Filing Compare · InNexus Biotechnology Inc

UNITEDTable STATES SECURITIESof AND EXCHANGE COMMISSION Contents

INNEXUSTable BIOTECHNOLOGYof INC. (A Development Stage Enterprise) Contents

TheTable Company’s independent auditor has not performed a review of these financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity’s auditor. Contents

INNEXUSTable BIOTECHNOLOGYof INC. (A Development Stage Enterprise) Contents

INNEXUSTable BIOTECHNOLOGYof INC. (A Development Stage Enterprise) Contents

EffectiveTable June 27, 2003, Cusil, which on July 3, 2003 changed its name to InNexus Biotechnology Inc., with its wholly owned subsidiary IEC, completed the acquisition of 100% of the outstanding shares of IXI. Concurrently, the shareholders of IXI obtained control of Cusil/lnNexus through the exchange of IXI shares for shares of the Company; as a result, Cusil/InNexus’ transaction with IXI has been accounted for in these consolidated financial statements as a reverse takeover. Consequently, the consolidated statements of operations and deficit and cash flows for the period from IXI’s incorporation on July 20, 1997 to June 30, 2003 reflect IXI’s results from operations and cash flows combined with those of Cusil/InNexus from the reverse takeover on June 27, 2003 to June 30, 2003. In subsequent periods, the consolidated statements of operations, and deficit and cash flows reflect the results of operations and cash flows of the consolidated Company. Contents

(c) CashTable andof cash equivalents: Contents

(e) TechnologyTable rights: of Contents

TheTable carrying value of technology rights does not necessarily reflect present or future values. The ultimate amount recoverable will be dependent upon the successful development and commercialization of products based on these technology rights. Contents

EffectiveTable July 1, 2008, the Company adopted two new CICA standards, Section 3862 “Financial Instruments — Disclosures” and Section 3863 “Financial Instruments — Presentation” which together replace Section 3861 “Financial Statements — Disclosure and Presentation.” The new disclosure standards increase the emphasis on the risks associated with both recognized and unrecognized financial instruments and how these risks are managed. The new presentation standard carries forward the former presentation requirements. The adoption of these sections did not have a material effect on the Company’s unaudited interim consolidated financial statements. Contents

NonrefundableTable feesof received under licensing agreements are recognized as revenue when the Company has completed all significant continuing obligations to the other party. Contents

TheTable Company’s functional currency is the United States dollar. Reported balances for financial reporting have been translated into Canadian dollars using a convenience translation adjustment at the exchange rate as reported by the Bank of Canada as of the date of the most recent balance sheet. Contents

TechnologyTable rights consist of the following: Contents

OnTable June 6, 2007, the Company sold to RP Dynamic™Cross-Linking LP (“Royalty Pharma” — an unrelated party) rights to 50% of the potential future revenues for DXL™ products to be developed with the Company’s technologies using two antibodies to be selected by Royalty Pharma. Royalty Pharma purchased rights to the first antibody on June 6, 2007 and exercised its option for the purchase of rights to the second antibody on February 7, 2008. There is a potential US$30,000,000 which would be received upon InNexus’ meeting specified milestones in the contracts; as of March 31, 2009, certain of these milestones have been met. Discussions continue with Royalty Pharma concerning each party’s obligation and to settle on an obligation payment date, however, there is no guarantee that these discussions will result in additional sales proceeds. Nor is there any assurance that additional sales contracts will follow. Contents

FromTable time to time the Company is involved in litigation relating to claims arising from its operations in the normal course of business. The Company utilizes various risk management strategies, including employee education and the maintenance of liability insurance against certain risks. Contents

FinancialTable instruments of the Company consist of cash and cash equivalents, cash held in trust, accounts receivable, prepaid and other current assets, accounts payable, accrued liabilities, dividends payable, the debt portion of preferred shares and commitment for drug development. The fair value of these financial instruments approximates their carrying amount due to their immediate or short-term maturity. The debt portion of preferred shares is reported at amortized cost which approximates fair value since it is recorded using an effective interest rate method. The Company has classified its financial instruments as follows: Contents

AtTable March 31,of 2009, the Company is exposed to currency risk through its net assets denominated in US and Barbados dollars as follows: Contents

AtTable March 31, 2009, 1,473,160 common shares remain in escrow in accordance with terms of their June 2003 issuance. All common shares in escrow are scheduled to be released during the year ended June 30, 2009. Contents

(b) ExchangeableTable preferredof shares: Contents

ThroughTable the fifth anniversary after issuance, the holder, after notice of redemption, will have a “follow on” conversion right for 20 days at a price of $0.25. After the fifth anniversary, the holder will have a conversion right at the market price if the shares are issued without a four month hold period, or at the discount to market price permitted under the TSX Venture Exchange’s rules if issued with a four month hold period. Through September 30, 2008, no redemptions have occurred. Contents

OnTable December 19, 2008 in a private placement, the Company issued $1,796,000 of unsecured convertible debentures. The notes mature on November 21, 2010 and accrue interest at 10% payable quarterly beginning November 21, 2009. The notes are convertible at the option of the holder into common shares of the Company at a conversion price of $0.10 per common share. The Company may opt to redeem the convertible debentures at the $0.10 conversion price if the Company’s common stock price exceeds $0.30 for thirty consecutive trading days prior to the maturity date. For the notes, the Company received cash proceeds of $580,154, applied a redemption of 9,240 preferred shares — series A at $100 per share and accrued dividends on the shares of $284,846. A non-related party received a $7,000 finder’s fee in accordance with policies of the TSX Venture Exchange.Contents

(d)Table Stockof options (continued):Contents

InTable June 2008, the Company issued 4,000,000 prepaid warrants, 19,720,000 stock purchase warrants and 1,320,200 agent warrants in connection with a brokered private placement (see note 8(a)). The prepaid warrants have no expiry date and no exercise price. The stock purchase warrants and agent warrants may each be converted into one common share of the Company at exercise prices of $0.35 and $0.25, respectively. Contents

INNEXUSTable BIOTECHNOLOGYof INC. Contents

OverviewTable andof Corporate Development Update Contents

•Table Convert existing, non-product grade antibodies into ones with product potential (this may represent the largest potential long-term use of the technology platform with thousands of such antibody candidates).Contents

•Table receiving patent grants in Germany, Spain, France, Great Britain and Italy further expanding patent protection of its DXL technology in Europe.Contents

•Table we completed proof-of-principle studies for the breast cancer product DXL702(HER2); these xenotransplantation experiments established the superiority of DXL702 over Herceptin to arrest growth of orthotopic tumor cell implants in immunocompromised mice. The tumor line chosen was one with low expression of the HER2 target antigen and this result provides further evidence that DXL702 can kill tumors that may evade existing treatment because of low expression of the intended target. Follow-up studies of the histology of the tumors shows clear differences in the cytolytic activity of 702 vs. the control Herceptin against this low expressing tumor.Contents

•Table we announced that we had received patent grants in Germany, Spain, France, Great Britain and Italy further expanding patent protection of its DXL technology in Europe.Contents

DuringTable the nine months ended March 31, 2009 the Company incurred a loss of $5,722,296 or $0.08 per share as compared to a loss of $4,095,716 or $0.08 per share for the nine months ended March 31, 2008. The increased loss resulted from decreased expense reimbursements for development costs under its development contracts. For the nine months ended March 31, 2009 and 2008, expense reimbursements were nil and $1,901,251, respectively. This was offset by costs capitalized for development projects in the current year. In addition to the Research and Development expenses, we recognized capitalized development costs of $2,676,903 during the first nine months of fiscal 2009 (2008 — nil) for our DXL625 product. Non-capitalized expenses decreased while we expanded our product line from one to six products over the past year, with two additional products announced in November 2008. Research and development costs decreased 37% and general and administrative costs increased 2% primarily due to legal and accounting fees. The decrease in research and development costs was expected with many upfront costs such as equipment purchases incurred in prior years and the beginning of product DXL625 capitalization during 2009. Additionally, the Company reduced the size of its research staff to reduce operating costs. Contents

•Table The value of stock based compensation recognized for development personnel and consultants decreased by $78,526 (2009 — $76,557; 2008 — $155,083), resulting from both lower valuations of the options for consultants resulting from current stock market levels, and also the forfeiture of options held by prior consultants.Contents

•Table Net rent expense allocated to non-laboratory space decreased by $169,073 (2009 - $144,974; 2008 — $314,047) as the Company allocated rent costs to research and development projects with the construction and full utilization of labs at the Scottsdale facility. In addition, sublease rental income was offset to rent expense in the current year.Contents

AsTable expected,of InNexus experienced research and development costs related to its expanded and continuing development efforts. Contents

InTable the fourth quarter of fiscal 2007, the Company entered into a sales agreement whereby significant operating revenues could occur. There is a potential US$30,000,000 which would be received upon InNexus’ meeting specified milestones in the contracts. As of March 31, 2009 the Company believes certain of these milestones have been met. Discussions continue with Royalty Pharma concerning each party’s obligation and to settle on an obligation payment date. However, there is no guarantee that these discussions will result in additional sales proceeds. Nor is there any assurance that additional sales contracts will follow. Contents

RelatedTable partyof transactions: Contents

INNEXUSTable BIOTECHNOLOGYof INC. Contents

TheTable market price of the Company’s common shares could be subject to wide fluctuations in response to, and may be adversely affected by, quarterly variations in operating results, announcements of technological innovations or new products by the Company or its competitors, changes in financial estimates by securities analysts, or other events or factors. In addition, the financial markets have experienced significant price and volume fluctuations. We are also subject to currency exchange rate fluctuations between the Canadian, US and Barbadian dollars. Exchange rate volatility can have a significant effect on the market prices of securities issued by companies for reasons unrelated to their operating performance. No dividends have been paid to date on the Company’s common shares. The Company anticipates that for the foreseeable future the Company’s earnings, if any, will be retained for use in its business and that no cash dividends will be paid on the common shares. Contents

~~Washington,~~UNITED ~~D.C.~~STATES SECURITIES ~~20549~~AND EXCHANGE COMMISSION

~~Form 6-K~~Washington, D.C. 20549

~~REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a~~Form 6-16K ~~OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~REPORT ~~the~~OF ~~month~~FOREIGN ofPRIVATE ~~March 2009.~~ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

~~Commission~~For ~~File~~the ~~Number~~month ~~000-50656~~of October, 2009.

~~InNexus~~Commission File ~~Biotechnology~~Number ~~Inc.~~ 000-50656

~~(Translation~~InNexus ofBiotechnology ~~registrant’s name into English) 1055 W~~Inc. ~~Hastings Street, Suite 2200 Vancouver, BC V6E 2E9~~ ~~(Address of principal executive office)~~

~~Indicate~~(Translation byof ~~check mark whether the~~ registrant’s ~~files~~name orinto ~~will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F þ Form 40-F o~~ English)

~~Indicate~~1055 byW. ~~check~~Hastings ~~mark~~Street, ifSuite 2200 ~~the~~Vancouver, ~~registrant~~BC isV6E ~~submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o~~ 2E9

~~Note: Regulation S-T Rule 101~~(~~b)(1)~~Address ~~only permits the submission in paper~~ of aprincipal ~~Form~~executive ~~6-K if submitted solely to provide an attached annual report to security holders.~~ office)

Indicate by check mark ifwhether the registrant isfiles ~~submitting~~or ~~the~~will ~~Form~~file ~~6-K~~annual inreports ~~paper~~under ascover ~~permitted by~~of ~~Regulation S~~Form 20-TF ~~Rule 101(b)(7):~~or oForm 40-F.

~~Note: Regulation~~Form S20-TF ~~Rule 101(b)(7)~~þ ~~only permits the submission in paper of a~~ Form 640-KF ~~if submitted~~o to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

Indicate by check mark ~~whether~~if the registrant byis ~~furnishing~~submitting the ~~information~~Form ~~contained~~6-K in ~~this~~paper ~~Form is~~as ~~also~~permitted ~~thereby~~by Regulation S-T ~~furnishing the information to the Commission pursuant to~~ Rule ~~12g3-2~~101(b)(1): ~~under the Securities Exchange Act of 1934. Yes~~ o ~~No þ~~

IfNote: ~~“Yes”~~Regulation S-T isRule 101(b)(1) ~~marked,~~only ~~indicate~~permits ~~below~~ the ~~file~~submission ~~number~~in ~~assigned~~paper of a Form 6-K if submitted solely to ~~the~~provide ~~registrant~~an inattached ~~connection~~annual ~~with Rule 12g3-2(b): 82-~~ report to security holders.

~~SIGNATURES~~Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

~~Pursuant~~Note: toRegulation S-T Rule 101(b)(7) only permits the ~~requirements~~submission in paper of a Form 6-K if submitted to furnish a report or other document that the ~~Securities~~registrant ~~Exchange~~foreign ~~Act~~private issuer must furnish and make public under the laws of ~~1934~~the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s ~~has~~“home ~~duly~~country”), or under the ~~caused~~rules ~~this~~of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be ~~signed~~and onhas ~~its~~not ~~behalf~~been distributed byto the ~~undersigned~~registrant’s security holders, ~~thereunto~~and, ~~duly~~if ~~authorized~~discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

	InNexus Biotechnology Inc. (Registrant)
Date May 18, 2009	By:	/s/ Jeff Morhet
		(Signature)*
		Jeff Morhet, CEO and Chairman

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes o No þ

*If ~~Print~~“Yes” ~~the~~is ~~name~~marked, ~~and~~indicate ~~title~~below ~~under~~ the ~~signature~~file ofnumber assigned to the ~~signing~~registrant ~~officer~~in connection with Rule 12g3-2(b): 82- .

~~NOTICE OF NO AUDITOR REVIEW OF~~SIGNATURES

~~INTERIM~~Pursuant ~~FINANCIAL~~to ~~STATEMENTS~~the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Under National Instrument 51-102, Part 4, subsection 4.3 (3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.


	InNexus Biotechnology Inc.

	(Registrant)

Date October 28, 2009	By	/s/ David Petulla (Signature)*
		David Petulla
		Chief Financial Officer

~~The~~* ~~accompanying~~Print ~~unaudited interim financial statements of~~ the ~~Company~~name ~~have~~and ~~been~~title ~~prepared~~under ~~by and are~~ the ~~responsibility~~signature of the ~~Company’s~~signing ~~management~~officer.

~~INNEXUS~~Consolidated ~~BIOTECHNOLOGY~~Financial ~~INC.~~Statements (AExpressed ~~Development~~in ~~Stage~~Canadian ~~Enterprise~~dollars)

~~Consolidated~~INNEXUS ~~Balance~~BIOTECHNOLOGY ~~Sheets~~INC. (~~Expressed~~A inDevelopment ~~Canadian~~Stage ~~dollars~~Enterprise)

	March 31,			June 30,
	2009			2008
	(unaudited)			(audited)
ASSETS
Current assets:
Cash and cash equivalents — unrestricted	$	33,907		$	3,121,819
Cash held in trust		366,287			461,188
Cash committed for drug development		—			—
Accounts receivable		29,542			43,628
Prepaid expenses and other		121,072			118,641
Total current assets		550,808			3,745,276
Property and equipment, net		2,003,477			2,383,106
Technology rights, net		31,247			78,119
Deferred development costs		—			—
Capitalized product development (DXL625)		2,676,903			—
TOTAL ASSETS	$	5,262,435		$	6,206,501
LIABILITIES AND SHAREHOLDERS’ EQUITY
Working Capital		(2,504,992	)		2,205,740
Current liabilities:
Accounts payable		2,427,513			318,503
Accrued liabilities		373,829			617,068
Commitment for drug development		—			—
Interest payable on debt portion of preferred shares		—			—
Accrued interest — unsecured debenture		141,584			—
Dividend payable (note 8(c))		112,339			603,541
Debt portion of preferred shares (note 8(c))		535			424
Total current liabilities		3,055,800			1,539,536
Long-term liabilities:
Convertible debentures		4,567,000			—
Discount on notes payable		(909,406	)		—
Total long-term liabilities		3,657,594			—
Shareholders’ equity:
Common shares, no par, unlimited shares authorized, 69,621,116 issued and outstanding (June 30, 2008 — 69,621,116) (note 8(c))		14,507,157			14,532,157
Preferred shares — exchangeable, no par, 6,917,188 shares authorized 2,258,594 issued and outstanding (June 20, 2008 — 2,258,594) (note 8(c))		60,286			60,286
Preferred shares — series A convertible, no par, 27,500 shares authorized 3,325 issued and outstanding (note 8(c)) (June 20, 2008 – 22,565) (note 8(c))		1			1
Contributed surplus		8,152,779			8,523,406
Deficit accumulated during the development stage		(24,171,182	)		(18,448,885	)
Total shareholders’ equity		(1,450,959	)		4,666,965
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	5,262,435		$	6,206,501

Years ended June 30, 2009, 2008 and 2007
Period from incorporation on July 20, 1997 to June 30, 2009

~~See~~INNEXUS ~~accompanying~~BIOTECHNOLOGY ~~notes~~INC. (A toDevelopment ~~consolidated~~Stage ~~financial statements.~~Enterprise)

~~Approved~~Index onto ~~behalf~~Consolidated ofFinancial ~~the Board of Directors:~~Statements

“Jeff Morhet” JEFF MORHET Director “Wade Brooksby” WADE BROOKSBY Director


	Page

Report of Independent Registered Public Accounting Firm		i

Consolidated Balance Sheets June 30, 2009 and 2008		1

Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended June 30, 2009, 2008 and 2007 and the Period from incorporation on July 20, 1997 to June 30, 2009		2

Consolidated Statements of Shareholders’ Equity for the years ended June 30, 2009, 2008 and 2007		3

Consolidated Statements of Cash Flows for the years ended June 30, 2009, 2008 and 2007 and the Period from incorporation on July 20, 1997 to June 30, 2009		4

Notes to Consolidated Financial Statements		6

~~Consolidated~~REPORT ~~Statements~~OF ofINDEPENDENT ~~Operations~~REGISTERED ~~and~~PUBLIC ~~Accumulated~~ACCOUNTING ~~Deficit~~FIRM ~~(Expressed in Canadian dollars) (unaudited)~~

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2009			2008			2009			2008
Revenues:
Analytical Sales	$	—		$	—		$	—		$	1,014
Contract Revenues		—			411,123			—			411,123
Rental Revenue		—			31,377			—			47,322
Total revenues		—			442,500			—			459,459
Operating expenses (note 11):
Reimbursements received for development commitment (note 6(a))		—			(409,108	)		—			(1,901,251	)
Research and development		621,855			943,288			1,900,920			3,015,261
General and administrative		1,256,049			972,629			3,404,681			3,232,745
General and administrative — related party (note 5)		—			8,982			—			98,685
Total operating expense		1,877,905			1,515,791			5,305,602			4,445,440
Operating loss		(1,877,905	)		(1,073,291	)		(5,305,602	)		(3,985,981	)
Other income (expense):
Interest income		25			7,841			1,377			67,041
Interest expense (note 8(c))		(219,161	)		(67,712	)		(414,189	)		(176,769	)
Gain on sale of fixed assets		(3,882	)		—			(3,882	)		—
Total other income		(223,018	)		(59,871	)		(416,694	)		(109,728	)
Net loss and comprehensive loss	$	(2,100,923	)	$	(1,133,162	)	$	(5,722,296	)	$	(4,095,709	)
Deficit accumulated during the development stage, beginning of period	$	(22,070,258	)	$	(15,523,790	)	$	(18,448,885	)	$	(12,561,243	)
Deficit accumulated during the development stage, end of period	$	(24,171,182	)	$	(16,656,953	)	$	(24,171,182	)	$	(16,656,953	)
Basic and diluted loss per share (note 9)	$	(0.029	)	$	(0.030	)	$	(0.078	)	$	(0.085	)
Weighted average number of common shares outstanding (note 9)		75,267,511			54,935,761			75,267,511			54,302,434

To the Board of Directors

~~See~~InNexus Biotechnology ~~accompanying notes to consolidated financial statements~~Inc.

~~INNEXUS~~Scottsdale, ~~BIOTECHNOLOGY INC.~~Arizona ~~(A Development Stage Enterprise)~~

~~Consolidated~~We ~~Statements~~have audited the accompanying consolidated balance sheets of ~~Shareholders’~~InNexus ~~Equity~~Biotechnology Inc. and subsidiaries as of June 30, 2009 and 2008, and the related consolidated statements of operations and comprehensive income (~~Expressed~~loss), shareholders’ equity, and cash flows for each of the two years in the ~~Canadian~~period ~~dollars)~~ended June 30, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. The consolidated financial statements of operations and comprehensive income (~~unaudited~~loss), shareholders’ equity, and cash flow of InNexus Biotechnology Inc. for the year ended June 30, 2007, were audited by other auditors whose report, dated October 19, 2007, on those financial statements included an explanatory paragraph that expressed substantial doubt about the Company’s ability to continue as a going concern.

						Preferred Shares						Preferred Shares								Deficit accumulated
	Common Shares					Exchangeable						Series A Convertible					Contributed			during the
	Shares		Amount			Shares			Amount			Shares			Amount		Surplus			development stage
BALANCES, June 30, 2007		52,098,253	$	11,973,466			2,758,594		$	186,748			22,565		$	1	$	5,481,725		$	(12,561,243	)
Conversion of Preferred Shares Exchangeable		500,000		126,462			(500,000	)		(126,462	)		—			—		—			—
Issuance of common shares and warrants, net of issuance costs		1,136,363		168,289			—			—			—			—		76,624			—
Exercise of stock options		166,500		114,000														(64,050	)
Stock based compensation		—		—			—			—			—			—		962,536			—
Net loss		—		—			—			—			—			—					(5,887,642	)
Allocation of preferred shares - series A to debt		—		—			—			—			—			—		(397	)		—
Placement		15,720,000		2,149,940														2,066,968
BALANCES, June 30, 2008		69,621,116	$	14,532,157			2,258,594		$	60,286			22,565		$	1	$	8,523,406		$	(18,448,885	)
Stock based compensation		—		—			—			—			—			—		477,212			—
Net loss		—		—			—			—			—			—					(5,722,296	)
Allocation of preferred shares - series A to debt		—		—			—			—			—			—		(545	)		(0	)
Conversion of Preferred Shares Exchangeable to Debentures		—		—			—			—			(19,240	)		—		(847,294	)		(0	)
Placement costs		—		(25,000	)								—			—		—			—
BALANCES, March 31, 2009		69,621,116	$	14,507,157			2,258,594		$	60,286			3,325		$	1	$	8,152,779		$	(24,171,182	)

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

~~See~~In ~~accompanying~~our ~~notes~~opinion, tothe consolidated financial statements referred to above present fairly, in all material respects, the financial position of InNexus Biotechnology Inc. and subsidiaries as of June 30, 2009 and 2008, and the results of their operations and their cash flows for each of the two years in the period ended June 30, 2009, in conformity with Canadian generally accepted accounting principles.

~~INNEXUS~~We ~~BIOTECHNOLOGY~~have ~~INC.~~also audited the combination in the statements of operations and comprehensive income (Aloss), ~~Development~~cash ~~Stage~~flows, ~~Enterprise~~and shareholders’ equity of the amounts as presented for the years ending June 30, 2009 and 2008 with the amounts for the corresponding statements for the period from inception (July 20, 1997) through June 30, 2007. In our opinion the amounts have been properly combined for the period from inception (July 20, 1997) through June 30, 2009.

~~Consolidated~~The ~~Statements~~accompanying ofconsolidated ~~Cash~~financial ~~Flows~~statements have been prepared assuming that the Company ~~(Expressed~~will continue as a going concern. As discussed in ~~Canadian~~Note ~~dollars)~~1 to the financial statements, the Company ~~(unaudited)~~has limited revenue and has incurred substantial losses from operations and is in the development stage. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2009			2008			2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss for the period	$	(2,100,923	)	$	(1,133,162	)	$	(5,722,296	)	$	(4,095,709	)
Adjustments to reconcile net loss to net cash (used in)/provided by operating activities:
Gross Depreciation/Amortization		242,490			161,899			484,801			428,799
Accrued interest preferred shares series A		(34,229	)		67,695			88,110			176,759
Accrued interest — debentures		109,592			—			141,583			—
Stock-based compensation		229,129			130,618			353,800			759,410
Release of cash restricted for drug development		—			52,335			—			889,745
Changes in non-cash operating working capital:
Accounts receivable		(25,408	)		1,014			(34,199	)		—
Prepaids and other assets		(13,099	)		(61,727	)		45,854			74,547
Accounts payable and accrued liabilities		1,930,273			370,009			3,193,477			72,339
Deferred Revenue		—			—			—			—
Commitment for drug development		—			1,708,518			—			216,376
Net cash (used in)/provided by operating activities		337,824			1,297,199			(1,448,870	)		(1,477,734	)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash restricted for development equipment		—			(1,464,355	)		—			(52,259	)
Capitalized development costs		(1,207,657	)		(385,062	)		(2,676,903	)		(385,062	)
Purchase of equipment		28,272			(168,022	)		(58,299	)		(1,007,490	)
Net cash (used in)/provided by investing activities		(1,179,385	)		(2,017,439	)		(2,735,203	)		(1,444,811	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options		—			69,000			—			69,000
Proceeds from share capital		—			247,251			1,121,162			247,251
Issuance Costs		—			—			(25,000	)		—
Net cash provided by investing activities		—			316,251			1,096,162			316,251
Increase/(decrease) in cash and cash equivalents		(841,561	)		(403,989	)		(3,087,912	)		(2,606,294	)
Cash and cash equivalents, beginning of period		875,468			658,246			3,121,819			2,860,551
Cash and cash equivalents, end of period	$	33,907		$	254,257		$	33,907		$	254,257
SUPPLEMENTARY INFORMATION
Interest paid		—			—			—			—
Taxes paid		—			—			—			—
NON-CASH INVESTING AND FINANCING ACTIVITIES
Conversion to debentures		—			—			—			—
Accretion of preferred shares series A to debt		—			106			1,200			184
Capitalized depreciation		55,459			—			178,232			—
Exercise of stock options		—			78,219			—			78,219
Warrants for issuance costs		—			—			—			47,758
Capitalized stock based compensation		60,275			—			120,062			—

HEIN & ASSOCIATES LLP

~~See~~Denver, ~~accompanying~~Colorado October 28, ~~notes to consolidated financial statements.~~2009

~~Notes~~INNEXUS toBIOTECHNOLOGY ~~Consolidated Financial Statements~~INC. (~~Expressed~~A inDevelopment ~~Canadian~~Stage ~~dollars~~Enterprise) ~~(unaudited)~~

~~1. Going~~Consolidated ~~concern:~~Balance Sheets (Expressed in Canadian dollars)

InNexus Biotechnology Inc. (“InNexus,” “IXS” or the “Company”) is incorporated under the laws of British Columbia. On July 3, 2003, the Company changed its name from Cusil Venture Corporation (“Cusil”) to InNexus Biotechnology Inc. in connection with a business combination. The Company is a drug development company focused on commercializing the next generation of monoclonal antibodies based on its Dynamic Cross Linking (“DXLTM”) technology. DXLTM technology seeks to improve the therapeutic potency of existing monoclonal antibody products by increasing the binding to target antigen, enhancing antibody effector functions and installing new properties into antibodies. The Company is a development stage enterprise and commercial operations have not yet commenced.


	June 30,			June 30,
	2009			2008
ASSETS

Current assets:
Cash and cash equivalents	$	124,344		$	3,121,819
Cash held in trust		8,631			461,188
Prepaid expenses and other		102,597			162,269

Total current assets		235,572			3,745,276

Property and equipment, net (note 3)		1,867,317			2,383,106

Intangible assets, net		2,580,623			78,119


TOTAL ASSETS	$	4,683,512		$	6,206,501


LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	2,279,283		$	318,503
Accrued liabilities		678,467			617,068
Dividend payable (note 9(c))		166,464			603,541
Loan payable, net of discount of $166,451 (note 6(b))		903,049			—
Debt portion of preferred shares (note 9(c))		2,706			424

Total current liabilities		4,029,969			1,539,536

Convertible debentures, net of discount of $1,995,489 (note 6(a))		2,571,511			—

Total liabilities		6,601,480			1,539,536


Shareholders’equity:
Common shares, no par, unlimited shares authorized, 70,012,835 issued and outstanding (June 30, 2008 — 69,621,116) (note 9(a))		14,543,614			14,532,157
Preferred shares — exchangeable, no par, 6,917,188 shares authorized 1,866,875 issued and outstanding (June 30, 2008 — 2,258,594) (note 9(b))		48,829			60,286
Preferred shares — series A convertible, no par, 27,500 shares authorized, 3,325 issued and outstanding (June 30, 2008 — 22,565) (note 9(c))		1			1
Equity component of convertible debentures (note 6(a))		1,632,324			—
Equity component of loan payable (note 6(b))		194,513			—
Contributed surplus		8,128,860			8,523,406
Deficit accumulated during the development stage		(26,466,109	)		(18,448,885	)

Total shareholders’ equity (deficit)		(1,917,968	)		4,666,965


TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT	$	4,683,512		$	6,206,501

~~The~~See accompanying ~~consolidated~~notes 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’s continuation as a going concern is uncertain and dependent on successfully bringing its technologies to ~~market, achieving future profitable operations and obtaining additional sources of financing to sustain its operations, the outcome of which cannot be predicted at this time. These~~ consolidated financial statements ~~do not reflect adjustments to the carrying values and classifications of assets and liabilities that might be necessary should the Company not be able to continue in its operations~~.

~~2. Significant~~Approved ~~accounting~~on ~~policies~~behalf of the Board of Directors:

~~(a) Basis~~“Jeff ofMorhet” ~~presentation:~~ JEFF MORHET Director “David Warden” DAVID WARDEN Director

~~These consolidated financial statements have been prepared in accordance with Canadian generally~~1 accepted accounting principles. They include the accounts of the Company and its subsidiaries InNexus, Inc. (“IXI”), InNexus Exchange Corp. (“IEC”), both of which are U.S. corporations, InNexus Biotechnology International Limited (“IBIL”) and InNexus Bioscience (Barbados) Inc., Barbados corporations, and North Bioscience Inc., a British Columbia corporation, all of which are wholly-owned. All intercompany transactions and balances have been eliminated.

INNEXUS BIOTECHNOLOGY INC. (A Development Stage Enterprise)

~~Notes~~Consolidated toStatements ~~Consolidated~~of ~~Financial~~Operations ~~Statements~~and Comprehensive Income (Loss) (Expressed in Canadian dollars) ~~(unaudited)~~

2. Significant accounting policies (continued):


										Period from
										incorporation on
										July 20, 1997
	Year ended June 30,									to June 30,
	2009			2008			2007			2009

Revenues
License fees	$	—		$	—		$	15,274		$	281,940
Other					1,010			—			1,010

Total revenues		—			1,010			15,274			282,950


Operating expenses (note 12)
Reimbursements received for development commitment (note 8(a))		—			(2,709,988	)		(638,727	)		(3,322,653	)
Research and development		2,305,354			3,813,259			1,361,628			8,916,647
Research and development — related party (note 7)		—			—			766,912			2,076,735
General and administrative		4,388,744			4,511,284			3,335,559			16,747,089
General and administrative — related party (note 7)		8,227			98,685			322,510			835,110

Total operating expense		6,702,325			5,713,240			5,147,882			25,252,928


Operating loss		(6,702,325	)		(5,712,230	)		(5,132,608	)		(24,969,978	)

Other income (expense):
Interest income		3,306			77,248			159,431			292,439
Interest expense (note 9(c))		(1,314,323	)		(252,660	)		(198,833	)		(1,937,153	)
Gain (loss) on sale of investments and other		(3,882	)		—			—			148,583

Total other expense		(1,314,899	)		(175,412	)		(39,402	)		(1,496,131	)


Net loss and comprehensive loss	$	(8,017,224	)	$	(5,887,642	)	$	(5,172,010	)	$	(26,466,109	)


Basic and diluted loss per share (note 10)		(0.11	)		(0.11	)		(0.13	)

Weighted average number of common shares outstanding (note 10)		75,286,829			55,258,560			43,942,846

~~(b) Development~~See ~~stage~~accompanying ~~enterprise:~~notes to consolidated financial statements.

~~The accompanying consolidated financial statements have been prepared in accordance with the~~2 ~~provisions of The Canadian Institute of Chartered Accountants (“CICA”) Accounting Guideline (AcG-11) Enterprises in the Development Stage.~~

~~Cash~~INNEXUS ~~equivalents~~BIOTECHNOLOGY ~~are highly liquid investments which are readily convertible to contracted amounts of cash having an original maturity of three months or less~~INC. ~~Restricted cash is contractually~~ ~~obligated~~(A toDevelopment beStage ~~used by the Company for normal and routine operations related to specific research~~Enterprise) ~~activities in existence at the time of the restriction. Cash held in trust represents funds of the~~ Company which are disbursed upon final closing of legal processes such as private placement agreements. Periodically, the Company’s cash balances may be in excess of federally insured limits. At March 31, 2009 and June 30, 2008, there were no restricted cash balances.

Consolidated Statements of Shareholders’ Equity (~~d) Property~~Expressed ~~and~~in ~~equipment:~~Canadian dollars)

Property and equipment are recorded at cost less accumulated amortization. Amortization is provided on the straight line basis over the estimated useful lives from the time the equipment is put in use:


																							Deficit
					Preferred shares						Preferred shares								Equity component		Equity		accumulated
	Common shares				exchangeable						series A convertible					Contributed			of convertible		component of		during the
	Shares		Amount		Shares			Amount			Shares			Amount		Surplus			debentures		loan payable		development stage
BALANCES, June 30, 2006		25,881,239		4,827,936		6,917,188			468,276			27,500			1		3,222,143			—		—		(7,389,233	)

Conversion of Series A — convertible preferred shares @ $0.25 (note 9(c))		1,974,000		435,815		—			—			(4,935	)		—		(435,815	)		—		—		—
Issuance of convertible prepaid warrants @ $0.45, net of issuance costs (note 9(e))		—		—		—			—			—			—		5,117,856			—		—		—
Exercise of convertible prepaid warrants, @ $0.45 (note 9(a))		10,432,105		3,297,293		—			—			—			—		(3,297,293	)		—		—
Exercise of stock options @ $0.25 to $0.55 (note 9(d))		1,306,664		426,000		—			—			—			—		—			—		—		—
Exercise of preferred shares — exchangeable		4,158,594		281,528		(4,158,594	)		(281,528	)		—			—		—			—		—		—
Exercise of stock warrants @ $0.30 to $0.55 (note 9(e))		6,741,953		1,101,640		—			—			—			—		—			—		—		—
Issued for contract services @ $0.60		10,000		6,000		—			—			—			—		—			—		—		—
Issued for fixed assets @ $1.07 (note 3)		496,808		531,584		—			—			—			—		168,942			—		—		—
Issued for contract agreement @ $0.97 (note 9(a))		1,096,890		1,065,670		—			—			—			—		—			—		—		—
Stock-based compensation (note 9(d))		—		—		—			—			—			—		705,918			—		—		—
Net loss		—		—		—			—			—			—		—			—		—		(5,172,010	)
Preferred shares — series A debt accretion (note 9^©)		—		—		—			—			—			—		(26	)		—		—		—

BALANCES, June 30, 2007		52,098,253		11,973,466		2,758,594			186,748			22,565			1		5,481,725			—		—		(12,561,243	)

Issuance of common shares @ $0.22 and stock warrants to CEO, net of issuance costs		1,136,363		168,289		—			—			—			—		76,624			—		—		—
Conversion of Preferred Shares — Exchangeable		500,000		126,462		(500,000	)		(126,462	)		—			—		—			—		—		—
Preferred shares — series A debt accretion (note 9(c))		—		—		—			—			—			—		(397	)		—		—		—
Issuance of common shares @ $0.25, prepaid stock warrants, and stock warrants, net of issuance costs		15,720,000		2,149,940		—			—			—			—		2,066,968			—		—		—
Exercise of stock options @ $0.30		166,500		114,000													(64,050	)
Stock-based compensation (note 9(d))		—		—		—			—			—			—		962,536			—		—
Net loss		—		—		—			—			—			—		—			—		—		(5,887,642	)

BALANCES, June 30, 2008		69,621,116		14,532,157		2,258,594			60,286			22,565			1		8,523,406			—		—		(18,448,885	)

Conversion of Preferred Shares — Series A @ $0.25		—		—					—			(19,240	)				(846,640	)
Preferred shares — series A debt accretion (note 9(c))		—		—		—			—			—			—		(3,371	)		—		—
Exercise of preferred shares — exchangeable (note 9(b))		391,719		11,457		(391,719	)		(11,457	)		—			—					—		—
Equity component of convertible debentures																				1,632,324
Equity component of loan payable																						194,513
Stock-based compensation (note 9(d))																	455,465
Net loss																								(8,017,224	)

BALANCES, June 30, 2009		70,012,835	$	14,543,614		1,866,875		$	48,829			3,325		$	1	$	8,128,860		$	1,632,324	$	194,513	$	(26,466,109	)

~~Asset~~See ~~Rate~~accompanying ~~Laboratory~~notes ~~equipment~~to ~~five~~consolidated ~~years~~financial ~~Computer hardware and software three years Office equipment five years Leasehold improvements ten years~~statements.

~~Gains and losses on depreciable assets retired or sold are recognized in the statement of~~3 ~~operations in the year of disposal. Repairs and maintenance expenditures are expensed as incurred.~~

~~Acquisition costs for technology rights are capitalized and amortized on a straight-line basis over~~INNEXUS ~~their~~BIOTECHNOLOGY ~~estimated useful lives of five years~~INC.

~~Research~~ (A ~~costs are charged as an expense in the period in which they are incurred.~~ Development ~~costs~~ ~~are~~Stage ~~charged as an expense in the period incurred unless they meet generally accepted criteria~~Enterprise) for deferral and amortization. Once they meet the criteria for deferral and amortization, the Company defers further costs directly related to the development of the project, net of refundable investment tax credits and government assistance, until such time as the project reaches commercial production or the project is abandoned or sold. At that time, all deferred costs on that project will either be amortized over its estimated useful life, or written-down to the estimated amount recoverable, as appropriate.

~~INNEXUS~~Consolidated ~~BIOTECHNOLOGY~~Statements ~~INC.~~of Cash Flows (AExpressed ~~Development~~in ~~Stage~~Canadian ~~Enterprise~~dollars)

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) (unaudited)


										Period from
										incorporation on
										July 20, 1997
	Year ended June 30,									to June 30,
	2009			2008			2007			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period	$	(8,017,224	)	$	(5,887,642	)	$	(5,172,010	)	$	(26,466,109	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		409,724			501,753			273,940			1,551,246
Accrued dividends preferred shares — series A		142,234			244,454			198,758			841,075
Accrued interest on debt		278,288									278,288
Stock based compensation		344,289			917,527			705,918			2,660,315
Unrealized foreign exchange loss		—			—			—			12,470
Shares received for license fees		—			—			—			(266,666	)
Common stock for contract services		—			—			6,000			6,000
Non cash interest and accretion on debt		751,755			—			—			762,763
(Gain) loss on assets		3,882			—			—			(43,246	)
Financing costs by issuance of warrants		—			—			—			90,000
Changes in non-cash operating working capital:
Accounts receivable		13,881			(43,628	)		7,500			(138,150	)
Prepaids and other assets		498,349			(401,349	)		(56,436	)		39,884
Accounts payable and accrued liabilities		2,258,029			85,019			481,084			2,548,037
Commitment for drug development		—			(3,861,239	)		1,492,142			(2,369,097	)

Net cash used in operating activities		(3,316,793	)		(8,445,105	)		(2,063,104	)		(20,493,190	)

CASH FLOWS FROM INVESTING ACTIVITIES
Cash restricted for drug development		—			2,546,502			(2,546,502	)		—
Proceeds on sale of assets		24,390			—			—			338,768
Purchase of equipment		(86,571	)		(1,174,125	)		(834,419	)		(2,525,271	)
Proceeds from royalty contract					2,528,750						2,528,750
Capitalized development costs		(1,395,917	)		—			—			(1,395,917	)
Technology rights		—			—			—			(139,939	)

Net cash provided by (used in) investing activities		(1,458,098	)		3,901,127			(3,380,921	)		(1,193,609	)

CASH FLOWS FROM FINANCING ACTIVITIES
Due to related parties		—			—			—			300,479
Proceeds from secured notes		610,312			—			—			1,184,554
Proceeds from sale of convertible debentures		1,167,104			—			—			1,167,104
Proceeds from option exercise		—			49,950			426,000			483,450
Proceeds from equity financing		—			5,180,000			7,602,635			19,953,865
Issuance costs		—			(424,704	)		(317,469	)		(1,278,309	)

Net cash provided by financing activities		1,777,416			4,805,246			7,711,166			21,811,143

Increase (decrease) in cash and cash equivalents		(2,997,475	)		261,268			2,267,141			124,344
Cash and cash equivalents, beginning of period		3,121,819			2,860,551			593,410			—

Cash and cash equivalents, end of period	$	124,344		$	3,121,819		$	2,860,551		$	124,344

2.See ~~Significant~~accompanying ~~accounting~~notes ~~policies~~to ~~(continued):~~consolidated financial statements.

~~(e) Technology rights (continued):~~4

~~(f) Impairment~~INNEXUS orBIOTECHNOLOGY ~~disposal~~INC. (A ofDevelopment ~~long-lived~~Stage ~~assets:~~Enterprise)

~~The~~Consolidated ~~Company~~Statements ~~assesses the impairment~~ of ~~equipment~~Cash orFlows ~~technology~~(continued) (Expressed ~~rights whenever events or changes~~ in ~~circumstances~~ ~~indicate~~Canadian ~~that the carrying values may not be recoverable. For long-lived assets to be~~dollars) held and used, the Company recognizes an impairment loss only if its carrying amount is not recoverable and exceeds its fair value. The carrying amount of the long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposal of the asset. No provision for write-downs with respect to long-lived assets has been made to date.

(g) Development contract:


							Period from
							incorporation on
							July 20, 1997
	Year ended June 30,						to June 30,
	2009		2008		2007		2009
Supplementary information
Interest paid	$	—	$	—	$	—	$	—
Taxes paid		—		—		—		—
Non-cash investing and financing activities:
Capitalized compensation and depreciation		338,035		45,009		—		383,044
Shares issued for property and equipment				—		531,584		531,584
Warrants issued for property and equipment				—		168,942		168,942
Warrants issued for debt		194,513						194,513
Shares issued upon exercise of stock options				64,050		—		64,050
Issuance costs in accounts payable				293,475		—		293,475
Shares isssued upon exchange or conversion of preferred shares		11,457		126,462		717,343		855,262
Shares issued upon exchange of prepaid warrants				—		3,297,293		3,297,293
Warrants for issuance costs				146,186		56,149		202,335
Shares issued on conversion of bridge loan		—		—		—		250,000
Shares issued for business combination, net of cash acquired		—		—		—		220,098
Shares issued in settlement of debts		—		—		—		409,957
Shares issued for technology rights		—		—		—		275,000
Technology rights acquired with future debt payments		—		—		—		161,620
Exchange of preferred stock-Series A into convertible debentures		846,639		—		—		846,639
Services provided by directors and employees in exchange for convertible debentures		886,000		—		—		403,000
Services provided by directors and employees in exchange for bridge loan		459,188		—		—		459,188
Accrued dividends exchanged for convertible debentures		579,311		—		—		579,311
Capitalized expenses remaining in accounts payable at June 30, 2009		831,048		—		—		831,048

~~During~~See ~~fiscal~~accompanying ~~2007,~~notes ~~the Company entered into a contract with Royalty Pharma for the sale of potential future revenue rights~~ to anconsolidated ~~undeveloped~~financial ~~DXL product (note 6(a))~~statements. The contract carries milestones which, if achieved, will trigger additional proceeds. The Company conducts development activities which complement the Company’s ability to meet these milestones. All proceeds received under the contract are non-refundable and carry no additional performance requirements. The Company accounts for the contract under the guidance set forth in Statement of Financial Accounting Standard No. 68 “Research and Development Agreements” (“SFAS 68”), since performance under the contract depends solely on the results of the development having future economic benefit. As a result, the Company has recognized deferred proceeds as a commitment for drug development on the balance sheet and applies costs incurred for applicable development costs. At the time the Company can establish precedence for the use of this type of contract as a recurring operating activity, deferred proceeds may be recognized as revenue in accordance with contractual reporting standards.

~~(h) Financial instruments: Disclosures and Presentation:~~5

INNEXUS BIOTECHNOLOGY INC. (A Development Stage Enterprise)

Notes to Consolidated Financial Statements ~~(Expressed in Canadian dollars) (unaudited)~~

2.(Expressed ~~Significant~~in ~~accounting~~Canadian ~~policies (continued~~dollars):

~~(i)~~Years ended June ~~Management~~30, of2009, ~~capital:~~2008 and 2007 Period from incorporation on July 20, 1997 to June 30, 2009

~~The~~1. ~~Company’s~~Organization ~~objectives~~and ~~when managing capital are~~Liquidity:

ToInNexus ~~safeguard~~Biotechnology Inc. (“InNexus,” “IXS” or the “Company’s”) ~~ability~~is toincorporated ~~continue~~under asthe alaws of ~~going~~British ~~concern~~Columbia. inOn ~~order~~July 3, 2003, the Company changed its name from Cusil Venture Corporation (“Cusil”) to ~~pursue~~InNexus ~~the~~Biotechnology Inc. in connection with a business combination. The Company is a drug development company focused on commercializing the next generation of monoclonal antibodies based on its ~~products~~Dynamic ~~and~~Cross Linking (“DXLTM”) technology. DXLTM technology seeks to ~~maintain~~improve athe ~~flexible~~therapeutic ~~capital~~potency ~~structure~~of ~~which~~existing ~~optimizes~~monoclonal antibody products by increasing the ~~cost~~binding to target antigen, enhancing antibody effector offunctions ~~capital~~and atinstalling annew ~~acceptable~~properties ~~level;~~into antibodies. The Company is a development stage enterprise and commercial operations have not yet commenced.

ToThe ~~provide~~accompanying anconsolidated ~~adequate~~financial ~~return~~statements tohave ~~shareholders~~been ~~commensurate~~prepared ~~with~~on a going concern basis, which contemplates the ~~level~~realization of ~~risk~~assets ~~associated~~and ~~with~~the asatisfaction of liabilities in the normal ~~development~~course ~~stage~~of ~~biotechnology~~business. ~~company~~These consolidated financial statements do not reflect adjustments to the carrying values and classifications of assets and liabilities that might be necessary should the Company not be able to continue in its operations.

In ~~the~~light ~~management~~ of ~~capital~~significant operating losses incurred in past years and the Company’s ~~includes~~difficulty ~~cash~~in generating revenues and ~~cash~~in ~~equivalents,~~attaining positive cash ~~held~~flows infrom ~~trust~~operations, there is significant ~~dividends~~doubt ~~payable,~~about ~~commitment~~the ~~for~~Company’s ~~drug~~ability ~~development~~to ~~and~~continue ~~the~~as ~~components~~a ofgoing ~~shareholders~~concern. The Company’s ~~equity~~ability to ~~provide~~realize ~~capital~~its ofassets $1and discharge its liabilities depends on its ability to generate revenues and positive earnings and realize its strategic operating plans. Its ability to continue as a going concern also depends on its ability to obtain additional financing to meet its cash requirements as necessary. Over the past year,~~738,814~~ atthe ~~March 31~~Corporation has completed several financings and has restructured its operations to substantially reduce expenses going forward. Management is continuing its efforts to obtain additional financing as necessary. However, ~~2009~~the ~~(June 30~~Company has no assurance that it will be able to realize its strategic operating plans and generate revenues. As a result, ~~2008~~it ~~capital~~will ~~deficit~~require ofadditional —financing $1and there is no assurance that the Company will be able to obtain such additional financing,~~687,499)~~ when required.

The Company sets the amount of capital in proportion to risk and manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets2. InSignificant ~~order~~accounting to maintain or adjust the capital structure, the Company may adjust the number of shares issued, sell assets, enter into mergers and acquisitions, acquire debt or enter into some other form of financing facility. policies:

In(a) ~~order~~Basis ~~to maximize ongoing research and development~~ of ~~its products, the Company does not pay out dividends on common shares.~~ presentation:

~~The~~These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles. They include the accounts of the Company ~~continues~~and toits subsidiaries ~~seek~~InNexus, ~~financing~~Inc. ~~for~~(“IXI”), ~~ongoing~~InNexus ~~research~~Exchange Corp. (“IEC”), both of which are U.S. corporations, InNexus Biotechnology International Limited (“IBIL”) and ~~development~~InNexus ~~activities~~Bioscience (Barbados) Inc., Barbados corporations, and North Bioscience Inc., a British Columbia ~~operations~~corporation, all of which are wholly-owned. All intercompany transactions and balances have been eliminated.

~~The~~Effective June 27, 2003, Cusil, which on July 3, 2003 changed its name to InNexus Biotechnology Inc., with its wholly owned subsidiary IEC, completed the acquisition of 100% of the outstanding shares of IXI. Concurrently, the shareholders of IXI obtained control of Cusil/lnNexus through the exchange of IXI shares for shares of the Company; isas ~~not~~a ~~subject~~result, Cusil/InNexus’ transaction with IXI has been accounted for in these consolidated financial statements as a reverse takeover. Consequently, the consolidated statements of operations and deficit and cash flows for the period from IXI’s incorporation on July 20, 1997 to ~~any~~June 30, ~~externally~~2003 ~~imposed~~reflect ~~capital~~IXI’s ~~requirements~~results from operations and cash flows combined with those of Cusil/InNexus from the reverse takeover on June 27, 2003 to June 30, 2003. In subsequent periods, the consolidated statements of operations, and deficit and cash flows reflect the results of operations and cash flows of the consolidated Company.

~~(j) Revenue recognition:~~6

INNEXUS BIOTECHNOLOGY INC. (A Development Stage Enterprise)

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) ~~(unaudited)~~

2.Years ~~Significant~~ended ~~accounting~~June 30, ~~policies~~2009, ~~(continued):~~2008 and 2007 Period from incorporation on July 20, 1997 to June 30, 2009

2. Significant accounting policies (kcontinued) ~~Stock-based compensation~~:

~~The~~(b) ~~Company~~Development ~~follows~~stage the Canadian Institute of Chartered Accountants Handbook Section 3870, Stock-based Compensation and Other Stock-based Payments, to account for grants under this plan. As recommended by Section 3870, the Company has adopted the fair value method for stock-based compensation. The fair value of stock options is determined by the Black-Scholes Option Pricing Model. enterprise:

~~Under~~The ~~the~~accompanying ~~fair~~consolidated ~~value~~financial ~~based~~statements ~~method,~~have ~~stock-based~~been ~~payments~~prepared toin ~~non-employees~~accordance ~~are measured at the fair~~with ~~value of~~ the ~~equity~~provisions instruments issued, and the awards are re-measured at each reporting date during the vesting period as the options are earned. Any changes therein are recognized over the period and in the same manner as if the Company had paid cash instead of ~~paying with or using equity instruments.~~ The ~~fair~~Canadian ~~value~~Institute of ~~awards~~Chartered toAccountants ~~employees~~(“CICA”) ~~is typically measured at the grant date~~Accounting ~~and~~Guideline ~~amortized over the vesting period. All of the Company’s option grants have a graded vesting schedule; the Company measures related compensation costs on a straight~~(AcG-~~line~~11) ~~basis~~Enterprises ~~over~~in the ~~requisite~~ ~~service~~Development ~~period for the entire award~~Stage.

(lc) ~~Income~~ ~~taxes~~Cash and cash equivalents:

~~The~~Cash ~~Company~~equivalents ~~uses~~are ~~the~~highly ~~asset~~liquid ~~and~~investments ~~liability~~which ~~method of accounting for income taxes. Under this method of tax allocation, future income tax assets and liabilities~~ are ~~determined~~readily ~~based~~convertible onto ~~differences~~contracted ~~between~~amounts ~~the financial statement carrying values~~ of ~~existing~~cash ~~assets~~having ~~and~~an ~~liabilities~~original ~~and~~maturity ~~their respective~~of ~~income~~three ~~tax~~months ~~bases~~or ~~(temporary differences) and losses carried forward~~less. ~~Future~~Cash ~~income~~held ~~tax assets and liabilities are measured using the tax rates expected to be~~ in ~~effect when the temporary~~trust ~~differences~~represents ~~are~~funds ~~likely to reverse. The effect on future income tax assets and liabilities~~ of ~~a change in tax rates is included in operations in~~ the ~~period~~Company in which ~~the~~are ~~change~~disbursed isupon ~~substantively enacted.~~final ~~The~~closing ~~Company recognizes in its financial statements the impact~~ of alegal ~~tax position if that~~processes ~~position~~such isas ~~more~~private ~~likely~~placement ~~than~~agreements. ~~not to be sustained on audit~~Periodically, ~~based~~the onCompany’s ~~the~~cash ~~technical~~balances ~~merits~~may ofbe ~~the~~in ~~position.~~excess Aof ~~valuation~~federally ~~allowance~~insured islimits. ~~provided~~At ifJune 30, it2009, isthe ~~more~~Company’s ~~likely~~cash ~~than~~and ~~not that some or all of the~~cash ~~deferred~~equivalent ~~tax~~balances ~~asset~~included ~~will~~US$99,421 ~~not~~in beUnited ~~realized~~States dollars.

(md) ~~Comprehensive~~ ~~income~~Property and equipment:

~~Comprehensive~~Property ~~income~~and isequipment ~~defined~~are asrecorded ~~the~~at ~~change~~cost inless ~~equity~~accumulated ~~from~~amortization. ~~transactions~~Amortization ~~and~~is provided ~~other~~on ~~events~~the ~~from non-owner~~straight ~~sources~~line ~~and~~basis ~~other~~over ~~comprehensive~~the ~~income~~estimated ~~comprises~~useful ~~revenues,~~lives ~~expenses,~~from ~~gains~~the ~~and~~time ~~losses~~the ~~that,~~equipment inis ~~accordance~~put ~~with generally accepted accounting principles, are recognized~~ in ~~comprehensive~~use: ~~income but excluded from net income.~~

~~(n) Net~~Asset ~~loss~~Rate ~~per~~Laboratory ~~common~~equipment ~~share:~~ five years Computer hardware and software three years Office equipment five years Leasehold improvements ten years

~~Basic~~Gains ~~loss~~and ~~per~~losses ~~share~~on isdepreciable ~~computed~~assets byretired ~~dividing~~or ~~loss~~sold ~~available~~are torecognized ~~common~~in ~~stockholders by~~ the ~~weighted average~~statement ~~number~~ of ~~common shares outstanding during the period. Diluted loss per share gives effect~~ tooperations ~~all~~in ~~dilutive potential common shares outstanding during~~ the ~~period.~~year ~~The computation~~ of ~~diluted loss~~disposal. ~~per~~Repairs ~~share~~and ~~does~~maintenance ~~not~~expenditures ~~assume~~are ~~conversion,~~expensed ~~exercise or contingent exercise of securities that would~~as ~~have an anti-dilutive effect on earnings~~incurred.

~~INNEXUS BIOTECHNOLOGY INC.~~ (Ae) ~~Development~~Technology ~~Stage Enterprise)~~ rights:

~~Notes~~Acquisition tocosts ~~Consolidated~~for ~~Financial~~technology ~~Statements~~rights are capitalized and amortized on a straight-line ~~(Expressed~~basis inover ~~Canadian~~their ~~dollars)~~estimated useful lives of five years. ~~(unaudited)~~

2Research costs are charged as an expense in the period in which they are incurred. ~~Significant~~Development costs ~~accounting~~are ~~policies~~charged ~~(continued):~~as an expense in the period incurred unless they meet generally accepted criteria for deferral and amortization. Once they meet the criteria for deferral and amortization, the Company defers further costs directly related to the development of the project, net of refundable investment tax credits and government assistance, until such time as the project reaches commercial production or the project is abandoned or sold. At that time, all deferred costs on that project will either be amortized over its estimated useful life, or written-down to the estimated amount recoverable, as appropriate.

~~(o) Foreign currency translation:~~7

INNEXUS BIOTECHNOLOGY INC. (~~p) Use~~A ofDevelopment ~~estimates:~~Stage Enterprise)

~~The~~Notes ~~preparation~~to ofConsolidated ~~financial~~Financial ~~statements~~Statements (Expressed in ~~conformity with~~ Canadian ~~generally accepted accounting~~dollars) ~~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 period. Significant areas requiring the use of management estimates relate to the determination of impairment of technology rights, useful lives and methods for amortization, and valuation of stock options and warrants. Actual results may differ from those estimates.

~~(q)~~Years ended June ~~Reclassifications:~~30, 2009, 2008 and 2007 Period from incorporation on July 20, 1997 to June 30, 2009

~~Certain of the prior periods’ comparative figures have been reclassified to conform to the presentation adopted for the current year~~2. ~~The~~Significant ~~reclassifications~~accounting ~~had~~policies ~~no effect on net income, loss per share or cash flows.~~ (continued):

~~(r) International~~The ~~Financial~~carrying ~~Reporting~~value ~~Standards~~of ~~(“IFRS”):~~technology rights does not necessarily reflect present or future values. The ultimate amount recoverable will be dependent upon the successful development and commercialization of products based on these technology rights.

~~In 2006, the Canadian Accounting Standards Board~~ (~~“AcSB”~~f) ~~published~~Impairment aor ~~new~~disposal ~~strategic plan that will significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan outlines the convergence~~ of ~~Canadian GAAP with IFRS over an expected five year transitional period. In February 2008, the AcSB announced that 2011 is the changeover date for publicly~~long-~~listed companies~~lived to use IFRS, replacing Canada’s own GAAP. InNexus will be required to report interim and annual financial statements relating to fiscal periods beginning on July 1, 2011. The transition date of July 1, 2011 will require the restatement for comparative purposes of amounts reported by the Company for the year ended June 30, 2011. While the Company has begun assessing the adoption of IFRS for 2011, the financial reporting impact of the transition to IFRS cannot be reasonably estimated at this time. assets:

~~(s) Recent~~The ~~Accounting~~Company ~~Pronouncements:~~assesses the impairment of equipment or technology rights whenever events or changes in circumstances indicate that the carrying values may not be recoverable. For long-lived assets to be held and used, the Company recognizes an impairment loss only if its carrying amount is not recoverable and exceeds its fair value. The carrying amount of the long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposal of the asset. No provision for write-downs with respect to long-lived assets has been made to date.

~~The~~(g) ~~following~~Development ~~accounting standards were recently issued by the CICA. The Company is currently evaluating the impact of these new standards on its consolidated financial statements.~~ contract:

~~CICA~~During ~~Handbook~~fiscal ~~Section 3064~~2007, ~~Goodwill~~the ~~and~~Company ~~Intangible~~entered ~~Assets,~~into ~~amends~~a ~~the~~contract ~~standards~~with Royalty Pharma for ~~recognition,~~the sale of ~~measurement,~~potential ~~presentation~~future ~~and~~revenue ~~disclosure~~rights ofto ~~intangible~~an ~~assets~~undeveloped ~~for~~product ~~profit-oriented~~(note ~~enterprises~~8(a)). The contract ~~These~~carries ~~standards~~milestones ~~are~~which, ~~effective~~if ~~for~~achieved, will trigger additional proceeds. The Company conducts development activities which complement the Company’s ~~annual~~ability to meet these milestones. All proceeds received under the contract are non-refundable and ~~interim~~carry ~~financial~~no additional ~~statements~~performance ~~beginning~~requirements. As a result, the Company recognized deferred proceeds ~~July~~as a commitment for drug development on the balance sheet and applied costs incurred for applicable development costs. As of June 130, 2009, all deferred proceeds have been applied to development costs. ~~Standards~~At ~~concerning~~the ~~goodwill~~time ~~are~~the ~~unchanged~~Company ~~from~~can ~~previous~~establish precedence for the use of this type of contract as a recurring operating activity, deferred proceeds may be recognized as revenue in accordance with contractual reporting standards.

~~INNEXUS BIOTECHNOLOGY INC.~~ (Ah) ~~Development~~Financial ~~Stage Enterprise)~~ instruments:

~~Notes~~The tocarrying ~~Consolidated~~amounts ~~Financial~~of ~~Statements~~financial instruments, including cash, cash equivalents, restricted ~~(Expressed~~cash, inaccounts ~~Canadian~~receivable, ~~dollars)~~prepaid expenses, accounts payable, accrued expenses and ~~(unaudited)~~contractual commitments approximate fair value due to the short maturity of these instruments.

~~3. Property~~(i) ~~and~~Revenue ~~equipment~~recognition:

~~Equipment~~Nonrefundable ~~consists~~fees ofreceived under licensing agreements are recognized as revenue when the Company ~~following:~~has completed all significant continuing obligations to the other party.

	March 31,			June 30,
	2009			2008
Laboratory equipment	$	1,997,355		$	2,028,472
Computer hardware and software		159,374			154,772
Office equipment		223,054			223,054
Leasehold improvements		734,535			734,535
		3,114,317			3,140,833
Accumulated amortization		(1,110,841	)		(757,727	)
Total equipment, net	$	2,003,476		$	2,383,106

(j)

Stock-based compensation:

~~For~~The Company follows the ~~nine~~Canadian ~~months~~Institute ~~ended~~of ~~March~~Chartered Accountants Handbook Section 313870, Stock-based ~~2009~~Compensation and ~~2008~~Other Stock-based Payments, to account for grants under this plan. As recommended by Section 3870, the Company ~~recorded~~has ~~$437,929~~adopted ~~and~~the ~~$342,315~~fair ofvalue method for ~~amortization~~stock-based ~~expense~~compensation. ~~related~~The tofair ~~property~~value ~~and~~of ~~equipment~~stock options is determined by the Black-Scholes Option Pricing Model.

~~4. Technology rights:~~8

	March 31,			June 30,
	2009			2008
DXL™ rights	$	254,076		$	254,076
1F7 rights		10,000			10,000
Additional antibodies		312,482			312,482
		576,558			576,558
Accumulated amortization		(545,311	)		(498,439	)
Technology rights, net	$	31,247		$	78,119

INNEXUS BIOTECHNOLOGY INC.
(A Development Stage Enterprise)

~~Estimated~~Notes ~~aggregate~~to ~~amortization~~Consolidated ~~expense~~Financial ~~for~~Statements (Expressed ~~technology~~in ~~rights~~Canadian ~~for subsequent years is as follows:~~dollars)

2009 (Three months remaining)	$	15,624
2010		15,623
Total	$	31,247

Years ended June 30, 2009, 2008 and 2007
Period from incorporation on July 20, 1997 to June 30, 2009

~~For~~2. ~~the~~Significant ~~nine~~accounting ~~months~~policies ~~ended March 31, 2009 and 2008, the company recorded $46,872 and $86,484 of amortization expense related to technology rights.~~ (continued):

~~INNEXUS~~Under ~~BIOTECHNOLOGY~~the ~~INC~~fair value based method, stock-based payments to non-employees are measured at the fair value of the equity instruments issued, and the awards are remeasured at each reporting date during the vesting period as the options are earned. Any changes therein are (Arecognized ~~Development~~over ~~Stage~~the ~~Enterprise)~~period and in the same manner as if the Company had paid cash instead of paying with or using equity instruments. The fair value of awards to employees is typically measured at the grant date and amortized over the vesting period. All of the Company’s option grants have a graded vesting schedule; the Company measures related compensation costs on a straight-line basis over the requisite service period for the entire award.

~~Notes to Consolidated Financial Statements~~ (~~Expressed~~k) inIncome ~~Canadian dollars) (unaudited)~~ taxes:

4The Company uses the asset and liability method of accounting for income taxes. ~~Technology~~ ~~rights~~Under this method of tax allocation, future income tax assets and liabilities are determined based on differences between the financial statement carrying values of existing assets and liabilities and their respective income tax bases (~~continued~~temporary differences): and losses carried forward. Future income tax assets and liabilities are measured using the tax rates expected to be in effect when the temporary differences are likely to reverse. The effect on future income tax assets and liabilities of a change in tax rates is included in operations in the period in which the change is substantively enacted. The Company recognizes in its financial statements the impact of a tax position if that position is more likely than not to be sustained on audit, based on the technical merits of the position. A valuation allowance is provided if it is more likely than not that some or all of the future tax asset will not be realized.

In(l) ~~July 2003,~~Comprehensive the Company notified the unrelated holder of the 1F7 license of their breach of a sub-license agreement held between two subsidiaries of the Company. The Company has ceased use of the sub-license pending resolution of the matter. The Company has concluded that there has not been a material impairment in the value of its acquired 1F7 rights. income:

~~5. Related~~Comprehensive ~~parties:~~income is defined as the change in equity from transactions and other events from non-owner sources and other comprehensive income comprises revenues, expenses, gains and losses that, in accordance with generally accepted accounting principles, are recognized in comprehensive income but excluded from net income.

~~Consulting~~(m) ~~expenses~~Net ofloss ~~nil~~per ~~and~~common ~~$98,685 were recognized by the Company for management services provided by related parties during the nine months ended March 31, 2009 and 2008, respectively.~~ share:

OnBasic ~~November 21,~~loss ~~2008,~~per inshare ais ~~private~~computed ~~placement,~~by ~~the~~dividing ~~Company~~loss ~~issued~~available ~~$2,368,000~~to common stockholders by the weighted average number of ~~unsecured~~common shares outstanding during the period. Diluted loss per ~~convertible~~share ~~debentures~~gives effect to all dilutive potential common shares outstanding during the period. The ~~$483,000~~computation of ~~the~~diluted ~~placement~~loss ~~was~~per ~~made~~share ~~with~~does ~~board~~not ~~members~~assume ~~and~~conversion, ~~senior~~exercise ~~management~~or contingent exercise of ~~the~~securities ~~Company~~that would have an anti-dilutive effect on earnings.

~~6. Commitments~~(n) ~~and~~Foreign ~~contingent~~currency ~~liabilities~~translation:

(The Company’s functional currency is the United States dollar. Reported balances for financial reporting have been translated into Canadian dollars using a~~) Development~~ ~~commitments:~~convenience translation adjustment at the exchange rate as reported by the Bank of Canada as of the date of the balance sheet.

~~Royalty Pharma~~9

~~Sale~~INNEXUS ~~proceeds~~BIOTECHNOLOGY ~~are committed to use within the Company’s research activities~~INC. ~~If both parties agree~~ that the Company’s development of each antibody has reached a mutually agreed potency target, Royalty Pharma must elect to either 1) pay an additional US$15,000,000 to the Company for additional development of each antibody within twelve months of meeting the potency target, or 2) incur a reduction of its purchased rights from 50% to 10% of revenues on the future products. If Royalty Pharma selects option (~~2),~~A ~~the~~Development ~~Company~~Stage will have the right to sell the DXL™ product to a third party. In the event InNexus enters into a third party agreement and Royalty Pharma does not elect to make the additional payment, its revenue interest will be calculated based upon 10% of the payments made to InNexus by the third party (subject to a floor of 5% of the third party’s net salesEnterprise) ~~instead of 10% of net sales of future products.~~

~~The~~Notes ~~Company received US$2,000,000 in June 2007 for the sale rights~~ to ~~the~~Consolidated ~~first~~Financial ~~antibody product~~Statements ~~and~~(Expressed ~~US$2,500,000~~ in ~~February 2008~~Canadian ~~for the second. In February 2008, InNexus met accounting criteria~~dollars) ~~for capitalization of its first antibody, DXL625, and began capitalization of development expenses~~ ~~in accordance with CICA Handbook Section 3064, Goodwill and Intangible Assets.~~

~~Development~~Years ~~costs~~ended ~~for products giving rise to royalties under the contract during the nine months ending March~~June 3130, 2009, ~~and~~ 2008 ~~included expenses of $1,719,654~~ and ~~$1,569,319, respectively,~~2007 ~~capitalized~~Period ~~development~~from ~~costs~~incorporation ofon $2July 20,~~676,903~~ ~~and~~1997 ~~nil,~~to ~~respectively and capitalized equipment costs of nil and $951~~June 30,~~566,~~ ~~respectively.~~2009

~~INNEXUS BIOTECHNOLOGY INC~~2. (A ~~Development~~Significant ~~Stage~~accounting ~~Enterprise~~policies (continued) :

~~Notes to Consolidated Financial Statements~~ (~~Expressed~~o) inUse ~~Canadian~~of ~~dollars) (unaudited)~~ estimates:

~~6. Commitments~~The preparation of financial statements in conformity with Canadian 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 ~~(continued):~~at the date of the financial statements and the reported amounts of revenues and expenses during the period. Significant areas requiring the use of management estimates relate to the determination of impairment of capitalized product development costs, technology rights, useful lives and methods for amortization, and valuation of stock options and warrants. Actual results may differ from those estimates.

In(p) March 2008 at the annual general meeting, the shareholders approved payment of compensation to the Company’s CEO as consideration of additional proceeds, if any, received by the Company under the Royalty Pharma contract. As of March 31, 2009, no additional proceeds had been received, and no additional compensation was owed. Reclassifications:

~~Technology~~Certain ~~rights:~~of the prior periods’ comparative figures have been reclassified to conform to the presentation adopted for the current year. The reclassifications had no effect on net loss, loss per share or cash flows.

In(q) ~~October 2004,~~International ~~the~~Financial ~~Company~~Reporting ~~acquired~~Standards all rights, title and interest to technology rights for specific additional antibodies from ImmPheron, which subsequently became a related party. Consideration included a royalty of 3% on net sales of any products the Company develops from the antibodies, and payment, if any, of 10% of income received by the Company from third party licenses of products developed from the antibodies. As of March 31, 2009, no such royalties had become payable by the Company. (“IFRS”):

In 2006, the Canadian Accounting Standards Board (b“AcSB”) published a new strategic plan that will significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan outlines the convergence of Canadian GAAP with IFRS over an expected five year transitional period. In February ~~Leases:~~2008, the AcSB announced that 2011 is the changeover date for publicly-listed companies to use IFRS, replacing Canada’s own GAAP. InNexus will be required to report interim and annual financial statements relating to fiscal periods beginning on July 1, 2011. The transition date of July 1, 2011 will require the restatement for comparative purposes of amounts reported by the Company for the year ended June 30, 2011. While the Company has begun assessing the adoption of IFRS for 2011, the financial reporting impact of the transition to IFRS cannot be reasonably estimated at this time.

~~The~~(r) ~~Company~~Recent ~~has~~Accounting entered into operating leases for office and laboratory space located at the Mayo Clinic’s MCCRB Building in Scottsdale, Arizona with non-cancelable lease payments of US$55,902 per month through September 2016. Aggregate minimum annual lease commitments under non-cancelable operating leases as of March 31, 2009 are as followsPronouncements:

Fiscal year:	US$
2009 (three months remaining)	$	167,706
2010		670,824
2011		670,824
2012		670,824
2013		670,824
Thereafter		2,180,178
	$	5,031,180

The following accounting standards were recently issued by the CICA. The Company is currently evaluating the impact of these new standards on its consolidated financial statements.

~~Gross~~CICA ~~expenses~~Handbook ~~incurred~~Section 1582, ~~under~~Business ~~operating~~Combinations, ~~leases~~establishes ~~were~~the ~~(CAN$)~~standards ~~$622~~for the accounting of business combinations,~~485~~ and ~~$356,834~~stated ~~for~~that ~~the~~all ~~nine~~assets and liabilities of an ~~months~~acquired ~~ended~~business ~~March 31,~~will ~~2009~~be recorded at fair value. Obligations for contingent considerations and ~~2008,~~contingencies ~~respectively~~will also be recorded at acquisition date fair value. ~~For~~The standard also states that acquisition-related costs will be expensed as incurred and that restructuring charges will be expensed in the ~~nine~~periods ~~months~~after ~~ended~~the ~~March 31,~~acquisition ~~2009,~~date. This standard is equivalent to the International Financial Reporting Standard on business combinations. The Company ~~netted~~will ~~$106,585~~be ofrequired ~~sublease~~to ~~income~~adopt ~~against~~this ~~gross~~standard ~~rent~~prospectively ~~expense~~for ~~and~~business ~~capitalized~~combinations with ~~$118,365~~acquisition ~~of rent~~dates ~~expense~~no later than April 1, ~~compared~~2011. toThe ~~nil~~Company ~~and~~is ~~$33,437~~currently ~~respectively~~assessing ~~for~~the impact ~~2008~~of adopting this standard on the financial statements.

~~(c) Contingent liabilities:~~10

AsINNEXUS ofBIOTECHNOLOGY ~~March 31, 2009, there was a $304,377 fee dispute pending in connection with professional services provided to the Company in British Columbia, Canada~~INC. ~~The $304,377 has been included in the~~ ~~Company’s~~(A ~~financial~~Development ~~statements~~Stage ~~as legal expenses and accrued liabilities.~~Enterprise)

~~INNEXUS~~Notes ~~BIOTECHNOLOGY~~to ~~INC.~~Consolidated Financial Statements (AExpressed ~~Development~~in ~~Stage~~Canadian ~~Enterprise~~dollars)

~~Notes~~Years toended ~~Consolidated~~June 30, ~~Financial~~2009, ~~Statements~~2008 and 2007 ~~(Expressed~~Period infrom ~~Canadian~~incorporation ~~dollars)~~on July 20, 1997 to June 30, 2009 ~~(unaudited)~~

62. ~~Commitments~~ ~~and~~Significant ~~contingent~~accounting ~~liabilities~~policies (continued):

~~Subject~~CICA toissued ~~the~~Handbook ~~uncertainty~~Section 1602, ~~inherent~~Non-Controlling inInterests ~~all~~establishes ~~pending litigation,~~ the ~~Company~~standards ~~does~~for accounting ~~not~~of ~~believe~~non-controlling atinterests ~~the present~~of ~~time~~a ~~that~~subsidiary in the ~~resolution~~preparation of ~~these~~consolidated financial ~~legal~~statements ~~proceedings~~subsequent isto ~~likely~~a tobusiness ~~have~~combination, aand ~~material~~is ~~adverse~~effective for the ~~effect~~Company on ~~the~~April 1, 2011. The Company’s ~~financial~~is ~~position,~~assessing ~~operations~~the orimpact ~~cash~~of ~~flows~~adopting this standard on the financial statements.

(ds) ~~Convertible~~ ~~debentures~~Changes in Accounting Policies:

OnThe ~~November 21,~~following ~~2008,~~CICA inHandbook aSections ~~private~~were ~~placement,~~adopted by the Company ~~issued $2,368,000 of unsecured convertible debentures. The notes mature~~ on ~~November~~July 211, ~~2010 and accrue interest at 10% payable quarterly beginning November 21, 2009~~2008. The ~~notes are convertible at the option of the holder into~~ ~~common~~impact ~~shares~~ of the ~~Company~~adoption ~~at a conversion price~~ of ~~$0.10~~these ~~per~~sections ~~common~~on ~~share. The Company may opt to redeem~~ the ~~convertible debentures at the $0.10 conversion price if the~~ Company’s ~~common~~consolidated ~~stock price~~financial ~~exceeds $0.30 for thirty consecutive trading days prior to the maturity date. For the notes,~~statements ~~the~~is ~~Company~~presented received cash proceeds of $840,777, satisfaction of accrued and future expenses of $232,751 and applied a redemption of 10,000 preferred shares — series A at $100 per share and accrued dividends on the shares of $294,466 (note 8(c))below. ~~$483,000 of the placement was made with~~ ~~board members and senior management of the Company. A non-related party received a $9,100 finder’s fee in accordance with policies of the TSX Venture Exchange.~~

OnCICA ~~December~~Handbook Section 191535, ~~2008~~Capital ~~in a private placement~~Disclosures, ~~the~~requires ~~Company~~disclosure ~~issued $1,796,000~~ of ~~unsecured~~an ~~convertible~~entity’s ~~debentures. The notes mature on November 21~~objectives, ~~2010~~policies and ~~accrue~~processes ~~interest~~for atmanaging ~~10% payable quarterly beginning November 21~~capital, ~~2009.~~quantitative ~~The~~data ~~notes~~about ~~are~~what ~~convertible at~~ the entity ~~option~~regards ofas ~~the~~capital, ~~holder~~whether ~~into common shares of~~ the ~~Company~~entity athas acomplied ~~conversion~~with ~~price~~any ofcapital ~~$0.10 per common share. The Company may opt to~~requirements ~~redeem~~and, ~~the convertible debentures at the $0.10 conversion price~~ if ~~the~~it ~~Company’s~~has ~~common~~not ~~stock price exceeds $0.30 for thirty consecutive trading days prior to the maturity date. For the notes~~complied, the ~~Company~~ ~~received~~consequences ~~cash proceeds~~ of ~~$580,154,~~such ~~applied~~non-compliance. aThe ~~redemption of 9,240 preferred shares — series~~disclosure Arequired atby ~~$100 per share and accrued dividends on~~ the ~~shares~~standard ofis ~~$284,846.~~provided ~~A non-related party received a $7,000 finder’s fee~~ in ~~accordance~~the ~~with~~Note ~~policies~~17 of the ~~TSX~~financial ~~Venture Exchange~~statements.

~~INNEXUS~~CICA ~~BIOTECHNOLOGY~~Handbook ~~INC~~Section 3862, Financial Instruments — Disclosures, and Section 3863, Financial Statements — Presentation, replace Handbook Section 3861, Financial Statements — Disclosure and Presentation. The replacement revises and enhances disclosure requirements (Aand ~~Development~~carries ~~Stage~~forward ~~Enterprise)~~unchanged the existing presentation requirements. The disclosure required by the standard is provided in the Note 16 of the financial statements.

~~Notes~~As of July 1. 2008, the Company chose to ~~Consolidated~~adopt ~~Financial~~early ~~Statements~~the CICA Handbook Section 3064, ~~(Expressed~~Goodwill and Intangible Assets, which replace Section 3062, Goodwill and Other Intangible Assets, and Section 3450, Research and Development Costs. The standard provides guidance on the recognition of intangible assets in ~~Canadian~~accordance ~~dollars)~~with the definition of an intangible ~~(unaudited)~~asset and the criteria for asset recognition as well as classifying the application of the concept of matching revenues and expenses, whether these assets are separately acquired or internally developed. The change as result of early adoption of accounting standard in respect of development costs has been applied. The impact of adopting this standard had been to capitalize $2,565,000 of development costs related to the DXL625 product during 2009.

~~7. Financial instruments:~~11

	March 31,		June 30,
	2009		2008
Financial assets
Cash and cash equivalents, cash held in trust held-for-trading, recorded at fair value	$	400,194	$	3,583,007
Accounts receivable, prepaids and other current assets held-for-trading, recorded at fair value	$	150,614	$	162,269
Financial liabilities
Accounts payable, accrued liabilities and dividends payable recorded at amortized cost	$	3,055,265	$	1,539,112
Debt portion of preferred shares recorded at amortized cost	$	535	$	424
Commitment for drug development recorded at amortized cost		—		—

INNEXUS BIOTECHNOLOGY INC.
(A Development Stage Enterprise)

~~The~~Notes ~~Company has not identified or measured any embedded derivatives that require separation for the nine months ended March 31, 2009 or the year ended June 30, 2008. The Company is required~~ to ~~identify~~ ~~and~~Consolidated ~~measure~~Financial ~~embedded derivatives that require separation from the related host contract~~Statements ~~and~~(Expressed ~~measure those embedded derivatives at fair value. Subsequent changes~~ in ~~fair~~Canadian ~~value of embedded~~dollars) ~~derivatives are recognized in the consolidated statement of loss in the period the change occurs.~~

~~The~~Years ~~Company~~ended ~~did~~June 30, ~~not~~2009, ~~have~~2008 ~~any~~and ~~available-for-sale~~2007 Period ~~financial~~from ~~instruments~~incorporation ~~during~~on ~~the nine months ended March~~July 3120, ~~2009~~1997 orto ~~the year ended~~ June 30, ~~2008.~~2009

~~Credit~~3. ~~risk~~ Property and equipment:

~~Credit~~Equipment ~~risk~~consists ~~is the risk~~ of ~~a financial loss to~~ the ~~Company~~following ifat ~~a customer or counterparty to a~~June 30: ~~financial instrument fails to meet its contractual obligation.~~


	2009			2008
Laboratory equipment	$	1,997,355		$	2,028,472
Computer hardware and software		159,374			154,772
Office equipment		223,053			223,054
Leasehold improvements		734,535			734,535

		3,114,317			3,140,833

Accumulated amortization		(1,247,000	)		(757,727	)


Total equipment, net	$	1,867,317		$	2,383,106

~~INNEXUS~~For ~~BIOTECHNOLOGY~~the ~~INC.~~years ended June 30, 2009, 2008 and 2007, the Company recorded $347,229, $386,441 and (A$158,630 ~~Development~~of ~~Stage~~amortization ~~Enterprise)~~expense related to property and equipment.

~~Notes~~4. toIntangible ~~Consolidated Financial Statements (Expressed in Canadian dollars) (unaudited)~~ Assets:

~~7. Financial~~Intangible ~~instruments~~assets ~~(continued)~~consist of the following at June 30:

Interest rate risk


	2009			2008
Capitalized product development costs	$	2,565,000		$	0
DXL™ rights		254,076			254,076
1F7 rights		10,000			10,000
additional antibodies		312,482			312,482

		3,141,558			576,558

Accumulated amortization		(560,935	)		(498,439	)


Technology rights, net	$	2,580,623		$	78,119

~~Interest~~Estimated ~~rate~~aggregate ~~risk~~amortization isexpense ~~the~~for ~~risk~~technology ~~that~~rights ~~future~~for ~~cash~~subsequent ~~flows~~years ofis ~~a financial instrument will fluctuate~~as ~~because of changes in the market interest rates.~~follows:

~~The~~2010 Company is exposed to interest rate risk arising from fluctuations in interest rates on its cash and cash equivalents and short-term investments that earn interest at market rates. The Company does not use derivative instruments to reduce its exposure to interest rate risk. 15,623

~~The~~For ~~Company manages its interest rate risk by maximizing~~ the ~~interest~~years ~~income~~ended ~~earned on excess funds while maintaining the liquidity necessary to conduct operations on a day-to-day basis. Based on the net exposures as at March~~June 3130, 2009, 2008 and ~~assuming that all other variables remain constant~~2007, ~~a 1% appreciation or deterioration of~~ the ~~interest~~Company ~~rate~~recorded ~~would~~$62,496, ~~result in a decrease/increase of~~ $30115,~~000~~312 and in$115,312 ~~the~~of ~~Company’s~~amortization ~~net~~expense ~~loss~~related ~~for~~to ~~the~~technology ~~nine months ended March 31, 2009~~rights.

~~Fluctuations~~In inJuly 2003, ~~market~~the ~~rates~~Company notified the unrelated holder of ~~interest~~the do1F7 ~~not~~license ~~have~~of their breach of a sub-license ~~significant~~agreement ~~impact~~held onbetween two subsidiaries of the Company’s. ~~results~~The Company has ceased use of ~~operations~~the ~~due~~sub-license topending resolution of the ~~short~~matter. ~~term~~The ~~maturity~~Company ofhas concluded that there has not been a material impairment in the ~~investments~~value ~~held~~of its acquired 1F7 rights.

The Company is not exposed to interest rate risk arising from the debt portion of its preferred shares — series A stock, or from the unsecured debentures as the dividend or interest is at a fixed rate5. ~~However,~~Accounts ~~should~~payable ~~market interest rates vary significantly, the Company could be accruing dividends~~ and ~~interest~~accrued ~~at a rate either higher or lower than market rates.~~ liabilities:

~~Currency~~The ~~risk~~Company’s accounts payable and accrued liabilities balances at June 30, 2009 and 2008 included amounts of US$2,134,258 and US$308,866, respectively, payable in United States dollars.

~~The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates.~~12 The Company operates primarily within the United States, although a significant portion of its expenses are incurred in Canada (“Canada dollars”). The Company also incurs a small number of transactions in Barbados, whose totals are considered to have an insignificant effect on financial reporting. The Company has not entered into foreign exchange derivative contracts. A significant change in the currency exchange rates between the Canadian dollar relative to the US or Barbados dollars could have an effect on the Company’s results of operations, financial position or cash flows.

	March 31, 2009			June 30, 2008
	US $			US $
Cash and cash equivalents	$	31,702		$	2,786,574
Accounts payable and accrued liabilities	$	(2,457,645	)	$	(308,866	)
	$	(2,425,943	)	$	2,477,708

INNEXUS BIOTECHNOLOGY INC.
(A Development Stage Enterprise)

~~Based~~Notes onto ~~the~~Consolidated ~~above~~Financial ~~net exposures as at March 31, 2009, and assuming that all other variables remain~~Statements ~~constant,~~(Expressed ain ~~5% appreciation or deterioration of the~~ Canadian ~~dollar against the US dollar would~~dollars) ~~result in a decrease/increase of $121,297 in the Company’s net loss.~~

~~INNEXUS~~Years ~~BIOTECHNOLOGY~~ended ~~INC.~~June 30, 2009, 2008 and 2007 (APeriod ~~Development~~from ~~Stage~~incorporation ~~Enterprise)~~on July 20, 1997 to June 30, 2009

~~Notes~~6. toConvertible ~~Consolidated~~debentures ~~Financial~~and ~~Statements (Expressed in Canadian dollars) (unaudited)~~ loans:

~~7. Financial instruments~~ (~~continued~~a) Convertible debentures:

~~Liquidity~~On ~~Risk~~November 21, 2008, in a private placement, the Company issued $2,368,000 of unsecured convertible debentures. The notes mature on November 21, 2010 and accrue interest at 10% payable quarterly beginning November 21, 2009. The notes are convertible at the option of the holder into common shares of the Company at a conversion price of $0.10 per common share. The Company may opt to redeem the convertible debentures at the $0.10 conversion price if the Company’s common stock price exceeds $0.30 for thirty consecutive trading days prior to the maturity date. For the notes, the Company received cash proceeds of $586,948, satisfaction of accrued and future expenses of $483,000 relating to services provided by board members and senior management of the Company and applied redemption of 10,000 preferred shares — series A at $100 per share and accrued dividends on the shares of $294,466 (note 9(c)). A non-related party received a $9,100 finder’s fee in accordance with policies of the TSX Venture Exchange.

~~Liquidity~~On ~~risk~~December 19, is2008 in a private placement, the ~~risk~~Company ~~that~~issued $1,696,000 of unsecured convertible debentures. The notes mature on November 20, 2010 and accrue interest at 10% payable quarterly beginning November 21, 2009. The notes are convertible at the option of the holder into common shares of the Company ~~will~~at ~~not~~a beconversion ~~able~~price of $0.10 per common share. The Company may opt to ~~meet~~redeem ~~its~~the ~~obligations~~convertible asdebentures ~~they~~at ~~fall~~the $0.10 conversion price if the ~~due~~Company’s common stock price exceeds $0.30 for thirty consecutive trading days prior to the maturity date. For the notes, the Company received cash proceeds of $487,155 applied redemption of 9,240 preferred shares — series A at $100 per share and accrued dividends on the shares of $284,846. A non-related party received a $7,000 finder’s fee in accordance with policies of the TSX Venture Exchange.

~~The~~On January 23, 2009 in a private placement, the Company’s ~~exposure~~issued to$503,000 ~~liquidity~~of ~~risk~~unsecured convertible isdebentures. ~~dependent~~The notes mature on ~~purchasing~~January 23, ~~commitments~~2011 and ~~obligations~~accrue orinterest at 10% payable ~~raising~~quarterly beginning January 23, 2010. The notes are convertible at the option of ~~funds~~the toholder into ~~meet~~common ~~commitments~~shares ~~and~~of ~~sustain~~the ~~operations~~Company at a conversion price of $0.10 per common share. The Company may ~~controls~~opt ~~liquidity~~to ~~risk~~redeem the convertible debentures at the $0.10 conversion price if the Company’s ~~through~~common ~~management~~stock ofprice ~~working~~exceeds ~~capital~~$0.30 for thirty consecutive trading days prior to the maturity date. For the notes, the Company received cash ~~flows~~proceeds of $93,000 and $403,000 of the placement ~~availability~~was made with board members and ~~sourcing~~senior management of ~~financing~~the Company to satisfy accrued expenses for services provided.

~~Accounts~~In ~~payable~~accordance ~~and~~with ~~accrued~~applicable standards, the debentures were accounted for in accordance with ~~liabilities~~their ~~are~~substance ~~include~~and ~~past~~the liability and equity components on the relative fair values of each ~~due~~instrument. ~~liabilities~~The value of $2the equity component of the debentures was determined,~~414,295~~ at ~~March 31~~the time of their issuance, ~~2009.~~by calculating the future conversion rights using the Black-Scholes model and the following assumptions on the date of issuance:

8. Share capital:


Dividend yield	0.0	%
Risk-free interest rate	1.19–1.85	%
Expected life (years)	2
Expected volatility	104	%

~~(a) Common shares:~~13

AsINNEXUS ofBIOTECHNOLOGY ~~March 31, 2009, 2,258,594 common shares had been allocated for issuance upon the conversion~~INC. of(A ~~exchangeable~~Development ~~preferred~~Stage ~~shares of IEC.~~Enterprise)

InNotes June 2008, the Company completed a brokered private placement of 15,720,000 common share units at $0.25 and 4,000,000 prepaid warrant units at $0.25 for total gross proceeds of $4,930,000. Each common share unit consisted of one common share and one non-transferable warrant. The non-transferable warrant entitles the holder to ~~purchase~~Consolidated ~~one~~Financial ~~additional common share for $0.35 for~~Statements a(Expressed ~~five~~in ~~year~~Canadian ~~period from closing. Each prepaid warrant unit consisted of one prepaid warrant and one~~dollars) ~~non-transferable warrant. Each prepaid warrant has no expiry date and may be converted by the~~ ~~holder into one common share of the Company at no additional cost. Each prepaid warrant also entitles the holder to purchase one common share for $0.35 for a five year period from closing.~~

InYears ~~conjunction~~ended ~~with this placement~~June 30, ~~the Company recognized placement costs of $713~~2009,~~093~~ 2008 and ~~issued~~2007 ~~1,320,200~~Period ~~agent warrants, each of which may be converted into one common share of the Company for $0.25 for a three year period~~ from ~~closing.~~incorporation ~~All securities are subject to a hold period which expired~~ on ~~October~~July 720, ~~2008.~~1997 ~~The proceeds net of costs were allocated~~ to ~~the~~June 30, ~~separate equity~~2009 ~~instruments in proportion to their fair values on the date of issuance. Share warrants were valued~~ ~~using the Black-Scholes model using the following assumptions:~~

	Share Warrants			Agent Warrants
Dividend yield		0	%		0	%
Risk-free interest rate		3.46	%		3.30	%
Expected life (years)		2.5			1.5
Expected volatility		157	%		136	%
Forfeiture rate		10	%		12	%

Convertible debentures and loans (continued):

~~INNEXUS~~The ~~BIOTECHNOLOGY~~debt ~~INC~~is shown net of the amount allocated to equity. The debentures contain various (Aspecific ~~Development~~covenants ~~Stage~~primarily ~~Enterprise)~~related to payment of the debentures and restrictive covenants related to the nonpayment of dividends and the issuance of any debt without the written consent of the majority of the debenture holders.

~~Notes to Consolidated Financial Statements~~ (~~Expressed~~b) inLoan ~~Canadian dollars) (unaudited)~~ payable:

8On March 25, 2009, the Company entered into a loan facility with a group of investors for an aggregate amount of up to USD$2.5 ~~Share~~million. ~~capital~~The ~~(continued~~loan facility bears interest at 12.5% payable in cash or in common shares of the Company and matures 6 months from the date of drawdown. The Company is entitled to extend the term for a further 6 months. The loans are repayable at any time subject to a 5% penalty. In connection with the loan, the Company issued to the lenders common share purchase warrants obtained by 1) dividing each lender’s loan value by b) the then prevailing market price c) multiplied by 25%. Each warrant will entitle the holder to acquire one common share of InNexus at a price equal to the greater of $0.10 or the then prevailing market price. The purchase warrants are exercisable for the earlier of a period of 60 months from closing or complete repayment of the total loan. Proceeds of the loan facility were used for paying current liabilities and operating expenses for the Company’s continued research and development programs. At June 30, 2009, the Company had borrowed US$920,000 and issued 3,056,882 warrants under the loan facility, of which US$395,000 was borrowed from senior management of the Company. The loans are secured by all of the Company’s present and after acquired personal property of every nature and kind including, without limitation, all equipment, intellectual property, vehicles and accounts receivable. The loans are secured by all of the Company’s present and after acquired personal property of every nature and kind including, without limitation, all equipment, intellectual property, vehicles and accounts receivable. The loans contain various specific convenants that include: the repayment of the loans and related interest; cannot sell or dispose of assets over CAD$250,000 other than in the normal course of business; cannot declare or pay any dividends on shares of InNexus’ capital stock; cannot redeem, retire, or purchase any shares of InNexus’ stock; the remuneration payable to any employee/officer cannot increase more than 15% unless approved by an independent compensation committee; must maintain corporate existence and provide information available to the Board of Directors to the loan holders based upon reasonable requests.

~~(a) Common~~In ~~shares~~accordance ~~(continued)~~with applicable standards, the loans were accounted for in accordance with their substance and the liability and equity components on the relative fair values of each instrument. The value of the equity component of the transaction was determined by valuing the warrants, at the time of their issuance, using the Black-Scholes model and the following assumptions on the date of issuance:

In February 2008, the Company completed a non-brokered private placement of 1,136,363 units with the Chief Executive Officer (“CEO”) for proceeds of CD$250,000. Each unit is comprised of one common share and one warrant. Each warrant is convertible into one common share of the Company at an exercise price of $0.22. The warrants expire on February 6, 2010. Issuance costs of $2,750 were netted against proceeds. The proceeds were allocated to the separate equity instruments in proportion to their fair values on the date of issuance. The warrants were valued using the Black-Scholes model using the following assumptions:


Dividend yield	0.0	%
Risk-free interest rate	1.78%–2.77	%
Expected life (years)	5
Expected volatility	118	%

Dividend yield	0	%
Risk-free interest rate	3.12	%
Expected life (years)	2
Expected volatility	99	%
Forfeiture rate	0	%

The fair value of the warrants is presented as part of the Shareholders’ equity.

~~In June 2007, as part of an agreement for the sale of future revenue rights (Note 6(a)), the~~14 ~~Company issued 1,096,890 common shares for proceeds of $1,065,670 (US$1,000,000). Proceeds are restricted for use within the Company’s normal operating activities.~~

~~Exchangeable~~INNEXUS ~~preferred~~BIOTECHNOLOGY ~~shares are convertible at the option of the holder into an equal number of common shares of the Company~~INC. ~~The shares do not accrue dividends.~~ At(A ~~March 31,~~Development ~~2009,~~Stage ~~1,175,156 exchangeable preferred shares remain in escrow in accordance with~~Enterprise) ~~terms of their June 2003 issuance. All shares in escrow are scheduled to be released during the~~ ~~year ended June 30, 2009.~~

Notes to Consolidated Financial Statements (~~c) Series A~~Expressed ~~convertible~~in ~~preferred~~Canadian ~~shares:~~dollars)

InYears ~~October~~ended June ~~2005~~30, ~~the Company completed a private placement with institutional investors consisting of 27~~2009,~~500~~ ~~units~~2008 ~~valued~~and ~~at $100 each; each unit was comprised of one Series A convertible preferred~~2007 ~~share~~Period ~~and~~from ~~400~~incorporation ~~warrants.~~on 25July 20,~~000~~ of1997 ~~the units were offered for cash proceeds of $2,500,000 and 2,500 units were issued~~ to ~~settle a bridge loan payable with a principal amount of $250~~June 30,~~000.~~ ~~Total~~2009 ~~issuance costs of $321,444 included finders’ fees of 8% of the gross proceeds and 660,000 warrants.~~

~~Each Series A convertible preferred share will bear a cumulative 8% dividend increasing to 12% in the third and succeeding years~~6. ~~Each~~Convertible ~~preferred~~debentures ~~share is convertible into 400 common shares of the Company at the option of the holder for a period of five years after issuance. At March 31, 2009~~ and ~~June 30,~~loans ~~2008 $112,339 and $603,541 of dividends, respectively, were accrued.~~ (continued):

~~Each~~The following ~~warrant~~table ~~will~~presents ~~entitle~~a ~~the~~summary ~~holder to purchase one additional common share~~ of the Company’s ~~at a~~convertible ~~price~~debentures ofand ~~$0.25~~loans, ~~per~~net ~~share~~of ~~for~~discounts, ~~five~~as ~~years from the closing date. The issuance allows for cashless~~of ~~conversion.~~June 30,

INNEXUS BIOTECHNOLOGY INC. (A Development Stage Enterprise)


	2009
Convertible Debentures	Liability component		Equity component
Balance, beginning of year	$	—	$	—
Issuance of debentures		1,847,819		1,632,324
Interest accretion		723,692		—


Balance, end of year		2,571,511		1,632,324

Current portion		—		—


Long-term portion	$	2,571,511	$	1,632,324

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) (unaudited)


	2009
Loan payable	Liability component		Equity component
Balance, beginning of year	$	—	$	—
Net borrowings		874,987		194,513
Interest accretion		28,062		—


Balance, end of year		903,049		194,513

Current portion		903,049		—


Long-term portion	$	—	$	194,513

87. ~~Share~~ ~~capital~~Related ~~(continued)~~parties:

~~(c)~~Consulting expenses of $8,227, $98,685, and $322,510 were recognized by the Company for various services provided by related parties during the years ended June ~~Series A~~30, ~~convertible~~2009, ~~preferred~~2008 ~~shares~~and ~~(continued):~~2007, respectively.

~~In the event that the prevailing market price of the Company’s common share is less than $0.25, the~~15 Company will have the right until five years from issuance to redeem any outstanding Series A convertible preferred shares at a price of $100 per share, plus any accrued but unpaid dividends. After the fifth anniversary, the redemption price is $120 per share, plus any accrued but unpaid dividends.

~~The~~INNEXUS ~~Series A~~BIOTECHNOLOGY ~~convertible preferred shares have both an equity and a debt component~~INC. ~~The allocation~~ ~~from~~(A ~~equity~~Development toStage ~~debt is recorded using the effective interest method over the five year term of the~~Enterprise) ~~holders’ conversion option. At March 31, 2009 and June 30, 2008 the allocation of the shares’ value~~ ~~to the debt component was $535 and $424, respectively, as reported in current liabilities.~~

~~The~~Notes ~~Company allocated the placement proceeds~~ to ~~the~~Consolidated ~~preferred~~Financial ~~shares and warrants based on the~~Statements ~~relative~~(Expressed ~~fair values of each instrument. The valuation of the warrants using the Black-Scholes model and the following assumptions on the date of issuance resulted~~ in aCanadian ~~value higher than the~~dollars) ~~total proceeds:~~

Dividend yield	0.0	%
Risk-free interest rate	3.94	%
Expected life (years)	5
Expected volatility	73	%

Years ended June 30, 2009, 2008 and 2007
Period from incorporation on July 20, 1997 to June 30, 2009

~~Furthermore, the beneficial conversion valuation for the preferred shares also resulted in an amount larger than the total proceeds~~8. ~~Since~~Commitments ~~both instruments individually were determined to have values in excess of the gross proceeds, the valuation of proceeds less issuance costs was split evenly between the preferred shares~~ and ~~warrants,~~contingent ~~with the $1 debt portion allocated from the share value.~~ liabilities:

~~Private~~(a) ~~placement~~Development ~~— partial Conversion of Series A convertible preferred shares to unsecured debenture~~ commitments:

On ~~November~~June 216, ~~2008~~2007, ~~in a private placement,~~ the Company ~~issued~~sold ~~$2,368,000~~to ofRP ~~unsecured convertible~~Dynamic™Cross-Linking ~~debentures.~~LP ~~The~~(“Royalty ~~notes~~Pharma” ~~mature~~— ~~on November 21, 2010 and accrue interest at 10% payable~~an ~~quarterly~~unrelated ~~beginning~~party) ~~November 21,~~rights ~~2009.~~to ~~The~~potential ~~notes~~future ~~are~~revenues ~~convertible~~for atDXL™ ~~the~~products ~~option~~to ofbe ~~the~~developed ~~holder into~~with ~~common shares of~~ the Company’s attechnologies ausing ~~conversion~~two ~~price~~antibodies ofto ~~$0.10~~be ~~per~~selected ~~common~~by ~~share~~Royalty Pharma. ~~The~~Royalty Pharma ~~Company~~purchased ~~may~~rights ~~opt~~ to ~~redeem~~ the ~~convertible~~first ~~debentures~~antibody aton ~~the~~June 6, ~~$0.10~~2007 ~~conversion~~and ~~price~~exercised ifits ~~the~~option ~~Company’s common stock~~for ~~price~~the ~~exceeds~~purchase ~~$0.30~~of ~~for~~rights ~~thirty consecutive trading days prior~~ to the ~~maturity~~second ~~date.~~antibody ~~For~~on ~~the notes~~February 7, ~~the~~ ~~Company~~2008. ~~received~~The ~~cash~~sales ~~proceeds~~entitle Royalty ofPharma ~~$840,777,~~to ~~satisfaction~~50% of ~~accrued~~the ~~and~~revenues ~~future expenses~~ of ~~$232,751~~ ~~and~~DXL™ ~~applied~~products adeveloped ~~redemption~~from each of ~~10,000 preferred shares — series A at $100 per share and accrued dividends on~~ the ~~shares of $294,466 (note 8(c))~~selected antibodies.

~~INNEXUS~~Sale ~~BIOTECHNOLOGY~~proceeds ~~INC~~are committed to use within the Company’s research activities. If both parties agree that the Company’s development of each antibody has reached a mutually agreed potency target, Royalty Pharma must elect to either 1) pay an additional US$15,000,000 to the Company for additional development of each antibody within twelve months of meeting the potency target, or 2) incur a reduction of its purchased rights from 50% to 10% of revenues on the future products. If Royalty Pharma selects option (A2), ~~Development~~the ~~Stage~~Company ~~Enterprise~~will have the right to sell the DXL™ product to a third party. In the event InNexus enters into a third party agreement and Royalty Pharma does not elect to make the additional payment, its revenue interest will be calculated based upon 10% of the payments made to InNexus by the third party (subject to a floor of 5% of the third party’s net sales) instead of 10% of net sales of future products.

~~Notes~~The Company received US$2,000,000 in June 2007 for the sale rights to ~~Consolidated~~the ~~Financial~~first ~~Statements~~antibody ~~(Expressed~~product and US$2,500,000 in ~~Canadian~~February 2008 ~~dollars)~~for the second. All proceeds were restricted ~~(unaudited)~~until spent on research and development activities and were reported as a commitment for drug development on the balance sheet. In February 2008, InNexus met accounting criteria for capitalization of its first antibody, DXL625, and began capitalization of unreimbursed development expenses in accordance with CICA Handbook Section 3064, Goodwill and Intangible Assets. For the year ended June 30, 2008, all capitalizable development costs were reimbursed from the Royalty Pharma; thus, no capitalized development costs were recognized at June 30, 2008. During the year ended June 30, 2009, the Company capitalized $2,565,000 in unreimbursed development expenses.

8.Development costs for products giving rise to royalties under the contract during the years ending June ~~Share~~30, ~~capital~~2009, ~~(continued):~~2008 and 2007 included expenses of $0, $2,735,530 and $180,174, respectively, reimbursed capitalized development costs of $0, $1,310,905 and $0, respectively and capitalized equipment costs of $0, $918,437 and $458,553, respectively.

~~(c)~~In ~~Series~~March 2008 Aat ~~convertible~~the ~~preferred~~annual ~~shares~~general ~~(continued):~~meeting, the shareholders approved payment of compensation to the Company’s CEO as consideration for additional proceeds, if any, received by the Company under the Royalty Pharma contract. As of June 30, 2009, no additional proceeds had been received, and no additional compensation was owed.

~~$483,000 of the placement was made with board members and senior management of the~~16 ~~Company. A non-related party received a $9,100 finder’s fee in accordance with policies of the TSX Venture Exchange.~~

OnINNEXUS ~~January 5,~~BIOTECHNOLOGY ~~2009 in a private placement, the Company issued $530,000 of unsecured convertible debentures~~INC. ~~The notes mature on January 4, 2011 and accrue~~ ~~interest~~(A atDevelopment ~~10%~~Stage ~~payable quarterly beginning January 4, 2011. The notes are~~Enterprise) ~~convertible at the option of the holder into common shares of the Company at a~~ conversion price of $0.10 per common share. The Company may opt to redeem the convertible debentures at the $0.10 conversion price if the Company’s common stock price exceeds $0.30 for thirty consecutive trading days prior to the maturity date. This private placement was made with board members and senior management of the Company.

Notes to Consolidated Financial Statements (d)Expressed ~~Stock~~in ~~options:~~Canadian dollars)

AtYears ~~December~~ended June 3130, ~~2008~~2009, ~~InNexus~~2008 ~~Biotechnology~~and ~~Inc. has a stock option plan which is~~2007 ~~described~~Period ~~below.~~from ~~Amounts~~incorporation ~~recognized~~on inJuly 20, ~~the~~1997 ~~financial statements with respect~~ to ~~these~~ ~~plans~~June 30, ~~are as follows:~~2009

	Nine Months Ended
	March 31,
	2009		2008
Total cost of stock options during the period	$	280,750	$	73,409
Amounts charged against income, before income tax benefit	$	189,655	$	55,836
Amounts capitalized as reimbursed development costs	$	91,095	$	17,573

Commitments and contingent liabilities (continued):

~~INNEXUS~~Technology ~~BIOTECHNOLOGY INC.~~rights: ~~(A Development Stage Enterprise)~~

~~Notes~~In October 2004, the Company acquired all rights, title and interest to ~~Consolidated~~technology ~~Financial~~rights for ~~Statements~~specific additional antibodies from ImmPheron, which subsequently became a related ~~(Expressed~~party. inConsideration ~~Canadian~~included ~~dollars)~~a royalty of 3% on net sales of any products the Company ~~(unaudited)~~develops from the antibodies, and payment, if any, of 10% of income received by the Company from third party licenses of products developed from the antibodies. As of June 30, 2009, no such royalties had become payable by the Company.

~~8. Share capital~~ (~~continued~~b) Leases:

~~(d)~~The ~~Stock~~Company ~~options~~has ~~(continued)~~entered into operating leases for office and laboratory space located at the Mayo Clinic’s MCCRB Building in Scottsdale, Arizona with non-cancelable lease payments of US$ 46,710 per month through September 2016. Aggregate minimum annual lease commitments under non-cancelable operating leases as of June 30, 2009 are as follows:

InNexus Biotechnology Inc.’s Stock Option Plan (the “Plan”) was approved by the shareholders on December 20, 2005 and last amended by the shareholders on March 17, 2008. The plan permits the grant of common share options for up to 13,924,223 shares of common stock. Stock option awards are granted with an exercise price at or above the market price of InNexus’ shares at the date of grant. All option grants have a graded vesting schedule whereby each grant vests ratably over an eighteen month period. Certain share options provide for accelerated vesting if there is a change in control (as defined in the Plan).


	US$

2010	$	560,520
2011		560,520
2012		560,520
2013		560,520
2014		560,520
Thereafter		1,261,170


	$	4,063,770

~~The~~Gross ~~fair~~expenses ~~value~~incurred ofunder ~~each~~operating ~~share~~leases ~~option~~were ~~award~~(CAN$) ~~is estimated~~$879,923, on$724,229 ~~the~~and ~~date~~$614,086 for ~~of grant using~~ the ~~Black-Scholes~~ ~~option~~years ~~pricing~~ended ~~model~~June 30, ~~based~~2009, on2008 ~~the assumptions~~and ~~noted~~2007, ~~in the following table~~respectively. ~~Because fair~~For ~~value~~the ~~pricing~~year ~~models~~ended ~~incorporate ranges of~~June ~~assumptions~~30, ~~for inputs~~2009, ~~those~~the ~~ranges~~Company ~~are~~received ~~disclosed. Expected~~$166,274 ~~volatilities are based on historical volatility of InNexus’ shares~~ and ~~other~~$79,275 ~~factors such~~for asthe ~~expected~~year ~~changes~~ended inJune 30, ~~volatility~~2008 ~~arising from~~of ~~planned~~sub-lease ~~changes~~income inagainst ~~InNexus’~~gross ~~business~~rent ~~operations~~expense.

~~InNexus uses historical data to estimate share option exercise and employee departure behavior used in the Black-Scholes option pricing model; groups of Plan participants~~ (~~employees and non-employees~~c) ~~that~~Contingent have similar historical behavior are considered separately for valuation purposes. The expected term of share options granted is estimated as the average midpoint between vesting dates and expiration dates for the grant; it represents the estimated period of time that the options are expected to be outstanding. The risk-free rate for periods within the contractual term of the share option is based on the Government of Canada marketable bonds with an average yield of the expected lives of the options as reported by the Bank of Canada.liabilities:

~~INNEXUS~~From ~~BIOTECHNOLOGY~~time ~~INC~~to time the Company is involved in litigation relating to claims arising from its operations in the normal course of business. The Company utilizes various risk management (Astrategies, ~~Development~~including ~~Stage~~employee ~~Enterprise)~~education and the maintenance of liability insurance against certain risks.

~~Notes~~Subject to ~~Consolidated~~the ~~Financial~~uncertainty ~~Statements (Expressed~~inherent in ~~Canadian~~all ~~dollars)~~litigation, the Company does not believe at the ~~(unaudited)~~present time that the resolution of these legal proceedings is likely to have a material adverse effect on the Company’s financial position, operations or cash flows.

~~8. Share capital (continued):~~17

AINNEXUS ~~summary~~BIOTECHNOLOGY ~~of share option activity under the Plan as of March 31,~~INC. ~~2009~~(A ~~and~~Development ~~changes~~Stage ~~during the year then ended is presented below:~~Enterprise)

				Weighted-
				average
	Number of			Exercise Price
	Options			($)
Outstanding at July 1, 2008		7,573,509		$	0.39
Granted		3,250,000		$	0.09
Exercised		—		$	0.00
Forfeited		(154,000	)	$	0.33
Expired		(220,000	)	$	0.81
Outstanding at March 31, 2009		10,449,509		$	0.29
Exerciseable at March 31, 2009		6,785,444		$	0.37

Notes to Consolidated Financial Statements
(Expressed in Canadian dollars)

AYears ~~summary~~ended ~~of the status of InNexus’ non-vested stock options as of March~~June 3130, 2009, 2008 and ~~changes~~2007 ~~during~~Period ~~the~~from ~~nine~~incorporation ~~months~~on ~~then~~July 20, ~~ended~~1997 isto asJune 30, ~~follows:~~2009

				Average Exercise
	Number of Options			Price for Options
Nonvested at July 1, 2008		3,541,366		$	0.27
Granted		3,250,000		$	0.09
Vested		(3,086,968	)	$	0.25
Forfeited		(40,333	)	$	0.26
Nonvested at March 31, 2009		3,464,065		$	0.11

Share capital:

~~INNEXUS BIOTECHNOLOGY INC.~~ (Aa) ~~Development~~Common ~~Stage Enterprise)~~ shares:

~~Notes~~At toJune 30, ~~Consolidated~~2009, ~~Financial~~491,055 ~~Statements (Expressed~~common shares remain in ~~Canadian~~escrow ~~dollars)~~in accordance with terms of their ~~(unaudited)~~June 2003 issuance. These remaining common shares were released July 2, 2009.

8.As ~~Share~~of ~~capital~~June 30, ~~(continued):~~2009, 1,866,875 common shares had been allocated for issuance upon the conversion of exchangeable preferred shares of IEC.

~~(e)~~In ~~Share~~June 2008, the Company completed a brokered private placement of 15,720,000 common share units at $0.25 and 4,000,000 prepaid warrant units at $0.25 for total gross proceeds of $4,930,000. Each common share unit consisted of one common share and one non-transferable warrant. The non-transferable warrant entitles the holder to purchase ~~warrants:~~one additional common share for $0.35 for a five year period. Each prepaid warrant unit consisted of one prepaid warrant and one non-transferable warrant. Each prepaid warrant has no expiry date and may be converted by the holder into one common share of the Company at no additional cost. Each prepaid warrant also entitles the holder to purchase one common share for $0.35 for a five year period from closing.

~~For~~In conjunction with this placement, the ~~nine~~Company ~~months~~recognized ~~ended~~placement ~~March~~costs of $713,093 and issued 1,320,200 agent warrants, each of which may be converted into one common share of the Company for $0.25 for a three year period from closing. All securities are subject to a hold period which expires on October 317, ~~2009~~2008. The proceeds net of costs were allocated to the separate equity instruments in proportion to their fair values on the date of issuance. Share warrants were valued using the Black-Scholes model using the following assumptions:

Exercise	Exercise			June 30,							Expired/			March 31,
	Share Warrants			Agent Warrants
Expiry Date	price			2008			Granted		Exercised		Forfeited			2009
Dividend yield		0	%		0	%
August 10, 2008		0.50			177,778			—		—		(177,778	)		—
Risk-free interest rate		3.46	%		3.30	%
August 25, 2008*		0.50			6,366,317			—		—		(6,366,317	)		—
Expected life (years)		2.5			1.5
March 15, 2009		1.17			322,925			—		—		(322,925	)		—
Expected volatility		157	%		136	%
January 26, 2010		0.67			150,000			—		—		—			150,000
Forfeiture rate		10	%		12	%
January 26, 2010		1.34			150,000			—		—		—			150,000
February 6, 2010		0.22			1,136,363			—		—		—			1,136,363
October 7, 2010		0.25			5,283,000			—		—		—			5,283,000
October 7, 2010		0.25			660,000			—		—		—			660,000
June 17, 2011		0.25			1,320,200			—		—		—			1,320,200
June 17, 2013		0.35			19,720,000			—		—		—			19,720,000
None		0.00			5,646,395			—		—		—			5,646,395
					40,932,978			—		—		(6,867,020	)		34,065,958

~~For~~In February 2008, the ~~year~~Company ~~ended~~completed ~~June~~a non-brokered private placement of 1,136,363 units with the Chief Executive Officer (“CEO”) for proceeds of CD$250,000. Each unit is comprised of one common share and one warrant. Each warrant is convertible into one common share of the Company at an exercise price of $0.22. The warrants expire on February 306, 2010. ~~2008~~Issuance costs of $2,750 were netted against proceeds. The proceeds were allocated to the separate equity instruments in proportion to their fair values on the date of issuance. The warrants were valued using the Black-Scholes model using the following assumptions:

Exercise	Exercise			June 30,						Expired/			June 30,
Dividend yield		0	%
Expiry Date	price			2007		Granted		Exercised		Forfeited			2008
Risk-free interest rate		3.12	%
September 6, 2007		0.30			1,605,000		—		—		(1,605,000	)		—
Expected life (years)		2
August 10, 2008		0.50			177,778		—		—		—			177,778
Expected volatility		99	%
August 25, 2008*		0.50			6,366,317		—		—		—			6,366,317
Forfeiture rate		0	%
March 15, 2009		1.17			322,925		—		—		—			322,925
January 26, 2010		0.67			150,000		—		—		—			150,000
January 26, 2010		1.34			150,000		—		—		—			150,000
February 6, 2010		0.22			—		1,136,363		—		—			1,136,363
October 7, 2010		0.25			5,283,000		—		—		—			5,283,000
October 7, 2010		0.25			660,000		—		—		—			660,000
June 17, 2011		0.25			—		1,320,200		—		—			1,320,200
June 17, 2013		0.35			—		19,720,000		—		—			19,720,000
None		0.00			1,646,395		4,000,000		—		—			5,646,395
					16,361,415		26,176,563		—		(1,605,000	)		40,932,978

* 65% warrants must be remitted in sufficient numbers to allow issuance of common shares at their 100% equivalent units. All warrants reported are reported as 100% equivalent units.18

INNEXUS BIOTECHNOLOGY INC. (A Development Stage Enterprise)

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) ~~(unaudited)~~

8.Years ~~Share~~ended ~~capital~~June 30, ~~(continued):~~2009, 2008 and 2007 Period from incorporation on July 20, 1997 to June 30, 2009

~~(e)~~9. Share ~~purchase~~capital ~~warrants~~ (continued):

~~The~~In June 2007, ~~stock~~as ~~purchase~~part ~~warrants~~of ~~and~~an ~~agent~~agreement ~~warrants~~for ~~have exercise~~the ~~periods~~sale of ~~five~~future ~~and~~revenue ~~three~~rights ~~years~~(Note 8(a)), ~~respectively. The prepaid warrants were valued using~~ the Company’s ~~stock~~issued ~~price~~1,096,890 ~~and~~common ~~the~~shares ~~stock purchase~~for ~~and~~proceeds ~~agent~~of ~~warrants~~$1,065,670 ~~were~~(US$1,000,000). Proceeds ~~valued~~are ~~using~~restricted ~~the Black-Scholes~~for ~~model~~use ~~using~~within the ~~assumptions~~Company’s innormal ~~note 8(a)~~operating activities.

In ~~February~~August ~~2008~~2006, the Company ~~issued~~completed 1a non-brokered private placement of 12,~~136~~078,~~363~~500 units ~~stock~~at ~~purchase~~$0.45 ~~warrants~~for ingross aproceeds ~~private~~of ~~placement~~$5,435,325 ~~with the~~(note ~~Chief Executive Officer~~9(e)). ~~The~~Each ~~warrants~~unit ~~have~~contained anone prepaid ~~exercise~~warrant ~~price~~which ofis ~~$0.22~~convertible ~~and~~into ~~may~~one becommon ~~exercised~~share ~~over~~of ~~a 2 year~~the ~~period~~Company at no additional cost. As ~~The~~of ~~warrants~~June 30, ~~were~~2008, ~~valued~~10,432,105 ~~using~~of the ~~Black-Scholes~~ ~~model~~12,078,500 ~~using~~prepaid ~~the~~warrants ~~assumptions~~were inconverted ~~note~~into ~~8(a)~~common shares.

~~Prepaid~~In ~~warrants~~September 2005, ~~are~~the ~~included~~Company incompleted ~~the~~a ~~Company’s~~private ~~loss~~placement of 2,020,000 units at $0.25 ~~per~~for ~~share~~gross ~~calculation~~proceeds ~~because~~of $505,000. Each unit consisted of ~~their~~one ~~equivalency~~common share and one non-transferable share warrant. Each warrant entitled the holder to purchase one common share ~~shares~~for $0.30 until expiry in September 2006. In conjunction with this placement, the Company paid issuance costs of $14,207 and finder’s fees of $32,250.

9.(b) ~~Net~~Exchangeable ~~loss~~preferred ~~per share~~shares:

~~Basic~~Exchangeable ~~and~~preferred ~~diluted losses per share have been computed by dividing the net loss available to common shareholders including prepaid warrant holders for each respective period by the weighted average~~ shares ~~outstanding~~ ~~during~~are ~~that period. All non-prepaid warrants, options and~~ convertible ~~preferred~~at ~~shares for~~ the ~~three~~option ~~and~~of ~~nine~~the ~~months~~holder ~~ending March 31,~~into ~~2009~~an ~~and 2008, respectively, have been excluded from the~~equal ~~computation~~number of ~~diluted~~common ~~loss~~shares ~~per~~of ~~share as they are anti-dilutive due to~~ the ~~losses generated~~Company. ~~For~~The ~~March 31,~~shares ~~2009~~do ~~and~~not ~~2008,~~accrue ~~net loss available for common shareholders has been increased by $112,339 and $535,846, respectively, for accrued~~ dividends ~~payable to shareholders of preferred stock — Series A~~.

10At June 30, 2009, 1,399,687 exchangeable preferred shares remain in escrow in accordance with terms of their June 2003 issuance. ~~Income~~These ~~taxes:~~shares in escrow were released in July 2009.

~~Substantially all of the difference between the actual tax expense~~ (~~recovery~~c) of ~~nil~~Series ~~and~~A ~~the~~convertible ~~expected~~preferred ~~federal and provincial/state statutory corporate income tax recovery relates to losses not recognized.~~shares:

AtIn ~~December~~October 312005, ~~2008,~~ the Company ~~has~~completed ~~available~~a ~~losses~~private ~~for~~placement ~~tax~~with ~~purposes~~institutional ininvestors consisting ~~Canada~~of 27,500 units valued at $100 each; each unit was comprised of one Series A ~~approximately~~convertible preferred share and 400 warrants. 25,000 of the units were offered for cash proceeds of $142,~~593~~500,~~682~~000 ~~which~~and ~~may~~2,500 beunits ~~applied~~were issued to ~~reduce~~settle ~~taxable~~a ~~income~~bridge ~~until~~loan ~~2029~~payable with a principal amount of $250,000. Total issuance costs of $321,444 included finders’ fees of 8% of the gross proceeds and 660,000 warrants

11Each Series A convertible preferred share will bear a cumulative 8% dividend increasing to 12% in the third and succeeding years. ~~Operating~~Each ~~expenses:~~preferred share is convertible into 400 common shares of the Company at the option of the holder for a period of five years after issuance. During the years ended June 30, 2009, 2008 and 2007 $142,234, $244,379 and $198,833 of dividends, respectively, were accrued.

~~The~~Each ~~Company’s~~warrant ~~operating~~will ~~expenses~~entitle ~~consist~~the holder to purchase one additional common share of the ~~following:~~Company at a price of $0.25 per share for five years from the closing date. The issuance allows for cashless conversion.

~~INNEXUS~~In ~~BIOTECHNOLOGY~~the ~~INC~~event that the prevailing market price of the Company’s common share is less than $0.25, the Company will have the right until five years from issuance to redeem any (outstanding Series A ~~Development~~convertible ~~Stage~~preferred ~~Enterprise)~~shares at a price of $100 per share, plus any accrued but unpaid dividends. After the fifth anniversary, the redemption price is $120 per share, plus any accrued but unpaid dividends.

~~Consolidated Statements of Operations Detail~~19 ~~(Expressed in Canadian dollars) (unaudited)~~

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2009			2008			2009			2008
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Operating expenses:
Research and development:
Compensation	$	112,902		$	298,722		$	513,997		$	858,800
Stock Based Compensation — salaries		25,682			7,827			76,557			155,083
Benefits, payroll taxes and related		9,903			34,783			43,997			106,544
Depreciation and amortization expense		61,541			85,138			190,511			294,319
Communications		252			5,166			5,941			18,961
Conferences		176			11,496			9,755			19,190
Consulting fees		228,239			76,098			336,639			353,196
Stock Based Compensation — consulting		—			—			(283	)		—
Director fees and expenses		10,215			18,114			45,490			30,814
Advisory board fees		21,874			25,722			65,108			97,866
Employee training, education, and seminars		—			27,067			5,748			68,502
Finance charges		—			4,974			63			7,450
Insurance		—			951			928			13,469
Legal and accounting		24,220			66,129			97,044			178,371
Marketing and promotion		—			25,784			12,306			48,471
Office and general expense		8,183			23,290			56,491			73,933
Publications and research		1,079			—			1,502			286
Rent expense and related		94,762			89,049			258,096			221,154
Research supplies		14,761			72,157			83,397			256,146
Travel		8,065			70,821			97,632			212,706
Total research and development	$	621,855		$	943,288		$	1,900,920		$	3,015,261
Research and development — related party:
Compensation	$	—		$	—		$	—		$	—
Benefits, payroll taxes and related		—			—			—			—
Consulting fees		—			—			—			—
Travel		—			—			—			—
Total research and development — related party	$	—		$	—		$	—		$	—
General and administrative:
Compensation	$	136,746		$	276,546		$	757,742		$	857,798
Stock Based Compensation — salaries		41,048			(44,482	)		113,098			(44,482	)
Benefits, payroll taxes and related		30,341			98,337			107,301			156,893
Depreciation and amortization expense		43,147			40,296			116,058			113,724
Conferences		11,925			6,238			15,478			39,166
Communications		7,526			5,406			21,756			19,217
Consulting fees		159,372			86,822			225,805			535,119
Stock Based Compensation — Consulting		165,750			—			164,429			—
Director fees and expenses		71,502			94,722			321,048			172,904
Advisory board		—			—			—			—
Finance charges		1,474			1,624			3,148			3,760
Employee training, education, and seminars		7			19,223			18,420			85,543
Foreign currency translation		(9,698	)		(3,419	)		(24,745	)		(9,676	)
Insurance		39,301			24,847			104,290			88,062
Legal and accounting		379,448			209,705			985,314			539,269
Marketing and promotion		42,600			21,962			78,505			126,327
Office and general expense		30,142			15,870			119,475			79,874
Publications and research		4,455			—			5,850			2,757
Rent expense and related		51,701			75,263			144,974			314,047
Transfer, license and fees		23,892			—			23,892			—
Travel		25,370			43,669			102,843			152,443
Total general and administrative	$	1,256,049		$	972,629		$	3,404,681		$	3,232,745
General and administrative — related party:
Consulting fees	$	—		$	9,370		$	—		$	98,692
Travel		—			(388	)		—			(7	)
Total general and administrative — related party	$	—		$	8,982		$	—		$	98,685
Total operating expenses	$	1,877,905		$	1,924,899		$	5,305,602		$	6,346,691

INNEXUS BIOTECHNOLOGY INC. (A Development Stage Enterprise)

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) ~~(unaudited)~~

~~12.~~Years ~~Subsequent~~ended ~~events:~~June 30, 2009, 2008 and 2007 Period from incorporation on July 20, 1997 to June 30, 2009

~~Private~~9. ~~Placement~~Share capital (continued):

~~The~~Through ~~Company~~the ~~has~~fifth ~~arranged~~anniversary aafter ~~bridge~~issuance, ~~loan~~the ~~facility~~holder, toafter benotice ~~funded~~of byredemption, ~~secured~~will have ~~promissory~~a ~~notes~~ “follow on” conversion right for 20 days at a price of $20.25. After the fifth anniversary,~~500~~ the holder will have a conversion right at the market price if the shares are issued without a four month hold period,~~000~~ or at the discount to market price permitted under the TSX Venture Exchange’s rules if issued with a four month hold period. The ~~Outside~~Series A ~~interests,~~convertible ~~board~~preferred ~~members~~shares have both an equity and ~~senior~~a ~~management~~debt ~~have~~component. ~~begun~~The ~~providing~~allocation ~~loans~~from ~~through~~equity ~~this~~to ~~facility.~~debt ~~During~~is ~~April~~recorded using the ~~Company~~effective ~~issued~~interest ~~$330~~method over the five year term of the holders’ conversion option. At June 30,~~000~~ in2009, 2008 and 2007 the ~~warrants~~allocation ~~related~~of the shares’ value to the ~~bride~~debt ~~loan~~component ~~facility~~was $2,706, $424 and $27, respectively, as reported in current liabilities.

13The Company allocated the placement proceeds to the preferred shares and warrants based on the relative fair values of each instrument. ~~Development~~The ~~Stage~~valuation ~~Products~~of the warrants using the Black-Scholes model and the following assumptions on the date of issuance resulted in a value higher than the total proceeds:

The Company has commenced multiple projects, all of which are related to the commercialization of our DXL™ technology for improving the therapeutic potency of existing monoclonal antibody products. DXL625, DXL702 and DXL1218 are current development efforts related to specific products. DXLdiagnostics is an improved antibody-based diagnostics test and our DXLmouse will facilitate in vivo recombinant production techniques of our DXL™ antibodies.


Dividend yield	0.0	%
Risk-free interest rate	3.94	%
Expected life (years)	5
Expected volatility	73	%

~~Project~~Furthermore, ~~totals~~the beneficial conversion valuation for the preferred shares also resulted in an amount larger than the total proceeds. Since both instruments individually were determined to ~~date~~have asvalues in excess of ~~March 31~~the gross proceeds, ~~2009:~~the valuation of proceeds less issuance costs was split evenly between the preferred shares and warrants, with the $1 debt portion allocated from the share value.

	DXL625			DXL702
Development expenses	$	5,573,579		$	3,541,153
Contractual reimbursements of development expenses	$	(2,000,000	)	$	(2,500,000	)
Capitalized costs	$	(2,676,903	)	$	—
Development expenses recognized in income	$	896,676		$	1,041,153
Revenues	$	—		$	—

On November 21, 2008, in a private placement, the Company issued $1,691,000 of unsecured convertible debentures. For the notes, the Company received cash proceeds of $406,528, and applied a redemption of 10,000 preferred shares — series A at $100 per share and accrued dividends on the shares of $294,466. On December 19, 2008 in a private placement, the Company issued $1,696,000 of unsecured convertible debentures. For the notes, the Company received cash proceeds of $487,155, applied a redemption of 9,240 preferred shares — series A at $100 per share and accrued dividends on the shares of $284,846. (note 6(a)). For the total issuance, the difference between the debentures issued of $3,387,000 and the cash proceeds, redemptions of preferred shares, fees related to the placement and accrued dividends was $1,086,848 which was recorded as a discount to the debentures to be charged to interest expense over the life of the convertible debentures.

~~Management Discussion and Analysis~~20 ~~for the nine months ended March 31, 2009~~

~~MANAGEMENT’S~~INNEXUS ~~DISCUSSION~~BIOTECHNOLOGY ~~AND ANALYSIS~~INC. OF(A ~~FINANCIAL~~Development ~~CONDITION~~Stage ~~AND RESULTS OF OPERATIONS~~Enterprise)

~~For~~Notes ~~The~~to ~~Nine~~Consolidated ~~Months~~Financial ~~Ended~~Statements (Expressed ~~March 31,~~in ~~2009~~Canadian dollars)

~~The~~Years ~~following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes for the year~~ ended June 30, 2009, 2008 ~~which were prepared~~ and ~~audited in~~2007 ~~accordance~~Period ~~with~~from ~~Canadian~~incorporation ~~generally~~on ~~accepted~~July 20, ~~accounting~~1997 ~~principles~~to ~~(“GAAP”). All dollar amounts are expressed in Canadian dollars unless otherwise indicated. This discussion and analysis is dated as of May~~June 1130, 2009.

~~The information provided in this document is not intended to be a comprehensive review of all matters concerning the Company~~9. ~~The~~Share ~~users~~capital of this information, including but not limited to investors and prospective investors, should read it in conjunction with all other disclosure documents provided, including but not limited to all documents filed on SEDAR (~~www.SEDAR.com~~continued). :

As(d) ~~used~~Stock in this Management’s Discussion and Analysis, the terms “InNexus,” “the Company,” “we,” “us,” or “our” mean InNexus Biotechnology Inc and its consolidated subsidiaries as a whole, unless the context indicates otherwise. Except as otherwise stated, the information contained herein is as of March 31, 2009. options:

~~Special~~At ~~Note~~June 30, on2009, ~~Forward~~InNexus ~~Looking~~Biotechnology ~~Statements~~Inc. has a stock option plan which is described below. Amounts recognized in the financial statements with respect to these plans are as follows:

Except for statements of historical fact, certain information contained herein constitutes forward-looking statements. Forward-looking statements are usually identified by our use of certain terminology, including but not limited to “will”, “believes”, “may”, “expects”, “should”, “seeks”, “anticipates” or “intends” or by discussions of strategy or intentions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results or achievements to be materially different from any future results or achievements expressed or implied by such forward-looking statements. Without limiting the generality of the foregoing, such factors may include the outcome of research and development programs, clinical trials and other scientific based activities, approval of drug applications by FDA or other regulatory bodies, the outcome of licensing and other prospective third party negotiations, actions of existing or yet unidentified competing products or companies, new scientific discoveries, changes in market conditions for the Company’s technology or products based thereon and numerous other factors, including those outlined in other disclosure documents filed by the Company on SEDAR at www.SEDAR.com. Forward-looking statements in this document are not a prediction of future events or circumstances, and those future events or circumstances may not occur. Given these uncertainties, users of the information included herein, including investors and prospective investors are cautioned not to place undue reliance on such forward-looking statements. Although we believe these forward-looking statements are based on reasonable assumptions, statements made regarding future results are subject to a number of assumptions, uncertainties and risks that could cause future results to be materially different from the results stated or implied in this document.


	Year ended June 30,
	2009		2008		2007

Total cost of stock options during the year	$	455,464	$	917,523	$	705,918

Amounts charged against income, before income tax benefit	$	455,464	$	917,523	$	705,918

1InNexus Biotechnology Inc.’s Stock Option Plan (the “Plan”) was approved by the shareholders on December 20, 2005 and last amended by the shareholders on June 30, 2009. The plan permits the grant of common share options for up to 13,924,223 shares of common stock. Stock option awards are granted with an exercise price at or above the market price of the Company shares at the date of grant. All option grants have a graded vesting schedule whereby each grant vests ratably over an eighteen month period. Certain share options provide for accelerated vesting if there is a change in control (as defined in the Plan).The fair value of each share option award is estimated on the date of grant using the Black-Scholes option pricing model based on the assumptions noted in the following table. Because fair value pricing models incorporate ranges of assumptions for inputs, those ranges are disclosed. Expected volatilities are based on historical volatility of InNexus’ shares and other factors such as expected changes in volatility arising from planned changes in InNexus’ business operations. InNexus uses historical data to estimate share option exercise and employee departure behavior used in the Black-Scholes option pricing model; groups of Plan participants (employees and non-employees) that have similar historical behavior are considered separately for valuation purposes. The expected term of share options granted is estimated as the average midpoint between vesting dates and expiration dates for the grant; it represents the estimated period of time that the options are expected to be outstanding. The risk-free rate for periods within the contractual term of the share option is based on the Government of Canada marketable bonds with an average yield of the expected lives of the options as reported by the Bank of Canada. The range of exercise prices for the stock option awards are $0.06 to $0.71 as of June 30, 2009.

~~INNEXUS BIOTECHNOLOGY INC.~~21

~~InNexus~~INNEXUS ~~Biotechnology~~BIOTECHNOLOGY ~~Inc~~INC. ~~is headquartered in Vancouver, British Columbia with principal~~ ~~management~~(A ~~and~~Development ~~developmental~~Stage ~~facilities based in Scottsdale, Arizona on the campus of The Mayo~~Enterprise) ~~Clinic. These development facilities provide validation of protein and peptide discoveries,~~ ~~enabling the Company and its strategic partners to advance novel drug therapeutics and diagnostics.~~

~~InNexus~~Notes is engaged in monetizing its technology for its own product development projects whether independently, through collaborations with strategic partners and/or through business development activities for the licensing of our technologies and services. The Company’s business strategy to ~~develop~~ ~~and~~Consolidated ~~market~~Financial ~~Dynamic Cross Linking~~ Statements (~~“DXL™”)~~Expressed ~~technology~~in toCanadian ~~the biotechnology and~~dollars) ~~pharmaceutical community launching and developing multiple product candidates. These candidates~~ include potential therapeutic and diagnostic products. The Company may be paid front-end payments, milestone payments, and royalties for the use of our technology, internal expertise for rapid R&D, and products based on DXL™ technology by emphasizing the development of great clinical and early clinical developments with an eye on commercializing these opportunities to the industry. InNexus is focused on developing products and moving them through a transaction which will provide additional funds to the Company for the creation of additional products.

~~The~~Years ~~Company~~ended ~~has~~June 30, a2009, ~~dual~~2008 ~~mission~~and of2007 Period ~~monetizing~~from ~~the~~incorporation ~~Company’s~~on ~~technology~~July 20, ~~through~~1997 ~~partnerships~~to ~~and advancing~~June 30, ~~DXL™ technology into the clinic.~~2009

~~Developing~~9. ~~DXL™~~Share ~~Technology~~ capital (continued):

InNexus developed its DXL™ technology and is using it to isolate and expand individual antibodies for the treatment of numerous diseases, including cancer. DXL™ technology is a drug development approach that adds secondary properties to monoclonal antibodies (binding is a primary property) and applies to virtually every antibody product currently in development. Adding these secondary properties can increase the potency of antibodies and present opportunities for creating new intellectual property.


	Year ended June 30,
	2009			2008			2007

Expected volatility		76 - 120	%		90 - 116	%		75 - 83	%

Weighted-average volatility		89	%		99	%		75	%

Expected dividends		—			—			—

Expected term (in years)	1.4 - 5 years			1.4 - 2.9 years			2 - 5 years

Risk-free rate		0.78% - 3.27	%		2.85 - 4.57	%		3.89 - 4.60	%

Expected forfeiture rate		1 - 11	%		6 - 11	%		—

Weighted-average issuance fair value	$	0.13		$	0.13		$	0.17

Total Intrinsic value of options exercised		—			—		$	114,700

Total fair value of options vested	$	420,442		$	1,667,890		$	705,354

~~InNexus’~~A ~~DXL™~~summary ~~technology~~of ~~has~~share ~~applications~~option ~~for~~activity ~~developers~~under the Plan as of ~~monoclonal~~June 30, ~~antibody~~2009 ~~products.~~and ~~The~~changes during ~~technology~~the ~~could~~year ~~potentially~~then ~~enable~~ended ~~the~~is ~~following.~~presented below:

• Increase potency and thus profitability of FDA-approved products. There are currently approved and pending antibody products with a large combined market potential. Such products may have consumed a significant portion of their patent life before reaching the product approval stage. Application of DXL™ technology to such products provides opportunities to extend patent life.


						Weighted-
				Weighted-		average
				average		Remaining
	Number of			Exercise Price		Contractual		Aggregate
	Options			($)		Term (Years)		Intrinsic Value

Outstanding at July 1, 2008		7,573,509		$	0.39		3.38		—

Granted		5,429,000		$	0.09		4.32		—

Exercised		—		$	0.00		—		—

Forfeited		(1,640,759	)	$	0.28		2.07		—

Expired		(220,000	)	$	0.81		—		—

Outstanding at June 30, 2009		11,141,750		$	0.25		3.55		—

Exercisable at June 30, 2009		6,771,976		$	0.35		2.77		—

• Create new patents on existing antibody diagnostics and therapeutics. Each antibody developed with DXL ™ technology may represent a new, patentable invention. This allows InNexus and partners to pursue products and markets in which there are already established competitors.22

•INNEXUS ~~Create~~BIOTECHNOLOGY ~~new~~INC. (A ~~uses~~Development ~~and~~Stage ~~large new markets for antibody products which did not previously exist.~~Enterprise)

~~DXL™~~Notes ~~technology gives us a strategic competitive advantage: the ability~~ to ~~apply~~Consolidated ~~DXL™~~Financial ~~technology~~Statements to(Expressed ~~existing~~in ~~FDA~~Canadian approved products to make them more effective without changing the fundamental characteristics of how the product seeks its target such as cancer and potentially extend their patent life. This gives us the chance to cut years of time and millions of dollars ~~off the typical~~) ~~product development cycle, allowing us to establish value for our products or ‘monetize’ our R&D efforts faster than our competitors.~~

2Years ended June 30, 2009, 2008 and 2007 Period from incorporation on July 20, 1997 to June 30, 2009

~~INNEXUS~~9. ~~BIOTECHNOLOGY~~Share ~~INC.~~ capital (continued):

~~During~~A summary of the ~~past~~status ~~year,~~of InNexus’ ~~advanced~~non-vested ~~its~~stock ~~goals~~options byas of June 30, 2009, and changes during the year then ended is as follows:

• entering into a collaborative partnership with St. Joseph’s Hospital in Phoenix, Arizona USA which will focus on the development of treatments for women with endometriosis. The first project of the collaboration is aimed at providing new treatments to attack the problem of endometriosis, a painful condition that can lead to other conditions, such as infertility.


				Weighted-
				average Grant
	Number of			Date Fair Value
	Options			($)

Nonvested at July 1, 2008		3,541,366		$	0.13

Granted		5,429,000		$	0.06

Vested		(3,923,072	)	$	0.11

Forfeited		(677,520	)	$	0.10

Nonvested at June 30, 2009		4,369,774		$	0.06

•As ~~filing~~of ~~certain~~June 30, ~~patent~~2009, ~~applications~~there ~~for~~was ~~the~~$239,378 ~~development~~ of ~~diagnostic~~total ~~and~~unrecognized ~~research~~compensation ~~tools~~cost ~~based~~related onto nonvested ~~our~~share-based ~~DXL™~~compensation ~~technology~~arrangements ~~platform,~~granted ~~including~~under ~~a quantitative amplification technology aimed at improving and accelerating~~ the ~~development~~Plan. ofThat ~~antibody-based~~cost ~~diagnostic~~is expected ~~tests offered~~ to ~~the~~be ~~pharmaceutical~~recognized ~~and~~over ~~diagnostics~~a ~~industry~~weighted-average ~~and~~period toof ~~contract research organizations~~3.6 years.

• filing for patent protection for certain in vivo recombinant production techniques of our DXL™ antibodies. The DXLmouse™ is another R&D tool that enables InNexus to target a desirable antibody, introduce the antibody into the mouse and then have that animal produce the desired antibody incorporating InNexus’ DXL™ technology.23

•INNEXUS ~~The~~BIOTECHNOLOGY ~~United States food & Drug Administration~~ INC. (~~FDA)~~A ~~completed~~Development ~~its~~Stage ~~comprehensive review of the development plans for InNexus’ lead candidate, DXL625 (CD20~~Enterprise) for the prospective treatment of Non-Hodgkin’s Lymphoma (NHL) and/or Chronic Lymphocytic Leukemia (CLL). InNexus’ submission included detailed information on plans for a Phase I clinical program, preclinical pharmacology and toxicology data and its current manufacturing. At the Pre-IND meeting, FDA supported InNexus’ current manufacturing plans stating that the plans were suitable for the manufacture of Phase I product of DXL625 onsite at InNexus. FDA also reveiwed completed animal testing and recommended a more expeditious design for the final animal studies to set the state for human studies. Per these recommendations, InNexus foresees no regulatory impediment to the initiation of human clinical studies in early 2010.

~~Advancing~~Notes ~~DXL™~~to ~~forward~~Consolidated Financial Statements (Expressed in Canadian dollars)

~~The~~Years ~~Company’s~~ended ~~advancement~~June 30, of2009, ~~DXL™~~2008 ~~technology~~and ~~toward the clinic is anticipated to involve additional~~2007 ~~partnerships~~Period orfrom ~~agreements.~~incorporation Inon ~~fiscal 2008~~July 20, ~~InNexus~~1997 ~~completed~~to aJune 30, ~~significant partnership agreement~~2009 ~~and we continue negotiations with multiple potential partners for other collaborative arrangements.~~

~~Although~~9. Share ~~DXL™~~capital ~~is a fundamentally diverse technology with important synergies for the development of~~(continued): ~~products, partners and other uses such as diagnostics, we believe our best opportunities come from rapid product development using our DXL™ technology.~~

~~Our~~(e) Share ~~strategy~~purchase ~~for growth includes the following elements~~warrants:

• For ~~Invest~~the ~~financial,~~year ~~human~~ended ~~and~~June 30, ~~lab resources in DXL625 (CD20) and DXL702 (HER2/neu) for near-term growth.~~2009:

In the past year:


Exercise	Exercise								Expired/
Expiry Date	price		June 30, 2008		Granted		Exercised		forfeited			June 30, 2009

August 10, 2008		0.50		177,778		—		—		(177,778	)		—
August 25, 2008*		0.50		6,366,317		—		—		(6,366,317	)		—
March 15, 2009		1.17		322,925		—		—		(322,925	)		—
January 26, 2010		0.67		150,000		—		—		—			150,000
January 26, 2010		1.34		150,000		—		—		—			150,000
February 6, 2010		0.22		1,136,363		—		—		—			1,136,363
October 7, 2010		0.25		5,283,000		—		—		—			5,283,000
October 7, 2010		0.25		660,000		—		—		—			660,000
June 17, 2011		0.25		1,320,200		—		—		—			1,320,200
June 17, 2013		0.35		19,720,000		—		—		—			19,720,000
April 1, 2014		0.10				500,000		—		—			500,000
April 2, 2014		0.10				483,397		—		—			483,397
April 29, 2014		0.10				253,876		—		—			253,876
May 1, 2014		0.10				179,052		—		—			179,052
May 14, 2014		0.10				355,426		—		—			355,426
May 27, 2014		0.10				93,329		—		—			93,329
May 28, 2014		0.10				135,401		—		—			135,401
June 1, 2014		0.10				424,750		—		—			424,750
June 12, 2014		0.10				164,727		—		—			164,727
June 19, 2014		0.10				232,085		—		—			232,085
June 30, 2014		0.10				234,839		—		—			234,839
None		0.00		5,646,395		—		—		—			5,646,395


				40,932,978		3,056,882		—		(6,867,020	)		37,122,840

•For ~~we announced preliminary data showing an increase of potency of DXL625, compared with Rituxan®. Our data shows that DXL625 showed increased binding to~~ the ~~target~~year ~~antigen~~ended (CD20) on non-hodgkin’s lymphoma (“NHL”) tumor cells. Studies done at InNexus have also discovered that DXL625 has greater killing potency than Rituxan® in cell lines of both moderate and low expressors of CD20June 30, the target used to attack NHL. Additional results demonstrated DXL625 more potently induced apoptosis (cell suicide) in B-cell lymphoma cells and B-cell leukemia (Hairy Cells). Data showing that the mechanisms of inducing apoptosis is via DXL-induced antibody crosslinking introduces an important advantage over Rituximab and has the potential to overcome certain forms of resistance to efficacy of anti-CD20 treatment.2008:


Exercise	Exercise								Expired/
Expiry Date	price		June 30, 2007		Granted		Exercised		forfeited			June 30, 2008

September 6, 2007		0.30		1,605,000		—		—		(1,605,000	)		—
August 10, 2008		0.50		177,778		—		—		—			177,778
August 25, 2008*		0.50		6,366,317		—		—		—			6,366,317
March 15, 2009		1.17		322,925		—		—		—			322,925
January 26, 2010		0.67		150,000		—		—		—			150,000
January 26, 2010		1.34		150,000		—		—		—			150,000
February 6, 2010		0.22		—		1,136,363		—		—			1,136,363
October 7, 2010		0.25		5,283,000		—		—		—			5,283,000
October 7, 2010		0.25		660,000		—		—		—			660,000
June 17, 2011		0.25		—		1,320,200		—		—			1,320,200
June 17, 2013		0.35		—		19,720,000		—		—			19,720,000
None		0.00		1,646,395		4,000,000		—		—			5,646,395


				16,361,415		26,176,563		—		(1,605,000	)		40,932,978

~~INNEXUS~~* 65% ~~BIOTECHNOLOGY~~warrants ~~INC~~must be remitted in sufficient numbers to allow issuance of common shares at their 100% equivalent units. All warrants reported are reported as 100% equivalent units.

• we completed a large scale primate study of DXL625. The single injection, multidose test provided preliminary toxicity and pharmokinetic data of our product and demonstrated B-cell depletion even at the lowest dose of DXL625 tested (1 mg/kg). No adverse events were observed and complete recovery of B cells was seen in all cynomolgus monkeys. The study represents the pilot portion of our drug development plan and has provided data to plan the IND-enabling long term multidose study that will move us toward human clinical trial testing with DXL625. Results of this study were presented at the 2009 AACR meeting.24

•INNEXUS weBIOTECHNOLOGY ~~announced the results of an extensive mouse tumor study demonstrating superiority of InNexus’ DXL625~~ INC. (~~CD20)~~A ~~versus~~Development ~~Rituxan®~~Stage in the xenograft model. An independent group investigating the survival of mice intravenously injected with B-lymphoma cells and treated subsequently with DXL625 showed a significant improvement in outcome compared to animals treated with equivalent doses of Rituxan®.Enterprise)

•Notes ~~Launch~~to ~~additional~~Consolidated ~~DXL~~Financial ™Statements (Expressed ~~based~~in ~~products~~Canadian dollars)

•Years weended ~~added~~June 30, ~~a new product~~2009, ~~DXLr120~~2008 ~~(CD20). This is the third product added to the growing InNexus pipeline~~ and ~~was~~2007 Period ~~developed~~from ~~using~~incorporation ~~new~~on ~~recombinant~~July 20, ~~methods~~1997 to ~~produce a DXL CD20 antibody. In addition~~June 30, ~~recombinant forms of DXL702 are being prepared and tested for enhanced potency.~~2009

~~• we have shown that controlled oxidation of tryptophan residues in the V region of certain antibodies can produce products with properties similar to the DXL antibodies~~9. Share ~~These~~capital ~~data were presented at the 2009 AACR meeting. Patent application for this novel method is sought.~~(continued):

•In weJune 2008, ~~announced~~ the ~~development~~Company ofissued a4,000,000 ~~new~~prepaid ~~antibody~~warrants, ~~product~~19,720,000 ~~from~~stock ~~its~~purchase warrants ~~DXL~~and ~~platform technology~~1, ~~DXL1218 (EGFR)~~320,200 ~~for~~agent ~~the~~warrants ~~prospective~~in ~~treatment~~connection ofwith ~~colorectal~~a ~~cancer,~~brokered ~~for~~private ~~which~~placement ~~recent~~(see note ~~experimental data suggests that DXL1218~~ 8(~~EGFR~~a)). isThe ~~superior~~prepaid towarrants ~~competing~~have ~~commercialized~~no ~~products~~expiry ondate ~~the~~and ~~market,~~no ~~such~~exercise asprice. ~~ERBITUX~~The ~~(cetuximab),~~stock purchase inwarrants ~~terms of potency~~ and ~~efficacy.~~agent ~~Different~~warrants ~~forms~~may ofeach ~~this antibody will~~ be ~~prepared~~converted ininto ~~order~~one tocommon ~~select~~share ~~those~~of ~~with~~the Company ~~maximum~~at ~~efficacy~~exercise ~~and~~prices ~~minimum off target reactivity to lessen known side-effect~~ of ~~treatment~~$0.35 ~~with~~and ~~EGFR~~$0.25, ~~antibodies~~respectively.

•The westock ~~filed~~purchase ~~certain~~warrants ~~patent~~and ~~applications~~agent ~~for~~warrants ~~the~~have ~~development~~exercise periods of ~~diagnostic~~five and ~~research~~three years, ~~tools based on our DXL™ technology platform~~respectively. The ~~tools~~prepaid ~~continue~~warrants ~~development~~were asvalued ausing ~~quantitative~~the ~~amplification~~Company’s ~~technology~~stock ~~aimed~~price ~~at improving~~ and ~~speeding up~~ the ~~development~~stock ofpurchase ~~antibody-based~~and ~~diagnostic~~agent ~~tests~~warrants ~~offered~~were tovalued using the ~~pharmaceutical~~Black-Scholes ~~and~~model ~~diagnostics~~using ~~industry~~the assumptions ~~and~~in tonote ~~contract research organizations~~8(a).

4In February 2008, the Company issued 1,136,363 stock purchase warrants in a private placement with the Chief Executive Officer. The warrants have an exercise price of $0.22 and may be exercised over a 2 year period. The warrants were valued using the Black-Scholes model using the assumptions in note 8(a).

~~INNEXUS~~In ~~BIOTECHNOLOGY~~the ~~INC~~fourth quarter of fiscal year 2009, the Company issued 3,056,882 stock purchase warrants to lenders related to loans made to the Company. The warrants were issued by 1) dividing each lender’s loan value by b) the then prevailing market price c) multiplied by 25%. The warrant price was equal to the greater of $0.10 or the previous day closing market price of the Company’s common stock. The stock purchase warrants are exercisable for the earlier of a period of 60 months from closing or complete repayment of the total loan.

•Prepaid wewarrants ~~filed~~are ~~for~~included ~~patent~~in ~~protection~~the ~~for~~Company’s ~~certain~~loss inper ~~vivo~~share ~~recombinant~~calculation ~~production~~because ~~techniques~~ of ~~our~~their equivalency ~~DXL™ antibodies. The DXLmouse™ is another R&D tool that enables InNexus~~ to ~~target~~common ~~a desireable antibody, introduce the antibody into the mouse and then have that animal produce the desired antibody incorporating InNexus’ DXL™ technology~~shares.

•10. ~~Capture~~Net ~~opportunities~~loss ~~with~~per ~~collaborations~~share: Basic and diluted losses per share have been computed by dividing the net loss available to common shareholders including prepaid warrant holders for each respective period by the weighted average shares outstanding during that period. All non-prepaid warrants, ~~licensing~~options and~~/or~~ ~~joint~~convertible ~~activities~~preferred shares representing 5,556,499, 10,550,972, and 19,685,719 incremental shares for the years ending June 30, 2009, 2008 and 2007, respectively, have been excluded from the computation of diluted loss per share as they are antidilutive due to the losses generated. In fiscal 2009, 2008 and 2007, net loss available for common shareholders has been increased by $144,234, $244,454 and $359,087, respectively, for accrued dividends payable to shareholders of preferred stock — Series A.

• we entered into a collaborative partnership with St. Joseph’s Hospital in Phoenix, Arizona USA which will focus on the development of treatments for women with endometriosis. The first project of the collaboration is aimed at providing new treatments for endometriosis, a painful condition that can lead to other conditions, such as infertility.25

~~R&D~~INNEXUS ~~investments~~BIOTECHNOLOGY ~~are not our only strategy for driving growth~~INC. ~~InNexus continues to work with~~ ~~collaborators~~(A ~~and~~Development ~~new~~Stage ~~corporate acquaintances to conduct proof-of-concept and joint scientific~~Enterprise) ~~exploration activities for the potential development of innovative products and technologies.~~

~~Appointments~~Notes ofto ~~Officers~~Consolidated ~~and~~Financial ~~Directors~~Statements (Expressed in Canadian dollars)

AsYears ofended ~~March~~June 3130, 2009, ~~the~~2008 ~~Board of Directors consisted of five members: Jeff Morhet, CEO~~ and ~~Chairman~~ ~~of the Board; Wade Brooksby, CFO; Dr. Leroy Chiao, Compensation Committee Chair; Dr. J.~~2007 ~~Donald~~Period ~~Capra,~~from ~~Chair~~incorporation ofon ~~the Scientific Advisory Board; and David Warden. In addition, officers include Dr.~~July ~~Thomas Kindt~~20, ~~Chief~~1997 ~~Scientific~~to ~~Officer; and Dr.~~June ~~Jur Strobos~~30, ~~VP Clinical and Regulatory~~2009 ~~Affairs.~~

~~During the third quarter of fiscal year 2009, the Company accepted the resignations of Laurence Luke, former Audit Committee Chair and R~~11. ~~Glenn~~Income Williamson, former Corporate Governance Committee Chair. Responsibility for the audit and compensation committees of the Board were revised during the third quarter and now consist of independent directors Leroy Chiao, Governance and Compensation Committee Chair and David Warden, Audit Committee Chair. These committees were first established in fiscal year 2007. taxes:

~~Establishment~~Substantially all of the ~~Scientific~~difference ~~Advisory~~between ~~Board~~the actual tax expense (recovery) of nil and the expected federal and provincial/state statutory corporate income tax recovery relates to losses not recognized.

~~InNexus~~(a) ~~charges~~The ~~its~~significant ~~Scientific~~components ~~Advisory~~of ~~Board with~~ the ~~responsibility~~Company’s tofuture ~~oversee~~income ~~technological development,~~tax ~~collaborate~~assets ~~on the best uses~~ and ~~marketability~~liabilities ofat ~~intellectual~~June ~~property~~30, ~~and advise management on best practices for conducting ongoing development to effect the most efficient marketability of existing and potential technology. On March 31,~~ 2009, ~~our Scientific Advisory Board included Chair Dr. J. Donald Capra~~ and ~~members~~2008 ~~Dr. Carlos~~are ~~Arteaga,~~as ~~Dr. Judith James, Dr. Ronald Levy, Dr. John Minna, Dr. Ellen Vitetta, Dr. Martin Weigert and Dr. Maurizio Zanetti.~~ follows:


	2009			2008

Future income tax assets (liabilities):
Equipment and other assets	$	50,000		$	57,000
Share issue costs		192,000			377,000
Capitalized development cost		(950,000	)
Tax effect of losses carried forward:
Canada		1,400,000			1,300,000
United States		6,400,000			1,500,000


Total future income tax assets		7,092,000			3,234,000

Valuation allowance		(7,092,000	)		(3,234,000	)


Future income tax assets, net of allowance	$	—		$	—

~~INNEXUS~~(b) ~~BIOTECHNOLOGY~~Income ~~INC~~tax expense (recovery) before valuation allowances differs from that which would be expected from applying the combined effective Canadian federal and provincial income tax rates of 30. 32% to loss before income taxes. The difference results from the following:

Private Placements of Securities


	Year ended June 30,
	2009			2008			2007

Expected income tax (recovery)	$	(2,490,000	)	$	(1,785,000	)	$	(1,577,000	)
Difference resulting from:
Share issuance costs		(90,000	)		(95,000	)		(63,000	)
Increase in valuation allowance and other		2,580,000			1,880,000			1,640,000


Future income taxes (recovery)	$	0		$	0		$	0

On(c) ~~December 19,~~The ~~2008 in a private placement, the~~ Company ~~issued~~has ~~$1,796,000 of unsecured convertible debentures. The notes mature on November 21, 2010 and accrue interest at 10% payable quarterly beginning November 21, 2009. The notes are convertible at~~ the ~~option~~following ofapproximate ~~the~~unused ~~holder~~Canadian ~~into~~tax ~~common shares~~deductions ofavailable ~~the~~as ~~Company~~ at aJune ~~conversion price of $0.10 per common share. The Company may opt to redeem the convertible debentures at the $0.10 conversion price if the Company’s common stock price exceeds $0.~~30 ~~for thirty consecutive trading days prior to the maturity date. For the notes~~, the Company received cash proceeds of $580,154, applied a redemption of 9,240 preferred shares — series A at $100 per share and accrued dividends on the shares of $284,846. A non-related party received a $7,000 finder’s fee in accordance with policies of the TSX Venture Exchange. 2009:

On November 21, 2008, in a private placement, the Company issued $2,368,000 of unsecured convertible debentures. The notes mature on November 21, 2010 and accrue interest at 10% payable quarterly beginning November 21, 2009. The notes are convertible at the option of the holder into common shares of the Company at a conversion price of $0.10 per common share. The Company may opt to redeem the convertible debentures at the $0.10 conversion price if the Company’s common stock price exceeds $0.30 for thirty consecutive trading days prior to the maturity date. For the notes, the Company received cash proceeds of $840,777, satisfaction of accrued and future expenses of $232,751 and applied a redemption of 10,000 preferred shares — series A at $100 per share and accrued dividends on the shares of $294,466 (note 8(c)).


Share issue costs		630,000
Other		150,000


Future Canadian income deductions	$	780,000

~~$483~~At June 30,~~000~~ of2009, the ~~placement~~Company ~~was~~has ~~made~~available ~~with~~losses ~~board~~for ~~members~~tax ~~and~~purposes ~~senior~~in ~~management~~Canada of ~~the~~approximately $4,700,000 ~~Company~~which may be applied to reduce Canadian taxable income until 2029. InThe Company has ~~addition,~~US anet ~~non-related~~operating ~~party~~losses ~~received~~of aapproximately US$914,~~100~~900,000 ~~finder’s~~which ~~fee~~may inbe ~~accordance~~applied ~~with~~to ~~policies~~reduce US taxable income until 2029. The use of the ~~TSX~~Company’s net operating loss carry forwards may be limited due to ~~Venture~~issuances ~~Exchange~~of equity securities and related changes in ownership.

~~Results of Operations~~26

~~The~~INNEXUS ~~details~~BIOTECHNOLOGY ~~of selected, significant differences between the nine months ended March 31, 2009 and~~INC. ~~the~~(A ~~nine~~Development ~~months~~Stage ~~ended March 31, 2008 are as follows:~~Enterprise)

~~Research~~Notes ~~and~~to ~~Development:~~Consolidated ~~During~~Financial ~~the quarter, gross Research and Development expenses decreased by~~Statements ~~$321,433, a decrease of 34%~~ (~~2009~~Expressed —in ~~$621,855;~~Canadian ~~2008 — $943,288~~dollars)~~. There were significant decreases~~ ~~in almost every category, offset by increases in consulting fees to complete animal testing.~~

6Years ended June 30, 2009, 2008 and 2007 Period from incorporation on July 20, 1997 to June 30, 2009

~~INNEXUS~~12. ~~BIOTECHNOLOGY~~Operating ~~INC.~~ expenses: The Company’s operating expenses consist of the following:

With respect to the Research and Development expenses, the following significant changes during the nine months ended March 31, 2009:


	Year ended June 30,
	2009			2008		2007
Research and development:
Compensation	$	612,398		$	815,957	$	146,395
Benefits and payroll taxes		43,673			200,083		25,445
Amortization expense		256,855			344,843		87,036
Communications		1,201			21,468		—
Conferences and employee training		2,923			47,290		71,276
Consulting fees		494,255			476,127		512,351
Stock based compensation		85,958			395,226		189,838
Scientific advisory board		88,319			113,660		—
Director fees		52,848			35,869		—
Legal and accounting		115,658			156,560		—
Office and general expense		59,065			117,014		12,598
Insurance					14,980		—
Marketing		2,984			57,540		—
Rent		359,448			362,049		147,355
Research Supplies		95,986			324,624		118,120
Travel		33,783			329,969		51,214

Total research and development		2,305,354			3,813,259		1,361,628
Research and development — related party
Compensation		—			—		29,272
Benefits and payroll taxes		—			—		1,842
Consulting fees		—			—		673,658
Stock based compensation		—			—		62,140

Total research and development - related party		—			—		766,912
General and administrative
Compensation		873,592			863,122		107,966
Benefits and payroll taxes		117,855			190,928		78,947
Amortization expense		152,869			156,910		186,904
Communications		32,693			29,613		99,242
Conferences and employee training		63,998			142,563		—
Consulting fees		623,194			529,044		533,610
Stock based compensation		254,980			448,438		328,920
Director fees		369,937			255,030		70,257
Finance charges		5,597			4,359		7,015
Foreign currency translation		(44,723	)		175,969		112,988
Insurance		132,112			109,045		59,641
Legal and accounting		1,062,647			846,707		716,845
Marketing and promotion		125,405			152,061		79,616
Office and general		144,134			158,931		213,402
Publications and research		10,340			3,049		4,290
Rent		196,113			256,982		466,731
Transfer, license and fees		69,373			11,174		9,108
Travel		198,628			177,359		260,077

Total general and administrative:		4,388,744			4,511,284		3,335,559
General and administrative — related party
Benefits and payroll taxes		—			—		197,490
Consulting fees		8,227			24,826		—
Stock based compensation		—			73,859		125,020

Total general and administrative — related party		8,227			98,685		322,510

Total operating expenses	$	6,702,325		$	8,423,228	$	5,786,609

• Compensation decreased $344,803, or 40% (2009 — $513,997; 2008 — $858,800). Employee benefits and payroll taxes decreased during the same time period from $106,544 in 2008 to $43,997 in 2009. Benefit costs were higher in the prior year for both the cost of initial benefit implementation and the costs incurred to reduce the workforce at our Kentucky research facility which was closed in the prior year. Expenses in both categories benefited from the capitalization of DXL625 expenses.27

•INNEXUS ~~Research~~BIOTECHNOLOGY ~~supplies decreased $172,749, or 67%,~~ INC. (~~2009~~A —Development ~~$83,397;~~Stage ~~2008 — $256,146~~Enterprise)~~. The decrease reflects the increased costs of stocking new laboratory space during the prior year and capitalization of supplies specifically related to product DXL625.~~

•Notes ~~Travel expenses related~~ to ~~research~~Consolidated ~~and~~Financial ~~development as well as conferences and employee training decreased $115,074~~ Statements (~~2009~~Expressed ~~— $97,632; 2008 — $212,706), partially due to consolidating lab space~~ in ~~Scottsdale,~~Canadian ~~AZ and capitalization of expenses specifically related to product DXL625.~~dollars)

•Years ~~Amortization~~ended ~~expense decreased by $103~~June 30,~~808~~ ~~from $294~~2009,~~319~~ in 2008 toand ~~$190,511~~2007 Period ~~in 2009. The reduction in amortization resulted~~ from ~~several~~incorporation ~~factors:~~on ~~a slowdown in asset purchases as the laboratories became more fully equipped~~July 20, ~~capitalization~~1997 ~~of amortization costs related specifically~~ to ~~product DXL625 (costs which had previously been expensed)~~June 30, ~~and some intellectual property costs which had completed full amortization during the year, and thus are no longer generating amortization expense.~~2009

~~General and Administrative: During the nine months ended March 31, 2009, General and Administrative expenses increased $73,251, an increase of 2% (2009 — $3,404,681; 2008 — $3,331,251)~~13. ~~Related party~~Subsequent general and administrative expenses in fiscal 2008 included $98,685 of stock based compensation and consulting fees for directors of the Company who are not also officers. Generally, the increase in gross general and administrative expenses in the nine months ended March 31, 2009 correlates with increases in legal and accounting fees, stock based compensation-consulting and salaries, and director fees and expenses. These increases were partially offset by lower consulting fees, reduced rent expense and compensation. Decreases reflect the Company’s transition to using employees for professional services and becoming more efficient in its marketing activities and use of office space for G&A activities. events:

~~With~~From ~~respect~~the toperiod ~~general~~from ~~and~~July 1, ~~administrative~~2009 ~~expenses~~to October 22, 2009, the ~~following~~Company ~~significant~~borrowed ~~increases~~US$1,012,500 ~~occurred~~under ~~during~~their loan facility and issued 3,708,972 share purchase warrants to the ~~year~~lenders, ~~compared~~of ~~with~~which US$387,500 was borrowed from senior management of the ~~same~~Company ~~period~~and 1,495,178 warrants were issued to senior management in ~~the~~lieu ~~prior~~of ~~year:~~salaries.

•On ~~Legal~~August 5, ~~and~~2009, ~~accounting~~the ~~fees~~Company’s ~~increased~~Board ~~$446~~of Directors approved the grant of 500,~~045~~000 ~~(2009~~incentive common —options ~~$985~~to Jeff Morhet,~~314;~~ ~~2008~~President —and Raymond Mullaney, a director, at a price of $~~539269)~~0.08 each ~~Increases~~for ~~resulted~~a ~~from~~term aof ~~higher~~five ~~level~~years. The options vest over 18 months. Concurrently, an equal number of ~~accounting~~the ~~and~~Company’s ~~legal~~unissued ~~activity~~common shares were allocated for ~~corporate~~the ~~governance~~exercise ~~activity,~~of athe ~~larger~~options. ~~product~~As ~~line~~of October 22, ~~increased~~2009, ~~patent~~12,029,500 ~~activity~~options and 40,831,811 ashare ~~fee~~purchase ~~dispute~~warrants were outstanding with ano ~~prior~~exercises ~~professional~~subsequest ~~service~~to ~~provider~~June 30, ~~and~~2009. ~~litigation~~During ~~relating~~the toperiod ~~claims~~from ~~arising~~July 1, ~~from~~2009 ~~its~~to ~~operations~~October 22, in2009, ~~the~~112,700 ~~normal~~incentive ~~course~~common ofoptions ~~business~~were forfeited.

•On ~~Stock~~August 4, ~~based~~2009, ~~compensation-consulting~~a ~~increased~~holder ~~from~~of ~~nil~~a in$5,000 ~~2008~~convertible todebenture ~~$164~~voluntarily converted it into 52,~~429~~644 inshares of common stock, including interest . On September 28, 2009, a holder of a $32,000 convertible debenture voluntarily converted it into 343,321 shares of common stock, including interest.

•14. ~~Stock~~Development ~~based~~Stage ~~compensation-salaries is higher than 2008 by $157,580.~~Products:

•The ~~Director~~Company ~~fees~~has ~~increased~~commenced ~~$148~~multiple projects,~~144~~ ~~(2009~~all —of ~~$321,048;~~which ~~2008~~are —related ~~$172,904)~~to as the ~~Company~~commercialization of ~~incurred~~our ~~costs~~DXL™ technology for ~~more~~improving ~~frequent~~the ~~meetings~~therapeutic potency of existing monoclonal antibody products. DXL625, DXL702, DXL1218 and ~~travel~~current development efforts related to specific products. DXLdiagnostics is an ~~increased~~improved ~~corporate~~antibody-based ~~activity~~diagnostics ~~level~~test and our DXLmouse will facilitate in vivo recombinant production techniques of our DXL™ antibodies.

7Project totals to date as of June 30:

INNEXUS BIOTECHNOLOGY INC.


	2009				2008
	DXL625		DXL702		DXL625			DXL702

Capitalized costs	$	2,565,000	$	—	$	1,310,905		$	—

Contractual reimbursements of development expenses	$	—	$	—	$	(1,310,905	)	$	—


	$	2,565,000	$	—	$	—		$	—


Development expenses	$	—	$	2,048,489	$	1,788,486		$	1,127,218

Contractual reimbursements of development expenses	$	—	$	—	$	(1,788,486	)	$	(1,127,218	)


Development expenses recognized in income	$	—	$	2,048,489	$	—		$	—

• Consulting fees decreased $309,314 in the current year from $535,119 in the prior to $225,805 in the first nine months of the current year as the company continued its replacement of outside consultants with internal personnel for recurring matters and began a stock based compensation plan for selected consultants.28

•INNEXUS ~~Compensation~~BIOTECHNOLOGY ~~decreased by $100,056~~ INC. (~~2009~~A —Development ~~$757,742;~~Stage ~~2008 — $857,798~~Enterprise) during the nine months ended March 31, 2009 compared to the same period in the prior year. Decreases resulted primarily from executive staff declining a regular wage, and receiving compensation in stock instead. This reduction was partially offset by the addition of personnel to oversee regulatory compliance requirements. InNexus’ rapid approach toward FDA applications for its expanding developing product line has created a need for regulatory compliance personnel, as have new financial compliance requirements for internal controls over financial reporting, the change in accounting to International Financial Reporting Standards and continued compliance with securities regulations in both Canada and the United States. In addition, the Company added administrative support personnel to address increased operational needs.

~~During~~Notes ~~the~~to ~~nine~~Consolidated ~~months~~Financial ~~ended March 31, 2009, the Company received interest income of $1,377~~Statements (~~March 31,~~Expressed ~~2008~~in —Canadian ~~$67,041~~dollars) ~~and interest expense of $414,189 (March 31, 2008 — $176,776). Prior~~ year saw larger average cash balances due to equity placements and greater amounts of stock option and warrant exercises while the rate of interest on preferred shares — series A increased during the current year, coupled with amortization of discount on notes payable, and interest accrual on convertible debentures.

~~Selected~~Years ~~Annual~~ended ~~Information~~June 30, 2009, 2008 and 2007 ~~Expressed~~Period infrom ~~Canadian~~incorporation $on July 20, 1997 to June 30, 2009

	Year ended			Year ended			Year ended
	June 30, 2008			June 30, 2007			June 30, 2006
Revenue		1,010			15,274		Nil
Net loss		5,887,642			5,172,010			2,932,875
Per share — basic and diluted		(0.11	)		(0.13	)		(0.12	)
Total assets		6,206,501			7,489,030			1,365,446
Long-term liabilities	Nil				1,492,142		Nil
Dividend accrued on Preferred Shares — Series A		603,541			359,087			160,329

15.

United States generally accepted accounting principles:

8These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Canada which are substantially the same as measurement principles applicable in the United States and practices prescribed by the United States Securities and Exchange Commission, except for the following:

~~INNEXUS~~(a) ~~BIOTECHNOLOGY~~Technology ~~INC.~~ rights:

~~Summary~~Under Canadian generally accepted accounting principles (“Canadian GAAP”), development costs for a project that meets accepted criteria for deferral and amortization, or expenditures relating to the acquisition of ~~Quarterly~~technology ~~Results~~and other assets and patent and ~~Expressed~~trademark rights which relate to in-process ~~Canadian~~research and development, are deferred and amortized to expense in a rational and systematic manner. Under United States generally accepted accounting principles ($“US ~~thousands~~GAAP”), development costs and acquisitions that reflect in-process research and development are charged to expense when incurred. In the Company’s case, the technology rights acquired in fiscal 2005 would be considered in-process research and development and accordingly would have been charged to expense in 2005 for US GAAP purposes. In February 2008, the Company met capitalization criteria for its DXL625 drug development product and began capitalization of associated costs; the DXL625 costs capitalized during the year ended June 30, 2008 were subject to reimbursement under a development agreement (note 8(a)) and as a result no net capitalized costs were recognized on the balance sheet. During the year ended June 30, 2009, the Company capitalized $2,565,000 in unreimbursed development expenses

	Q3-09			Q2-09			Q1-09			Q4-08			Q3-08			Q2-08			Q1-08
Revenue	$	—		$	—		$	—		$	—		$	—		$	1		$	—
Net Income
(Loss) (1)	$	(2,101	)	$	(1,864	)	$	(1,757	)	$	(1,792	)	$	(1,133	)	$	(2,047	)	$	(915	)
(Per Share) (2)	$	(0.03	)	$	(0.03	)	$	(0.03	)	$	(0.03	)	$	(0.03	)	$	(0.05	)	$	(0.02	)

(b)

Stock-based compensation:

(1)		Net loss per quarter and on a per share basis is the same as net loss before extraordinary items.
(2)		Diluted loss per share is the same as basic loss per share as the effect of outstanding options, warrants and other dilutive instruments would be anti-dilutive.

Compensation expense recognized for US GAAP purposes reflects estimates of employee award forfeitures and any change of estimates thereof are reflected in the period of change. Canadian GAAP does not require the estimation of award forfeitures. For US GAAP purposes, the Company has recognized a cumulative effect adjustment to reflect the change in accounting policy related to the estimated forfeitures for unvested stock options at July 1, 2006 of $66,869 as a reduction to contributed surplus and loss. In addition, the amount of compensation expense for the year ended June 30, 2007 for US GAAP purposes differs from the amount for Canadian GAAP purposes, representing the impact of estimated forfeitures.

~~Trend~~During ~~analysis:~~fiscal 2007, nine options holders who were classified as non-employees for option valuation and reporting purposes under SFAS No. 123(R) met the criteria for re-classification as employees, and were reclassified on the specific dates the criteria were met between from October 1, 2006 and March 16, 2007.

~~Throughout the nine months ended March 31, 2009 the Company continued to perform in accordance with~~29 the business strategy it built in prior years, whereby additional pre-clinical drug candidates were selected and entered into development using the application of our DXL™ technology. Specifically, drug candidate DXL1218 was added to our existing products, DXL625, DXL702, DXLr120, our DXLdiagnostics™ tool and our patented DXLmouse™.

~~Accordingly,~~INNEXUS ~~the~~BIOTECHNOLOGY Company continued an operating financial trend established in the prior year as research and development activity increased consistently from prior year, resulting from the drive of development activity for the DXL™ productsINC. ~~The increase in development activity resulted in a~~ ~~proportionate~~(A ~~increase~~Development inStage ~~net loss for the first nine months of fiscal year 2009 since the~~Enterprise) development costs up to the amount of the contract were reimbursable under the Company’s contract with Royalty Pharma. As a result of the exhaustion of reimbursements, net loss increased during the nine months ended March 31, 2009. Net loss for the same period in the prior year was reduced by $1,901,251 due to the reimbursements. The Company is not expecting further development cost reimbursements under the contract and is expecting that net loss will increase in future periods as a result.

~~Net~~Notes ~~cash flows for the first nine months of fiscal year 2009 were similar~~ to ~~the~~Consolidated ~~first~~Financial ~~nine months~~Statements of(Expressed ~~the prior year, with notable exceptions~~ in ~~cash~~Canadian ~~flows from the various activities:~~dollars)

	Three months ended March 31,						Nine months ended March 31,
	2009			2008			2009			2008
Cash flows from:
Operating activities	$	337,824		$	1,297,199		$	(1,448,870	)	$	(1,477,734	)
Investing activities		(1,179,385	)		(2,017,439	)		(2,735,203	)		(1,444,811	)
Financing activities		—			316,251			1,096,162			316,251
Decrease in cash and cash equivalents	$	(841,561	)	$	(403,989	)	$	(3,087,911	)	$	(2,606,294	)

Years ended June 30, 2009, 2008 and 2007
Period from incorporation on July 20, 1997 to June 30, 2009

9 15. United States generally accepted accounting principles (continued):

~~INNEXUS~~The ~~BIOTECHNOLOGY~~Company ~~INC~~estimates forfeitures for unvested options as a percentage of stock-based compensation. For the years ended June 30, 2009 and 2008, the Company applied the following estimated forfeiture percentages for employees and consultants, which management considered to be a reasonable estimate based on actual forfeitures:

Cash generated during the third quarter, 2009 operating activities resulted from increases in accounts payable and liabilities. Cash generation through operating activities during the same quarter in 2008 was a result of $1,708,518 of funds committed for drug development.

~~Capitalization~~Cash ofreceived ~~development~~during ~~costs~~the ~~for~~years ~~DXL625~~ended ~~accounted~~June 30, ~~for~~2009 ~~nearly~~and ~~all~~2008 ~~cash~~related ~~requirements~~to ~~for~~ the ~~third~~ ~~quarter~~exercise ~~and~~of stock ~~full~~options ~~year~~was ~~2009,~~$0 ~~while~~and ~~the prior year showed~~ $149,~~007~~950,~~490~~ ~~for purchases of equipment~~respectively.

~~Cash~~(c) ~~provided~~Additional bydisclosures ~~financing~~required ~~activities~~for indevelopment ~~the~~stage ~~current year were from the issuance of debentures in November and December. No cash was provided through financing activities during the quarter ended March 31, 2009.~~ companies:

InUS ~~addition~~GAAP torequires ~~contractual~~summary ~~cost~~disclosure ~~reimbursements~~of ~~for~~all ~~development~~shareholders’ ~~activities~~equity ~~under~~transactions ~~the~~from ~~Royalty Pharma~~inception ~~contract,~~to the ~~Company~~latest ~~relied~~reporting onperiod ~~its~~for ~~traditional~~companies ~~trend~~in ofthe ~~equity~~development ~~financing~~stage. ~~while~~Share ~~also~~capital ~~using~~and additional ~~its~~paid-in ~~cash balances~~capital transactions for ~~operations.~~InNexus ~~The~~and ~~Royalty~~Cusil, ~~Pharma~~subsequent ~~contract~~to ~~calls~~the ~~for~~June 27, 2003 ~~potential~~transaction ~~additional~~with ~~cash~~InNexus, ~~proceeds for~~are ~~meeting~~disclosed ~~specified~~below; ~~milestones~~However, ~~and~~the statement of deficit accumulated during the ~~Company~~development ~~may~~stage ~~meet~~only ~~these~~discloses ~~milestones~~changes induring ~~future~~the periods since ~~resulting~~the inyear ~~cash~~ended ~~infusions~~June 30, ~~for~~2006. ~~additional~~Accordingly, the detailed statement of deficit accumulated during the development ~~efforts.~~stage for the period from inception on July 20, 1997 to June 30, 2009 is as follows:

~~Liquidity~~Loss ~~and~~for ~~Capital~~the ~~Resources~~period ended:

At March 31, 2009, the Company had negative working capital of $2,504,992 compared to a positive working capital of $2,205,740 at June 30, 2008.


December 31, 1997	$	239,511
December 31, 1998		76,113
December 31, 1999		—
December 31, 2000		—
December 31, 2001		313,560
June 30, 2002		256,878
June 30, 2003		466,862
June 30, 2004		925,913
June 30, 2005		2,177,521
June 30, 2006		2,932,875
June 30, 2007		5,172,010
June 30, 2008		5,887,642
June 30, 2009		8,017,224


Deficit accumulated during the development stage at June 30, 2009	$	26,466,109

~~Unrestricted cash balances decreased to $33,907 at March 31, 2009 from $3,121,819 at June~~ 30~~, 2008.~~ The cash balance from June 30, 2008 provided the cash source to cover our operating activities and our investments of laboratory property and equipment and capitalize development costs. In addition, we incurred $25,000 for potential future financings, and had proceeds from share capital of $1,121,162. Our vendor base is currently carrying some of the company financing load, as noted by the recent growth in current liabilities.

OnINNEXUS ~~December 19,~~BIOTECHNOLOGY ~~2008 in a private placement, the Company issued $1,796,000 of unsecured convertible debentures~~INC. ~~The notes mature on November 21, 2010 and accrue interest at 10% payable quarterly~~ beginning November 21, 2009. The notes are convertible at the option of the holder into common shares of the Company at a conversion price of $0.10 per common share. The Company may opt to redeem the convertible debentures at the $0.10 conversion price if the Company’s common stock price exceeds $0.30 for thirty consecutive trading days prior to the maturity date. For the notes, the Company received cash proceeds of $580,154, applied a redemption of 9,240 preferred shares — series (A atDevelopment ~~$100~~Stage ~~per share and accrued dividends on the shares of $284,846. A non-related party received a~~Enterprise) ~~$7,000 finder’s fee in accordance with policies of the TSX Venture Exchange.~~

OnNotes November 21, 2008, in a private placement, the Company issued $2,368,000 of unsecured convertible debentures. The notes mature on November 21, 2010 and accrue interest at 10% payable quarterly beginning November 21, 2009. The notes are convertible at the option of the holder into common shares of the Company at a conversion price of $0.10 per common share. The Company may opt to ~~redeem~~Consolidated ~~the~~Financial ~~convertible debentures at the $0.10 conversion price if the Company’s common stock~~Statements ~~price~~(Expressed ~~exceeds~~in ~~$0.30~~Canadian for thirty consecutive trading days prior to the maturity date. For the notes, the Company received cash proceeds of $840,777, satisfaction of accrued and future expenses of $232,751 and applied a redemption of 10,000 preferred shares — series A at $100 per share and accrued dividends on the shares of $294,466 (note 8(cdollars)).

10Years ended June 30, 2009, 2008 and 2007 Period from incorporation on July 20, 1997 to June 30, 2009

~~INNEXUS~~15. ~~BIOTECHNOLOGY~~United ~~INC.~~ States generally accepted accounting principles (continued):

~~The~~Share ~~Company has traditionally relied and still relies on obtaining~~ capital ~~through the sale of its securities~~ and ~~expects~~additional to do so until it is able to secure adequate revenue from licensing and/or sales of its technologies, or other operating activities. The sale of securities is highly dependent upon numerous conditions, such as the state of the paid-in-capital ~~markets,~~transactions ~~success~~for ~~in contractual~~InNexus ~~negotiations with third parties, success of products using the Company’s technology~~ and ~~other~~ ~~factors,~~Cusil ~~many of which are largely out of the Company’s control. The Company has, in the~~since ~~past,~~inception ~~been~~on ~~successful in securing sufficient funds through the sale of its securities to meet its operating requirements~~June 27, ~~and~~2003: ~~anticipates that it will continue to do so, but there is no assurance~~ ~~that it will be able to raise sufficient capital to fund its operations through the sale of its securities on terms favorable to the Company.~~

~~Commitments~~ (i) Common shares:

1. In ~~March~~June 2008, at the Company’s ~~annual~~completed ~~general~~a ~~meeting,~~brokered ~~the~~private ~~shareholders~~placement ~~approved~~of ~~payment~~15,720,000 ofcommon share ~~compensation~~units toat ~~the~~$0.25 ~~Company’s~~and ~~CEO~~4,000,000 asprepaid ~~consideration~~warrant units at $0.25 for ~~additional~~total gross proceeds of $4,930,000. ifEach ~~any,~~common ~~received~~share byunit ~~the~~consisted of one common share and one non-transferable ~~Company~~warrant. ~~under~~The non-transferable warrant entitles the ~~Royalty~~holder ~~Pharma~~to ~~contract~~purchase one additional common share for $0.35 Asfor a five year period from closing. Each prepaid warrant unit consisted of ~~March 31,~~one ~~2009~~prepaid nowarrant ~~additional~~and ~~proceeds~~one ~~had~~non-transferable ~~been~~warrant. Each prepaid warrant ~~received~~has no expiry date and may be converted by the holder into one common share of the Company at no additional ~~compensation~~cost. ~~was~~Each ~~owed~~prepaid warrant also entitles the holder to purchase one common share for $0.35 for a five year period from closing.

~~2. On~~In ~~September 27~~conjunction with this placement, ~~2006~~the Company recognized placement costs of $713,093 and issued 1,320,200 agent warrants, each of which may be converted into one common share of the Company ~~signed~~for $0.25 for a ~~non-cancelable~~three ~~operating~~year ~~lease~~period ~~agreement~~from ~~for~~closing. ~~its~~All securities are subject to ~~laboratory~~a ~~and~~hold ~~office~~period ~~space~~which ~~located~~expires on ~~the~~October 7, ~~campus~~2008. The proceeds net of costs were allocated to the ~~Mayo~~separate ~~Clinic~~equity instruments in ~~Scottsdale,~~proportion ~~Arizona.~~to ~~The agreement~~their ~~calls~~fair ~~for~~values ~~payments~~on the date of issuance. ~~US$55,902~~Share ~~per~~warrants ~~month~~were ~~through~~valued ~~September 2016.~~using the Black-Scholes model using the following assumptions:

Anticipated minimum annual rental payment under the agreement (US$):


	Share Warrants			Agent Warrants
Dividend yield		0	%		0	%
Risk-free interest rate		3.46	%		3.30	%
Expected life (years)		2.5			1.5
Expected volatility		157	%		136	%
Forfeiture rate		10	%		12	%

2009 (six months remaining)	$	167,706
2010		670,824
2011		670,824
2012		670,824
2013		670,824
Thereafter		2,180,178
	$	5,031,180


Dividend yield	0	%
Risk-free interest rate	3.12	%
Expected life (years)	2
Expected volatility	99	%
Forfeiture rate	0	%

~~INNEXUS BIOTECHNOLOGY INC.~~31

~~During~~INNEXUS ~~the~~BIOTECHNOLOGY ~~nine months ended March 31, 2009 the Company incurred nil~~ INC. (~~nine~~A ~~months~~Development ~~ended~~Stage ~~March 31, 2008 — $98,685~~Enterprise) ~~for management and administrative services and research fees from related parties~~ ~~who are related to officers or directors of the Company.~~

~~Changes~~Notes to Consolidated Financial Statements (Expressed in ~~Accounting~~Canadian ~~Policies~~dollars)

~~During~~Years ~~the year~~ ended June 30, 2009, 2008 ~~the~~and ~~Company~~2007 Period ~~changed~~from ~~its~~incorporation ~~functional~~on ~~currency~~July 20, 1997 to ~~the~~June 30, ~~United~~2009 ~~States dollar from the Canadian dollar.~~

On15. ~~July 1,~~United ~~2008~~States ~~the~~generally ~~Company~~accepted ~~implemented~~accounting ~~policies~~principles ~~related to the following new accounting pronouncements~~(continued):

~~• CICA Handbook Section 1535~~In June 2007, ~~Capital~~as ~~Disclosures,~~part ~~which requires disclosure~~ of an ~~entity’s~~agreement ~~objectives, policies and processes~~ for ~~managing~~the ~~capital,~~sale ~~quantitative~~of ~~data~~future ~~about~~revenue ~~what~~rights (Note 8(a)), the ~~entity~~Company ~~regards~~issued ~~as capital~~1,096,890 ~~whether~~common ~~the~~shares ~~entity~~for ~~has~~proceeds ~~complied~~of ~~with~~$1,065,670 ~~any capital requirements and~~(US$1,000,000). Proceeds ifare itrestricted ~~has~~for ~~not~~use ~~complied,~~within the ~~consequences~~Company’s ofnormal ~~such~~operating ~~non-compliance~~activities.

•In ~~CICA~~August 2006, ~~Handbook~~the ~~Section~~Company ~~3862,~~completed ~~Financial~~a ~~Instruments~~non-brokered —private ~~Disclosures~~placement of 12,078,500 ~~and~~units at ~~Section~~$0.45 ~~3863,~~for ~~Financial~~gross ~~Statements~~proceeds —of ~~Presentation~~$5,435,325 ~~which~~(note ~~replaced~~15(e)(v)). ~~Handbook~~Each ~~Section~~unit ~~3861,~~contained ~~Financial~~one ~~Statements~~prepaid warrant —which ~~Disclosure~~is ~~and~~convertible ~~Presentation.~~into ~~The~~one ~~replacement~~common ~~revises~~share ~~and~~of ~~enhances~~the ~~disclosure~~Company ~~requirements~~at ~~and~~no ~~carries~~additional ~~forward~~cost. During ~~unchanged~~fiscal 2007, 10,432,105 of the ~~existing~~12,078,500 ~~presentation~~issued ~~requirements~~prepaid warrants were converted into common shares.

•In ~~CICA Handbook Section 1400~~September 2005, ~~General Standards of Financial Statement Presentation which was amended to change~~ the ~~guidance~~Company ~~related~~completed toa ~~management’s~~private ~~responsibility~~placement ~~to assess the ability~~ of ~~the~~2,020,000 ~~entity~~units toat ~~continue as a going concern~~$0.25 for ~~When~~gross ~~preparing~~proceeds ~~financial~~of ~~statements~~$505,000. ~~management~~Each isunit ~~required~~consisted ~~to make an assessment~~ of anone ~~entity’s~~common ~~ability~~share ~~to continue as a going concern~~ and ~~should~~one non-transferable ~~take~~share ~~into~~warrant. ~~account~~Each ~~all~~warrant ~~available~~will ~~information~~entitle ~~about~~ the ~~future,~~holder ~~which~~to ispurchase atone ~~least,~~common share ~~but~~for is$0.30 ~~not~~for ~~limited~~a ~~to,~~two-year ~~twelve~~period ~~months~~ from ~~the balance sheet date~~closing. ~~Disclosure~~In isconjunction ~~required~~with ofthis ~~material~~placement, ~~uncertainties~~the Company ~~related~~paid toissuance ~~events~~costs orof ~~conditions~~$14,207 ~~that~~and ~~may cast significant doubt upon the entity~~finder’s ~~ability~~fees toof ~~continue as a going concern~~$32,250.

~~CICA~~In ~~Handbook Section~~March ~~3064~~2005, ~~Goodwill~~the ~~and~~company ~~Intangible~~completed ~~Assets~~a private placement of 510,000 ~~amends~~common ~~the~~shares ~~standards~~at $0.45 for ~~recognition~~gross proceeds of $229, ~~measurement~~500. In conjunction with this placement, ~~presentation~~the ~~and~~company ~~disclosure~~paid finder’s fees of ~~intangible~~$18,360 ~~assets~~and granted for ~~profit~~issuance a non-~~oriented~~transferable ~~enterprises. These~~option ~~standards~~to ~~are~~acquire 51,000 ~~effective~~common ~~for~~shares of the ~~Company’s~~company ~~annual~~at ~~and~~a ~~interim~~price ~~financial~~of ~~statements~~$0.45 ~~beginning July 1~~per share, ~~2009.~~exercisable ~~Standards~~for ~~concerning~~a ~~goodwill~~period of ~~are~~two ~~unchanged~~years from ~~previous~~the ~~standards~~closing of the offering.

~~Equity~~In ~~Securities~~November 2004, ~~Issued~~the Company completed a private placement of 2,090,000 common shares at $0.45 for gross proceeds of $940,500. In conjunction, the Company incurred issuance costs of $9,591 and ~~Outstanding~~finder’s fees of $71,460. Also for issuance, the Company granted 193,000 non-transferable warrants, each convertible into one common share for $0.45 for a period of two years from the closing of the offering.

~~The~~In January 2004, the Company ~~had~~completed ~~69,621,116~~a ~~common~~non-brokered ~~shares~~private ~~authorized~~placement of 2,800,000 ~~issued~~units at ~~and~~$0.21 ~~outstanding~~for asgross proceeds of ~~June 30~~$588,000. ~~2008~~Each ~~and~~unit consisted of one common share of the ~~March 31,~~Company ~~2009.~~and Asone atnon-transferable ~~June 30~~warrant ~~2008,~~exercisable ~~1,473,164~~to ~~outstanding~~purchase a common ~~shares~~share ~~remained~~of inthe Company ~~escrow~~for $0.27 per share until expiry on January 14, 2006.

AsConcurrent ofwith ~~June 30,~~the ~~2008~~reverse ~~and~~takeover ~~March~~business combination in June 312003, ~~2009~~ the Company completed ~~had~~a ~~authorized,~~short-form ~~issued~~private ~~and~~offering ~~outstanding~~of 53,~~646~~795,~~395 prepaid~~000 ~~stock~~units ~~purchase~~at ~~warrants~~$0.25 ~~which~~for ~~are~~gross ~~convertible~~proceeds atof $948,750. ~~the~~Each ~~option~~unit consisted of one common share of the ~~holders~~Company ~~into~~and anone-half ~~equal~~of one ~~number~~non-transferable warrant exercisable to purchase a common share of the company for $0.30 until expiry on June 27, 2004. In conjunction, the Company issued 759,000 agent’s warrants and 50,000 common shares ~~without~~for ~~any~~corporate ~~payment~~finance ofand ~~additional~~sponsorship ~~cash~~fees. The ~~company considers~~agent’s ~~the prepaid~~ warrants are asexercisable ~~equivalent~~ to purchase one common ~~shares~~share ~~for~~of the ~~purpose~~company at a price of ~~computing~~$0.25 ~~losses~~ per share until expiry on June 27, 2004.

1232

AtINNEXUS ~~June 30,~~BIOTECHNOLOGY ~~2008 the Company had 2,258,594 outstanding exchangeable preferred shares issued by InNexus Exchange Corp~~INC.~~, which at the option of the holder, are convertible into an equal number of~~ ~~common~~(A ~~shares~~Development ofStage ~~the Company at no additional cash consideration. As at June 30, 2008 and March~~Enterprise) ~~31, 2009, 1,175,156 of the issued exchangeable preferred shares remained in escrow.~~

InNotes conjunction with the Convertible Preferred Share financing completed by the Company in October 2005 there were 22,565 convertible preferred shares issued and outstanding as at June 30 and September 30, 2008. At November 21, 2008, 12,565 convertible preferred shares — series A remain after converting 10,000 to ~~convertible~~ ~~debentures~~Consolidated ~~(see~~Financial ~~section on “Private Placements of Securities”). At December 20, 2008,~~Statements 3,325 convertible preferred shares — series A remain after converting 9,240 to convertible debentures. Each convertible preferred share is convertible into 400 common shares of the Company. At June 30, September 30, 2008, 9,026,000 common shares of the Company had been allotted for future conversion (~~5,026,000~~Expressed atin ~~November 21,~~Canadian ~~2008, with an additional 4,000,000 allotted for conversion of the November 18, 2010 convertible debentures~~dollars)~~. As of December 20, 2008 and March 31,~~ ~~2009 1,330,000 in common shares had been allotted for future conversion.~~

AsYears ofended ~~March~~June 3130, 2009 10,~~449,509~~ ~~stock~~2008 ~~options~~and ~~with a weighted average exercise price of $0.29 as~~2007 ~~well~~Period ~~as 28,742,488 share purchase warrants with exercise prices ranging~~ from ~~$0.17~~incorporation to $1.34 were outstanding. The Warrant Certificate entitles the holder to surrender the warrant and to receive in exchange a lesser number of shares than the holder would have received had the holder paid cash to exercise the warrant, and the reduction of common shares received by the holder is equivalent, at the market price on ~~the exercise date~~July 20, to1997 ~~the amount of cash that would have been paid~~ to ~~exercise~~ ~~the~~June 30, ~~warrant.~~2009

13 15. United States generally accepted accounting principles (continued):

~~INNEXUS~~During ~~BIOTECHNOLOGY~~fiscal ~~INC~~2003, the Company issued 213,572 common shares in settlement of related party debts of $106,786.

~~Current~~During ~~Outlook~~fiscal ~~and~~2002, ~~Business~~the ~~Risk~~Company ~~Factors~~issued 380,760 common shares in settlement of related party debts of $190,380.

~~Our~~(ii) ~~company~~Exchangeable ~~continues~~preferred to concentrate on developing itself as well as our science, product candidates and credibility in the pharmaceutical industry. We continue to build a team of industry and regulatory expert leaders, an interactive and engaged Scientific Advisory Board, a team of commercially experienced scientists and our Board of Directors. Our state-of-the-art R&D laboratories located on the campus of the Mayo Clinic are staffed with a team of qualified professionals focused on the development of DXL™ products. We are securing long-term partners and obtaining funding through equity placements and loan facilities. shares:

WeIn ~~continue~~June 2003, to3,750,000 ~~progress~~exchangeable ~~our~~preferred ~~company~~shares ~~and~~were ~~believe~~issued weby ~~are~~IEC ~~positioned~~as topart ~~take advantage~~ of ~~market~~the ~~trends~~reverse astakeover ~~antibody-based~~business ~~products~~combination ~~are~~between ~~widely~~IXI ~~expected~~and toCusil/InNexus beBiotechnology ~~the~~Inc. Concurrently, ~~primary~~an ~~source~~additional of167,188 ~~growth~~shares inwere ~~the Biotechnology~~issued ~~industry~~to ~~over~~settle ~~the~~related ~~next~~party ~~decade~~debt. ~~Within~~The exchangeable ~~this~~preferred ~~space,~~shares ~~cancer~~were ~~therapeutics~~valued ~~are~~at ~~expected to~~$109,682 beand ~~the~~$83,594, ~~fastest~~respectively. ~~growing~~The ~~type~~shares are ofheld ~~product~~pursuant ~~and~~to wean ~~also~~escrow ~~believe~~agreement ~~our~~that ~~DXL™~~provides ~~technology~~for ~~gives~~their usrelease aaccording to the ~~significant~~following ~~strategic~~schedule: ~~advantage~~5% ineach ~~developing~~six ~~new~~months ~~antibody-based~~for ~~cancer~~the ~~therapeutics,~~first ~~such~~two asyears ~~our DXL625~~and ~~(CD20),~~10% aseach ~~well~~six asmonths ~~other~~for the ~~DXL™~~remaining ~~based~~four ~~products~~years.

~~Technology~~In ~~platform~~June 2003, ~~companies face many and varied risks~~2,500,000 ~~many~~exchangeable ofpreferred ~~which~~shares ~~are~~were ~~the~~issued ~~same~~by ~~industry~~IEC ~~risks~~to acquire ~~faced~~DXLTM bytechnology ~~companies~~rights invalued ~~direct~~at ~~research~~$25,000 ~~and~~from ~~development~~ImmPheron, ofa ~~pharmaceutical~~related ~~products~~party. ~~While InNexus~~Of ~~strives~~the toshares, ~~manage~~90% ~~such~~were ~~risks~~held pursuant to ~~the~~an ~~extent~~escrow ~~possible~~agreement ~~and~~that ~~practical,~~provides ~~risk~~for ~~management~~their ~~cannot~~release ~~completely~~at ~~eliminate risk. The following factors are those~~ the ~~Company’s~~rate ~~management~~of ~~believes~~15% ~~are most~~each ~~important~~six inmonths ~~the~~for ~~context~~three ~~of the Company’s business~~years.

WeIn ~~are~~December 2004 ~~establishing~~IEC aissued ~~biotechnology development business and there are no developed or approved products incorporating our DXL™ technologies. We currently rely solely on our DXL™ technology~~500,000 ~~and if~~exchangeable ~~our~~preferred ~~product~~shares ~~development efforts are unsuccessful, our ability~~ to ~~generate~~acquire ~~revenues~~$250,000 ~~cash flows and earnings will be impaired or non-existent. In addition, we have a history~~ of ~~losses and~~ ~~anticipate~~additional ~~that~~technology werights ~~will~~from ~~continue to incur losses for the foreseeable future. Traditionally~~ImmPheron, ~~we have~~which ~~been~~subsequently ~~dependent~~became on our collaborators’ efforts to perform research and development activities. During the past year, we built and staffed our new laboratory facilities in order to retain our development efforts within the Company. If we are unable to develop monoclonal antibody based products utilizing our DXL technology platform, we will not be able to achieve profitable operations. As a ~~result,~~related ~~we need to raise additional capital at favorable terms to fund our operations~~party. ~~The lack of additional capital or profitable products stemming from either internal~~ ~~development or collaborative arrangements could dilute our shareholders’ equity or eventually compel the Company to cease operations.~~

We(iii) ~~are~~Series ~~dependent~~A ~~upon~~convertible ~~our~~preferred key personnel, the loss of whom would make it difficult to manage our business operations and may jeopardize the development of our DXL products. Any potential products resulting from our DXL™ technology will require research and development and significant testing before they may be marketed commercially. Furthermore, it is uncertain whether any potential products will require regulatory approval, which can be a long process, which could delay approval and our ability to market the product and generate revenues. Our technology may also become obsolete or otherwise fail to keep pace with the industry’s evolving requirements. Failure to obtain market acceptance for products would negatively impact our revenue and ability to operate profitably. shares:

14In October 2005, the Company completed a private placement with institutional investors consisting of 27,500 units valued at $100 each; each unit was comprised of one Series A convertible preferred share and 400 warrants. 25,000 of the units were offered for cash proceeds of $2,500,000 and 2,500 units were issued to settle a bridge loan payable with a principal amount of $250,000. Total issuance costs of $321,444 included finders’ fees of 8% of the gross proceeds and 660,000 warrants

~~INNEXUS~~Each ~~BIOTECHNOLOGY~~Series A ~~INC~~convertible preferred share will bear a cumulative 8% dividend increasing to 12% in the third and succeeding years. Each preferred share is convertible into 400 common shares of the Company at the option of the holder for a period of five years after issuance.

~~From~~Each ~~time~~warrant towill ~~time~~entitle the ~~Company~~holder ~~is involved in litigation relating~~ to ~~claims~~purchase ~~arising~~one ~~from~~additional ~~its operations~~common inshare ~~the normal course~~ of ~~business.~~the ~~The~~ Company ~~utilizes various risk management~~ ~~strategies,~~at ~~including~~a ~~employee~~price ~~education and the maintenance~~ of ~~liability insurance against certain risks~~$0.25 ~~Though~~per ~~all~~share ~~litigation~~for ~~contains~~five ~~inherent~~years ~~uncertainty,~~from the ~~Company~~closing ~~does~~date. ~~not~~The ~~currently~~issuance ~~believe that~~allows ~~the resolution of any legal proceedings is likely to have a material adverse effect on the~~for ~~Company’s~~cashless ~~financial position, operations or cash flows in the future~~conversion.

~~Our~~In ~~proprietary~~the ~~technology~~event ~~may~~that ~~require~~the ~~unpredictable~~prevailing ~~and~~market ~~costly~~price ~~protection.~~of ~~Failure~~the toCompany’s ~~protect~~common ~~our technology~~share ~~could~~is ~~result~~less ~~in additional competition for our potential products from third parties who~~than ~~may~~$0.25, ~~infringe~~the onCompany ~~our~~will ~~technology.~~have Inthe ~~addition,~~right ~~claims~~until offive ~~infringement~~years onfrom ~~proprietary~~issuance ~~rights~~to ofredeem ~~third~~any ~~parties~~outstanding ~~may~~Series A ~~prevent~~convertible uspreferred ~~from~~shares ~~marketing~~at ~~our~~a ~~technology~~price orof ~~using~~$100 itper ~~to develop products~~share, orplus ~~we may be~~any ~~required~~accrued tobut ~~enter~~unpaid ~~into~~dividends. aAfter ~~license~~the ~~agreement~~fifth toanniversary, dothe ~~so.~~redemption ~~These~~price ~~situations~~is ~~may~~$120 ~~negatively impact our~~per ~~ability~~share, toplus ~~generate~~any ~~revenues,~~accrued ~~cash~~but ~~flows~~unpaid ~~and earnings~~dividends.

~~We could be exposed to significant liability claims if we are unable to continue to obtain~~33 insurance at acceptable costs and adequate levels, or otherwise protect ourselves against claims. Also, our business may be materially affected by cost-containment efforts of governmental and third party payers to reduce costs of health care, such as pricing restriction on pharmaceutical products, including ours.

~~Disclosure~~INNEXUS ~~Controls~~BIOTECHNOLOGY ~~and~~INC. (A ~~Procedures~~Development Stage Enterprise)

~~Disclosure~~Notes ~~controls and procedures are designed~~ to ~~provide~~Consolidated ~~reasonable~~Financial ~~assurance that material~~Statements ~~information~~(Expressed isin ~~gathered~~Canadian ~~and reported to senior management, including the Chief Executive Officer~~dollars) ~~and Chief Financial Officer, as appropriate to permit timely decisions regarding public disclosure.~~

~~The~~Years ~~Company~~ended isJune 30, ~~not~~2009, ~~required~~2008 toand ~~file~~2007 Period anfrom ~~Annual~~incorporation ~~Information~~on ~~Form~~July 20, ~~under~~1997 ~~current~~to ~~security~~June 30, ~~legislation~~2009 ~~and thus has not filed one.~~

~~Disclaimer~~ 15. United States generally accepted accounting principles (continued):

~~The~~Through ~~information~~the ~~provided~~fifth inanniversary ~~this~~after ~~document~~issuance, isthe ~~not~~holder, ~~intended~~after tonotice beof redemption, will have a ~~comprehensive~~“follow ~~review~~on” conversion right for 20 days at a price of ~~all~~$0.25. After the ~~matters~~fifth ~~concerning~~anniversary, the ~~Company.~~holder ~~The~~will ~~users~~have ofa ~~this~~conversion ~~information,~~right ~~including~~at ~~but~~the ~~not~~market ~~limited~~price toif the ~~investors~~ ~~and~~shares ~~prospective~~are ~~investors,~~issued ~~should~~without ~~read~~a itfour inmonth ~~conjunction~~hold ~~with~~period ~~all~~or ~~other~~at ~~disclosure~~the discount to market price ~~documents~~permitted ~~provided~~under ~~including~~the ~~but~~TSX ~~not~~Venture ~~limited~~Exchange’s torules ~~all~~if ~~documents~~issued ~~file~~with ona ~~SEDAR~~four ~~(www~~month hold period.~~SEDAR.com).~~ ~~No securities~~The ~~commission~~common orshares ~~regulatory~~of ~~authority~~the ~~has~~Company ~~reviewed~~issuable upon either conversion of the Series A ~~accuracy~~convertible preferred shares or ~~adequacy~~exercise of the warrants were subject to a hold ~~information~~period ~~presented~~expiring ~~herein~~through February 5, 2006.

15On November 21, 2008, in a private placement, the Company issued $1,691,000 of unsecured convertible debentures. For the notes, the Company received cash proceeds of $406,528 and applied redemption of 10,000 preferred shares — series A at $100 per share and accrued dividends on the shares of $294,466.

~~INNEXUS~~On ~~BIOTECHNOLOGY~~December 19, ~~INC~~2008 in a private placement, the Company issued $1,696,000 of unsecured convertible debentures. For the notes, the Company received cash proceeds of $487,155, applied a redemption of 9,240 preferred shares — series A at $100 per share and accrued dividends on the shares of $284,846. (Note 6(a)).

~~Forward-Looking~~The ~~Statements~~Series A convertible preferred shares have both an equity and a debt component. The allocation from equity to debt is recorded using the effective interest method over the five year term of the holders’ conversion option. At June 30, 2009 and 2008 the allocation of the shares’ value to the debt component was $2,706 and $424, respectively, as reported in current liabilities,

~~Except~~The ~~for~~Company ~~statements~~allocated ofthe ~~historical~~placement ~~fact,~~proceeds ~~certain~~to ~~information~~the ~~contained~~preferred ~~herein~~shares ~~constitutes forward-looking~~and ~~statements.~~warrants ~~Forward~~based ~~looking statements are usually identified by our use of~~on ~~certain~~the ~~terminology,~~relative ~~including~~fair ~~“will”,~~values ~~“believes”, “may”, “expects”, “should”, “seeks”, “anticipates” or “intends” or by discussions~~ of ~~strategy~~each ~~or intentions~~instrument. ~~Such~~The ~~forward-looking statements~~valuation ~~involve~~of ~~known~~the ~~and~~warrants ~~unknown~~using ~~risks, uncertainties and other factors which may cause our~~the ~~actual results or achievements to be materially different from any future results or achievements expressed or implied by such forward~~Black-~~looking~~Scholes statements. Forward-looking statements are statements that are not historical facts, and include but are not limited to, estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to the effectiveness of the Company’s business model; ~~future operations, products~~ and ~~services;~~ the ~~impact of~~following ~~regulatory~~assumptions ~~initiatives~~ on the ~~Company’s~~date ~~operations; the size~~ of ~~and~~issuance ~~opportunities~~resulted ~~related~~in ~~to the~~a ~~markets~~value ~~for~~higher than the ~~Company’s~~total ~~products; general industry and macroeconomic growth rates; expectations~~proceeds: ~~related to possible joint and/or strategic ventures and statements regarding future performance.~~

Forward-looking statements used in this discussion are subject to various risks and uncertainties, most of which are difficult to predict and are generally beyond the control of the Company. If risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated or projected. Forward-looking statements in this document are not a prediction of future events or circumstances, and those future events or circumstances may not occur. Given these uncertainties, users of the information included herein, including investors and prospective investors are cautioned not to place undue reliance on such forward-looking statements.


Dividend yield	0.0	%
Risk-free interest rate	3.94	%
Expected life (years)	5
Expected volatility	73	%

16Furthermore, the beneficial conversion valuation for the preferred shares also resulted in an amount larger than the total proceeds. Since both instruments individually were determined to have values in excess of the gross proceeds, the valuation of proceeds less issuance costs was split evenly between the preferred shares and warrants, with the $1 debt portion allocated from the share value.

(iv)

Stock options:

The terms of InNexus’ stock option plan and activity are described in note 9(d).

(v)

Share purchase warrants:

In June 2008, the Company issued 4,000,000 prepaid warrants, 19,720,000 stock purchase warrants and 1,320,200 agent warrants in connection with a brokered private placement (see note 9(a)). The prepaid warrants have no expiry date and no exercise price. The stock purchase warrants and agent warrants may each be converted into one common share of the Company at exercise prices of $0.35 and $0.25, respectively.

The stock purchase warrants and agent warrants have exercise periods of five and three years, respectively. The prepaid warrants were valued using the Company’s stock price and the stock purchase and agent warrants were valued using the Black-Scholes model using the assumptions in note 9(a).

INNEXUS BIOTECHNOLOGY INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in Canadian dollars)

Years ended June 30, 2009, 2008 and 2007
Period from incorporation on July 20, 1997 to June 30, 2009

15.

United States generally accepted accounting principles (continued):

In February 2008, the Company issued 1,136,363 stock purchase warrants in a private placement with the Chief Executive Officer. The warrants have an exercise price of $0.22 and may be exercised over a 2 year period. The warrants were valued using the Black-Scholes model using the assumptions in note 9(a).

On August 25, 2006, the Company completed a non-brokered private placement of 12,078,500 units at $0.45 for gross proceeds of $5,435,325. Each unit is comprised of one prepaid warrant and one 65% warrant. Each prepaid warrant is convertible into one common share of the Company at no additional cost immediately following the closing of the placement; the 65% warrants must be combined into equivalent 100% warrants to be convertible into one common share at a price of $0.50 for two years. The holders have the option of remitting additional warrants in lieu of the cash exercise price. Issuance costs included $317,469 and 177,788 100% warrants with an exercise price of $0.50 for two years valued at $56,149. All securities were subject to a hold period which expired on December 11, 2006. The proceeds were allocated to the separate equity instruments in proportion to their fair values on the date of issuance. The prepaid warrants were valued using the Company’s stock price and the equivalent 100% share warrants and issuance warrants were valued using the Black-Scholes model using the following assumptions:


Dividend yield	0	%
Risk-free interest rate	4.17	%
Expected life (years)	2
Expected volatility	76	%

Prepaid warrants are included in the Company’s loss per share calculation because of their equivalency to common shares.

(d)

Recent United States accounting standards:

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162” (“SFAS No. 168”). SFAS No. 168 establishes the FASB Accounting Standards Codification™ (“Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (GAAP) in the United States. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. SFAS No. 168 is effective for financial statements issued by the Company for periods ended after September 15, 2009. The Company does not expect the adoption of SFAS No. 168 to have a material impact on its consolidated financial statements.

INNEXUS BIOTECHNOLOGY INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in Canadian dollars)

Years ended June 30, 2009, 2008 and 2007
Period from incorporation on July 20, 1997 to June 30, 2009

15.

United States generally accepted accounting principles (continued):

In May 2009, SFAS 165, “Subsequent Events,” (“SFAS 165”) was issued and provides guidance on when a subsequent event should be recognized in the financial statements. Subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet should be recognized at the balance sheet date. Subsequent events that provide evidence about conditions that arose after the balance sheet date but before financial statements are issued, or are available to be issued, are not required to be recognized. The date through which subsequent events have been evaluated must be disclosed as well as whether it is the date the financial statements were issued or the date the financial statements were available to be issued. For non-recognized subsequent events which should be disclosed to keep the financial statements from being misleading, the nature of the event and an estimate of its financial effect, or a statement that such an estimate cannot be made, should be disclosed. The standard is effective for interim or annual periods ending after June 15, 2009.

In March 2008, the Financial Accounting Standards Board (“FASB”), affirmed the consensus of FASB Staff Position (FSP) Accounting Principles Board Opinion No. 14-1 (APB 14-1), Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement), which applies to all convertible debt instruments that have a net settlement feature; which means that such convertible debt instruments, by their terms, may be settled either wholly or partially in cash upon conversion. FSP APB 14-1 requires issuers of convertible debt instruments that may be settled wholly or partially in cash upon conversion to separately account for the liability and equity components in a manner reflective of the issuer’s nonconvertible debt borrowing rate. Previous guidance provided for accounting for this type of convertible debt instrument entirely as debt. FSP APB 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. The adoption of FSP APB 14-1 will not have an impact on our financial statements.

In April 2008, the FASB issued FSP No. 142-3 (“FSP 142-3”),”Determination of the Useful Life of Intangible Assets.” FSP 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under FASB Statement No. 142, “Goodwill and Other Intangible Assets.” This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions. FSP 142-3 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. Early adoption is prohibited. Since this guidance will be applied prospectively on adoption, there will be no impact to our current consolidated financial statements.

In June 2008, the FASB ratified Emerging Issues Task Force (“EITF”) Issue No. 07-5,”Determining Whether an Instrument (or an Embedded Feature) is indexed to an Entity’s Own Stock” (“EITF 07-5”). EITF 07-5 provides that an entity should use a two step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. It also clarifies on the impact of foreign currency denominated strike prices and market based employee stock option valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning after December 15, 2008. The adoption of EITF 07-5 will not have an impact on our consolidated financial position and results of operations.

INNEXUS BIOTECHNOLOGY INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in Canadian dollars)

Years ended June 30, 2009, 2008 and 2007
Period from incorporation on July 20, 1997 to June 30, 2009

15.

United States generally accepted accounting principles (continued):

(e)

Accounting for the issue of Series A Convertible Preferred Shares:

Under Canadian GAAP, the Series A convertible preferred shares have both equity and note payable components. Under US GAAP SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” the securities would have met criteria requiring reporting as strictly equity instruments.

Under US GAAP the cash received on the issuance of the preferred shares would be allocated based on relative fair values of the warrants ($1,123,977) and Series A convertible preferred shares ($1,626,023). The fair value of the warrants was estimated using the Black-Scholes model under the same set of assumptions used for Canadian GAAP purposes (note 9(e)); the fair value of the Series A convertible preferred shares was determined using the market price of the Company’s common stock on the date of issuance. The convertible shares contain a beneficial conversion feature which, when valued, is greater than the allocated value of the shares. Accordingly, the intrinsic value of the beneficial conversion feature ($1,626,022) has been separately disclosed from the series A convertible preferred shares and the shares have been given a $1 nominal value. Since the shares have no debt component under US GAAP, dividends would not be included in net loss unless declared by the Board of Directors. No such declaration has occurred.

In accordance with SEC staff Accounting Bulletin Topic 5Q “Increasing Rate Preferred Shares”, the discounts on increasing rate preferred shares should be amortized over the period preceding commencement of the perpetual dividends by charging the imputed interest against the deficit and increasing the carrying amounts of preferred shares by an equal amount. Under US GAAP, the Company would have recorded an additional $172,998 in accumulated deficit and preferred shares – series A at June 30, 2008.

Convertible Bridge Loan:

The convertible bridge loan, under US GAAP, was recorded at its face value of $250,000: in addition, it had a beneficial conversion feature whose value was $25,000 using the intrinsic value method.

INNEXUS BIOTECHNOLOGY INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in Canadian dollars)

Years ended June 30, 2009, 2008 and 2007
Period from incorporation on July 20, 1997 to June 30, 2009

15.

United States generally accepted accounting principles (continued):


	Number
	of units		Amount
Additional paid in capital:			$	1,626,023
Conversion option, Series A convertible preferred shares				1,123,977
Warrants, Series A convertible preferred shares Issuance cost				(321,444	)

Additional paid in capital — Series A convertible preferred shares and warrants		27,500		2,428,556
Add: beneficial conversion feature		—		25,000


Total additional paid in capital — Series A convertible preferred shares and warrants		27,500	$	2,453,556

(f)

Accounting for the convertible debentures and loans:

Under Canadian GAAP, the convertible debentures have both a debt and an equity component. The allocation from equity to debt is recorded using the effective interest method over the two year term of the debentures. At June 30, 2009, allocation of the debenture’s value to the equity component was 1,632,324 as reported in Shareholders’ equity. Under US GAAP, the debentures would have been recorded with a discount based on the intrinsic value of the beneficial conversion feature.

INNEXUS BIOTECHNOLOGY INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in Canadian dollars)

Years ended June 30, 2009, 2008 and 2007
Period from incorporation on July 20, 1997 to June 30, 2009

15.

United States generally accepted accounting principles (continued):

(i)

Reconciliation of statement of operations and balance sheet:

A reconciliation of the loss for the years ended June 30, 2009, 2008 and 2007 under Canadian GAAP, to the loss for the year in accordance with US GAAP and to net income (loss) for the year using US GAAP, is as follows:


	2009			2008			2007

Loss for the year under Canadian GAAP	$	(8,017,224	)	$	(5,887,642	)	$	(5,172,010	)

Adjustment to reconcile to US GAAP:
Technology rights		62,496			62,496			62,496
Capitalized Development Costs		(2,565,000	)		—			—
Discount on debenture and Loans		275,498			—			—
Interest on Series A Convertible Preferred Shares		142,233			244,454			198,758
Stock-based compensation		—			—			66,869


Net loss for the year under US GAAP	$	(10,101,997	)	$	(5,580,692	)	$	(4,843,887	)


Dividends on preferred shares — series A		(142,233	)		(244,454	)		(198,758	)

Basic and diluted loss per share under US GAAP	$	(0.15	)	$	(0.11	)	$	(0.12	)

Weighted average number of common shares outstanding		69,641,507			55,258,560			43,942,846

INNEXUS BIOTECHNOLOGY INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in Canadian dollars)

Years ended June 30, 2009, 2008 and 2007
Period from incorporation on July 20, 1997 to June 30, 2009

15.

United States generally accepted accounting principles (continued):

A reconciliation of assets, liabilities and shareholders’ equity as at June 30, 2009, 2008 and 2007 under Canadian GAAP, liabilities and shareholders’ equity under US GAAP is as follows:


	2009			2008			2007

Assets under Canadian GAAP	$	4,683,512		$	6,206,501		$	7,489,030
Adjustment to reconcile to US GAAP:
Technology rights		(15,623	)		(78,119	)		(140,617	)
Capitalized Development Costs		(2,565,000	)		—			—


Assets under US GAAP	$	2,102,889		$	6,128,382		$	7,348,413


Liabilities under Canadian GAAP		6,601,480			1,539,536			2,408,333
Adjustment to equity portion-debentures		742,296
Adjustments to debt portion — Series A convertible preferred shares		(2,706	)		(424	)		(27	)


Liabilities under US GAAP	$	7,341,070		$	1,539,112		$	2,408,306

Shareholders’ equity as at June 30, 2009, 2008 and 2007 under US GAAP would be as follows:


	2009			2008			2007

Shareholders’ deficit:
Common stock	$	14,470,235		$	14,458,778		$	11,973,466
Preferred shares — exchangeable		48,829			60,286			186,748
Preferred shares — Series A		1			1			1
Equity component of convertible debentures		642,592			—			—
Additional paid-in capital		8,304,527			8,530,340			5,414,883
Deficit		(28,704,365	)		(18,460,135	)		(12,634,991	)


Total shareholders’ deficit	$	(5,238,181	)	$	4,589,270		$	4,940,107

The impact of measurement differences to US GAAP would increase the net cash used in operations by $1,395,917 and decrease the net cash used in investing activities by the same amount for the year ended June 30, 2009. There are no impacts of measurement differences to US GAAP on the operating, investing or financing cash flows on the consolidated statement of cash flows for the years ended June 30, 2008 and 2007.

INNEXUS BIOTECHNOLOGY INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in Canadian dollars)

Years ended June 30, 2009, 2008 and 2007
Period from incorporation on July 20, 1997 to June 30, 2009

16.

Financial Instruments:

Financial instruments of the Company consist of cash and cash equivalents, cash held in trust, prepaid expenses and other current assets, accounts payable, accrued liabilities, dividends payable, loans payable, the debt portion of preferred shares, and the liability component of convertible debentures.

The fair value of cash and cash equivalents, cash held in trust, prepaid expenses and other current assets, accounts payable, accrued liabilities, and dividends payable approximates their carrying amount due to their immediate or short-term maturity. The debt portion of preferred shares and the liability component of convertible debentures are carried at amortized cost using an effective interest rate method. The Company has classified its financial instruments as follows:


	June 30,		June 30,
	2009		2008
Financial assets
Cash and cash equivalents, cash held in trust held-for-trading, recorded at fair value	$	132,975	$	3,583,007
Accounts receivable, prepaid and other current assets held-for-trading, recorded at fair value	$	102,596	$	162,269


Financial liabilities
Accounts payable, accrued liabilities and dividends payable recorded at amortized cost	$	3,124,214	$	1,539,112
Debt portion of preferred shares recorded at amortized cost	$	2,706	$	424
Commitment for drug development recorded at amortized cost		—		—
Convertible debentures, net of discount	$	2,571,000		—
Loan payable, net of discount	$	903,049		—

The Company has not identified or measured any embedded derivatives that require separation for the year ended June 30, 2009 or the year ended June 30, 2008. The Company is required to identify and measure embedded derivatives that require separation from the related host contract and measure those embedded derivatives at fair value. Subsequent changes in fair value of embedded derivatives are recognized in the consolidated statement of loss in the period the change occurs.

The Company did not have any available-for-sale financial instruments during the year ended June 30, 2009 or June 30, 2008.

(a)

Credit risk:

Credit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligation.

INNEXUS BIOTECHNOLOGY INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in Canadian dollars)

Years ended June 30, 2009, 2008 and 2007
Period from incorporation on July 20, 1997 to June 30, 2009

16.

Financial Instruments (continued):

Financial instruments that potentially expose the Company to significant concentrations of credit risk consist principally of cash and equivalents. The Company’s investment policies are designed to mitigate the possibility of deterioration of principal, enhance the Company’s ability to meet its liquidity needs, and to provide high returns within those parameters. Cash and equivalents are on deposit with a Canadian chartered bank and an FDIC insured American bank. Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in the market interest rates. The Company is exposed to interest rate risk arising from fluctuations in interest rates on its cash and cash equivalents and short-term investments that earn interest at market rates. The Company does not use derivative instruments to reduce its exposure to interest rate risk.

The Company manages its interest rate risk by maximizing the interest income earned on excess funds while maintaining the liquidity necessary to conduct operations on a day-to-day basis. Based on the net exposures as at June 30, 2009, and assuming that all other variables remain constant, a 1% appreciation or deterioration of the interest rate would result in a decrease/increase of $1,100 in the Company’s net loss for the year ended June 30, 2009.

Fluctuations in market rates of interest do not have a significant impact on the Company’s results of operations due to the short term maturity of the investments held.

(b)

Currency Risk:

The Company is not exposed to interest rate risk arising from the debt portion of its preferred shares — series A stock, or from the secured debentures or loan payable as the dividend or interest is at a fixed rate. However, should market interest rates vary significantly; the Company could be accruing dividends and interest at a rate either higher or lower than market rates. The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Company operates primarily within the United States, although a significant portion of its expenses are incurred in Canada (“Canadian dollar”). The Company also incurs a small number of transactions in Barbados, whose totals are considered to have an insignificant effect on financial reporting. The Company has not entered into foreign exchange derivative contracts. The Company has short-term loans denominated in US dollars of US$920,000 at June 30, 2009.

A significant change in the currency exchange rates between the Canadian dollar relative to the US dollars could have an effect on the Company’s results of operations, financial position or cash flows.

The Company is exposed to currency risk through its net assets denominated in US dollars as follows:



	June 30, 2009			June 30, 2008
	US $			US $
Cash and cash equivalents	$	99,421		$	2,786,574
Accounts payable and accrued liabilities	$	(2,134,258	)	$	(308,866	)


	$	(2,034,837	)	$	2,477,708

Based on the above net exposures at June 30, 2009, and assuming that all other variables remain constant, a 5% appreciation or deterioration of the Canadian dollar against the US dollar would result in a decrease/increase of $ 101,742 in the Company’s net loss.

INNEXUS BIOTECHNOLOGY INC.
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
(Expressed in Canadian dollars)

Years ended June 30, 2009, 2008 and 2007
Period from incorporation on July 20, 1997 to June 30, 2009

16.

Financial instruments (continued):

(c)

Liquidity Risk:

Liquidity risk is the risk that the Company will encounter difficulties in meeting its financial liability obligations as they become due. Since inception, the Company has financed its cash requirements primarily through issuances of securities, cost recoveries, licensing fees, reimbursements for drug development, short-term borrowings, long-term debt including convertible debentures, and interest income. The Company controls liquidity risk through management of working capital, cash flows and the availability and sourcing of financing. The Company’s ability to accomplish all of its future strategic plans is dependent upon obtaining additional financing or executing other strategic options, however, there is no assurance that the Company will achieve these objectives. Accounts payable and accrued liabilities include past due liabilities of $2,097,240 at June 30, 2009.

17.

Capital Management:

The Company’s capital management objectives are to safeguard its ability to continue as a going concern and to provide returns for shareholders and benefits for other stakeholders, by ensuring it has sufficient cash resources to fund its research and development activities, to pursue its commercialization efforts including its DXL 625 program and to maintain its ongoing operations. The Company includes cash and cash equivalents, liability component of convertible debentures, liability component of loans payable, debt portion of convertible convertible preferred shares and shareholders’ equity/(deficit) in the definition of capital. A summary of the Company’s capital structure is as follows:


	2009			2008

Cash and cash equivalents	$	124,344		$	3,121,819
Liability component of convertible debentures		2,571,511			—
Loans payable		903,049			—
Debt portion of convertible preferred shares		2,706			424
Shareholders’ deficit		(1,917,968	)		4,666,965


	$	1,683,642		$	7,789,208

During 2009, the Company scaled back its Scottsdale, Arizona operations in an effort to conserve capital. This included subleasing part of its lab space, laying off and furloughing employees, eliminating director fees and reducing other operating costs. The Company is aggressively pursuing a number of alternatives to raise additional capital in the near term including seeking additional equity funding, entering into licensing and purchase agreements and selling equipment.

Management Discussion and Analysis
for the year ended June 30, 2009

INNEXUS BIOTECHNOLOGY INC.

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

For The Year Ended June 30, 2009

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes for the year ended June 30, 2009 which were prepared and audited in accordance with Canadian generally accepted accounting principles (“GAAP”). All dollar amounts are expressed in Canadian dollars unless otherwise indicated. This discussion and analysis is dated as of October 23, 2009.

The information provided in this document is not intended to be a comprehensive review of all matters concerning the Company. The users of this information, including but not limited to investors and prospective investors, should read it in conjunction with all other disclosure documents provided, including but not limited to all documents filed on SEDAR (www.SEDAR.com).

As used in this Management’s Discussion and Analysis, the terms “InNexus,” “the Company,” “we,” “us,” or “our” mean InNexus Biotechnology Inc and its consolidated subsidiaries as a whole, unless the context indicates otherwise. Except as otherwise stated, the information contained herein is as of June 30, 2009.

Special Note on Forward Looking Statements

Except for statements of historical fact, certain information contained herein constitutes forward-looking statements. Forward-looking statements are usually identified by our use of certain terminology, including but not limited to “will”, “believes”, “may”, “expects”, “should”, “seeks”, “anticipates” or “intends” or by discussions of strategy or intentions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results or achievements to be materially different from any future results or achievements expressed or implied by such forward-looking statements. Without limiting the generality of the foregoing, such factors may include the outcome of research and development programs, clinical trials and other scientific based activities, approval of drug applications by United States Food & Drug Administration (“FDA”) or other regulatory bodies, the outcome of licensing and other prospective third party negotiations, actions of existing or yet unidentified competing products or companies, new scientific discoveries, changes in market conditions for the Company’s technology or products based thereon and numerous other factors, including those outlined in other disclosure documents filed by the Company on SEDAR at www.SEDAR.com. Forward-looking statements in this document are not a prediction of future events or circumstances, and those future events or circumstances may not occur. Given these uncertainties, users of the information included herein, including investors and prospective investors are cautioned not to place undue reliance on such forward-looking statements. Although we believe these forward-looking statements are based on reasonable assumptions, statements made regarding future results are subject to a number of assumptions, uncertainties and risks that could cause future results to be materially different from the results stated or implied in this document.

Overview and Corporate Development Update

InNexus Biotechnology Inc. is headquartered in Vancouver, British Columbia with principal management and developmental facilities based in Scottsdale, Arizona on the campus of The Mayo Clinic. These development facilities provide validation of protein and peptide discoveries, enabling the Company and its strategic partners to advance novel drug therapeutics and diagnostics.

INNEXUS BIOTECHNOLOGY INC.

InNexus is engaged in monetizing its technology for its own product development projects whether independently, through collaborations with strategic partners and/or through business development activities for the licensing and sale of our technologies and services. Our business strategy is to develop and market Dynamic Cross Linking (“DXL™”) technology to the biotechnology and pharmaceutical community by launching and developing multiple product candidates. These candidates include potential therapeutic and diagnostic products. We may be paid front-end payments, milestone payments, and royalties for the use of our technology, internal expertise for rapid R&D, and products based on DXL™ technology by emphasizing the development of pre clinical and early clinical developments with an eye on commercializing these opportunities to the industry. InNexus is focused on developing products and moving them through a transaction which will provide additional funds to us for the creation of additional products.

We have a dual mission of monetizing our technology through partnerships and advancing DXL™ technology into the clinic.

Developing DXL™ Technology

InNexus is developing its DXL™ technology using it to isolate and expand individual antibodies for the treatment of numerous diseases, including cancer. DXL™ technology is a drug development approach that creates new products and/or enhances existing monoclonal antibodies and applies to virtually all antibody products currently in development. DXL™ enhancements can increase the potency of antibodies and present opportunities for creating new intellectual property.

InNexus’ DXL™ technology has broad applications for developers of monoclonal antibody products. The technology could potentially enable the following:

•

Increase potency and thus profitability of FDA-approved products. There are currently numerous approved and pending antibody products with a large combined annual market of approximately US$30 billion in worldwide sales. Many products have consumed a significant portion of their patent life before reaching the product approval stage. Application of DXL™ technology to such products may provide opportunities to extend patent and/or franchise opportunities.

•

Create new patents of existing antibody diagnostics and therapeutics. Each antibody developed with DXL™ technology may represent a new, patentable invention. This provides InNexus and partners the ability to pursue products and markets in which there are already established competitors.

•

Convert existing, non-product grade antibodies into ones with greater potential. This may represent the largest potential long-term use of the technology platform with thousands of such antibody candidates.

•

Create new uses and large new markets for antibody products which did not previously exist.

DXL™ technology gives us a strategic competitive advantage: the ability to apply DXL™ technology to existing FDA approved products to make them more effective without changing the fundamental characteristics of how the product seeks its target such as cancer and potentially extend their patent life. This gives us the chance to cut years of time and millions of dollars off the typical product development cycle, allowing us to establish value for our products or ‘monetize’ our R&D efforts faster than our competitors.

During the past year, InNexus advanced its goals by:

•

entering into a collaborative partnership with St. Joseph’s Hospital in Phoenix, Arizona USA which will focus on the development of treatments for women with endometriosis. The first project of the collaboration is aimed at providing new treatments to attack the problem of endometriosis, a painful condition that can lead to other conditions, such as infertility.

•

filing certain patent applications for the development of diagnostic and research tools based on our DXL™ technology platform, including a quantitative amplification technology aimed at improving and accelerating the development of antibody-based diagnostic tests offered to the pharmaceutical and diagnostics industry and to contract research organizations.

INNEXUS BIOTECHNOLOGY INC.

•

filing for patent protection for certain in vivo recombinant production techniques of our DXL™ antibodies. The DXLmouse™ is another R&D tool that enables InNexus to target a desirable antibody, introduce the antibody into the mouse and then have that animal produce the desired antibody incorporating InNexus’ DXL™ technology.

•

receiving patent grants in Germany, Spain, France, Great Britain and Italy further expanding patent protection of its DXL™ technology in Europe.

•

The FDA completed its comprehensive review of the development plans for InNexus’ lead candidate, DXL625 (CD20) for the prospective treatment of Non-Hodgkin’s Lymphoma (NHL) and/or Chronic Lymphocytic Leukemia (CLL). InNexus’ submission included detailed information on plans for a Phase I clinical program, preclinical pharmacology and toxicology data and its current manufacturing. At the Pre-IND meeting, FDA supported InNexus’ current manufacturing plans stating that the plans were suitable for the manufacture of Phase I product of DXL625 onsite at InNexus. The FDA also reviewed our completed animal testing and recommended a more expeditious design for the final animal studies to set the state for human studies. Per these recommendations, InNexus foresees no regulatory impediment to the initiation of human clinical studies in 2010.

Advancing DXL™ forward

Our advancement of DXL™ technology is anticipated to involve additional partnerships or agreements. In fiscal 2008, InNexus completed a significant partnership agreement and we continue negotiations with multiple potential partners for other collaborative arrangements.

Although DXL™ is a fundamentally diverse technology with important synergies for the development of products, partners and other uses such as diagnostics, we believe our best opportunities come from rapid product development using our DXL™ technology.

Our strategy for growth includes the following elements:

•

Invest financial, human and lab resources in DXL625 (CD20) and DXL702 (HER2/neu) for near-term growth.

Over the last year:

•

we announced preliminary data showing an increase of potency of DXL625, compared with Rituxan^®. Our data shows that DXL625 showed increased binding to the target antigen (CD20) on non-hodgkin’s lymphoma (“NHL”) tumor cells. Studies done at InNexus have also discovered that DXL625 has greater killing potency than Rituxan^® in cell lines of both moderate and low expressors of CD20, the target used to attack NHL. Additional results demonstrated DXL625 more potently induced apoptosis (cell suicide) in B-cell lymphoma cells and B-cell leukemia (Hairy Cells). Data showing that the mechanisms of inducing apoptosis is via DXL-induced antibody crosslinking introduces an important advantage over Rituxan^® and has the potential to overcome certain forms of resistance to efficacy of anti-CD20 treatment.

•

we completed a large scale primate study of DXL625. The single injection, multidose test provided preliminary toxicity and pharmokinetic data of our product and demonstrated B-cell depletion even at the lowest dose of DXL625 tested (1 mg/kg). No adverse events were observed and complete recovery of B cells was seen in all cynomolgus monkeys. The study represents the pilot portion of our drug development plan and has provided data to plan the IND-enabling long term multidose study that will move us toward human clinical trial testing with DXL625. Results of this study were presented at the 2009 AACR meeting.

INNEXUS BIOTECHNOLOGY INC.

•

we announced the results of an extensive mouse tumor study demonstrating superiority of InNexus’ DXL625 (CD20) versus Rituxan^® in the xenograft model. An independent group investigating the survival of mice intravenously injected with B-lymphoma cells and treated subsequently with DXL625 showed a significant improvement in outcome compared to animals treated with equivalent doses of Rituxan^®.

•

we completed proof-of-principle studies for the breast cancer product DXL702(HER2); these xenotransplantation experiments established the superiority of DXL702 over Herceptin to arrest growth of orthotopic tumor cell implants in immunocompromised mice. The tumor line chosen was one with low expression of the HER2 target antigen and this result provides further evidence that DXL702 can kill tumors that may evade existing treatment because of low expression of the intended target. Follow-up studies of the histology of the tumors shows clear differences in the cytolytic activity of 702 vs. the control Herceptin against this low expressing tumor.

•

Launch additional DXL ™ based products

•

we added a new product, DXLr120 (CD20). This is the third product added to the growing InNexus pipeline and was developed using new recombinant methods to produce a DXL™ CD20 antibody. In addition, recombinant forms of DXL702 are being prepared and tested for enhanced potency.

•

we have shown that controlled proprietary processes with certain antibodies can produce products with properties similar to the DXL™ antibodies. These data were presented at the 2009 AACR meeting. Patent application for this novel method is sought.

•

we announced the development of a new antibody product from our DXL™ platform technology, DXL1218 (EGFR), for the prospective treatment of colorectal cancer, for which recent experimental data suggests that DXL1218 (EGFR) is superior to competing commercialized products on the market, such as ERBITUX^® (cetuximab), in terms of potency and efficacy. Different forms of this antibody will be prepared in order to select those with maximum efficacy and minimum off target reactivity to lessen known side-effect of treatment with EGFR antibodies.

•

we filed certain patent applications for the development of diagnostic and research tools based on our DXL™ technology platform. The tools continue development as a quantitative amplification technology aimed at improving and speeding up the development of antibody-based diagnostic tests offered to the pharmaceutical and diagnostics industry and to contract research organizations.

•

we filed for patent protection for certain in vivo recombinant production techniques of our DXL™ antibodies. The DXLmouse™ is another R&D tool that enables InNexus to target a desireable antibody, introduce the antibody into the mouse and then have that animal produce the desired antibody incorporating InNexus’ DXL™ technology.

INNEXUS BIOTECHNOLOGY INC.

•

Capture opportunities with collaborations, licensing and/or joint activities

•

we entered into a collaborative partnership with St. Joseph’s Hospital in Phoenix, Arizona USA which will focus on the development of treatments for women with endometriosis. The first project of the collaboration is aimed at providing new treatments for endometriosis, a painful condition that can lead to other conditions, such as infertility.

•

we announced that we had received patent grants in Germany, Spain, France, Great Britain and Italy further expanding patent protection of its DXL™ technology in Europe.

R&D investments are not our only strategy for driving growth. InNexus continues to work with collaborators and new corporate acquaintances to conduct proof-of-concept and joint scientific exploration activities for the potential development of innovative products and technologies.

Appointments of Officers and Directors

As of June 30, 2009, the Board of Directors consisted of four members: Jeff Morhet, CEO and Chairman of the Board; Dr. Leroy Chiao, Raymond Mullaney and David Warden. Officers include Dr. Thomas Kindt, Chief Scientific Officer; David Petulla, Chief Financial Officer and Dr. Jur Strobos, VP Clinical and Regulatory Affairs.

During the fiscal year 2009, the Company accepted the resignations of Laurence Luke, former Audit Committee Chair and R. Glenn Williamson, former Corporate Governance Committee Chair and Wade Brooksby, Chief Financial Officer and Director. Responsibility for the audit and compensation committees of the Board now consist of independent directors Leroy Chiao, Governance and Compensation Committee Chair and David Warden, Audit Committee Chair. These committees were first established following the appointment of Jeff Morhet as Chairman of the Board in fiscal year 2007.

Establishment of the Scientific Advisory Board

InNexus charges it’s Scientific Advisory Board with the responsibility to oversee technological development, collaborate on the best uses and marketability of intellectual property, and advise management on best practices for conducting ongoing development to effect the most efficient marketability of existing and potential technology. On June 30, 2009, our Scientific Advisory Board included Dr. J. Donald Capra, Dr. Carlos Arteaga, Dr. Judith James, Dr. Thomas Kindt, Dr. Ronald Levy, Dr. John Minna, Dr. Jur Strobos, Dr. Ellen Vitetta, Dr. Daniel Van Hoff, Dr. Martin Weigert and Dr. Maurizio Zanetti.

Results of Operations

During the year ended June 30, 2009 we incurred a loss of $8,017,224 or $0.11 per share as compared to a loss of $5,887,642 or $0.11 per share for the year ended June 30, 2008. The increased loss resulted primarily from decreased expense reimbursements for development costs under our development contracts; offset by a decrease in operating expenses primarily due to the capitalization of development costs totaling $2,565,000 and the implementation of a cost reduction program. For the year ended June 30, 2009 and 2008, the total funded research and development reimbursements under the Royalty Pharma agreement were $0 and $2,709,988, respectively. Our cost reduction program was implemented in response to our inability to secure funding during 2009 due to the current challenges in the capital markets and included the downsizing of the operations at the Scottsdale location and the reducing of all administrative expenses during the current year to reduce the monthly cash consumption.

INNEXUS BIOTECHNOLOGY INC.

The details of selected, significant differences between the year ended June 30, 2009 and the year ended June 30, 2008 are as follows:

Research and Development: In fiscal 2008, we began capitalizing the costs related to its DXL625 product because the product has reached a point in development where it has inherent salable value. We recognized total capitalized development costs of $2,565,000 during fiscal 2009. All 2008 costs that were eligible for capitalization related to DXL625 were reimbursed under our development agreement with Royalty Pharma and recorded as reimbursements on the income statement.

For fiscal 2009, Research and Development expenses were $2,305,354 compared to $3,813,259 for 2008, a decrease of $1,507,528 or 40%. There were significant decreases in almost every expense category primarily due to the capitalization of development costs previously explained and the cost reduction program at the Scottsdale location.

With respect to the Research and Development expenses, the following significant changes during the year ended June 30, 2009:

•

Compensation decreased $203,559, or 25% (2009 — $612,398; 2008 — $815,957). During 2009, scientific headcount decreased from 17 people to 6 over the year due to downsizing related to reducing costs. Employee benefits and payroll taxes decreased $156,410 during the same time period from $200,083 in 2008 to $43,673 in 2009. Benefit costs were higher in the prior year for both the cost of initial benefit implementation and the costs incurred to reduce the workforce at our Kentucky research facility which was closed in fiscal 2008. Expenses in both categories benefited from the capitalization of DXL625 expenses.

•

The value of stock based compensation recognized for development personnel and consultants decreased by $309,268 (2009 — $85,958; 2008 — $395,226), resulting from: lower valuations of the options for consultants resulting from current stock market levels; the forfeiture of options held by prior consultants and employees; and more options were issued in 2008 due to larger headcount.

•

Research supplies decreased $228,637, or 70%, (2009 — $95,986; 2008 — $324,623). The decrease reflects the increased costs of stocking the new laboratory space during 2008 offset by the capitalization of supplies specifically related to product DXL625 and less buying of supplies due to the cost reduction program in 2009.

•

Travel expenses related to research and development as well as conferences and employee training decreased $340,553 (2009 — $36,706; 2008 — $377,259), partially due to the elimination of most travel and conferences to conserve cash and the capitalization of expenses specifically related to product DXL625.

•

Amortization expense decreased by $87,988 (2009 — $256,855; 2008 — $344,843), due to several factors: a slowdown in asset purchases to conserve cash; capitalization of amortization costs related specifically to product DXL625; and some intellectual property costs no longer had amortization expense, as they were fully amortized.

General and Administrative: During the year ended June 30, 2009, General and Administrative expenses were $4,388,744 a decrease of $122,540, or 3% from $4,511,284 for the year ended June 30, 2008. The decrease in gross general and administrative expenses in the year ended June 30, 2009 is directly attributable to our cost reduction program to conserve cash that was initiated in early 2009.

INNEXUS BIOTECHNOLOGY INC.

With respect to general and administrative expenses, the following significant increases occurred during the year compared with the same period in the prior year:

	•		Legal and accounting fees increased $215,940 (2009 — $1,062,647; 2008 — $846,707). Increases resulted from a higher level of accounting and legal activity for corporate governance activity, a larger product line, increased patent activity, a fee dispute with a prior professional service provider, and litigation relating to claims arising from our operations in the normal course of business.

	•		Consulting fees increased $94,150 (2009 — $623,194; 2008 — $529,044) due to the engagement of additional accounting personnel during the year.

	•		Foreign currency translation expenses decreased $220,692 (2009 — $ (44,723); 2008 - $175,969) as the Canadian dollar lost value over the year against the US dollar, the currency in which most of our transactions are recorded.

	•		The value of stock based compensation recognized for management and administrative personnel and consultants decreased by $193,457 (2009 — $254,981; 2008 — $448,438), resulting from less awards granted to consultants and employees and the forfeiture of options held by prior consultants and employees.

	•		Travel expenses as well as conferences and employee training decreased $57,296 (2009 — $262,626; 2008 — $319,922), primarily due to the reduction of travel and conferences to conserve cash.

	•		Net rent expense allocated to non-laboratory space decreased by $60,869 (2009 - $196,113; 2008 — $256,982) as the Company allocated rent costs to development projects and received sublease rental income during the current year.

During the year ended June 30, 2009, we received interest income of $3,306 and $77,248 in fiscal year 2008 and had interest expense of $1,314,323 for the year ended June 30, 2009 and $252,660 in fiscal year 2008. In 2008, we had larger average cash balances due to equity placements and greater amounts of stock option and warrant exercises than in 2009. In 2009, the rate of interest on preferred shares — series A increased during the current year, coupled with the interest accrual on convertible debentures that did not exist in 2008 caused the increase in interest expense in 2009.

Selected Annual Information

Expressed in Canadian $


	Year ended			Year ended			Year ended
	June 30, 2009			June 30, 2008			June 30, 2007
Revenue		—			1,010			15,274
Net loss		8,017,224			5,887,642			5,172,010
Per share — basic and diluted		(0.11	)		(0.11	)		(0.13	)
Total assets		4,683,512			6,206,501			7,489,030
Long-term liabilities		2,571,511			—			1,492,142
Dividend accrued on Preferred Shares — Series A		166,464			603,541			359,087

INNEXUS BIOTECHNOLOGY INC.

Summary of Quarterly Results
Expressed in Canadian $ (in thousands except per share data)


	Q4-09			Q3-09			Q2-09			Q1-09			Q4-08			Q3-08			Q2-08			Q1-08
Revenue	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

Net loss (1)	$	(2,295	)	$	(2,101	)	$	(1,864	)	$	(1,757	)	$	(1,792	)	$	(1,133	)	$	(2,047	)	$	(915	)
Loss per share (2)	$	(0.02	)	$	(0.03	)	$	(0.03	)	$	(0.03	)	$	(0.03	)	$	(0.03	)	$	(0.05	)	$	(0.02	)


(1)		Net loss per quarter and on a per share basis is the same as net loss before extraordinary items.

(2)

Diluted loss per share is the same as basic loss per share as the effect of outstanding options, warrants and other dilutive instruments would be anti-dilutive.

Trend analysis

Throughout the year ended June 30, 2009 we were able to perform in accordance with the business strategy that we had built in prior years. We completed a large scale primate study of DXL625 that lead to the FDA recommending a more expeditious design for the final animal studies to set the stage for human clinical studies.

However, as a result of the exhaustion of reimbursements from Royalty Pharma and our inability to raise additional funding due to the challenging economic environment in fiscal 2009, we were unable to sustain the operations we had established in fiscal 2008. We were forced early in fiscal 2009 to begin a series of cost reduction programs so we could reduce our monthly burn. We scaled back our Scottsdale, Arizona operations including: subleasing additional sections of our lab space; laying off and furloughing employees; reducing the number of consultants; eliminating director fees and reducing other operating costs. Our cost reduction programs were successful and we were able to sustain our operations through 2009. We expect our expenditures to decrease in 2010 due to the cost reduction programs we implemented in fiscal 2009. In the current economic climate, where the capital and other financial markets are extremely difficult to access, our utmost objective is to execute initiatives that will enhance our ability to continue as a going concern.

To date, we have no net earnings, minimal revenue and negative operating cash flows, which are expected to continue at least for the near term. Our ability to continue as a going concern and accomplish all of our future strategic plans is dependent upon obtaining additional financing or executing other strategic options, however, there is no assurance that we will achieve these objectives. We are aggressively pursuing a number of alternatives to raise additional capital in the near term including seeking additional equity funding, entering into licensing and purchase agreements to generate revenue and selling equipment. There can no assurance that we will be successful in raising additional investment capital, realizing assets, or achieving revenue to generate sufficient cash flows to continue as a going concern. As a result, there is significant risk regarding our ability to continue as a going concern.

In the fourth quarter of fiscal 2007, we entered into a sales agreement with Royalty Pharma whereby significant operating revenues could occur. There is a potential US$30,000,000 which could be received upon InNexus’ meeting specified milestones in the contracts. As of June 30, 2009 and 2008, we believe certain of these milestones have been met. Discussions continue with Royalty Pharma concerning each party’s obligation under the purchase agreement. There is no guarantee that these discussions will result in additional cash proceeds, nor is there any assurance that additional sales contracts will follow.

INNEXUS BIOTECHNOLOGY INC.

Liquidity and Capital Resources

At June 30, 2009, we had negative working capital of $(3,794,397) compared to working capital of $2,205,740 at June 30, 2008. Unrestricted cash balances decreased to $124,344 at June 30, 2009 from $3,121,819 at June 30, 2008.

Net cash flows for the year ended June 30, 2009 compared to the year ended June 30, 2008 are shown below:


	Year ended June 30,
	2009			2008
Cash flows from:
Operating activities	$	(3,316,793	)	$	(8,445,105	)
Investing activities		(1,458,098	)		(3,901,127	)

Financing activities		1,777,416			4,805,246

Decrease in cash and cash equivalents	$	(2,997,475	)	$	261,268

The cash used in operating activities was significantly reduced in 2009 compared to 2008. Cash generated during the year ended June 30, 2009 from operating activities resulted from increases in accounts payable and accrued liabilities and decreases of accounts receivable and prepaid and other assets. Our vendor base is currently carrying a portion of our financing load.

Cash generation from operating activities during the same period in 2008 was a result of $ 3,861,239 that was committed for drug development.

Capitalization of development costs for DXL625 of $1,395,917 accounted for nearly all cash requirements for investing activities for the full year 2009, while during the prior year we used $1,174,125 for purchases of equipment offset by proceeds from Royalty Pharma.

Cash provided by financing activities in the period ended June 30, 2009 were from the proceeds from the issuance of debentures in November and December 2008 and proceeds from the loan facility in the fourth quarter of 2009. Fiscal 2008 received cash related to financing activities primarily from the equity financing in June 2008.

On November 21, 2008, in a private placement, we issued $2,368,000 of unsecured convertible debentures. The notes mature on November 21, 2010 and accrue interest at 10% payable quarterly beginning November 21, 2009. The notes are convertible at the option of the holder into common shares of the Company at a conversion price of $0.10 per common share. We may opt to redeem the convertible debentures at the $0.10 conversion price if our common stock price exceeds $0.30 for thirty consecutive trading days prior to the maturity date. For the notes, we received cash proceeds of $586,948, satisfaction of accrued and future expenses of $483,000 from board members and senior management of the Company and applied a redemption of 10,000 preferred shares — series A at $100 per share and accrued dividends on the shares of $294,466 ((note 9(c)). In addition, a non-related party received a $9,100 finder’s fee in accordance with policies of the TSX Venture Exchange.

On December 19, 2008 in a private placement, we issued $1,696,000 of unsecured convertible debentures. The notes mature on November 21, 2010 and accrue interest at 10% payable quarterly beginning November 21, 2009. The notes are convertible at the option of the holder into common shares of the Company at a conversion price of $0.10 per common share. We may opt to redeem the convertible debentures at the $0.10 conversion price if our common stock price exceeds $0.30 for thirty consecutive trading days prior to the maturity date. For the notes, we received cash proceeds of $487,155, applied redemption of 9,240 preferred shares — series A at $100 per share and accrued dividends on the shares of $284,846. A non-related party received a $7,000 finder’s fee in accordance with policies of the TSX Venture Exchange.

INNEXUS BIOTECHNOLOGY INC.

On January 23, 2009 in a private placement, the Company issued $503,000 of unsecured convertible debentures. The notes mature on January 23, 2011 and accrue interest at 10% payable quarterly beginning January 23, 2010. The notes are convertible at the option of the holder into common shares of the Company at a conversion price of $0.10 per common share. The Company may opt to redeem the convertible debentures at the $0.10 conversion price if the Company’s common stock price exceeds $0.30 for thirty consecutive trading days prior to the maturity date. For the notes, the Company received cash proceeds of $93,000. $403,000 of the placement satisfied accrued and future expenses.

On March 25, 2009, we entered into a loan facility with a group of investors for an aggregate amount of up to USD$2.5 million. The loan facility bears interest at 12.5% payable in cash or in common shares of InNexus, and matures 6 months from the date of drawdown. InNexus is entitled to extend the term for a further 6 months. The loans are repayable at any time subject to a 5% penalty. In connection with the loan, InNexus will issue to the lenders at closing common share purchase warrants obtained by 1) dividing each lender’s loan value by b) the then prevailing market price c) multiplied by 25%. Each warrant will entitle the holder to acquire one common share of InNexus at a price equal to the greater of $0.10 or the then prevailing market price. The purchase warrants are exercisable for the earlier of a period of 60 months from closing or complete repayment of the total loan. Proceeds of the loan facility are intended to be used for paying current liabilities and operating expenses for our continued research and development programs. At June 30, 2009, we had borrowed US$920,000 and issued 3,056,882 warrants under the loan facility, of which we received US$525,000 in cash and US$395,000 was used to satisfy accrued expenses from our senior management.

We have traditionally relied and still rely on obtaining capital through the sale of our securities or from debt obligations and we expect to do so until we are able to secure adequate revenue from licensing and/or sales of our technologies, or other operating activities. Raising capital is highly dependent upon numerous conditions, such as the state of the capital markets, success in contractual negotiations with third parties, success of products using our technology and other factors, many of which are largely out of our control. We have, in the past, been successful in securing sufficient funds through the sale of our securities or debt obligations to meet our operating requirements, and we anticipate that we will continue to do so, but there is no assurance that we will be able to raise sufficient capital to fund our operations through the sale of its securities or debt obligations on terms favorable to us.

Commitments

In June 2007, we completed a sale of advance revenue rights for an undeveloped product. Concurrently, a sale of common shares occurred with the same party to the sale. Total proceeds of $3,196,815 recognized for the sale and placement was used by the Company on the development of the specified product.

In March 2008 at our annual general meeting, the shareholders approved payment of compensation to the Company’s CEO as consideration for additional proceeds, if any, received by the Company under the Royalty Pharma contract. As of June 30, 2009 no additional proceeds had been received and no additional compensation was owed.

On September 27, 2006, we signed a non-cancelable operating lease agreement for our corporate head office and laboratory located on the campus of the Mayo Clinic in Scottsdale, Arizona. The agreement calls for payments of US$46,710 per month through September 2016.

INNEXUS BIOTECHNOLOGY INC.

Anticipated minimum annual rental payment under the agreement (US$):


2010	$	560,520
2011		560,520
2012		560,520
2013		560,520
2014		560,520
Thereafter		1,261,170

	$	4,063,770

During fiscal 2008 and 2009, we subleased part of our office and laboratory space. For the year ended June 30, 2009, we received $166,274 of sub-lease income against gross rent expense and $79,275 for the year ended June 30, 2008.

Related party transactions

During the year ended June 30, 2009, we incurred $8,227 compared to $98,685 at June 30, 2008 for management and administrative services and legal fees from related parties who are related to officers or directors of the Company.

Changes in Accounting Policies

During the year ended June 30, 2008 we changed our functional currency to the United States dollar from the Canadian dollar.

On July 1, 2008, we implemented policies related to the following new accounting pronouncements:

	•		CICA Handbook Section 1535, Capital Disclosures, which requires disclosure of an entity’s objectives, policies and processes for managing capital, quantitative data about what the entity regards as capital, whether the entity has complied with any capital requirements and, if it has not complied, the consequences of such non-compliance.

	•		CICA Handbook Section 3862, Financial Instruments — Disclosures, and Section 3863, Financial Statements — Presentation, which replaced Handbook Section 3861, Financial Statements — Disclosure and Presentation. The replacement revises and enhances disclosure requirements and carries forward unchanged the existing presentation requirements.

	•		As of July 1, 2008, the Company chose to adopt early the CICA Handbook Section 3064, Goodwill and Intangible Assets, which replace Section 3062, Goodwill and Other Intangible Assets, and Section 3450, Research and Development Costs. The standard provides guidance on the recognition of intangible assets in accordance with the definition of an intangible asset and the criteria for asset recognition as well as classifying the application of the concept of matching revenues and expenses, whether these assets are separately acquired or internally developed. The change as result of early adoption of accounting standard in respect of development costs has been applied. The impact of adopting this standard had been to capitalize $2,565,000 of development costs related to the DXL625 product during 2009.

INNEXUS BIOTECHNOLOGY INC.

The following accounting standards were recently issued by the CICA. The Company is currently evaluating the impact of these new standards on its consolidated financial statements.

			CICA Handbook Section 1582, Business Combinations, establishes the standards for the accounting of business combinations, and stated that all assets and liabilities of an acquired business will be recorded at fair value. Obligations for contingent considerations and contingencies will also be recorded at acquisition date fair value. The standard also states that acquisition-related costs will be expensed as incurred and that restructuring charges will be expensed in the periods after the acquisition date. This standard is equivalent to the International Financial Reporting Standard on business combinations. The Company will be required to adopt this standard prospectively for business combinations with acquisition dates no later than April 1, 2011. The Company is currently assessing the impact of adopting this standard on financial statements.

			CICA issued Handbook Section 1602, Non-Controlling Interests establishes the standards for accounting of non-controlling interests of a subsidiary in the preparation of consolidated financial statements subsequent to a business combination, and effective for the Company on April 1, 2011. The Company is assessing the impact of adopting this standard on financial statements.

Equity Securities Issued and Outstanding

We had 70,012,835 common shares authorized, issued and outstanding as of June 30, 2009 and 69,621,116 at June 30, 2008. At June 30, 2009, 491,055 common shares remain in escrow in accordance with terms of their June 2003 issuance. These remaining common shares were released July 2, 2009.

As of June 30, 2008 and 2009, we had authorized, issued and outstanding 5,646,395 prepaid stock purchase warrants which are convertible at the option of the holders into an equal number of the Company’s common shares without any payment of additional cash. We consider the prepaid warrants as equivalent to common shares for the purpose of computing losses per share.

At June 30, 2009 we had 1,866,875 and at June 30, 2008, 2,258,594 outstanding exchangeable preferred shares issued by InNexus Exchange Corp., which at the option of the holder, are convertible into an equal number of common shares of the Company at no additional cash consideration. As at June 30, 2008 and June 30, 2009, 1,399,687 of the issued exchangeable preferred shares remained in escrow.

In conjunction with the Convertible Preferred Share financing completed by the Company in October 2005, there were 22,565 convertible preferred shares issued and outstanding as at June 30, 2008. In November and December 2008, we converted 21,085 convertible preferred shares to convertible debentures. At June 30, 2009, 3,325 convertible preferred shares — series A remain. Each convertible preferred share is convertible into 400 common shares of the Company. At June 30, 2008, 9,026,000 common shares of the Company had been allotted for future conversion. As of June 30, 2009, 1,330,000 in common shares had been allotted for future conversion.

As of June 30, 2009, 11,141,750 stock options with a weighted average exercise price of $0.25 as well as 37,122,840 share purchase warrants (100% equivalent units) with exercise prices ranging from $0.10 to $1.34 were outstanding. As at October 23, 2009, 12,029,500 options and 40,831,811 of share purchase warrants were outstanding with no exercises subsequent to June 30, 2009. The Warrant Certificate entitles the holder to surrender the warrant and to receive in exchange a lesser number of shares than the holder would have received had the holder paid cash to exercise the warrant, and the reduction of common shares received by the holder is equivalent, at the market price on the exercise date, to the amount of cash that would have been paid to exercise the warrant.

INNEXUS BIOTECHNOLOGY INC.

Current Outlook and Business Risk Factors

Our company continues to concentrate on developing itself as well as our science, product candidates and credibility in the pharmaceutical industry. We continue to build a team of industry and regulatory expert leaders, an interactive and engaged Scientific Advisory Board, a team of commercially experienced scientists and our Board of Directors. Our state-of-the-art research & development laboratories located on the campus of the Mayo Clinic are staffed with a team of qualified professionals focused on the development of DXL™ products. In March 2009, we had a meeting with the FDA, where the agency expressed clear support for our product development plans following a comprehensive review of the proposed clinical pathway for our lead preclinical candidate, DXL625 (CD20) for the prospective treatment of Non-Hodgkin’s Lymphoma and/or Chronic Lymphocytic Leukemia. The agency also provided a Manufacturing Exception Approval allowing us to manufacture all clinical material needed for DXL625’s Phase l human trial, in our facilities located on the campus of Mayo Clinic in Scottsdale, Arizona. We are securing long-term partners and obtaining funding using equity placements and debt financing so we can advance our products on to the next level of clinical approval.

The antibody industry is growing at an unprecedented rate. Today, it is estimated to have over $30 billion in world-wide sales, and antibodies are expected to be the pharmaceutical industry’s leading choice for the development of new therapeutic compounds. We continue to progress our research and believe we are positioned to take advantage of these market trends as antibody-based products are widely expected to be the primary source of growth in the Biotechnology industry over the next decade. Within this space, cancer therapeutics are expected to be the fastest growing type of product and we also believe our DXL™ technology gives us a significant strategic advantage in developing new antibody-based cancer therapeutics, such as our DXL625 (CD20), as well as other DXL™ based products.

Technology platform companies face many and varied risks, many of which are the same industry risks faced by companies in direct research and development of pharmaceutical products. While InNexus strives to manage such risks to the extent possible and practical, risk management cannot completely eliminate risk. The following factors are those the Company’s management believes are most important in the context of the Company’s business.

We continue to grow our biotechnology development business but we have no developed or approved products incorporating our DXL™ technologies. We currently rely solely on our DXL™ technology, and if our product development efforts are unsuccessful, our ability to generate revenues, cash flows and earnings will be impaired or non-existent. In addition, we have a history of losses and anticipate that we will continue to incur losses for the foreseeable future. If we are unable to develop monoclonal antibody based products utilizing our DXL™ technology platform, we will not be able to achieve profitable operations. As a result, we will need to raise additional capital at favorable terms to fund our operations. The lack of additional capital or profitable products stemming from either internal development or collaborative arrangements could dilute our shareholders’ equity or eventually compel us to cease operations.

We are dependent upon our key personnel, the loss of whom would make it difficult to manage our business operations and may jeopardize the development of our DXL™ products. While we have been able to attract and retain skilled and experienced personnel in the past, no assurance can be given that we will be able to do so in the future.

Any potential products resulting from our DXL™ technology will require research and development and significant testing before they may be marketed commercially. Furthermore, it is uncertain whether any of our potential products will gain regulatory approval, which can be a long process and could delay our ability to market the product and generate revenues. Our technology may also become obsolete or otherwise fail to keep pace with the industry’s evolving requirements. Failure to obtain market acceptance for products would negatively impact our revenue and ability to operate profitably.

INNEXUS BIOTECHNOLOGY INC.

From time to time we are involved in litigation relating to claims arising from our operations in the normal course of business. We utilize various risk management strategies, including employee education and the maintenance of liability insurance against certain risks. Though all litigation contains inherent uncertainty, we do not currently believe that the resolution of any legal proceedings is likely to have a material adverse effect on the Company’s financial position, operations or cash flows in the future.

Our proprietary technology may require unpredictable and costly protection. Failure to protect our technology could result in additional competition for our potential products from third parties who may infringe on our technology. In addition, claims of infringement on proprietary rights of third parties may prevent us from marketing our technology or using it to develop products, or we may be required to enter into a license agreement to do so. These situations may negatively impact our ability to generate revenues, cash flows and earnings.

We could be exposed to significant liability claims and if we are unable to continue to obtain insurance at acceptable costs and adequate levels, we would be unable to protect ourselves against claims. Also, our business may be materially affected by cost-containment efforts of governmental and third party payers to reduce costs of health care, such as pricing restriction on pharmaceutical products, including ours.

Our strategy is to enter into various arrangements for clinical testing and eventual manufacturing, marketing and commercialization of some of our products and product candidates. We expect to enter into collaborations for the potential development and commercialization of our products and product candidates with other companies, pursuant to which we may receive additional funding, including milestone payments. We also intend to enter into additional corporate partnering agreements to develop and commercialize products and product candidates based upon our core technology. There can be no assurance, however, that we will be able to establish such additional collaborations on favorable terms, if at all, or that our current or future collaborative arrangements will be successful. Should any collaborative partner fail to successfully develop or commercialize any product or product candidate to which it has rights, or any of the partner’s products or product candidates to which we have rights, our business may be adversely affected. In addition, while we believe that our actual and eventual collaborative partners will have sufficient economic motivation to continue their funding, there can be no assurance that any of these collaborations will be continued or will result in successfully commercialized products or product candidates. Failure of a collaborative partner to continue funding any particular program could delay or halt the development or commercialization of any products or product candidates arising out of such program. In addition, there can be no assurance that the collaborative partners will not pursue alternative technologies or develop alternative products or product candidates either on their own or in collaboration with others, including our competitors.

The market price of our common shares could be subject to wide fluctuations in response to, and may be adversely affected by, quarterly variations in operating results, announcements of technological innovations or new products by the Company or its competitors, changes in financial estimates by securities analysts, or other events or factors. In addition, the financial markets have experienced significant price and volume fluctuations. We are also subject to currency exchange rate fluctuations between the Canadian, US and Barbadian dollars. Exchange rate volatility can have a significant effect on the market prices of securities issued by companies for reasons unrelated to their operating performance. No dividends have been paid to date on our common shares. We anticipate that for the foreseeable future our earnings, if any, will be retained for use in our business and that no cash dividends will be paid on the common shares.

INNEXUS BIOTECHNOLOGY INC.

Disclosure Controls and Procedures

Disclosure controls and procedures are designed to provide reasonable assurance that material information is gathered and reported to senior management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to permit timely decisions regarding public disclosure.

The Company is not required to file an Annual Information Form under current security legislation and thus has not filed one.

Disclaimer

The information provided in this document is not intended to be a comprehensive review of all matters concerning the Company. The users of this information, including but not limited to investors and prospective investors, should read it in conjunction with all other disclosure documents provided including but not limited to all of our documents filed on SEDAR (www.SEDAR.com). No securities commission or regulatory authority has reviewed the accuracy or adequacy of the information presented herein.

Forward-Looking Statements

Except for statements of historical fact, certain information contained herein constitutes forward-looking statements. Forward looking statements are usually identified by our use of certain terminology, including “will”, “believes”, “may”, “expects”, “should”, “seeks”, “anticipates” or “intends” or by discussions of strategy or intentions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results or achievements to be materially different from any future results or achievements expressed or implied by such forward-looking statements. Forward-looking statements are statements that are not historical facts, and include but are not limited to, estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to the effectiveness of the Company’s business model; future operations, products and services; the impact of regulatory initiatives on the Company’s operations; the size of and opportunities related to the markets for the Company’s products; general industry and macroeconomic growth rates; expectations related to possible joint and/or strategic ventures and statements regarding future performance.

Certification of Annual Filings
Venture Issuer Basic Certificate

I, Jeff Morhet, Chief Executive Officer of INNEXUS BIOTECHNOLOGY INC., certify the following:

Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including for greater certainty all documents and information that are incorporated by reference in the AIF (together the annual filings) of InNexus Biotechnology Inc. (the issuer) for the financial year ended June 30, 2009.

No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the annual filings.

Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date of and for the periods presented in the annual filings.


Date: October 26, 2009

“Jeff Morhet” Jeff Morhet, CEO

NOTE TO READER

In contrast to the certificate required under multilateral Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (MI 52-109), this Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in MI 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of:

i) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

ii) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate.

Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in MI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.

Certification of Annual Filings
Venture Issuer Basic Certificate

I, David Petulla, Chief Financial Officer of INNEXUS BIOTECHNOLOGY INC., certify the following:


Date: October 26, 2009

“David Petulla” David Petulla, CFO

NOTE TO READER

Consultants