant pool based upon 5% of our common stock outstanding as of April 7, 2011, August 31, 2011 and August 31, 2012 up to an aggregate maximum increase of 6,000,000 shares. The April 7, 2011 and August 31, 2011 increases added 1,629,516 and 1,778,459 shares, respectively, available for grant under the 2010 Plan. As of February 29, 2012, options to purchase 5,841,848 shares of our common stock were outstanding and 1,563,508 shares of our common stock remain available for future issuance under the 2010 Plan. The amendments also allow for 50% accelerated vesting of unvested stock options upon a change of control as defined in the 2010 Plan, as amended. In September 2011, our Board of Directors approved an amended and restated form of award agreement to the 2010 Plan, which will be used for awards granted on or after September 22, 2011. The amended and restated award agreement, subject to the terms of any applicable employment agreement, extends the termination date of the awards granted under the 2010 Plan that are vested as of such termination date due to (a) an employee’s or a non-employee director’s retirement at age 62 or older which employee or non-employee director has at least five (5) years of continuous service with us prior to such retirement, (b) the termination of a non-employee director’s board membership for reasons other than for cause or retirement and (c) an employee’s or a non-employee director’s death (during his or her continuous service with us or within 90 days’ of such continuous service with us) or permanent disability, to eighteen (18) months from the date of termination of continuous service with us.

In May 2006, Raptor Pharmaceuticals Corp.’s stockholders approved the 2006 Equity Compensation Plan, as amended, referred to herein as the 2006 Plan. The 2006 Plan’s term is ten years and allows for the granting of options to employees, directors and consultants. Effective as of the effective time of the 2009 Merger, we assumed the outstanding stock options of Raptor Pharmaceuticals Corp. granted under the 2006 Plan. Such assumed options are subject to the terms of the 2006 Plan and, in each case, are also subject to the terms and conditions of an incentive stock option agreement, non-qualified stock option agreement or other option award, as the case may be, issued under such 2006 Plan. Prior to the 2009 Merger, and subject to the 2009 Merger becoming effective, our Board of Directors adopted the 2006 Plan such that the 2006 Plan became an equity incentive plan of ours after the 2009 Merger. Typical option grants under the 2010 and 2006 Plans are for ten years with exercise prices at or above market price based on the last closing price as of the date prior to the grant date on the relevant stock market or exchange and vest over four years as follows: 6/48ths on the six month anniversary of the date of grant; and 1/48th per month thereafter.

Effective September 1, 2006, our stock-based compensation is accounted for in accordance with ASC Topic 718, Accounting for Compensation Arrangements , or ASC Topic 718 (previously listed as Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment , or SFAS 123(R)), and related interpretations. Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. Determining the fair value of share-based awards at the grant date requires judgment, including estimating future stock price volatility and employee stock option exercise behavior. If actual results differ significantly from these estimates, stock-based compensation expense and results of operations could be materially impacted.

In March 2005, the FASB issued ASC Topic 718 (previously listed as Staff Accounting Bulletin No. 107), which offers guidance for what was previously referred to as SFAS 123(R). ASC Topic 718 was issued to assist preparers by simplifying some of the implementation challenges of SFAS 123(R) while enhancing the information that investors receive. ASC Topic 718 creates a framework that is premised on two overarching themes: (a) considerable judgment will be required by preparers to successfully implement SFAS 123(R), specifically when valuing employee stock options; and (b) reasonable individuals, acting in good faith, may conclude differently on the fair value of employee stock options. Key topics covered by ASC Topic 718 include valuation models, expected volatility and expected term.

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For the three month period ended February 29, 2012, stock-based compensation expense was based on the Black-Scholes option-pricing model assuming the following: risk-free interest rate of 1.12%; 5 year expected life; 122.38% volatility; 2.5% turnover rate; and 0% dividend rate.

We based our Black-Scholes inputs on the following factors: the risk-free interest rate was based upon our review of current constant maturity treasury bill rates for seven and five years (average); the expected life of five years was based upon our assessment of the ten-year term of the stock options issued along with the fact that we are a development-stage company and our anticipation that option holders will exercise stock options when we are at a more mature stage of development; the volatility was based on the actual volatility of our common stock price as quoted on NASDAQ since the closing of our 2009 Merger on September 30, 2009; the turnover rate was based on our assessment of our historical employee turnover; and the dividend rate was based on our current decision to not pay dividends on our stock at our current development stage. If factors change and different assumptions are employed in the application of ASC Topic 718, the compensation expense recorded in future periods may differ significantly from what was recorded in the current period. See Note 7 of our condensed consolidated financial statements for a further discussion of our accounting for stock based compensation.

We recognize as consulting expense the fair value of options granted to persons who are neither employees nor directors. Stock options issued to consultants are accounted for in accordance with the provisions of the FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees (previously listed as Emerging Issues Task Force, or EITF, Consensus No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services ). The fair value of expensed options is based on the Black-Scholes option-pricing model assuming the same factors as stock-based compensation expense discussed above.

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Results of Operations

Three months ended February 29, 2012 and February 28, 2011

General and Administrative Expenses

General and administrative expenses include finance and executive compensation and benefits for personnel performing pre-commercial and administrative expenses, pre-commercial expenses, such as reimbursement and marketing studies, corporate costs, such as legal and auditing fees, business development expenses, travel, board of director fees and expenses, investor relations expenses, intellectual property costs associated with filed (but not issued) patents, administrative consulting and allocated human resources and facilities costs. General and administrative expenses for the three-month period ended February 29, 2012 increased by approximately $1.3 million compared to the prior year’s second fiscal quarter. The increase was primarily due to:

Reason for increase (decrease)	Increase (decrease) in $ thousands
Expenses not in Q2 FY2011:
Commercial operations requirements RP103 for cystinosis:
Pre-commercial consulting services		117
Tax study and advisory fees related to EU headquarters		183
Estimated Q2 accrual for annual performance bonus based on assessment of performance to date		60
Salary and benefit increases and new personnel especially related to commercial operations		239
Stock option grants, employees and directors (non-cash)		647
Board expansion from 5 to 8 members, retainer fees and expenses		65
Higher NASDAQ fees and Delaware taxes due to increase in shares outstanding and market capitalization		114
Increased executive and human resource costs allocated to R&D due to higher headcount		(188	)
Other, net		89
Total increase Q2 FY2012 versus Q2 FY 2011		1,326

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Research and Development

Research and development expenses include medical, clinical, regulatory and scientists’ compensation and benefits, lab collaborations, preclinical studies, clinical trials, clinical trial materials, commercial drug manufacturing costs prior to marketing approval, regulatory and clinical consultants, lab supplies, lab services, lab equipment maintenance and small equipment purchased to support the research laboratory, amortization of intangible assets and allocated executive, human resources and facilities expenses. Research and development expenses for the three month period ended February 29, 2012 increased by approximately $300,000 over the prior year’s second fiscal quarter primarily due to:

Reason for increase (decrease)	Increase (decrease) in $ thousands
Reduction in tax rebate		158
Increased executive and human resource costs allocated to R&D due to higher headcount		188
Compensation
Salary increases and new hire salaries		112
Stock option grants, employees (non-cash)		151
Estimated Q2 accrual for annual performance bonus based on assessment of performance to-date		50
Regulatory consulting for NDA/MAA preparation		62
Reduction in Phase 3 cystinosis trial expense partially offset by extension study		(439	)
Other, net		20
Total increase Q2 FY2012 versus Q2 FY 2011		302

Research and development expenses include the following: (in $ millions)

	Three month periods ended
Major Program (stage of development)	February 29, 2012		February 28, 2011
RP103/RP104 – All indications (clinical/pre-commercial)		2.7		3.0
Preclinical programs		—		(0.2	)
Minor or inactive programs		—		0.1
R & D personnel and other costs not allocated to programs		1.3		0.8
Total research & development expenses		4.0		3.7

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Major Program expenses recorded as general and administrative expenses: (in $ millions)

	Three month periods ended
Major Program (stage of development)	February 29, 2012		February 28, 2011
RP103/RP104 – All indications (clinical and pre-commercial)		0.3		0.06
Convivia™ (clinical)		—		0.03
Preclinical programs		0.0		0.05

Additional major program expenses include patent fees and patent expenses which were recorded as general and administrative expenses as these fees are to support patent applications (not issued patents) and expenses related to the preparation for commercial launch of RP103 for the treatment of cystinosis (approximately $170,000, $388,000 and $858,000 for the three and six month periods ended February 29, 2012 and the cumulative period from September 8, 2006 (inception) to February 29, 2012, respectively).

Any of our major programs could be partnered for further development and/or could be accelerated, slowed or ceased due to scientific results or challenges in obtaining funding. We anticipate that we will need additional funding in order to pursue our plans beyond the first calendar quarter of 2013. In addition, the timing and costs of development of our programs beyond the next 12 months are highly uncertain and difficult to estimate. See risks and other factors described under the section captioned “Risk Factors That May Affect Future Results” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Current Status of Major Programs

Please refer to the subsection titled “Future Activities” under this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this Quarterly Report on Form 10-Q for a detailed discussion of each of our major programs. In summary, RP103/RP104 is being developed in cystinosis, NASH and HD. In July 2011, we announced that our Phase 3 clinical trial of RP103 for the treatment of cystinosis met its sole primary clinical endpoint and in November 2009, we released data from our Phase 2b clinical trial. In March 2012, we filed for marketing approval of RP103 for cystinosis in both the U.S. and in the E.U. and have begun commercial planning in anticipation of drug launch. In May 2010, we presented the data from our NASH Phase 2a clinical trial and have signed a collaborative agreement with the NIH for a Phase 2b clinical trial anticipated to commence early in the second quarter of calendar 2012. We continue to work on the formulation of RP104 as a delayed-released compressed tablet of cysteamine bitartrate for future studies. In October 2010, our collaborator commenced a Phase 2a clinical trial of RP103 in HD patients and we anticipate full enrollment in the second quarter of calendar 2012 with potential data in the first half of calendar 2014.

Our Convivia™ product candidate completed its initial clinical study in 2008 and in June 2010, we licensed Convivia™ to Uni Pharma for further clinical development in Taiwan. We continue to seek other potential partners for Convivia™ in other Asian countries where its potential market exists.

We are preparing for a Phase 1 clinical trial for the potential treatment of thrombotic disorder but plan to eventually out-license our tezampanel product candidate. HepTide™ will be undergoing further preclinical proof of concept studies and WntTide™ and NeuroTrans™ are being considered for potential out-licensing for further development. All preclinical product candidates will require further study prior to moving into a clinical phase of development.

Interest Income

Interest income for the three-month periods ended February 29, 2012 and February 28, 2011 was approximately $107,000 and $12,000, respectively.

Interest Expense

Interest expense for the three-month periods ended February 29, 2012 and February 28, 2011 was nominal.

Foreign Currency Transaction Loss

Foreign currency transaction gain (loss) for the three-month periods ended February 29, 2012 and February 28, 2011 was nominal.

Unrealized Loss on Cash Equivalents

Unrealized loss on short-term investments represents the change in net asset value of the Company’s two short-term bond funds. The unrealized loss on short-term investments for the three-month periods ended February 29, 2012 and February 28, 2011 was nominal.

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Adjustment to the Fair Value of Common Stock Warrants

Adjustment to the fair value of common stock warrants was a loss of approximately $(7.8) million for the three month period ended February 29, 2012 compared to a gain of approximately $1.8 million for the three month period ended February 28, 2011, representing an increase of approximately $9.6 million resulting from a higher increase in stock price of our common stock during the three months ended February 29, 2012 compared to the three months ended February 28, 2011. These losses are non-cash.

Six months ended February 29, 2012 and February 28, 2011

General and Administrative Expenses

General and administrative expenses include finance and executive compensation and benefits for personnel performing pre-commercial and administrative expenses, pre-commercial expenses, such as reimbursement and marketing studies, corporate costs, such as legal and auditing fees, business development expenses, travel, Board of Director fees and expenses, investor relations expenses, intellectual property costs associated with filed (but not issued) patents, administrative consulting and allocated human resources and facilities costs. General and administrative expenses for the six-month period ended February 29, 2012 increased by approximately $2.0 million compared to the same period of the prior year. The increase was primarily due to:

Reason for increase (decrease)	Increase (decrease) in $ thousands
Expenses not in Q2 FY2011:
Investor relations, research coverage and financial advisory fees		296
Commercial operations requirements RP103 for cystinosis:
Pre-commercial consulting services		233
Tax study and advisory fees related to EU headquarters		156
Estimated Q2 YTD accrual for annual performance bonus based on assessment of performance to date		130
Audit fee increase primarily due to internal control attestation in FY2011 audit		102
Salary and benefit increases and new personnel especially related to commercial operations		388
Stock option grants, employees and directors (non-cash)		701
Board expansion from 5 to 8 members, retainer fees and expenses		116
Higher NASDAQ fees and Delaware taxes due to increase in shares outstanding and market capitalization		132
Increased executive and human resource costs allocated to R&D due to higher headcount		(335	)
Other, net		37
Total increase YTD FY2012 versus YTD FY 2011		1,956

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Research and development expenses include the following: (in $ millions)

Research and Development

Research and development expenses include medical, clinical, regulatory and scientists’ compensation and benefits, lab collaborations, preclinical studies, clinical trials, clinical trial materials, commercial drug manufacturing costs prior to marketing approval, regulatory and clinical consultants, lab supplies, lab services, lab equipment maintenance and small equipment purchased to support the research laboratory, amortization of intangible assets and allocated executive, human resources and facilities expenses. Research and development expenses for the six month period ended February 29, 2012 increased by approximately $2.6 million over the same period of the prior year primarily due to:

Reason for increase (decrease)	Increase (decrease) in $ thousands
Increased product manufacture of RP103 and RP104 for cystinosis, HD, NASH		1,470
Reduction in tax rebate		704
Increased executive and human resource costs allocated to R&D due to higher headcount		335
Compensation
Salary increases and new hire salaries		188
Stock option grants, employees (non-cash)		140
Estimated Q2 YTD accrual for annual performance bonus based on assessment of performance to-date		100
Reagents for preclinical studies		57
Reduction in Phase 3 cystinosis trial expense partially offset by extension study		(466	)
Other, net		95
Total increase YTD FY2012 versus YTD FY 2011		2,623

Research and development expenses include the following: (in $ millions)

	Cumulative through February 29, 2012		Six month periods ended
Major Program (stage of development)			February 29, 2012		February 28, 2011
RP103/RP104 – All indications (clinical/pre-commercial)		28.3		6.5		4.6
Convivia™ (clinical)		2.5		—		0.1
Preclinical programs		2.5		—		(0.2	)
Minor or inactive programs		1.1		—		0.2
R & D personnel and other costs not allocated to programs		13.9		2.5		1.7
Total research & development expenses		48.3		9.0		6.4

Major Program expenses recorded as general and administrative expenses: (in $ millions)

	Cumulative through February 29, 2012		Six month periods ended
Major Program (stage of development)			February 29, 2012		February 28, 2011
RP103/RP104 – All indications (clinical and pre-commercial)		1.73		0.60		0.16
Convivia™ (clinical)		0.27		—		0.09
Preclinical programs		0.78		0.01		0.07

Additional major program expenses include patent fees and patent expenses which were recorded as general and administrative expenses as these fees are to support patent applications (not issued patents) and expenses related to the preparation for commercial launch of RP103 for the treatment of cystinosis.

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Any of our major programs could be partnered for further development and/or could be accelerated, slowed or ceased due to scientific results or challenges in obtaining funding. We anticipate that we will need additional funding in order to pursue our plans beyond the first calendar quarter of 2013. In addition, the timing and costs of development of our programs beyond the next 12 months are uncertain and difficult to estimate. See risks and other factors described under the section captioned “Risk Factors That May Affect Future Results” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Interest Income

Interest income increased by $152,360 for the six months ended February 29, 2012 compared to the same period of the prior fiscal year due to the purchase of short-term investments in October 2011.

Interest Expense

Interest expense for the six months ended February 29, 2012 and February 28, 2011 was nominal.

Foreign Currency Transaction Loss

Foreign currency transaction gain for the six months ended February 29, 2012 and February 28, 2011 was nominal.

Adjustment to the Fair Value of Common Stock Warrants

Adjustment to the fair value of common stock warrants was a loss of approximately $(12.0) million for the six months ended February 29, 2012 compared to a loss of approximately $(3.9) million for the six months ended February 28, 2011, an increase in loss of approximately $15.9 million resulting from a higher increase in stock price of our common stock during the six months ended February 29, 2012 compared to the six months ended February 28, 2011. These losses are non-cash.

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Liquidity and Capital Resources

Capital Resource Requirements

As of February 29, 2012, we had approximately $50.1 million in cash, cash equivalents, restricted cash and short-term investments, approximately $30.1 million in current liabilities (of which $26.6 million represented the non-cash common stock warrant liability) and approximately $22.4 million of net working capital.

We believe our cash and cash equivalents as of February 29, 2012 will be sufficient to meet our obligations through the first calendar quarter of 2013.

Our recurring losses from operations raise substantial doubt about our ability to continue as a going concern and, as a result, our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statements for the year ended August 31, 2011 with respect to this uncertainty. We may need to generate significant revenue or raise additional capital to continue to operate as a going concern beyond the first calendar quarter of 2013. In addition, the perception that we may not be able to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations and may adversely affect our ability to raise additional capital.

The sale of additional securities is likely to result in additional dilution to our stockholders. Additional financing may not be available when needed in amounts or on terms satisfactory to us or at all. We may be unable to raise additional financing due to a variety of factors, including our financial condition, the status of our research and development programs, and the general condition of the financial markets. If we fail to raise additional financing when needed, we may have to delay or terminate some or all of our research and development programs, our financial condition and operating results may be adversely affected and we may have to scale back our operations.

In December 2009, we entered into a definitive securities purchase agreement, or the Direct Offering Purchase Agreement, dated as of December 17, 2009, with 33 investors (collectively, the Direct Offering Investors) with respect to the sale of units, whereby, on an aggregate basis, the investors agreed to purchase 3,747,558 Units for a negotiated purchase price of $2.00 per unit for aggregate gross proceeds of approximately $7.5 million. Each unit consists of one share of our common stock, one Series A Warrant exercisable for 0.5 of a share of our common stock and one Series B Warrant exercisable for 0.5 of a share of our common stock. The shares of our common stock and the warrants were issued separately. The Series A Warrants exercisable for an aggregate 1,873,779 shares of our common stock were exercisable commencing on June 20, 2010 and ending December 22, 2014. The Series B Warrants exercisable for an aggregate 1,873,779 shares of our common stock were exercisable commencing on June 20, 2010 and ending June 22, 2011. The investor warrants have a per share exercise price of $2.45. In connection with this offering we paid a placement agent cash compensation equal to 6.5% of the gross proceeds or $487,183 plus a five-year warrant at an exercise price of $2.50 per share for the purchase of up to 74,951 shares of our common stock. As of February 29, 2012, 1,055,029 shares of our common stock have been issued upon exercise of the Series A Warrants, 1,873,779 shares of our common stock have been issued upon exercise of the Series B Warrants and 74,951 shares of our common stock have been issued upon exercise of the placement agent warrants. As of February 29, 2012, Series A warrants to purchase up to 818,750 shares of our common stock were outstanding.

On August 9, 2010, we entered into the 2010 Private Placement Purchase Agreements with the 2010 Private Placement Investors for the private placement of our common stock and warrants to purchase our common stock, at a purchase price of $3.075 per unit, with each unit comprised of one share of common stock and a warrant to purchase one share of common stock. We issued and sold an aggregate of 4,897,614 units, comprised of an aggregate of 4,897,614 shares of common stock and warrants to purchase up to 4,897,614 shares of our common stock for gross proceeds of approximately $15.1 million. Each warrant, exercisable for 5 years from August 12, 2010, has an exercise price of $3.075 per share. The placement agent for the 2010 Private Placement was issued one warrant to purchase 97,952 shares of our common stock at an exercise price of $3.075 per share, paid a cash commission of $978,911 and reimbursed for certain of its expenses incurred in connection with the 2010 Private Placement. As of February 29, 2012, 1,275,931 shares of our common stock have been issued upon exercise of the warrants. As of February 29, 2012, warrants to purchase up to 3,719,635 shares (including the placement agent warrants) of our common stock were outstanding.

On September 13, 2011, we closed an underwritten public offering of shares of our common stock at a price to the public of $4.00 per share. The shares sold in the offering included 10.0 million shares of our common stock plus an additional 1.5 million shares of common stock pursuant to the exercise by the underwriters of the over-allotment option we granted to them. Total gross proceeds to us in the offering (including in connection with the sale of the shares of common stock pursuant to the exercise of the over-allotment option) were $46.0 million, before underwriting discounts and commissions. The offering resulted in net proceeds to us of approximately $42.8 million after deduction of underwriting discounts of 6% and other offering expenses payable by us.

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There can be no assurance that we will be able to obtain funds required for our continued operation. There can be no assurance that additional financing will be available to us or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain financing on a timely basis, we will not be able to meet our obligations as they become due and we will be forced to scale down or perhaps even cease the operation of our business. This also may be the case if we become insolvent or if we breach our asset purchase agreement with BioMarin, our licensing agreements with Washington University, UCSD, Yeda or the University of Arizona, or due to non-payment (and we do not cure our non-payment within the stated cure period). If this happens, we would lose all rights to the RAP technology assigned to us by BioMarin, the rights to Mesd licensed to us by Washington University, the rights to RP103 and RP104 licensed to us by UCSD, and the rights licensed to us by Yeda and University of Arizona, depending on which agreement is breached.

We anticipate that we will not be able to generate revenues from the sale of products until we further develop our drug product candidates and obtain the necessary regulatory approvals to market our future drug product candidates, which could take nine months or more for our first product candidate and several years or more for our other product candidates, if we are able to do so at all. Accordingly, our cash flow projections are subject to numerous contingencies and risk factors beyond our control, including successfully developing our drug product candidates, market acceptance of our drug product candidates, competition from well-funded competitors, and our ability to manage our expected growth. It is likely that for a couple of years, we will not be able to generate internal positive cash flow from the sales of our drug product candidates sufficient to meet our operating and capital expenditure requirements.

There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon obtaining further long-term financing, the successful development of our drug product candidates and related technologies, the successful and sufficient market acceptance of any product offerings that we may introduce and, finally, the achievement of a profitable level of operations. The issuance of additional equity securities by us is likely to result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, including on acceptable terms, will increase our liabilities and future cash commitments.

Research and Development Activities

We plan to conduct further research and development, seek to support several clinical trials for RP103 and RP104, improve upon our RAP-based and in-licensed technology and continue business development efforts for our preclinical and other clinical-stage product candidates in the next 12 months. We plan to conduct research and development activities by our own laboratory staff and also by engaging contract research organizations, clinical research organizations and contract manufacturing organizations. We also plan to incur costs for the production of our clinical study drug candidates, RP103 and RP104 and for commercial production of RP103, clinical trials, clinical and medical advisors and consulting and collaboration fees. We anticipate that our research and development costs will increase during the next 12 months primarily due to the build-up of inventory of RP103 prior to marketing approval in anticipation of drug launch and the addition of our Phase 2 clinical trial in NASH.

General and Administrative Activities

General and administrative costs in the next 12 months will consist primarily of commercial and pre-commercial activities in anticipation of approval and launch of RP103 for cystinosis, legal and accounting fees, patent legal fees, investor relations expenses, board fees and expenses, insurance, rent and facility support expenses. We anticipate that general and administrative expenses will increase primarily due to the commercial and pre-commercial efforts required to prepare for the commercial launch of RP103 in cystinosis in both the U.S. and the E.U.

Officer and Employee Compensation

We presently have 18 full time employees and two part-time employees. Of the 18 full-time employees, 10 are in general and administrative (including 3 commercial employees) and 8 are in research and development functions. Based on our current plan, over the next 12 month period, we plan to add personnel in the areas of sales and marketing, regulatory, clinical, medical affairs and quality. We also plan to supplement our human resources needs through consultants and contractors as needed. We anticipate that our compensation expense will increase significantly during the next 12 months due to the addition of employees primarily in support of commercial operations in anticipation of launching RP103 for cystinosis in both the U.S. and the E.U. Officer and employee compensation is recorded on our condensed consolidated statements of comprehensive loss as either research and development expenses or general and administrative expenses based upon the functions served by the officers and employees.

Capital Expenditures

In the next 12 months, relatively minor capital expenditures will be made for lab equipment and office furniture.

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Contractual Obligations with Thomas E. Daley (assignee of the dissolved Convivia, Inc.)

Pursuant to the terms of the asset purchase agreement, or the Asset Purchase Agreement, that we entered into with Convivia, Inc. and Thomas E. Daley, pursuant to which we purchased intellectual property related to our 4-MP product candidate program known as Convivia^TM, Mr. Daley will be entitled to receive various payments in the form of our restricted common stock and cash, if at all, in such amounts and only to the extent certain future milestones are accomplished by us. See Note 10 Commitments and Contingencies for further details in our condensed consolidated financial statements located elsewhere in this Quarterly Report on Form 10-Q.

Contractual Obligations with Former Encode Securityholders

Pursuant to the terms of the merger agreement, or the Encode Merger Agreement, that we entered into with Encode Pharmaceuticals, Inc. and Nicholas Stergis in December 2007, former Encode securityholders will be entitled to receive the following, if at all, in such amounts and only to the extent certain future milestones are accomplished by us, as set forth below:

• Restricted, unregistered common stock, stock options to purchase our common stock, and warrants to purchase our common stock in an amount equal to, in the aggregate, 116,562 shares of our common stock upon the receipt by it at any time prior to the fifth-year anniversary of the Encode Merger Agreement of approval to market and sell a product for the treatment of cystinosis predominantly based upon and derived from the assets acquired from Encode, or Cystinosis Product, from the applicable regulatory agency (e.g., FDA and European Agency for the Evaluation of European Medical Products, or EMA) in a given major market in the world.

• Restricted, unregistered common stock, stock options to purchase our common stock, and warrants to purchase our common stock in an amount equal to 442,934 shares of our common stock upon the receipt by us at any time prior to the fifth anniversary of the Encode Merger Agreement of approval to market and sell a product, other than a Cystinosis Product, predominantly based upon and derived from the assets acquired from Encode, from the applicable regulatory agency (e.g., FDA and EMA) in a given major market in the world.

If within five years from the date of the Encode Merger Agreement, there occurs a transaction or series of related transactions that results in the sale of all or substantially all of the assets acquired from Encode other than to our affiliate in such case where such assets are valued at no less than $2.5 million, the former Encode stockholders will be entitled to receive, in the aggregate, restricted, unregistered common stock, stock options to purchase our common stock, and warrants to purchase our common stock in an amount equal to 559,496 shares of common stock, less the aggregate of all milestone payments previously made or owing, if any.

To the extent that future milestones as described above are accomplished by us within five years from the effective time of the merger with Encode, we will be obligated to file a registration statement within 90 days covering such Encode stockholder’s portion of such respective future restricted, unregistered common stock issued relating to such milestone payment.

Contractual Obligations with UCSD

As a result of the merger of Raptor Therapeutics Inc. and Encode, we received the exclusive worldwide license to RP103/RP104, or the License Agreement for use in the field of human therapeutics for metabolic and neurologic disorders, developed by clinical scientists at the UCSD, School of Medicine. RP103/RP104 is a proprietary, delayed-release, enteric-coated formulation of cysteamine bitartrate, a cystine depleting agent currently approved by the FDA. Cysteamine bitartrate is prescribed for the management of the genetic disorder known as cystinosis, a lysosomal storage disease. The active ingredient in RP103/RP104 has also demonstrated potential in studies as a treatment for other metabolic and neurodegenerative diseases, such as HD and NASH.

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In consideration of the grant of the license, prior to the merger, Encode paid an initial license fee and we are obligated to pay an annual maintenance fee of $15,000 until we begin commercial sales of any products developed pursuant to the License Agreement. In addition to the maintenance fee, we are obligated to pay during the life of the License Agreement: milestone payments ranging from $20,000 to $750,000 for orphan indications and from $80,000 to $1,500,000 for non-orphan indications upon the occurrence of certain events, if ever; royalties on commercial net sales from products developed pursuant to the License Agreement ranging from 1.75% to 5.5%; a percentage of sublicense fees ranging from 25% to 50%; a percentage of sublicense royalties; and a minimum annual royalty commencing the year we begin commercially selling any products pursuant to the License Agreement, if ever. Under the License Agreement, we are obligated to fulfill predetermined milestones within a specified number of years ranging from 0.75 to 6 years from the effective date of the License Agreement, depending on the indication. In addition, we are obligated to, among other things, annually spend at least $200,000 for the development of products—which as of August 31, 2011, 2010 and 2009 we satisfied by spending approximately $11.3 million, $6.2 million and $4.1 million, respectively, on such programs —pursuant to the License Agreement. To date, we have paid $680,000 in milestone payments to UCSD based upon the initiation of clinical trials in cystinosis and in NASH. In March 2012, we filed our MAA for RP103 for the potential treatment of cystinosis, a milestone in which we will pay $250,000 to UCSD pursuant to this license. To the extent that we fail to perform any of our obligations under the License Agreement, UCSD may terminate the license or otherwise cause the license to become non-exclusive.

Off-Balance Sheet Arrangements

We do not have any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.

Reverse Acquisition

We have treated the 2009 Merger as a reverse acquisition and the reverse acquisition is accounted for as a recapitalization.

For accounting purposes, Raptor Pharmaceuticals Corp. is considered the accounting acquirer in the reverse acquisition. The historical financial statements reported in this Quarterly Report on Form 10-Q and in future periods are and will be those of Raptor Pharmaceuticals Corp. (merged into Raptor Pharmaceutical Corp. effective December 7, 2011) consolidated with its subsidiaries and with us, its parent, Raptor Pharmaceutical Corp. (formerly TorreyPines Therapeutics, Inc.). Earnings per share for periods prior to the reverse merger have been restated to reflect the number of equivalent shares received by former stockholders.

Going Concern

Due to the uncertainty of our ability to meet our current operating and capital expenses, in their reports on our audited financial statements for the years ended August 31, 2011, 2010, 2009, 2008, 2007 and for the period September 8, 2005 (inception) to August 31, 2006, our independent registered public accounting firm, Burr Pilger Mayer, Inc., included an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that led to this disclosure by our independent registered public accounting firm.

New Accounting Pronouncements

In December 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-28 , Intangibles – Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (“ASU 2010-28”). ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts and requires the company to perform Step 2 if it is more likely than not that a goodwill impairment may exist. ASU 2010-28 is effective for fiscal years and interim periods within those years, beginning after December 15, 2010. Early adoption is not permitted. We adopted these standards on September 1, 2011 and have determined that ASU 2010-28 has no material impact on our condensed consolidated financial statements for the three and six month periods ended February 29, 2012, because there was no requirement to perform Step 2 due to our positive carrying amount.

In December 2010, the FASB issued ASU 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations (“ASU 2010-29”). ASU 2010-29 is an update that addresses diversity in practice about the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations if the entity presents comparative financial statements and expands the required disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. This standard is effective prospectively for business combinations for which the acquisition dates are on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted. We adopted these standards on September 1, 2011, however since there were no business combinations during the three and six month periods ended February 29, 2012, ASU 2010-29 had no material impact on our financial disclosure, however, the provision will impact the financial disclosures of any business combinations in the future.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 is intended to result in convergence between U.S. GAAP and International Financial Reporting Standards (“IFRS”) requirements for measurement of and disclosures about fair value. The amendments are not expected to have a significant impact on companies applying U.S.

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GAAP. Key provisions of the amendment include: a prohibition on grouping financial instruments for purposes of determining fair value, except when an entity manages market and credit risks on the basis of the entity’s net exposure to the group; an extension of the prohibition against the use of a blockage factor to all fair value measurements (that prohibition currently applies only to financial instruments with quoted prices in active markets); and a requirement that for recurring Level 3 fair value measurements, entities disclose quantitative information about unobservable inputs, a description of the valuation process used and qualitative details about the sensitivity of the measurements. In addition, for items not carried at fair value but for which fair value is disclosed, entities will be required to disclose the level within the fair value hierarchy that applies to the fair value measurement disclosed. ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011. We will adopt these standards on March 1, 2012 and are currently assessing the impact on our condensed consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 will require companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. The standard does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. This standard is effective for interim and annual periods beginning after December 15, 2011. We early adopted these standards as of August 31, 2011. Because ASU 2011-05 impacts presentation only, it had no effect on our condensed consolidated financial statements or on our financial condition for the three and six month periods ended February 29, 2012.

In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU 2011-08”), which permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. Because we have only one reporting unit, which has a fair value higher than our carrying amount, adoption of ASU 2011-08 did not have a material impact on our condensed consolidated financial statements for the three and six month periods ended February 29, 2012.

Item 3. Quantitative And Qualitative Disclosures About Market Risk

Market risk represents the risk of changes in the value of market risk sensitive instruments caused by fluctuations in interest rates, foreign exchange rates and commodity prices. We are exposed to various market risks that may arise from adverse changes in market rates and prices, such as interest rates and foreign exchange fluctuations. We do not enter into derivatives or other financial instruments for trading or speculative purposes.

Foreign Exchange Risk

A majority of our assets and liabilities are maintained in the United States in U.S. dollars and a majority of our expenditures are transacted in U.S. dollars. We are subject to foreign exchange risk for the operations of BV which uses the European Euro as its functional currency. We do not believe that a hypothetical one percentage point fluctuation in the U.S. dollar exchange rate would materially affect our consolidated financial position, results from operations or cash flows as of February 29, 2012. We do not currently hedge our foreign currency transactions.

Interest Rate Risk

We are subject to interest rate risks associated with fluctuations in interest rates. In October 2011, we invested in two $15 million short-term bond funds with the goal of increasing yield on our idle cash. Approximately $19.2 million remained in the money market account yielding approximately .04% per year. The two short-term bond funds include one that exclusively invests in government securities and the other invests in a combination of government and other securities, both funds have historical annual yields of over 2%. Both bond funds pay dividends and provide their net asset value of their assets on a daily basis with daily liquidity. The change in net asset value is recorded on our statements of comprehensive loss as unrealized gain or loss on short-term investments. We completed an evaluation of our investments and determined that we did not have any other-than-temporary impairments as of February 29, 2012. The investments are placed in financial institutions with strong credit ratings and management expects full recovery of the carrying amounts. A hypothetical one percentage point decline in interest rates would not have materially affected our consolidated financial position, results of operations or cash flows as of February 29, 2012.

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Item 4. Controls and Procedures

As of February 29, 2012, we performed an evaluation of the effectiveness of our disclosure controls and procedures that are designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on our evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, has concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of February 29, 2012, are effective at a reasonable assurance level.

Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is defined as a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions; (ii) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework, our management concluded that our internal control over financial reporting was effective as of February 29, 2012.

Changes in Internal Control Over Financial Reporting

During the most recent fiscal quarter, there have not been any material changes in our internal control over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We know of no material, active or pending legal proceedings against us, or any of our property, and we are not involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholders are an adverse party or have a material interest adverse to us.

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Item 1A. Risk Factors.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

An investment in our securities involves a high degree of risk. Before you decide to invest in our securities, you should consider carefully all of the information in this Quarterly Report on Form 10-Q, including the risks and uncertainties described below, as well as other information included in or incorporated by reference into this Quarterly Report on Form 10-Q, particularly the specific risk factors discussed in the sections titled “Risk Factors” contained in our filings with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act before deciding whether to invest in our securities. Any of these risks could have a material adverse effect on our business, prospects, financial condition and results of operations. In any such case, the trading price of our common stock could decline and you could lose all or part of your investment. You should also refer to the other information contained in this Quarterly Report on Form 10-Q, or incorporated herein by reference, including our financial statements and the notes to those statements, and the information set forth under the caption “Forward-Looking Statements.” in Part I Item 2 of this Quarterly Report on Form 10-Q. The risks described below and contained in our other periodic reports are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also adversely affect our business operations.

As of February 29, 2012, there were no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended August 31, 2011 that was filed with the SEC on November 14, 2011, as amended by that certain Amendment No. 1 on Form 10-K/A filed with the SEC on December 19, 2011, except as set forth below:

Risks Related to Our Business

If we fail to obtain the capital necessary to fund our operations, our financial results, financial condition and our ability to continue as a going concern will be adversely affected and we will have to delay or terminate some or all of our product development programs.

Our condensed consolidated financial statements as of February 29, 2012 have been prepared assuming that we will continue as a going concern. As of February 29, 2012, we had an accumulated deficit of approximately $103.4 million. We expect to continue to incur losses for the foreseeable future and will have to raise substantial cash to fund our planned operations. Our recurring losses from operations raise substantial doubt about our ability to continue as a going concern and, as a result, our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statements for the year ended August 31, 2011, with respect to this uncertainty. We will need to generate significant revenue or raise additional capital to continue to operate as a going concern. In addition, the perception that we may not be able to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations and may adversely affect our ability to raise additional capital.

We believe our cash, cash equivalents and short-term investments as of February 29, 2012 will be sufficient to meet our obligations through the first calendar quarter of 2013. We may raise equity funds by the third calendar quarter of 2012. There can be no assurance that we will be successful in raising equity funds when needed. If we are unable to obtain such additional capital when needed, we will be forced to scale down our expenditures.

In addition, in the future, we may need to sell equity or debt securities to raise additional funds. The sale of additional securities is likely to result in additional dilution to our stockholders. Additional financing may not be available in amounts or on terms satisfactory to us or at all. We may be unable to raise additional financing due to a variety of factors, including our financial condition, the status of our research and development programs, and the general condition of the financial markets. If we fail to raise additional financing when needed, we may have to delay or terminate some or all of our research and development programs, our financial condition and operating results may be adversely affected and we may have to scale back our operations.

If we obtain additional financing, we expect to continue to spend substantial amounts of capital on our operations for the foreseeable future. The amount of additional capital we will need depends on many factors, including:

• the progress, timing and scope of our preclinical studies and clinical trials;

• the time and cost necessary to obtain regulatory approvals;

• the time and cost necessary to develop commercial manufacturing processes, including quality systems, and to build or acquire manufacturing capabilities;

• the time and cost necessary to launch and successfully commercialize our product candidates, once approved;

• the time and cost necessary to respond to technological and market developments; and

• any changes made or new developments in our existing collaborative, licensing and other corporate relationships or any new collaborative, licensing and other commercial relationships that we may establish.

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Moreover, our fixed expenses such as rent, collaboration and license payments and other contractual commitments are substantial and will likely increase in the future. These fixed expenses are likely to increase because we expect to enter into:

• additional licenses and collaborative agreements;

• contracts for manufacturing, clinical and preclinical research, consulting, maintenance and administrative services; and

• financing facilities.

We are an early development stage company and have not generated any revenues to date and have a limited operating history. Many of our drug product candidates are in the concept stage and have not undergone significant testing in preclinical studies or any testing in clinical trials. Moreover, we cannot be certain that our research and development efforts will be successful or, if successful, that our drug product candidates will ever be approved for sale or generate commercial revenues. We have a limited relevant operating history upon which an evaluation of our performance and prospects can be made. We are subject to all of the business risks associated with a new enterprise, including, but not limited to, risks of unforeseen capital requirements, failure of drug product candidates either in preclinical testing or in clinical trials, failure to establish business relationships, and competitive disadvantages against larger and more established companies.

Risks Related to Our Common Stock

There are a substantial number of shares of our common stock eligible for future sale in the public market, and the issuance or sale of equity, convertible or exchangeable securities in the market, or the perception of such future sales or issuances, could lead to a decline in the trading price of our common stock.

Any issuance of equity, convertible or exchangeable securities, including for the purposes of financing acquisitions and the expansion of our business, may have a dilutive effect on our existing stockholders. In addition, the perceived risk associated with the possible issuance of a large number of shares of our common stock or securities convertible or exchangeable into a large number of shares of our common stock could cause some of our stockholders to sell their common stock, thus causing the trading price of our common stock to decline. Subsequent sales of our common stock in the open market or the private placement of our common stock or securities convertible or exchangeable into our common stock could also have an adverse effect on the trading price of our common stock. If our common stock price declines, it may be more difficult for us to or we may be unable to raise additional capital.

In addition, future sales of substantial amounts of our currently outstanding common stock in the public market, or the perception that such sales could occur, could adversely affect prevailing trading prices of our common stock, and could impair our ability to raise capital through future offerings of equity or equity-related securities. We cannot predict what effect, if any, future sales of our common stock, or the availability of shares for future sales, will have on the trading price of our common stock.

As of February 29, 2012, we had the following warrants outstanding related to the assumption of warrants from our Encode merger, issuance of warrants related to our May/June 2008 private placement, issuance of warrants related to our August 2009 private placement, the assumption of warrants pursuant to the 2009 Merger, issuance of warrants related to our December 2009 registered direct offering and issuance of warrants related to our August 2010 private placement. See Note 9 in our condensed consolidated financial statements located elsewhere in this Quarterly Report on Form 10-Q for further discussion regarding our common stock warrants.

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	Number of shares exercisable		Exercise price			Expiration date
Issued in connection with Encode merger		233,309	$	2.87			12/13/2015
Issued to placement agents in May / June. 2008		432,649	$	2.36			5/21/2013
Issued to placement agents in August. 2009		65,000	$	1.50			8/21/2014
TorreyPines warrants assumed in 2009 Merger		8,140	$	80.86	*		6/11/2013 - 9/26/2015
Issued to registered direct investors in Dec. 2009		818,750	$	2.45			12/22/2014
Issued to private placement investors in Aug. 2010		3,621,683	$	3.075			8/12/2015
Issued to placement agent in Aug. 2010		97,952	$	3.075			8/12/2015
Total warrants outstanding		5,277,483	$	3.01	*

* Weighted average exercise price

Our executive officers and our Board of Directors own, in the aggregate, 1,723,810 shares, or approximately 3.5% of our outstanding common stock as of February 29, 2012. Sales of a substantial number of shares of our common stock by such officers and directors in the public trading market, whether in a single transaction or a series of transactions, or the perception that these sales may occur, could also have a significant effect on volatility and the trading price of our common stock.

As of February 29, 2012, there were (i) outstanding warrants to purchase 5,277,483 shares of our common stock at a weighted average exercise price of $3.01 per share (ii) outstanding options to purchase 5,692,401 shares of our common stock outstanding under our 2010 and 2006 Raptor stock option plans at a weighted-average exercise price of $3.96, (iii) options to purchase 149,447 shares of our common stock outstanding under our TorreyPines Therapeutics stock option plans at a weighted-average exercise price of $76.26 and (iv) 1,563,508 shares of our common stock available for future stock option grants issued under our 2010 Raptor Pharmaceutical stock option plan. The shares issuable under our stock option plans will be available for immediate resale in the public market. The shares issuable under the warrants are available for immediate resale in the public market. The market price of our common stock could decline as a result of such resales due to the increased number of shares available for sale in the market.

Future milestone payments, as more fully set forth under “Contractual Obligations with Thomas E. Daley (assignee of the dissolved Convivia, Inc.)” under Note 10 Commitments and Contingencies in our condensed consolidated financial statements located elsewhere in this Quarterly Report on Form 10-Q and “Contractual Obligations with Former Encode Securityholders” above, our acquisition of the Convivia assets and merger with Encode will result in dilution. We may be required to make additional contingent payments of up to 699,369 shares of our common stock, in the aggregate, under the terms of our acquisition of Convivia assets and merger with Encode, based on milestones related to certain future marketing and development approvals obtained with respect to Convivia and Encode product candidates. The issuance of any of these shares will result in further dilution to our existing stockholders.

These stock issuances and other future issuances of common stock underlying unexpired and unexercised warrants have and will result in, significant dilution to our stockholders. In connection with other collaborations, joint ventures, license agreements or future financings that we may enter into in the future, we may issue additional shares of common stock or other equity securities, and the value of the securities issued may be substantial and create additional dilution to our existing and future common stockholders.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

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Item 6. Exhibits

Exhibit Index
(2)	Plan of acquisition, reorganization, arrangement, liquidation or succession
2.1	Agreement and Plan of Merger and Reorganization, dated as of June 7, 2006, by and among Axonyx Inc., Autobahn Acquisition, Inc. and TorreyPines Therapeutics, Inc. (incorporated by reference to Annex A to Registration Statement No. 333-136018 filed on July 25, 2006).
2.2	Amendment No. 1 to Agreement and Plan of Merger and Reorganization, dated as of August 25, 2006, by and among Axonyx Inc., Autobahn Acquisition, Inc. and TorreyPines Therapeutics, Inc. (incorporated by reference to Annex A to Amendment No. 1 to Registration Statement No. 333-136018 filed on August 25, 2006).
2.3	Agreement and Plan of Merger and Reorganization, dated July 27, 2009, by and among Raptor Pharmaceuticals Corp., TorreyPines Therapeutics, Inc., a Delaware corporation, and ECP Acquisition, Inc., a Delaware corporation (incorporated by reference to Exhibit 2.3 to the Registrant’s Current Report on Form 8-K, filed on July 28, 2009).
2.4	Form of Voting Agreement between TorreyPines Therapeutics, Inc. and certain stockholders of Raptor Pharmaceuticals Corp. (incorporated by reference to Exhibit 99.3 to the Registrant’s Current Report on Form 8-K, filed on July 28, 2009).
2.5	Form of Voting Agreement between Raptor Pharmaceuticals Corp. and certain stockholders of TorreyPines Therapeutics, Inc. (incorporated by reference to Exhibit 99.2 to the Registrant’s Current Report on Form 8-K, filed on July 28, 2009).
(3)(i), (ii)	Articles of incorporation; Bylaws
3.1	Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on October 10, 2006).
3.2	Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed on October 10, 2006).
3.3	Certificate of Amendment filed with the Secretary of State of the State of Nevada effecting an 8-for-1 reverse stock of the Registrant’s common stock and changing the name of the Registrant from Axonyx Inc. to TorreyPines Therapeutics, Inc. (incorporated by reference to Exhibit 3.3 to the Registrant’s Current Report on Form 8-K, filed on October 10, 2006).
3.4	Articles of Conversion filed with the Secretary of State of the State of Nevada changing the state of incorporation of the Registrant (incorporated by reference to Exhibit 3.4 to the Registrant’s Current Report on Form 8-K, filed on October 10, 2006).
3.5	Certificate of Conversion filed with the Secretary of State of the State of Delaware (incorporated by reference to Exhibit 3.5 to the Registrant’s Current Report on Form 8-K, filed on October 10, 2006).
3.6	Amendment to Bylaws of the Registrant (incorporated by reference to Exhibit 3.6 to the Registrant’s Annual Report on Form 10-K, filed on March 29, 2007).
3.7	Charter Amendment for TorreyPines (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on October 9, 2009).
3.8	Certificate of Merger between Raptor Pharmaceuticals Corp., ECP Acquisition, Inc. and TorreyPines Therapeutics, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed on October 9, 2009).
(4)	Instruments defining the rights of security holders, including indentures
4.1	Specimen common stock certificate of the Registrant (incorporated by reference to Exhibit 4.7 to the Registrant’s Current Report on Form 8-K, filed on October 9, 2009).
4.2	Form of Warrant to Purchase Common Stock issued to previous holders of TPTX, Inc. redeemable convertible preferred stock in connection with the business combination between TorreyPines Therapeutics, Inc. and Axonyx, Inc. (incorporated by reference to Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K, filed on March 29, 2007).
4.3	Form of Registration Rights Agreement 1999 (incorporated by reference to Exhibit 4.4 to the Registrant’s Annual Report on Form 10-KSB, filed on March 13, 2000).
4.4	Registration Rights Agreement dated as of January 8, 2004 between Axonyx Inc. and certain investors (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed on January 12, 2004).

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4.5	Registration Rights Agreement dated as of May 3, 2004, between Axonyx Inc. and certain investors (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed on May 5, 2004).
4.6	Form of Warrant issued to Comerica Bank on July 1, 2003 (incorporated by reference to Exhibit 4.14 to the Registrant’s Annual Report on Form 10-K, filed on March 29, 2007).
4.7	Form of Warrant issued to Silicon Valley Bank on December 8, 2000 (incorporated by reference to Exhibit 4.15 to the Registrant’s Annual Report on Form 10-K, filed on March 29, 2007).
4.8	Form of Warrant issued to Oxford Financial and Silicon Valley Bank on September 27, 2005 (incorporated by reference to Exhibit 4.16 to the Registrant’s Annual Report on Form 10-K, filed on March 29, 2007).
4.9	Rights Agreement, dated as of May 13, 2005, between the Registrant and The Nevada Agency and Trust Company, as Rights Agent (incorporated by reference to Exhibit 99.2 to the Registrant’s Current Report on Form 8-K, filed on May 16, 2005).
4.10	Amendment to Rights Agreement, dated as of June 7, 2006, between the Registrant and The Nevada Agency and Trust Company, as Rights Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed on June 12, 2006).
4.11	Form of Warrant issued to Comerica Bank on June 11, 2008 (incorporated by reference to Exhibit 4.1 to the Registrant’s Report on Form 8-K, filed on June 17, 2008).
4.12	Amendment to Rights Agreement, dated as of October 3, 2006, between the Registrant and The Nevada Agency and Trust Company, as Rights Agent (incorporated by reference to Exhibit 4.19 to the Registrant’s Annual Report on Form 10-K, filed on March 29, 2007).
4.13	Rights Agreement Amendment, dated as of July 27, 2009, to the Rights Agreement dated May 13, 2005 between TorreyPines and American Stock Transfer and Trust Company (replacing The Nevada Agency and Trust Company) (incorporated by reference to Exhibit 2.3 to the Registrant’s Current Report on Form 8-K, filed on July 28, 2009).
4.14	Amendment to Rights Agreement, dated August 6, 2010, by and between the Registrant and American Stock Transfer & Trust Company, LLC (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed on August 10, 2010).
4.15 *	Warrant to purchase common stock dated December 14, 2007 issued to Flower Ventures, LLC (incorporated by reference to Exhibit 4.1 to Raptor Pharmaceuticals Corp.’s Quarterly Report on Form 10QSB/A, filed on April 15, 2008).
4.16 *	Warrant Agreement Amendment, dated December 17, 2009, between the Registrant and Flower Ventures, LLC (incorporated by reference to Exhibit 4.15 to Registrant’s Quarterly Report on Form 10Q, filed on April 9, 2010).
4.17 *	Warrant to purchase common stock dated December 14, 2007 issued to ICON Partners, LP (incorporated by reference to Exhibit 4.2 to Raptor Pharmaceuticals Corp.’s Quarterly Report on Form 10QSB/A, filed on April 15, 2008).
4.18 *	Form of Warrant to purchase common stock of Raptor Pharmaceuticals Corp. (incorporated by reference to Exhibit 4.1 to Raptor Pharmaceuticals Corp.’s Current Report on Form 8-K, filed on May 22, 2008).
4.19 *	Form of Placement Agent Warrant to purchase common stock of Raptor Pharmaceuticals Corp. (incorporated by reference to Exhibit 4.2 to Raptor Pharmaceuticals Corp.’s Current Report on Form 8-K/A, filed on May 28, 2008).
4.20 *	Form of Warrant to purchase common stock of Raptor Pharmaceuticals Corp. (incorporated by reference to Exhibit 4.1 to Raptor Pharmaceuticals Corp.’s Current Report on Form 8-K, filed on August 25, 2009).
4.21 *	Form of Placement Agent Warrant to purchase common stock of Raptor Pharmaceuticals Corp. (incorporated by reference to Exhibit 4.2 to Raptor Pharmaceuticals Corp.’s Current Report on Form 8-K, filed on August 25, 2009).
4.22	Form of Senior Debt Indenture of the Registrant (incorporated by reference to Exhibit 4.10 to the Registrant’s Registration Statement on Form S-3, filed on October 7, 2009).
4.23	Form of Subordinated Debt Indenture of the Registrant (incorporated by reference to Exhibit 4.11 to the Registrant’s Registration Statement on Form S-3, filed on October 7, 2009).
4.24	Form of Investor Warrants (incorporated by reference to Exhibit 4.1 on Registrant’s Current Report on Form 8-K filed on December 18, 2009).
4.25	Form of Investor Warrants (incorporated by reference to Exhibit 4.1 on Registrant’s Current Report on Form 8-K filed on August 10, 2010).
4.26	Placement Agent Warrant (incorporated by reference to Exhibit 4.2 on Registrant’s Current Report on Form 8-K filed on August 13, 2010).

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4.27	Reference is made to Exhibits 3.1 through 3.8.
(10)	Material Contracts
10.1†**	Cooperative Research and Development Agreement for Extramural-PHS Clinical Research dated December 15, 2011 between the U.S. Department of Health and Human Services, as represented by the National Institute of Diabetes and Digestive and Kidney Diseases, an institute or center of the National Institutes of Health, and Raptor Therapeutics Inc.
(31)	Section 302 Certification
31.1†	Certification of Christopher M. Starr, Ph.D., Chief Executive Officer and Director
31.2†	Certification of Kim R. Tsuchimoto, Chief Financial Officer, Secretary and Treasurer
(32)	Section 906 Certification
32.1†	Certification of Christopher M. Starr, Ph.D., Chief Executive Officer and Director, and of Kim R. Tsuchimoto, Chief Financial Officer, Secretary and Treasurer
101***	The following materials from the Raptor Pharmaceutical Corp. Quarterly Report on Form 10-Q for the quarter ended February 29, 2012, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Comprehensive Loss; (iii) the Condensed Consolidated Statement of Stockholders’ Equity (Deficit); (iv) the Condensed Consolidated Statements of Cash Flows; and (v) related notes, tagged as blocks of text.

* The Raptor Pharmaceuticals Corp. warrants set forth in Exhibits 4.15 - 4.21 have been converted into warrants of the Registrant and the exercise price of such warrants and number of shares of common stock issuable thereunder have been converted as described in Item 1.01 (under the section titled, “Background”) of the Registrant’s Current Report on Form 8-K, filed on October 5, 2009.

** Certain information omitted pursuant to a request for confidential treatment filed separately with the SEC.

*** Furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

# Indicates a management contract or compensatory plan or arrangement.

† Filed herewith.

Attached as Exhibit 101 to this report are documents formatted in XBRL (Extensible Business Reporting Language). Users of this data are advised that, pursuant to Rule 406T of Regulation S-T, the interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is otherwise not subject to liability under these sections.

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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, thereunto duly authorized.

RAPTOR PHARMACEUTICAL CORP.

By:	/s/ Christopher M. Starr
Christopher M. Starr, Ph.D.
Chief Executive Officer and Director
(Principal Executive Officer)
Date: April 9, 2012
By:	/s/ Kim R. Tsuchimoto
Kim R. Tsuchimoto
Chief Financial Officer, Secretary and Treasurer
(Principal Financial Officer and Principal Accounting Officer)
Date: April 9, 2012

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Exhibit Index
(2)	Plan of acquisition, reorganization, arrangement, liquidation or succession
2.1	Agreement and Plan of Merger and Reorganization, dated as of June 7, 2006, by and among Axonyx Inc., Autobahn Acquisition, Inc. and TorreyPines Therapeutics, Inc. (incorporated by reference to Annex A to Registration Statement No. 333-136018 filed on July 25, 2006).
2.2	Amendment No. 1 to Agreement and Plan of Merger and Reorganization, dated as of August 25, 2006, by and among Axonyx Inc., Autobahn Acquisition, Inc. and TorreyPines Therapeutics, Inc. (incorporated by reference to Annex A to Amendment No. 1 to Registration Statement No. 333-136018 filed on August 25, 2006).
2.3	Agreement and Plan of Merger and Reorganization, dated July 27, 2009, by and among Raptor Pharmaceuticals Corp., TorreyPines Therapeutics, Inc., a Delaware corporation, and ECP Acquisition, Inc., a Delaware corporation (incorporated by reference to Exhibit 2.3 to the Registrant’s Current Report on Form 8-K, filed on July 28, 2009).
2.4	Form of Voting Agreement between TorreyPines Therapeutics, Inc. and certain stockholders of Raptor Pharmaceuticals Corp. (incorporated by reference to Exhibit 99.3 to the Registrant’s Current Report on Form 8-K, filed on July 28, 2009).
2.5	Form of Voting Agreement between Raptor Pharmaceuticals Corp. and certain stockholders of TorreyPines Therapeutics, Inc. (incorporated by reference to Exhibit 99.2 to the Registrant’s Current Report on Form 8-K, filed on July 28, 2009).
(3)(i), (ii)	Articles of incorporation; Bylaws
3.1	Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on October 10, 2006).
3.2	Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed on October 10, 2006).
3.3	Certificate of Amendment filed with the Secretary of State of the State of Nevada effecting an 8-for-1 reverse stock of the Registrant’s common stock and changing the name of the Registrant from Axonyx Inc. to TorreyPines Therapeutics, Inc. (incorporated by reference to Exhibit 3.3 to the Registrant’s Current Report on Form 8-K, filed on October 10, 2006).
3.4	Articles of Conversion filed with the Secretary of State of the State of Nevada changing the state of incorporation of the Registrant (incorporated by reference to Exhibit 3.4 to the Registrant’s Current Report on Form 8-K, filed on October 10, 2006).
3.5	Certificate of Conversion filed with the Secretary of State of the State of Delaware (incorporated by reference to Exhibit 3.5 to the Registrant’s Current Report on Form 8-K, filed on October 10, 2006).
3.6	Amendment to Bylaws of the Registrant (incorporated by reference to Exhibit 3.6 to the Registrant’s Annual Report on Form 10-K, filed on March 29, 2007).
3.7	Charter Amendment for TorreyPines (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on October 9, 2009).
3.8	Certificate of Merger between Raptor Pharmaceuticals Corp., ECP Acquisition, Inc. and TorreyPines Therapeutics, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed on October 9, 2009).
(4)	Instruments defining the rights of security holders, including indentures
4.1	Specimen common stock certificate of the Registrant (incorporated by reference to Exhibit 4.7 to the Registrant’s Current Report on Form 8-K, filed on October 9, 2009).
4.2	Form of Warrant to Purchase Common Stock issued to previous holders of TPTX, Inc. redeemable convertible preferred stock in connection with the business combination between TorreyPines Therapeutics, Inc. and Axonyx, Inc. (incorporated by reference to Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K, filed on March 29, 2007).
4.3	Form of Registration Rights Agreement 1999 (incorporated by reference to Exhibit 4.4 to the Registrant’s Annual Report on Form 10-KSB, filed on March 13, 2000).
4.4	Registration Rights Agreement dated as of January 8, 2004 between Axonyx Inc. and certain investors (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed on January 12, 2004).
4.5	Registration Rights Agreement dated as of May 3, 2004, between Axonyx Inc. and certain investors (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed on May 5, 2004).

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4.6	Form of Warrant issued to Comerica Bank on July 1, 2003 (incorporated by reference to Exhibit 4.14 to the Registrant’s Annual Report on Form 10-K, filed on March 29, 2007).
4.7	Form of Warrant issued to Silicon Valley Bank on December 8, 2000 (incorporated by reference to Exhibit 4.15 to the Registrant’s Annual Report on Form 10-K, filed on March 29, 2007).
4.8	Form of Warrant issued to Oxford Financial and Silicon Valley Bank on September 27, 2005 (incorporated by reference to Exhibit 4.16 to the Registrant’s Annual Report on Form 10-K, filed on March 29, 2007).
4.9	Rights Agreement, dated as of May 13, 2005, between the Registrant and The Nevada Agency and Trust Company, as Rights Agent (incorporated by reference to Exhibit 99.2 to the Registrant’s Current Report on Form 8-K, filed on May 16, 2005).
4.10	Amendment to Rights Agreement, dated as of June 7, 2006, between the Registrant and The Nevada Agency and Trust Company, as Rights Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed on June 12, 2006).
4.11	Form of Warrant issued to Comerica Bank on June 11, 2008 (incorporated by reference to Exhibit 4.1 to the Registrant’s Report on Form 8-K, filed on June 17, 2008).
4.12	Amendment to Rights Agreement, dated as of October 3, 2006, between the Registrant and The Nevada Agency and Trust Company, as Rights Agent (incorporated by reference to Exhibit 4.19 to the Registrant’s Annual Report on Form 10-K, filed on March 29, 2007).
4.13	Rights Agreement Amendment, dated as of July 27, 2009, to the Rights Agreement dated May 13, 2005 between TorreyPines and American Stock Transfer and Trust Company (replacing The Nevada Agency and Trust Company) (incorporated by reference to Exhibit 2.3 to the Registrant’s Current Report on Form 8-K, filed on July 28, 2009).
4.14	Amendment to Rights Agreement, dated August 6, 2010, by and between the Registrant and American Stock Transfer & Trust Company, LLC (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed on August 10, 2010).
4.15 *	Warrant to purchase common stock dated December 14, 2007 issued to Flower Ventures, LLC (incorporated by reference to Exhibit 4.1 to Raptor Pharmaceuticals Corp.’s Quarterly Report on Form 10QSB/A, filed on April 15, 2008).
4.16 *	Warrant Agreement Amendment, dated December 17, 2009, between the Registrant and Flower Ventures, LLC (incorporated by reference to Exhibit 4.15 to Registrant’s Quarterly Report on Form 10Q, filed on April 9, 2010).
4.17 *	Warrant to purchase common stock dated December 14, 2007 issued to ICON Partners, LP (incorporated by reference to Exhibit 4.2 to Raptor Pharmaceuticals Corp.’s Quarterly Report on Form 10QSB/A, filed on April 15, 2008).
4.18 *	Form of Warrant to purchase common stock of Raptor Pharmaceuticals Corp. (incorporated by reference to Exhibit 4.1 to Raptor Pharmaceuticals Corp.’s Current Report on Form 8-K, filed on May 22, 2008).
4.19 *	Form of Placement Agent Warrant to purchase common stock of Raptor Pharmaceuticals Corp. (incorporated by reference to Exhibit 4.2 to Raptor Pharmaceuticals Corp.’s Current Report on Form 8-K/A, filed on May 28, 2008).
4.20 *	Form of Warrant to purchase common stock of Raptor Pharmaceuticals Corp. (incorporated by reference to Exhibit 4.1 to Raptor Pharmaceuticals Corp.’s Current Report on Form 8-K, filed on August 25, 2009).
4.21 *	Form of Placement Agent Warrant to purchase common stock of Raptor Pharmaceuticals Corp. (incorporated by reference to Exhibit 4.2 to Raptor Pharmaceuticals Corp.’s Current Report on Form 8-K, filed on August 25, 2009).
4.22	Form of Senior Debt Indenture of the Registrant (incorporated by reference to Exhibit 4.10 to the Registrant’s Registration Statement on Form S-3, filed on October 7, 2009).
4.23	Form of Subordinated Debt Indenture of the Registrant (incorporated by reference to Exhibit 4.11 to the Registrant’s Registration Statement on Form S-3, filed on October 7, 2009).
4.24	Form of Investor Warrants (incorporated by reference to Exhibit 4.1 on Registrant’s Current Report on Form 8-K filed on December 18, 2009).
4.25	Form of Investor Warrants (incorporated by reference to Exhibit 4.1 on Registrant’s Current Report on Form 8-K filed on August 10, 2010).

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4.26	Placement Agent Warrant (incorporated by reference to Exhibit 4.2 on Registrant’s Current Report on Form 8-K filed on August 13, 2010).
4.27	Reference is made to Exhibits 3.1 through 3.8.
(10)	Material Contracts
10.1†**	Cooperative Research and Development Agreement for Extramural-PHS Clinical Research dated December 15, 2011 between the U.S. Department of Health and Human Services, as represented by the National Institute of Diabetes and Digestive and Kidney Diseases, an institute or center of the National Institutes of Health, and Raptor Therapeutics Inc.
(31)	Section 302 Certification
31.1†	Certification of Christopher M. Starr, Ph.D., Chief Executive Officer and Director
31.2†	Certification of Kim R. Tsuchimoto, Chief Financial Officer, Secretary and Treasurer
(32)	Section 906 Certification
32.1†	Certification of Christopher M. Starr, Ph.D., Chief Executive Officer and Director, and of Kim R. Tsuchimoto, Chief Financial Officer, Secretary and Treasurer
101***	The following materials from the Raptor Pharmaceutical Corp. Quarterly Report on Form 10-Q for the quarter ended February 29, 2012, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Comprehensive Loss; (iii) the Condensed Consolidated Statement of Stockholders’ Equity (Deficit); (iv) the Condensed Consolidated Statements of Cash Flows; and (v) related notes, tagged as blocks of text.

* The Raptor Pharmaceuticals Corp. warrants set forth in Exhibits 4.15 - 4.21 have been converted into warrants of the Registrant and the exercise price of such warrants and number of shares of common stock issuable thereunder have been converted as described in Item 1.01 (under the section titled, “Background”) of the Registrant’s Current Report on Form 8-K, filed on October 5, 2009.

** Certain information omitted pursuant to a request for confidential treatment filed separately with the SEC.

*** Furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

# Indicates a management contract or compensatory plan or arrangement.

† Filed herewith.

Attached as Exhibit 101 to this report are documents formatted in XBRL (Extensible Business Reporting Language). Users of this data are advised that, pursuant to Rule 406T of Regulation S-T, the interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is otherwise not subject to liability under these sections.

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EX-10.1

Exhibit 10.1

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

PUBLIC HEALTH SERVICE

COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT

FOR EXTRAMURAL-PHS CLINICAL RESEARCH

This Agreement is based on the model Cooperative Research and Development Agreement (“CRADA” or “Agreement”) adopted by the U.S. Public Health Service (“PHS”) Technology Transfer Policy Board for use by components of the National Institutes of Health (“NIH”), the Centers for Disease Control and Prevention (“CDC”), and the Food and Drug Administration (“FDA”), which are agencies of the PHS within the Department of Health and Human Services (“HHS”).

This Cover Page identifies the Parties to this CRADA:

The U.S. Department of Health and Human Services, as represented by

NIDDK

an Institute or Center

(hereinafter referred to as the “IC”) of the

NIH

and

Raptor Therapeutics, Inc.,

(hereinafter referred to as the “Collaborator)

having offices at 9 Commercial Blvd., Suite 200

Novato, CA 94949,

created and operating under the laws of Delaware.

¨ COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT

FOR EXTRAMURAL-PHS CLINICAL RESEARCH

Article 1. Introduction

This CRADA between IC and Collaborator will be effective when signed by the Parties, which are identified on both the Cover Page and the Signature Page (page 22). The official contacts for the Parties are identified on the Contacts Information Page (page 23). Publicly available information regarding this CRADA appears on the Summary Page (page 24). The research and development activities that will be undertaken by IC, IC’s contractors or grantees, and Collaborator in the course of this CRADA are detailed in the Research Plan, attached as Appendix A. The staffing, funding, and materials contributions of the Parties are set forth in Appendix B. Any changes to the model CRADA are set forth in Appendix C.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

Article 2. Definitions

The terms listed in this Article will carry the meanings indicated throughout the CRADA. To the extent a definition of a term as provided in this Article is inconsistent with a corresponding definition in the applicable sections of either the United States Code (U.S.C.) or the Code of Federal Regulations (C.F.R.), the definition in the U.S.C. or C.F.R. will control.

“Adverse Drug Experience” or “ADE” means an Adverse Event associated with the use of the Test Article, that is, an event where there is a reasonable possibility that the Test Article may have caused the event (a relationship between the Test Article and the event cannot be ruled out), in accordance with the definitions of 21 C.F.R. Part 310, 305, or 312, or other applicable regulations.

“Adverse Event” or “AE” means any untoward medical occurrence in a Human Subject administered Test Article. An AE does not necessarily have a causal relationship with the Test Article, that is, it can be any unfavorable and unintended sign (including an abnormal laboratory finding), symptom, or disease temporally associated with the use of the Test Article, whether or not it is related to it. See FDA Good Clinical Practice Guideline (International Conference on Harmonisation (ICH) E6: “Good Clinical Practice: Consolidated Guidance, 62 Federal Register 25, 691 (1997)).

“Affiliate” means any corporation or other business entity controlled by, controlling, or under common control with Collaborator at any time during the term of the CRADA. For this purpose, “control” means direct or indirect beneficial ownership of at least fifty percent (50%) of the voting stock or at least fifty percent (50%) interest in the income of the corporation or other business entity.

“Annual Report” means the report of progress of an IND-associated investigation that the Sponsor must submit to the FDA within sixty (60) days of the anniversary of the effective date of the IND (pursuant to 21 C.F.R. § 312.33).

“Background Invention” means an Invention conceived and first actually reduced to practice (a) before the Effective Date or (b) outside of the activities under the Research Plan.

“Clinical Investigator” means, in accordance with 21 C.F.R. § 312.3, an individual who actually conducts a clinical investigation, that is, who directs the administration or dispensation of Test Article to a subject, and who assumes responsibility for studying Human Subjects, for recording and ensuring the integrity of research data, and for protecting the welfare and safety of Human Subjects.

“Clinical Research Site(s)” means the site(s) at which the Protocol(s) described in the Research Plan will be performed.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

“Clinical Trial” means the clinical trial to be performed in accordance with the Protocol under this CRADA.

“Collaborator Materials” means all tangible materials not first produced in the performance of this CRADA that are owned or controlled by Collaborator and used in the performance of the Research Plan. The term “Collaborator Materials” does not include “Test Article” (defined below).

“Confidential Information” means all information of a confidential or proprietary nature (including scientific, business, financial information, or Identifiable Private Information) of one Party provided to another Party under this CRADA; provided that Confidential Information does not include:

(a) information that is publicly known or that is available from public sources; except by acts or omissions of the receiving Party in breach of this CRADA;

(b) information that has been made available by its owner to others without a confidentiality obligation; or

(c) information that is already known by the receiving Party other than under an obligation of confidentiality, or information that is independently created or compiled by the receiving Party without reference to or use of the Confidential Information of the disclosing Party.

“Cooperative Research and Development Agreement” or “CRADA” means this Agreement, entered into pursuant to the Federal Technology Transfer Act of 1986, as amended (15 U.S.C. §§ 3710a et seq.), and Executive Order 12591 of April 10, 1987.

“CRADA Data” means all information developed by or on behalf of a Party in the performance of the Research Plan, including Summary Data, but excluding Raw Data. “CRADA Collaborator Principal Investigator(s)” or “CRADA Collaborator PI(s)” means the person(s) who will be responsible for the scientific and technical conduct of the Research Plan on behalf of the CRADA Collaborator.

“CRADA Subject Invention” means any Invention conceived or first actually reduced to practice by a Party in the performance of the Research Plan. For clarity, Inventions directed to the Test Article, or its manufacture or use, which are conceived or first actually reduced to practice by or on behalf of Collaborator in the course of activities outside the Research Plan (including without limitation manufacture of Test Article provided by Collaborator hereunder) shall not be deemed to be “in the performance of the Research Plan” solely by virtue of Collaborator’s supply of the Test Article under this CRADA.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

“Drug Master File” or “DMF” is described in 21 C.F.R. Part 314.420. A DMF is a submission to the FDA that may be used to provide confidential detailed information about facilities, processes, or articles used in the manufacturing, processing, packaging, and storing of one or more human drugs.

“Effective Date” means the date of the last signature of the Parties executing this Agreement.

“Government” means the Government of the United States of America.

“Human Subject” means, in accordance with the definition in 45 C.F.R. § 46.102(f), a living individual about whom an investigator conducting research obtains:

(a) data through intervention or interaction with the individual; or

(b) Identifiable Private Information.

“IC Materials” means all tangible materials not first produced in the performance of this CRADA that are owned or controlled by IC and used in the performance of the Research Plan.

“IND” means an “Investigational New Drug Application,” filed in accordance with 21 C.F.R. Part 312 under which clinical investigation of an experimental drug or biologic (Test Article) is performed in Human Subjects in the United States or intended to support a United States licensing action.

“Identifiable Private Information” or “IPI” about a Human Subject means private information from which the identity of the subject is or may readily be ascertained. Regulations defining and governing this information include 45 C.F.R. Part 46 and 21 C.F.R. Part 50.

“Institutional Review Board” or “IRB” means, in accordance with 45 C.F.R. Part 46, 21 C.F.R. part 56, and other applicable regulations, an independent body comprising medical, scientific, and nonscientific members, whose responsibility is to ensure the protection of the rights, safety, and well-being of the Human Subjects involved in a study.

“Invention” means any invention or discovery that is or may be patentable or otherwise protected under Title 35 of the United States Code by the U.S. Patent and Trademark Office or the corresponding patent-issuing authority of another nation, or any novel variety of plant which is or may be protectable under the Plant Variety Protection Act, 7 U.S.C. §§ 2321 et seq. by the U.S. Patent and Trademark Office or the corresponding patent-issuing authority of another nation.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

“Investigator’s Brochure” means, in accordance with the definition in 21 C.F.R. § 312.23(a)(5), a document containing information about the Test Article, including animal screening, preclinical toxicology, and detailed pharmaceutical data, including a description of possible risks and side effects to be anticipated on the basis of prior experience with the drug or related drugs, and precautions, such as additional monitoring, to be taken as part of the investigational use of the drug.

“NIH CRADA Extramural Investigator/Officer(s)” means the Extramural staff who are responsible for the conduct and/or management of the CRADA on behalf of the IC.

“Patent Application” means an application for patent protection, any continuations, continuations-in-part, substitutions or divisional applications thereof, for a CRADA Subject Invention with the United States Patent and Trademark Office (“U.S.P.T.O.”) or the corresponding patent-issuing authority of another nation.

“Patent” means any United States patent that issues on a Patent Application and any international counterpart(s) thereof, and any other patents issued by the U.S. Patent and Trademark Office or the corresponding patent-issuing authority of another nation on a Patent Application and any corresponding grant(s) by the corresponding patent-issuing authority of another nation. For clarity, “Patent” includes renewals, reissues, re-examinations, extensions and the like of all of the foregoing.

“Placebo” means an inactive substance identical in appearance to the material being tested that is used to distinguish between drug action and suggestive effect of the material under study.

“Protocol” means the formal, detailed description of the study to be performed as summarized in the Research Plan and approved by the Parties as further set forth hereunder. It describes the objective(s), design, methodology, statistical considerations, and organization of a trial. The most recent version of the Protocol is incorporated by reference into this Agreement. For the purposes of this CRADA, the term, Protocol, for clinical research involving Human Subjects, includes any and all associated documents, including informed consent forms, to be provided to Human Subjects and potential participants in the study. Any changes to the Protocol that are material to the design of the study being conducted under this CRADA or the use or administration of the Test Article will require prior written approval by Collaborator (except for reasons of patient safety pursuant to Paragraph 3.6 below); and Collaborator shall use commercially reasonable efforts to act on any such request for approval within one (1) week of its receipt of such request. In the event of a conflict between the CRADA Research Plan and the Protocol, the Protocol shall control.

“Raw Data” means the primary quantitative and empirical data first collected from experiments and clinical trials conducted within the scope of this CRADA.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

“Research Plan” means the statement in Appendix A of the respective research and development commitments of the Parties and approved by the Parties. The Research Plan should describe the provisions for sponsoring the IND, clinical and safety monitoring, and data management. For clarity, the manufacture of the Test Article is outside the scope of the Research Plan.

“Sponsor” means, in accordance with the definition in 21 C.F.R. § 312.3, an organization or individual who assumes legal responsibility for supervising or overseeing clinical trials with Test Articles, and is sometimes referred to as the IND holder.

“Steering Committee” means the research and development team whose composition and responsibilities with regard to the research and development performed under this CRADA are described in Appendix A.

“Summary Data” means any extract or summary of the Raw Data, generated either by or on behalf of IC, or by or on behalf of Collaborator, including all data collected pursuant to the “Data Collection Schedule” as set forth in the Protocol and the compiled and analyzed data sets containing such data.

“Test Article” means, in accordance with 21 C.F.R. § 50.3(j), any drug (including a biological product), medical device, food additive, color additive, electronic product, or any other article subject to regulation under the Federal Food, Drug, and Cosmetic Act that is intended for administration to humans or animals, including a drug or biologic as identified in the Research Plan and Appendix B, that is used within the scope of the Research Plan. The Test Article may also be referred to as Investigational Agent, Study Material, or Study Product. The Test Article to be used in this CRADA is Cysteamine Delayed Release (DR) tablet (internally referred to by Collaborator as “RP104”).

Article 3. Cooperative Research and Development

3.1 Performance of Research and Development. The research and development activities to be carried out under this CRADA will be performed by the Parties identified on the Cover Page, as well as IC’s contractors or grantees as described in the Research Plan (including the Clinical Research Sites and Clinical Investigators), in accordance with the terms and conditions of this CRADA and all applicable laws, rules and regulations. Notwithstanding that IC’s contractors or grantees are not Parties to the CRADA, and this CRADA does not grant to Collaborator any rights to Inventions made by IC’s contractors or grantees, IC agrees that its contractors and grantees (including the Clinical Research Sites and Clinical Investigators) will be required to comply with the Research Plan and Protocol; will use the Test Article, Placebo and Collaborator Materials in accordance with the Protocol and the terms and conditions under Paragraph 3.10 below, and will make available or otherwise provide access to all CRADA Data in accordance with Article 8 below. IC further agrees to notify Collaborator promptly upon becoming aware of any noncompliance with the foregoing and to discuss in good faith any action to be taken against its contractors and grantees in response to such noncompliance, including seeking any available remedies under any applicable law or in equity. The NIH CRADA Extramural Investigator/Officer(s) and CRADA Collaborator PI(s) will be responsible for coordinating the scientific and technical conduct of this project on behalf of their employers. Any Collaborator employees who will work at IC facilities will be required to sign a Guest Researcher or Special Volunteer Agreement appropriately modified in view of the terms of this CRADA.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

3.2 Research Plan. The Parties recognize that the Research Plan describes the collaborative research and development activities they will undertake and that interim research goals set forth in the Research Plan are good faith guidelines. Should events occur that require modification of these goals, then by mutual agreement the Parties can modify them through an amendment, according to Paragraph 13.6.

3.3 Use and Disposition of Collaborator Materials and IC Materials. IC agrees to use, and will require the Clinical Investigators to use, Collaborator Materials, and Collaborator agrees to use IC Materials, only in accordance with the Research Plan and Protocol. Each Party agrees not to transfer materials provided by the other Party to third parties except in accordance with the Research Plan and Protocol or as approved by the providing Party (i.e. approval by Collaborator in the case of Collaborator Materials, and approval by IC in the case of IC Materials), and, upon expiration or termination of the CRADA, to dispose of these materials as directed by the owning or providing Party.

3.4 Third-Party Rights in Collaborator’s CRADA Subject Inventions. If Collaborator has received (or will receive) support of any kind from a third party directly and specifically in exchange for rights in any of Collaborator’s CRADA Subject Inventions, Collaborator agrees to use reasonable efforts to ensure that its obligations to the third party are both consistent with Articles 6 through 8 and subordinate to those provisions of Article 7 of this CRADA applicable to Collaborator’s CRADA Subject Inventions; provided, however, that Collaborator shall have no obligation to renegotiate or amend its existing agreements with third parties.

3.5 Disclosures to IC. Prior to execution of this CRADA, Collaborator agrees to disclose to IC all instances in which outstanding royalties are due under a PHS license agreement and in which Collaborator had a PHS license terminated in accordance with 37 C.F.R. § 404.10. These disclosures will be treated as Confidential Information upon request by Collaborator in accordance with the definition in Article 2 and Paragraphs 8.3 and 8.4.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

3.6 Clinical Investigator Responsibilities. The Clinical Investigator will be required to submit, or to arrange for submission of, each Protocol and advertisement associated with this CRADA to all appropriate IRB(s), and for ensuring that the IRB(s) are notified of the role of the Collaborator in the research. In addition to the Protocol, all associated documents, including informational documents, must be reviewed and approved by both Parties and the appropriate IRB(s) before starting the research at each Clinical Research Site. The research and development will be done in strict accordance with the Protocol(s) and no substantive changes in a finalized Protocol will be made unless mutually agreed upon, in writing, by the Parties. Research will not commence (or will continue unchanged, if already in progress) until each substantive change to a Protocol, including those required by either the FDA or the IRB, has been integrated in a way acceptable to the Parties, submitted to the FDA (if applicable) and approved by the appropriate IRB(s). In the event that the IRB or the Data Safety Monitoring Committee recommend changes to the Protocol for reasons of patient safety, those changes may be made immediately provided that the IC or Clinical Investigator promptly notify Collaborator of the intent and need to make such changes and allow Collaborator to comment if reasonably practical. Notwithstanding the foregoing, Collaborator shall be informed promptly of any changes incorporated by the IRB or Data Safety Monitoring Committee and shall be permitted to provide suggestions and comments.

3.7 Investigational Applications.

3.7.1 If an IND is required to perform the research and development activities under this CRADA, then the IC will submit an IND and ensure all Clinical Investigators have completed all necessary registration documents (1572 forms).

3.7.2 If IC files its own IND pursuant to Paragraph 3.7.1 above, then Collaborator agrees to provide IC any background data and information under its control necessary to support the IND. Collaborator further agrees to provide a letter of cross-reference to all pertinent regulatory filings sponsored by Collaborator. Collaborator’s employees will be reasonably available to respond to inquiries from the FDA regarding information and data contained in the Collaborator’s IND, DMF, other filings, or other information and data provided to IC by the Collaborator pursuant to this Article 3. If Collaborator files its own IND filings pursuant to Paragraph 3.7.4 below, then IC agrees to provide Collaborator any background data and information under its control necessary to support the IND and to provide a letter of cross reference to its IND and respond to inquiries related to information provided by IC, as applicable.

3.7.3 If Collaborator supplies Confidential Information to IC in support of an IND filed by IC, this information will be protected in accordance with the corresponding confidentiality provisions of Article 8.

3.7.4 Collaborator may sponsor its own clinical trials and hold its own IND for studies performed outside the scope of this CRADA. These studies, however, should not adversely affect the ability to accomplish the goal of the Research Plan during the term of the CRADA, for example, by competing for the same study population. All data from those clinical trials are proprietary to Collaborator for purposes of this CRADA.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

3.8 Test Article Information and Supply. Collaborator agrees to use reasonable efforts to provide IC, or its designee as agreed, and on a schedule that will ensure adequate and timely performance of the Research Plan a sufficient quantity of formulated and acceptably labeled, clinical-grade Test Article (and, as required by the Protocol(s), Placebo) to complete the clinical trial(s) agreed to and approved under this CRADA without charge to IC or its designee. Collaborator and IC will agree upon a drug supply schedule which will ensure adequate and timely performance of the Research Plan, prior to commencement of the treatment of the first Human Subject. Collaborator will provide a Certificate of Analysis to IC for each lot of the Test Article provided.

3.9 Test Article Delivery and Usage. Collaborator will ship the Test Article to IC or its designee in containers marked in accordance with 21 C.F.R. § 312.6. IC agrees that the Clinical Investigators will keep appropriate records and take reasonable steps to ensure that the Test Article is used in accordance with the Protocol and applicable FDA regulations, and shall ensure that any contractor or grantee or Clinical Research Site performing research and development activities under this CRADA shall only use the Test Article in accordance with the Protocol and applicable FDA regulations. In addition, IC agrees that the Test Article (and all Confidential Information supplied by Collaborator relating to the Test Article) will be used solely for the conduct of the CRADA research and development activities. Furthermore, IC agrees that no analysis or modification of the Test Article will be performed without Collaborator’s prior written consent. At the completion of the Research Plan, any unused quantity of Test Article will be returned to Collaborator or disposed as directed by Collaborator. Pharmacy contacts at IC or its designee will be determined by IC and communicated to Collaborator.

3.10 Monitoring.

3.10.1 The Sponsor or its designee will be primarily responsible for monitoring clinical sites and for assuring the quality of all clinical data, unless otherwise stated in the Research Plan. Monitoring will comply with FDA Good Clinical Practice (International Conference on Harmonisation (ICH) E6: “Good Clinical Practice: Consolidated Guidance; 62 Federal Register 25, 691 (1997)). The other Party may also perform quality assurance oversight. The monitor will communicate significant Protocol violations and submit documentation of monitoring outcomes on Protocol insufficiencies to the other Party in a timely manner.

3.10.2 Subject to the restrictions in Article 8 concerning IPI, IC will obtain or has obtained permission from the Clinical Research Sites for the Collaborator or its designee(s) to access the Clinical Research Sites to monitor the conduct of the research, as well as to audit source documents containing Raw Data, to the extent necessary to verify compliance with FDA Good Clinical Practice and the Protocol(s); provided Collaborator and IC agree in advance to 1) reasonable advance notice 2) reasonable monitoring times, and 3) reasonable reimbursement by Collaborator to Clinical Research Sites for the time and materials required to provide the personnel and documents that will be required for the audit.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

3.10.3 In the performance of the CRADA, IC will, and the Clinical Investigators are obligated to, use reasonable efforts to accurately and efficiently perform the Research Plan as agreed between the Parties under this Agreement. This shall include, without limitation:

(i) exercising independent medical judgment as to the compatibility of each Human Subject with the Protocol requirements;

(ii) notifying Collaborator and IRB in writing in no event later than the time periods specified by the applicable regulations, of any Adverse Drug Experience or Adverse Event which occur during the performance of the CRADA;

(iii) notifying Collaborator and IRB promptly in writing of any deviations from the Protocol and the dates of and reasons for any deviations from the Protocol; provided that prior written approval by Collaborator is required for any deviations from the Protocol except for reasons of patient safety as set forth under Paragraph 3.6 above;

(iv) notifying Collaborator in writing of the withdrawal of IRB approval of any part of the Protocol including any Clinical Investigator’s participation in the conduct of the Protocol promptly, and in any event within five (5) days, following receipt of notice from the IRB of such withdrawal of approval; and

(v) notifying Collaborator and IRB in writing promptly of any failure to obtain informed consent from any Human Subject prior to use of the Test Article in connection with such Human Subject, and in any event within five (5) days, after discovery of such use.

3.11 FDA Meetings/Communications. All meetings with the FDA concerning any clinical trial within the scope of the Research Plan will be discussed by Collaborator and IC in advance. Each Party reserves the right to take part in setting the agenda for, to attend, and to participate in these meetings and IC agrees not to object to Collaborator’s attendance at any meetings with the FDA with an established agenda directed to and within the scope of the Research Plan. IC agrees to provide Collaborator with copies of FDA meeting minutes after such meetings, regardless of whether Collaborator attends, as well as copies of all transmittal letters for IND submissions, IND safety reports, formal questions and responses that will be submitted to the FDA, Annual Reports, and official FDA correspondence, pertaining either to the INDs under this CRADA or to the Clinical Investigators on Protocols performed in accordance with the Research Plan a reasonable time period prior to submittal to the FDA to allow Collaborator to review prior to submittal, when practicable, except to the extent that those documents contain the proprietary information of a third party or dissemination is prohibited by law. IC will consider Collaborator’s comments with regard to any response or letters sent to the FDA prior to their submittal.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

Article 4. Reports

4.1 Interim Research and Development Reports. The NIH CRADA Extramural Investigator/Officer(s) and CRADA Collaborator PI(s) should exchange information regularly, in writing. This exchange may be accomplished through meeting minutes, detailed correspondence, circulation of draft manuscripts, Steering Committee reports, copies of Annual Reports and any other reports updating the progress of the CRADA research. However, the Parties must exchange updated Investigator’s Brochure, formulation and preclinical data, and toxicology findings, as they become available.

4.2 Final Research and Development Reports. The Parties will exchange final reports of their results within six (6) months after the expiration or termination of this CRADA. These reports will set forth the technical progress made; any publications arising from the research; and the existence of invention disclosures of potential CRADA Subject Inventions and/or any corresponding Patent Applications.

4.3 Fiscal Reports. If Collaborator has agreed to provide funding to IC under this CRADA and upon the request of Collaborator, then each calendar year and concurrent with the exchange of final research and development reports according to Paragraph 4.2, IC will submit to Collaborator a statement of all costs incurred by IC for the CRADA. If the CRADA has been terminated, IC will specify any costs incurred before the date of termination for which IC has not received funds from Collaborator, as well as for all reasonable termination costs including the cost of returning Collaborator property or removal of abandoned Collaborator property, for which Collaborator will be responsible.

4.4 Safety Reports. In accordance with FDA requirements, the IC will establish and maintain records and submit safety reports to the FDA, as required by 21 C.F.R. § 312.32 and 21 C.F.R. 812.150(b)(1), or other applicable regulations. In the conduct of research under this CRADA, the Parties will comply with specific IC guidelines and policies for reporting ADEs and AEs, as well as procedures specified in the Protocol(s). The Sponsor must provide the other Party with copies of all safety reports concurrently with their submission to the FDA, and with any other information affecting the safety of Human Subjects in research conducted under this CRADA.

4.5 Annual Reports. The Sponsor will provide the other Party a copy of the Annual Report concurrently with the submission of the Annual Report to the FDA. Annual Reports will be kept confidential in accordance with Article 8.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

Article 5. Staffing, Financial, and Materials Obligations

5.1 IC and Collaborator Contributions. The contributions of any staff, funds, materials, and equipment by the Parties are set forth in Appendix B. The Federal Technology Transfer Act of 1986, 15 U.S.C. § 3710a(d)(1) prohibits IC from providing funds to Collaborator for any research and development activities under this CRADA.

5.2 IC Staffing. No IC employees will devote 100% of their effort or time to the research and development activities under this CRADA. IC will not use funds provided by Collaborator under this CRADA for IC personnel to pay the salary of any permanent IC employee. Although personnel hired by IC using CRADA funds will focus principally on CRADA research and development activities, Collaborator acknowledges that these personnel may nonetheless make contributions to other research and development activities, and the activities will be outside the scope of this CRADA.

5.3 Collaborator Funding. Collaborator acknowledges that Government funds received by Collaborator from an agency of the Department of Health and Human Services may not be used to fund IC under this CRADA. If Collaborator has agreed to provide funds to IC then the payment schedule appears in Appendix B and Collaborator will make payments according to that schedule. If Collaborator fails to make any scheduled payment, IC will not be obligated to perform any of the research and development activities specified herein or to take any other action required by this CRADA until the funds are received. IC will use these funds exclusively for the purposes of this CRADA and upon notice of any event that will cause significant delay in the conduct of the Research Plan, IC shall use reasonable efforts to delay the further commitment of any funds provided to or to be provided to IC by Collaborator in accordance with Appendix B. Each Party will maintain separate and distinct current accounts, records, and other evidence supporting its financial obligations under this CRADA and, upon written request, will provide the other Party a Fiscal Report according to Paragraph 4.3, which delineates all payments made and all obligated expenses, along with the Final Research Report described in Paragraph 4.2.

5.4 Capital Equipment. Collaborator’s commitment, if any, to provide IC with capital equipment to enable the research and development activities under the Research Plan appears in Appendix B. If Collaborator transfers to IC the capital equipment or provides funds for IC to purchase it, then IC will own the equipment. If Collaborator loans capital equipment to IC for use during the CRADA, Collaborator will be responsible for paying all costs and fees associated with the transport, installation, maintenance, repair, removal, or disposal of the equipment, and IC will not be liable for any damage to the equipment.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

Article 6. Intellectual Property

6.1 Ownership of CRADA Subject Inventions and CRADA Data. Subject to the Government license described in Paragraph 7.5, the sharing requirements of Paragraph 8.1 and the regulatory filing requirements and other provisions of Paragraph 8.2, the producing Party will retain sole ownership of and title to all CRADA Subject Inventions and all copies of CRADA Data produced solely by its employee(s). The Parties will own jointly all CRADA Subject Inventions invented jointly. An IC contractor’s or grantee’s rights in data and materials it generates will not be affected by this CRADA, except as otherwise provided to IC in accordance with its funding agreement with IC as a contractor or grantee to conduct the Research Plan.

6.2 Reporting. The Parties will promptly report to each other in writing each CRADA Subject Invention reported by their respective personnel, and any Patent Applications filed thereon, resulting from the research and development activities conducted under this CRADA. Each Party will report all CRADA Subject Inventions to the other Party in sufficient detail to determine inventorship, which will be determined in accordance with U.S. patent law. These reports will be treated as Confidential Information in accordance with Article 8. Formal reports will be made by and to the Patenting and Licensing Offices identified on the Contacts Information Page herein.

6.3 Filing of Patent Applications. Each Party will make timely decisions regarding the filing of Patent Applications on the CRADA Subject Inventions made solely by its employee(s), and will notify the other Party in advance of filing. Collaborator will have the first opportunity to file a Patent Application on joint CRADA Subject Inventions and will notify NIH of its decision within sixty (60) days of an Invention being reported or at least thirty (30) days before any patent filing deadline, whichever occurs sooner. If Collaborator fails to notify NIH of its decision within that time period or notifies NIH of its decision not to file a Patent Application, then NIH has the right to file a Patent Application on the joint CRADA Subject Invention, and if NIH files a Patent Application, Collaborator will be notified and the Parties will cooperate with each other concerning any claims on which Collaborator’s employee is an inventor or co-inventor. Neither Party will be obligated to file a Patent Application. Collaborator will place the following statement in any Patent Application it files on a CRADA Subject Invention: “This invention was created in the performance of a Cooperative Research and Development Agreement with National Institutes of Health, an Agency of the Department of Health and Human Services. The Government of the United States has certain rights in this invention.” If either Party files a Patent Application on a joint CRADA Subject Invention, then the filing Party will include a statement within the Patent Application that clearly identifies the Parties and states that the joint CRADA Subject Invention was made under this CRADA.

6.4 Patent Expenses. Unless agreed otherwise, the Party filing a Patent Application will pay all preparation and filing expenses, prosecution fees, issuance fees, post issuance fees, patent maintenance fees, annuities, interference expenses, and attorneys’ fees for that Patent Application and any resulting Patent(s). If an exclusive license to any CRADA Subject Invention is granted to Collaborator, then Collaborator will be responsible for all expenses and fees, past and future, in connection with the preparation, filing, prosecution, and maintenance for such Patent Applications and Patents claiming exclusively licensed CRADA Subject Inventions. If a nonexclusive license to any CRADA Subject Invention is granted to Collaborator, then Collaborator will be responsible for a pro-rated share, divided equally among all licensees, of those expenses and fees for non-exclusively licensed CRADA Subject Inventions. Collaborator may waive its exclusive option rights at any time, and incur no subsequent financial obligation for those Patent Application(s) or Patent(s).

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

6.5 Prosecution of Patent Applications. The Party filing a Patent Application will provide the non-filing Party with a copy of any official communication relating to prosecution of the Patent Application within thirty (30) days of transmission of the communication. Each Party will also provide the other Party with the power to inspect and make copies of all documents retained in the applicable Patent Application or Patent file. The Parties agree to consult with each other regarding the prosecution of Patent Applications directed to joint CRADA Subject Inventions. If Collaborator elects to file and prosecute Patent Applications on joint CRADA Subject Inventions, then Collaborator agrees to use the U.S.P.T.O. Customer Number Practice and/or grant NIH a power(s) of attorney (or equivalent) necessary to assure NIH access to its intellectual property rights in these Patent Applications. NIH and Collaborator will cooperate with each other to obtain necessary signatures on Patent Applications, assignments, or other documents.

Article 7. Licensing

7.1 Background Inventions. Nothing in this CRADA will be construed to grant any rights in one Party’s Background Invention(s) to the other Party, except to the extent necessary for the Parties to conduct the research and development activities described in the Research Plan.

7.2 Collaborator’s License Option to CRADA Subject Inventions. NIH hereby grants to Collaborator a non-exclusive, royalty-free, perpetual, irrevocable, transferable, worldwide internal research use license with respect to any NIH sole CRADA Subject Invention for which a Patent Application was filed. With respect to Government rights to any CRADA Subject Invention made solely by an IC employee(s) or made jointly by IC employee(s) and a Collaborator employee(s) for which a Patent Application was filed NIH hereby grants to Collaborator an exclusive option to elect an exclusive worldwide license to make, have made, use, offer for sale, sell, import and otherwise exploit such CRADA Subject Invention. Such exclusive license will be substantially in the form of the appropriate model PHS license agreement and will fairly reflect the nature of the CRADA Subject Invention, the relative contributions of the Parties to the CRADA Subject Invention and the CRADA, a plan for the development and marketing of the CRADA Subject Invention, the risks incurred by Collaborator, and the costs of subsequent research and development needed to bring the CRADA Subject Invention to the marketplace. Such exclusive license will also be granted with a defined field of use not to exceed the scope of the Research Plan, provided that the Parties shall amend the Research Plan from time-to-time to reflect any additional research and development activities performed in connection with this CRADA that are not reflected in the then-current Research Plan. Such exclusive license, to be negotiated by NIH and Collaborator, will also include the right to grant and authorize sublicenses subject to certain limitations.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

7.3 Exercise of Collaborator’s License Option. To exercise the option of Paragraph 7.2 Collaborator must submit a written notice to the PHS Patenting and Licensing Contact identified on the Contacts Information Page (and provide a copy to the IC Contact for CRADA Notices) within [*****] In the absence of Collaborator’s exercise of the option, NIH will be free to license the CRADA Subject Invention to others. The foregoing time periods for the option and negotiation of an exclusive license above may be extended at the sole discretion of NIH upon good cause shown in writing by Collaborator and NIH shall not negotiate with, or grant any rights to, a third party with respect to such CRADA Subject Inventions during such time periods.

7.4 Government License in IC Sole CRADA Subject Inventions and Joint CRADA Subject Inventions. Pursuant to 15 U.S.C. § 3710a(b)(1)(A), for CRADA Subject Inventions owned solely by IC or jointly by IC and Collaborator, and licensed pursuant to the option of Paragraph 7.2, Collaborator grants to the Government nonexclusive, nontransferable, irrevocable, paid-up license to practice the CRADA Subject Invention or have the CRADA Subject Invention practiced throughout the world by or on behalf of the Government. In the exercise of this license, the Government will not publicly disclose trade secrets or commercial or financial information that is privileged or confidential within the meaning of 5 U.S.C. § 552(b)(4) or which would be considered privileged or confidential if it had been obtained from a non-federal party.

7.5 Government License in Collaborator Sole CRADA Subject Inventions. Pursuant to 15 U.S.C. § 3710a(b)(2), for CRADA Subject Inventions made solely by an employee of Collaborator, Collaborator grants to the Government a nonexclusive, nontransferable, irrevocable, paid-up license to practice the CRADA Subject Invention or have the CRADA Subject Invention practiced throughout the world by or on behalf of the Government for research or other Government purposes. In the exercise of this license, the Government will not publicly disclose trade secrets or commercial or financial information that is privileged or confidential within the meaning of 5 U.S.C. § 552(b)(4) or which would be considered privileged or confidential if it had been obtained from a non-federal party.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

7.6 Third Party License. Pursuant to 15 U.S.C. § 3710a(b)(1)(B), if PHS grants Collaborator an exclusive license to a CRADA Subject Invention made solely by an IC employee or jointly with a Collaborator employee, the Government will retain the right to require Collaborator to grant to a responsible applicant a nonexclusive, partially exclusive, or exclusive sublicense to use the CRADA Subject Invention in Collaborator’s licensed field of use on terms that are reasonable under the circumstances; or, if Collaborator fails to grant a license, to grant a license itself. The exercise of these rights by the Government will only be in exceptional circumstances and only if the Government determines (i) the action is necessary to meet health or safety needs that are not reasonably satisfied by Collaborator, (ii) the action is necessary to meet requirements for public use specified by federal regulations, and such requirements are not reasonably satisfied by Collaborator; or (iii) Collaborator has failed to comply with an agreement containing provisions described in 15 U.S.C. § 3710a(c)(4)(B). The determination made by the Government under this Paragraph is subject to administrative appeal and judicial review under 35 U.S.C. § 203(b).

7.7 Third-Party Rights In IC Sole CRADA Subject Inventions. For a CRADA Subject Invention conceived prior to the Effective Date solely by an IC employee that is first actually reduced to practice after the Effective Date in the performance of the Research Plan, the option offered to Collaborator in Paragraph 7.2 may be restricted if, prior to the Effective Date, PHS had filed a Patent Application and has either offered or granted a license in the CRADA Subject Invention to a third party. Collaborator nonetheless retains the right to apply for a license to any such CRADA Subject Invention in accordance with the terms and procedures of 35 U.S.C. § 209 and 37 C.F.R. Part 404.

7.8 Joint CRADA Subject Inventions Not Exclusively Licensed by Collaborator. If Collaborator does not acquire an exclusive commercialization license in a joint CRADA Subject Invention in all fields of use then, for those fields of use not exclusively licensed to Collaborator, each Party will have the right to use the joint CRADA Subject Invention and to license its use to others, and each Party will cooperate with the other, as necessary, to fulfill international licensing requirements without obligation of accounting to the other Party for such use or activities. The Parties may agree to a joint licensing approach for any remaining fields of use.

Article 8. Rights of Access and Publication

8.1 Right of Access to CRADA Data and Human Biological Specimens. [*****]

8.2 Use of CRADA Data. [*****]

8.2.1 CRADA Data. [*****]

8.3 Confidential Information. The Parties agree that the Protocol contains proprietary information regarding the Test Article which is the Confidential Information of Collaborator. The Collaborator’s Confidential Information contained in the Protocol shall be subject to the obligations contained in Article 8 notwithstanding that the Protocol was developed prior to the Effective Date. Each Party agrees to limit its disclosure of Confidential Information of the other Party to the amount necessary to carry out the Research Plan or in accordance with this Article 8. A Party orally disclosing Confidential Information to the other Party will summarize the disclosure in writing and provide it to the other Party within fifteen (15) days of the disclosure. Each Party receiving Confidential Information of the other Party agrees to use it only for the purposes described in the Research Plan or in accordance with this Article 8. Either Party may object to the designation of information as Confidential Information by the other Party.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

8.4 Protection of Confidential Information. Confidential Information will not be disclosed, copied, reproduced or otherwise made available to any other person or entity without the consent of the owning or providing Party except as required by a court or administrative body of competent jurisdiction, or federal law or regulation or as expressly provided herein. Each Party agrees to use reasonable efforts to maintain the confidentiality of Confidential Information of the other Party, which will in no instance be less effort than the Party uses to protect its own Confidential Information. Each Party may use and disclose such Confidential Information of the other Party to its employees, contractors, grantees and agents who have a reasonable need to know such Confidential Information in exercise of its rights or in performance of its obligations under this CRADA; provided that such employees, contractors, grantees and agents are bound by written obligations of confidentiality at least as protective of such Confidential Information as the terms of this Article 8. Each Party agrees that a Party receiving Confidential Information will not be liable for the disclosure of that portion of the Confidential Information which, after notice to and consultation with the disclosing Party, the receiving Party determines may not be lawfully withheld, provided the disclosing Party has been given a reasonable opportunity to seek a court order to enjoin disclosure.

8.5 Human Subject Protection. The research to be conducted under this CRADA involves Human Subjects or human tissues within the meaning of 45 C.F.R. Part 46, and all research to be performed under this CRADA will conform to the Protocol, this Agreement, and all applicable laws, rules and regulations for protecting the rights, safety and welfare of human subjects and for control of new drugs under investigation. Additional information is available from the HHS Office for Human Research Protections (http://.hhs.gov/ohrp/).

8.6 Duration of Confidentiality Obligation. The obligation to maintain the confidentiality of Confidential Information will expire at the earlier of the date when the information is no longer Confidential Information as defined in Article 2 or [*****] after the expiration or termination date of this CRADA, except for IPI, for which the obligation to maintain confidentiality will extend indefinitely. Collaborator may request an extension to this term when necessary to protect Confidential Information relating to Collaborator’s products not yet commercialized.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

8.7 Publication. The Parties are encouraged to make publicly available the results of their research and development activities, and IC will use reasonable efforts to make publicly available the results of the Clinical Trial, including the relevant Summary Data, as soon as practicable without compromising any right of publication by IC or its Clinical Research Sites; it being understood that any presentations at scientific meetings and published abstracts, as well as any media coverage based thereon, will not compromise any such rights of publication. The IC and/or the Clinical Investigators will endeavor to present the results of the Clinical Trial, including the relevant Summary Data, at the earliest upcoming scientific meeting. Subject to approval (not to be unreasonably withheld) by the Steering Committee pursuant to this Section 8.7, Collaborator will be able to disclose such results that are presented at the above-referenced scientific meeting or thereafter covered by the media in its own press release or other public disclosure. Before either Party submits a paper or abstract for publication that includes, or otherwise intends to publicly disclose, such as in a press release, CRADA Data or information about CRADA Data or a CRADA Subject Invention that has not been previously published or publicly disclosed as approved by the Steering Committee pursuant to this Paragraph 8.7, the other Party will have thirty (30) days to review the proposed manuscript or other disclosure (except that the other Party will have seven (7) days to review any proposed oral presentation, abstract or press release) to assure that Confidential Information is protected. Either Party may request in writing that the proposed publication or other disclosure be delayed for up to sixty (60) additional days as necessary to file a Patent Application. Collaborator understands and agrees that all proposed publications or disclosures related to the results of the Clinical Trial, including press releases, must be reviewed and approved (not to be unreasonably withheld) by the Steering Committee before being submitted for publication or disclosed; provided that the review process will be conducted as promptly as is practicable.

8.8 Clinical Investigators’ Research and Development Activities. Although this CRADA does not grant to Collaborator any rights to Inventions made or Raw Data generated by IC’s contractors or grantees, as they are not parties to this CRADA, IC agrees that:

8.8.1 Subject to the other provisions of Article 8 of this CRADA, IC will maintain, to the extent permitted by law, all CRADA Data as Confidential Information, and will provide or otherwise make available all CRADA Data to Collaborator for the exclusive rights to use, disclose and otherwise exploit, and to authorize any third party to use, disclose and otherwise exploit, all such data for the development and commercialization of Test Article (including the use of any CRADA Data in regulatory filings to obtain and maintain regulatory approval thereof). Subject to Paragraph 8.8.4 below, IC shall not use, disclose or otherwise exploit, or authorize any third party to use, disclose or otherwise exploit, any CRADA Data for those purposes. IC will maintain, to the extent permitted by law, all CRADA Data as Confidential Information, until publication, and will provide or otherwise make available all CRADA Data to Collaborator for the non-exclusive rights to use, disclose and otherwise exploit, and to authorize any third party to use, disclose and otherwise exploit such data for the development and commercialization of other formulations of the Test Article. Nothing in this Agreement will prevent any Clinical Research Site or Clinical Investigator from using their Raw Data for any purpose.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

8.8.2 With regard to any of Collaborator’s Confidential Information that is provided to the Clinical Research Sites, IC will require the Clinical Investigators to agree to confidentiality provisions at least as restrictive as those provided in this CRADA.

8.8.3 If Collaborator wants access to Raw Data or any other data in the possession of the Clinical Investigators working with Test Article, Collaborator must first contact the NIH CRADA Extramural Investigator/Officer(s). Collaborator will bear any costs associated with Raw Data provided in formats customized for Collaborator.

8.8.4 Collaborator’s right to access CRADA Data under Paragraph 8.8 is dependent upon Collaborator’s continued development and commercialization of Test Article. If Collaborator fails to continue development or commercialization of Test Article without the transfer of its development or commercialization efforts to another party within ninety (90) days of IC’s written request to Collaborator to do so, IC has the right to make CRADA Data available to a third party.

Article 9. Representations and Warranties

9.1 Representations of IC IC hereby represents to Collaborator that:

9.1.1 IC has the requisite power and authority to enter into this CRADA and to perform according to its terms, and that IC’s official signing this CRADA has authority to do so. IC’s performance of this CRADA in accordance with its terms does not conflict with any obligations of IC under any agreement with a third party.

9.1.2 To the best of its knowledge and belief, neither IC nor any of its personnel involved in this CRADA is presently subject to debarment or suspension by any agency of the Government which would directly affect its performance of the CRADA. IC shall not, and the IC will require the Clinical Investigators not to, knowingly employ, contract with, retain or use any person directly or indirectly to perform services under this Agreement if such person is debarred pursuant to the Generic Drug Enforcement Act of 1992, as amended (21 U.S.C. § 301 et. seq., or regulations promulgated thereunder or similar laws or regulations in any applicable ex-U.S. jurisdiction) or that is subject to proceedings that may lead to such debarment. Should IC, the Clinical Investigators or any such person directly or indirectly performing services under this Agreement be debarred, or subject to proceedings that may lead to such debarment during the term of this CRADA, IC will notify Collaborator within thirty (30) days of when it becomes aware of any such debarment or proceedings that may lead to debarment.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

9.2 Representations and Warranties of Collaborator. Collaborator hereby represents and warrants to IC that:

9.2.1 Collaborator has the requisite power and authority to enter into this CRADA and to perform according to its terms, and that Collaborator’s official signing this CRADA has authority to do so.

9.2.2 Neither Collaborator nor any of its personnel involved in this CRADA, including Affiliates, agents, and contractors are presently subject to debarment or suspension by any agency of the Government. Should Collaborator or any of its personnel involved in this CRADA be debarred or suspended during the term of this CRADA, Collaborator will notify IC within thirty (30) days of receipt of final notice.

9.2.3 Subject to Paragraph 12.3, and if and to the extent Collaborator has agreed to provide funding under Appendix B, Collaborator is financially able to satisfy these obligations in a timely manner.

9.2.4 The Test Article provided has been produced in accordance with the FDA’s current Good Manufacturing Practice set out in 21 C.F.R. §§ 210-211, and ICH QA7, and meets the specifications cited in the Certificate of Analysis and Investigator’s Brochure provided.

Article 10. Expiration and Termination

10.1 Expiration. This CRADA will expire on the last date of the term set forth on the Summary Page. In no case will the term of this CRADA extend beyond the term indicated on the Summary Page unless it is extended in writing in accordance with Paragraph 13.6.

10.2 Termination by Mutual Consent. IC and Collaborator may terminate this CRADA at any time by mutual written consent.

10.3 Unilateral Termination. Either IC or Collaborator may unilaterally terminate this CRADA at any time by providing written notice at least [*****] before the desired termination date.

10.4 Effects of Expiration or Termination.

10.4.1 Expiration or Termination by IC or by Collaborator for Safety or Breach. In the event of expiration of this CRADA, termination of this CRADA by IC for any reason pursuant to Paragraph 10.3 above, or termination of this CRADA by Collaborator for reasons of safety concerns or breach by IC or IC’s contractors or grantees (including the Clinical Research Sites and Clinical Investigators) of its obligations with respect to the research and development activities to be carried out under this CRADA, IC shall return to Collaborator any and all funds provided by Collaborator to IC as of such expiration or termination [*****] and Collaborator shall have no further obligations to provide any funds to IC after such expiration or termination.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

10.4.2 Termination by Collaborator for Reasons other than Safety or Breach. [*****]

10.5 New Commitments. Except as expressly provided under Paragraph 10.4 above, neither Party will incur new costs and expenses related to this CRADA after expiration, mutual termination, or a written notice of a termination, and will, to the extent feasible, cancel all outstanding commitments and contracts by the termination date.

10.6 Continuation of Research Plan. If this CRADA is terminated before its expiration, and the clinical trial to be performed or performed pursuant to the Research Plan under this CRADA is performed or continues to be performed after such termination, each Party shall have the rights and licenses to CRADA Data as set forth herein with respect to any data generated in the performance of such clinical trial after such termination of this CRADA that would have been included within the definitions of CRADA Data if this CRADA had not been so terminated.

Article 11. Disputes

11.1 Settlement. [*****]

11.2 Continuation of Work. Pending the resolution of any dispute or claim pursuant to this Article 11, the Parties agree that performance of all obligations will be pursued diligently to the extent possible.

Article 12. Liability

12.1 NO WARRANTIES. EXCEPT AS SPECIFICALLY STATED IN ARTICLE 9, THE PARTIES MAKE NO EXPRESS OR IMPLIED WARRANTY AS TO ANY MATTER WHATSOEVER, INCLUDING THE CONDITIONS OF THE RESEARCH, TEST ARTICLE OR ANY INVENTION OR MATERIAL, WHETHER TANGIBLE OR INTANGIBLE, MADE OR DEVELOPED UNDER OR OUTSIDE THE SCOPE OF THIS CRADA, OR THE OWNERSHIP, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OF THE RESEARCH, TEST ARTICLE OR ANY INVENTION OR MATERIAL, OR THAT A TECHNOLOGY UTILIZED BY A PARTY IN THE PERFORMANCE OF THE RESEARCH PLAN DOES NOT INFRINGE ANY THIRD-PARTY PATENT RIGHTS.

12.2 Indemnification and Liability. [*****]

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

12.3 Force Majeure. Neither Party will be liable for any unforeseeable event beyond its reasonable control and not caused by its own fault or negligence, which causes the Party to be unable to perform its obligations under this CRADA, and which it has been unable to overcome by the exercise of due diligence. If a force majeure event occurs, the Party unable to perform will promptly notify the other Party. It will use its best efforts to resume performance as quickly as possible and will suspend performance only for such period of time as is necessary as a result of the force majeure event.

Article 13. Miscellaneous

13.1 Governing Law. The construction, validity, performance and effect of this CRADA will be governed by U.S. federal law, as applied by the federal courts in the District of Columbia. If any provision in this CRADA conflicts with or is inconsistent with any U.S. federal law or regulation, then the U.S. federal law or regulation will preempt that provision.

13.2 Compliance with Law. IC and Collaborator agree that they will comply with, and advise any contractors, grantees, or agents they have engaged to conduct the CRADA research and development activities to comply with, all applicable Executive Orders, statutes, and HHS regulations relating to research on human subjects (45 C.F.R. Part 46, 21 C.F.R. Parts 50 and 56) and relating to the appropriate care and use of laboratory animals (7 U.S.C. §§ 2131 et seq.; 9 C.F.R. Part 1, Subchapter A). IC and Collaborator will advise any contractors, grantees, or agents they have engaged to conduct clinical trials for this CRADA that they must comply with all applicable federal regulations for the protection of Human Subjects, which may include the Standards for Privacy of Individually Identifiable Health Information set forth in 45 C.F.R. Part 164. Collaborator agrees to ensure that its employees, contractors, and agents who might have access to a “select agent or toxin” (as that term is defined in 42 C.F.R. §§ 73.4-73.5) transferred from IC is properly licensed to receive the “select agent or toxin.”

13.3 Waivers. None of the provisions of this CRADA will be considered waived by any Party unless a waiver is given in writing to the other Party. The failure of a Party to insist upon strict performance of any of the terms and conditions hereof, or failure or delay to exercise any rights provided herein or by law, will not be deemed a waiver of any rights of any Party.

13.4 Headings. Titles and headings of the articles and paragraphs of this CRADA are for convenient reference only, do not form a part of this CRADA, and will in no way affect its interpretation.

13.5 Severability. The illegality or invalidity of any provisions of this CRADA will not impair, affect, or invalidate the other provisions of this CRADA.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

13.6 Amendments. Minor modifications to the Research Plan may be made by the mutual written consent of the NIH CRADA Extramural Investigator/Officer(s) and CRADA Collaborator PI(s). Substantial changes to the CRADA, extensions of the term, or any changes to Appendix C will become effective only upon a written amendment signed by the signatories to this CRADA or by their representatives duly authorized to execute an amendment. A change will be considered substantial if it directly expands the range of the potential CRADA Subject Inventions, alters the scope or field of any license option governed by Article 7, or requires a significant increase in the contribution of resources by either Party.

13.7 Assignment. Neither this CRADA nor any rights or obligations of any Party hereunder shall be assigned or otherwise transferred by either Party without the prior written consent of the other Party. The Collaborator acknowledges the applicability of 41 U.S.C. § 15, the Anti Assignment Act, to this Agreement. The Parties agree that the identity of the Collaborator is material to the performance of this CRADA and that the duties under this CRADA are nondelegable; provided, however, that Collaborator may request assignment of this CRADA to an entity that acquires all or substantially all of the business or assets of Collaborator related to the Test Article and ICD will not unreasonably deny such request within a reasonable time period. If IC denies such request or fails to approve such request within thirty (30) days, Collaborator shall be permitted to terminate this Agreement immediately upon written notice in accordance with Paragraph 10.3 above.

13.8 Notices. All notices pertaining to or required by this CRADA will be in writing, signed by an authorized representative of the notifying Party, and delivered by first class, registered, or certified mail, or by an express/overnight commercial delivery service, prepaid and properly addressed to the other Party at the address designated on the Contacts Information Page, or to any other address designated in writing by the other Party. Notices will be considered timely if received on or before the established deadline date or sent on or before the deadline date as verifiable by U.S. Postal Service postmark or dated receipt from a commercial carrier. Notices regarding the exercise of license options will be made pursuant to Paragraph 7.3. Either Party may change its address by notice given to the other Party in the manner set forth above.

13.9 Independent Contractors. The relationship of the Parties to this CRADA is that of independent contractors and not agents of each other or joint ventures or partners. Each Party will maintain sole and exclusive control over its personnel and operations.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

13.10 Use of Name; Press Releases. By entering into this CRADA, the Government does not directly or indirectly endorse any product or service that is or will be provided, whether directly or indirectly related to either this CRADA or to any patent or other intellectual-property license or agreement that implements this CRADA by Collaborator, its successors, assignees, or licensees. Collaborator will not in any way state or imply that the Government or any of its organizational units or employees endorses any product or services. Each Party agrees to provide proposed press releases that reference or rely upon the work under this CRADA to the other Party for review and comment at least five (5) business days before publication; and each Party shall not unreasonably withhold making the requested changes of the other Party. Either Party may disclose the Title and Abstract of the CRADA to the public without the approval of the other Party.

13.11 Reasonable Consent. Whenever a Party’s consent or permission is required under this CRADA, its consent or permission will not be unreasonably withheld.

13.12 Export Controls. Collaborator agrees to comply with U.S. export law and regulations. If Collaborator has a need to transfer any IC Materials or IC’s Confidential Information to a person located in a country other than the United States, to an Affiliate organized under the laws of a country other than the United States, or to an employee of Collaborator in the United States who is not a citizen or permanent resident of the United States, Collaborator will acquire any and all necessary export licenses and other appropriate authorizations.

13.13 Entire Agreement. This CRADA, including the Appendices attached hereto, constitutes the entire agreement between the Parties concerning the subject matter of this CRADA and supersedes any prior understanding or written or oral agreement. Specifically Confidential Disclosure Agreement DK-09-0345 effective June 23, 2009 (the “Confidentiality Agreement”) is superseded by this CRADA; provided however, the foregoing shall not be interpreted as a waiver of any remedies available to either Party as a result of any breach, prior to the effective date of this CRADA, by the other Party of its obligations pursuant to the Confidentiality Agreement. All information disclosed by either Party pursuant to the Confidentiality Agreement shall be deemed to be such Party’s Confidential Information disclosed hereunder. In the event of any conflict between this CRADA and any of the Appendices attached hereto, this CRADA shall control.

13.14 Survivability. The provisions of Paragraphs 3.3, 3.4, 4.2, 4.3, 4.4, 6.1-9.2, 10.4, 10.5, 10.6, 11.1, 11.2, 12.1-12.3, 13.1-13.3, 13.7, 13.10 and 13.14 will survive any expiration or early termination of this CRADA. In addition, the provisions of Paragraphs 3.1, 3.2, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 4.1, 4.5, 13.6, 13.8, 13.9, and 13.11 will survive if the CRADA is terminated early by Collaborator pursuant to Paragraph 10.3 unless such termination is for safety concerns.

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

SIGNATURE PAGE

ACCEPTED AND AGREED

BY EXECUTING THIS AGREEMENT, EACH PARTY REPRESENTS THAT ALL STATEMENTS MADE HEREIN ARE TRUE, COMPLETE, AND ACCURATE TO THE BEST OF ITS KNOWLEDGE. COLLABORATOR ACKNOWLEDGES THAT IT MAY BE SUBJECT TO CRIMINAL, CIVIL, OR ADMINISTRATIVE PENALTIES FOR KNOWINGLY MAKING A FALSE, FICTITIOUS, OR FRAUDULENT STATEMENT OR CLAIM.

FOR IC:
Signature	/s/ Griffin Rodgers	Date	December 15, 2011
	Griffin P. Rodgers, M.D., M.A.C.P.
	Director, NIDDK
FOR COLLABORATOR:
Signature	/s/ Thomas E. Daley	Date	December 8, 2011
	Ted Daley
	President
	Raptor Therapeutics, Inc.
	(415) 382-8111 x227
	tdaley@raptorpharma.com

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

CONTACTS INFORMATION PAGE

CRADA Notices

For IC:	For Collaborator:
Director, Office of Technology Transfer &	Ted Daley
Development, NIDDK	President
12 South Drive (Bldg 12A) Room 3011 Bethesda, MD 20892-5632	Raptor Therapeutics, Inc.         9 Commercial Blvd., Suite 200
T: (301) 451-3636Novato	CA 94949
MTA@niddk.nih.gov	T: (415) 382-8111 ext. 227
	tdaley@raptorpharma.com
	With a copy to:
	Kenneth A. Clark
	Attorney, Wilson Sonsini Goodrich and Rosati PC
	650 Page Mill Road
	Palo Alto, CA 94304
	kclark@wsgr.com

Patenting and Licensing

For IC:	For Collaborator (if separate from above):
Division Director
Division of Technology
Development and Transfer
NIH Office of Technology Transfer
6011 Executive Boulevard, Suite 325
Rockville, Maryland 20852-3804
Tel: 301-496-7057
Fax: 301-402-0220

IC Project Officer for Extramural Investigators

Name:	Edward Doo, MD
Title:	Director, Liver Diseases Program
Division:	Division of Digestive and Liver Diseases, NIDDK
Address:	6707 Democracy Blvd., Room 651 Bethesda, MD 20892-5450
	Telephone 301-451-4524
	Email: ed56o@nih.gov

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

SUMMARY PAGE

EITHER PARTY MAY, WITHOUT FURTHER CONSULTATION OR PERMISSION,

RELEASE THIS SUMMARY PAGE TO THE PUBLIC.

TITLE OF CRADA:	The Treatment of Nonalcoholic Fatty Liver Disease (NAFLD) in Children using Raptor Therapeutics, Inc.’s proprietary Investigational Drug Cysteamine DR (Cysteamine Bitartrate Delayed-release) - The CyNCh Trial
NIH COMPONENT:	National Institute of Diabetes & Digestive & Kidney Diseases (NIDDK)
EXTRAMURAL INVESTIGATOR/OFFICER:
	Edward Doo, M.D.
	Director, Liver Diseases Program
	National Institute of Diabetes and Digestive and Kidney Diseases
COLLABORATOR:	Raptor Therapeutics, Inc.
COLLABORATOR PRINCIPAL INVESTIGATOR:		Patrice Rioux, MD, Chief Medical Officer
TERM OF CRADA:	[*****]
ABSTRACT FOR PUBLIC RELEASE:

The National Institute of Diabetes & Digestive & Kidney Diseases (NIDDK) of the National Institutes of Health (NIH) and Raptor Therapeutics, Inc. will collaborate on a Phase IIb pediatric clinical trial to evaluate whether treatment with Cysteamine DR results in histologic improvement in children with Nonalcoholic Fatty Liver Disease (NAFLD).

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

APPENDIX A

[*****]

[*****] Raptor Pharmaceutical Corp. has requested confidential treatment of certain portions of this offer letter which have been omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

APPENDIX B

[*****]

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Christopher M. Starr, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Raptor Pharmaceutical Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 9, 2012

By: /s/ Christopher M. Starr

Christopher M. Starr, Ph.D.

Chief Executive Officer and Director

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Kim R. Tsuchimoto, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Raptor Pharmaceutical Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 9, 2012

By: /s/ Kim R. Tsuchimoto

Kim R. Tsuchimoto

Chief Financial Officer, Secretary and Treasurer

(Principal Financial Officer and Principal Accounting Officer)

EX-32.1

Exhibit 32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Securities and Exchange Commission

450 Fifth Street, N.W

Washington, D.C. 20549

Ladies and Gentlemen:

The certification set forth below is being furnished to the Securities and Exchange Commission solely for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and with Section 1350 of Chapter 63 of Title 18 of the United States Code. A signed original of this written statement required by Section 906 has been provided to Raptor Pharmaceutical Corp. (the “Company”) and will be retained by the Company and furnished to the Securities and Exchange Commission (the “SEC”) or its staff upon request.

Christopher M. Starr, Ph.D., the Chief Executive Officer and Director of the Company, and Kim R. Tsuchimoto, the Chief Financial Officer, Secretary and Treasurer of the Company, each certify that:

1. this Quarterly Report on Form 10-Q for the quarter ended February 29, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Raptor Pharmaceutical Corp.

This certification accompanies the Report to which it relates, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.

IN WITNESS WHEREOF, the undersigned have set their hands hereto as of the 9_th day of April, 2012.

By:	/s/ Christopher M. Starr
Christopher M. Starr, Ph.D.
Chief Executive Officer and Director
(Principal Executive Officer)

By:	/s/ Kim R. Tsuchimoto
Kim R. Tsuchimoto
Chief Financial Officer, Secretary and Treasurer
(Principal Financial Officer and Principal Accounting Officer)

XML

Summary Of Significant Accounting Policies

6 Months Ended

Feb. 29, 2012

Summary Of Significant Accounting Policies [Abstract]

Summary Of Significant Accounting Policies

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

The Company's condensed consolidated financial statements include the accounts of the Company's direct and indirect wholly owned subsidiaries, Raptor Discoveries Inc., Raptor Therapeutics Inc. and Raptor European Products, LLC, such subsidiaries incorporated in Delaware on September 8, 2005 (date of inception), August 1, 2007, and February 14, 2012, respectively, and Raptor Pharmaceuticals Europe B.V. and RPTP European Holdings C.V., incorporated/registered in the Netherlands on December 15, 2009 and February 16, 2012, respectively. All inter-company accounts have been eliminated. The Company's condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Through February 29, 2012, the Company had accumulated losses of approximately $103.4 million. Management expects to incur further losses for the foreseeable future. Management believes that the Company's cash, cash equivalents and short term investments as of February 29, 2012 of approximately $49.9 million will be sufficient to meet the Company's obligations through the first calendar quarter of 2013. Until the Company can generate sufficient levels of cash from its operations, the Company expects to continue to finance future cash needs primarily through proceeds from equity or debt financings, loans and collaborative agreements with corporate partners or through a business combination with a company that has such financing in order to be able to sustain its operations until the Company can achieve profitability and positive cash flows, if ever. The Company cannot assure that such financing or transaction will be available on acceptable terms, or at all. The uncertainty of this situation raises substantial doubt about the Company's ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the failure to continue as a going concern.

The Company's independent registered public accounting firm has audited the Company's consolidated financial statements for the years ended August 31, 2011 and 2010 and for the period from September 8, 2005 (inception) to August 31, 2011. The November 14, 2011 audit opinion included a paragraph indicating substantial doubt as to the Company's ability to continue as a going concern due to the fact that the Company is in the development stage and has not generated any revenue or sustained operating profits to date.

(b) Use of Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(c) Functional Currency

The Company's consolidated functional currency is the U.S. dollar. Raptor Pharmaceuticals Europe B.V. ("BV"), the Company's European subsidiary, uses the European Euro as its functional currency. At each quarter end, BV's balance sheet is translated into U.S. dollars based upon the quarter-end exchange rate, while its statement of operations is translated into U.S. dollars based upon an average of the Euro's value between the beginning and end date of the reporting period. BV's equity is adjusted for any translation gain or loss.

(d) Fair Value of Financial Instruments

The carrying amounts of certain of the Company's financial instruments including cash and cash equivalents, restricted cash, prepaid expenses, accounts payable, accrued liabilities and capital lease liability approximate fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these condensed consolidated financial statements. The warrant liability is carried at fair value which is determined using the Black-Scholes option valuation model at the end of each reporting period.

(e) Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less, when purchased, to be cash equivalents. The Company maintains cash and cash equivalents, which consist principally of money market funds with high credit quality financial institutions. Such amounts exceed Federal Deposit Insurance Corporation insurance limits. Restricted cash represents compensating balances required by the Company's U.S. and European banks as collateral for credit cards.

(f) Short-term Investments

The Company invests in short-term investments in high credit-quality funds in order to obtain higher yields on its idle cash. Short-term investments consisted of:

	February 29, 2012		August 31, 2011
Adjustable-rate government fund	$	15,126,444	$	—
Ultra short-term income fund		15,114,690		—
Total short-term investments	$	30,241,134	$	—

Such investments are not insured by the Federal Deposit Insurance Corporation. The Company completed an evaluation of its investments and determined that it did not have any other-than-temporary impairments as of February 29, 2012. The investments are placed in financial institutions with strong credit ratings and management expects full recovery of the carrying amounts.

(g) Deferred Offering Costs

Deferred offering costs represent expenses incurred to raise equity capital related to financing transactions which have not yet been completed as of the balance sheet dates.

(h) Intangible Assets

Intangible assets include the intellectual property and other rights relating to DR Cysteamine (currently developed as RP103 and RP104), to an out-license acquired in the 2009 Merger and the rights to tezampanel and NGX 426 (oral tezampanel) also acquired in the 2009 Merger (tezampanel and oral tezampanel are referred to as tezampanel hereafter). The intangible assets related to RP103/RP104 are amortized using the straight-line method over the estimated useful life of 20 years, which is the life of the intellectual property patents. The 20-year estimated useful life is also based upon the typical development, approval, marketing and life cycle management timelines of pharmaceutical drug products. The intangible assets related to the out-license will be amortized using the straight-line method over the estimated useful life of 16 years, which is the life of the intellectual property patents. The intangible assets related to tezampanel, which has been classified as in-process research and development, will not be amortized until development is completed, but will be tested annually for impairment.

(i) Goodwill

Goodwill represents the excess of the value of the purchase consideration over the identifiable assets acquired in the 2009 Merger. Goodwill is reviewed annually, or when an indication of impairment exists. An impairment analysis is performed, and if necessary, a resulting write-down in valuation is recorded.

(j) Fixed Assets

Fixed assets, which mainly consist of leasehold improvements, lab equipment, computer hardware and software and capital lease equipment, are stated at cost. Depreciation is computed using the straight-line method over the related estimated useful lives, except for leasehold improvements and capital lease equipment, which are depreciated over the shorter of the useful life of the asset or the lease term. Significant additions and improvements that have useful lives estimated at greater than one year are capitalized, while repairs and maintenance are charged to expense as incurred.

(k) Impairment of Long-Lived Assets

The Company evaluates its long-lived assets for indicators of possible impairment by comparison of the carrying amounts to future net undiscounted cash flows expected to be generated by such assets when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Should an impairment exist, the impairment loss would be measured based on the excess carrying value of the asset over the asset's fair value or discounted estimates of future cash flows. The Company has not identified any such impairment losses to date.

(l) Common Stock Warrant Liabilities

The warrants issued by the Company in the 2010 private placement contain a cash-out provision which may be triggered upon request by the warrant holders if the Company is acquired or upon the occurrence of certain other fundamental transactions involving the Company. This provision requires these warrants to be classified as liabilities and to be marked to market at each period-end commencing on August 31, 2010. The warrants issued by the Company in its December 2009 equity financing contain a conditional obligation that may require the Company to transfer assets to repurchase the warrants upon the occurrence of potential future events. Under the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 480, Distinguishing Liabilities from Equity ("ASC 480"), a financial instrument that may require the issuer to settle the obligation by transferring assets is classified as a liability. Therefore, the Company has classified the warrants as liabilities and will mark them to fair value at each period-end. The common stock warrants are re-measured at the end of every reporting period with the change in value reported in the Company's condensed consolidated statements of comprehensive loss. Warrants which are recorded as liabilities that are exercised are re-measured and marked to market the day prior to exercise. Upon exercise of such warrants, the fair value of such warrants is reclassified to equity.

(m) Income Taxes

Income taxes are recorded under the liability method, under which deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the 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.

(n) Research and Development

The Company is a development stage biotechnology company. Research and development costs are charged to expense as incurred. Research and development expenses include medical, clinical, regulatory and scientists' salaries and benefits, lab collaborations, preclinical studies, clinical trials, clinical trial materials, commercial drug manufactured prior to obtaining marketing approval, regulatory and clinical consultants, lab supplies, lab services, lab equipment maintenance and small equipment purchased to support the research laboratory, amortization of intangible assets and allocated executive, human resources and facilities expenses. Research and development expenses are offset by contra-expenses, which are reimbursements of research and development expenses received either from research collaborators or from government grants or tax rebates.

(o) In-Process Research and Development

Prior to September 1, 2009, the Company recorded in-process research and development expense for a product candidate acquisition where there is not more than one potential product or usage for the assets being acquired. Upon the adoption of the revised guidance on business combinations, effective September 1, 2009, the fair value of acquired in-process research and development is capitalized and tested for impairment at least annually. Upon completion of the research and development activities, the intangible asset is amortized into earnings over the related product's useful life. In-process research and development that is amortized or expensed is recorded as part of research and development expenses on the Company's condensed consolidated statements of comprehensive loss. The Company reviews each product candidate acquisition to determine the existence of in-process research and development.

(p) Net Loss per Share

Net loss per share is calculated by dividing net loss by the weighted average shares of common stock outstanding during the period. Diluted net income per share is calculated by dividing net income by the weighted average shares of common stock outstanding and potential shares of common stock during the period. For all periods presented, potentially dilutive securities are excluded from the computation of fully diluted net loss per share as their effect is anti-dilutive. Potentially dilutive securities include:

	February 29, 2012		February 28, 2011
Warrants to purchase common stock		5,277,483		10,137,255
Options to purchase common stock		5,841,848		3,265,307
Total potentially dilutive securities		11,119,331		13,402,562

Net loss per share, basic and diluted, was $(0.29) and $(0.09) for the three month periods ended February 29, 2012 and February 28, 2011, respectively. Net loss per share, basic and diluted, was $(0.54) and $(0.42) for the six month periods ended February 29, 2012 and February 28, 2011, respectively.

Loss per share from operations, basic and diluted, was $(0.13) and $(0.15) for the three month periods ended February 29, 2012 and February 28, 2011, respectively. Loss per share from operations, basic and diluted, was $(0.29) and $(0.30) for the six month periods ended February 29, 2012 and February 28, 2011, respectively.

(q) Comprehensive Loss

Components of comprehensive loss are reported in the Company's condensed consolidated statements of comprehensive loss in the period in which they are recognized. The components of comprehensive loss include net loss and foreign currency translation adjustments.

(r) Stock Option Plan

Effective September 1, 2006, the Company adopted the provisions of FASB ASC Topic 718, Accounting for Compensation Arrangements, ("ASC 718") (previously listed as Statement of Financial Accounting Standards ("SFAS") No. 123 (revised 2004), Share-Based Payment) in accounting for its stock option plans. Under ASC 718, compensation cost is measured at the grant date based on the fair value of the equity instruments awarded and is recognized over the period during which an employee is required to provide service in exchange for the award, or the requisite service period, which is usually the vesting period. The fair value of the equity award granted is estimated on the date of the grant. The Company accounts for stock options issued to third parties, including consultants, in accordance with the provisions of the FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees, ("ASC 505-50") (previously listed as Emerging Issues Task Force Consensus No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services). See Note 7, Stock Option Plans, for further discussion of employee stock-based compensation.

(s) Recent Accounting Pronouncements

In December 2010, the FASB issued Accounting Standards Update ("ASU") 2010-28, Intangibles – Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts ("ASU 2010-28"). ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts and requires the company to perform Step 2 if it is more likely than not that a goodwill impairment may exist. ASU 2010-28 is effective for fiscal years and interim periods within those years, beginning after December 15, 2010. Early adoption is not permitted. The Company adopted these standards on September 1, 2011 and has determined that ASU 2010-28 had no material impact on its condensed consolidated financial statements for the three and six month periods ended February 29, 2012, because there was no requirement to perform Step 2 due to the Company's positive carrying amount.

In December 2010, the FASB issued ASU 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations ("ASU 2010-29"). ASU 2010-29 is an update that addresses diversity in practice about the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations if the entity presents comparative financial statements and expands the required disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. This standard is effective prospectively for business combinations for which the acquisition dates are on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted. The Company adopted these standards on September 1, 2011, however since there were no business combinations during the three and six month periods ended February 29, 2012, ASU 2010-29 had no material impact on the Company's financial disclosure, however, the provision will impact the financial disclosures of any business combinations in the future.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs ("ASU 2011-04"). ASU 2011-04 is intended to result in convergence between U.S. GAAP and International Financial Reporting Standards ("IFRS") requirements for measurement of and disclosures about fair value. The amendments are not expected to have a significant impact on companies applying U.S. GAAP. Key provisions of the amendment include: a prohibition on grouping financial instruments for purposes of determining fair value, except when an entity manages market and credit risks on the basis of the entity's net exposure to the group; an extension of the prohibition against the use of a blockage factor to all fair value measurements (that prohibition currently applies only to financial instruments with quoted prices in active markets); and a requirement that for recurring Level 3 fair value measurements, entities disclose quantitative information about unobservable inputs, a description of the valuation process used and qualitative details about the sensitivity of the measurements. In addition, for items not carried at fair value but for which fair value is disclosed, entities will be required to disclose the level within the fair value hierarchy that applies to the fair value measurement disclosed. ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011. The Company will adopt these standards on March 1, 2012 and is currently assessing the impact on its condensed consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income ("ASU 2011-05"). ASU 2011-05 will require companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. The standard does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. This standard is effective for interim and annual periods beginning after December 15, 2011. The Company early adopted these standards as of August 31, 2011. Because ASU 2011-05 impacts presentation only, it had no effect on the Company's condensed consolidated financial statements or on its financial condition for the three and six month periods ended February 29, 2012.

In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment ("ASU 2011-08"), which permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. Because the Company has only one reporting unit, which has a fair value higher than its carrying amount, adoption of ASU 2011-08 did not have a material impact on the Company's condensed consolidated financial statements for the three and six month periods ended February 29, 2012.

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Nature Of Operations And Business Risks

6 Months Ended

Feb. 29, 2012

Nature Of Operations And Business Risks [Abstract]

Nature Of Operations And Business Risks

(1) NATURE OF OPERATIONS AND BUSINESS RISKS

The accompanying condensed consolidated financial statements reflect the results of operations of Raptor Pharmaceutical Corp. (the "Company" or "Raptor") and have been prepared in accordance with the accounting principles generally accepted in the United States of America. The Company's fiscal year end is August 31.

On July 28, 2009, the Company and ECP Acquisition, Inc., a Delaware corporation, the Company's then wholly-owned subsidiary ("merger sub"), entered into an Agreement and Plan of Merger and Reorganization (the "2009 Merger Agreement"), with Raptor Pharmaceuticals Corp., a Delaware corporation ("RPC"). On September 29, 2009, on the terms and subject to the conditions set forth in the 2009 Merger Agreement, pursuant to a stock-for-stock reverse triangular merger (the "2009 Merger"), merger sub was merged with and into RPC and RPC survived the 2009 Merger as a wholly-owned subsidiary of the Company. Immediately prior to the 2009 Merger and in connection therewith, the Company effected a 1-for-17 reverse stock split of its common stock and changed its corporate name from "TorreyPines Therapeutics, Inc." to "Raptor Pharmaceutical Corp."

As a result of the 2009 Merger and in accordance with the 2009 Merger Agreement, each share of RPC's common stock outstanding immediately prior to the effective time of the 2009 Merger was converted into the right to receive 0.2331234 shares of the Company's common stock, on a post 1-for-17 reverse-split basis. Each option and warrant to purchase RPC's common stock outstanding immediately prior to the effective time of the 2009 Merger was assumed by the Company at the effective time of the 2009 Merger, with each share of such common stock underlying such options and warrants being converted into the right to receive 0.2331234 shares of the Company's common stock, on a post 1-for-17 reverse split basis, rounded down to the nearest whole share of the Company's common stock. Following the 2009 Merger, each such option or warrant has an exercise price per share of the Company's common stock equal to the quotient obtained by dividing the per share exercise price of such common stock subject to such option or warrant by 0.2331234, rounded up to the nearest whole cent.

Immediately following the effective time of the 2009 Merger, RPC's stockholders (as of immediately prior to the 2009 Merger) owned approximately 95% of the Company's outstanding common stock and the Company's stockholders (as of immediately prior to the 2009 Merger) owned approximately 5% of the Company's outstanding common stock.

RPC, the Company's wholly-owned subsidiary, was the "accounting acquirer," and for accounting purposes, the Company was deemed as having been "acquired" in the 2009 Merger. The Board of Directors and officers that managed and operated RPC immediately prior to the effective time of the 2009 Merger became the Company's Board of Directors and officers. Additionally, following the effective time of the 2009 Merger, the business conducted by RPC immediately prior to the effective time of the 2009 Merger became primarily the business conducted by the Company. In December 2011, RPC merged into Raptor Pharmaceutical Corp.

The following reflects the Company's current, post-2009 Merger corporate structure (jurisdiction of incorporation):

Raptor Pharmaceutical Corp., formerly         TorreyPines Therapeutics, Inc. (Delaware)

                |                                                                                  |

    Raptor Therapeutics Inc. (Delaware)        Raptor Discoveries Inc. (Delaware)

                |                                     |

                |                 Raptor European Products, LLC (Delaware)

                |                                     |

        RPTP European Holdings C.V. (Netherlands)

                                 |

        Raptor Pharmaceuticals Europe B.V. (Netherlands)

Raptor, a publicly-traded biotechnology company, seeks to research, manufacture, and commercialize medicines that improve life for patients with severe, rare disorders. Raptor currently has product candidates in clinical development designed to potentially treat nephropathic cystinosis, Non-alcoholic Steatohepatitis ("NASH"), Huntington's Disease ("HD"), aldehyde dehydrogenase deficiency ("ALDH2"), and thrombotic disorder. Raptor's preclinical programs are based upon bioengineered novel drug candidates and drug-targeting platforms derived from the human receptor-associated protein and related proteins that are designed to target cancer and infectious diseases.

The Company is subject to a number of risks, including: the need to raise capital through equity and/or debt financings; the uncertainty whether the Company's research and development efforts will result in successful commercial products; competition from larger organizations; reliance on licensing the proprietary technology of others; dependence on key personnel; uncertain patent protection; and dependence on corporate partners and collaborators. See the section titled "Factors That May Affect Future Results" included elsewhere in this Quarterly Report on Form 10-Q.

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Condensed Consolidated Balance Sheets (USD $)	Feb. 29, 2012	Aug. 31, 2011
ASSETS
Cash and cash equivalents	$ 19,689,438	$ 15,172,086	[1]
Restricted cash	163,461	114,468	[1]
Short-term investments	30,241,134
Prepaid expenses and other	2,339,667	415,944	[1]
Total current assets	52,433,700	15,702,498	[1]
Intangible assets, net	3,177,917	3,250,917	[1]
Goodwill	3,275,403	3,275,403	[1]
Fixed assets, net	223,446	76,997	[1]
Deposits	104,906	104,906	[1]
Deferred offering costs		151,783	[1]
Total assets	59,215,372	22,562,504	[1]
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable	1,087,186	847,137	[1]
Accrued liabilities	2,375,832	2,249,254	[1]
Common stock warrant liability	26,568,922	23,575,294	[1]
Deferred rent	25,561	24,136	[1]
Capital lease liability - current	4,069	3,953	[1]
Total current liabilities	30,061,570	26,699,774	[1]
Capital lease liability - long-term	7,714	9,778	[1]
Total liabilities	30,069,284	26,709,552	[1]
Commitments and contingencies			[1]
Stockholders' equity (deficit):
Preferred stock, $0.001 par value, 15,000,000 shares authorized, zero shares issued and outstanding			[1]
Common stock, $0.001 par value, 150,000,000 shares authorized 48,854,168 and 35,569,188 shares issued and outstanding as at February 29, 2012, and August 31, 2011, respectively	48,854	35,569	[1]
Additional paid-in capital	132,528,834	73,817,083	[1]
Accumulated other comprehensive income (loss)	(4,979)	1,904	[1]
Deficit accumulated during development stage	(103,426,621)	(78,001,604)	[1]
Total stockholders' equity (deficit)	29,146,088	(4,147,048)	[1]
Total liabilities and stockholders' equity (deficit)	$ 59,215,372	$ 22,562,504	[1]

[1] Derived from the Company's audited consolidated financial statements as of August 31, 2011.

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Condensed Consolidated Statement Of Stockholders' Equity (Deficit) (Parenthetical) (USD $)	6 Months Ended
	Feb. 29, 2012
Condensed Consolidated Statement Of Stockholders' Equity (Deficit) [Abstract]
Issuance of common stock in a follow-on public offering, purchase price	$ 4.00
Issuance of common stock in a follow-on public offering, fundraising costs	$ 3,166,146

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Condensed Consolidated Statements Of Cash Flows (USD $)	6 Months Ended			78 Months Ended
	Feb. 29, 2012		Feb. 28, 2011	Feb. 29, 2012
Cash flows from operating activities:
Net loss	$ (25,425,017)		$ (13,095,071)	$ (103,426,621)
Adjustments to reconcile net loss to net cash used in operating activities:
Employee stock-based compensation exp.	2,021,039		1,179,562	5,372,401
Consultant stock-based compensation exp.			37,010	683,322
Fair value adjustment of common stock warrants	11,982,381		3,916,407	34,177,844
Amortization of intangible assets	73,000		76,750	623,958
Depreciation of fixed assets	17,964		39,441	518,737
Unrealized gain on short-term investments	(85,160)			(85,160)
Write-off of intangible assets and other intellectual property				348,750
Amortization of capitalized finder's fee				102,000
Capitalized acquisition costs previously expensed				38,000
Changes in assets and liabilities:
Prepaid expenses and other	(1,923,723)		123,191	(2,240,230)
Intangible assets				(150,000)
Deposits			(2,000)	(104,907)
Accounts payable	240,049		77,325	1,087,186
Accrued liabilities	126,578		(16,028)	1,695,106
Deferred rent	1,425		20,172	25,456
Net cash used in operating activities	(12,971,464)		(7,643,241)	(61,334,158)
Cash flows from investing activities:
Purchase of fixed assets	(164,413)		(25,000)	(710,939)
Cash acquired in 2009 Merger				581,391
Increase in restricted cash	(48,993)		(113,748)	(163,461)
Purchase of short-term investments	(30,155,974)			(30,155,974)
Net cash used in investing activities	(30,369,380)		(138,748)	(30,448,983)
Cash flows from financing activities:
Proceeds from the sale of common stock	46,000,000			85,941,278
Proceeds from the sale of common stock under an equity line			6,747,778	11,639,568
Proceeds from the exercise of common stock warrants	4,776,849		556,956	20,674,348
Proceeds from the exercise of common stock options	106,193		8,828	274,802
Fundraising costs	(3,016,015)		(8,186)	(7,342,979)
Proceeds from the sale of common stock to initial investors				310,000
Proceeds from bridge loan				200,000
Repayment of bridge loan				(200,000)
Principal payments on capital lease	(1,948)		(1,862)	(19,459)
Net cash provided by financing activities	47,865,079		7,303,514	111,477,558
Foreign currency translation gain (loss)	(6,883)		5,549	(4,979)
Net increase (decrease) in cash and cash equivalents	4,517,352		(472,926)	19,689,438
Cash and cash equivalents, beginning of period	15,172,086	[1]	16,953,524
Cash and cash equivalents, end of period	19,689,438		16,480,598	19,689,438
Supplemental disclosure of non-cash financing activities:
Warrants issued in connection with financing				16,310,414
Common stock issued as fee for equity line				208,660
Common stock and warrants issued in connection with reverse merger				4,417,046
Common stock issued as fee for equity line			352,500	827,637
Fair value of warrant liability reclassified to equity upon exercise	8,988,753			10,474,396
Acquisition of equipment in exchange for capital lease				35,134
Notes receivable issued in exchange for common stock				110,000
Common stock issued for a finder's fee				102,000
Common stock issued in asset purchase				$ 2,898,624

[1] Derived from the Company's audited consolidated financial statements as of August 31, 2011.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Feb. 29, 2012	Aug. 31, 2011
Condensed Consolidated Balance Sheets [Abstract]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	15,000,000	15,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	48,854,168	35,569,188
Common stock, shares outstanding	48,854,168	35,569,188

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Commitments And Contingencies

6 Months Ended

Feb. 29, 2012

Commitments And Contingencies [Abstract]

Commitments And Contingencies

(10) COMMITMENTS AND CONTINGENCIES

CONTRACTUAL OBLIGATIONS WITH BIOMARIN

Pursuant to the terms of the asset purchase agreement the Company entered into with BioMarin for the purchase of intellectual property related to the Company's receptor-associated protein ("RAP") based technology (including NeuroTrans™), the Company is obligated to make the following milestone payments to BioMarin upon the achievement of the following events:

$50,000 (paid by the Company in June 2006) within 30 days after the Company receives total aggregate debt or equity financing of at least $2,500,000;

$100,000 (paid by the Company in June 2006) within 30 days after the Company receives total aggregate debt or equity financing of at least $5,000,000;

$500,000 upon the Company's filing and acceptance of an investigational new drug application for a drug product candidate based on the NeuroTrans™ product candidate;

$2,500,000 upon the Company's successful completion of a Phase 2 human clinical trial for a drug product candidate based on the NeuroTrans™ product candidate;

$5,000,000 upon on the Company's successful completion of a Phase 3 human clinical trial for a drug product candidate based on the NeuroTrans™ product candidate;

$12,000,000 within 90 days of the Company's obtaining marketing approval from the FDA or other similar regulatory agencies for a drug product candidate based on the NeuroTrans™ product candidate;

$5,000,000 within 90 days of the Company's obtaining marketing approval from the FDA or other similar regulatory agencies for a second drug product candidate based on the NeuroTrans™ product candidate;

$5,000,000 within 60 days after the end of the first calendar year in which the Company's aggregated revenues derived from drug product candidates based on the NeuroTrans™ product candidate exceed $100,000,000; and

$20,000,000 within 60 days after the end of the first calendar year in which the Company's aggregated revenues derived from drug product candidates based on the NeuroTrans™ product candidate exceed $500,000,000.

In addition to these milestone payments, the Company is also obligated to pay BioMarin a royalty at a percentage of the Company's aggregated revenues derived from drug product candidates based on the NeuroTrans™ product candidate. On June 9, 2006, the Company made a milestone payment in the amount of $150,000 to BioMarin because the Company raised $5,000,000 in its May 25, 2006 private placement financing. If the Company becomes insolvent or if the Company breaches its asset purchase agreement with BioMarin due to non-payment and the Company does not cure its non-payment within the stated cure period, all of the Company's rights to the RAP technology (including NeuroTrans™) will revert back to BioMarin.

CONTRACTUAL OBLIGATIONS WITH THOMAS E. DALEY (ASSIGNEE OF THE DISSOLVED CONVIVIA, INC.)

Pursuant to the terms of the asset purchase agreement the Company entered into with Convivia, Inc. and Thomas E. Daley for the purchase of intellectual property related to its 4-MP product candidate program (the "Asset Purchase Agreement"), Mr. Daley will be entitled to receive the following, if at all, in such amounts and only to the extent certain future milestones are accomplished by the Company (or any of its subsidiaries thereof), as set forth below:

23,312 shares of Raptor's restricted, unregistered Common Stock within fifteen (15) days after the Company enters into a manufacturing license or other agreement to produce any product that is predominantly based upon or derived from any assets purchased from Convivia ("Purchased Assets") in quantity ("Product") if such license agreement is executed within one (1) year of execution of the Asset Purchase Agreement or, if thereafter, 11,656 shares of Raptor's restricted, unregistered Common Stock. Should the Company obtain a second such license or agreement for a Product, Mr. Daley will be entitled to receive 11,656 shares of the Company's restricted, unregistered Common Stock within 30 days of execution of such second license or other agreement. In January 2008, Mr. Daley earned a $30,000 cash bonus pursuant to his employment agreement for executing the Patheon formulation agreement for manufacturing Convivia™. On March 31, 2008, the Company issued 23,312 shares of Raptor's Common Stock valued at $56,000 to Mr. Daley pursuant to this milestone reflecting the execution of an agreement to supply the active pharmaceutical ingredient for Convivia™, combined with the execution of a formulation agreement to produce the oral formulation of Convivia™. In July 2010, the Company issued 11,656 shares of its restricted common stock valued at $35,551 and paid a $10,000 cash bonus to Mr. Daley as a result of the execution of the license agreement with Uni Pharma for the development of Convivia™ in Taiwan.

23,312 shares of the Company's restricted, unregistered Common Stock within fifteen (15) days after it receives its first patent allowance on any patents which constitute part of the Purchased Assets in any one of certain predetermined countries (each, a "Major Market").

11,656 shares of the Company's restricted, unregistered Common Stock within fifteen (15) days after the Company receives its second patent allowance on any patents which constitute part of the Purchased Assets different from the patent referenced in the immediately preceding paragraph above in a Major Market.

23,312 shares of the Company's restricted, unregistered Common Stock within fifteen (15) days of completing predetermined benchmarks in a Major Market by the Company or its licensee of the first Phase 2 human clinical trial for a Product ("Successful Completion") if such Successful Completion occurs within one (1) year of execution of the Asset Purchase Agreement or, if thereafter, 11,656 shares of the Company's restricted, unregistered Common Stock within thirty (30) days of such Successful Completion. In October 2008, the Company issued 23,312 shares of Raptor's Common Stock valued at $27,000 and a $30,000 cash bonus (pursuant to Mr. Daley's employment agreement) to Mr. Daley pursuant to the fulfillment of this milestone.

11,656 shares of the Company's restricted, unregistered Common Stock within fifteen (15) days of a Successful Completion in a Major Market by the Company's or its licensee of the second Phase 2 human clinical trial for a Product (other than the Product for which a distribution is made under the immediately preceding paragraph above).

23,312 shares of the Company's restricted, unregistered Common Stock within fifteen (15) days after the Company or its licensee applies for approval to market and sell a Product in a Major Market for the indications for which approval is sought ("Marketing Approval").

11,656 shares of the Company's restricted, unregistered Common Stock within fifteen (15) days after the Company or its licensee applies for Marketing Approval in a Major Market (other than the Major Market for which a distribution is made under the immediately preceding paragraph above).

46,625 shares of the Company's restricted, unregistered Common Stock within fifteen (15) days after the Company or its licensee obtains the first Marketing Approval for a Product from the applicable regulatory agency in a Major Market.

23,312 shares of the Company's restricted, unregistered Common Stock within fifteen (15) days after the Company or its licensee obtains Marketing Approval for a Product from the applicable regulatory agency in a Major Market (other than the Major Market for which a distribution is made under the immediately preceding paragraph above).

As discussed above, in aggregate, the Company has issued to Mr. Daley, 58,280 shares of Raptor's common stock valued at $118,551 and paid $70,000 in cash bonuses related to Convivia™ milestones along with another $20,000 in cash bonuses related to employment milestones pursuant to Mr. Daley's employment agreement.

CONTRACTUAL OBLIGATIONS WITH FORMER ENCODE STOCKHOLDERS AND UCSD RELATING TO THE ACQUISITION OF THE DR CYSTEAMINE (RP103 AND RP104) LICENSE

As a result of the merger between Raptor Therapeutics Inc. and Encode, as discussed in Note 8 above, the Encode Securityholders are eligible to receive up to an additional 559,496 shares of Raptor's common stock, Company Options and Company Warrants to purchase Raptor's common stock in the aggregate based on certain triggering events related to regulatory approval of RP103/RP104, an Encode product program, if completed within the five year anniversary date of the merger agreement.

Also as a result of the merger, the Company will be obligated to pay an annual maintenance fee to UCSD for the exclusive license to develop RP103/RP104 for certain indications of $15,000 until it begins commercial sales of any products developed pursuant to the License Agreement. In addition to the maintenance fee, the Company will be obligated to pay during the life of the License Agreement: milestone payments ranging from $20,000 to $750,000 for orphan indications and from $80,000 to $1,500,000 for non-orphan indications upon the occurrence of certain events, if ever; royalties on commercial net sales from products developed pursuant to the License Agreement ranging from 1.75% to 5.5%; a percentage of sublicense fees ranging from 25% to 50%; a percentage of sublicense royalties; and a minimum annual royalty commencing the year the Company begins commercially selling any products pursuant to the License Agreement, if ever. Under the License Agreement, the Company is obligated to fulfill predetermined milestones within a specified number of years ranging from 0.75 to 6 years from the effective date of the License Agreement, depending on the indication. In addition, the Company is obligated to, among other things, secure $1.0 million in funding prior to December 18, 2008 (which the Company has fulfilled by raising $10.0 million in its May/June 2008 private placement) and annually spend at least $200,000 for the development of products (which, as of its fiscal years ended August 31, 2011, 2010 and 2009 by spending approximately $11.3 million, $6.2 million and $4.1 million, respectively, on such programs) pursuant to the License Agreement. Cumulatively, the Company has expensed $680,000 in milestone payments to UCSD based upon the initiation of clinical trials in cystinosis, Huntington's Disease and NASH. Subsequent to quarter end, the Company filed its Marketing Authorization Application ("MAA") with the European Medicines Agency ("EMA") for RP103 for the potential treatment of cystinosis, a milestone in which the Company will pay $250,000 to UCSD pursuant to this license.

To the extent that the Company fails to perform any of its obligations under the License Agreement, then UCSD may terminate the license or otherwise cause the license to become non-exclusive.

OFFICE LEASES

In March 2006, the Company entered into a lease for the Company's executive offices and research laboratory in Novato, California and expanded the lease on January 26, 2007. Base monthly payments were subject to annual rent increase of between 3% to 5%, based on the Consumer Price Index ("CPI") and annual adjustments to base operating expenses. In October 2010, the Company executed a lease addendum to the Novato lease for an additional 3,100 square feet ($5,309 per month) starting in April 2011. In February 2012, the Company executed a second addendum to the Novato lease for an additional 1,636 square feet ($2,879.47 per month) starting in March 2012. Effective April 1, 2010, the Company's monthly base rent including base operating expenses was $10,826. Effective April 11, 2011, the Company's monthly base including base operating expenses increased to $16,135 with an adjustment for CPI and operating expenses in April 2012. Effective March 1, 2012, the monthly base including base operating expenses increased to $19,014, with an adjustment for CPI. The Novato lease expires in March 2013. In January 2010, the Company entered into a one-year lease for administrative offices in San Mateo, California for $2,655 per month. The Company anticipates continuing the San Mateo lease on a monthly basis.

During the three month periods ended February 29, 2012 and February 28, 2011, the Company's rent expense was $60,774 and $48,790, respectively. During the six month periods ended February 29, 2012 and February 28, 2011 and the cumulative period from September 8, 2005 (inception) to February 29, 2012, the Company's rent expense was $114,506, $100,515 and $841,586, respectively.

The minimum future lease payments under this operating lease assuming a 3% CPI increase per year are as follows:

Period	Amount
March 1, 2012 to August 31, 2012	$	116,939
Fiscal year ending August 31, 2013		137,094

CAPITAL LEASE

On August 31, 2011, the Company leased a photocopier which is subject to a 39-month lease at $387 per month. The future lease payments under the capital lease are as follows:

Period	Amount
March 1, 2012 to August 31, 2012	$	2,322
Year ending August 31, 2013		4,647
Year ending August 31, 2014		4,647
Year ending August 31, 2015		1,162
Total future capital lease payments		12,778
Less interest		(995	)
Total current and long-term capital lease liability	$	11,783

Interest rate on the capital lease is 6% based on the lessor's implicit rate of return.

CONTRACT/CLINICAL RESEARCH AGREEMENTS

During the three and six months ended February 29, 2012, the Company maintained several contracts with research organizations, clinical organizations and clinical sites, primarily to assist with clinical research for its cystinosis program and its NASH clinical collaboration. The future commitments pursuant to clinical research agreements are estimated as follows:

Period	Amount
March 1, 2012 to August 31, 2012	$	3,066,373
Fiscal year ending August 31, 2013		3,507,836
Fiscal year ending August 31, 2014		1,500,000

STORAGE AND CLINICAL DISTRIBUTION AGREEMENT

During the three and six months ended February 29, 2012, the Company maintained an agreement with a company that stores and distributes clinical materials for Raptor's cystinosis and Huntington's Disease trials. The future commitments pursuant to this agreement are estimated as follows:

Period	Amount
March 1, 2012 to August 31, 2012	$	216,935
Fiscal year ending August 31, 2013		691,900
Fiscal year ending August 31, 2014		207,200

FORMULATION / MANUFACTURING AGREEMENTS

In April 2008, the Company executed an agreement with a contract manufacturing organization to formulate and manufacture RP103 for its cystinosis and Huntington's Disease programs and subsequently, for its NASH program. The costs are invoiced to the Company in installments throughout the formulation and manufacturing process. In November 2010, the Company executed a supply agreement with a contract manufacturer for the active pharmaceutical ingredient of RP103. The future commitments pursuant to these contracts related to both clinical and near-term commercial manufacturing are estimated as follows:

Period	Amount
March 1, 2012 to August 31, 2012	$	5,461,003
Fiscal year ending August 31, 2013		9,490,100
Fiscal year ending August 31, 2014		10,278,200

XML

Document And Entity Information	6 Months Ended
	Feb. 29, 2012	Mar. 29, 2012
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Feb. 29, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Entity Registrant Name	Raptor Pharmaceutical Corp
Current Fiscal Year End Date	--08-31
Entity Central Index Key	0001070698
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		48,857,663

XML

Qualifying Therapeutic Discovery Project Grant

6 Months Ended

Feb. 29, 2012

Qualifying Therapeutic Discovery Project Grant [Abstract]

Qualifying Therapeutic Discovery Project Grant

(11) QUALIFYING THERAPEUTIC DISCOVERY PROJECT GRANT

In October 2010, the Company was awarded a tax grant under the U.S. Government's Qualifying Therapeutic Discovery Project for five of its research programs including its cystinosis, Huntington's Disease and NASH clinical programs and its HepTide™ and WntTide™ preclinical cancer research programs. The Company was granted an aggregate of approximately $1.1 million for all five programs of which, as of August 31, 2011, it had received approximately $874,000. The Company recorded the $194,000 and $680,000 of proceeds as a contra-research and development expense in its preclinical and clinical development division, respectively, during the first two quarters of fiscal 2011. The Company records the contra-expense upon deposit of the grant proceeds. During the three and six months ended February 29, 2012, the Company received approximately $162,000 pursuant to the government program funding guidelines and the remaining balance of approximately $36,000 was drawn but was returned to the government in March 2012 along with an additional $28,000 as recapture tax because the Company had not incurred the amount originally estimated as qualified expenses for its WntTide™ program, which was the basis for the program funding.

XML

Condensed Consolidated Statements Of Comprehensive Loss (USD $)	3 Months Ended		6 Months Ended		78 Months Ended
	Feb. 29, 2012	Feb. 28, 2011	Feb. 29, 2012	Feb. 28, 2011	Feb. 29, 2012
Operating expenses:
General and administrative	$ 2,452,418	$ 1,126,512	$ 4,788,706	$ 2,832,612	$ 21,642,729
Research and development	3,971,471	3,669,246	8,987,650	6,364,375	48,224,940
Total operating expenses	6,423,889	4,795,758	13,776,356	9,196,987	69,867,669
Loss from operations	(6,423,889)	(4,795,758)	(13,776,356)	(9,196,987)	(69,867,669)
Interest income	107,423	11,756	171,592	19,232	544,032
Interest expense	(212)	(356)	(717)	(998)	(116,847)
Foreign currency transaction gain (loss)	18,186	(159)	77,685	89	106,547
Unrealized gain on short-term investments	120,469		85,160		85,160
Adjustment to fair value of common stock warrants	(7,814,136)	1,810,223	(11,982,381)	(3,916,407)	(34,177,844)
Net loss	(13,992,159)	(2,974,294)	(25,425,017)	(13,095,071)	(103,426,621)
Other comprehensive income (loss)
Foreign currency translation adjustment	(1,589)	2,038	(6,883)	5,549	(4,979)
Comprehensive loss	$ (13,993,748)	$ (2,972,256)	$ (25,431,900)	$ (13,089,522)	$ (103,431,600)
Net loss per share:
Basic and diluted	$ (0.29)	$ (0.09)	$ (0.54)	$ (0.42)
Weighted average shares outstanding used to compute:
Basic and diluted	47,967,393	31,778,911	46,795,022	30,999,253

XML

Fair Value Measurement

6 Months Ended

Feb. 29, 2012

Fair Value Measurement [Abstract]

Fair Value Measurement

(5) FAIR VALUE MEASUREMENT

The Company uses a fair-value approach to value certain assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company uses a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity's own assumptions (unobservable inputs). The hierarchy consists of three levels:

• Level one — Quoted market prices in active markets for identical assets or liabilities;

• Level two — Inputs other than level one inputs that are either directly or indirectly observable; and

• Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. Assets and liabilities measured at fair value on a recurring basis at February 29, 2012 and August 31, 2011 are summarized as follows:

Assets	Level 1		Level 2		Level 3		February 29, 2012
Fair value of cash equivalents	$	19,215,313	$	—	$	—	$	19,215,313
Restricted cash		—		163,461		—		163,461
Short-term investments		30,241,134		—		—		30,241,134
Total	$	49,456,447	$	163,461	$	—	$	49,619,908
Liabilities
Fair value of common stock warrants	$	—	$	—	$	26,568,922	$	26,568,922
Total	$	—	$	—	$	26,568,922	$	26,568,922
Assets	Level 1		Level 2		Level 3		August 31, 2011
Fair value of cash equivalents	$	13,855,813	$	—	$	—	$	13,855,813
Restricted cash		—		114,468		—		114,468
Total	$	13,855,813	$	114,468	$	—	$	13,970,281
Liabilities
Fair value of common stock warrants	$	—	$	—	$	23,575,294	$	23,575,294
Total	$	—	$	—	$	23,575,294	$	23,575,294

Cash equivalents and short-term investments represent the fair value of the Company's investment in four money markets and two short-term bond funds, respectively, as of February 29, 2012 and two money market accounts as of August 31, 2011. As of February 29, 2012, the fair value of the Company's common stock warrant liability increased resulting primarily from an increase in the Company's common stock price compared to the stock price as of August 31, 2011.

Marked-to-Market

The common stock warrants issued in the Company's August 2010 private placement and the Company's December 2009 equity financing are classified as liabilities under ASC 480 and are, therefore, re-measured using the Black-Scholes option valuation model at the end of every reporting period with the change in value reported in the Company's condensed consolidated statements of comprehensive loss.

For the three and six months ended February 29, 2012 and for the cumulative period from September 8, 2005 (inception) to February 29, 2012, as a result of the marking-to-market of the warrant liability at quarter-end and the day prior to the exercise of warrants subject to warrant liability accounting, the Company recorded losses of $7.8 million, $12.0 million and $34.2 million, respectively, in the line item adjustment to fair value of common stock warrants in its consolidated statements of comprehensive loss. See Note 9 for further discussion on the calculation of the fair value of the warrant liability. Below is the activity of the warrant liabilities (in millions):

	Six month periods ended
	February 29, 2012			February 28, 2011
Fair value of December 2009 direct offering warrants (including placement agent warrants) at beginning of the fiscal years	$	5.9		$	5.8
December 2009 direct offering warrants exercised during the six month periods ended February 29, 2012 and February 28, 2011		(3.3	)		2.3
Adjustment to mark to market common stock warrants for the six month periods ended February 29, 2012 and February 28, 2011		2.2			(1.0	)
December 2009 direct offering common stock warrant liability at fair value at February 29, 2012 and February 28, 2011		4.8			7.1
Fair value of August 2010 private placement warrants (including broker warrants) at beginning of the fiscal years		17.7			9.9
August 2010 private placement warrants exercised during the six month periods ended February 29, 2012 and February 28, 2011		(3.8	)		3.5
Adjustment to mark to market common stock warrants for the six month periods ended February 29, 2012 and February 28, 2011		7.9			(0.8	)
August 2010 private placement common stock warrant liability at fair value at February 29, 2012 and February 28, 2011		21.8			12.6
Total warrant liability at February 29, 2012 and February 28, 2011	$	26.6		$	19.7

XML

Fixed Assets

6 Months Ended

Feb. 29, 2012

Fixed Assets [Abstract]

Fixed Assets

(4) FIXED ASSETS

Fixed assets consisted of:

Category	February 29, 2012			August 31, 2011			Estimated useful lives
Leasehold improvements	$	129,762		$	124,763		Shorter of life of asset or lease term
Office furniture		3,188			3,188		7 years
Laboratory equipment		423,472			285,346		5 years
Computer hardware and software		152,517			131,229		3 years
Capital lease equipment		13,730			13,730		Shorter of life of asset or lease term
Total at cost		722,669			558,256
Less: accumulated depreciation		(499,223	)		(481,259	)
Total fixed assets, net	$	223,446		$	76,997

Depreciation expense for the three month periods ended February 29, 2012 and February 28, 2011 was $9,295 and $19,756, respectively. Depreciation expense for the six month periods ended February 29, 2012 and February 28, 2011 and the cumulative period from September 8, 2005 (inception) to February 29, 2012 was $17,964, $39,441 and $518,737, respectively. Accumulated depreciation on capital lease equipment was $2,112 and zero as of February 29, 2012 and August 31, 2011, respectively.

XML

Subsequent Events

6 Months Ended

Feb. 29, 2012

Subsequent Events [Abstract]

Subsequent Events

(12) SUBSEQUENT EVENTS

On March 26, 2012, the Company announced that the EMA has determined that its MAA for its investigational drug candidate, RP103 for the potential treatment of nephropathic cystinosis, submitted in early March, is valid. Validation of the MAA confirms that the submission is sufficiently complete to begin the formal review process. The Company anticipates a decision from the EMA in the first calendar quarter of 2013.

On March 28, 2012, the Company announced the appointment of Henk Doude van Troostwijk as its General Manager of European Commercial Operations, effective April 15, 2012. Mr. Doude van Troostwijk will be responsible for building and managing the Company's commercial operations in Europe initially focusing on the potential launch and subsequent marketing of RP103 for nephropathic cystinosis in anticipation of the EMA's approval of the Company's MAA. The Company anticipates additional hiring in Europe as well as the U.S. over the next nine months in preparation for the potential commercialization of RP103 for the potential treatment of nephropathic cystinosis in the U.S. and Europe.

On March 30, 2012, the Company announced that it submitted a New Drug Application ("NDA") to the U.S. Food and Drug Administration ("FDA") seeking approval to market its investigational drug candidate, Cysteamine Bitartrate Delayed-release Capsules (RP103), for the potential treatment of nephropathic cystinosis. In its application, the Company has requested Priority Review of the NDA, which, if granted, could lead to a decision for marketing approval from the FDA of RP103 for the potential treatment of nephropathic cystinosis in the fourth calendar quarter of 2012. If Priority Review is not granted, the Company anticipates a decision by the FDA in the first calendar quarter of 2013.

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Issuance Of Common Stock

6 Months Ended

Feb. 29, 2012

Issuance Of Common Stock [Abstract]

Issuance Of Common Stock

(8) ISSUANCE OF COMMON STOCK

As of February 29, 2012, there were 48,854,168 shares of the Company's common stock outstanding.

ISSUANCE OF COMMON STOCK PURSUANT TO COMMON STOCK WARRANT EXERCISES AND STOCK OPTION EXERCISES

During the three and six month periods ended February 29, 2012, the Company received approximately $2.8 million and $4.8 million from the exercise of warrants in exchange for the issuance of 1.1 million and 1.7 million shares of the Company's common stock respectively. During the cumulative period from September 8, 2005 (inception) through February 29, 2012, the Company received approximately $20.7 million from the exercise of warrants in exchange for the issuance of an aggregate of 8.8 million shares.

During the three and six month periods ended February 29, 2012, the Company received $0.07 million and $0.1 million from the exercise of stock options in exchange for the issuance of 26,128 and 43,613 shares of the Company's common stock, respectively. For the cumulative period from September 8, 2005 (inception) through February 29, 2012, the Company received approximately $0.3 million from the exercise of stock options resulting in the issuance of 124,176 shares of common stock.

ISSUANCE OF COMMON STOCK PURSUANT TO AN ASSET PURCHASE AGREEMENT WITH CONVIVIA, INC.

On October 18, 2007, the Company purchased certain assets of Convivia, including intellectual property, know-how and research reports related to a product candidate targeting liver ALDH2 deficiency, a genetic metabolic disorder. The Company hired Convivia's chief executive officer and founder, Thomas E. (Ted) Daley, as President of clinical development. In exchange for the assets related to the ALDH2 deficiency program, the Company issued to Convivia 46,625 shares of its restricted, unregistered common stock, an additional 46,625 shares of its restricted, unregistered common stock to a third party in settlement of a convertible loan between the third party and Convivia, and another 8,742 shares of restricted, unregistered common stock in settlement of other obligations of Convivia. Mr. Daley, as the former sole stockholder of Convivia (now dissolved), may earn additional shares of the Company based on certain triggering events or milestones related to the development of Convivia assets. In addition, Mr. Daley may earn cash bonuses based on the same triggering events pursuant to his employment agreement. In January 2008, Mr. Daley earned a $30,000 cash bonus pursuant to his employment agreement for executing the Patheon formulation agreement for manufacturing Convivia™. In March 2008, Mr. Daley earned a $10,000 cash bonus pursuant to his employment agreement and was issued 23,312 shares of common stock valued at $56,000 based on the execution of an agreement to supply the Company with the active pharmaceutical ingredient for Convivia™ pursuant to the asset purchase agreement.

In October 2008, Mr. Daley was issued 23,312 shares of restricted common stock valued at $27,000 and earned a $30,000 cash bonus (pursuant to Mr. Daley's employment agreement) pursuant to the fulfillment of a clinical milestone. In July 2010, the Company issued 11,656 shares of its restricted common stock valued at $35,551 and paid a $10,000 cash bonus to Mr. Daley as a result of the execution of the license agreement with Uni Pharma for the development of Convivia™ in Taiwan. As discussed above, in aggregate, the Company has issued to Mr. Daley, 58,280 shares of Raptor's common stock valued at $118,551 and paid $70,000 in cash bonuses related to Convivia™ milestones along with another $20,000 in cash bonuses related to employment milestones pursuant to Mr. Daley's employment agreement. Pursuant to ASC 730, the accounting guidelines for expensing research and development costs, the Company has expensed the value of the stock issued in connection with this asset purchase (except for milestone bonuses, which are expensed as compensation expense) as in-process research and development expense under research and development expenses in the amount of $240,625 on its consolidated statement of operations for the year ended August 31, 2008.

MERGER OF RAPTOR THERAPEUTICS INC. AND ENCODE PHARMACEUTICALS, INC.

On December 14, 2007, the Company entered into a Merger Agreement (the "Encode Merger Agreement"), dated as of the same date, by and between the Company, its subsidiary, Raptor Therapeutics Inc. and Encode. Pursuant to the Encode Merger Agreement, a certificate of merger was filed with the Secretary of State of the State of Delaware and Encode was merged with and into Raptor Therapeutics Inc. The existence of Encode ceased as of the date of the Encode Merger Agreement. Pursuant to the Encode Merger Agreement and the certificate of merger, Raptor Therapeutics Inc., as the surviving corporation, continued as a wholly-owned subsidiary of the Company. Under the terms of and subject to the conditions set forth in the Encode Merger Agreement, the Company issued 802,946 shares of restricted, unregistered shares of the Company's common stock, par value $.001 per share (the "Common Stock") to the stockholders of Encode (the "Encode Stockholders"), options ("Company Options") to purchase 83,325 shares of Common Stock to the optionholders of Encode (the "Encode Optionholders"), and warrants ("Company Warrants") to purchase 256,034 restricted, unregistered shares of Common Stock to the warrantholders of Encode (the "Encode Warrantholders", and together with the Encode Stockholders and Encode Optionholders, the "Encode Securityholders"), as of the date of the Encode Merger Agreement. Such Common Stock, Company Options to purchase Common Stock, and Company Warrants to purchase Common Stock combine for an aggregate amount of 1,142,305 shares of Common Stock issuable to the Encode Securityholders as of the closing of the merger with Encode. The purchase price was valued at $2.6 million, which is reflected as intangible assets on the Company's consolidated balance sheet as of August 31, 2008, primarily based on the value of the Company's common stock and warrants issued to Encode stockholders. The Encode Securityholders are eligible to receive up to an additional 559,496 shares of Common Stock, Company Options and Company Warrants to purchase Common Stock in the aggregate based on certain triggering events related to regulatory approval of RP103/RP104, an Encode product program described below, if completed within the five year anniversary date of the Encode Merger Agreement. The Company recorded this transaction as an asset purchase rather than a business combination, as Encode had not commenced planned principal operations at the time of the merger, such as generating revenues from its drug product candidate.

As a result of the merger with Encode, the Company received the exclusive worldwide license to RP103/RP104 (the "License Agreement"), developed by clinical scientists at the UCSD, School of Medicine. RP103/RP104 is a proprietary enterically coated formulation of cysteamine bitartrate, a cystine depleting agent currently approved by the U.S. Food and Drug Administration ("FDA"). Cysteamine bitartrate is prescribed for the management of the genetic disorder known as nephropathic cystinosis ("cystinosis"), a lysosomal storage disease. The active ingredient in RP103/RP104 has also demonstrated potential in studies as a treatment for other metabolic and neurodegenerative diseases, such as Huntington's Disease and NASH.

In consideration of the grant of the license, the Company will be obligated to pay an annual maintenance fee until it begins commercial sales of any products developed pursuant to the License Agreement. In addition to the maintenance fee, the Company will be obligated to pay during the life of the License Agreement: milestone payments ranging from $20,000 to $750,000 for orphan indications and from $80,000 to $1,500,000 for non-orphan indications upon the occurrence of certain events, if ever; royalties on commercial net sales from products developed pursuant to the License Agreement ranging from 1.75% to 5.5%; a percentage of sublicense fees ranging from 25% to 50%; a percentage of sublicense royalties; and a minimum annual royalty commencing the year the Company begins commercially selling any products pursuant to the License Agreement, if ever. Under the License Agreement, the Company is obligated to fulfill predetermined milestones within a specified number of years ranging from 0.75 to 6 years from the effective date of the License Agreement, depending on the indication. To the extent that the Company fails to perform any of the obligations, UCSD may terminate the license or otherwise cause the license to become non-exclusive. Cumulatively, Raptor has expensed $680,000 in milestone payments to UCSD based upon the initiation of clinical trials in cystinosis, Huntington's Disease and NASH.

ISSUANCES OF COMMON STOCK AND WARRANTS IN CONNECTION WITH THE SALE OF UNITS IN A PRIVATE PLACEMENT

During the period from May 21, 2008 through June 27, 2008, Raptor entered into a Securities Purchase Agreement, as amended (the "2008 Private Placement Purchase Agreement"), with 11 investors for the private placement of units of the Company, each unit comprised of one share of Raptor's Common Stock and one warrant to purchase one half of one share of Raptor's Common Stock, at a purchase price of $2.14 per unit. Pursuant to the 2008 Private Placement Purchase Agreement, the Company sold an aggregate of 4,662,468 shares of Common Stock for aggregate gross proceeds of $10.0 million and issued to the investors warrants, exercisable for two years from the initial closing, which entitle the investors to purchase up to an aggregate of 2,331,234 shares of Common Stock of the Company and have an exercise price of either $3.22 or $3.86 per share, depending on when such warrants are exercised, if at all, and were valued at approximately $3.0 million (using the following Black-Scholes pricing model assumptions: risk-free interest rate 2%; expected term 2 years and annual volatility 121.45%).

In connection with the May / June 2008 private placement, the Company issued warrants and a cash fee to placement agents to compensate them for placing investors into the financing. Placement agents were issued warrants exercisable for 7% of Common Stock issued and issuable under the warrants issued to investors as part of the financing units and a cash fee based upon the proceeds of the sale of the units of the private placement. In connection with the sale of units, the Company issued placement agent warrants to purchase 489,559 shares of Raptor's Common Stock at an exercise price of $2.36 per share for a five year term (valued at approximately $960,000 using the following Black-Scholes pricing model assumptions: risk-free interest rate 2%; expected term 5 years and annual volatility 121.45%) and cash fees to placement agents totaling $700,000. Of the placement agents compensated, Limetree Capital was issued warrants to purchase 438,890 shares of Raptor's Common Stock and cash commission of $627,550. One of the Company's Board members served on the board of Limetree Capital.

On April 29, 2009, in order to reflect current market prices, Raptor notified the holders of warrants purchased in the May/June 2008 private placement that the Company was offering, in exchange for such warrants, new warrants to purchase its common stock at an exercise price of $1.29 per share, but only to the extent such exchange of the original warrants and exercise of the new warrants, including the delivery of the exercise price, occurred on or prior to July 17, 2009. The new warrants were valued at approximately $2.3 million based on the following Black-Scholes pricing model assumptions: risk-free interest rate 0.55%; expected term 1 year and annual volatility 231.97%. The warrants that were not exchanged prior to or on July 17, 2009 retained their original exercise prices of $3.86 per share and original expiration date of May 21, 2010. The Company received $2,614,500 of proceeds from warrant exercises that resulted in the issuance of 2,031,670 shares of Raptor's common stock pursuant to the exchange described above.

On August 21, 2009, Raptor entered into a securities purchase agreement with four investors for the private placement of units of the Company at a purchase price of $1.37 per unit, each unit comprised of one share of Raptor's common stock, par value $0.001 per share and one warrant to purchase one half of one share of Raptor's common stock. Pursuant to the securities purchase agreement, the Company sold an aggregate of 1,738,226 units to the investors for aggregate gross proceeds of $2,386,000. The 1,738,226 units are comprised of an aggregate of 1,738,226 shares of common stock and warrants to purchase up to 869,113 shares of Raptor's common stock valued at $1.0 million (using the following Black-Scholes pricing model assumptions: risk-free interest rate 1.11%; expected term 2 years and annual volatility 240.29%). The warrants, exercisable for two years from the closing, entitle the investors to purchase, in the aggregate, up to 869,113 shares of Raptor's common stock and have an exercise price of either $2.57 until the first anniversary of issuance or $3.22 per share after the first anniversary of issuance.

In connection with the August 2009 private placement, the Company issued warrants and a cash fee to Limetree Capital as its sole placement agent to compensate it for placing investors into the financing. Limetree Capital was issued warrants exercisable for 7% of common stock issued and issuable under the warrants issued to investors as part of the financing units and a 3.5% cash fee based upon the proceeds of the sale of the units of the August 2009 private placement. Limetree Capital was issued a five-year warrant to purchase 129,733 shares of Raptor's Common Stock at an exercise price of $1.50 per share (valued at approximately $171,000 using the following Black-Scholes pricing model assumptions: risk-free interest rate 2.58%; expected term 5 years and annual volatility 240.29%) and cash commission of $59,360.

2009 MERGER AND NASDAQ LISTING

On September 29, 2009, the Company, formerly known as TorreyPines Therapeutics, Inc. ("TorreyPines") and RPC completed a reverse merger. The Company changed its name to "Raptor Pharmaceutical Corp." and commenced trading on September 30, 2009 on the NASDAQ Capital Market under the ticker symbol "RPTP."

In connection with the exchange of shares in the merger, immediately after the effective time of such merger, RPC and the Company's stockholders owned 95% and 5% of the outstanding shares of the combined company, respectively. RPC stockholders received (as of immediately prior to such merger) 17,881,300 shares of the combined company's common stock in exchange for the 76,703,147 shares of RPC's common stock outstanding immediately prior to the closing of the merger. On September 29, 2009, immediately prior to the effective time of such merger, the Company's Board of Directors, with the consent of RPC's Board of Directors, acted to effect a reverse stock split of the issued and outstanding shares of the Company's common stock such that every 17 shares of the Company's common stock outstanding immediately prior to the effective time of the merger would represent one share of the Company's common stock. Due to the reverse stock split implemented by the Company, the 15,999,058 shares of the Company's common stock outstanding immediately prior to the closing of the merger became 940,863 shares of the combined company's common stock.

In connection with the merger and subject to the same conversion factor as the RPC common stock (.2331234), the combined company assumed all of RPC's stock options and warrants outstanding at the time of the merger. The combined company also retained the Company's stock options and warrants outstanding at the merger, subject to the same adjustment factor as described above to give effect to the 1 for 17 reverse split.

The combined company is headquartered in Novato, California and is managed by Christopher M. Starr, Ph.D., as Chief Executive Officer and director, Todd C. Zankel, Ph.D., as Chief Scientific Officer, Kim R. Tsuchimoto as Chief Financial Officer, Ted Daley, as President of clinical development and Patrice P. Rioux., M.D., Ph.D., as Chief Medical Officer of clinical development.

There were a number of factors on which RPC's Board of Directors relied in approving the 2009 Merger. The primary reason for RPC's Board of Directors' decision to merge with TorreyPines was the benefit anticipated from the additional liquidity expected from having a NASDAQ trading market on which the combined company's common stock could be listed, in addition to having access to an expanded pipeline of product candidates across a wider spectrum of diseases and markets.

The liquidity benefit is the primary factor behind the goodwill recognized in the transaction (see below). The goodwill is expected to be fully deductible for tax purposes. Below is a breakdown of the assets acquired and liabilities assumed in the merger described herein (in millions, except for %):

		(millions)			(millions)
Asset Allocation	Value (millions)			%
Cash and equivalents	$	0.58			13
Other current assets		0.10			2
Accrued liabilities		(0.68	)		(15	)
Intangible assets:
In-process research & development		0.90			20
Licenses		0.24			6
Total identifiable assets		1.14			26
Plus goodwill		3.28			74
Total net assets acquired	$	4.42			100

ISSUANCES OF COMMON STOCK AND WARRANTS IN CONNECTION WITH THE SALE OF UNITS IN A REGISTERED DIRECT OFFERING

On December 17, 2009, the Company entered into a Placement Agent Agreement with Ladenburg Thalmann & Co. Inc. as placement agent (the "2009 Placement Agent"), relating to the issuance and sale to the Direct Offering Investors (as defined below) pursuant to a registered direct offering (the "Direct Offering") of up to 3,747,558 units (the "Units"), consisting of (i) 3,747,558 shares of the Company's common stock, (ii) warrants to purchase an aggregate of up to 1,873,779 shares of the Company's common stock (and the shares of common stock issuable from time to time upon exercise of such warrants) (the "Series A Warrants"), and (iii) warrants to purchase an aggregate of up to 1,873,779 shares of the Company's common stock (and the shares of common stock issuable from time to time upon exercise of such warrants) (the "Series B Warrants," and collectively with the Series A Warrants, the "Investor Warrants").

The 2009 Placement Agent received a placement fee equal to 6.5% of the gross cash proceeds to the Company from the Direct Offering of the Units or $487,183 (excluding any consideration that may be paid in the future upon exercise of the Warrants), a warrant to purchase up to an aggregate of 74,951 shares of the Company's common stock at $2.50 per share (valued at approximately $52,000 using the following Black-Scholes pricing model assumptions: risk-free interest rate 2.23%; expected term 5 years and annual volatility 49.28%) and $25,000 in out-of-pocket accountable expenses. The warrant issued to Ladenburg has the same terms and conditions as the Investor Warrants except that the exercise price is 125% of the public offering price per share or $2.50 per share, and the expiration date is five years from the effective date of the Registration Statement.

In connection with the Direct Offering, following execution of the Placement Agent Agreement, the Company also entered into a definitive securities purchase agreement (the "Direct Offering Purchase Agreement"), dated as of December 17, 2009, with 33 investors set forth on the signature pages thereto (collectively, the "Direct Offering Investors") with respect to the Direct Offering of the Units, whereby, on an aggregate basis, the Direct Offering Investors agreed to purchase 3,747,558 Units for a negotiated purchase price of $2.00 per Unit, amounting to gross proceeds of approximately $7.5 million and net proceeds after commissions and expenses of approximately $6.2 million. Each Unit consists of one share of the Company's common stock, one Series A Warrant exercisable for 0.5 of a share of the Company's common stock and one Series B Warrant exercisable for 0.5 of a share of the Company's common stock. The shares of the Company's common stock and the Warrants were issued separately. The Series A Warrants were exercisable during the period beginning one hundred eighty (180) days after the date of issue and ending on the fifth (5th) anniversary of the date of issue. The Series B Warrants were exercisable during the period beginning one hundred eighty (180) days after the date of issue and ending on the eighteen (18) month anniversary of the date of issue. The Investor Warrants have a per share exercise price of $2.45. At closing of the financing, the Series A Warrants were valued at $1.3 million (using the following Black-Scholes pricing model assumptions: risk-free interest rate 2.23%; expected term 5 years and annual volatility 49.28%) and the Series B Warrants were valued at $0.5 million (using the following Black-Scholes pricing model assumptions: risk-free interest rate 0.56%; expected term 18 months and annual volatility 49.28%). Based on the underlying terms of the Investor Warrants and Placement Agent Warrants, the Investor Warrants and the Placement Agent Warrants are classified as a liability, as discussed further below in Note 9.

ISSUANCES OF COMMON STOCK IN CONNECTION WITH AN EQUITY LINE

On April 16, 2010, the Company signed a purchase agreement with Lincoln Park Capital Fund, LLC ("LPC"), together with a registration rights agreement, whereby LPC agreed to purchase up to $15.0 million of the Company's common stock over a 25 month period. Under the registration rights agreement, the Company agreed to file a registration statement related to the transaction with the U.S. Securities and Exchange Commission ("SEC") covering the shares that have been issued or may be issued to LPC under the purchase agreement. Such registration statement was declared effective by the SEC on May 7, 2010. Post-effective amendments to such registration statement were filed on November 23, 2010 and December 1, 2010, which amended registration statement was declared effective by the SEC on December 1, 2010. Post-effective amendments to such amended registration statement were filed on October 11, 2011 and October 14, 2011 on Form S-3, which amended registration statement was declared effective by the SEC on October 21, 2011. After May 7, 2010, the Company had the right over a 25-month period to sell its shares of common stock to LPC in amounts of $100,000 to up to $1 million per sale, depending on certain conditions as set forth in the purchase agreement, up to the aggregate amount of $15.0 million. The purchase agreement may be terminated by the Company at any time at its discretion without any cost to the Company.

The purchase price of the shares issued to LPC under the purchase agreement is based on the prevailing market prices of the Company's shares at the time of sale without any fixed discount. The Company controlled the timing and amount of any sales of shares to LPC. LPC did not have the right or the obligation to purchase any shares of the Company's common stock on any business day that the purchase price of the Company's common stock is below $1.50 per share.

In consideration for entering into the purchase agreement (the "LPC Purchase Agreement"), the Company issued to LPC 145,033 shares of common stock valued at $246,556 (recorded as deferred offering costs on the Company's balance sheet and amortized over the usage of the equity line) as a commitment fee and is required to issue up to an additional 217,549 shares of its common stock pro rata as LPC purchases the $15.0 million of the Company's common stock over the 25-month period. Since inception, the Company sold 4,186,038 shares to LPC at a weighted average price of $2.78 and paid commitment fees to LPC in the form of 168,929 shares (in addition to the 145,033 shares issued as the initial commitment fee), valued at $581,081. The Company issued an aggregate of 4,500,000 shares (including shares issued to LPC as commitment fees) to LPC pursuant to the LPC Purchase Agreement and does not plan to issue or register additional shares under such agreement.

2010 PRIVATE PLACEMENT

On August 9, 2010, the Company entered into a securities purchase agreement with 23 investors set forth on the signature pages thereto (the "U.S. Investors") and a separate securities purchase agreement with a certain Canadian investor (the "Canadian Investor") and together with the U.S. Investors, the "2010 Private Placement Investors") set forth on the signature pages thereto (collectively, the "2010 Private Placement Purchase Agreements"), for the private placement (the "2010 Private Placement") of the Company's common stock and warrants to purchase its common stock, at a purchase price of $3.075 per unit, with each unit comprised of one share of common stock and a warrant to purchase one share of common stock. JMP Securities LLC (the "2010 Placement Agent") served as the Company's placement agent in the 2010 Private Placement.

The closing of this private placement occurred on August 12, 2010. The Company issued and sold an aggregate of 4,897,614 units, comprised of 4,897,614 shares of common stock and warrants to purchase up to 4,897,614 shares of its common stock for gross proceeds of approximately $15.1 million. Each warrant, exercisable for 5 years from August 12, 2010, has an exercise price of $3.075 per share. At closing of the 2010 Private Placement, the warrants issued to investors were valued at approximately $7.8 million (using the following Black-Scholes pricing model assumptions: risk-free interest rate 1.74%; expected term 5 years and annual volatility 85.14%.) As the placement agent for the 2010 Private Placement, the 2010 Placement Agent was issued one warrant to purchase 97,952 shares of the Company's common stock (valued at approximately $0.2 million, based upon the same Black-Scholes inputs as the investor warrants), paid a cash commission of $978,911 and reimbursed for certain of its expenses incurred in connection with the 2010 Private Placement.

In connection with the 2010 Private Placement, on August 12, 2010, the Company entered into a registration rights agreement with the 2010 Private Placement Investors, pursuant to which the Company filed with the SEC a registration statement related to the 2010 Private Placement covering the resale of the common stock issued to the 2010 Private Placement Investors under the 2010 Private Placement Purchase Agreements and the shares of common stock that will be issued to the 2010 Private Placement Investors upon exercise of the warrants, including the warrant issued to the 2010 Placement Agent. Such registration statement was declared effective on August 31, 2010. Post-effective amendments to such registration statement were filed on November 23, 2010 and December 1, 2010, which amended registration statement was declared effective by the SEC on December 1, 2010. A post-effective amendment to such amended registration statement was filed on October 11, 2011 on Form S-3, which amended registration statement was declared effective by the SEC on October 21, 2011.

2011 FOLLOW-ON PUBLIC OFFERING

On September 13, 2011, the Company closed an underwritten public offering of shares of the Company's common stock at a price to the public of $4.00 per share. The shares sold in the offering included 10.0 million shares of common stock plus an additional 1.5 million shares of common stock pursuant to the exercise by the underwriters of the over-allotment option the Company granted to them. Total gross proceeds to the Company in the offering (including in connection with the sale of the shares of common stock pursuant to the exercise of the over-allotment option) totaled $46.0 million, before underwriting discounts and commissions. The offering resulted in net proceeds to the Company of approximately $42.8 million after deduction of underwriting discounts of 6% and other offering expenses paid by the Company.

The following is a summary of common stock outstanding as of February 29, 2012:

Transaction	Date of Issuance	Common Stock Issued
Founders' shares	Sep. 2005		1,398,742
Seed round	Feb. 2006		466,247
PIPE concurrent with reverse merger	May 2006		1,942,695
Shares issued in connection with reverse merger	May 2006		3,100,541
Warrant exercises	Jan. 2007 –Feb. 2012		6,791,485
Stock option exercises	Mar. 2007 –Feb. 2012		124,176
Loan finder's fee	Sep. 2007		46,625
Convivia asset purchase	Oct. 2007 –Jun. 2010		160,272
Encode merger RP103/RP104 asset purchase	Dec. 2007		802,946
Shares issued pursuant to consulting agreement	May 2008		2,040
2008 private placement	May/Jun. 2008		4,662,468
Warrant exercises from warrant exchange	Jun./Jul. 2009		2,031,670
2009 private placement	Aug. 2009		1,738,226
Shares issued in connection with reverse merger	Sep. 2009		940,863
2009 registered direct financing	Dec. 2009		3,747,558
Shares issued to equity line investor (incl. fee shares)	Apr. 2010 – Feb. 2011		4,500,000
2010 private placement	Aug. 2010		4,897,614
2011 follow-on public offering	Sep. 2011		11,500,000
Total shares of common stock outstanding			48,854,168

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Accrued Liabilities

6 Months Ended

Feb. 29, 2012

Accrued Liabilities [Abstract]

Accrued Liabilities

(6) ACCRUED LIABILITIES

Accrued liabilities consisted of:

		$1,658,386		$1,658,386
	February 29, 2012		August 31, 2011
Clinical trial costs	$	1,320,554	$	1,177,859
Accrued vacation and employee benefits		293,586		142,678
Accrued bonuses		239,310		478,619
Salaries and wages		175,101		125,069
Legal fees		148,763		164,761
Consulting—general and administrative		79,534		18,085
Patent costs		34,197		2,969
Clinical trial materials		—		125,256
Other		84,787		13,958
Total accrued liabilities	$	2,375,832	$	2,249,254

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Stock Option Plans

6 Months Ended

Feb. 29, 2012

Stock Option Plans [Abstract]

Stock Option Plans

(7) STOCK OPTION PLANS

Effective September 1, 2006, the Company began recording compensation expense associated with stock options and other forms of equity compensation in accordance with ASC 718. Prior to September 1, 2006, the Company accounted for stock options according to the provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, and therefore no related compensation expense was recorded for awards granted with no intrinsic value. The Company adopted the modified prospective transition method provided for under ASC 718, and consequently has not retroactively adjusted results from prior periods. Under this transition method, compensation cost associated with stock options now includes: (i) quarterly amortization related to the remaining unvested portion of all stock option awards granted prior to September 1, 2006, based on the grant date value estimated in accordance with the original provisions of ASC 718; and (ii) quarterly amortization related to all stock option awards granted subsequent to September 1, 2006, based on the grant date fair value estimated in accordance with the provisions of ASC 718. In addition, the Company records consulting expense over the vesting period of stock options granted to consultants. The compensation expense for stock-based compensation awards includes an estimate for forfeitures and is recognized over the requisite service period of the options, which is typically the period over which the options vest, using the straight-line method. Employee stock-based compensation expense for the three month periods ended February 29, 2012 and February 28, 2011 was $1,104,301 and $305,888, respectively. Employee stock-based compensation expense for the six month periods ended February 29, 2012, February 28, 2011 and for the cumulative period from September 8, 2005 (inception) to February 29, 2012 was $2,021,039, $1,179,562 and $5,372,401, respectively, of which cumulatively $4,311,183 was included in general and administrative expense and $1,061,218 was included in research and development expense. No employee stock compensation costs were recognized for the period from September 8, 2005 (inception) to August 31, 2006, which was prior to the Company's adoption of ASC 718.

Stock-based compensation expense was based on the Black-Scholes option-pricing model assuming the following:

		170 to 240		170 to 240		170 to 240
Period*	Risk-free interest rate			Expected life of stock option	Annual volatility
September 8, 2005 (inception) to August 31, 2006**		5	%	10 years		100	%
Year ended August 31, 2007		4 to 5	%	8 years		100	%
Year ended August 31, 2008		2 to 3.75	%	8 years		109 to 128	%
Year ended August 31, 2009		1.5 to 3.2	%	7 years		170 to 240	%
Year ended August 31, 2010		2.1 to 3.1	%	6 to 7 years		55 to 245	%
Year ended August 31, 2011		1.6 to 2.4	%	6 years		88 to 116	%
Three months ended November 30, 2011		1.2	%	6 years		121	%
Three months ended February 29, 2012		1.12	%	5 years		122	%

* Dividend rate is 0% for all periods presented.

** Stock-based compensation expense was recorded on the condensed consolidated statements of operations and statements of comprehensive loss commencing on the effective date of ASC 718, September 1, 2006. Prior to September 1, 2006, stock based compensation was reflected only in the footnotes to the condensed consolidated statements of operations, with no effect on the condensed consolidated statements of operations, per the guidelines of APB Opinion No. 25. Consultant stock-based compensation expense has been recorded on the condensed consolidated statements of operations and statements of comprehensive loss since inception.

If factors change and different assumptions are employed in the application of ASC 718, the compensation expense recorded in future periods may differ significantly from what was recorded in the current period.

The Company recognizes as an expense the fair value of options granted to persons who are neither employees nor directors. The fair value of expensed options was based on the Black-Scholes option-pricing model assuming the same factors shown in the stock-based compensation expense table above. Stock-based compensation expense for consultants for the three and six month periods ended February 29, 2012 and February 28, 2011 and for the cumulative period from September 8, 2005 (inception) to February 29, 2012 was zero, zero, $32,737, $37,010 and $683,322, respectively, of which cumulatively $147,295 was included in general and administrative expense and $536,027 was included in research and development expense.

A summary of the activity in the 2010 Equity Incentive Plan, the 2006 Equity Compensation Plan, as amended and the Company's other stock option plans, is as follows:

	Option shares			Weighted- average exercise price		Exercisable		Weighted- average fair value of options granted
Outstanding at September 8, 2005		—		$	—		—	$	—
Granted		580,108		$	2.64		—	$	2.47
Exercised		—		$	—		—	$	—
Canceled		—		$	—		—	$	—
Outstanding at August 31, 2006		580,108		$	2.64		4,010	$	2.47
Granted		107,452		$	2.56		—	$	2.31
Exercised		(3,381	)	$	2.57		—	$	2.40
Canceled		—			—		—	$	—
Outstanding at August 31, 2007		684,179		$	2.63		273,236	$	2.45
Granted		223,439		$	2.27		—	$	2.21
Exercised		—		$	—		—	$	—
Canceled		—		$	—		—	$	—
Outstanding at August 31, 2008		907,618		$	2.54		600,837	$	2.39
Granted		81,595		$	1.13		—	$	1.04
Exercised		—		$	—		—	$	—
Canceled		—		$	—		—	$	—
Outstanding at August 31, 2009		989,213		$	2.42		826,303	$	2.40
Granted		302,772		$	2.29		160,605	$	1.24
Assumed in the 2009 Merger		161,044		$	114.12		158,475	$	2.63
Exercised		(37,881	)	$	1.69		—	$	1.49
Canceled		(23,860	)	$	142.42		—	$	2.00
Outstanding at August 31, 2010		1,391,288		$	14.25		1,089,248	$	1.87
Granted		2,231,790		$	3.39		834,624	$	2.54
Exercised		(39,302	)	$	2.44		—	$	2.02
Canceled		(3,221	)	$	1,088.33		—	$	—
Outstanding at August 31, 2011		3,580,555		$	6.64		1,881,349	$	2.30
Granted		2,119,905		$	5.13		—	$	4.45
Exercised		(17,485	)	$	2.27		—	$	1.97
Canceled		(477	)	$	15.81		—	$	0.05
Outstanding at November 30, 2011		5,682,498		$	6.09		2,051,680	$	3.14
Granted		190,000		$	6.87		—	$	5.73
Exercised		(26,128	)	$	2.55		—	$	1.96
Canceled		(4,522	)	$	429.54		—	$	—
Outstanding at February 29, 2012		5,841,848		$	5.80		2,222,773	$	3.25

The weighted average intrinsic values of stock options outstanding and expected to vest and stock options exercisable as of February 29, 2012 and February 28, 2011 were approximately $20.4 million, $9.6 million, $1.6 million and $1.0 million, respectively (representing 5.8 million, 2.2 million, 3.3 million and 1.5 million shares, respectively).

There were 1,563,508 options available for grant as of February 29, 2012 under the 2010 Equity Incentive Plan, as amended (the "Plan"), which was approved by the Company's Board of Directors as of February 2, 2010 and approved by its stockholders on March 9, 2010. On April 7, 2011, the Company's stockholders passed amendments to the Plan which allow for an increase of the grant pool based upon 5% of the Company's common stock outstanding as of April 7, 2011, August 31, 2011 and August 31, 2012 up to an aggregate maximum increase of 6,000,000 shares. The April 7 and August 31, 2011, replenishments added 1,629,516 and 1,778,459 shares, respectively, available for grant under the Plan. The amendments also allow for 50% accelerated vesting of unvested stock options upon a change of control as defined in the Plan. In September 2011, the Company's Board of Directors approved an amended and restated form of award agreement under the Plan, which will be used for awards granted on or after September 22, 2011. The amended and restated award agreement, subject to the terms of any applicable employment agreement, extends the termination date of the awards granted under the Plan that are vested as of such termination date due to (a) an employee's or a non-employee director's retirement at age 62 or older which employee or non-employee director has at least five (5) years of continuous service with us prior to such retirement, (b) the termination of a non-employee director's board membership for reasons other than for cause or retirement and (c) an employee's or a non-employee director's death (during his or her continuous service with us or within 90 days' of such continuous service with us) or permanent disability, to eighteen (18) months from the date of termination of continuous service with the Company. No further grants will be made under any previous or assumed stock option plans. As of February 29, 2012, the options outstanding under all of the Company's stock option plans consisted of the following:

		1,537,404		1,537,404		1,537,404		1,537,404		1,537,404
	Options outstanding						Options exercisable
Range of exercise prices	Number of options outstanding and expected to vest (#)		Weighted- average remaining contractual life (yrs.)		Weighted- average exercise price ($)		Number of options exercisable (#)		Weighted- average exercise price ($)
$0 to $1.00		34,969		7.13		0.85		24,769		0.85
$1.01 to $2.00		84,427		7.26		1.74		68,752		1.74
$2.01 to $3.00		1,514,129		6.52		2.65		1,077,807		2.65
$3.01 to $4.00		1,766,957		8.77		3.50		880,193		3.50
$4.01 to $5.00		87,674		7.46		4.70		86,215		4.70
$5.01 to $6.00		2,119,905		9.57		5.13		41,250		5.13
$6.01 to $7.00		120,000		8.03		6.36		0		4.71
$7.01 to $8.00		70,000		9.88		7.75		0		7.75
$8.01 to $964.24		43,787		3.54		249.94		43,787		249.94
		5,841,848		8.41		5.80		2,222,773		7.92

At February 29, 2012, the total unrecognized compensation cost was approximately $11.8 million. The weighted-average period over which it is expected to be recognized is 3.25 years.

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Warrants

6 Months Ended

Feb. 29, 2012

Warrants [Abstract]

Warrants

(9) WARRANTS

The table reflects the number of common stock warrants outstanding as of February 29, 2012:

	Number of shares exercisable		Exercise price			Expiration date
Issued in connection with Encode merger		233,309	$	2.87		12/13/2015
Issued to placement agents in May / June 2008		432,649	$	2.36		5/21/2013
Issued to placement agents in August 2009		65,000	$	1.50		8/21/2014
TorreyPines warrants assumed in 2009 Merger		8,140	$	80.86	*	6/11/2013-9/26/2015
Issued to registered direct investors in Dec. 2009		818,750	$	2.45		12/23/2014
Issued to private placement investors in Aug. 2010		3,621,683	$	3.075		8/11/2015
Issued to placement agent in Aug. 2010		97,952	$	3.075		8/11/2015
Total warrants outstanding		5,277,483	$	3.01	*

* Weighted average exercise price

The warrants issued by the Company in the August 2010 private placement and the December 2009 equity financing contain a conditional obligation that may require the Company to transfer assets to repurchase the warrants upon the occurrence of potential future events. Under ASC 480, a financial instrument that may require the issuer to settle the obligation by transferring assets is classified as a liability. Therefore, the Company has classified the warrants from both financings as liabilities and will mark them to fair value at each period end.

A Black-Scholes option-pricing model was used to obtain the fair value of the warrants issued in the December 2009 and August 2010 equity financings using the following assumptions at February 29, 2012 and August 31, 2011:

	December 2009 equity financing Series A						August 2010 equity financing investors and placement agent
	February 29,  2012			August 31, 2011			February 29, 2012			August 31, 2011
Fair value ($ millions)		4.7			5.9			21.8			17.7
Black-Scholes inputs:
Stock price	$	6.98		$	4.73		$	6.98		$	4.73
Exercise price	$	2.45		$	2.45		$	3.075		$	3.075
Risk free interest rate		0.43	%		0.38	%		0.65	%		0.70	%
Volatility		122.4	%		116.4	%		122.4	%		116.4	%
Expected term (years)		2.75			3.25			3.50			4.00
Dividend		0			0			0			0

For the three and six month periods ended February 29, 2012 and February 28, 2011, and for the cumulative period from September 8, 2005 (inception) to February 29, 2012, as a result of the marking-to-market of the warrant liability at quarter-end and the day prior to the exercise of warrants subject to warrant liability accounting, the Company recorded losses of approximately $7.8 million, $12.0 million, a gain of approximately $1.8 million, a loss of approximately $3.9 million and losses of approximately $34.2 million, respectively, in the line item adjustment to fair value of common stock warrants in its condensed consolidated statements of comprehensive loss. See Note 5 for further discussion on the marking-to-market of the warrant liability.

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Condensed Consolidated Statement Of Stockholders' Equity (Deficit) (USD $)	Common Stock [Member]	Additional Paid- In Capital [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Deficit Accumulated During Development Stage [Member]	Total
Balance at Aug. 31, 2011	$ 35,569	$ 73,817,083	$ 1,904	$ (78,001,604)	$ (4,147,048)	[1]
Balance, shares at Aug. 31, 2011	35,569,188
Exercise of common stock warrants	1,741	4,775,108			4,776,849
Exercise of common stock warrants, shares	1,741,367
Exercise of common stock options	44	106,149			106,193
Exercise of common stock options, shares	43,613
Employee stock-based compensation expense		2,021,039			2,021,039
Reclassification of the fair value of warrant liabilities upon exercise		8,988,753			8,988,753
Issuance of common stock in a follow-on public offering at $4.00 per share purchase price, net of fundraising costs totaling $3,166,146	11,500	42,820,702			42,832,202
Issuance of common stock in a follow-on public offering at $4.00 per share purchase price, net of fundraising costs totaling $3,166,146, shares	11,500,000
Foreign currency translation loss			(6,883)		(6,883)
Net loss				(25,425,017)	(25,425,017)
Balance at Feb. 29, 2012	$ 48,854	$ 132,528,834	$ (4,979)	$ (103,426,621)	$ 29,146,088
Balance, shares at Feb. 29, 2012	48,854,168

[1] Derived from the Company's audited consolidated financial statements as of August 31, 2011.

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Intangible Assets And Goodwill

6 Months Ended

Feb. 29, 2012

Intangible Assets And Goodwill [Abstract]

Intangible Assets And Goodwill

(3) INTANGIBLE ASSETS AND GOODWILL

On December 14, 2007, the Company acquired the intellectual property and other rights to develop RP103/RP104 to treat various clinical indications from the University of California at San Diego ("UCSD") by way of a merger with Encode Pharmaceuticals, Inc., a privately held development stage company ("Encode"), which held the intellectual property license with UCSD. The intangible assets acquired in the merger with Encode were recorded at approximately $2.6 million, primarily based on the value of the Company's common stock and warrants issued to the Encode stockholders.

Intangible assets recorded as a result of the 2009 Merger were approximately $1.1 million as discussed in Note 8 below.

Summary of intangibles acquired as discussed above:

	February 29, 2012			August 31, 2011
Intangible asset (IP license for RP103/RP104) related to the Encode merger	$	2,620,000		$	2,620,000
Intangible assets (out-license) related to the 2009 Merger		240,000			240,000
In-process research and development (IP license for tezampanel) related to the 2009 Merger		900,000			900,000
Total intangible assets		3,760,000			3,760,000
Less accumulated amortization		(582,083	)		(509,083	)
Intangible assets, net	$	3,177,917		$	3,250,917

The intangible assets related to RP103/RP104 are being amortized monthly over 20 years, which are the life of the intellectual property patents and the estimated useful life. The 20 year estimated useful life is also based upon the typical development, approval, marketing and life cycle management timelines of pharmaceutical drug products. The intangible assets related to the out-license will be amortized using the straight-line method over the estimated useful life of 16 years, which is the life of the intellectual property patents. The intangible assets related to tezampanel, which has been classified as in-process research and development, will not be amortized until the product is developed. During the three month periods ended February 29, 2012 and February 28, 2011, the Company amortized $36,500 and $38,375, respectively, of intangible assets to research and development expense. During the six month periods ended February 29, 2012 and February 28, 2011 and the cumulative period from September 8, 2005 (inception) to February 29, 2012, the Company amortized $73,000, $76,750 and $623,958 (included $41,875 related to NeuroTrans™ which was written off as of August 31, 2011), respectively, of intangible assets to research and development expense.

The following table summarizes the actual and estimated amortization expense for intangible assets for the periods indicated:

Amortization period	Amortization expense
Fiscal year ending August 31, 2012 – estimate		146,000
Fiscal year ending August 31, 2013 – estimate		146,000
Fiscal year ending August 31, 2014 – estimate		146,000
Fiscal year ending August 31, 2015 – estimate		146,000
Fiscal year ending August 31, 2016 – estimate		146,000

Goodwill of $3,275,403 represents the excess of total consideration recorded for the 2009 Merger over the value of the assets assumed. The Company tested the carrying value of goodwill for impairment as of its fiscal year ended August 31, 2011 and determined that there was no impairment. Intangibles are tested for impairment whenever events indicate that their carrying values may not be recoverable. During the year ended August 31, 2011 the NeuroTrans™ asset was written off with a carrying value of $108,250 due to the termination of a collaboration agreement.