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-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UY78a2rxvtjdt1qSOuNeju8vpgMaZa/JRSLz5S9CfUzLwVfx56fcb6XbgXIwKJ6X OtgcwQYmihdOa1xs+YTj4w== 0000950134-05-021379.txt : 20051114 0000950134-05-021379.hdr.sgml : 20051111 20051114061910 ACCESSION NUMBER: 0000950134-05-021379 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20050930 FILED AS OF DATE: 20051114 DATE AS OF CHANGE: 20051114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMMUNE RESPONSE CORP CENTRAL INDEX KEY: 0000817785 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 330255679 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18006 FILM NUMBER: 051195943 BUSINESS ADDRESS: STREET 1: 5931 DARWIN COURT CITY: CARLSBAD STATE: CA ZIP: 92008 BUSINESS PHONE: 7604317080 MAIL ADDRESS: STREET 1: 5931 DARWIN COURT CITY: CARLSBAD STATE: CA ZIP: 92008 10-Q 1 a14338e10vq.htm FORM 10-Q e10vq

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2005


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

Commission file number 0-18006

THE IMMUNE RESPONSE CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		33-0255679
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

5931 Darwin Court
Carlsbad, California		92008
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (760) 431-7080

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 þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

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

As of October 31, 2005, there were 66,189,192 shares of our common stock outstanding.

THE IMMUNE RESPONSE CORPORATION

INDEX


	Page
Part I FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited):

Condensed Balance Sheets — September 30, 2005 and December 31, 2004		3

Condensed Statements of Operations — Three and nine months ended September 30, 2005 and 2004		4

Condensed Statements of Cash Flows — Nine months ended September 30, 2005 and 2004		5

Notes to Condensed Financial Statements		6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		10

Item 3. Quantitative and Qualitative Disclosures About Market Risk		25

Item 4. Controls and Procedures		25

Part II OTHER INFORMATION

Item 1. Legal Proceedings		26

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		26

Item 3. Defaults Upon Senior Securities		26

Item 4. Submission of Matters to a Vote of Security Holders		26

Item 5. Other Information		26

Item 6. Exhibits		27

SIGNATURES		28
EXHIBIT 10.186
EXHIBIT 10.187
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

-2-

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

The Immune Response Corporation

Condensed Balance Sheets

(in thousands, except for share amounts)


	September 30,			December 31,
	2005			2004
	(unaudited)
Assets

Current Assets:
Cash and cash equivalents	$	1,004		$	8,798
Other current assets		158			364

		1,162			9,162

Property and equipment, net		3,801			4,431
Licensed technology, net		883			1,413
Deposits and other assets ($600 restricted as security for letter of credit)		690			690


	$	6,536		$	15,696


Liabilities and Stockholders’ Equity (Deficit)

Current Liabilities:
Accounts payable	$	829		$	494
Accrued expenses		990			1,316
Short-term convertible debenture, net of discount of $722 at September 30, 2005		278			—
Current portion of convertible promissory notes, related party, net of discount of $0 and $1,807 plus accrued interest of $0 and $1,151 at September 30, 2005 and December 31, 2004, respectively		—			6,552
Current portion of deferred liabilities and revenue		295			256


		2,392			8,618


Convertible promissory note, related party, net of discount of $817 plus accrued interest of $193 at September 30, 2005		5,117			—
Long-term deferred liabilities and revenue, net of current portion		2,370			2,584


Total long-term liabilities		7,487			2,584


Stockholders’ Equity (Deficit):
Preferred stock, $.001 par value, 10,000,000 shares authorized; 0 and 688,146 Series A convertible shares issued and outstanding at September 30, 2005 and December 31, 2004 with a liquidation preference aggregating $0 and $4,484, respectively		—			13,952
Common stock, $.0025 par value, 170,000,000 shares authorized; 64,282,479 and 48,627,099 shares issued and outstanding at September 30, 2005 and December 31, 2004, respectively		161			122
Warrants		21,201			20,827
Additional paid-in capital		319,827			299,408
Accumulated deficit		(344,532	)		(329,815	)


Total stockholders’ equity (deficit)		(3,343	)		4,494

	$	6,536		$	15,696

See accompanying notes to condensed financial statements.

-3-

The Immune Response Corporation

Condensed Statements of Operations

(in thousands, except for per share amounts)

(unaudited)


	Three months ended September 30,						Nine months ended September 30,
	2005			2004			2005			2004
Revenues:
Licensed research revenue	$	4		$	277		$	12		$	291
Contract research revenue		7			7			21			21


		11			284			33			312


Expenses:
Research and development		2,511			3,086			7,980			9,441
General and administrative		794			781			2,541			2,504


		3,305			3,867			10,521			11,945


Other income and (expense):
Interest expense — including non-cash accretion of $229 and $590 for three months and $1,098 and $1,770 for nine months, respectively		(366	)		(739	)		(1,521	)		(2,229	)
Investment income		9			39			80			82
Beneficial inducement cost		—			—			(1,201	)		(4,923	)
Loss on extinguishment of debt		—			—			—			(4,935	)


		(357	)		(700	)		(2,642	)		(12,005	)


Net loss		(3,651	)		(4,283	)		(13,130	)		(23,638	)
Less preferred stock dividends		(86	)		(93	)		(271	)		(274	)
Less preferred stock beneficial inducement cost		(950	)					(950	)


Net loss attributable to common stockholders	$	(4,687	)	$	(4,376	)	$	(14,351	)	$	(23,912	)


Basic and diluted loss per share:
Net loss	$	(0.07	)	$	(0.09	)	$	(0.26	)	$	(0.52	)


Net loss attributable to common stockholders	$	(0.09	)	$	(0.09	)	$	(0.29	)	$	(0.53	)


Weighted average number of shares outstanding		52,572			48,458			50,281			45,268

See accompanying notes to condensed financial statements.

-4-

The Immune Response Corporation

Condensed Statements of Cash Flows

(in thousands)

(unaudited)


	Nine months ended September 30,
	2005			2004
Cash Flows From Operating Activities:
Net loss	$	(13,130	)	$	(23,638	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,231			1,224
Operating expenses paid with common stock and warrants		261			276
Stock option adjustments		12			(385	)
Deferred liabilities and revenue		(175	)		(100	)
Related party accrued interest		381			432
Related party accrued interest paid upon convertible notes exchanged and extended		(1,340	)		—
Accretion of notes, related party		992			1,770
Accretion of convertible debenture		106
Beneficial inducement cost		1,201			4,923
Loss on extinguishment of debt		—			4,935
Interest expense converted into Series A preferred stock		—			219
(Gain) loss on sale of assets		—			14
Changes in operating assets and liabilities:
Other current assets		206			88
Accounts payable		335			(476	)
Accrued expenses		(327	)		(423	)

Net cash used in operating activities		(10,247	)		(11,141	)


Cash Flows From Investing Activities:
Purchase of property and equipment		(71	)		(351	)
Proceeds from sale of equipment		—			4

Net cash used in investing activities		(71	)		(347	)


Cash Flows From Financing Activities:
Net proceeds from common stock sold under the Security Equity Distribution Agreement		1,850			—
Net proceeds from the convertible debenture		890			—
Net offering costs for the SEDA and convertible debenture		(234	)		—
Net proceeds from private placement of common stock		—			10,709
Net proceeds from exercises of Unit Purchase Options		18			110
Net offering costs for Series A preferred stock		—			(23	)
Net proceeds from common stock purchases through employee plans		—			145

Net cash provided by financing activities		2,524			10,941


Net decrease in cash and cash equivalents		(7,794	)		(547	)
Cash and cash equivalents — beginning of year		8,798			12,838

Cash and cash equivalents — end of period	$	1,004		$	12,291


Supplemental Disclosure of Cash Flow Information:
Interest paid	$	1,379		$	23


Supplemental Disclosure of Noncash Information:
Promissory note converted into common stock	$	1,467		$	—

Series A preferred stock converted into common stock	$	13,952		$	—

Beneficial inducement cost for the Series A preferred stock conversion	$	950		$	—

Common stock issued for payment of accumulated dividends on Series A preferred stock	$	637		$	—

Debt Discount allocated to convertible debenture for warrants and beneficial conversion cost	$	719		$	—

Promissory notes and interest converted into Series A preferred stock	$	—		$	4,118

Common stock issued for consulting services and offering costs	$	567		$	924

Common stock issued for 401(k) plan	$	219		$	158

See accompanying notes to condensed financial statements.

-5-

THE IMMUNE RESPONSE CORPORATION

Notes to Condensed Financial Statements (unaudited)

Note 1 — Interim Financial Statements:

The accompanying condensed balance sheet as of September 30, 2005 and the condensed statements of operations for the three and nine months ended September 30, 2005 and 2004 and of cash flows for the nine months ended September 30, 2005 and 2004 have been prepared by The Immune Response Corporation (the “Company”) and have not been audited. Effective January 1, 2005, the Company and its wholly-owned subsidiary were merged into one company through a statutory tax-free reorganization. There was no financial statement impact as a result of this merger. These financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the financial position, results of operations and cash flows for all periods presented. The financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed for the year ended December 31, 2004. Interim operating results are not necessarily indicative of operating results for the full year.

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

Stock-Based Compensation

The Company measures its stock-based employee compensation using the intrinsic value method of accounting in accordance with Accounting Principles Board, APB, Opinion No. 25, “Accounting for Stock Issued to Employees.” Because the Company establishes the exercise price based on the fair market value of the Company’s stock at the date of grant, the options have no intrinsic value upon grant, and therefore no expense is recorded. Equity instruments issued to non-employees for goods or services are accounted for at fair value and are marked to market until service is complete or a performance commitment date is reached.

As required under FAS No. 123, “Accounting for Stock-Based Compensation,” and FAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” the pro forma effects of stock-based compensation on net loss and net loss per common share have been estimated at the date of grant using the Black-Scholes option-pricing model.

For purposes of pro forma disclosures, the estimated fair value of the options is assumed to be amortized to expense over the options’ vesting periods. The pro forma effects of recognizing compensation expense under the fair value method on net income and net earnings per common share were as follows:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004
Net loss attributable to common stockholders:
As reported	$	(4,687,000	)	$	(4,376,000	)	$	(14,351,000	)	$	(23,912,000	)
Stock-based employee compensation expense (benefit) included in net loss		(6,000	)		(139,000	)		(197,000	)		(287,000	)
Fair value of stock-based employee compensation		(291,000	)		(380,000	)		(1,150,000	)		(1,851,000	)


Pro forma	$	(4,984,000	)	$	(4,895,000	)	$	(15,698,000	)	$	(26,050,000	)


Net loss per share (basic and diluted):
As reported	$	(0.09	)	$	(0.09	)	$	(0.29	)	$	(0.53	)


Pro forma	$	(0.09	)	$	(0.10	)	$	(0.31	)	$	(0.58	)

-6-

THE IMMUNE RESPONSE CORPORATION
Notes to Condensed Financial Statements (unaudited)

Note 2 — The Company:

The Immune Response Corporation, a Delaware corporation, is a biopharmaceutical company dedicated to becoming a leading immune-based therapy (“IBT”) company in HIV and multiple sclerosis (“MS”). The Company’s HIV products are based on its patented whole-inactivated virus technology, co-invented by Company founder Dr. Jonas Salk to stimulate HIV immune responses. The Company currently has three active IBT programs; Remune^â and IR103 target HIV and NeuroVax^TMtargets MS. Remune^â, currently in Phase II clinical trials, is being developed as a first-line treatment for people with early-stage HIV. The Company has initiated development of a new immune-based therapy, IR103, which incorporates a Toll-like receptor (TLR) agonist-based adjuvant and is currently in Phase I/II clinical trials in Canada, Italy and the United Kingdom.

The Company is also developing an immune-based therapy for MS, NeuroVax^TM, which is currently in Phase II clinical trials and has shown potential therapeutic value for this difficult-to-treat disease.

Note 3 — Going Concern:

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred net losses since inception and has an accumulated deficit of $344,532,000 as of September 30, 2005. The Company will not generate meaningful revenues in the foreseeable future.

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s independent registered public accountants, Levitz, Zacks & Ciceric, indicated in their audit report on the 2004 consolidated financial statements that there is substantial doubt about the Company’s ability to continue as a going concern.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company entered into a $15,000,000 Standby Equity Distribution Agreement (“SEDA”) on July 15, 2005 to fund operations beyond the second quarter of 2005. The Company believes that its current resources, including those from the SEDA and a $1,000,000 convertible debenture financing obtained after the SEDA, are sufficient to fund its planned operations, including necessary capital expenditures and ongoing clinical trials, through the second quarter of 2006. The Company may need to raise additional capital before the second quarter of 2006 if we commence a Phase III clinical trial with Remune^â; however, no assurance can be given that the Company will be able to obtain additional financing when and as needed in the future.

Note 4 — Net Loss per Share:

Basic and diluted net loss per share is computed using the weighted average number of common shares outstanding during the period. Potentially dilutive securities are excluded from the diluted net loss per share calculation, as the effect would be antidilutive. As of September 30, 2005 potentially dilutive shares not included are 6,900,000 shares for outstanding employee stock options, 8,200,000 shares issuable under a convertible note payable, related party, 1,600,000 shares issuable under a convertible debenture, 16,600,000 shares issuable under warrants outstanding, 9,400,000 shares issuable under Class B Warrants outstanding and 1,900,000 shares issuable under an option issued to the placement agent for the private offering in December 2002.

Note 5 — Convertible Promissory Note, Related Party:

On April 29, 2005, the Company entered into a Note Exchange Agreement with Cheshire Associates LLC (“Cheshire”) to exchange 8% Convertible Secured Promissory Notes with outstanding principal amounts totaling $5,741,000 (the “8% Notes”), previously issued by the Company, for a new secured 2007 Mortgage Note with a principal amount of $5,741,000 (the “Mortgage Note”). In connection with this agreement, Cheshire converted a separate convertible promissory note, which had a maturity date of May 3, 2005 and an outstanding principal amount of $1,467,000, into 1,007,000 shares of the Company’s common stock at a conversion price of $1.457 per share. Cheshire is an affiliate of Kevin Kimberlin, a director and major stockholder of the Company.

-7-

THE IMMUNE RESPONSE CORPORATION
Notes to Condensed Financial Statements (unaudited)

As of September 30, 2005, the Company had outstanding approximately $5,117,000 (net of discount of $817,000, plus accrued interest of $193,000) of convertible, related party secured debt, namely the Mortgage Note. Under the terms of the agreement, the Mortgage Note has the same terms and conditions as the 8% Notes had, except that (a) the 8% Notes would have matured at various dates in 2005, but the Mortgage Note has a maturity date of May 31, 2007, and (b) the Mortgage Note has a conversion price, subject to possible future adjustment, of $0.70 per share (the closing price of the Company’s common stock on April 29, 2005). At this conversion price, the Mortgage Note is convertible into 8,201,000 shares of common stock. The 8% Notes had higher conversion prices. The agreement also involved a reduction, to $0.70 per share, of the exercise prices of the associated warrants that were previously issued with the 8% Notes. These warrants are currently exercisable for 8,634,000 shares of common stock, and immediately before the agreement had a weighted average exercise price of $1.41. Furthermore as part of the agreement, Cheshire waived all anti-dilution protection under the Mortgage Note and these warrants for the $15,000,000 SEDA financing that the Company obtained from Cornell Capital Partners, LP (“Cornell Capital”).

In addition, pursuant to the agreement, the Company paid all accrued interest as of April 29, 2005 on the 8% Notes and on the converted note. This constituted a prepayment, as such interest had not been due until the original maturity dates of the 8% Notes and the converted note. Aggregate interest paid was $1,340,000.

Also, the notes exchange and the note conversion transactions resulted in a non-cash charge to operations in the second quarter of 2005 for $1,201,000 representing beneficial inducement cost.

Note 6 — Security Equity Distribution Agreement:

On July 15, 2005, the Company entered into a SEDA with Cornell Capital, to support the continued development of its product candidates. Under the agreement, Cornell Capital has committed to provide up to $15,000,000 of funding to be drawn down over a 24-month period at the Company’s discretion. The maximum amount of each draw is $500,000, and there must be at least five trading days between draws.

Through September 30, 2005, the Company has made six draws under the SEDA for net proceeds of $1,849,500 and issued 3,941,944 shares of common stock at an average price per share of $0.4692.

Under the SEDA, each draw is actually a sale by the Company to Cornell Capital of newly-issued common stock, in the quantity required to equate to the desired cash proceeds. Cornell Capital pays 97% of, or a 3% discount to, the lowest daily volume weighted average price of the Company’s common stock during the five consecutive trading day period immediately following the date of notification to Cornell Capital that the Company desires to access the SEDA. In addition, Cornell Capital retains 5% of each cash payment under the SEDA. The Company also issued 725,353 shares of common stock to Cornell Capital as a one-time commitment fee. The 3% discount, the 5% retainage fee and the 725,353 shares of common stock are considered to be underwriting discounts payable to Cornell Capital. The Company registered for resale, on Form S-1, the shares of common stock to be sold to Cornell Capital under the SEDA.

The Company engaged Monitor Capital, Inc., a registered broker-dealer, to act as placement agent in connection with the SEDA. The Company paid Monitor Capital, Inc. 14,085 shares of common stock on July 15, 2005, as a fee under a Placement Agent Agreement.

On August 4, 2005, the Company borrowed $1,000,000 in cash from Cornell Capital against a secured a convertible debenture (the “Debenture”). As of September 30, 2005, the Company had outstanding approximately $278,000 (net of discount of $722,000) on the Debenture. The outstanding principal balance must be repaid in equal monthly installments beginning in October 2005 and ending on August 4, 2006 and bears 12% interest per annum, payable monthly. The outstanding principal amount of the Debenture is convertible at the option of Cornell Capital into shares of the Company’s common stock at a conversion price of $0.6315 per share, which was 80% of the volume weighted average price on August 4, 2005.

The Debenture is secured by substantially all of the Company’s assets and a pledge of 14,285,705 shares of common stock, of which 4,959,705 were pledged on August 4, 2005 and 9,326,000 were pledged on September 30, 2005. The 14,285,705 pledged shares are held in escrow in the event Cornell Capital chooses to exercise its conversion option or in the event of a call on the pledge. The pledged shares are accounted for as contingently issuable shares and are not included in the calculation of the

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THE IMMUNE RESPONSE CORPORATION
Notes to Condensed Financial Statements (unaudited)

weighted average number of shares for purposes of calculating net loss per share or in the calculation of the 64,282,479 shares issued and outstanding on the balance sheet at September 30, 2005.

From August 4, 2005 through September 30, 2005, the Company’s obligation was further secured by a pledge of 6,000,000 shares of the Company’s common stock from Cheshire. The Company issued common stock warrants to Cheshire as an inducement to pledge the 6,000,000 shares to Cornell Capital. The warrants will be exercisable at any time between August 2005 and August 2010 at an exercise price of $0.78 per share for 114,000 shares equal to 2,000 shares times the 57 days that Cheshire’s shares were pledged to Cornell Capital.

The Company also issued warrants to purchase 500,000 shares of common stock, exercisable for five years at an exercise price of $0.924 per share, to Cornell Capital in connection with the Debenture. Finally, the Company paid Cornell Capital a commitment fee of $100,000 cash in connection with the Debenture. The Company also paid Cornell Capital a structuring fee of $10,000 in cash.

Note 7 — Series A Convertible Preferred Stock Exchanged for Common Stock:

On September 21, 2005, the Company entered into and closed a Shares Exchange Agreement with Cheshire to exchange Cheshire’s 688,146 shares of the Company’s Series A Convertible Preferred Stock (the “Preferred Shares”), previously issued, for 9,643,060 newly-issued shares of the Company’s common stock (the “Common Shares”). These newly-issued shares also included payment for all accumulated dividends of $637,000 on the Preferred Shares in the form of 1,385,308 shares of common stock at a rate of 9%.

The Shares Exchange Agreement transaction resulted in a non-cash charge to net loss attributable to common stockholders in the third quarter of 2005 for $950,000 representing beneficial inducement cost.

Cheshire waived all anti-dilution adjustments which would have arisen as a result of this transaction under all Company securities beneficially owned by Cheshire. Also, Cornell Capital waived all anti-dilution adjustments which would have arisen as a result of this transaction under all Company securities beneficially owned by Cornell Capital. Under the terms of the agreement, the Common Shares will have the same registration rights, if any, as the common stock underlying the Preferred Shares had had.

After this transaction, the Company no longer has any shares of preferred stock outstanding.

Note 8 — Subsequent Events:

Subsequent to September 30, 2005, the Company has made 4 draws under the SEDA for net proceeds of $1,185,500 and issued 4,068,000 shares of common stock at an average price per share of $0.2914.

On October 31, 2005 in conjunction with the employment of a new Chief Executive Officer, the Company granted an Inducement Stock Option for 6,000,000 shares of common stock at an exercise price of $0.32 per share.

-9-

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

The following discussion contains forward-looking statements concerning our liquidity, capital resources, financial condition, results of operation and timing of anticipated revenues and expenditures. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Factors that could cause or contribute to such differences include those discussed under “Risk Factors,” as well as those discussed elsewhere in this Form 10-Q. The following discussion should be read in conjunction with our financial statements and notes thereto included elsewhere in this Form 10-Q. Except for our ongoing obligation to disclose material information as required by federal securities laws, we undertake no obligation to publicly release the result of any revisions to these forward-looking statements that may be indicated in order to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Overview

We are a biopharmaceutical company whose products are in the development stage. We have a critical need to raise cash both in the near term and the medium term. Nonetheless, we believe our products could prove to have substantial value as part of a therapy for patients infected with HIV or MS.

On October 31, 2005 we hired Joseph F. O’Neill as our new Chief Executive Officer and President.

Liquidity and Capital Resources

As of September 30, 2005, we had an accumulated deficit of $344,532,000. We have not generated revenues from the commercialization of any product. We expect to continue to incur substantial net operating losses over the next several years, which would imperil our ability to continue operations. We may not be able to generate significant product revenue to become profitable on a sustained basis, or at all, and do not expect to generate significant product revenue before the end of 2009, if at all. We have operating and liquidity concerns due to our significant net losses and negative cash flows from operations. As a result of these and other factors, our independent registered public accountants, Levitz, Zacks & Ciceric, indicated, in their report on our 2004 consolidated financial statements, that there is substantial doubt about our ability to continue as a going concern. We believe, in fact, that our current cash resources, including those from the Standby Equity Distribution Agreement and the $1,000,000 bridge loan we received from Cornell Capital Partners, LP (“Cornell Capital”), are sufficient to fund our planned operations through the second quarter of 2006. We may need to raise additional capital before the second quarter of 2006 if we commence a Phase III clinical trial with Remune^â.

On July 15, 2005, we entered into a $15,000,000 Standby Equity Distribution Agreement (“SEDA”) with Cornell Capital to fund future operations and to support the continued development of our product candidates. Under the agreement, Cornell Capital has committed to provide up to $15,000,000 of funding to be drawn down over a 24-month period at our discretion, subject to an effective registration. The maximum amount of each draw is $500,000, and there must be at least five trading days between draws. The SEDA prohibits us from, during its term, issuing securities in an equity financing without the consent of Cornell Capital, which consent is not to be unreasonably withheld.

Through September 30, 2005, we had made six draws under the SEDA for net proceeds of $1,849,500 and issued 3,941,944 shares of common stock at an average price per share of $0.4692. We tend to raise cash using the SEDA on a “just in time” basis as needed, so at any given point our balance of cash on hand will be quite low.

We also issued 725,353 shares of common stock to Cornell Capital as a one-time commitment fee, and we issued 14,085 shares of common stock to Monitor Capital, Inc. as a placement agent fee. We registered for resale, on Form S-1, the shares of common stock which we will sell to Cornell Capital under the SEDA, and the shares issued as a commitment fee and the placement agent fee.

Under the SEDA and Nasdaq rules, we were required to obtain stockholder approval before drawing down the bulk of the SEDA funding. We received such stockholder approval on September 27, 2005.

On August 4, 2005, we borrowed $1,000,000 in cash from Cornell Capital against a convertible debenture (the “Debenture”). The outstanding principal balance must be repaid in equal monthly installments beginning in October 2005 and ending on August 4, 2006 and bears 12% interest per annum, payable monthly.

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The Debenture is secured by substantially all our assets plus a pledge of a substantial amount of stock. The outstanding principal amount of the Debenture is convertible, at the holder’s option, into our common stock at a conversion price of $0.6315, which was 80% of our volume weighted average price on August 4, 2005.

In addition, we issued 500,000 common stock warrants, exercisable for five years at an exercise price of $0.924 per share, to Cornell Capital in connection with the Debenture. Finally, we paid Cornell Capital a commitment fee of $100,000 cash in connection with the Debenture. We also paid Cornell Capital a $10,000 structuring fee, in cash.

We must be able to use the SEDA with Cornell Capital effectively in order to raise the money we need to pay our Debenture obligation. Even if we are able to obtain and use SEDA proceeds to pay our Debenture obligation, that will leave less of the proceeds under the SEDA to fund our operations.

Since our inception in 1986, we have financed our activities primarily from public and private sales of equity, funding from collaborations with corporate partners, investment income, the Cornell Capital SEDA and Debenture, and the issuance to Cheshire Associates LLC (“Cheshire”) and other entities affiliated with or related to Kevin Kimberlin, who is one of our directors and our principal stockholder, of capital stock, convertible notes and warrants.

On April 29, 2005, we entered into a Note Exchange Agreement with Cheshire to exchange 8% Convertible Secured Promissory Notes with outstanding principal amounts totaling $5,741,000 (the “8% Notes”), previously issued by us, for a new secured 2007 Mortgage Note with a principal amount of $5,741,000 (the “Mortgage Note”). In connection with this agreement, Cheshire converted a separate convertible promissory note, which had a maturity date of May 3, 2005 and an outstanding principal amount of $1,467,000, into 1,007,000 shares of our common stock at a conversion price of $1.457 per share. All of the notes bore interest at a fixed rate of 8% per year and were secured by our intellectual property.

As of September 30, 2005, we had outstanding approximately $5,117,000 (net of discount of $817,000, plus accrued interest of $193,000) of convertible, related party secured debt, namely the Mortgage Note. Under the terms of the agreement, the Mortgage Note has the same terms and conditions as the 8% Notes had, except that (a) the 8% Notes would have matured at various dates in 2005, but the Mortgage Note has a maturity date of May 31, 2007, and (b) the Mortgage Note has a conversion price, subject to possible future adjustment, of $0.70 per share (the closing price of our common stock on April 29, 2005). At this conversion price, the Mortgage Note will be convertible into 8,201,000 shares of common stock. The 8% Notes had higher conversion prices. The agreement also involved a reduction, to $0.70 per share, of the exercise prices of the associated warrants that were previously issued with the 8% Notes. These warrants are currently exercisable for 8,634,000 shares of common stock, and immediately before the agreement had a weighted average exercise price of $1.41. Furthermore, as part of the agreement, Cheshire waived all anti-dilution protection under the Mortgage Note and these warrants for the $15,000,000 SEDA financing that we obtained from Cornell Capital.

In addition, pursuant to the agreement, we paid all accrued interest as of April 29, 2005 on the 8% Notes and on the converted note. This constituted a prepayment, as such interest had not been due until the original maturity dates of the 8% Notes and the converted note. Aggregate interest paid was $1,340,000.

Also, the notes exchange and the note conversion transactions resulted in a non-cash charge to operations in the second quarter of 2005 for $1,201,000 representing beneficial inducement cost.

We could raise an additional $16,700,000 if all of the Class B warrants issued as a result of Class A warrant exercises since July 7, 2003, which are redeemable by us if the price of our common stock is equal to or greater than $3.32, are exercised. The exercise price is $1.77 per share. Because at that price it would be profitable for the warrant holders to exercise their warrants rather than to allow the redemption to proceed, we assume they would choose to exercise. However, there is no assurance that our stock price will rise to the $3.32 per share redemption trigger price. Also, there can be no assurances that all or any portion of the warrants will be exercised by the initial purchasers or by any subsequent holders.

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We could raise an additional $11,800,000 if all the warrants issued in connection with the October 2003 private placement are exercised for cash. The exercise price is $3.32 per share. The warrants issued in the October 2003 private placement are redeemable by us if the price of our common stock is equal to or greater than $8.00 for 20 consecutive trading days. Because at that price it would be profitable for the warrant holders to exercise their warrants rather than to allow the redemption to proceed, we assume they would choose to exercise. However, there is no assurance that our stock price will rise to the $8.00 per share redemption trigger price. Also, there can be no assurances that all or any portion of the warrants will be exercised by the initial purchasers or by any subsequent holders.

Additionally, we could raise $7,100,000 if all the warrants issued in connection with the April 2004 private placement are exercised for cash. The warrants issued in the April 2004 private placement are exercisable by the holders at any time between October 2004 and April 2009 at $2.75 per share. However, there is no assurance that our stock price will rise to the $2.75 per share exercise price and/or that all or any portion of the warrants will be exercised by the initial purchasers or by any subsequent holders.

Finally, we could raise an additional $462,000 if all the 500,000 warrants issued to Cornell Capital in connection with the August 2005 Debenture are exercised for cash. The warrants issued in connection with the Debenture are exercisable by Cornell Capital at any time between August 2005 and August 2010 at $0.924 per share. However, there is no assurance that our stock price will rise to the $0.924 per share exercise price and/or that all or any portion of the warrants will be exercised by Cornell Capital or by any subsequent holders.

As we use our current cash balances, we continue to look for alternative sources of funding which, even if available, may be on terms substantially less favorable. In any event, the SEDA prohibits us from, during its term, issuing securities in an equity financing without the consent of Cornell Capital, which consent is not to be unreasonably withheld. The Debenture contains a similar provision. If we are unable to raise adequate capital, we may be required to delay, or reduce the scope of, our research or development of Remune^â, IR103 and NeuroVax^TM, or take other measures to cut costs, which would have a material adverse effect on us and likely result in our inability to continue as a going concern.

We will need to raise very substantial additional funds over several years to conduct research and development, preclinical studies and clinical trials necessary to bring potential products to market and to establish manufacturing and marketing capabilities. We anticipate that for the foreseeable future, the scale-up of the manufacturing process for Remune^â, IR103 and NeuroVax^TM and the cost of producing clinical supplies for ongoing and future Remune^â, IR103 and NeuroVax^TM studies will continue to represent a significant portion of our overall expenditures. Overall, future Remune^â, IR103 and NeuroVax^TM research and development expenditures are expected to increase from current levels in the event additional financing is obtained. Future spending for research and development may further increase if we enter into additional collaborations, but there can be no assurance that we will enter into any such collaborations. We anticipate additional capital improvements of approximately $2,000,000 to scale-up and improve the manufacturing process for Remune^â and IR103 through 2006. Other anticipated costs with respect to Remune^â, IR103 and NeuroVax^TM, including investment in inventory, will depend on many factors including the need for additional clinical trials and other factors, which will influence our determination of the appropriate continued investment of our financial resources in these programs.

Our future capital requirements will depend on many factors including whether the remaining warrants will be exercised by the initial purchasers or by any subsequent holders. Other capital requirement factors include continued scientific progress in our research and development programs, the scope and results of preclinical studies and clinical trials, the time and costs involved in obtaining regulatory approvals, the costs involved in filing, prosecuting and enforcing patent claims, the costs involved in paying any settlements or judgments in class actions, competing technological and market developments, the cost of manufacturing scale-up and inventories, effective commercialization activities and arrangements and other factors not within our control. We intend to seek additional funding through additional research and development agreements with suitable corporate collaborators and through public or private financing, if available. However, we cannot provide assurance that such collaboration arrangements or any public or private financing will be available on acceptable terms, if at all. If we raise funds through future equity arrangements, significant further dilution to stockholders will result.

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Results of Operations

Three and Nine Months Ended September 30, 2005 Compared to Three and Nine Months Ended September 30, 2004.

We recorded revenues for the three and nine months ended September 30, 2005 of $11,000 and $33,000, respectively, as compared to $284,000 and $312,000 for the corresponding periods in 2004. In September 2004, we transferred to NovaRx Corporation (“NovaRx”) our in-license rights to certain cancer-related technology and received an initial payment of $150,000. We recognized this payment as revenue and fully recognized the remaining deferred revenue of $121,000 for previous sublicense agreements with NovaRx. We have no future contractual obligations under either the in-licensing or out-licensing agreements. NovaRx also agreed to pay us an additional $900,000 due on or before August 2007. We will recognize this amount as revenue only upon collection, due to the uncertainty of NovaRx’s ability to pay the fee at this time. All other revenues were from the amortization of other multi-year out-licenses of technology. We expect no additional revenues earlier than the fourth quarter of 2009, if at all unless they are earned through corporate collaborations or new research and development agreements. We have not received any revenues from the sale of products and do not expect to derive revenue from the sale of any products earlier than the fourth quarter of 2009, if at all.

Our research and development expenditures for the three and nine months ended September 30, 2005 were $2,511,000 and $7,980,000, respectively, as compared to $3,086,000 and $9,441,000 for the corresponding periods in 2004. The decrease in research and development expenses during 2005 is attributable to decreased HIV clinical development activity and manufacturing scale-up activities for Remune^â and IR103 as compared to the corresponding periods in 2004; as well as the absence in 2005 of NeuroVax^TM manufacturing costs incurred in the first quarter of 2004.

General and administrative expenses for the three and nine months ended September 30, 2005 were $794,000 and $2,541,000, respectively, as compared to $781,000 and $2,504,000 for the corresponding periods in 2004. These figures include $(6,000) and $(197,000) of non-cash benefit for the three and nine months ended September 30, 2005, respectively, related to the variable accounting for employee and consultant stock options, reversing (for the three and nine-month periods) previously taken stock-based compensation expense, as compared to $(139,000) and $(287,000) of non-cash benefit for the three and nine months ended September 30, 2004, respectively. Other than the period to period fluctuations in stock option accounting, general and administrative expenses are relatively comparable year-to-year and reflect our ongoing cost containment efforts, which include lower insurance and legal costs, offset slightly by increased consulting fees for the three and nine months ended September 30, in both years.

Interest expense decreased to $366,000 and $1,521,000, respectively, for the three and nine months ended September 30, 2005 as compared to $739,000 and $2,229,000 for the corresponding periods in 2004. The decrease during the first nine months of 2005 is attributable to lower accretion of discount after entering into the Note Exchange Agreement, which extended the due dates of the debt until May 31, 2007. Also during the second quarter of 2005, we converted approximately $1,467,000 of debt into common stock, but this reduction was offset by issuing the Debenture for $1,000,000.

On September 21, 2005, we entered into and closed a Shares Exchange Agreement with Cheshire to exchange Cheshire’s 688,146 shares of our Series A Convertible Preferred Stock (the “Preferred Shares”), previously issued by us, for 9,643,000 newly-issued shares of our common stock (the “Common Shares”). The newly-issued shares also included payment for all accumulated dividends of $637,000 on the Preferred Shares in the form of 1,385,308 shares of common stock. The Shares Exchange Agreement transaction resulted in a $950,000 charge to net loss attributable to common stockholders in the third quarter of 2005 representing beneficial inducement cost. This was a one-time, non-cash charge.

As part of the Note Exchange Agreement we entered into with Cheshire on April 29, 2005, we exchanged 8% Convertible Secured Promissory Notes with outstanding principal amounts totaling $5,741,000, previously issued by us, for a new secured 2007 Mortgage Note with a principal amount of $5,741,000. Also in connection with this agreement, Cheshire converted a separate convertible promissory note, which had a maturity date of May 3, 2005 and an outstanding principal amount of $1,467,000, into 1,007,000 shares of our common stock at a conversion price of $1.457 per share. The notes exchange and the note conversion transactions resulted in a $1,201,000 charge to operations in the second quarter of 2005 representing beneficial inducement cost. This was a one-time, non-cash charge.

In January 2004, Cheshire converted $3,899,000 of convertible promissory notes into Series A Convertible Preferred stock, which resulted in additional beneficial inducement cost of $4,923,000 and a charge for loss on the extinguishment of debt of $4,935,000, both recognized upon the conversion. These were one-time, non-cash charges.

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Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying financial statements and related footnotes. In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. We do not believe there is a great likelihood that materially different amounts would be reported related to the accounting policies described below.

Pro Forma Stock-Based Compensation

We measure stock-based employee compensation using the intrinsic value method of accounting in accordance with Accounting Principles Board, APB, Opinion No. 25, “Accounting for Stock Issued to Employees.” Because we establish the exercise price based on the fair market value of our common stock at the date of grant, the options have no intrinsic value upon grant, and therefore generally no expense is recorded. Equity instruments issued to non-employees for goods or services are accounted for at fair value and are marked to market until service is complete or a performance commitment date is reached.

In December 2004, the FASB issued FAS No. 123R, “Share-Based Payment.” This statement is a revision to FAS No. 123, “Accounting for Stock-Based Compensation,” and it supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and amends FAS No. 95, “Statement of Cash Flows.” Generally the approach in FAS No. 123R is similar to the approach described in FAS No. 123. However, FAS No. 123R will require all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure will no longer be an alternative.

FAS No. 123R must be adopted no later than January 1, 2006. We expect to adopt FAS No. 123R on January 1, 2006. FAS No. 123R permits public companies to adopt its requirements using one of two methods, the modified prospective or the modified retrospective method. We are currently evaluating the two different methods for the adoption of FAS No. 123R and have not determined which of the two methods will be adopted.

As permitted by FAS No. 123, we currently account for share-based payments to employees using APB Opinion No. 25’s intrinsic value method; and as such, we generally recognize no compensation cost for employee stock options. Accordingly, the adoption of FAS No. 123R’s fair value method will have a material impact on our results of operations, although it will have no impact on our overall financial position. The impact of adoption of FAS No. 123R cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted FAS No. 123R in prior periods using the Black-Scholes valuation model, the impact of that standard would have approximated the impact of FAS No. 123 as described in the disclosure of pro forma net loss and net loss per share in Note 1 to our financial statements.

Intangibles and Other Long-Lived Assets

We believe that patents and other proprietary rights are important to our business. Licensed technology is recorded at cost and is amortized over its estimated useful life. In December 1999, we acquired licenses to certain patent technology, which are being amortized over seven years. Changes in our estimates of useful lives may have a material effect on our financial statements.

We evaluate potential impairment of long-lived assets in accordance with FAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” FAS No. 144 requires that certain long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable based on expected undiscounted cash flows that result from the use and eventual disposition of the asset. The amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset.

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Certain Risk Factors

Our future operating results are subject to a number of factors, including:

We need more cash immediately, and also on an ongoing basis.

We have never generated any revenue from product sales. As of September 30, 2005, we had an accumulated deficit of approximately $344,532,000, cash and cash equivalents of only $1,004,000, a working capital deficiency of $1,230,000 and a deficiency in stockholders’ equity of $3,343,000. Because we do not anticipate generating any revenue from our products until at least the fourth quarter of 2009, if at all, we will continue to have negative cash flow.

We need to raise substantial additional capital to fund our operations and repay our loan obligations beyond the second quarter of 2006. We may need to raise additional capital before the second quarter of 2006 if we commence a Phase III clinical trial with Remune^®. We will need to raise substantial funds to continue our operations and to conduct research and development, preclinical studies and clinical trials necessary to bring our potential products to market and to establish manufacturing and marketing capabilities. We will continue to have limited cash resources. There can be no assurance that we will be successful in consummating any financing transaction or, if consummated, that the terms and conditions will not be unfavorable to us.

We entered into a Standby Equity Distribution Agreement, or the SEDA, with Cornell Capital on July 15, 2005. The SEDA prohibits us from, during its term, issuing securities in an equity financing without the consent of Cornell Capital, which consent is not to be unreasonably withheld. The $1,000,000 Debenture we issued to Cornell Capital in August 2005 contains a similar provision. Therefore, we will be dependent for our equity capital needs over the next two years (or less, if we exhaust the SEDA earlier) on Cornell Capital and the SEDA. If Cornell Capital becomes unable or unwilling to honor its obligations under the SEDA, we would be at grave risk.

We have the opportunity to raise an additional $16,700,000 if all of the Class B warrants that were issued upon exercise of our Class A warrants are exercised. Our Class B warrants are redeemable by us if the price of our common stock is equal to or greater than $3.32 for ten consecutive trading days. However, there can be no assurances that our stock price will rise to $3.32 so as to enable us to call the Class B warrants for redemption, nor that (even in that event) all or any portion of the warrants will be exercised by the initial purchasers or by any subsequent holders.

We have the opportunity to raise an additional $11,800,000 if all the warrants issued in connection with the October 2003 private placement are exercised for cash. The warrants issued in the October 2003 private placement are redeemable by us if the price of our common stock is equal to or greater than $8.00 for 20 consecutive trading days. However, there can be no assurances that our stock price will rise to $8.00 so as to enable us to call the warrants for redemption, nor that (even in that event) all or any portion of the warrants will be exercised by the initial purchasers or by any subsequent holders.

Additionally, we have the opportunity to raise $7,100,000 if all the warrants issued in connection with the April 2004 private placement are exercised for cash. The warrants issued in the April 2004 private placement are exercisable by the holders at any time between October 2004 and April 2009 at $2.75 per share. However, there is no assurance that our stock price will rise to the $2.75 per share exercise price and/or that all or any portion of the warrants will be exercised by the initial purchasers or by any subsequent holders.

On September 9, 2002, we commenced the implementation of a cost reduction strategy to focus our core competencies on efforts related to the research, development, commercialization and production of Remune^®. The cost reductions related to research, administrative and operational costs have been offset by increased costs relating to increasing our production capabilities at our King of Prussia, Pennsylvania facility and conducting additional clinical trials. Since then we have also renewed our focus on NeuroVax^TM and commenced development of IR103.

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The timing and amount of our future capital requirements will depend on many factors, including (but not limited to):

	•		the timing of approval to begin new clinical trials;

	•		our ability to raise additional funding and the amounts raised, if any;

	•		the time and cost involved in obtaining regulatory approvals;

	•		continued scientific progress in our research and development programs;

	•		the scope and results of preclinical studies and clinical trials;

	•		the cost of manufacturing scale-up;

	•		the costs involved in filing, prosecuting and enforcing patent claims;

	•		competing technological and market developments;

	•		effective commercialization activities and arrangements;

	•		the costs of defending against and settling lawsuits; and/or

	•		other factors not within our control or known to us.

Our access to capital could be limited if we do not progress in:

	•		obtaining regulatory approvals;

	•		our research and development programs;

	•		our preclinical and clinical trials; or

	•		scaling up manufacturing.

Our access to capital also could be limited by:

	•		our covenant in the SEDA not to, during its term, engage in any other equity financing without the consent of Cornell Capital, which is not to be unreasonably withheld, and a similar covenant made by us in connection with the Cornell Capital Debenture;

	•		overall financial market conditions;

	•		applicable Nasdaq rules and federal and state securities laws;

	•		the security interest in our intellectual property in respect of the $5,741,000 principal amount of the 2007 Mortgage Note issued to Cheshire Associates LLC (Cheshire), an affiliate of Kevin Kimberlin (who is one of our directors and our principal stockholder);

	•		the security interest in substantially all of our assets in respect of Cornell Capital’s Debenture;

	•		the effect of the potential for conversion of the 2007 Mortgage Note into approximately 8,201,000 shares of common stock;

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	•		the effect of the potential for conversion of the Cornell Capital Debenture into approximately 1,584,000 shares of common stock and the potential for exercise of Cornell Capital’s warrants into 500,000 shares of common stock;

	•		the effect of the potential for exercise of outstanding options and warrants exercisable into approximately 32,374,000 shares of common stock (not including the warrants issued in connection with Cornell Capital’s Debenture and not including the 6,000,000 share inducement stock option grant to Dr. Joseph F. O’Neill, our new Chief Executive Officer, on October 31, 2005);

	•		the issuance of a placement agent option to Spencer Trask Ventures, Inc., (an affiliate of Kevin Kimberlin) and its transferees that is exercisable for 1,672,000 shares of common stock, 1,438,000 Class A warrants and 1,452,000 Class B warrants, all of which are not redeemable by us.

Our independent registered public accountants have expressed substantial doubt as to our ability to continue as a going concern.

We have hired a new CEO.

On October 31, 2005, we hired Joseph F. O’Neill as Chief Executive Officer and President. Executive leadership transition periods are often difficult, due to learning curve issues, cultural differences and friction caused by changes in strategy and style. Sometimes these factors result in important personnel choosing to leave a company.

In addition, Dr. O’Neill has no experience as an executive of a for-profit corporation.

Our stock may become delisted and subject to penny stock rules, which may make it more difficult for you to sell your securities.

On April 29, 2005, we received notice from the Nasdaq Stock Market (“Nasdaq”) that we were not in compliance with Nasdaq Marketplace Rule 4310(c)(4), which is a standard for continued listing on the Nasdaq Capital Market, due to the fact that the closing price of our common stock was below $1.00 for the last 30 consecutive trading days. In accordance with Nasdaq Marketplace Rule 4310(c)(8)(D), we had until October 26, 2005 to regain compliance by having our common stock close at or above $1.00 for a minimum of ten consecutive trading days; provided, however, that Nasdaq may require that our common stock trade at or above $1.00 for up to 20 consecutive trading days before deeming us to be in compliance with Nasdaq listing standards. Our stock did not, in fact, reach the $1.00 level by October 26, 2005, and it remains below that level.

In addition, on September 27, 2005, we received a letter from the staff of Nasdaq advising us that our securities were subject to delisting from the Nasdaq Capital Market under Marketplace Rule 4310(c)(2)(B)(ii) at the opening of business on October 6, 2005, due to the fact that the market value of our listed securities was below $35,000,000, and we also did not satisfy either of the alternative compliance tests.

We had an oral hearing before a Nasdaq Listing Qualifications Panel to review the staff’s determination pursuant to Marketplace Rule 4805 on November 3, 2005 and requested a 60 day extension to regain compliance. We currently expect to be delisted. We are awaiting a decision from the Panel.

If we are delisted from Nasdaq for any reason, our common stock might be considered a penny stock under regulations of the Securities and Exchange Commission, and if so, would be subject to rules that impose additional sales practice requirements on broker-dealers who buy and sell our securities. The additional burdens imposed upon broker-dealers by these requirements could discourage broker-dealers from effecting transactions in our common stock, which could severely limit the market liquidity of the common stock and warrants and your ability to sell our securities in the secondary market. We cannot assure you that we will be able to maintain our listing on Nasdaq. Being delisted would also hurt our ability to raise additional financing, in part because many investors are unwilling to take large positions in stocks which do not trade on Nasdaq or a major stock exchange.

Our failure to successfully develop our product candidates, Remune^®, IR103 and NeuroVax^TM, may cause us to cease operations.

We have not completed the development of any products. As part of our restructuring program announced in September 2002, we halted development of most of our products other than Remune^®and NeuroVax^TM.Our other potential therapies, which were under development before September 2002, would require significant additional research and development efforts, funding and regulatory approvals if we recommence development in the future. We are dependent upon our ability to successfully develop Remune^®, IR103 and NeuroVax^TM and our failure to do so may cause us to cease operations.

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In May 1999 we discontinued a Phase III clinical endpoint trial of Remune^® because differences in clinical endpoints were not observed between treatment groups and extending the trial would have been unlikely to provide sufficient additional clinical endpoints. The discontinuation of the Phase III trial has had a material adverse effect on us. We cannot assure you that any future Phase III trials of Remune^® (or related drug candidate, IR103) will be conducted. Furthermore, we cannot guarantee that we, or our corporate collaborators, if any, will ever obtain any regulatory approvals of Remune^® (or related drug candidate, IR103).

The results of our pre-clinical studies and clinical trials may not be indicative of future clinical trial results. A commitment of substantial financial and other resources to conduct time-consuming research, preclinical studies and clinical trials will be required if we are to develop any products. Delays in planned patient enrollment in clinical trials may result in increased costs, program delays or both. None of our potential products may prove to be safe or effective in clinical trials. Approval by the Food and Drug Administration, or other regulatory approvals, including export license permissions, may not be obtained and even if successfully developed and approved, our products may not achieve market acceptance. Any products resulting from our programs may not be successfully developed or commercially available for several years, if at all.

Moreover, unacceptable toxicity or side effects could occur at any time in the course of human clinical trials or, if any products are successfully developed and approved for marketing, during commercial use of our products. Although preliminary research and clinical evidence have shown Remune^®, IR103 and NeuroVax^TMto be safe, the appearance of any unacceptable toxicity or side effects could interrupt, limit, delay or abort the development of any of our products or, if previously approved, necessitate their withdrawal from the market.

The lengthy product approval process and uncertainty of government regulatory requirements may delay or prevent us from commercializing products. We must work to re-establish our credibility with the FDA.

Clinical testing, manufacture, promotion, export and sale of our products are subject to extensive regulation by numerous governmental authorities in the United States, principally the FDA, and corresponding state and numerous foreign regulatory agencies worldwide. This regulation may delay or prevent us from commercializing products. Noncompliance with applicable requirements can result in, among other things, fines, injunctions, seizure or recall of products, total or partial suspension of product manufacturing and marketing, failure of the government to grant pre-market approval, withdrawal of marketing approvals and criminal prosecution.

The regulatory process for new therapeutic drug products, including the required preclinical studies and clinical testing, is lengthy and expensive. We may not receive necessary international regulatory or FDA clearances for Remune^® or any of our other potential products in a timely manner, or at all. The length of the clinical trial process and the number of patients regulatory agencies will require to be enrolled in the clinical trials in order to establish the safety and efficacy of our products is uncertain.

Even if additional Phase III clinical trials of Remune^® or our other products are initiated and successfully completed, the FDA and numerous foreign regulatory agencies may not approve Remune^®or our other products for commercial sale. We may encounter significant delays or excessive costs in our efforts to secure necessary approvals. Regulatory requirements are evolving and uncertain. Future United States or foreign legislative or administrative acts could also prevent or delay regulatory approval of our products. We may not be able to obtain the necessary approvals for clinical trials, manufacturing or marketing of any of our products under development. Even if commercial regulatory approvals are obtained, they may include significant limitations on the indicated uses for which a product may be marketed.

In addition, a marketed product is subject to continual regulatory review. Later discovery of previously unknown problems or failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market, as well as possible civil or criminal sanctions.

Among the other requirements for regulatory approval is the requirement that prospective manufacturers conform to the FDA’s Good Manufacturing Practices, or GMP, requirements. In complying with the FDA’s GMP requirements, manufacturers must continue to expend time, money and effort in production, record keeping and quality control to assure that products meet applicable specifications and other requirements. Failure to comply and maintain compliance with the FDA’s GMP requirements subjects manufacturers to possible FDA regulatory action and as a result may have a material adverse effect on us. We, or our contract manufacturers, if any, may not be able to maintain compliance with the FDA’s GMP requirements on a continuing basis. Failure to maintain compliance could have a material adverse effect on us.

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The FDA has not designated expanded access protocols for Remune^® or our other products as “treatment” protocols. The FDA may not determine that Remune^®or our other products meets all of the FDA’s criteria for use of an investigational drug for treatment use. Even if Remune^® or our other products are allowed for treatment use, third party payers may not provide reimbursement for the costs of treatment with Remune^® or our other products. The FDA also may not consider Remune^®or our other products under development to be appropriate candidates for accelerated approval, expedited review or fast track designation.

The timing and substance of most FDA decisions are, as a practical matter, discretionary. There are significant doubts in the minds of some persons at the FDA regarding our corporate credibility and the viability of Remune^®. Our efforts to re-establish our credibility may not succeed; but if they don’t, the FDA approvals that are indispensable if we are to survive and succeed may be delayed or denied despite any merit our applications may have.

Marketing any drug products outside of the United States will subject us to numerous and varying foreign regulatory requirements governing the design and conduct of human clinical trials and marketing approval. Additionally, our ability to export drug candidates outside the United States on a commercial basis is subject to the receipt from the FDA of export permission, which may not be available on a timely basis, if at all. Approval procedures vary among countries and can involve additional testing, and the time required to obtain approval may be even longer than that required to obtain FDA approval. Foreign regulatory approval processes include all of the risks associated with obtaining FDA approval set forth above, and approval by the FDA does not ensure approval by the health authorities of any other country.

Before we will be permitted to export Remune^® to foreign countries for clinical use in those countries, we need to meet a number of regulatory requirements. One of those requirements is that we must ensure that we can manufacture Remune^® at our United States manufacturing facility in a manner that is in “substantial compliance” with current United States GMP requirements. We must provide the FDA with “credible scientific evidence” that Remune^® would be safe and effective under the conditions of proposed use in foreign countries. There can be no assurance, however, that we will successfully meet any or all of these requirements for the export of Remune^®, and if we are unable to successfully meet all regulatory requirements, we will not be permitted by the FDA to export Remune^®to foreign countries for clinical use, even if the foreign governments were to approve Remune^® for clinical use.

Technological change and competition may render our potential products obsolete.

The pharmaceutical and biotechnology industries continue to undergo rapid change, and competition is intense and we expect it to increase. Competitors may succeed in developing technologies and products that are more effective or affordable than any that we are developing or that would render our technology and products obsolete or noncompetitive. Many of our competitors have substantially greater experience, financial and technical resources and production and development capabilities than we. Accordingly, some of our competitors may succeed in obtaining regulatory approval for products more rapidly or effectively than we, or develop or acquire technologies and products that are more effective and/or affordable than any that we are developing.

Our lack of commercial manufacturing and marketing experience and our dependence on third parties for manufacturing may prevent us from successfully commercializing products.

We have not manufactured any of our products in commercial quantities. We may not successfully make the transition from manufacturing clinical trial quantities to commercial production quantities or be able to arrange for contract manufacturing and this could prevent us from commercializing products or limit our profitability from our products. Even if Remune^® or our other products are successfully developed and receives FDA approval, we have not demonstrated the capability to manufacture Remune^®or our other products in commercial quantities. Except for Remune^® (and, by extension, IR103), we have not demonstrated the ability to manufacture any of our treatments in large-scale clinical quantities. We rely on a third party for the final inactivation step of the Remune^® manufacturing process. If the existing manufacturing operations prove inadequate, there can be no assurance that any arrangement with a third party can be established on a timely basis or that we can establish other manufacturing capacity on a timely basis.

We have no experience in the sales, marketing and distribution of pharmaceutical or biotechnology products. Thus, our products may not be successfully commercialized even if they are developed and approved for commercialization and even if we can manufacture them. In addition, our competitors will have significantly greater marketing resources and power than we will.

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The manufacturing process of our products involves a number of steps and requires compliance with stringent quality control specifications imposed by us and by the FDA. Moreover, our products can be manufactured only in a facility that has undergone a satisfactory inspection and certification by the FDA. For these reasons, we would not be able to quickly replace our manufacturing capacity if we were unable to use our manufacturing facilities as a result of a fire, natural disaster (including an earthquake), equipment failure or other difficulty, or if our manufacturing facilities are deemed not in compliance with the GMP requirements, and the non-compliance could not be rapidly rectified. Our inability or reduced capacity to manufacture our products would prevent us from successfully commercializing our products.

We may enter into arrangements with contract manufacturing companies to expand our own production capacity in order to meet requirements for our products, or to attempt to improve manufacturing efficiency. If we choose to contract for manufacturing services, we may encounter costs, delays and /or other difficulties in producing, packaging and distributing our clinical trials and finished product. Further, contract manufacturers must also operate in compliance with the GMP requirements; failure to do so could result in, among other things, the disruption of our product supplies. Our potential dependence upon third parties for the manufacture of our products may adversely affect our profit margins and our ability to develop and deliver products on a timely and competitive basis.

Adverse determinations and pressures concerning product pricing, reimbursement and related matters could prevent us from successfully commercializing any of our other products.

Our ability to earn revenue on any of our products will depend in part on the extent to which patient reimbursement for the costs of the products and related treatments will be available from government health administration authorities, private health coverage insurers, managed care organizations and other organizations. Failure of patients to obtain appropriate cost reimbursement may prevent us from successfully commercializing any of our other products. Third-party payers are increasingly challenging the prices of medical products and services. If purchasers or users of any of our other products are not able to obtain adequate reimbursement for the cost of using the products, they may forego or reduce their use. Significant uncertainty exists as to the reimbursement status of newly approved health care products and whether adequate third party coverage will be available. In addition, many HIV patients live in poor countries, which may be unable to afford to pay substantial sums for their citizens’ HIV therapies. Political pressure exists to seek to require manufacturers of HIV therapies to supply them at below-market prices to poor persons and/or poor countries, and this pressure may increase in the future.

Our success may depend upon the acceptance of Remune^® and IR103 by the medical and HIV-activist communities.

Our ability to market and commercialize Remune^® and IR103 would depend in part on the acceptance and utilization of Remune^® and IR103 by the medical and HIV-activist communities. Physician inertia may be a problem for us as it is for many emerging medical products companies. We will need to develop commercialization initiatives designed to increase awareness about us and Remune^®and IR103 among targeted audiences, including public health and AIDS activists and community-based outreach groups in addition to the investment community. Currently, we have not developed any commercialization initiatives.

Hazardous materials and environmental matters could expose us to significant costs.

We may be required to incur significant costs to comply with current or future environmental laws and regulations. Although we do not currently manufacture commercial quantities of our product candidates, we produce limited quantities of these products for our clinical trials. Our research and development and manufacturing processes involve the controlled storage, use and disposal of hazardous materials, biological hazardous materials and radioactive compounds. We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of these materials and some waste products. Although we believe that our safety procedures for handling and disposing of these materials comply with the standards prescribed by these laws and regulations, the risk of contamination or injury from these materials cannot be completely eliminated. In the event of an incident, we could be held liable for any damages that result, and any liability could exceed our resources. Current or future environmental laws or regulations may have a material adverse effect on our operations, business and assets.

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Our patents and proprietary technology may not be enforceable and the patents and proprietary technology of others may prevent us from commercializing products. Some of our patents expire fairly soon.

We have a portfolio of 173 patents worldwide. Although we believe these patents to be protected and enforceable, the failure to obtain meaningful patent protection for our potential products and processes would greatly diminish the value of our potential products and processes.

In addition, whether or not our patents are issued, or issued with limited coverage, others may receive patents, which contain claims applicable to our products. Patents we are not aware of may adversely affect our ability to develop and commercialize products. Also, our patents related to HIV therapy have expiration dates that range from 2010 to 2017 and our patents related to autoimmune diseases have expiration dates that range from 2010 to 2019. The limited duration of our patents could diminish the value of our potential products and processes, particularly since we do not expect to generate any revenue from our products sooner than the fourth quarter of 2009, if at all.

The patent positions of biotechnology and pharmaceutical companies are often highly uncertain and involve complex legal and factual questions. Therefore, the breadth of claims allowed in biotechnology and pharmaceutical patents cannot be predicted. We also rely upon non-patented trade secrets and know how, and others may independently develop substantially equivalent trade secrets or know how. We also rely on protecting our proprietary technology in part through confidentiality agreements with our current and former corporate collaborators, employees, consultants and some contractors. These agreements may be breached, and we may not have adequate remedies for any breaches. In addition, our trade secrets may otherwise become known or independently discovered by our competitors. Litigation may be necessary to defend against claims of infringement, to enforce our patents and/or to protect trade secrets. Litigation could result in substantial costs and diversion of management efforts regardless of the results of the litigation. An adverse result in litigation could subject us to significant liabilities to third parties, require disputed rights to be licensed or require us to cease using proprietary technologies.

Our products and processes may infringe, or be found to infringe, on patents not owned or controlled by us. If relevant claims of third-party patents are upheld as valid and enforceable, we could be prevented from practicing the subject matter claimed in the patents, or be required to obtain licenses or redesign our products or processes to avoid infringement.

If Cornell Capital does not convert its convertible Debenture into common stock, we must repay the Debenture.

We have taken a Debenture from Cornell Capital, pursuant to which we borrowed $1,000,000 in cash on August 4, 2005. The outstanding principal balance must be repaid in equal monthly installments beginning in October 2005 and ending on August 4, 2006 and bears 12% interest per annum, payable monthly.

The convertible Debenture is secured by substantially all our assets plus a pledge of a substantial amount of stock. The outstanding principal amount of the convertible Debenture is convertible, at the holder’s option, into our common stock at a conversion price of $0.6315, which was 80% of our volume weighted average price (VWAP) on August 4, 2005.

In addition, we issued 500,000 common stock warrants, exercisable for five years at an exercise price of $0.924 per share, to Cornell Capital in connection with the Debenture.

We also paid Cornell Capital a cash commitment fee of $100,000 and a cash structuring fee of $10,000 in connection with the Debenture.

We must be able to use the SEDA with Cornell Capital effectively in order to raise the money we need to pay our Debenture obligation. Even if we are able obtain and use SEDA proceeds to pay our Debenture obligation, that will leave less of the proceeds under the SEDA for us to use on our operations.

Kevin Kimberlin, a member of our Board of Directors, beneficially owns approximately 28.1% of our outstanding common stock and has the rights to acquire an additional 20,679,578 shares of our common stock, which could result in ownership of up to approximately 45.6% of our outstanding shares and could allow him to control or influence stockholder votes.

Kevin B. Kimberlin, a member of our Board of Directors, together with his affiliates and/or related parties, currently owns of record approximately 28.1% of our outstanding shares of common stock. He and they also have the right to acquire, through the

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conversion of the 2007 Mortgage Note and the exercise of options and warrants beneficially owned by them, 20,679,578 additional shares. If his/their 2007 Mortgage Note, options and warrants were to be converted and exercised in full, Mr. Kimberlin and his affiliates and/or related parties would own approximately 45.6% of our outstanding shares of common stock on a post-conversion/exercise basis.

As a result of ownership of our common stock and the ability to acquire additional shares, Mr. Kimberlin and his affiliates and/or related persons have the ability to influence, and possibly control, substantially all matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions. If your interests as a stockholder are different from his interests, you may not agree with his decisions and you might be adversely affected thereby.

Mr. Kimberlin is also a secured creditor under the 2007 Mortgage Note.

As collateral for the 2007 Mortgage Note, which has a principal amount of $5,741,000 and matures on May 31, 2007, parties affiliated with and/or related to Kevin Kimberlin, one of our directors and our principal stockholder, have a perfected security interest in our intellectual property. Pursuant to the security agreement, we must comply with covenants with respect to our intellectual property. The security interests and covenants could impair our ability to enter into collaborative and licensing arrangements.

We may be unable to enter into additional collaborations.

We are seeking additional collaborative arrangements to develop and commercialize our products. We may not be able to negotiate collaborative arrangements on favorable terms in the future, or at all, and our current or future collaborative arrangements may not be successful or continue.

You could suffer substantial dilution of your investment as a result of past and future financings.

We will continue to have limited cash resources even though as of November 9, 2005 we were entitled to advances of up to an aggregate of approximately $11.8 million remaining from Cornell Capital under the SEDA. Although our management recognizes the need to secure additional financing, there can be no assurance that we will be successful in consummating any financing transaction or, if consummated, that the terms and conditions of the financing will not be unfavorable to us. In the last three years we have issued very large numbers of shares, plus other securities convertible or exercisable for additional very large numbers of shares, in order to raise cash as required for our survival. As a result, pre-existing stockholders have been substantially diluted.

We have warrants and unit purchase options outstanding which, if exercised, will purchase approximately 27,900,000 shares of our common stock and up to an additional 9,785,000 shares are issuable upon conversion of our outstanding 2007 Mortgage Note and Cornell Capital’s convertible Debenture, subject to adjustment. In addition, we may issue up to 1,250,000 shares of our common stock to Trinity Medical Group, Ltd. pursuant to our License and Collaboration Agreement. Issuance of these additional shares could substantially dilute your interest in us.

Both the SEDA and the Debenture from Cornell Capital involved and will involve very substantial potential and actual dilution of outstanding equity. Our stock price has declined during the term of the SEDA, and therefore each of our regular SEDA draws has resulted in greater and greater dilution.

Any other future near-term financings will almost certainly involve substantial dilution of outstanding equity. Any subsequent offerings may also require the creation or issuance of a class or series of stock that by its terms ranks senior to the common stock with respect to rights relating to dividends, voting and/or liquidation. In addition, existing stockholders will experience dilution as a result of the issuance of shares under the SEDA.

You could suffer substantial dilution of your investment if compensatory warrants and options to purchase common stock are exercised for common stock.

As of September 30, 2005 we had reserved approximately 9,286,000 shares of our common stock for potential issuance upon the exercise of stock options (including options already granted under our stock option plans, non-plan stock options already granted, and the still-available share reserve under our stock option plans) or awards and purchases under our employee 401(k) match and employee stock purchase plans. Issuance of these additional shares could substantially dilute your interest in us. In addition, we granted a 6,000,000-share inducement stock option to Dr. Joseph F. O’Neill, our new Chief Executive Officer, on October 31, 2005.

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Future sales by our stockholders may adversely affect our stock price and our ability to raise funds in new stock offerings.

Sales of our common stock in the public market by Cornell Capital, associated with SEDA draws, could lower the market price of our common stock. Sales may also make it more difficult for us to sell equity securities or equity-related securities in the future at a time and price that our management deems acceptable, or at all. Of the 64,282,479 shares of common stock outstanding as of September 30, 2005, all such shares are, or will be, freely tradable without restriction, unless held by our “affiliates.” Some of these shares may be resold under Rule 144.

Existing stockholders will experience significant dilution from our sale of shares under the SEDA.

We depend on external financing to fund our operations. Our financial needs may be partially provided (and, at least in the short-term, will be predominantly provided) from the SEDA. The issuance of shares of our common stock under the SEDA, at below-market prices, will have a dilutive impact on our other stockholders and the issuance or even potential issuance of such shares could have a negative effect on the market price of our common stock.

As a result, the market price of our common stock has declined and could continue to decline. In addition, the lower our stock price, the more shares of common stock we will have to issue under the SEDA to draw down the full amount. If our stock price is lower, then our existing stockholders would experience greater dilution.

Under the SEDA, Cornell Capital pays less than the then-prevailing market price of our common stock.

The common stock to be issued under the SEDA agreement will be issued at a 3% discount to the lowest daily VWAP of our common stock during the five consecutive trading day period immediately following the date we notify Cornell Capital that we desire to access the SEDA. In addition, Cornell Capital will retain 5% from each advance. Based on this discount, Cornell Capital will have an incentive to sell immediately to realize the gain on the 3% discount. These sales could cause the price of our common stock to decline, based on increased selling of our common stock.

The sale of our stock under the SEDA could encourage short sales by third parties, which could contribute to the future decline of our stock price.

In many circumstances, the provisions of a SEDA have the potential to cause a significant downward pressure on the price of a company’s common stock. This is especially the case if the shares being placed into the market exceed the market’s ability to take up the increased stock or if we have not performed in such a manner to show that the equity funds raised will be used for growth. Such an event could place further downward pressure on the price of our common stock. We may request numerous draws pursuant to the terms of the SEDA. Even if we use the SEDA to invest in ways that are materially beneficial to us, the opportunity exists for short sellers and others to contribute to the future decline of our stock price. If there are significant short sales of stock, the price decline that would result from this activity in turn may cause long holders of the stock to sell their shares thereby contributing to sales of stock in the market. If there is an imbalance on the sell side of the market for our common stock, the price will decline.

It is not possible to predict those circumstances where short sales could materialize or the extent to which the stock price could drop. In some companies that have been subjected to short sales the stock price has dropped to near zero. This could happen to our stock price.

We may not be able to access sufficient funds under the SEDA when needed.

Our financing needs will have to be provided largely from the SEDA over the next year. No assurances can be given that such financing will be available in sufficient amounts or at all when needed, in part because the amount of each advance is subject to a maximum advance amount of $500,000, and we may not submit any request for an advance within five trading days of a prior request. And, if Cornell Capital becomes unable or unwilling to honor its obligations under the SEDA, we would be at grave risk.

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We may not be able to obtain a cash advance under the SEDA if Cornell Capital holds more than 9.9% of our common stock.

In the event Cornell Capital holds more than 9.9% of our then-outstanding common stock, we will be unable to obtain a cash advance under the SEDA. A possibility exists that Cornell Capital may own more than 9.9% of our outstanding common stock at a time when we would otherwise plan to request an advance under the SEDA. In that event, if we are unable to obtain additional external funding, we could be forced to curtail or cease our operations.

Cornell Capital may sell shares of our common stock after we deliver an advance notice during the pricing period, which could cause our stock price to decline.

Cornell Capital is deemed to beneficially own the shares of common stock corresponding to a particular advance on the date that we deliver an advance notice to Cornell Capital, which is necessarily before the date the stock is delivered to Cornell Capital. Cornell Capital may sell such shares any time after we deliver an advance notice. Accordingly, Cornell Capital may sell such shares during the pricing period. Such sales may cause our stock price to decline and if so would result in a lower VWAP during the pricing period, which would result in us having to issue a larger number of shares of common stock to Cornell Capital in respect of the advance.

Legal proceedings could require us to pay substantial amounts of money and impair our operations.

Between July 2001 and 2003, several complaints were filed in the United States District Court for the Southern District of California seeking an unspecified amount of damages on behalf of an alleged class of persons, who purchased shares of our common stock at various times between May 17, 1999 and July 6, 2001. The complaints have been consolidated into a single action under the name In re Immune Response Securities Litigation by order of the Court, and a consolidated, amended complaint was filed in July 2003. The consolidated, amended complaint names us and certain of our former officers as defendants, as well as Agouron Pharmaceuticals, Inc. and one of its officers. The consolidated, amended complaint alleges that we, Agouron and/or such officers violated federal securities laws by misrepresenting and failing to disclose certain information about the results of clinical trials of Remune^®. On October 31, 2003 the defendants filed motions to dismiss the consolidated, amended complaint. The court denied these motions on June 7, 2005.

On July 5, 2005, a shareholder derivative complaint was filed in the Superior Court of the State of California in the County of San Diego against certain of our current and former officers and directors, seeking an unspecified amount of damages. We are also named as a nominal defendant in the complaint, which alleges, among other things, that such officers and directors breached their fiduciary duties by causing the misrepresentation of our financial results and failing to correct our publicly reported financial results and guidance, and engaged in certain improper acts including abuse of control, gross mismanagement and waste of corporate assets from May 1999 to the present. We and the other defendants are currently in the process of preparing a response to this complaint.

Although we intend to vigorously defend the actions, we cannot now predict or determine the outcome or resolution of these proceedings, or to estimate the amounts of, or potential range of, loss with respect to these proceedings. In addition, the timing of the final resolution of these proceedings is uncertain. The range of possible resolutions of these proceedings could include judgments against us or our former officers or settlements that could require substantial payments by us, which could have a material adverse impact on our consolidated financial position, results of operations and cash flows. These proceedings also might require substantial attention of our management team and therefore, regardless of whether we win or lose the litigation, divert their time and attention from our business and operations.

Our certificate of incorporation and bylaws include provisions that could make attempts by stockholders to change management more difficult.

The approval of 66 2/3% of our voting stock is required to approve specified transactions and to take specified stockholder actions, including the calling of special meetings of stockholders and the amendment of any of the anti-takeover provisions, including those providing for a classified board of directors, contained in our certificate of incorporation. Further, pursuant to the terms of our stockholder rights plan, we have distributed a dividend of one preferred stock purchase right for each outstanding share of common stock. These rights will cause substantial dilution to the ownership of a person or group that attempts to acquire us on terms not approved by our Board of Directors and may have the effect of deterring hostile takeover attempts. The substantial aggregate equity positions of Mr. Kimberlin and his affiliates and/or related parties would make a hostile takeover

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attempt very unlikely. The practical effect of these provisions is to require a party seeking control of us to negotiate with our Board of Directors, which could delay or prevent a change in control. These provisions could limit the price that investors might be willing to pay in the future for our securities and make attempts by stockholders to change management more difficult.

We are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which prohibits us from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person first becomes an “interested stockholder,” unless the business combination is approved in a prescribed manner. The application of Section 203 also could have the effect of delaying or preventing a change of control.

Product liability exposure may expose us to significant liability.

We face an inherent business risk of exposure to product liability and other claims and lawsuits in the event that the development or use of our technology or prospective products is alleged to have resulted in adverse effects. We may not be able to avoid significant liability exposure. We may not have sufficient insurance coverage, and we may not be able to obtain sufficient coverage at a reasonable cost. An inability to obtain product liability insurance at acceptable cost or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of our products. A product liability claim could hurt our financial performance. Even if we avoid liability exposure, significant costs could be incurred that could hurt our financial performance and condition.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We invest our excess cash primarily in U.S. government securities and money market accounts. These instruments have maturities of two years or less when acquired. We do not utilize derivative financial instruments, derivative commodity instruments or other market risk sensitive instruments, positions or transactions. Furthermore, our debt is at fixed rates. Accordingly, we believe that, while the instruments we hold are subject to changes in the financial standing of the issuer of such securities, we are not subject to any material risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes that affect market risk sensitive instruments.

Item 4. Controls and Procedures

Dr. Joseph F. O’Neill, our principal executive officer and Michael K. Green, our principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Securities Exchange Act Rule 13a-15(e)) have concluded that, as of September 30, 2005, our disclosure controls and procedures are effective.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

No further disclosure required.

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

No further disclosure required.

Item 3. Defaults Upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

On September 27, 2005, we held a Special Meeting of Stockholders. There were issued and outstanding on August 30, 2005, the record date, 52,008,121 shares of common stock and 688,146 shares of Series A Convertible Preferred stock. There were present at the meeting in person or by proxy, holders of 39,228,342 shares of common stock and 688,146 shares of Series A Convertible Preferred stock entitled to vote, constituting a quorum. The following actions were taken at the meeting:

1.		The stockholders considered a proposal, for purposes of complying with certain rules of the Nasdaq Capital Market, to approve, even though the number of shares of common stock so issued or issuable would exceed 20% of our previously outstanding common stock, the issuance of up to $15,000,000 worth of shares of our common stock pursuant to the Standby Equity Distribution Agreement dated July 15, 2005 between Cornell Capital Partners, LP (“Cornell Capital”) and us, the issuance of 725,353 shares of our common stock to Cornell Capital as a commitment fee, the issuance of 14,085 shares of our common stock pursuant to the Placement Agent Agreement dated July 15, 2005 between Monitor Capital, Inc. and us and the issuance of shares of our common stock and derivative securities overlying shares of our common stock (together, up to approximately 15,000,000 shares of our common stock) in connection with an August 4, 2005 bridge loan from Cornell Capital. This proposal was approved. Common shares voted for the proposal were 18,760,530, with 516,676 common shares voted against, 72,674 common shares abstained and 19,878,462 common shares were broker non-votes; and 688,146 Series A Convertible Preferred shares were voted in favor.

2.		The stockholders considered a proposal to ratify the Audit Committee’s appointment of Levitz, Zacks & Ciceric as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2005. This proposal was approved. Common shares voted for the proposal were 38,987,049, with 155,104 common shares voted against, and 86,189 common shares abstained; and 688,146 Series A Convertible Preferred shares were voted in favor.

Item 5. Other Information

On July 6, 2005, we granted annual director stock option grants of 100,000 shares each at $0.67 per share (the market value on the date of grant) to the following outside directors – James B. Glavin, Martyn Greenacre, David P. Hochman, Kevin B. Kimberlin, Kevin L. Reilly, and Alan S. Rosenthal.

On July 18, 2005, we granted annual officer stock option grants of 100,000 shares each at $0.74 per share (the market value on the date of grant) to the following officers – Michael K. Green and Georgia Theofan.

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Item 6. Exhibits


Exhibit
Number		Description of Document

10.170(1)		Standby Equity Distribution Agreement dated July 15, 2005 between us and Cornell Capital Partners, LP.

10.171(1)		Placement Agent Agreement dated July 15, 2005 among us, Monitor Capital, Inc. and Cornell Capital Partners, LP.

10.172(1)		Escrow Agreement dated July 15, 2005 among us, Cornell Capital Partners, LP and David Gonzalez, Esq.

10.173(1)		Registration Rights Agreement dated July 15, 2005 between us and Cornell Capital Partners, LP.

10.174(2)		Securities Purchase Agreement dated August 4, 2005 between us and Cornell Capital Partners, LP.

10.175(2)		Secured Convertible Debenture dated August 4, 2005 in favor of Cornell Capital Partners, LP.

10.176(2)		Warrant dated August 4, 2005 in favor of Cornell Capital Partners, LP.

10.177(2)		Security Agreement dated August 4, 2005 between us and Cornell Capital Partners, LP.

10.178(2)		Investor Registration Rights Agreement dated August 4, 2005 between us and Cornell Capital Partners, LP.

10.179(2)		Pledge and Escrow Agreement dated August 4, 2005 among us, Cornell Capital Partners, LP and David Gonzalez, Esq.

10.180(2)		Insider Pledge and Escrow Agreement dated August 4, 2005 among us, Cornell Capital Partners, LP, Cheshire Associates LLC and David Gonzalez, Esq.

10.181(2)		Pledge Inducement Agreement dated August 4, 2005 between us and Cheshire Associates LLC.

10.182(2)		Warrant Agreement dated August 4, 2005 between us and Cheshire Associates LLC.

10.183(3)		Shares Exchange Agreement dated as of September 21, 2005 between us and Cheshire Associates LLC.

10.184(3)		Antidilution Amendment/Waiver Re Shares Exchange Agreement dated as of September 21, 2005 from Cornell Capital Partners, LP.

10.185(4)		Pledge and Escrow Agreement dated September 30, 2005 among us, Cornell Capital Partners, LP and David Gonzalez, Esq.

10.186**		Employment Letter Agreement dated October 26, 2005, and effective October 31, 2005 between us and Dr. Joseph F. O’Neill.

10.187**		Inducement Stock Option Grant Notice and Option Agreement dated October 31, 2005 between us and Dr. Joseph F. O’Neill.

31.1		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002/SEC Rule 13a-14(a).

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Exhibit
Number		Description of Document

31.2		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002/SEC Rule 13a-14(a).

32.1		Certification pursuant to Section 1350 of Chapter 63 of 18 U.S.C. as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002/SEC Rule 13a-14(b).

32.2		Certification pursuant to Section 1350 of Chapter 63 of 18 U.S.C. as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002/SEC Rule 13a-14(b).


(1)		Incorporated by reference to the Exhibit of the same number filed with the Company’s Registration Statement on Form S-1, No. 333-126833.

(2)		Incorporated by reference to the Exhibit of the same number filed with the Company’s Form 8-K dated August 4, 2005.

(3)		Incorporated by reference to the Exhibit of the same number filed with the Company’s Form 8-K dated September 21, 2005.

(4)		Incorporated by reference to the Exhibit of the same number filed with the Company’s Form 8-K dated September 27, 2005.

**		Indicates management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.


	THE IMMUNE RESPONSE CORPORATION
Date: November 14, 2005	By:	/s/ Michael K. Green
		Michael K. Green,
		Chief Operating Officer & Chief Financial Officer

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Exhibit Index


Exhibit
Number		Description of Document

10.186**		Employment Letter Agreement dated October 26, 2005, and effective October 31, 2005 between us and Dr. Joseph F. O’Neill.

10.187**		Inducement Stock Option Grant Notice and Option Agreement dated October 31, 2005 between us and Dr. Joseph F. O’Neill.

31.1		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002/SEC Rule 13a-14(a).

31.2		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002/SEC Rule 13a-14(a).

32.1		Certification pursuant to Section 1350 of Chapter 63 of 18 U.S.C. as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002/SEC Rule 13a-14(b).

32.2		Certification pursuant to Section 1350 of Chapter 63 of 18 U.S.C. as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002/SEC Rule 13a-14(b).


**		Indicates management contract or compensatory plan or arrangement.

EX-10.186 2 a14338exv10w186.htm EXHIBIT 10.186 exv10w186

Exhibit 10.186

The Immune Response Corporation
5931 Darwin Court
Carlsbad, CA 92008


October 26, 2005

Dr. Joseph F. O’Neill
Ellicott City, MD

Dear Joe:

Pursuant to this letter agreement (the “Agreement”) and subject to completing background investigations and you providing evidence of your United States citizenship or eligibility to work in the United States, we are pleased to make to you the following offer of employment with The Immune Response Corporation (the “Company”):

Responsibilities

Your title will be Chief Executive Officer (or CEO) of the Company, effective October 31, 2005 (the “Effective Date”). As the CEO, you will serve full-time and report to the Board of Directors of the Company (the “Board”). You also will serve as a member of the Board at no additional compensation. It is acknowledged that continuation of your service as a director shall be subject to your re-election by the Company’s stockholders. The Company agrees to propose to the stockholders at each appropriate annual meeting during the term hereof your reelection as a member of the Board, provided you are otherwise eligible for reelection.

Term of Employment

The initial term of your employment shall commence on the Effective Date and shall, except as provided in Section 4.1 hereof, continue for a term of three (3) years following the Effective Date (the “Initial Term”). Thereafter, the term of this Agreement shall be automatically extended for successive and additional two-year periods, unless either party shall provide a written notice of termination to the other at least ninety (90) days prior to the end of the Initial Term or any extended term. The term of this Agreement is subject to early termination in accordance with the provisions set forth in Section 4 hereof.

Compensation and Benefits

You shall be entitled to the following:

3.1 (a)

Base salary at the annual rate of $412,000, or at such increased rate as the Board, in its sole discretion, may hereafter from time to time determine (“Base Salary”), payable bi-weekly less required tax withholding. During the term of this Agreement, your Base Salary will be reviewed annually by the Board to determine whether such Base Salary should be increased in light of your duties, responsibilities and performance, and, if it is determined by the Board that an

Dr. Joseph F. O’Neill
October 26, 2005
Page 2

increase is merited, such increase shall be promptly put into effect and your Base Salary, as so increased, shall constitute your Base Salary for purposes of this Section 3.1(a).

	3.1 (b)		Within sixty (60) days after the Effective Date, the Board shall meet with you to discuss the terms and conditions under which you will be paid an annual bonus, whereby the Board and you shall mutually agree on (a) appropriate and reasonably obtainable criteria which the Board or its Compensation Committee are to consider with regard to an annual bonus and (b) the target amount of such annual bonus or the formula by which such annual bonus target amount is to be determined. The Board shall meet with you annually for this purpose, within sixty (60) days prior to the start of each Term year (October 31-October 30). During the term of this Agreement, the target bonus amount may be up to 400% of Base Salary, but not less than 100% of the Base Salary. The bonus shall be payable no later than thirty (30) days following the conclusion of the Term year (October 31-October 30) for which the bonus was earned.

	3.2		Fringe benefits (medical, disability insurance, 401k plan, vacation/PTO, flex spending account) shall be according to the Company policies in place from time to time for all employees. The Company reserves the right to change its benefit programs or policies, and/or its providers, at any time.

	3.3		Four (4) weeks annual paid vacation; provided, however, that the Company acknowledges and agrees that you have pre-existing commitments from November 8-20, 2005, December 1-5, 2005, and December 10-15, 2005, and that you will not be required to use vacation time for these periods. The Company agrees that you will be on an unpaid leave of absence during these periods. In the event that you do perform work for the Company during this leave, the Company and you will discuss reasonable compensation for such work.

	3.4		Subject to Board approval, within ten (10) days following the Effective Date, you will receive an inducement grant of 6,000,000 nonqualified stock options (the “CEO Grant”). The exercise price for these stock options will be set equal to the closing price of the Company’s common stock on the date the Board grants the options. The shares comprising the CEO Grant will vest according to the following schedule: (1) 3,000,000 shall vest in 8 equal quarterly installments over the first eight (8) complete quarters in the Initial Term; and (2) 3,000,000 shall vest in a lump amount on the date that is 7 years following the date of the grant, or earlier upon the attainment of key performance milestones to which you and the Board will mutually agree within sixty (60) days after the Effective Date. Although the CEO Grant will not be made under a pre-existing Company plan, the Company will register the common stock underlying the CEO Grant on Form S-8 with the SEC within sixty (60) days following the date of the grant.

Dr. Joseph F. O’Neill
October 26, 2005
Page 3

In the event of the occurrence of a Change of Control (as defined below), the CEO Grant shall immediately vest in full and become fully exercisable to the extent not previously vested or exercisable, and shall continue to be exercisable for a period of six (6) months or until the applicable expiration date of such options (in accordance with their terms), whichever period is shorter. For purposes of this Agreement, “Change of Control” shall mean any of the following events:

	(a)		a sale, lease or other disposition of all or substantially all of the assets of the Company so long as the Company’s stockholders immediately prior to such transaction will, immediately after such transaction, fail to possess direct or indirect beneficial ownership of more than fifty percent (50%) of the voting power of the acquiring entity (for purposes of this section, any person who acquired securities of the Company prior to the occurrence of such asset transaction in contemplation of such transaction and who after such transaction possesses direct or indirect ownership of at least ten percent (10%) of the securities of the acquiring entity immediately following such transaction shall not be included in the group of stockholders of the Company immediately prior to such transaction);

	(b)		either a merger or consolidation in which the Company is not the surviving corporation and the stockholders of the Company immediately prior to the merger or consolidation fail to possess direct or indirect beneficial ownership of more than fifty percent (50%) of the voting power of the securities of the surviving corporation (or if the surviving corporation is a controlled subsidiary of another entity, then the required beneficial ownership shall be determined with respect to the securities of that entity which controls the surviving corporation and is not itself a controlled subsidiary of any other entity) immediately following such transaction, or a reverse merger in which the Company is the surviving corporation and the stockholders of the Company immediately prior to the reverse merger fail to possess direct or indirect beneficial ownership of more than fifty percent (50%) of the securities of the Company (or if the Company is a controlled subsidiary of another entity, then the required beneficial ownership shall be determined with respect to the securities of that entity which controls the Company and is not itself a controlled subsidiary of any other entity) immediately following the reverse merger (for purposes of this section, any person who acquired securities of the Company prior to the occurrence of a merger, reverse merger, or consolidation in contemplation of such transaction and who after such transaction possesses direct or indirect beneficial ownership of at least ten percent (10%) of the securities of the Company or the surviving corporation (or if the Company or the surviving corporation is a controlled subsidiary, then of the appropriate entity as determined above)

Dr. Joseph F. O’Neill
October 26, 2005
Page 4

immediately following such transaction shall not be included in the group of stockholders of the Company immediately prior to such transaction).

3.5

Reimbursement from the Company for all reasonable and customary expenses incurred by you in performing services under this Agreement, including travel expenses, expenses related to wireless communications (cell phone and Blackberry) and reasonable expenses related to home communications for the company (e.g., high speed internet access, fax, computer and accessories if needed) and other out-of-pocket expenses, in accordance with your expense account and the Company’s reimbursement policies and provided that you shall submit to the Company reasonable documentation with respect to such expenses.

Termination of Employment

4.1

Events of Termination

Your employment with the Company may be terminated prior to the expiration of the Initial Term or extended term set forth in Section 2 hereof as follows:

	(a)		By the Company With Cause. Your employment with the Company may be terminated at any time for “Cause.” As used in this Agreement, the term “Cause” shall mean (i) your willful misconduct or willful failure to fulfill and perform your stated duties, including the obligations stated herein, which misconduct or failure, if curable, is not fully cured to the reasonable satisfaction of the Board within thirty (30) days after written notice thereof, (ii) any material breach by you of any provision of this Agreement or the policies pertaining to Company employees which the Company adopts from time to time and provides a copy of to you, which, if curable, is not fully cured to the reasonable satisfaction of the Board within thirty (30) days after written notice thereof, (iii) any violation by you of Section 6.2 hereof, or (iv) your committing a material act of theft, fraud, dishonesty, or embezzlement with regard to the Company or your conviction of a felony.

	(b)		By the Company Without Cause; By You With Good Reason. Your employment with the Company may be terminated, at any time by written notice to the other, without Cause by the Company or for “Good Reason” by you. As used herein, the term “Good Reason” shall mean the occurrence, without your consent, of any of the following: (i) any material diminution of your position, duties or responsibilities hereunder (except in each case in connection with the termination of your employment for Cause or disability or as a result of your death, or temporarily as a result of your illness or other absence), including but not limited to failing to continue you in the position of Chief Executive Officer; or (ii) any material breach by the Company of any provision of this Agreement,

Dr. Joseph F. O’Neill
October 26, 2005
Page 5

including but not limited to failure to provide you with the Base Salary and bonus opportunity set forth in Section 3 hereof, which breach is not fully cured to your reasonable satisfaction within thirty (30) days after written notice from you thereof; or (iii) failure of any successor to the Company to assume in a writing delivered to you upon the assignee becoming such, the obligations of the Company hereunder.

	(c)		By You Without Good Reason. Your employment with the Company may be terminated by you without Good Reason, at any time upon notice to the Company.

	(d)		Death. In the event of your death, your employment shall terminate on the date of death.

	(e)		Disability. In the event of your Disability (as defined below), the Company may terminate your employment by giving to you a written notice of termination. For purposes of this Agreement, “Disability” means your inability to, even with reasonable accommodation, substantially perform your duties hereunder for ninety (90) consecutive days or one hundred eighty (180) days out of three hundred sixty five (365) days as a result of a physical or mental illness or condition. If any question shall arise as to whether you are unable to substantially perform your duties hereunder, the determination will be made through a medical examination by a physician mutually selected by you and the Company.

4.2

The Company’s Obligations Upon Termination

Following the termination of your employment under the circumstances described below, the Company shall pay to you the following compensation and provide the following benefits in full satisfaction and final settlement of any and all claims and demands that you then have or thereafter may have against the Company in connection with this Agreement and the termination of your employment that are lawfully released by the release described in Section 4.3 below, subject to your executing and delivering a release to the Company as provided in Section 4.3 below prior to the provision of the compensation and benefits set forth below:

(a)

Termination Without Cause by the Company or with Good Reason by You or Failure by the Company to Renew the Initial Term or any extended term. In the event that your employment shall be terminated by the Company pursuant to Section 4.1(b) hereof or upon expiration of the initial or any renewal term of this Agreement or pursuant to written notice by you in accordance with Section 4.1(b) hereof, you will be entitled to the continued payment of your Base Salary (less required tax withholding) for a period of twelve (12) months from the date of termination or expiration, as the case may be. In addition, any options within the CEO Grant which

Dr. Joseph F. O’Neill
October 26, 2005
Page 6

have vested and remain unexercised prior to the date of termination of your employment by the Company pursuant to Section 4.1(b) hereof or upon expiration of the initial or any renewal term of this Agreement or pursuant to written notice by you in accordance with Section 4.1(b) hereof shall remain exercisable and will not terminate until the date which is six (6) months after such termination, expiration or written notice. In addition, the Company shall reimburse you for any expenses incurred through the date of such termination in accordance with Section 3.5 hereof, shall pay you for any vacation time that you had earned but not used through the date of termination, at your final base rate of pay, shall pay you for any Base Salary earned, but not paid through the date of termination, and shall pay you for any unpaid bonus awarded (or required to be awarded based on the full achievement of one or more pre-established and fully objective criteria) for the year preceding the year in which termination occurs.

	(b)		Termination by the Company for Cause or by You Without Good Reason. In the event that your employment shall be terminated by the Company pursuant to Section 4.1(a) hereof (or if you voluntarily resign otherwise than for Good Reason, in accordance with Section 4.1(c) hereof prior to the expiration of the then current term of this Agreement), you shall be entitled to no further compensation or other benefits under this Agreement, other than any Base Salary earned by you on or prior to the date of such termination, but not yet paid and any unpaid bonus awarded (or required to be awarded based on the full achievement or one or more pre-established and fully objective criteria) for the year preceding the year in which termination occurs. In addition, the Company shall reimburse you for any expenses incurred through the date of such termination in accordance with Section 3.5 hereof, and shall pay you for any vacation time that you had earned but not used through the date of termination, at your final base rate of pay. Upon termination by the Company of your employment for Cause or termination for reason other than Good Reason by you, all of your rights under this Agreement (except as otherwise set forth herein) shall immediately terminate and the Company shall have no further obligation to you.

	(c)		Termination Upon Death or Disability. In the event that your employment shall be terminated pursuant to Section 4.1(d) or 4.1(e) hereof, the Company shall pay you (or your estate or trust or legal representatives) all Base Salary earned, but unpaid, through the date of termination and any unpaid bonus awarded (or required to be awarded based on the full achievement of one or more pre-established and fully objective criteria) for the year preceding the year in which termination occurs and shall reimburse you (or your estate or trust or legal representatives) for any

Dr. Joseph F. O’Neill
October 26, 2005
Page 7

expenses incurred through the date of such termination in accordance with Section 3.5 hereof. The Company shall also pay you or your estate or trust or legal representative for any vacation time that you had earned but not used through the date of termination, at your final base rate of pay.

4.3

Release. Notwithstanding the foregoing, as a condition for the provision of the compensation and benefits set forth in this Section 4, you will be required to sign a release of all claims against the Company, its officers, agents, employees and the members of the Board, on such terms and form provided by the Company, which shall be binding on your estate, heirs, assignees, attorneys, agents and personal representatives as provided therein.

Relocation.

The Company will pay all your expenses related to travel and lodging with respect to trips to the Company’s headquarters in Carlsbad, California. In addition, you will receive relocation pay of $8,333 per month for each of the first 24 months you are serving the Company in Carlsbad, California.

Proprietary Information and Inventions.

You immediately shall enter into a Proprietary Information and Inventions Agreement (including Non-Competition) with the Company, on the Company’s standard form. Such Agreement shall survive your employment in accordance with applicable law.

Miscellaneous

	7.1		Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to principles of conflict of laws.

	7.2		Arbitration. Any controversy or claim based on, arising out of or relating to the interpretation and performance of this Agreement or any termination hereof shall be solely and finally settled by arbitration under the employment dispute rules of the American Arbitration Association, and judgment on the award rendered in the arbitration may be entered in any court having jurisdiction thereof. Any such arbitration shall be in the State of California or in the state of your principal employment for the Company at the time your employment terminates and shall be submitted to a single arbitrator appointed by the mutual consent of the parties or, in the absence of such consent, by application of any party to the American Arbitration Association. A decision of the arbitrator shall be final and binding upon the parties, and the arbitrator shall be authorized to apportion fees and expenses (including counsel fees and expenses), as the arbitrator shall deem appropriate.

Dr. Joseph F. O’Neill
October 26, 2005
Page 8

	7.3		Entire Agreement; Amendment. This Agreement contains the complete understanding and agreement between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous understandings and agreements, written or oral, between the parties relating to the subject matter hereof. This Agreement may not be amended except in a written document signed by you and the Company following express approval of the amendment by the Board of Directors.

	7.4		Severability. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law and any such invalidity or unenforceability shall be deemed replaced by a term or provision determined by the parties or the arbitrator as coming closest to expressing the intention of the invalid or unenforceable term or provision.

	7.5		Notice. Any notice to be given hereunder shall be in writing and delivered either in person, by nationally recognized overnight courier, or by registered or certified first class mail, postage prepaid, addressed, if the Company, to its Chief Financial Officer at its headquarters and, if to you, to your address as last provided to the Company in writing Either party may, by notice hereunder, change its address for notices.

	7.6		Headings. The Section headings in this Agreement are for convenience of reference only and shall not affect its interpretation.

	7.7		Amendment. This Agreement may be modified only by a written instrument signed by you and by an expressly authorized representative of the Company.

	7.8		Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of either party to require the performance of any term or obligation of this Agreement, or the waiver by either party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of subsequent breach

	7.9		Assignment. Neither the Company nor you may make assignment of this Agreement or any interest herein, by operation of law or otherwise, without the prior written consent of the other; provided, however, that the Company may assign its rights and obligations under this Agreement without the consent of the Executive in the event that the Company shall hereafter effect a reorganization, be acquired by reverse triangular merger, consolidate with, or merge into, any other entity or transfer all or substantially all of its assets or properties to any other entity. This Agreement shall inure to the benefit of and be binding upon the

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October 26, 2005
Page 9

Company and the Executive, their respective successors, executors, administrators, heirs and permitted assigns.

	7.10		Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which when together shall constitute one and the same agreement.

	7.11		Liability Insurance. D&O Liability insurance shall be provided to you by the Company to the same extent that it is provided to the other executive officers in the Company.

	7.12		Indemnification. You shall be given the opportunity to enter into the Company’s standard form of bilateral Indemnification Agreement.

	7.13		Timing of Payments. In the event that at the time that your employment with the Company terminates the Company is publicly traded (as defined in Section 409A of the Internal Revenue Code), any amounts payable under this Agreement that would otherwise be considered deferred compensation subject to the additional twenty percent (20%) tax imposed by Section 409A if paid within six (6) months following the date of termination of Company employment shall be paid at the time that will prevent such amounts from being considered deferred compensation.

You understand and agree that by accepting this offer, you represent to the Company that your performance will not breach any other agreement to which you are a party and that you have not entered into, and will not during the term of your employment with the Company enter into, any oral or written agreement in conflict with any of the provisions of this letter or the Company’s policies. You are not to bring with you to the Company, or use or disclose to any person associated with the Company, any confidential or proprietary information belonging to any former employer or other person or entity with respect to which you owe an obligation of confidentiality under any agreement or otherwise. The Company does not need and will not use such information and we will assist you in any way possible to preserve and protect the confidentiality of proprietary information belonging to third parties. Also, we expect you to abide by any obligations to refrain from soliciting any person employed by or otherwise associated with any former employer and suggest that you refrain from having any contact with such persons until such time as any non-solicitation obligation expires.

As an employee, you will be expected to adhere to the Company’s standards of professionalism, loyalty, integrity, honesty, reliability and respect for all. Please note that the Company is an equal opportunity employer. The Company does not permit, and will not tolerate, the unlawful discrimination or harassment of any employees, consultants, or third parties on the basis of sex, race, color, religion, age, national origin or ancestry, marital status, veteran status, mental or physical disability or medical condition, sexual orientation, pregnancy, childbirth or related medical condition, or any other status protected by applicable law.

Dr. Joseph F. O’Neill
October 26, 2005
Page 10

Joe, if the foregoing accurately represents your understanding, please sign below and return it to us, at which time it will become a legally-binding agreement. Welcome aboard. We will accomplish great things together.


Warmest regards,

THE IMMUNE RESPONSE CORPORATION

By:		/s/ Robert E. Knowling, Jr.
		Robert E. Knowling, Jr.
		Chairman

ACCEPTED AND AGREED IN ALL RESPECTS:

By:		/s/ Joseph F. O’Neill

		Dr. Joseph F. O’Neill

EX-10.187 3 a14338exv10w187.htm EXHIBIT 10.187 exv10w187

Exhibit 10.187

THE IMMUNE RESPONSE CORPORATION
INDUCEMENT STOCK OPTION GRANT NOTICE

THE IMMUNE RESPONSE CORPORATION, a Delaware corporation (the “Company”), hereby grants to the Optionee an option to purchase the number of shares of the Company’s Common Stock set forth below. This option is not intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), but is intended to qualify as an “employee benefit plan” within the meaning of Rule 405 under the Securities Act of 1933. This option is an “inducement grant” under Nasdaq Marketplace Rule 4350(i)(1)(A)(iv) and is granted outside of, and is not subject to, the Company’s 1989 Stock Plan or the Company’s 2003 Stock Plan.

This option is subject to all of the terms and conditions set forth herein and in the Inducement Stock Option Agreement, which is attached hereto as Attachment I and incorporated herein in its entirety.


Optionee:	Joseph F. O’Neill

Date of Grant:	October 31, 2005

Vesting Commencement Date:	October 31, 2005

Number of Shares Subject to Option:		6,000,000

Exercise Price (Per Share):	$	0.32

Total Exercise Price:	$	1,920,000

Expiration Date:	October 31, 2015

VESTING SCHEDULE: The Option shall vest with respect to 3,000,000 of the underlying shares in 8 equal quarterly installments from the Vesting Commencement Date and shall vest with respect to the other 3,000,000 shares in a lump sum on October 31, 2012, all subject to the Optionee’s “Continuous Service as CEO” (as defined in the attached Stock Option Agreement). It is understood that Optionee and the Company may, in the future, mutually agree upon key performance milestones relative to the “other” (7-year) 3,000,000 underlying shares, and if they do so agree then this Grant Notice may be amended by the parties in writing to provide for possible earlier vesting of some or all of such underlying shares upon attainment of some or all of the milestones (but always also subject to the backstop 7-year vesting).

PAYMENT: Payment of the exercise price may be made in cash, check or any other method provided in the Stock Option Agreement.

ADDITIONAL TERMS/ACKNOWLEDGEMENTS: The undersigned Optionee acknowledges receipt of, and understands and agrees to, this Grant Notice and the Stock Option

Agreement. This Option is granted pursuant to the Offer Letter (defined below) and Optionee acknowledges that as of the Date of Grant, this Grant Notice and the Stock Option Agreement set forth the entire understanding between Optionee and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject.

OTHER AGREEMENTS: Offer Letter, dated October 26, 2005 (the “Offer Letter”).

OPTIONEE


/s/ Joseph F. O’Neill
Joseph F. O’Neill

[SIGNATURE PAGE TO INDUCEMENT STOCK OPTION GRANT NOTICE]

Attachment I

THE IMMUNE RESPONSE CORPORATION
INDUCEMENT STOCK OPTION AGREEMENT

Pursuant to your Inducement Stock Option Grant Notice (“Grant Notice”), which incorporates this Inducement Stock Option Agreement, THE IMMUNE RESPONSE CORPORATION, a Delaware corporation (the “Company”), has granted you an option to purchase the number of shares of the Company’s common stock (“Common Stock”) indicated in your Grant Notice at the exercise price indicated in your Grant Notice. This option is not intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), but is intended to qualify as an “employee benefit plan” within the meaning of Rule 405 under the Securities Act of 1933 (the “Securities Act”). This option is an “inducement grant” under Nasdaq Marketplace Rule 4350(i)(1)(A)(iv) and is granted outside of, and is not subject to, the Company’s 1989 Stock Plan or the Company’s 2003 Stock Plan.

The details of your option are as follows:

1. VESTING. Subject to the limitations contained herein, your option will vest and become exercisable as provided in your Grant Notice, provided that vesting will cease upon the termination of your Continuous Service as CEO (as defined in Section 6 below).

2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common Stock subject to your option and your exercise price per share are set forth in your Grant Notice and may be adjusted from time to time for Capitalization Adjustments, as provided in Section 9 below.

3. FORM OF PAYMENT. When you submit your notice of exercise, you must include payment of the option price for the shares you are purchasing. Payment may be made in one (or a combination of two or more) of the following forms, to the extent permitted now or hereafter by applicable law:

(a) by personal check, a cashier’s check or money order; or

(b) by cashless same-day-sale exercise, whereby you provide irrevocable direction to a securities broker approved by the Company to sell shares of common stock underlying the Option and to deliver part or all of the sales proceeds to the Company in payment of all or part of the Exercise Price and any withholding taxes, provided that no such arrangement may result in the Company extending or arranging for the extension of credit.

4. WHOLE SHARES. You may exercise your option only for whole shares of Common Stock.

5. SECURITIES LAW COMPLIANCE; INVESTMENT INTENT.

(a) Notwithstanding anything to the contrary contained herein, you may not exercise your option unless the shares of Common Stock issuable upon such exercise are then

registered under the Securities Act, or, if such shares of Common Stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your option must also comply with other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in compliance with such laws and regulations.

(b) You represent that you are acquiring this option and, when and if you exercise this option, the shares of Common Stock issuable upon exercise of this option for your own account and not with a view to, or for sale in connection with, any distribution of such securities.

6. TERM. The term of your option commences on the Date of Grant (as specified in your Grant Notice) and expires on the earlier of the following:

(a) For all vested but unexercised shares, three months after the termination of your Continuous Service as CEO; provided that if during any part of such three month period your option is not exercisable solely because of the condition set forth in the preceding paragraph relating to “Securities Law Compliance,” your option shall not expire until the earlier of the Expiration Date indicated in your Grant Notice or until it shall have been exercisable for an aggregate period of three months after the termination of your Continuous Service as CEO;

(b) the Expiration Date indicated in your Grant Notice.

For purposes of this option, “Continuous Service as CEO” means that your service as Chief Executive Officer of the Company is not interrupted or terminated. Provided, that for the purpose of the preceding sentence, service as President shall be deemed to constitute service as Chief Executive Officer, even if you no longer formally hold the title of Chief Executive Officer. The Board of Directors of the Company, in its sole discretion, shall determine whether Continuous Service as CEO has been interrupted or terminated. Any such interruption or termination, for any reason whatsoever, can break Continuous Service as CEO. For the avoidance of doubt, there is no agreement entitling you to continue to serve as Chief Executive Officer and/or President. The Board of Directors has discretion whether or not to re-elect or remove you as Chief Executive Officer and/or President.

7. EXERCISE.

(a) You may exercise the vested portion of your option during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require.

(b) By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your option, (2) the lapse of any substantial risk of forfeiture to

which the shares of Common Stock are subject at the time of exercise, or (3) the disposition of shares of Common Stock acquired upon such exercise.

8. TRANSFERABILITY. Your option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your option, subject to the terms and conditions otherwise applicable to the exercise of this option, the issuance of Common Stock pursuant to such exercise and the subsequent transfer of such Common Stock.

9. CAPITALIZATION ADJUSTMENTS. If any change is made in the Common Stock subject to this option without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), this Stock Option Agreement will be appropriately adjusted in the class(es) and number of shares and price per share of stock subject to the option. Such adjustments shall be made by the Board, the determination of which shall be final, binding and conclusive. (The conversion of any convertible securities or net-exercise of any exercisable securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company.)

10. CHANGE OF CONTROL. Upon the occurrence of a Change of Control, the vesting of the Option shall be accelerated in full and all options so vested or previously vested shall continue to be exercisable for a period of six months or until the applicable expiration date of the options (in accordance with the terms of the Grant Notice and this agreement), whichever period is shorter. For purposes of this option, a “Change of Control” shall have the meaning set forth in the Company’s offer letter to you, dated October 26, 2005 (the “Offer Letter”). Notwithstanding anything herein to the contrary, in the event of a Change of Control pursuant to which 100% of the outstanding stock of the Company is acquired, you shall be entitled to receive, upon exercise during such period, instead of the indicated number of shares of common stock of the Company, whatever consideration was given in the Change of Control in exchange for such number of shares of common stock of the Company.

11. OPTION NOT A SERVICE CONTRACT. Nothing in your option shall obligate the Company, its stockholders or the Board to continue your service as Chief Executive Officer, President or a director or to continue any other relationship that you might have with the Company.

12. ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have the power to accelerate the time at which the option may first be exercised or the time during which the option or any part thereof will vest, notwithstanding the provisions in the Grant Notice or this Stock Option Agreement stating the time at which it may first be exercised or the time during which it will vest.

13. STOCKHOLDER RIGHTS. You shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to the option unless and until you have satisfied all requirements for exercise of the option pursuant to its terms.

14. WITHHOLDING OBLIGATIONS.

(a) At the time you exercise your option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from any amounts payable to you, and otherwise agree to make adequate provision for (including by means of a same-day-sale “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an affiliate of the Company, if any, which arise in connection with your option.

(b) Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable conditions or restrictions of law, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock having a fair market value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law. If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of your option, share withholding pursuant to the preceding sentence shall not be permitted unless you make a proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of your option. Notwithstanding the filing of such election, shares of Common Stock shall be withheld solely from fully vested shares of Common Stock determined as of the date of exercise of your option that are otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility. Notwithstanding the foregoing, the Company shall not be authorized to withhold shares of Common Stock in excess of the minimum statutory withholding requirements for federal and state tax purposes, including payroll taxes.

(c) You may not exercise your option unless the tax withholding obligations of the Company and/or any affiliate are satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock.

15. NOTICES. Any notices provided for in your option shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.

16. CHOICE OF LAW. This option shall be governed by, and construed in accordance with the laws of the State of California, as such laws are applied to contracts entered into and performed in such State between California residents.

17. GOVERNING AUTHORITY. This option is subject to all interpretations, amendments, rules and regulations that may from time to time be promulgated and adopted by the Company. This authority shall be exercised by the Board, or by a committee of one or more members of the Board in the event that the Board delegates its authority to a committee. The Board, in the exercise of this authority, may correct any defect, omission or inconsistency in this option in a manner and to the extent the Board shall deem necessary or desirable. References to the Board also include any committee appointed by the Board to administer and interpret this option. Any interpretations, amendments, rules and regulations promulgated by the Board shall be final and binding upon the Company and its successors in interest as well as you and your heirs, assigns, and other successors in interest.

18. AMENDMENT OF OPTION. The Board at any time, and from time to time, may amend the terms of this option; provided, however, that the rights under this option shall not be impaired by any such amendment unless you consent in writing.

* * *

NOTICE OF EXERCISE

The Immune Response Corporation
5931 Darwin Court
Carlsbad, CA 92008

Date of Exercise:

Ladies and Gentlemen:

This constitutes notice under my non-statutory stock option that I elect to purchase the number of shares for the price set forth below.

Stock option dated: October 31, 2005

Number of shares as to which option is exercised: _______________

Certificates to be issued in name of: _______________

Total exercise price: $______________

Cash payment delivered herewith: $______________

By this exercise, I agree (i) to provide such additional documents as you may require and (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the exercise of this option.


		Very truly yours,

		Joseph F. O’Neill

EX-31.1 4 a14338exv31w1.htm EXHIBIT 31.1 exv31w1

Exhibit 31.1

Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002/SEC Rule 13a-14(a)

I, Joseph F. O’Neill, certify that:

	1.		I have reviewed this quarterly report on Form 10-Q of The Immune Response Corporation;

	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 respect 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)) for the registrant and we 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)		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

	(c)		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 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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 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: November 14, 2005


		/s/ Joseph F. O’Neill
		Joseph F. O’Neill
		Chief Executive Officer

EX-31.2 5 a14338exv31w2.htm EXHIBIT 31.2 exv31w2

Exhibit 31.2

Certification of Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002/SEC Rule 13a-14(a)

I, Michael K. Green, certify that:

	1.		I have reviewed this quarterly report on Form 10-Q of The Immune Response Corporation;

	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 respect 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)) for the registrant and we 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.		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

	c.		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 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	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: November 14, 2005


		/s/ Michael K. Green
		Michael K. Green
		Chief Operating Officer and
		Chief Financial Officer

EX-32.1 6 a14338exv32w1.htm EXHIBIT 32.1 exv32w1

Exhibit 32.1

Certification Pursuant To Section 1350 Of Chapter 63 Of 18 U.S.C.
As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002/SEC Rule 13a-14(b)

In connection with the Quarterly Report of The Immune Response Corporation (the “Company”) on Form 10-Q for the period ending September 30, 2005 as filed with the Securities and Exchange Commission (the “Report”), which this written statement accompanies, I, Joseph F. O’Neill, Chief Executive Officer of the Company, certify that:

	(1)		The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and

	(2)		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Dated: November 14, 2005	/s/ Joseph F. O’Neill
	Joseph F. O’Neill
	Chief Executive Officer

EX-32.2 7 a14338exv32w2.htm EXHIBIT 32.2 exv32w2

Exhibit 32.2

Certification Pursuant To Section 1350 Of Chapter 63 Of 18 U.S.C.
As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002/SEC Rule 13a-14(b)

In connection with the Quarterly Report of The Immune Response Corporation (the “Company”) on Form 10-Q for the period ending September 30, 2005 as filed with the Securities and Exchange Commission (the “Report”), which this written statement accompanies, I, Michael K. Green, Chief Financial Officer of the Company, certify that:

	(1)		The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and

	(2)		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Dated: November 14, 2005	/s/ Michael K. Green
	Michael K. Green
	Chief Operating Officer and Chief Financial Officer

-----END PRIVACY-ENHANCED MESSAGE-----

THE IMMUNE RESPONSE CORPORATION

/s/ Michael K. Green

Chief Operating Officer & Chief Financial Officer