UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ýx QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2007 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~For~~Commission file ~~the~~number ~~quarterly period ended June 30, 2004~~0-18006

ORORCHESTRA THERAPEUTICS, INC.

~~o TRANSITION~~(Exact ~~REPORT~~name ~~PURSUANT~~of ~~TO SECTION 13 OR 15(d)~~registrant OFas ~~THE~~specified ~~SECURITIES~~in ~~EXCHANGE~~its ~~ACT OF 1934~~charter)

Commission file number 0-18006

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

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

~~THE IMMUNE~~Registrant’s ~~RESPONSE~~telephone ~~CORPORATION~~number, including area code: (760) 431-7080

Indicate by check mark whether the registrant (~~Exact~~1) ~~name~~has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant aswas ~~specified~~required into ~~its~~file ~~charter~~such reports), and (2) has been subject to such filing requirements for the past 90 days.

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

Yes x No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

~~Registrant’s~~Large ~~telephone~~accelerated ~~number,~~filer o Accelerated ~~including area code: (760) 431~~filer o Non-~~7080~~accelerated filer x

Indicate by check mark whether the registrant ~~(1)~~is ~~has~~a shell ~~filed~~company ~~all~~(as ~~reports~~defined ~~required~~in toRule be12b-2 ~~filed by Section 13 or 15(d)~~ of the ~~Securities~~ Exchange Act ~~of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports~~)~~, and (2) has been subject to such filing requirements for the past 90 days~~. ~~Yes ý No o~~

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

~~Yes~~As ~~o No~~of ýSeptember 26, 2007, there were 10,527,675 shares of our common stock outstanding.

~~As of July 30, 2004, there~~ORCHESTRA ~~were 48~~THERAPEUTICS,~~450,670~~ ~~shares of our common stock outstanding~~INC.

~~THE IMMUNE RESPONSE CORPORATION~~INDEX

~~INDEX~~PART I – FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Condensed Balance Sheets Condensed Statements of Operations Condensed Statements of Cash Flows Notes to Condensed Financial Statements Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures about Market Risk Item 4. Controls and Procedures PART II – OTHER INFORMATION Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits SIGNATURES

Part I	FINANCIAL INFORMATION
	Item 1.	Financial Statements (unaudited):
		Condensed Consolidated Balance Sheets - June 30, 2004 and December 31, 2003
		Condensed Consolidated Statements of Operations – Three and Six months ended June 30, 2004 and 2003
		Condensed Consolidated Statements of Cash Flows – Six months ended June 30, 2004 and 2003
		Notes to Condensed Consolidated Financial Statements
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk
	Item 4.	Controls and Procedures
Part II	OTHER INFORMATION
	Item 1.	Legal Proceedings
	Item 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
	Item 3.	Defaults Upon Senior Securities
	Item 4.	Submission of Matters to a Vote of Security Holders
	Item 5.	Other Information
	Item 6.	Exhibits and Reports on Form 8-K
SIGNATURES

2PART I – FINANCIAL INFORMATION

~~PART~~Item I1. –Financial ~~FINANCIAL INFORMATION~~Statements

~~Item~~Orchestra 1Therapeutics, Inc. ~~Financial Statements~~

~~The~~Condensed Balance ~~Immune Response Corporation~~Sheets

~~Condensed~~(in thousands, ~~Consolidated~~except ~~Balance Sheets~~for share amounts)

(in thousands, except for share amounts)

	June 30,			December 31,
	2007			2006
	(unaudited)
Assets

Current Assets:
Cash and cash equivalents	$	269		$	3,421
Accounts receivable	—			900
Prepaid expenses	157			389
	426			4,710
Property and equipment, net	2,401			2,785
Deposits and other assets ($370 and $521 restricted in escrow account as security for long-term lease at June 30, 2007 and December 31, 2006, respectively)	460			611
	$	3,287		$	8,106

Liabilities and Stockholders’ (Deficit) Equity

Current Liabilities:
Accounts payable and accrued expenses	$	3,730		$	3,084
Liability for warrants committed in excess of authorized stock	1,839			7,308
Convertible promissory notes, net of discount of $1,381 plus accrued interest of $535 at June 30, 2007	4,189			—
Convertible promissory notes, related party, net of discount of $149 plus accrued interest of $60 at June 30, 2007	461			—
Current portion of deferred liabilities and revenue	387			358
	10,606			10,750

Convertible promissory notes, related party, net of discount of $224 and $592 plus accrued interest of $545 and $458 at June 30, 2007 and December 31, 2006, respectively	3,477			3,571
Convertible promissory notes, net of discount of $2,845 plus accrued interest of $348 at December 31, 2006	—			2,733
Long-term deferred liabilities and revenue, net of current portion	1,739			1,936
Total long-term liabilities	5,216			8,240

Stockholders’ (Deficit) Equity :
Common stock, $.0025 par value, 35,000,000 shares authorized; 10,642,400 and 9,088,410 shares issued and outstanding at June 30, 2007 and December 31, 2006, respectively	27			23
Warrants	2,610			2,610
Additional paid-in capital	142,236			139,908
Accumulated deficit	(157,408		)	(153,425		)
Total stockholders’ deficit	(12,535		)	(10,884		)
	$	3,287		$	8,106

	June 30, 2004			December 31, 2003
	(unaudited)
Assets
Current Assets:
Cash and cash equivalents	$	15,720		$	12,838
Marketable securities - available-for-sale	5			4
Other current assets	205			372
	15,930			13,214
Property and equipment, net	4,770			4,949
Licensed technology, net	1,766			2,119
Deposits and other assets ($600 restricted as security for letter of credit)	690			690
	$	23,156		$	20,972
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	887		$	1,151
Accrued expenses	722			1,112
Short-term convertible notes, related party	—			3,899
Current portion of convertible promissory notes, related party, net of discount of $428 plus accrued interest of $116 at June 30, 2004	1,155			—
Current portion of accrued excess lease costs	452			452
Current portion of deferred revenue	56			56
	3,272			6,670
Convertible promissory notes, related party, net of discount of $2,559 and $4,167 and plus accrued interest of $747 and $575 at June 30, 2004 and December 31, 2003, respectively, net of current portion	3,929			3,616
Accrued excess lease costs	1,780			1,990
Long-term deferred revenue, net of current portion	295			323
	9,276			12,599
Stockholders’ Equity:
Preferred stock, 10,000,000 shares authorized; 688,146 Series A shares issued and outstanding at June 30, 2004 with a liquidation preference aggregating $4,299	13,952			—
Common stock, $.0025 par value, 170,000,000 shares authorized; 48,370,060 and 41,201,187 shares issued and outstanding at June 30, 2004 and December 31, 2003, respectively	121			102
Warrants	20,888			17,777
Additional paid-in capital	298,125			290,346
Accumulated other comprehensive income	5			4
Accumulated deficit	(319,211		)	(299,856		)
Total stockholders’ equity	13,880			8,373
	$	23,156		$	20,972

See accompanying notes to condensed financial statements.

~~See accompanying notes to condensed consolidated financial statements.~~3

3Orchestra Therapeutics, Inc.

~~The~~Condensed Statements ~~Immune~~of ~~Response Corporation~~Operations

~~Condensed~~(in ~~Consolidated~~thousands, ~~Statements~~except offor ~~Operations~~per share amounts)

(~~in thousands, except for per share amounts~~unaudited)

(unaudited)

	Three Months Ended June 30,						Six months ended June 30,
	2007			2006			2007			2006
Revenues:
Licensed research revenue	$	4		$	4		$	8		$	8
Contract research revenue	—			7			—			14
	4			11			8			22

Expenses:
Research and development	1,834			2,475			4,103			4,938
General and administrative	1,077			1,469			2,551			2,798
	2,911			3,944			6,654			7,736

Other income and (expense):
Interest expense - including non-cash accretion of $814 and $2,760 for the three months and $1,684 and $3,488 for six months, respectively	(1,030		)	(3,632		)	(2,160		)	(4,862		)
Investment income	15			44			50			64
Gain on warrant liability marked to fair value	1,857			111,521			5,713			226,180
Beneficial inducement cost	—			—			(940		)	(14,095		)
	842			107,933			2,663			207,287

Net income (loss)	$	(2,065	)	$	104,000		$	(3,983	)	$	199,573

Basic income (loss) per share	$	(0.20	)	$	31.53		$	(0.40	)	$	87.60

Diluted (loss) per share	$	(0.20	)	$	0.39		$	(0.40	)	$	1.50

	Three months ended June 30,						Six months ended June 30,
	2004			2003			2004			2003
Revenues:
Contract research revenue	$	7		$	7		$	14		$	14
Licensed research revenue	7			7			14			24
	14			14			28			38
Expenses:
Research and development	3,235			2,527			6,355			5,004
General and administrative	885			2,348			1,723			3,383
Exit and disposal related costs	—			1,005			—			1,290
	4,120			5,880			8,078			9,677
Other income and (expense):
Investment income	21			3			43			11
Interest expense - including non-cash accretion of $591 and $3,028 for three months and $1,180 and $4,130 for six months, respectively	(737		)	(3,398		)	(1,490		)	(4,822		)
Beneficial inducement cost	—			—			(4,923		)	—
Loss on extinguishment of debt	—			—			(4,935		)	—
	(716		)	(3,395		)	(11,305		)	(4,811		)
Net loss	(4,822		)	(9,261		)	(19,355		)	(14,450		)
Less preferred stock dividends	(92		)	—			(181		)	—
Net loss attributable to common stockholders	$	(4,914	)	$	(9,261	)	$	(19,536	)	$	(14,450	)
Basic and diluted loss per share:
Net loss	$	(0.10	)	$	(0.46	)	$	(0.44	)	$	(0.72	)
Net loss attributable to common stockholders	$	(0.11	)	$	(0.46	)	$	(0.45	)	$	(0.72	)
Weighted average number of shares outstanding	46,071			20,204			43,655			19,939

See accompanying notes to condensed financial statements.

~~See accompanying notes to condensed consolidated financial statements.~~4

4Orchestra Therapeutics, Inc.

~~The~~Condensed Statements ~~Immune~~of ~~Response~~Cash ~~Corporation~~Flows

~~Condensed Consolidated~~(in ~~Statements of Cash Flows~~thousands)

(~~in thousands~~unaudited)

(unaudited)

	Six Months Ended June 30,
	2007			2006

Net cash used in operating activities	$	(4,111	)	$	(6,246	)

Cash Flows From Investing Activities:
Purchase of property and equipment	(2		)	(29		)
Net cash used in investing activities	(2		)	(29		)

Cash Flows From Financing Activities:
Net proceeds from common stock sold under the Standby Equity Distribution Agreement	—			1,139
Proceeds from secured convertible notes	—			7,700
Proceeds from secured convertible note, related party	—			550
Payments on short-term convertible debenture	—			(548		)
Proceeds from warrant exercise	1,067			6,123
Offering costs for debt and equity transactions	(106		)	(1,876		)
Net cash provided by financing activities	961			13,088

Net increase (decrease) in cash and cash equivalents	(3,152		)	6,813
Cash and cash equivalents - beginning of year	3,421			146
Cash and cash equivalents - end of period	$	269		$	6,959

	Six months ended June 30,
	2004			2003
Cash Flows From Operating Activities:
Net loss	$	(19,355	)	$	(14,450	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	819			1,001
Operating expenses paid with common stock and warrants	137			156
Stock option adjustments	(196		)	1,323
Deferred revenue	(28		)	(27		)
Accrued excess lease costs	(210		)	541
Long-term accrued interest	288			523
Accretion of notes	1,180			4,130
Beneficial inducement cost	4,923			—
Loss on extinguishment of debt	4,935			—
Interest expense converted into Series A preferred stock	219			—
Gain on sale of assets	(4		)	(46		)
Changes in operating assets and liabilities:
Other current assets	167			(209		)
Accounts payable	(264		)	32
Accrued expenses	(390		)	(28		)
Net cash used in operating activities	(7,779		)	(7,054		)
Cash Flows From Investing Activities:
Purchase of property and equipment	(287		)	(26		)
Proceeds from sale of equipment	4			196
Other	—			38
Net cash provided by (used in) investing activities	(283		)	208
Cash Flows From Financing Activities:
Payments of equipment notes and capital leases	—			(766		)
Net proceeds from private placement of common stock	10,712			—
Net proceeds from exercises of Unit Purchase Options	110			—
Proceeds from issuance of short-term convertible notes, related party	—			3,899
Proceeds from issuance of short-term unsecured promissory notes	—			1,000
Net offering costs for Series A preferred stock	(23		)	—
Net proceeds from common stock purchases through employee plans	145			76
Net cash provided by financing activities	10,944			4,209
Net increase (decrease) in cash and cash equivalents	2,882			(2,637		)
Cash and cash equivalents - beginning of year	12,838			3,939
Cash and cash equivalents - end of period	$	15,720		$	1,302
Supplemental Disclosure of Cash Flow Information:
Interest paid	$	19		$	105
Supplemental Disclosure of Noncash Information:
Promissory notes and interest converted into Series A preferred stock	$	4,118		$	—
Convertible notes and interest converted into common stock	$	—		$	5,000
Value allocated to common stock as debt discount	$	—		$	385
Common stock and warrants issued for consulting services, 401K match and offering costs	$	942		$	152
Unrealized gain on marketable securities	$	1		$	—

See accompanying notes to condensed financial statements.

~~See accompanying notes to condensed consolidated financial statements.~~5

5ORCHESTRA THERAPEUTICS, INC.

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

~~Notes~~Note to1 ~~Condensed~~– ~~Consolidated~~The ~~Financial Statements (unaudited)~~Company:

~~Note~~Orchestra 1Therapeutics, Inc., a Delaware Corporation, is an immuno-pharmaceutical company focused on ~~Interim~~developing ~~Financial~~products ~~Statements:~~to treat autoimmune diseases. Our lead immune-based therapeutic product candidate is NeuroVaxTM for the treatment of multiple sclerosis (MS). NeuroVaxTM is designed to stimulate pathogen-specific immune responses aimed at slowing or halting the rate of disease progression.

~~The~~In ~~accompanying~~addition ~~condensed~~to ~~consolidated~~MS, ~~balance sheet~~we ashave ofproprietary ~~June~~technology ~~30, 2004~~ and ~~the~~prior ~~condensed~~clinical ~~consolidated~~experience ~~statements of operations~~ for ~~the~~ ~~three~~evaluation ~~and six months ended June 30, 2004 and 2003 and~~ of peptide-based ~~cash~~immune ~~flows~~therapies for ~~the six~~rheumatoid ~~months~~arthritis ~~ended June 30, 2004 and 2003 have been prepared by The Immune Response Corporation~~ (~~the~~ “~~Company~~RA”) and ~~have not been audited~~ psoriasis. ~~The~~We ~~condensed~~are ~~consolidated financial~~conducting ~~statements of the Company include the accounts of its wholly~~pre-~~owned~~clinical ~~subsidiary I.R.C.~~work ~~Inc. All~~with ~~significant~~human ~~intercompany transactions~~samples ~~and~~with ~~accounts~~various ~~have~~prestigious ~~been~~academic ~~eliminated in consolidation. These consolidated financial statements, in~~institutions ~~the~~toward ~~opinion of management, include all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of~~ the ~~consolidated~~development ~~financial position, results~~ of ~~operations~~several ~~and~~therapeutic ~~cash~~vaccines ~~flows~~to ~~for~~treat ~~all periods presented. The consolidated financial statements should~~other beautoimmune ~~read~~diseases inincluding ~~conjunction~~RA ~~with the consolidated financial statements~~ and ~~notes thereto included in the Company’s Annual Report on Form 10-K filed for the year ended December 31, 2003~~psoriasis. ~~Interim operating results are not necessarily indicative of operating results for the full year.~~

~~The~~We ~~preparation~~have ofcompleted ~~financial~~our ~~statements~~transition into ~~conformity~~an ~~with~~autoimmune ~~generally~~diseases ~~accepted~~development ~~accounting~~company ~~principles~~from ~~requires management~~our toorigins ~~make~~as ~~estimates~~an HIV ~~and~~vaccine ~~assumptions~~development ~~that affect~~ company. Over the ~~reported~~past ~~amounts of~~five ~~assets~~years ~~and~~we ~~liabilities~~have ~~and~~increased ~~disclosure~~our offocus ~~contingent~~on ~~assets~~our ~~and~~autoimmune ~~liabilities~~disease atprogram, ~~the~~and ~~date~~in ofparticular ~~the~~NeuroVaxTM and ~~financial~~MS; ~~statements~~at ~~and~~ the ~~reported~~beginning ~~amounts~~ of ~~revenues and expenses during~~ the ~~reporting~~ period. our ~~Actual~~focus ~~results~~was ~~could~~almost ~~differ~~exclusively ~~materially~~on ~~from those estimates~~HIV.

~~Certain~~During the quarter the ~~reclassifications~~Company ~~have~~scaled ~~been~~back ~~made~~operations toat ~~conform~~its ~~prior~~King ~~period~~of ~~financial~~Prussia, ~~information~~Pennsylvania (KOP) tofacility ~~the~~which ~~current~~resulted ~~presentation~~in a reduction in its workforce and a one time severance charge of $75,000. ~~These~~The ~~reclassifications~~remaining ~~had~~employees nowere ~~effect~~given ona ~~reported~~six ~~income~~month oremployment ~~losses~~agreement and a promise of a stay bonus. The stay bonus of $226,000 is being expensed ratably over the six month service period.

~~Stock-Based~~On August 24, 2007 the ~~Compensation~~Company laid off almost all of its employees and discontinued its NeuroVaxTM multiple sclerosis PII trial which was being enrolled in Eastern Europe. The Company has hired a broker and is attempting to sell its HIV manufacturing assets and intellectual property. The proceeds from the sale of these assets will be used to pay its creditors. The Company is currently evaluating strategic options related to its autoimmune technology. Additionally, on August 24, 2007 Dr. Joseph O’Neill’s employment was terminated, without cause, in conjunction with the reorganization of the Company. Dr. O’Neill’s severance per his 2005 employment agreement is being accrued by the Company and will be paid when the Company’s KOP facility is sold.

~~During~~The ~~April~~Company ~~2003~~believes, ~~the Company~~ ~~repriced~~based ~~and~~on ~~accelerated~~consultations ~~the~~with ~~vesting~~its ~~of stock options to purchase 664~~broker,~~007 shares~~ ~~previously~~that ~~granted~~the tonet ~~employees~~realizable ~~and~~value ~~outside~~for ~~directors. The weighted average share price was reduced from $10.04 per share to $1.12 per share. This repricing was expensed using~~ the ~~intrinsic valuation method~~ ~~required~~potential ~~under~~sale ~~APB No. 25. The Company recorded additional employee compensation (benefit) expense~~ of ~~$(93,000)~~its ~~and $(148,000)~~KOP ~~for~~facility ~~the~~equals ~~repriced~~or ~~options~~exceeds ~~during~~ the ~~three~~net ~~and~~book ~~six~~value ~~months~~of ~~ended June~~the ~~30,~~KOP ~~2004,~~facility ~~respectively~~assets ~~and~~of $12,~~107~~299,000 ~~for the three and six months ended June~~ at June 30, ~~2003~~2007.

~~The~~On ~~Company~~July ~~measures~~23, ~~its~~2007, ~~stock-based~~Cheshire ~~employee~~Associates ~~compensation~~(“Cheshire”) ~~using~~invested ~~the~~$250,000 ~~intrinsic~~in ~~value~~a ~~method~~bridge transaction with the Company.. The ~~following~~Company ~~disclosures~~issued ~~utilizing~~a ~~the~~15% ~~intrinsic~~Secured ~~value~~Promissory ~~method~~Note to Cheshire in the principal amount of $250,000 (the “Note”). and ~~pro~~issued ~~forma amounts~~500,000 ~~after~~shares ~~applying~~of the ~~fair~~Company’s ~~value method,~~common ~~related~~stock to ~~stock-based~~Cheshire. The ~~awards~~Note ~~made~~accrues tointerest ~~employees~~at ~~that~~the ~~were~~rate ~~outstanding~~of 15% asper annum and matures on the earlier of ~~June~~December 301, ~~2004~~2007 ~~and~~or ~~2003:~~immediately before the closing of a financing which raises over $10,000,000 for the Company. In connection with this transaction, on July 23, 2007, the Company also entered into a Security Agreement with Cheshire.

	Three Months Ended June 30,						Six Months Ended June 30,
	2004			2003			2004			2003
Net loss attributable to common stockholders:
As reported	$	(4,914,000	)	$	(9,261,000	)	$	(19,536,000	)	$	(14,450,000	)
Stock-based employee compensation expense (benefit) included in net loss	(93,000		)	1,107,000			(148,000		)	1,107,000
Fair value of stock-based employee compensation	(505,000		)	(1,704,000		)	(1,471,000		)	(1,828,000		)
Pro forma	$	(5,512,000	)	$	(9,858,000	)	$	(21,155,000	)	$	(15,171,000	)
Net loss per share (basic and diluted):
As reported	$	(0.11	)	$	(0.46	)	$	(0.45	)	$	(0.72	)
Pro forma	$	(0.12	)	$	(0.49	)	$	(0.48	)	$	(0.76	)

On August 28, 2007, Spencer Trask Investment Partners LLC (“STIP”) made a $150,000 investment in the Company. In exchange STIP received a Senior Subordinated Secured Promissory Note, due on January 1, 2008 (the “STIP Note”) in the principal amount of $450,000 as well as 600,000 shares of common stock of the Company. The STIP Note and shares of common stock were issued pursuant to a Securities Purchase Agreement between the Company and Spencer Trask, dated August 28, 2007, and is secured by the grant of a security interest in all of the assets of the Company pursuant to the terms of a Security Agreement, dated the same date, by the Company in favor of Spencer Trask. On August 28, 2007, the Company also entered into a Registration Rights Agreement with Spencer Trask. Pursuant to the Registration Rights Agreement, the Company agreed to register Spencer Trask’s shares of common stock issued under the Securities Purchase Agreement.

6All numbers herein have been adjusted to reflect our 1-for-100 reverse stock split of December 2006.

Note 2 ~~- The~~– ~~Company~~Interim Financial Statements:

The ~~Immune~~accompanying ~~Response~~condensed ~~Corporation (Nasdaq:~~balance ~~IMNR)~~sheet isas aof ~~biopharmaceutical company dedicated to becoming a leading~~June ~~immune-based~~30, ~~therapy~~2007 ~~company in HIV~~ and ~~multiple~~the ~~sclerosis~~condensed ~~(MS).~~statements ~~The~~of ~~Company’s HIV~~operations ~~products~~and ~~are~~of ~~based~~cash onflows ~~its~~for ~~patented whole-killed virus technology,~~the ~~co-invented~~three byand ~~Company~~six ~~founder~~months ~~Dr.~~ended ~~Jonas~~June ~~Salk~~30, to2007 ~~stimulate~~and ~~HIV~~2006 ~~immune responses. We currently~~ have ~~three active~~been ~~IBT~~prepared ~~programs; REMUNEâ~~by ~~and~~Orchestra ~~IR103~~Therapeutics, ~~target HIV and NeuroVaxTM targets MS~~Inc. ~~Remune®, currently~~ in(the ~~Phase~~“Company”) IIand ~~clinical trials, is being developed as a first-line treatment for people with early-stage HIV. We~~ have ~~initiated development of a new immune-based therapy, IR103, which incorporates a second-generation immunostimulatory oligonucleotide adjuvant.~~

~~We are also developing an immune-based therapy for MS, NeuroVaxTM, which is currently in Phase II and has shown potential therapeutic value for this difficult-to-treat disease.~~6

~~Note~~not been audited. These financial statements, in the 3opinion of management, include all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the financial position, results of operations and cash flows for all periods presented. The financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K ~~Going~~filed ~~Concern:~~for the year ended December 31, 2006. Interim operating results are not necessarily indicative of operating results for the full year.

The ~~accompanying~~ ~~consolidated~~preparation of financial statements ~~have~~in ~~been~~conformity with ~~prepared~~generally onaccepted aaccounting ~~going~~principles requires management to make ~~concern~~estimates ~~basis,~~and ~~which~~assumptions ~~contemplates~~that affect the ~~realization~~reported amounts of assets and ~~the~~ ~~satisfaction of~~ liabilities inand ~~the~~disclosure ~~normal course~~ of ~~business. The~~contingent ~~Company~~assets ~~has~~and ~~incurred~~liabilities ~~net~~at ~~losses~~the ~~since~~date of ~~inception~~the ~~and~~financial ~~has~~statements anand ~~accumulated~~the ~~deficit~~reported ofamounts ~~$319,211,000 as~~ of ~~June~~revenues ~~30,~~and ~~2004.~~expenses ~~The~~during ~~Company~~the ~~will~~reporting ~~not~~period. ~~generate~~Actual ~~meaningful~~results ~~revenues~~could indiffer ~~the~~from ~~foreseeable~~those ~~future~~estimates.

~~These factors,~~Certain ~~among~~prior ~~others,~~year ~~raised~~amounts ~~substantial~~have ~~doubt~~been ~~about~~reclassified ~~the~~to ~~Company’s~~conform ~~ability~~ to ~~continue~~ ~~as a going concern. Our independent certified public accountants, BDO Seidman, LLP, indicated in their report on~~ the ~~2003 consolidated financial statements that there is substantial~~current ~~doubt~~year ~~about our ability to continue as a going concern~~presentation.

~~The consolidated~~Note ~~financial~~3 ~~statements~~– doGoing not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.Concern:

OnThe ~~January~~accompanying financial statements have been 7,prepared ~~2004,~~on ~~$3,899,000~~a ofgoing ~~previously~~concern ~~issued~~basis, ~~related~~which ~~party~~contemplates ~~convertible~~the ~~promissory~~realization of assets ~~notes~~and ~~plus~~the ~~accrued~~satisfaction ~~interest~~of liabilities in the normal course of ~~approximately~~business. The Company has incurred net losses since inception (but for the $~~219~~238,640,000 ~~were converted into~~cumulative ~~688,146~~gain ~~shares~~on ofwarrant ~~Series~~liability Amarked ~~convertible~~to ~~preferred~~fair ~~stock~~value) ~~(see~~and ~~Note~~has ~~5).~~an Onaccumulated ~~April~~deficit ~~30,~~of ~~2004~~$157,408,000 ~~the~~and ~~Company~~cash ~~raised~~and ~~approximately~~cash equivalents of $11269,~~850,~~000 inas ~~gross~~of June 30, 2007. ~~proceeds~~The ~~through~~Company awill ~~private~~not ~~placement~~generate ~~(see~~meaningful ~~Note~~revenues 7)in the foreseeable future. ~~The~~These factors, among others, raise substantial doubt about the Company’s ~~believes~~ability ~~that~~to ~~its~~continue ~~current~~as ~~resources~~a ~~are~~going ~~sufficient~~concern. toThe ~~fund~~Company’s ~~its~~independent ~~planned~~registered ~~operations~~public accounting firm, ~~including necessary~~LevitZacks, ~~capital~~indicated ~~expenditures~~in ~~and~~its ~~new~~audit ~~clinical~~report ~~trials,~~on ~~for~~the at2006 financial ~~least~~statements that there is substantial doubt about the ~~next~~Company’s ~~twelve~~ability ~~months~~to continue as a going concern.

~~Note~~The 4financial -statements do ~~Short-Term~~not ~~Convertible~~include ~~Notes,~~any ~~Related~~adjustments ~~Party:~~relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

~~The~~In ~~short-term~~July ~~convertible~~and ~~notes totaling~~August $32007,~~899,000,~~ ~~described~~the ~~below,~~Company ~~plus~~received loan ~~approximately~~proceeds of $~~219~~400,000 offrom ~~accrued~~certain ~~interest~~investors ~~were~~(see ~~converted~~Note ~~into~~7). The Company is currently being funded on a ~~688,146~~month-to-month ~~shares~~basis ofby ~~Series~~STIP Awhile ~~convertible~~it ~~preferred~~attempts ~~stock~~to onsell ~~January~~its 7KOP facility; however, ~~2004~~ ~~(see~~no ~~Note~~assurance 5)can be given that the Company will be able to obtain additional financing when and as needed in the future.

OnNote ~~March~~4 ~~28,~~– ~~2003,~~Net ~~the~~Income ~~Company issued to Cheshire Associates, LLC, a related party, a short-term convertible note in the amount of $2,000,000, bearing interest at the rate of 8% per annum, due March 28, 2004~~ (~~the “March Note”~~Loss). ~~The March Note was convertible into 1,626,016 shares of common stock at a price of $1.23~~ per ~~share.~~Share:

InBasic ~~May~~and ~~2003,~~diluted ~~the~~net ~~Company~~loss ~~issued~~per toshare was computed ~~Cheshire~~using ~~two~~the ~~short-term~~weighted ~~convertible~~average ~~notes~~number inof ~~the~~common ~~aggregate~~shares ~~amount~~outstanding, ~~of $1~~10,~~080~~519,000 and 9,853,000 ~~bearing~~for ~~interest~~the atthree ~~the~~and ~~rate~~six ofmonths 8%ended ~~per~~June ~~annum~~30, ~~due~~2007, ~~May~~respectively. Potentially ~~2004~~dilutive ~~and January~~securities ~~2004,~~are ~~respectively~~excluded (from the ~~“May~~diluted ~~Notes”).~~ net loss per ~~One~~share ofcalculation for the ~~May~~three ~~Notes,~~months ~~with~~and asix ~~principal~~months ~~balance~~ended ofJune $130,~~000,000,~~ ~~was~~2007 as ~~convertible~~the ~~into~~effect ~~shares~~would be antidilutive. As of ~~common~~June ~~stock~~30, on2007 ~~terms~~potentially todilutive shares benot ~~negotiated~~included inare ~~good~~137,000 ~~faith prior~~shares tofor ~~its~~outstanding ~~maturity~~employee ~~date. The~~stock ~~$80~~options,~~000~~ ~~May~~4,940,000 ~~Note~~shares ~~was~~issuable under convertible ~~into~~notes 59payable,~~259~~ 3,499,000 shares issuable ofunder ~~common~~warrants ~~stock~~outstanding, atand a94,000 ~~price~~shares ofissuable ~~$1.35~~under Class B ~~per~~Warrants ~~share~~outstanding.

InThe ~~June~~following ~~2003,~~is ~~the~~a ~~Company~~reconciliation ~~issued~~of ~~to Cheshire~~net aincome ~~short-term~~and share ~~convertible~~amounts ~~note~~used in the ~~amount~~computations of ~~$819,000,~~income ~~bearing interest~~(loss) ~~at the rate of 8%~~ per ~~annum,~~share ~~due~~for ~~January 2004 (~~the ~~“June Note”). The June Note was convertible into shares of~~three ~~common~~and ~~stock~~six onmonths ~~terms~~ended toJune be30, ~~negotiated~~2006 (in ~~good faith prior to its maturity date.~~thousands):

	Three Months Ended June 30, 2006			Six Months Ended June 30, 2006
Net income used in computing basic net income per share	$	104,000		$	199,573
Impact of assumed conversions:
8% interest on convertible debentures	225			379
Impact of equity classified as liability
Gain on warrant liability marked to fair value	(111,521		)	(226,180		)
Net loss used in computing diluted net loss per share	$	(7,296	)	$	(26,228	)

~~Note~~The 5weighted -average ~~Series~~shares Aoutstanding ~~Preferred~~used ~~Stock:~~in the basic net income per share computations for the three and six months ended June 30, 2006 were 3,298,590 and 2,278,320, respectively. In determining the number of shares used in computing diluted loss per share, the Company added approximately 16,000,000 potentially dilutive securities, mostly attributed to the 2006 Private Placement. As a result, the diluted loss per share was $0.39 and $1.50 for the three and six months ended June 30, 2006.

~~On January~~ 7, 2004, $3,899,000 of previously issued, related party short-term convertible notes plus accrued interest of approximately $219,000 were converted into 688,146 shares of Series A convertible preferred stock (Series A) at $5.984 per share. The holders of shares of Series A have the right to further convert each share of Series A into anywhere from four to twelve shares of common stock, depending on the date of conversion. The Series A votes with the holders of common stock as a single class. The Series A is only entitled to three votes for each initial share of Series A received.

~~The~~Note ~~Series A has~~5 ~~dividend~~– ~~and~~Stockholders’ liquidation preferences over common stock holders. The holders of the Series A are entitled to receive cumulative dividends on each share of Series A at the rate of 9% per annum until the earliest of (i) July 7, 2006, (ii) the date the Series A is redeemed and (iii) the date the Series A is converted into common stock. At June 30, 2004 accrued but undeclared dividends on the Series A amounted to $181,000. The liquidation preference at June 30, 2004 aggregated $4,299,000.Equity:

~~In addition,~~2006 ~~the~~Private ~~holders~~Placement ofConvertible ~~Series A~~Notes ~~are~~Activity: During ~~entitled~~the tosix ~~protective~~months ~~provisions that~~ended ~~require~~June 6630, ~~2/3~~2007, $195,000 % of ~~the~~ outstanding ~~Series A~~principal ~~to approve,~~plus ~~among~~accrued ~~other~~interest ~~things, creating a new class~~ of ~~security~~$15,000 ~~with~~was ~~dividend~~converted ~~or liquidation~~into ~~rights~~approximately ~~equal or senior to the Series A convertible preferred stock~~105,000 ~~a liquidation or recapitalization or increasing the number of~~ shares ~~reserved~~ ~~for issuance under our stock option plans to greater than 10%~~ of ~~our~~the ~~outstanding~~Company’s ~~capital~~common stock ~~(on an as if converted, fully-diluted basis)~~. ~~The Series A also contains anti-dilution provisions.~~

~~The~~2006 Private Placement Investor ~~conversion~~Warrant ofActivity: In March $22007,~~080,000~~ ofthe ~~short-term~~Company ~~convertible~~entered ~~notes~~ into ~~Series~~a AWarrant ~~resulted~~Exercise and Price Protection inarrangement with certain warrant holders of the 2006 Private Placement. This arrangement included a ~~non-cash~~special ~~charge~~warrant exercise toinducement ~~operations~~whereby (i) the warrant holder would receive 2.5 shares of Company ~~approximately~~common stock for each $~~4,923,000~~2.00 inof ~~the~~second ~~first~~tranche warrant exercise price ~~quarter~~paid to the Company (this equates to an effective price of ~~2004~~$0.80 asper ashare) ~~beneficial~~and (ii) ~~inducement~~the ~~cost~~warrant holder would receive short-term ratchet-style price protection (through September 30, ~~representing~~2007) on March 2007 warrant exercises. Under the ~~difference~~special ~~between~~Warrant ~~the~~Exercise ~~fair~~and ~~value~~Price ofProtection ~~the~~arrangement, ~~common~~533,625 ~~stock~~second ~~into~~tranche warrants ~~which~~were exercised during the ~~Series~~first Aquarter isof 2007. The Company received ~~convertible~~gross proceeds totaling $1,067,000 (atnet proceeds to the ~~most~~Company ~~preferential~~were ~~rate)~~$961,000 after ~~compared~~$106,000 of cash commissions paid to the ~~fair~~placement ~~value~~agent), ofand ~~the~~issued approximately 1,334,000 shares of common stock ~~into~~(of which ~~the~~approximately ~~related~~206,000 shares ~~debt~~were ~~was~~subscribed ~~convertible~~at inMarch ~~accordance~~31, ~~with~~2007 ~~FAS~~and subsequently issued during April No2007). 84The remaining 5,447,625 ~~“Induced~~unexercised ~~Conversions~~warrants offrom ~~Convertible~~the ~~Debt~~second tranche expired on March 30, 2007.”

~~Conversion of~~The ~~the~~Warrant ~~remaining~~Exercise ~~$1,819,000~~and Price ofProtection ~~the~~arrangement ~~short-term convertible notes~~ resulted in a non-cash charge to operations of ~~approximately~~ $4940,~~935,~~000 induring the first quarter of ~~2004 as a loss on the extinguishment~~ of ~~debt,~~2007 representing ~~the~~beneficial ~~difference~~inducement ~~between the carrying value of the related debt and the fair value of the Series A issued~~cost.

~~Note~~Warrants 6Issued -for Limited Recourse Support: In connection with the limited recourse ~~Net~~interest ~~Loss~~support on the 2006 Private Placement convertible notes, Spencer Trask Intellectual Capital Company LLC (“STIC”) earned approximately 63,000 and 127,000 seven-year warrants to purchase the Company’s common stock at $2.00 per share ~~Share:~~for the three and six months ended June 30, 2007, respectively. These warrants were valued utilizing the Black-Scholes option-pricing model (“BSOPM”) and the Company recognized the value of these warrants, $39,000 and $121,000 for the three and six months ended June 30, 2007, respectively, as interest expense at the time of issuance.

~~Basic~~Commissions Paid and Warrants ~~diluted~~Issued ~~net~~to ~~loss~~Placement ~~per~~Agent: Upon ~~share~~exercise isof ~~computed~~the ~~using~~2006 ~~the~~Private ~~weighted~~Placement ~~average~~investor ~~number~~warrants, ofSpencer ~~common~~Trask ~~shares~~Ventures, ~~outstanding~~Inc. ~~during~~(“STVI”) was entitled to a commission equal to 10% of the warrant ~~period.~~ exercise proceeds in cash plus seven-year placement agent warrants to ~~Potentially~~purchase ~~dilutive~~a ~~securities~~number ~~are~~of ~~excluded~~shares ~~from~~of the ~~diluted~~Company’s ~~net~~common ~~loss~~ stock (at $2.00 per share) equal ~~calculation,~~to as20% of the ~~effect~~number ~~would~~of beexercised ~~antidilutive~~warrants. ~~Potentially~~ ~~dilutive~~As ~~shares~~a ~~not~~result ~~included~~of ~~are~~the exercise 4of 533,~~900,000~~625 ~~shares~~second ~~for~~tranche ~~outstanding~~warrants ~~employee~~during ~~stock~~the ~~options,~~first 6quarter of 2007,~~600,000~~ ~~shares~~STVI ~~issuable~~became ~~under~~entitled ~~convertible~~to ~~promissory~~approximately ~~notes~~$106,000 ~~related~~in ~~party,~~cash 16and 106,~~200,~~000 ~~shares~~additional ~~issuable~~placement ~~under~~agent warrants. ~~outstanding,~~The 9exercise price per share of the 106,~~400,~~000 ~~shares~~additional placement ~~issuable~~agent ~~under~~warrants Bis ~~warrants outstanding~~at ~~and~~$0.80 1instead of $2.00,~~700,000~~ ~~shares~~as ~~issuable~~a ~~under~~result of an amendment ~~option~~related ~~issued~~ to the ~~placement~~Warrant Exercise and Price Protection ~~agent~~arrangement. STVI ~~for~~has chosen to share some of this compensation with its employees and/or its selected dealers. STVI will retain approximately 23,000 warrants of the ~~private~~106,000 ~~offering~~warrants inearned ~~December~~during ~~2002~~the first quarter of 2007.

~~Note~~Antidilution 7Adjustments: The 2006 Private Placement (including the placement agent warrants) resulted in weighted-average antidilution adjustments under various warrants held by Cheshire Associates LLC (“Cheshire”) resulting in them becoming exercisable for an aggregate of 1,070,731 shares of common stock, instead of the 338,091 shares of common stock for which they had been exercisable before the 2006 Private Placement:, and at a blended exercise price of $9.72 instead of at a blended exercise price of $31.00. Following the Warrant Exercise and Price Protection exercises during the six month period ended June 30, 2007 and the expiration of the remaining 5,447,625 unexercised second tranche warrants, the warrants held by Cheshire are now exercisable for an aggregate of 934,120 shares of common stock at a blended exercise price of $11.14 per share.

OnNote ~~April 30, 2004 the Company raised $10,712,000, net of $1,138,000 of offering costs, in connection with a private placement of approximately~~ 6~~,800,000 shares~~ of– ~~common stock at $1.75 per~~Commitments share to a number of institutional investors. Investors also received five-year warrants to purchase an aggregate of approximately 2,031,000 shares of common stock at $2.75 per share with an allocated value of $2,569,000. The investors were not affiliated with the Company, except for one investor which is an affiliate of Cheshire; that investor purchased 342,857 shares and 102,857 warrants for $600,000. In connection with this private placement, we issued additional warrants to purchase 541,714 shares of common stock to Rodman & Renshaw, Inc., our placement agent for this offering, with a value of $805,000, representing non-cash offering costs. The Company has an effective registration statement with the Securities and Exchange Commission covering the resale of the common shares and the underlying shares of common stock. Proceeds from the financing will be used to fund the Company’s ongoing clinical activities and for general corporate purposes.Contingencies:

8On October 3, 2006 the Company reached agreement with class counsel to settle the Company’s securities-law class action lawsuit for approximately $9.6 million. In May 2007, the federal court gave final approval to the settlement. The Company also reached an agreement to settle the related California state-court derivative lawsuit for approximately $0.25 million, which settlement would also be funded entirely by the Company’s insurers, plus agreement to adopt certain corporate governance requirements. The settlements, which include no admission of wrongdoing by the Company, or any defendants, had no effect on the Company’s operations, cash flow, or financial position as they are within insurance limits. The settlements also include company officers who were named in the lawsuits.

~~Note~~ 8 ~~- Exit and Disposal Related Costs:~~

~~During~~7 ~~May~~– ~~2003, the Company disposed of excess~~Subsequent assets, and was negotiating an early lease termination for the Company’s Carlsbad, California headquarters facility resulting in exit and disposal related costs of $1,290,000 as of June 30, 2003, including an estimate of approximately $700,000 of additional costs accrued to cover a potential settlement of a claim filed by the landlord for breach of contract under the lease.Events:

9On July 23, 2007, Cheshire Associates (“Cheshire”) invested $250,000 in a bridge transaction with the Company.. The Company issued a 15% Secured Promissory Note to Cheshire in the principal amount of $250,000 (the “Note”). and issued 500,000 shares of the Company’s common stock to Cheshire. The Note accrues interest at the rate of 15% per annum and matures on the earlier of December 1, 2007 or immediately before the closing of a financing which raises over $10,000,000 for the Company. In connection with this transaction, on July 23, 2007, the Company also entered into a Security Agreement with Cheshire.

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

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

Overview

WeOrchestra ~~are~~Therapeutics, Inc., a ~~biopharmaceutical~~ ~~company~~Delaware ~~whose~~Corporation, ~~products~~is ~~are~~an inimmuno-pharmaceutical ~~the~~company ~~development~~focused ~~stage. We~~on developing ~~have~~products ato ~~critical~~treat ~~need~~autoimmune todiseases. Our ~~raise~~lead ~~cash~~immune-based ~~both~~therapeutic inproduct ~~the~~candidate ~~near~~is ~~term~~NeuroVaxTM for ~~and~~ the ~~medium~~treatment ~~term.~~of ~~Nonetheless,~~multiple wesclerosis (MS). NeuroVaxTM is designed ~~believe~~to ~~our~~stimulate ~~products~~pathogen-specific ~~could~~immune ~~prove~~responses toaimed ~~have~~at ~~substantial~~slowing ~~value~~or halting asthe ~~part~~rate of a ~~therapy~~disease ~~for patients infected with HIV or MS~~progression.

In addition to MS, we have proprietary technology and prior clinical experience for evaluation of peptide-based immune therapies for rheumatoid arthritis (“RA”) and psoriasis. We are conducting pre-clinical work with human samples with various prestigious academic institutions toward the development of several therapeutic vaccines to treat other autoimmune diseases including RA and psoriasis.

We have completed our transition to an autoimmune diseases development company from our origins as an HIV vaccine development company. Over the past five years we have increased our focus on our autoimmune disease program, and in particular NeuroVaxTM and MS; at the beginning of the period our focus was almost exclusively on HIV.

During the quarter the Company scaled back operations at its King of Prussia, Pennsylvania (KOP) facility which resulted in a reduction in its workforce and a one time severance charge of $75,000. The remaining employees were given a six month employment agreement and a promise of a stay bonus. The stay bonus of $226,000 is being expensed ratably over the six month service period.

On August 24, 2007 the Company laid off almost all of its employees and discontinued its NeuroVaxTM multiple sclerosis PII trial which was being enrolled in Eastern Europe. The Company has hired a broker and is attempting to sell its HIV manufacturing assets and intellectual property. The proceeds from the sale of these assets will be used to pay its creditors. The Company is currently evaluating strategic options related to its autoimmune technology. Additionally, on August 24, 2007 Dr. Joseph O’Neill’s employment was terminated, without cause, in conjunction with the reorganization of the Company. Dr. O’Neill’s severance per his 2005 employment agreement is being accrued by the Company and will be paid when the Company’s KOP facility is sold.

The Company believes, based on consultations with its broker, that the net realizable value for the potential sale of its KOP facility equals or exceeds the net book value of the KOP facility assets of $2,299,000 at June 30, 2007.

On July 23, 2007, Cheshire Associates (“Cheshire”) invested $250,000 in a bridge transaction with the Company.. The Company issued a 15% Secured Promissory Note to Cheshire in the principal amount of $250,000 (the “Note”). and issued 500,000 shares of the Company’s common stock to Cheshire. The Note accrues interest at the rate of 15% per annum and matures on the earlier of December 1, 2007 or immediately before the closing of a financing which raises over $10,000,000 for the Company. In connection with this transaction, on July 23, 2007, the Company also entered into a Security Agreement with Cheshire.

We caution investors not to be misled by the “gain on warrant liability marked to fair value” reported for the three and six months ended June 30, 2007 and June 30, 2006, and the resulting net income we reported for the three and six months June 30, 2006. Our operations are not profitable. Indeed, our operations used approximately $6,246,000 of cash for the six months ended June 30, 2006, and 5,011,000 for the six months ended June 30, 2007, excluding the $900,000 received from NovaRx, Inc. in January 2007.

In December 2006, we effected a 1-for-100 reverse stock split. All numbers in this Quarterly Report have been adjusted to reflect the reverse stock split.

Liquidity and Capital Resources

As of June 30, ~~2004~~2007, we had ~~a consolidated~~an accumulated deficit of $~~319~~157,~~211~~408,000. We have not generated revenues from the commercialization of any product. We expect to continue to ~~incur~~ incur substantial net operating losses over the next several years, which would imperil our ability to continue operations. even if we can resolve our more immediate cash needs. We may not be able to generate sufficient product revenue to become profitable on a sustained basis, or at all, and do not expect to generate ~~sufficient~~significant product revenue before ~~the third quarter of 2008~~2012, if at all., unless they are earned through corporate collaborations or new research and development agreements. We have operating and liquidity concerns due to our significant net losses and negative cash flows from operations. We have $5,335,000 of secured indebtedness which matures on January 1, 2008. As a result of these and other factors, our independent ~~certified~~registered public ~~accountants,~~accounting ~~BDO Seidman~~firm, ~~LLP~~LevitZacks, ~~indicated~~ indicates, in ~~their~~ its report on the ~~2003~~2006 ~~consolidated~~ financial statements, that there is ~~substantial~~ substantial doubt about our ability to continue as a going concern.

~~Since~~In ~~our inception~~March ~~in 1986~~2007, we ~~have~~entered ~~financed~~into ~~our~~a ~~activities~~Warrant ~~primarily~~Exercise ~~from~~and Price ~~public~~Protection ~~and~~arrangement with certain warrant holders of the 2006 Private ~~private~~Placement. This ~~sales~~agreement included a special warrant exercise inducement whereby (i) the warrant holder would receive 2.5 shares of ~~equity,~~our ~~funding~~common ~~from~~stock ~~collaborations~~for ~~with~~each ~~corporate~~$2.00 ~~partners,~~of warrant exercise price ~~investment~~paid ~~income~~to ~~and~~us ~~the~~(this ~~issuance~~equates to ~~Cheshire~~an ~~Associates~~effective ~~LLC~~price of $0.80 per share) and, ~~other~~(ii) ~~entities~~the ~~affiliated~~warrant ~~with~~holder orwould ~~related~~receive toshort-term Mrratchet-style price protection (through September 30, 2007) on March 2007 warrant exercises. Under ~~Kevin~~the ~~Kimberlin~~special Warrant Exercise and Price Protection arrangement, ~~who~~533,625 issecond ~~one~~tranche warrants were exercised during the first quarter of ~~our~~2007. We received ~~directors~~gross ~~and~~proceeds ~~our~~totaling ~~principal~~$1,067,000 ~~stockholder~~(net proceeds to us were $961,000 after $106,000 of ~~capital~~cash ~~stock~~commissions paid to the placement agent), ~~convertible~~and ~~notes~~issued approximately 1,334,000 shares of common stock (of which approximately 206,000 shares were subscribed at March 31, 2007 and subsequently issued during April 2007). The remaining 5,447,625 unexercised warrants ~~and~~from ~~short-term~~the ~~promissory~~second ~~notes~~tranche expired on March 30, 2007.

AsOn ofJuly ~~June~~23, 302007, Cheshire ~~2004~~Associates (“Cheshire”) invested $250,000 in a bridge transaction with the Company.. The ~~had~~Company issued a 15% ~~outstanding~~Secured ~~approximately~~Promissory ~~$5,084,000~~Note ~~(net~~to ofCheshire ~~discount~~in the principal amount of $2250,~~987,~~000, ~~plus~~(the “Note”). ~~accrued~~and ~~interest~~issued ~~of $863~~500,000) shares of ~~convertible,~~the ~~related~~Company’s ~~party~~common ~~debt.~~stock ~~All~~to ofCheshire. The ~~the notes~~Note ~~bear~~accrues interest at athe ~~fixed~~ rate of 815% per ~~year~~annum and ~~are~~matures ~~secured~~on by the ~~intellectual~~ ~~property~~earlier of ~~the~~December ~~Company. The~~1, ~~notes~~2007 ~~mature~~or atimmediately ~~various dates~~before ~~through~~the ~~November~~closing ~~2005. The notes are convertible into shares~~ of ~~the Company’s~~a ~~common~~financing ~~stock~~which atraises ~~any~~over ~~time~~$10,000,000 atfor the ~~option of the investors~~Company. ~~The conversion~~In ~~prices~~connection ~~are~~with ~~based~~this transaction, on aJuly 23, ~~percentage~~2007, of the ~~average closing bid prices of the~~ Company’s ~~common~~also ~~stock~~entered ~~for~~into a ~~ten-day~~Security ~~trading~~Agreement ~~period~~with ~~ended on the day preceding each closing~~Cheshire.

InOn ~~January 2004~~August 28, ~~in a transaction~~2007, ~~with~~Spencer aTrask ~~company~~Investment ~~related~~Partners toLLC ~~Mr.~~(“STIP”) ~~Kimberlin,~~made wea ~~converted~~ $4150,~~100,~~000 ofinvestment ~~previously~~in ~~issued~~the ~~promissory~~Company. In ~~notes~~exchange ~~and~~STIP ~~accrued~~received ~~interest~~a Senior ~~into~~Subordinated ~~688,000~~Secured ~~shares~~Promissory ~~of Series A~~Note, ~~Convertible~~due ~~Preferred~~on ~~Stock. On~~January ~~April 30~~1, ~~2004,~~2008 we(the ~~raised~~“STIP ~~approximately~~Note”) ~~$11,850,000~~ in ~~gross~~the ~~proceeds~~principal ~~through~~amount ~~a private placement~~ of ~~common~~ stock and warrants, primarily to unaffiliated investors. We believe that our current resources are sufficient to fund our planned operations, including necessary capital expenditures and new clinical trials, for at least the next twelve months.

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

~~In addition~~$450,000 as wewell ~~could raise an additional $11~~as 600,~~800,~~000 ifshares ~~all~~of ~~the~~common ~~warrants~~stock ~~issued~~of ~~in connection with~~ the ~~October~~Company. The ~~2003 private placement~~STIP ~~are~~Note ~~exercised~~and ~~for~~shares ~~cash.~~of ~~The~~common ~~warrants~~stock were issued inpursuant ~~the~~to ~~October~~a ~~2003~~Securities ~~private~~Purchase ~~placement~~Agreement ~~are~~between ~~redeemable~~the byCompany usand ifSpencer ~~the~~Trask, ~~price~~dated ofAugust ~~our~~28, ~~common~~2007, ~~stock~~and is ~~equal to or~~ ~~greater~~secured ~~than~~by ~~$8.00~~the ~~for~~grant 20of ~~consecutive~~a ~~trading~~security ~~days.~~interest ~~Because~~in atall ~~that~~of ~~price~~the ~~it would~~assets beof ~~profitable for~~ the ~~warrant~~Company pursuant ~~holders~~ to ~~exercise~~the ~~their~~terms ~~warrants~~of ~~rather than~~a toSecurity ~~allow~~Agreement, dated the ~~redemption~~same ~~to proceed~~date, weby ~~assume~~the Company ~~they~~in ~~would~~favor ~~choose~~of ~~to exercise~~Spencer Trask. On August ~~However~~28, ~~there~~2007, isthe noCompany ~~assurance~~also ~~that~~entered ~~our~~into ~~stock~~a ~~price~~Registration ~~will~~Rights ~~rise~~Agreement with Spencer Trask. Pursuant to the ~~$8.00~~Registration ~~per~~Rights ~~share redemption trigger price. Also~~Agreement, ~~there~~the ~~can~~Company beagreed noto ~~assurances~~register ~~that~~Spencer Trask’s ~~all~~shares ~~or any portion~~ of ~~the~~common ~~warrants~~stock ~~will~~issued beunder ~~exercised by~~ the ~~initial~~Securities ~~purchasers or~~Purchase ~~by any subsequent holders~~Agreement.

~~Additionally,~~We weneed ~~could~~to raise an additional ~~$7,100,000~~capital ~~if all the warrants issued in connection with the April 2004 private placement are exercised for cash~~immediately. The ~~warrants~~Company ~~issued~~is currently inbeing ~~the~~funded ~~April~~on ~~2004~~a ~~private~~month-to-month ~~placement~~basis ~~are exercisable~~ by ~~the~~STIP ~~holders~~while atit ~~any~~attempts ~~time between October 2004 and April 2009 at~~to ~~$2.75~~sell ~~per~~its ~~share.~~KOP ~~However~~facility; however, ~~there is~~ no assurance ~~that~~can ~~our~~be ~~stock~~given ~~price~~that ~~will~~the ~~rise~~Company will tobe ~~the~~able ~~$2.75~~to ~~per~~obtain ~~share~~additional ~~exercise~~financing ~~price~~when and~~/or~~ ~~that~~as ~~all~~needed orin ~~any portion of~~ the ~~warrants~~ ~~will be exercised by the initial purchasers or by any subsequent holders~~future.

~~Once~~We ~~we have used our current cash balances, we~~ will beneed ~~forced~~ to ~~look~~raise ~~for~~very ~~alternative sources~~substantial ~~of funding which, even if available, may be on terms substantially less~~additional ~~favorable. If~~funds weover ~~are~~several ~~unable~~years toinorder ~~raise adequate capital, we may be required~~ to ~~delay,~~continue ~~or reduce the scope of, our~~ research orand development ~~of REMUNEâ~~, preclinical ~~IR103~~studies and ~~NeuroVaxTM~~clinical ortrials ~~take~~necessary ~~other measures~~ to ~~cut~~bring ~~costs,~~potential ~~which~~products to ~~would~~market ~~have a material adverse effect on us~~ and ~~likely~~ ~~result in our inability~~ to ~~continue~~establish asmanufacturing aand ~~going~~marketing ~~concern~~capabilities.

We ~~will need~~cannot toprovide ~~raise~~assurance very substantial additional funds over several years to conduct research and development, preclinical studies and clinical trials necessary to bring potential products to market and to establish manufacturing and marketing capabilities. We anticipate that ~~for~~such ~~the~~financing foreseeable future, the scale-up of the manufacturing process for REMUNEâ, IR103 and NeuroVaxTM and the cost of producing clinical supplies for ongoing and future REMUNEâ, IR103 and NeuroVaxTM studies will ~~continue~~be toavailable ~~represent~~on aacceptable ~~significant portion of our overall expenditures. Overall~~terms, ~~future~~if ~~REMUNEâ,~~at ~~IR103 and NeuroVaxTM research and development expenditures are expected to increase from current levels in the event additional financing is obtained~~all. ~~Future~~If ~~spending for research and development may further increase if~~ we ~~enter~~raise ~~into~~funds ~~additional~~through ~~collaborations,~~future ~~but~~equity ~~there can be no assurance that we will enter into any such collaborations. We anticipate additional capital improvements of approximately $750~~arrangements,~~000~~ ~~to scale-up~~significant ~~the~~further ~~manufacturing~~dilution ~~process for REMUNEâ and IR103 through 2006. Other anticipated costs with respect~~ to ~~REMUNEâ,~~stockholders ~~IR103~~might and NeuroVaxTM, including investment in inventory, will depend on many factors including the need for additional clinical trials and other factors, which will influence our determination of the appropriate continued investment of our financial resources in these programsresult.

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

Results of Operations

Three and Six Months Ended June 30, ~~2004~~2007 Compared to Three and Six Months Ended June 30, ~~2003~~ 2006.

Revenues. We recorded revenues for the three and six months ended June 30, ~~2004~~2007 of $144,000 and $288,000, respectively, asthe ~~compared~~same toas the $1411,000 and $3822,000 for the corresponding period in ~~2003~~2006. ~~The revenues were from the amortization of additional multi-year out-licensing contracts of various intellectual property and/or patents that we own.~~ We ~~expect no additional revenues unless it is earned through corporate collaborations or new research and development agreements. We~~ have not received any revenues from the sale of products and do not expect to derive revenue from the sale of any products earlier ~~for~~than ~~the~~2012, ~~foreseeable~~if ~~future~~at all.

~~Our~~Research and Development Expenses. Our research and development expenditures for the three and six months ended June 30, ~~2004~~2007 were $31,~~235~~834,000 and $64,~~355~~103,000, respectively, as compared to $2,~~527~~475,000 and $54,~~004~~938,000 for the corresponding period in ~~2003~~2006. The ~~increase~~$641,000 decrease in research and development expenses ~~during~~for the ~~first~~three ~~six~~month ~~months~~period ofended ~~2004~~June is30, 2007 compared with the corresponding period in 2006 is attributable primarily to a decrease of $177,000 in licensed technology amortization due to our ~~increased~~licensed ~~HIV~~technology being ~~clinical~~fully ~~development~~amortized ~~activity~~at December 31, 2006 and an overall decrease of $266,000 in administration, manufacturing and facility expenditures related to the scale~~-up~~ back ~~activities~~of ~~for~~the ~~REMUNEâ~~HIV business. In addition, clinical trials expenses during the second quarter of 2007 decreased $198,000 compared with the corresponding period in 2006 representing a decrease of $170,000 associated with HIV clinical trials and ~~IR103~~a decrease of $28,000 in expenses associated with MS clinical trials.

Research and development expenses decreased $835,000 for the six month period ended June 30, 2007 compared with the six month period ended June 30, 2006. This overall decrease in research and development expenses for the six month period ended June 30, 2007 compared with the corresponding period in 2006 is attributable primarily to a decrease of $353,000 in licensed technology amortization due to our licensed technology being fully amortized at December 31, 2006 and an overall decrease of $354,000 in administration, manufacturing and facility expenditures related to the scale back of the HIV business. In addition, clinical trials expenses for the six month period ended June 30, 2007 decreased $128,000 compared with the corresponding period in 2006 representing a decrease of $449,000 associated with HIV clinical trials offset by a $321,000 increase in expenses associated with our current MS trials.

General and Administrative Expenses. General and administrative expenses for the three and six months ended June 30, 2007 were $1,077,000 and $2,551,000 respectively, as compared to $1,469,000 and $2,798,000 for the corresponding period in 2006. General and administrative expenses decreased $392,000 for the three month period ended June 30, 2007 compared to the three month period ended June 30, 2006 primarily due to a $189,000 decrease in non-cash employee stock-based compensation cost and a combined decrease in legal, public relations and executive severance costs of $203,000.

General and administrative expenses decreased $247,000 for the six month period ended June 30, 2007 compared to the six month period ended June 30, 2006 primarily due to a $354,000 decrease in non-cash employee stock-based compensation cost and combined $259,000 decrease in legal, administrative and executive severance costs. This overall decrease in expense for the period was offset by a $366,000 increase in expenses associated with investor and public relations activities.

Interest Expense. Interest expense for the three and six months ended June 30, 2007 was $1,030,000 and $2,160,000, respectively, as compared to $3,632,000 and $4,862,000 for the corresponding period in 2006. The decrease of $2,602,000 and $2,702,000 for the

~~Expenses associated~~three ~~with~~and ~~our~~six ~~scale-up~~months ofended ~~the~~June ~~manufacturing~~30, ~~process~~2007 ~~for~~is ~~REMUNEâ~~primarily due ~~and~~to ~~IR103,~~ the ~~cost~~reduction ofin ~~producing~~2007 ~~clinical supplies~~of ~~for~~debt ~~ongoing~~discount ~~and~~accretion ~~future REMUNEâ, IR103~~ and ~~NeuroVaxTM~~interest ~~studies~~expense ~~and~~associated ~~additional~~with ~~clinical~~the ~~trials~~notes ~~for~~issued ~~NeuroVaxTM~~in ~~are~~the ~~expected~~2006 toPrivate ~~increase~~Placement, ~~during~~issuing the ~~next~~Debenture for ~~several~~$1,000,000 to ~~quarters~~Cornell asCapital wein 2005 ~~focus~~at ~~our financial~~a ~~resources~~12% oninterest ~~REMUNEâ~~rate, ~~IR103~~ and ~~NeuroVaxTM. Clinical study spending~~ for ~~our~~the ~~other~~accelerated ~~development~~accretion ~~programs~~on ~~has~~debt ~~decreased~~discount ~~beginning~~for inearly ~~the~~partial ~~second~~conversions ~~quarter~~by ofCornell ~~2002.~~Capital Ifand weearly ~~enter~~payoff ~~into~~of ~~additional collaborations,~~the ~~research~~note. In ~~and~~addition, ~~development~~the ~~expenditures~~decrease ~~for~~reflects ~~our other development~~the ~~programs~~partial ~~would~~conversion ~~likely~~during ~~increase~~the ~~over~~first ~~their~~six ~~current~~months ~~levels.~~of ~~There~~2006 ~~can~~of bethe ~~no assurance~~8% ~~that~~Mortgage ~~we will enter into any collaborations, that existing~~Note ~~collaborations~~held ~~will~~by ~~not~~Cheshire beAssociates ~~terminated~~LLC, orwhich ~~that~~is wean ~~will~~affiliate beof ~~able to obtain other financing needed to continue~~ our ~~research~~director and major ~~development~~stockholder ~~efforts~~Kevin Kimberlin.

~~General and~~In ~~administrative~~addition, ~~expenses~~the ~~for~~interest expense associated with the issuance ~~three~~of ~~and~~warrants ~~six~~to ~~months~~STIC ~~ended~~for ~~June~~its ~~30,~~limited ~~2004~~recourse interest support ~~were~~decreased approximately $~~885~~610,000 and $1854,~~723,~~000, ~~respectively,~~for asthe ~~compared~~three toand ~~$2,348,000~~six ~~and~~months $3ended June 30,~~383,000~~ ~~for~~2007 as compared to the corresponding period in ~~2003~~2006. ~~During~~The ~~the~~decrease ~~second~~in ~~quarter~~the value of ~~2003~~the ~~there was a~~warrants ~~one-time~~issued ~~adjustment~~to ofSTIC ~~$1,100,000~~is ~~related~~primarily due to the ~~repricing~~decrease ofin ~~employee~~our stock ~~options.~~ Weprice, ~~expect~~which ~~general and administrative expenses to remain consistent~~is ~~with~~one ~~prior~~of ~~years~~the ~~with~~assumptions ~~savings~~utilized ~~attributed~~in to the ~~September~~Black-Scholes ~~2002~~option-pricing ~~restructuring~~model (“BSOPM”) ~~being~~valuation ~~offset~~of bythe ~~possible increased consulting fees~~warrants.

During ~~May~~ ~~2003,~~the wefirst ~~disposed~~quarter of ~~excess~~2007 ~~assets,~~we ~~and~~recognized ~~were negotiating an early lease~~a ~~termination~~non-cash ~~for~~charge ~~our~~to ~~Carlsbad,~~operations ~~California headquarters facility resulting in exit and disposal related costs~~ of $1940,~~290,~~000 asrepresenting ofbeneficial ~~June 30, 2003, including an~~inducement ~~estimate~~cost ofassociated ~~approximately~~with ~~$700,000 of additional costs accrued to cover a potential settlement of a claim filed by~~ the ~~landlord~~Warrant ~~for~~Exercise ~~breach~~and ofPrice ~~contract under~~Protection ~~the lease~~arrangement.

~~Interest expense~~During ~~increased~~the tofirst ~~$737,000~~quarter ~~and~~of ~~$1,490,000,~~2006 ~~respectively,~~we ~~for~~recognized ~~the three and~~a ~~six~~non-cash ~~months~~charge ~~ended June 30, 2004 as compared~~ to ~~$3,398,000~~operations ~~and~~of $414,~~822~~095,000 ~~for~~representing ~~the~~beneficial inducement ~~corresponding~~cost ~~period~~associated inwith ~~2003. The decrease during~~ the ~~first~~Note ~~six~~Exchange ~~months~~and ofNote ~~2004 is~~Revision ~~attributable~~transactions ~~to an overall reduction in levels of debt~~with Cheshire.

~~Our~~Pursuant ~~net~~to EITF No. 00-19, we are currently required ~~loss~~to ~~per~~classify ~~share~~certain ~~increased~~outstanding ~~during~~derivative instruments (primarily warrants) as a liability. This warrant liability was initially established in March 2006 and the ~~first~~fair ~~quarter~~value of ~~2004~~the aswarrant liability is remeasured utilizing the BSOPM at each reporting date. We reported a ~~result~~gain on warrant liability marked to fair value of $1,857,000 and $5,713,000 for the three and six months ~~increased~~ended ~~net~~June ~~loss~~30, ~~offset~~2007, byrespectively, as compared to $111,521,000 and $226,180,000 for the ~~increase~~corresponding period in ~~our~~2006, ~~weighted~~using ~~average~~the ~~number~~assumptions ofin the table ~~shares~~below. The ~~outstanding,~~decrease ~~due~~in the gain recorded each quarter is attributable to ~~several~~a ~~securities~~continued ~~issuance~~decrease ~~transactions~~in the company common stock price since the respective prior period measurement dates, combined with the expiration of the 2006 Private Placement warrants in March 2007..

	March 31, 2007			March 31, 2006			June 30, 2007			June 30, 2006
Dividend yield	0.0		%	0.0		%	0.0		%	0.0		%
Expected volatility - based on the Company’s three year historical rate	161.95		%	139.61		%	164.87		%	162.62		%
Risk-free interest rate	4.54		%	4.83		%	4.89		%	5.130		%
Company common stock price	$	1.17		$	11.00		$	0.61		$	2.25

Critical Accounting Policies and Estimates

WeThe ~~believe~~preparation ~~that~~of ~~patents~~financial ~~and~~statements ~~other~~in ~~proprietary~~conformity ~~rights~~with ~~are~~generally ~~important~~accepted accounting principles requires management to ~~our~~make estimates and assumptions in ~~business.~~certain ~~Licensed~~circumstances ~~technology~~that isaffect ~~recorded~~amounts atreported ~~cost~~in the accompanying financial statements and isrelated ~~amortized~~footnotes. In preparing ~~over~~these financial statements, management has made its best estimates ~~estimated~~and ~~useful~~judgments ~~life.~~of Incertain ~~December~~amounts ~~1999,~~included wein ~~acquired~~the ~~licenses~~financial statements, giving due consideration to ~~certain~~materiality. However, ~~patent~~application of these accounting policies involves the exercise ~~technology~~of judgment and use of assumptions as to future uncertainties and, ~~which~~as ~~are~~a ~~being~~result, actual ~~amortized~~results ~~over~~could ~~seven~~differ ~~years~~from these estimates. Historically, ~~Changes~~there inhave ~~our~~been no significant differences between estimates recorded for impairment of ~~useful~~intangibles ~~lives~~and long-lived ~~may~~assets ~~have~~or aexit ~~material~~and ~~effect~~disposal onrelated costs compared to actual expenses incurred. In preparing our financial statements the most difficult, subjective and complex estimates and the assumptions that deal with the greatest amount of uncertainty relate to our accounting for stock-based compensation, asset impairments and warrant liability associated with EITF No. 00-19, as described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2006.

~~We evaluate~~Item ~~potential impairment of long-lived assets in accordance with FAS No~~3. ~~144,~~ ~~“Accounting~~Quantitative for the Impairment or Disposal of Long-Lived Assets.” FAS No. 144 requires that certain long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable based on expected undiscounted cash flows that result from the use and ~~eventual disposition of the asset. The amount of~~Qualitative ~~any~~Disclosures ~~impairment~~about isMarket ~~measured as the difference between the carrying value and the fair value of the impaired asset.~~Risk

~~In accordance~~We ~~with~~invest ~~FAS~~our ~~No.~~excess ~~144,~~cash weprimarily ~~have~~in ~~identified~~U.S. ~~our~~government securities ~~property~~ and ~~equipment~~money ~~and licensed~~market ~~technology~~accounts. asThese ~~long-lived~~instruments ~~assets~~have ~~subject~~maturities toof three ~~annual~~months ~~impairment~~or ~~review. Given~~less ~~our~~when ~~current~~acquired. ~~financial~~We ~~status,~~do ~~our~~not ~~historical~~utilize ~~losses~~derivative ~~and the~~financial ~~indeterminable~~instruments, ~~outcome~~derivative ofcommodity ~~the~~instruments ~~development~~or ~~and~~other ~~approval~~market ofrisk ~~our products~~sensitive instruments, ~~there is~~positions ~~substantial~~or ~~uncertainty~~transactions. asFurthermore, to our ~~ability~~debt tois ~~recover~~at ~~our~~fixed rates. ~~investment~~Accordingly, inwe ~~these long-lived~~believe ~~assets~~that, ~~through~~while the ~~generation~~instruments ofwe ~~net~~hold ~~future~~are ~~cash~~subject to ~~flows.~~changes Inin ~~light~~the ~~of this~~financial ~~uncertainty,~~standing weof ~~obtained~~the anissuer ~~independent~~of ~~third-party~~such ~~appraisal~~securities, ofwe ~~these~~are ~~long-lived~~not ~~assets~~subject into ~~the~~any ~~first~~material ~~quarter~~risks ofarising ~~2003.~~from Aschanges ain ~~result~~interest ~~of such appraisal~~rates, weforeign ~~recognized~~currency ~~substantial~~exchange ~~impairment~~rates, ~~charges~~commodity ~~related~~prices, toequity ~~property~~prices ~~and~~or ~~equipment~~other ~~for~~market ~~the~~changes ~~year~~that ~~ended~~affect ~~December~~market ~~31,~~risk ~~2002~~sensitive instruments.

In September 2002, we implemented a restructuring program and management changes aimed at reducing costs and refocusing our efforts on REMUNEâ. The restructuring program reduced staff and cut spending at our headquarters while maintaining limited manufacturing capacity at one of our production facilities in King of Prussia, Pennsylvania. During May 2003, we disposed of excess assets, and during August 2003, we negotiated an early lease termination for our former Carlsbad, California headquarters facility resulting in exit and disposal related costs of approximately $1,400,000. During 2003, we recorded an additional charge of $2,000,000 related to the estimated net rental expense of our vacant manufacturing facility in Pennsylvania. These costs have been accounted for in accordance with Emerging Issues Task Force 94-3.

~~Certain~~Item ~~Risk~~4. Controls ~~Factors~~and Procedures

~~Our~~Mr. ~~future~~Michael ~~operating~~K. ~~results~~Green, ~~are~~our ~~subject~~principal toexecutive aofficer and ~~number~~principal financial officer, after evaluating the effectiveness of ~~factors~~our disclosure controls and procedures (as defined in Securities Exchange Act Rule 13a-15(e)) have concluded that, as of June 30, 2007, our disclosure controls ~~including:~~and procedures are effective.

Our failure to successfully develop our product candidates, REMUNEâ, IR103 and NeuroVaxTM may cause us to cease operations

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

In May 1999 we discontinued a Phase III clinical endpoint trial of REMUNEâ because differences in clinical endpoints were not observed between treatment groups and extending the trial would have been unlikely to provide sufficient additional clinical endpoints. The discontinuation of the Phase III trial has had a material adverse effect on us. Additionally, the most recent pivotal trial of REMUNEâ conducted by our former collaborative partner, Pfizer, was discontinued by us. See “—Pfizer has terminated its collaboration with us, which has hindered the continued development and commercialization of REMUNEâ.” We cannot assure you that any future Phase III trials of REMUNEâ will be conducted. Furthermore, we cannot guarantee that we, or our corporate collaborators, if any, will ever obtain any regulatory approvals of REMUNEâ.

Before the cessation of the development efforts of our products other than REMUNEâ and NeuroVaxTM in September 2002, our technologies and other potential therapies were at earlier stages of development than REMUNEâ and had not been shown to be safe or effective. Some of our technologies have not been tested on humans. Even if we do continue development of our other potential products, regulatory authorities may not permit human testing of the potential products based on these technologies. Even if human testing were permitted, the products based on these technologies may not be successfully developed or shown to be safe or effective.

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

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

Our current cash position, significant financing requirements and limited access to financing may adversely affect our ability to develop products and continue operations

We have never generated any revenue from product sales. As of June 30, 2004, we had an accumulated deficit of approximately $319,211,000, cash and cash equivalents of only approximately $15,720,000 and working capital of only approximately $12,658,000. Because we do not anticipate generating any revenue from our products until at least the third quarter of 2008, if at all, we will continue to have negative cash flow and will need to raise substantial additional capital to fund our operations beyond this time. We will need to raise substantial funds to continue our operations and to conduct research and development, preclinical studies and clinical trials necessary to bring our potential products to market and to establish manufacturing and marketing capabilities.

WePART ~~will~~II ~~continue to have limited cash resources. There can be no~~– ~~assurance~~OTHER ~~that we will be successful in consummating any financing transaction or, if consummated, that the terms and conditions will not be unfavorable to us.~~INFORMATION

WeItem ~~could raise an additional $16,700,000 if all of the Class B warrants that were issued upon exercise of our Class A warrants are exercised~~1. ~~Our~~Legal Class B warrants are redeemable by us if the price of our common stock is equal to or greater than $3.32 for ten consecutive trading days. However, there can be no assurances that our stock price will rise to $3.32 so as to enable us to call the Class B warrants for redemption, nor that (even in that event) all or any portion of the warrants will be exercised by the initial purchasers or by any subsequent holders.Proceedings

InOn ~~addition~~October 3, we2006 ~~could~~the ~~raise~~Company anreached ~~additional~~agreement ~~$11,800,000 if all the~~with ~~warrants~~class ~~issued~~counsel into ~~connection~~settle ~~with~~ the ~~October~~Company’s ~~2003~~securities-law ~~private~~class ~~placement~~action ~~are exercised~~lawsuit for approximately ~~cash~~$9.6 ~~The~~million. ~~warrants~~In ~~issued~~May in2007, the ~~October~~federal ~~2003~~court ~~private~~gave ~~placement~~final approval ~~are~~to ~~redeemable by us if~~ the ~~price~~settlement. ofThe ~~our~~Company ~~common~~also ~~stock~~reached isan ~~equal~~agreement to orsettle ~~greater~~the related ~~than~~California ~~$8.00~~state-court ~~for~~derivative 20lawsuit ~~consecutive~~for ~~trading~~approximately ~~days~~$0.25 ~~However~~million, which ~~there~~settlement ~~can~~would also be nofunded ~~assurances that~~entirely ~~our~~by ~~stock~~the ~~price~~Company’s ~~will~~insurers, ~~rise~~plus agreement to $8adopt certain corporate governance requirements.00 soThe assettlements, which toinclude ~~enable~~no usadmission toof ~~call~~wrongdoing by the ~~warrants for~~Company, ~~redemption~~or any defendants, ~~nor~~had no ~~that~~effect ~~(even~~on inthe ~~that~~Company’s ~~event)~~operations, ~~all~~cash flow, or ~~any~~financial ~~portion~~position ofas ~~the~~they ~~warrants~~are ~~will~~within beinsurance ~~exercised~~limits. byThe ~~the~~settlements ~~initial~~also ~~purchasers~~include orcompany byofficers ~~any subsequent~~who ~~holders~~were named in the lawsuits.

~~Additionally,~~Item ~~we could raise an additional $7,100,000 if all the warrants issued in connection with the April 2004 private placement are exercised for cash~~1A. ~~The~~Risk warrants issued in the April 2004 private placement are exercisable by the holders at any time between October 2004 and April 2009 at $2.75 per share. However, there is no assurance that our stock price will rise to the $2.75 per share exercise price and/or that all or any portion of the warrants will be exercised by the initial purchasers or by any subsequent holders.Factors

OnOur ~~September 9,~~future ~~2002,~~operating weresults ~~commenced~~are ~~the~~subject ~~implementation~~to of a ~~cost~~number ~~reduction strategy to focus our core competencies on efforts related to the research, development, commercialization and production~~ of ~~REMUNEâ. The cost reductions related to research~~factors, administrative and operational costs have been offset by increased costs relating to increasing our production capabilities at our King of Prussia, Pennsylvania facility and conducting additional clinical trials. Since then we have also renewed our focus on NeuroVaxTM and commenced development of IR103.including:

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

We have never generated any revenue from product sales. As of June 30, 2007, we had an accumulated deficit of approximately $157,408,000, cash and cash equivalents of only $269,000, a working capital deficiency of $10,180,000 and a deficiency in stockholders’ equity of $12,535,000. Even after our July/August 2007 bridge financing, we must raise additional capital immediately. In July and August 2007, the Company received loan proceeds of $400,000 from certain investors. The Company is currently being funded on a month-to-month basis by STIP while it attempts to sell its KOP facility; however, no assurance can be given that these monthly loans will continue or that the Company will be able to obtain additional financing when and as needed in the future.

Because we do not anticipate generating any revenue from our products until at least 2012, if at all, we will continue to have negative cash flow.

We need to raise substantial additional capital to fund our operations and repay our loan obligations. We will need to raise substantial funds to continue our operations and to conduct research and development, preclinical studies and clinical trials necessary to bring our potential products to market and to establish manufacturing and marketing capabilities. We will continue to have limited cash resources. There can be no assurance that we will be successful in consummating any financing transaction or, if consummated, that the terms and conditions will not be unfavorable to us.

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

~~• our ability to raise~~· the ~~additional~~timing ~~funding~~of ~~and~~approval ~~the~~to ~~amounts~~begin ~~raised,~~new ifclinical ~~any~~trials;

~~• the~~· our ability ~~time~~to raise additional funding and ~~costs involved~~the inamounts ~~obtaining~~raised, ~~regulatory~~if ~~approvals~~any;

~~• continued scientific~~· the ~~progress~~time inand ~~our~~cost ~~research~~involved ~~and~~in ~~development~~obtaining ~~programs~~regulatory approvals;

~~• the scope and~~· continued ~~results~~scientific ofprogress ~~preclinical~~in ~~studies~~our research and ~~clinical~~development ~~trials~~programs;

• · the scope ~~cost~~and results of ~~manufacturing~~ ~~scale-up~~preclinical studies and clinical trials;

• · the ~~costs involved~~ incost ~~filing,~~of ~~prosecuting~~manufacturing scale-up and/or ~~enforcing patent claims~~withdrawal;

~~• competing~~· the ~~technological~~costs involved in filing, prosecuting and ~~market~~enforcing ~~developments~~patent claims;

~~• effective~~· competing ~~commercialization~~technological ~~activities~~ and ~~arrangements~~market developments;

~~• the costs of~~· effective ~~defending~~commercialization ~~against~~activities and ~~settling lawsuits~~arrangements; ~~and/or~~

~~• other factors not~~· the ~~within~~costs ~~our~~of ~~control~~defending oragainst ~~known~~and tosettling ~~us.~~lawsuits; and/or

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

• obtaining regulatory approvals;

• our research and development programs;

~~• our~~· other factors ~~preclinical~~not ~~and clinical~~within ~~trials;~~our control or known to us.

~~• scaling~~Our upperceived momentum, ~~manufacturing.~~and therefore also our access to capital, could be limited if we do not progress in:

· obtaining regulatory approvals;

· our research and development programs;

· our preclinical and clinical trials.

Our access to capital also could be limited by:

• · overall ~~financial~~ financial market conditions;

~~• applicable~~· the ~~Nasdaq~~security ~~rules~~interest ~~and~~in ~~federal~~substantially ~~and~~all ~~state~~of ~~securities~~our ~~laws~~assets in respect of indebtedness in an aggregate principal amount of $8,740,000;

~~• the perfected~~· Potential ~~security~~dilution ~~interest~~which inwould ~~our~~occur ~~intellectual~~upon ~~property in respect of~~ the ~~aggregate $7,208,000~~exercise ~~in convertible promissory notes issued to affiliates and/~~or ~~related parties~~conversion of ~~Kevin Kimberlin, (who is one of our directors and our principal~~outstanding ~~stockholder~~derivative ~~(See~~securities ~~“An~~which ~~existing~~overlie ~~stockholder owns~~ approximately ~~14.6% of our outstanding common stock and has the rights to acquire an additional 23~~8,~~192~~700,~~308~~ 000 shares of our common stock~~, which could result in ownership of up to approximately 42~~.~~5% of our outstanding shares and could allow him to control or influence stockholder votes”);~~

~~• the~~Our ~~effect~~independent ofregistered ~~the potential~~public ~~for~~accountants ~~exercise~~have ofexpressed substantial ~~outstanding~~doubt ~~options~~as ~~and~~to ~~warrants~~our ~~exercisable~~ability ~~into approximately~~to ~~20,500,000~~continue ~~shares~~as ofa ~~common~~going ~~stock;~~concern.

• As of June 30, 2007, we had an accumulated deficit of $157,408,000. We have not generated revenues from the ~~effect~~commercialization of any product. We expect to continue to incur substantial net operating losses over the next several years, which would imperil our ~~potential~~ability ~~for~~to ~~conversion~~continue operations. Our cash currently on hand does not provide us with adequate liquidity beyond the third quarter of ~~688~~2007. We have $5,335,000 ~~shares~~ of ~~Series A~~secured ~~Convertible~~indebtedness ~~Preferred~~which ~~Stock~~matures ~~issued~~on in January ~~2004~~1, 2008. We may not be able to generate sufficient ~~The~~product ~~Series~~revenue Ato isbecome ~~initially~~profitable ~~convertible~~on ~~into~~a 2sustained basis,~~800~~ or at all,~~000~~ ~~shares~~and ofdo not ~~common~~expect to generate significant product revenue before 2012, if at all. We ~~stock~~have upoperating and liquidity concerns due to our significant net losses and negative cash flows from operations. As a ~~maximum~~result of 8these and other factors,~~300~~ our independent registered public accounting firm,~~000~~ ~~shares~~LevitZacks, ofindicated, ~~common~~in its ~~stock;~~report ~~and~~on our 2006 financial statements, that there is substantial doubt about our ability to continue as a going concern.

~~• the~~We ~~issuance~~have ofexited ~~the~~from our ~~placement~~historic ~~agent~~HIV ~~option~~vaccine todevelopment ~~Spencer~~business. Over ~~Trask~~the ~~Ventures, Inc.,~~past ~~(an~~five ~~affiliate~~years ~~of Kevin Kimberlin)~~we ~~and~~have ~~its~~increased ~~transferees~~our ~~that~~focus ison ~~exercisable~~our ~~for~~autoimmune disease 1program,~~714,909 shares~~ ofand ~~common~~in ~~stock~~particular NeuroVax™ and ~~1,437,658~~MS; ~~Class A~~at ~~warrants,~~the ~~which~~beginning ~~are~~of ~~not~~the ~~redeemable~~period byour ~~us.~~focus was almost exclusively on HIV

AnOn ~~existing~~August ~~stockholder~~24, ~~owns~~2007 ~~approximately~~the ~~14.6%~~Company oflaid ~~our~~off ~~outstanding~~almost ~~common~~all ~~stock~~of its employees and discontinued its Neurovax multiple sclerosis PII trial which was being enrolled in Eastern Europe. The Company has hired a broker and is attempting to sell its HIV manufacturing assets and intellectual property. The proceeds from the ~~rights~~sale of these assets will be used to ~~acquire~~pay anits creditors. The Company is currently evaluating ~~additional~~strategic 23options related to its autoimmune technology. Additionally,~~192~~ on August 24,~~308~~ ~~shares~~2007 ofDr. ~~our~~Joseph ~~common~~O’Neill’s employment ~~stock~~was terminated, ~~which~~without ~~could~~cause, ~~result~~ in conjunction with the ~~ownership~~reorganization of upthe toCompany. ~~approximately 42~~Dr.5% ofO’Neill’s ~~our~~severance ~~outstanding~~per ~~shares~~his ~~and~~2005 ~~could~~employment ~~allow~~agreement ~~him~~is tobeing ~~control~~accrued orby ~~influence~~the ~~stockholder~~Company ~~votes~~and will be paid when the Company’s KOP facility is sold.

~~Kevin~~The B.Company ~~Kimberlin~~believes, based aon ~~member~~consultations ~~of our Board of Directors, together~~ with ~~his~~ ~~affiliates~~its ~~and/or related parties~~broker, ~~currently~~that ~~own~~the ofnet ~~record~~realizable ~~approximately 14.6%~~value offor ~~our outstanding shares of common stock. He and they also have~~ the ~~right~~potential tosale ~~acquire, through the conversions~~ of ~~notes~~its ~~and~~KOP ~~exercise~~facility ofequals ~~options~~or ~~and warrants~~exceeds ~~beneficially owned by them, 23,192,308 additional shares. If~~ the ~~notes,~~net ~~options~~book ~~and~~value ~~warrants were to be converted and exercised in full, Mr. Kimberlin and his affiliates and/or related parties would own approximately 42.5%~~ of ~~our outstanding shares~~the ofKOP ~~common~~facility ~~stock~~assets ~~on a post-conversion/exercised basis. As a result~~ of ~~ownership of our common stock and the ability to acquire additional shares~~$2, ~~Mr. Kimberlin and his affiliates and/or related persons have the ability to influence~~299, ~~and possibly control, substantially all matters requiring~~000 at ~~approval~~June ~~by our stockholders~~30, ~~including the election of directors and the approval of mergers or other business combination transactions~~2007. ~~If your interests as a stockholder are different from his interests, you may not agree with his decisions and you might be adversely affected thereby.~~

~~The~~Except ~~lengthy~~for ~~product~~any ~~approval process and~~proceeds ~~uncertainty~~from ofselling ~~government~~the ~~regulatory~~KOP ~~requirements~~facility, ~~may~~it ~~delay~~is orunlikely ~~prevent~~that usstockholders ~~from~~will receive ~~commercializing~~any ~~products.~~return Weon ~~must~~the ~~work~~hundreds toof ~~re-establish~~millions ~~our~~of ~~credibility~~dollars ~~with~~we ~~the~~have invested in our HIV ~~FDA~~program since we were founded in 1987.

~~Clinical~~Due ~~testing,~~to ~~manufacture,~~our ~~promotion,~~low ~~export~~stock ~~and~~price, ~~sale of~~ our ~~products~~ ~~are~~recent ~~subject~~financings tohave ~~extensive regulation by numerous governmental~~been ~~authorities~~extraordinarily ~~in the United States~~dilutive, ~~principally the FDA,~~ and ~~corresponding~~our ~~state and~~stockholders ~~foreign~~can ~~regulatory~~be ~~agencies.~~expected ~~This~~to ~~regulation may delay or prevent us from~~suffer ~~commercializing~~significant ~~products.~~additional ~~Noncompliance~~dilution ~~with applicable requirements can result~~ in, ~~among~~connection ~~other~~with ~~things,~~any ~~fines,~~future injunctions, seizure or recall of products, total or partial suspension of product manufacturing and marketing, failure of the government to grant pre-market approval, withdrawal of marketing approvals and criminal prosecutionfinancings.

As part of our 2006 Private Placement, we offered and sold 80 units in a private securities offering, each unit comprising a $100,000 principal amount 8% Senior Secured Convertible Promissory Note, due January 1, 2008, and a warrant to purchase up to 150,000 shares of common stock at a price of $2.00 per share. The principal plus accrued interest on the notes may be converted into common

~~The~~stock ~~regulatory~~at ~~process~~a ~~for~~conversion ~~new~~price ~~therapeutic~~equal ~~drug~~to ~~products,~~$2.00 ~~including~~per ~~the~~share. ~~required~~We ~~preclinical~~have ~~studies~~issued ~~and~~approximately ~~clinical testing~~7,561,000 isshares ~~lengthy~~of common stock in respect of note conversions and ~~expensive~~warrant exercises through June 30, 2007. WeIf the remaining ~~may~~notes ~~not~~are ~~receive~~converted ~~necessary~~in ~~FDA~~full, ~~clearances~~we ~~for~~would ~~REMUNEâ~~be required to issue approximately or2,667,500 ~~any~~more shares of ~~our~~common ~~other~~stock. ~~potential~~Additionally, ~~products~~our inplacement aagent ~~timely~~for this ~~manner~~offering, orwhich atis ~~all.~~an ~~The length~~affiliate of ~~the~~Kevin ~~clinical~~Kimberlin, ~~trial~~a ~~process~~director and ~~the~~our largest ~~number~~stockholder, ofreceived ~~patients~~warrants ~~the~~to ~~FDA~~purchase ~~will~~approximately 1,769,000 shares ~~require~~of tocommon bestock ~~enrolled~~at ina ~~the~~price ~~clinical~~of ~~trials~~$2.00 inper ~~order~~share toand ~~establish~~warrants ~~the~~to ~~safety~~purchase ~~and~~approximately ~~efficacy~~106,000 shares of ~~our~~common ~~products~~stock isat ~~uncertain~~$0.80 per share.

~~Even~~In ifMarch ~~additional~~2007, ~~Phase III~~we ~~clinical~~entered ~~trials~~into ofa ~~REMUNEâ or~~Warrant ~~our~~Exercise ~~other~~and Price ~~products~~Protection ~~are~~arrangement ~~initiated~~with ~~and~~certain ~~successfully~~warrant ~~completed,~~holders of the ~~FDA~~2006 ~~may not~~Private ~~approve~~Placement. This ~~REMUNEâ~~agreement orincluded ~~our other~~a ~~products~~special ~~for~~warrant ~~commercial~~exercise ~~sale.~~inducement Wewhereby ~~may~~(i) ~~encounter~~the ~~significant~~warrant ~~delays~~holder ~~or excessive~~would ~~costs~~receive in2.5 ~~our~~shares ~~efforts~~of toour ~~secure~~common ~~necessary~~stock ~~approvals.~~for ~~Regulatory~~each ~~requirements are evolving and uncertain~~$2.00 ~~Future~~of ~~United~~warrant ~~States~~exercise ~~or foreign legislative or~~price ~~administrative~~paid ~~acts~~to ~~could~~us ~~also~~(this ~~prevent~~equates orto ~~delay~~an ~~regulatory~~effective ~~approval~~price of ~~our products~~$0.80 Weper ~~may~~share) ~~not~~and be(ii) ~~able~~the warrant toholder ~~obtain~~would ~~the~~receive ~~necessary~~short-term ~~approvals~~ratchet-style ~~for~~price ~~clinical~~protection (through ~~trials~~September 30, ~~manufacturing~~2007) oron ~~marketing~~March of2007 ~~any~~warrant ofexercises. We ~~our~~issued ~~products~~approximately ~~under~~1,334,000 ~~development.~~shares of ~~Even~~common ifstock ~~commercial~~for ~~regulatory~~the ~~approvals~~exercise ~~are~~of ~~obtained,~~warrants ~~they~~under ~~may~~the ~~include significant~~Warrant ~~limitations~~Exercise onand ~~the~~Price Protection ~~indicated~~arrangement. ~~uses~~The ~~for~~1,334,000 ~~which~~shares aare ~~product~~included ~~may~~in bethe previous ~~marketed~~paragraph’s figures.

InOn ~~addition~~July 23, 2007, Cheshire Associates (“Cheshire”) invested $250,000 in a ~~marketed~~bridge ~~product~~transaction iswith the ~~subject~~Company.. The Company issued a 15% Secured Promissory Note to ~~continual~~Cheshire ~~FDA~~in ~~review~~the principal amount of $250,000 (the “Note”). ~~Later~~and ~~discovery~~issued of500,000 ~~previously~~shares ~~unknown~~of ~~problems~~the orCompany’s ~~failure~~common stock to ~~comply~~Cheshire. The ~~with~~Note accrues interest at the ~~applicable~~ ~~regulatory~~rate ~~requirements~~of ~~may~~15% per ~~result~~annum inand ~~restrictions~~matures on the ~~marketing~~ earlier of aDecember ~~product~~1, 2007 or ~~withdrawal~~immediately before the closing of ~~the~~a ~~product~~financing ~~from~~which ~~the~~raises ~~market~~over $10,000,000 asfor ~~well~~the asCompany. In ~~possible~~connection with this transaction, on July ~~civil~~23, or2007, ~~criminal~~the ~~sanctions~~Company also entered into a Security Agreement with Cheshire.

~~Among~~On ~~the~~August 28, ~~other~~2007, Spencer ~~requirements~~Trask ~~for~~Investment ~~regulatory~~Partners ~~approval~~LLC is(“STIP”) ~~the~~made ~~requirement that~~a ~~prospective~~$150,000 ~~manufacturers~~investment ~~conform~~in the toCompany. In ~~the~~exchange ~~FDA’s~~STIP ~~Good~~received ~~Manufacturing~~a ~~Practices~~Senior Subordinated Secured Promissory Note, ordue ~~GMP~~on January 1, ~~requirements.~~2008 In(the ~~complying~~“STIP Note”) ~~with~~in the ~~FDA’s~~principal ~~GMP~~amount ~~requirements~~of $450, ~~manufacturers~~000 as ~~must~~well ~~continue~~as 600,000 toshares ~~expend~~of ~~time,~~common ~~money~~stock ~~and~~of ~~effort~~the inCompany. The ~~production, record~~STIP ~~keeping~~Note and ~~quality~~shares ~~control~~of common stock were issued pursuant to ~~assure~~a ~~that~~Securities ~~products~~Purchase ~~meet~~Agreement ~~applicable specifications~~between the Company and Spencer ~~other~~Trask, ~~requirements.~~dated ~~Failure~~August to28, ~~comply~~2007, and ~~maintain compliance~~is ~~with~~secured by the ~~FDA’s~~grant ~~GMP~~of ~~requirements~~a ~~subjects~~security interest ~~manufacturers~~in toall ~~possible FDA~~of ~~regulatory~~the ~~action~~assets ~~and~~of asthe aCompany ~~result~~pursuant ~~may~~to ~~have~~the terms of a Security ~~material~~Agreement, ~~adverse~~dated ~~effect~~the onsame ~~us. We~~date, orby ~~our~~the ~~contract~~Company ~~manufacturers,~~in iffavor ~~any,~~of ~~may~~Spencer Trask. On ~~not~~August be28, ~~able~~2007, tothe ~~maintain~~Company ~~compliance~~also ~~with~~entered ~~the~~into ~~FDA’s~~a ~~GMP~~Registration ~~requirements~~Rights onAgreement awith ~~continuing~~Spencer ~~basis~~Trask. Pursuant ~~Failure~~ to the Registration Rights ~~maintain~~Agreement, ~~compliance~~the ~~could~~Company ~~have~~agreed ato ~~material~~register ~~adverse~~Spencer ~~effect~~Trask’s onshares usof common stock issued under the Securities Purchase Agreement.

~~The~~As ~~FDA~~a ~~has~~result ~~not designated expanded access protocols for REMUNEâ or our other products as “treatment” protocols. The FDA may not determine that REMUNEâ or our other products meets all~~ of the ~~FDA’s~~ ~~criteria~~2006 ~~for~~Private ~~use~~Placement ofand anthe ~~investigational drug for treatment use. Even if~~2007 ~~REMUNEâ~~Bridge orFinancing, our ~~other~~existing ~~products~~stockholders ~~are~~as ~~allowed~~of ~~for treatment~~early ~~use~~2006, ~~third~~after ~~party payers may not provide reimbursement for~~ the ~~costs~~ ofconversion ~~treatment~~and ~~with~~exercise ~~REMUNEâ or~~of ~~our~~the ~~other products.~~notes ~~The~~and ~~FDA~~warrants, ~~also~~hold ~~may~~only ~~not~~a ~~consider~~fraction ~~REMUNEâ or~~of ~~our other products under development to be appropriate candidates for~~the ~~accelerated~~equity ~~approval,~~interest ~~expedited~~they ~~review~~previously orheld ~~fast~~in ~~track~~the ~~designation~~Company.

~~The~~Although ~~timing~~we ~~and~~urgently ~~substance~~need ofto ~~most~~secure ~~FDA~~additional financing, ~~decisions~~there ~~are,~~can asbe ano ~~practical matter,~~assurance ~~discretionary. Past~~that ~~events~~we ~~have raised~~will ~~doubts~~be successful in ~~the~~consummating any ~~minds~~financing oftransaction ~~some~~or, ~~persons~~if atconsummated, that the ~~FDA~~terms ~~regarding~~and ~~our~~conditions ~~corporate~~of ~~credibility~~the ~~and~~financing ~~the~~will ~~viability~~not ofbe ~~REMUNEâ~~unfavorable to us. ~~Our~~ ~~efforts~~Any toother ~~re-establish~~future ~~our~~near-term ~~credibility~~financings ~~may~~will ~~not~~almost ~~succeed;~~certainly ~~but~~involve ifsubstantial ~~they~~further ~~don’t,~~dilution of outstanding equity. Any subsequent offerings may also require the ~~FDA~~creation ~~approvals~~or ~~that~~issuance ~~are~~of a ~~indispensable~~class ifor weseries ~~are~~of tostock ~~survive~~that ~~and~~by ~~succeed~~its ~~may~~terms beranks ~~delayed~~senior orto ~~denied~~the ~~despite~~common stock ~~any~~with ~~merit~~respect ~~our~~to ~~applications~~rights ~~may~~relating ~~have~~to dividends, voting and/or liquidation.

~~Marketing~~Our ~~any~~stock ~~drug~~has ~~products~~been ~~outside~~delisted offrom ~~the~~Nasdaq ~~United States will subject us to numerous~~ and varying foreign regulatory requirements governing the design and conduct of human clinical trials and marketing approval. Additionally, our ability to export drug candidates outside the United States on a commercial basis is subject to penny ~~the~~stock ~~receipt from the FDA of export permission~~rules, which may ~~not~~ bemake ~~available~~it onmore adifficult ~~timely~~for ~~basis,~~us ifto atraise ~~all.~~capital ~~Approval procedures vary among countries~~ and ~~can involve additional testing, and the time required to obtain~~ ~~approval~~for ~~may~~you ~~be even longer than that required~~ to ~~obtain~~sell ~~FDA~~your ~~approval~~securities. Foreign regulatory approval processes include all of the risks associated with obtaining FDA approval set forth above, and approval by the FDA does not ensure approval by the health authorities of any other country, including those in Thailand.

~~Specifically,~~In ~~before~~November we2005, ~~will~~our stock beand ~~permitted~~Class toB ~~export~~warrants ~~REMUNEâ to~~were ~~Thailand~~delisted ~~for~~from ~~clinical~~the ~~use~~Nasdaq inStock ~~that~~Market ~~country,~~(Nasdaq) wedue to ~~need~~our failure to ~~meet~~satisfy athe ~~number~~Nasdaq ~~of regulatory~~continued ~~requirements~~listing criteria. As ~~One~~a ofresult, ~~those~~our ~~requirements~~stock is ~~that~~currently wequoted ~~must ensure that~~on wethe ~~can~~Over-the-Counter ~~manufacture~~Bulletin ~~REMUNEâ~~Board atquotation ~~our~~service (OTCBB). ~~United~~Securities ~~States~~traded ~~manufacturing~~on ~~facility~~the inOTCBB agenerally ~~manner~~suffer ~~that~~from islower inliquidity ~~“substantial~~and ~~compliance”~~greater ~~with~~price ~~current~~volatility. Additionally, because ~~United~~our ~~States~~stock ~~GMP~~price ~~requirements.~~is Wecurrently ~~must~~considered ~~provide~~a ~~the FDA with~~ “~~credible~~penny ~~scientific evidence~~stock” ~~that REMUNEâ~~under ~~would~~regulations beof ~~safe and effective under~~ the ~~conditions~~Securities ofand ~~proposed~~Exchange ~~use in Thailand. Furthermore~~Commission, ~~the~~broker-dealers ~~Thailand~~who ~~FDA~~buy and ~~must~~sell ~~(i) formally~~our ~~request~~securities ~~the~~are ~~FDA~~subject to ~~approve export~~rules ofthat ~~REMUNEâ~~impose toadditional ~~Thailand,~~sales practice ~~(ii) certify~~requirements. toThese ~~the~~additional ~~FDA~~burdens ~~that~~imposed itupon isbroker-dealers ~~aware~~could discourage ~~that~~broker-dealers ~~REMUNEâ is~~from ~~not~~effecting ~~approved~~transactions in ~~the~~our ~~United~~common ~~States~~stock, which orcould inseverely ~~any~~limit ofthe ~~several~~market ~~other~~liquidity ~~countries~~of ~~with comprehensive~~the ~~drug~~common ~~review~~stock and warrants ~~approval systems~~ and ~~(iii) concur~~your ~~that~~ability ~~the scientific evidence presented~~ to ~~the~~sell ~~FDA~~our issecurities ~~“credible~~in ~~scientific~~the ~~evidence~~secondary ~~that REMUNEâ~~market. Being ~~will~~delisted bealso ~~reasonably~~hurts ~~safe~~our ~~and~~ability ~~effective” for~~to ~~use~~raise inadditional ~~Thailand.~~financing, ~~There~~in ~~can~~part bebecause nomany ~~assurance,~~investors ~~however,~~are ~~that~~unwilling ~~we will successfully~~to ~~meet~~take ~~any~~large orpositions ~~all~~in ofstocks ~~these~~which ~~requirements~~do ~~for~~not ~~the~~trade ~~export~~on ofNasdaq ~~REMUNEâ, and~~or ifa wemajor ~~are unable to successfully meet all~~stock exchange.

Our failure to successfully develop our product candidates may cause us to cease operations.

We have not completed the development of any products. We are dependent upon our ability to successfully develop our product candidates and our failure to do so may cause us to cease operations.

~~regulatory~~For ~~requirements,~~20 years we ~~will~~were engaged ~~not~~in bean ~~permitted~~effort byto ~~the~~develop ~~FDA~~a tovaccine ~~export REMUNEâ~~against toHIV. We ~~Thailand for~~exited ~~clinical~~this ~~use,~~program ~~even~~in ifAugust ~~the~~2007 We ~~Thai~~have ~~government~~chosen ~~were~~ to ~~approve~~focus ~~REMUNEâ~~our development ~~for~~efforts ~~clinical~~on ~~use, which it has not yet done~~ NeuroVaxTM and ~~might~~other ~~never~~autoimmune dodisease. We ~~There~~cannot ~~can~~assure beyou ~~no assurance~~ that ~~Trinity~~any ~~Medical~~of ~~Group~~our ~~USA, Inc.~~drug candidates ~~and~~will ~~its~~succeed ~~affiliate,~~in ~~Trinity Medical~~clinical ~~Group,~~trials ~~Co. Ltd.,~~or athat ~~Thailand company~~we, ~~collectively,~~or ~~Trinity,~~ our corporate ~~collaborative~~collaborators, ~~partner~~if any, will beever ~~successful in its efforts to~~ obtain any regulatory ~~approval~~ ~~from~~approvals ~~the~~for ~~Thailand~~these ~~FDA~~drug candidates.

~~Technological~~The ~~change~~results of our preclinical studies and ~~competition~~clinical trials may not be indicative of future ~~render~~clinical ~~our~~trial results. A commitment of substantial financial and other resources to conduct time-consuming research, preclinical studies and clinical trials will be required if we are to develop any products. None of our potential products ~~obsolete~~may prove to be safe or effective in clinical trials. Approval by the U.S. FDA, or other regulatory approvals, including export license permissions, may not be obtained and even if successfully developed and approved, our products may not achieve market acceptance. Any products resulting from our programs may not be successfully developed or commercially available until 2012 or later, if at all. Moreover, unacceptable toxicity or side effects could occur at any time in the course of human clinical trials or, if any products are successfully developed and approved for marketing, during commercial use of our products. Although preliminary research and clinical evidence have shown our product candidates to be safe, the appearance of any unacceptable toxicity or side effects could interrupt, limit, delay or abort the development of any of our products or, if previously approved, necessitate their withdrawal from the market.

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

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

WeThe ~~have~~regulatory ~~not~~process for ~~manufactured~~new ~~any~~therapeutic ofdrug ~~our~~ products, inincluding ~~commercial quantities. We may not successfully make~~ the ~~transition~~required ~~from~~preclinical ~~manufacturing~~studies and clinical ~~trial quantities~~testing, tois ~~commercial~~lengthy ~~production quantities or be able to arrange for contract manufacturing~~ and ~~this~~expensive. ~~could~~We ~~prevent~~may usnot ~~from~~receive ~~commercializing products~~necessary orinternational ~~limit~~regulatory ~~our profitability from our products. Even if REMUNEâ~~ or ~~our other products are successfully developed and receives~~ FDA ~~approval,~~clearances ~~we have~~for ~~not demonstrated the capability to manufacture REMUNEâ or~~ our ~~other~~drug ~~products~~candidates in ~~commercial~~a ~~quantities. Except for REMUNEâ,~~timely wemanner, ~~have~~or ~~not~~at ~~demonstrated~~all. ~~the~~The ~~ability~~length ~~to manufacture any~~ of ~~our~~the ~~treatments in large-scale~~ clinical ~~quantities.~~trial Weprocess ~~rely~~and ~~on a third party for~~ the ~~final inactivation~~number ~~step~~ of ~~the REMUNEâ~~ ~~manufacturing~~patients ~~process.~~regulatory Ifagencies ~~the~~will ~~existing~~require ~~manufacturing~~to ~~operations prove inadequate, there can~~ be noenrolled ~~assurance~~in ~~that~~the ~~any~~clinical ~~arrangement with a third party~~trials ~~can~~in beorder ~~established~~to onestablish athe ~~timely~~safety ~~basis~~and orefficacy ~~that~~of weour ~~can~~products ~~establish~~is ~~other manufacturing capacity on a timely basis~~uncertain.

WeEven ~~have~~if nolate-stage clinical ~~experience~~trials infor ~~the~~our ~~sales~~drug candidates are initiated and successfully completed, ~~marketing~~the FDA and ~~distribution~~numerous offoreign regulatory agencies may not approve ~~pharmaceutical~~these candidates for commercial sale. We may encounter significant delays or excessive ~~biotechnology~~costs ~~products~~in our efforts to secure necessary approvals. ~~Thus,~~Regulatory requirements are evolving and uncertain. Future United States or foreign legislative or administrative acts could also prevent or delay regulatory approval of our products. We may not be able to obtain the necessary approvals ~~successfully~~for ~~commercialized~~clinical ~~even~~trials, ifmanufacturing ~~they~~or ~~are~~marketing ~~developed~~of ~~and~~any ~~approved~~of ~~for commercialization~~our ~~and~~products ~~even~~under development. Even if wecommercial ~~can~~regulatory ~~manufacture~~approvals ~~them. In~~are ~~addition~~obtained, ~~our~~they ~~competitors~~may include ~~will~~significant ~~have significantly~~limitations ~~greater~~on ~~marketing~~the ~~resources~~indicated ~~and~~uses ~~power~~for ~~than~~which wea ~~will~~product may be marketed.

~~The~~In ~~manufacturing~~addition, ~~process of our products involves~~ a ~~number of steps~~marketed ~~and~~product ~~requires~~is ~~compliance~~subject ~~with~~to ~~stringent~~continual ~~quality~~regulatory ~~control specifications imposed by us and by the FDA~~review. ~~Moreover,~~Later ~~our~~discovery ~~products can be manufactured only in a~~of ~~facility~~previously ~~that~~unknown ~~has~~problems ~~undergone~~or afailure ~~satisfactory~~to ~~inspection~~comply ~~and~~with ~~certification by~~ the ~~FDA.~~ ~~For~~applicable ~~these reasons, we would not be able to quickly replace our~~regulatory ~~manufacturing~~requirements ~~capacity~~may ifresult wein ~~were~~restrictions ~~unable~~on tothe ~~use~~marketing ~~our manufacturing facilities as a result~~ of a ~~fire,~~product ~~natural disaster (including an earthquake), equipment failure~~ or ~~other difficulty, or if our manufacturing facilities are deemed not~~ inwithdrawal ~~compliance~~of ~~with~~ the ~~GMP~~product ~~requirements,~~from ~~and~~ the ~~non-compliance~~market, ~~could~~as ~~not~~well ~~be rapidly~~as ~~rectified.~~possible ~~Our~~civil ~~inability~~ or ~~reduced capacity to manufacture our~~ ~~products~~criminal ~~would prevent us from successfully commercializing our products~~sanctions.

WeAmong ~~may~~the ~~enter~~other requirements ~~into~~for ~~arrangements~~regulatory ~~with~~approval ~~contract~~is ~~manufacturing~~the ~~companies~~requirement tothat prospective ~~expand~~manufacturers ~~our~~conform ~~own production capacity in order~~ to ~~meet~~the ~~requirements~~FDA’s ~~for~~Good ~~our products~~Manufacturing Practices, or toGMP, requirements. ~~attempt~~In tocomplying ~~improve~~with ~~manufacturing~~the ~~efficiency.~~FDA’s IfGMP werequirements, ~~choose~~manufacturers tomust ~~contract~~continue ~~for~~to ~~manufacturing~~expend ~~services~~time, wemoney ~~may~~and ~~encounter~~effort ~~costs~~in production, ~~delays~~record ~~and~~keeping ~~/or~~and ~~other~~quality ~~difficulties~~control into ~~producing,~~assure ~~packaging~~that ~~and~~products ~~distributing~~meet ~~our~~applicable ~~clinical~~specifications ~~trials~~ and other ~~finished product~~requirements. ~~Further,~~Failure ~~contract~~to ~~manufacturers~~comply ~~must~~and ~~also~~maintain ~~operate in~~ compliance with the FDA’s GMP requirements; ~~failure~~subjects manufacturers to dopossible soFDA ~~could~~regulatory ~~result~~action ~~in, among~~and ~~other~~as ~~things,~~a ~~the~~result ~~disruption~~may ofhave ~~our~~a ~~product~~material ~~supplies~~adverse effect on us. ~~Our~~We, ~~potential~~or ~~dependence~~our contract ~~upon~~manufacturers, ~~third~~if ~~parties~~any, ~~for~~may ~~the~~not ~~manufacture~~be ofable ~~our~~to ~~products~~maintain ~~may~~compliance ~~adversely~~with ~~affect~~the ~~our~~FDA’s ~~profit~~GMP ~~margins~~requirements ~~and~~on ~~our~~a ~~ability~~continuing tobasis. ~~develop~~Failure ~~and~~to ~~deliver~~maintain ~~products~~compliance oncould have a ~~timely~~material ~~and competitive~~adverse ~~basis~~effect on us.

~~Adverse~~The ~~determinations~~FDA ~~concerning~~has ~~product~~not ~~pricing,~~designated ~~reimbursement~~expanded ~~and~~access ~~related~~protocols ~~matters~~for ~~could~~our ~~prevent~~drug uscandidates ~~from~~as ~~successfully~~“treatment” ~~commercializing~~protocols. ~~REMUNEâ or~~The FDA may not determine that any of our ~~other~~drug ~~products~~candidates meet all of the FDA’s criteria for use of an investigational drug for treatment use. Even if one of our candidates is allowed for treatment use, third party payers may not provide reimbursement for the costs of treatment. The FDA also may not consider our product candidates under development to be appropriate candidates for accelerated approval, expedited review or “fast track” designation.

Our ability to earn revenue on REMUNEâ or any other of our products will depend in part on the extent to which reimbursement for the costs of the products and related treatments will be available from government health administration authorities, private health coverage insurers, managed care organizations and other organizations. Failure to obtain appropriate reimbursement may prevent us from successfully commercializing REMUNEâ or any of our other products. Third-party payers are increasingly challenging the

~~prices~~Marketing any drug products outside of ~~medical~~the ~~products~~United ~~and~~States ~~services.~~will Ifsubject ~~purchasers~~us orto ~~users~~numerous ofand varying ~~REMUNEâ~~foreign orregulatory ~~any~~requirements ~~of our~~governing ~~other~~the ~~products~~design ~~are~~and ~~not~~conduct ~~able~~of tohuman clinical ~~obtain~~trials ~~adequate~~and ~~reimbursement~~marketing ~~for~~approval. ~~the~~Additionally, ~~cost~~our ability to export ofdrug ~~using~~candidates outside the ~~products,~~United ~~they~~States ~~may~~on ~~forego~~a orcommercial ~~reduce~~basis ~~their~~is ~~use.~~subject ~~Significant~~to ~~uncertainty~~the ~~exists~~receipt asfrom to the ~~reimbursement~~FDA ~~status~~ of ~~newly~~export ~~approved~~permission, ~~health~~which ~~care products~~may ~~and~~not ~~whether~~be ~~adequate~~available ~~third~~on ~~party~~a timely ~~coverage~~basis, ~~will~~if beat ~~available~~all. In ~~addition,~~Approval ~~many~~procedures ~~HIV~~vary ~~patients~~among ~~live~~countries inand ~~poor~~can ~~countries,~~involve ~~which~~additional ~~may~~testing, beand ~~unable~~the totime ~~afford~~required to ~~pay~~obtain ~~substantial~~approval ~~sums~~may ~~for their~~be ~~citizens’~~even ~~HIV~~longer ~~therapies. Political pressure~~than ~~exists~~that required to ~~seek~~obtain toFDA ~~require~~approval. ~~manufacturers~~Foreign ofregulatory approval ~~HIV~~processes ~~therapies~~include toall ~~supply them~~of atthe ~~below-market~~risks ~~prices~~associated towith ~~poor~~obtaining ~~persons~~FDA approval ~~and/or~~set ~~poor~~forth ~~countries~~above, and ~~this pressure~~approval ~~may~~by ~~increase~~the inFDA does not ensure approval by the ~~future~~health authorities of any other country.

~~Our~~Before ~~success~~we ~~may~~will ~~depend~~be permitted ~~upon~~to any either of our drug candidates to foreign countries for clinical use in those countries, we need to meet a number of regulatory requirements. One of those requirements is that we must ensure that we can manufacture the ~~acceptance~~candidate at a United States manufacturing facility in a manner that is in “substantial compliance” with current United States GMP requirements. We must provide the FDA with “credible scientific evidence” that the candidate would be safe and effective under the conditions of proposed use ~~REMUNEâ~~ in foreign countries. There can be no assurance, however, that we will successfully meet any or all of these requirements for the export of our drug candidates, and ~~IR103~~ if we are unable to successfully meet all regulatory requirements, we will not be permitted by the ~~medical~~FDA ~~and~~to ~~HIV-activist~~export ~~communities~~our candidates to foreign countries for clinical use, even if the foreign governments were to approve such use.

Our ~~ability~~patents ~~to market~~ and ~~commercialize REMUNEâ~~ ~~and~~proprietary ~~IR103~~technology ~~depends~~may onnot ~~the~~be ~~acceptance~~enforceable and ~~utilization~~the ~~of REMUNEâ~~patents and ~~IR103~~proprietary technology byof ~~the~~others ~~medical and HIV-activist communities. Physician inertia~~ may ~~be a~~prevent ~~problem for~~ us asfrom ~~it is for many emerging medical~~ commercializing products ~~companies~~. WeSome ~~will need~~of toour ~~develop~~patents ~~commercialization initiatives designed to increase awareness~~expire ~~about~~fairly ~~us and REMUNEâ and IR103 among targeted audiences, including public health and AIDS activists and community-based outreach groups in addition to the investment community~~soon. ~~Currently, we have not developed any commercialization initiatives.~~

~~Hazardous~~Although ~~materials~~we ~~and~~believe ~~environmental~~our ~~matters~~patents to be protected and ~~could~~enforceable, ~~expose~~the usfailure to ~~significant~~obtain ~~costs~~meaningful patent protection for our potential products and processes would greatly diminish the value of our potential products and processes.

WeIn ~~may~~addition, bewhether ~~required~~or tonot ~~incur~~our ~~significant~~patents ~~costs~~are toissued, ~~comply with current~~ or ~~future~~issued ~~environmental~~with ~~laws~~limited ~~and~~coverage, ~~regulations.~~others ~~Although~~may wereceive ~~do not currently manufacture commercial quantities of our product candidates~~patents, wewhich ~~produce~~contain ~~limited~~claims ~~quantities~~applicable ofto ~~these products for~~ our ~~clinical trials~~products. ~~Our~~Patents ~~research~~we ~~and~~are ~~development and~~not ~~manufacturing~~aware ~~processes involve the controlled storage, use and disposal~~ of ~~hazardous~~ ~~materials,~~may ~~biological~~adversely ~~hazardous materials and radioactive compounds.~~affect Weour ~~are~~ability ~~subject~~ to ~~federal,~~develop ~~state~~ and ~~local~~commercialize ~~laws and regulations governing the use, manufacture, storage, handling and disposal of these materials and some waste~~ products. ~~Although~~Also, ~~we believe that~~ our ~~safety~~patents ~~procedures~~related ~~for handling and~~to ~~disposing~~autoimmune ofdiseases ~~these~~have ~~materials~~expiration ~~comply~~dates ~~with~~that ~~the~~range ~~standards~~from ~~prescribed~~2010 byto ~~these~~2019. ~~laws~~The ~~and~~limited ~~regulations,~~duration ~~the risk~~ of ~~contamination~~our orpatents ~~injury~~could ~~from~~diminish ~~these materials cannot be completely eliminated. In~~ the ~~event~~value of anour ~~incident, we could be held~~potential ~~liable~~products ~~for~~and ~~any damages that result~~processes, ~~and~~particularly ~~any~~since ~~liability~~we ~~could~~do ~~exceed~~not ~~our resources.~~expect ~~Current~~to orgenerate ~~future environmental laws or regulations may have a~~any ~~material~~revenue ~~adverse~~from ~~effect~~our onproducts ~~our~~sooner ~~operations~~than 2012, ~~business~~if ~~and~~at ~~assets~~all.

Pfizer terminated its collaboration with us, which has hindered the continued development and commercialization of REMUNEâ

We received in July 2001, a letter from Pfizer which indicated that Pfizer had elected to immediately terminate, in their entirety, all of its rights and obligations under our agreement with them. Our agreement with Pfizer permitted this termination. Although we retained all rights relating to REMUNEâ upon Pfizer’s termination, we lost a significant source of funding. Following the termination of our agreement with Pfizer, we decided not to proceed with one of our clinical trials of REMUNEâ developed by Agouron (subsequently acquired by Pfizer). The termination of this agreement has had, and may continue to have, a material adverse effect on our stock price and, consequently, our ability to successfully raise additional capital.

We may be unable to enter into additional collaborations

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

As collateral for the notes with a current principal balance of $7,208,000 and accrued interest of $863,000 outstanding to parties affiliated with and/or related to Kevin Kimberlin, one of our directors and principal stockholders, such parties have a perfected security interest in our intellectual property. Pursuant to the security agreement, we must comply with covenants with respect to our intellectual property. The security interests and covenants could impair our ability to enter into collaborative and licensing arrangements.

Our patents and proprietary technology may not be enforceable and the patents and proprietary technology of others may prevent us from commercializing products

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

In addition, whether or not our patents are issued, or issued with limited coverage, others may receive patents, which contain claims applicable to our products. Patents we are not aware of may adversely affect our ability to develop and commercialize products. Also, our patents related to HIV therapy have expiration dates that range from 2010 to 2017 and our patents related to autoimmune diseases have expiration dates that range from 2010 to 2019. The limited duration of our patents could diminish the value of our potential products and processes, particularly since we do not expect to generate any revenue from our products sooner than the third quarter of 2008, if at all.

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

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

~~You could suffer substantial dilution of your~~Technological ~~investment~~change asand acompetition ~~result~~may ofrender ~~past~~our ~~and~~potential ~~future financings~~products obsolete.

WeThe ~~will~~pharmaceutical and biotechnology industries continue to ~~have~~undergo ~~limited~~rapid ~~cash~~change, ~~resources.~~and ~~Although~~competition ~~our management~~is ~~recognizes~~intense ~~the~~and ~~need~~we expect it to ~~secure~~increase. ~~additional~~Competitors ~~financing,~~may ~~there~~succeed ~~can~~in bedeveloping notechnologies and products ~~assurance~~that are more effective or affordable than any that we ~~will~~are bedeveloping ~~successful~~or that would render our technology and products obsolete or noncompetitive. Many of our competitors have substantially greater experience, financial and technical resources and production and development capabilities than we. Accordingly, some of our competitors may succeed in ~~consummating~~obtaining ~~any~~regulatory ~~financing~~approval ~~transaction~~for products more rapidly or, ifeffectively ~~consummated~~than we, ~~that~~or ~~the~~develop ~~terms~~or acquire technologies and ~~conditions~~products ofthat ~~the~~are ~~financing~~more ~~will~~effective ~~not~~and/or beaffordable than any ~~unfavorable~~that towe usare developing.

InOur ~~the~~lack ~~last three years we have issued very large numbers~~ of ~~shares,~~ ~~plus~~commercial ~~other~~manufacturing ~~securities~~and ~~convertible~~marketing orexperience ~~exercisable~~and ~~for additional very large numbers of shares, in order to raise cash as required for~~ our ~~survival. Indeed,~~ independence ~~2003~~on ~~alone, our weighted average number of shares outstanding nearly~~third ~~tripled.~~parties Asfor amanufacturing ~~result,~~may ~~pre-existing~~prevent ~~stockholders~~us ~~have~~from ~~been~~successfully commercializing ~~substantially diluted~~products. ~~Any further near- term financings will almost certainly involve substantial dilution of outstanding equity.~~

~~Our recent financings have been primarily with related parties (affiliates of Mr. Kimberlin). Any further near-term financings may also be primarily with related parties.~~18

~~Any~~We ~~subsequent~~have ~~offerings~~arrangements ~~may~~with ~~also~~third ~~require~~party ~~the~~contract manufacturing ~~creation~~companies orto ~~issuance~~manufacture ofour aproduct candidates. We may encounter ~~class~~costs, delays and /or ~~series~~other ofdifficulties ~~stock~~in ~~that~~producing, bypackaging ~~its~~and distributing ~~terms~~our ~~ranks~~clinical ~~senior~~trials toand ~~the~~finished ~~common~~product. ~~stock~~Further, contract manufacturers must also operate in compliance with ~~respect~~the GMP requirements; failure to ~~rights~~do ~~relating~~so tocould ~~dividends~~result in, ~~voting~~among other things, the disruption of our product supplies. Our potential dependence upon third parties for the manufacture of our products may adversely affect our profit margins and~~/or~~ ~~liquidation~~our ability to develop and deliver products on a timely and competitive basis.

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

AsWe ofhave ~~July~~no ~~30,~~experience ~~2004~~in wethe ~~had reserved approximately 7~~sales,~~300,000~~ ~~shares~~marketing ofand ~~our~~distribution ~~common stock for potential issuance upon the exercise~~ of ~~stock~~pharmaceutical ~~options~~ or ~~awards~~ ~~and~~biotechnology ~~purchases~~products. ~~under~~Thus, our ~~employee 401K match and stock purchase plans.~~products ~~Issuance~~may ofnot ~~any~~be ofsuccessfully ~~these~~commercialized ~~additional~~even ~~shares~~if ~~could~~they ~~substantially~~are ~~dilute~~developed ~~your~~and approved ~~interest~~for incommercialization ~~us.~~and ~~Furthermore,~~even ~~we have warrants outstanding which,~~ if ~~exercised, will~~we ~~purchase~~can ~~approximately~~manufacture ~~26,100,000~~them. ~~shares~~In ~~of our common stock and approximately 6~~addition,~~600,000~~ ~~shares are issuable upon conversion of~~ our ~~outstanding~~ ~~convertible~~competitors ~~notes,~~will ~~subject~~have tosignificantly ~~adjustment.~~greater ~~Additionally,~~marketing ~~our~~resources ~~placement~~and ~~agent~~power inthan ~~the~~we ~~December 2002 private~~will.

We may be unable to enter into collaborations.

Our current development strategy is to seek collaborative arrangements with larger pharmaceutical companies for the clinical development and commercialization of our product candidates. If we are able to enter into such arrangements, we expect that a large portion of the ongoing development costs for our drug candidates would be funded by our collaborative partners. However, we may be unable to negotiate collaborative arrangements on favorable terms, or at all, and any future collaborative arrangements may not be successful or continue. If we are unable to enter into favorable collaborative arrangements, we expect that our future capital requirements would increase and we may be required to delay or curtail development efforts for one or both of our drug candidates.

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

Our ability to earn revenue on any of our products will depend in part on the extent to which patient reimbursement for the costs of the products and related treatments will be available from government health administration authorities, private health coverage insurers, managed care organizations and other organizations. Failure of patients to obtain appropriate cost reimbursement may prevent us from successfully commercializing any of our other products. Third-party payers are increasingly challenging the prices of medical products and services. If purchasers or users of any of our other products are not able to obtain adequate reimbursement for the cost of using the products, they may forego or reduce their use. Significant uncertainty exists as to the reimbursement status of newly approved health care products and whether adequate third party coverage will be available.

Kevin Kimberlin, a member of our Board of Directors, beneficially owns approximately 24% of our outstanding common stock and has the rights to acquire approximately 3,522,000 additional shares of our common stock, which could theoretically result in ownership of up to approximately 41% of our outstanding shares and could allow him to control or influence stockholder votes.

Kevin B. Kimberlin, a member of our Board of Directors, together with his affiliates and/or related parties, currently owns of record approximately 24 % of our outstanding shares of common stock. He and they also have the right to acquire, through the conversion of indebtedness and the exercise of options and warrants beneficially owned by them, approximately 3,522,000 additional shares. If his/their indebtedness, options and warrants (but not those of anyone else) were to be converted and exercised in full, Mr. Kimberlin and his affiliates and/or related persons would own approximately 41% of our outstanding shares of common stock on a post-conversion/exercise basis.

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

Mr. Kimberlin is also a secured creditor.

~~placement,~~As ~~and~~collateral ~~its~~for ~~transferees,~~the ~~hold~~Mortgage ~~unit~~Note ~~options~~held toby ~~purchase~~Cheshire and upthe ~~to 1~~Qubit Note,~~714,909~~ ~~shares~~which ofhave ~~common~~principal ~~stock~~amounts ~~and~~of 1$3,~~437~~155,~~658~~000 ~~Class A~~and ~~warrants~~$250,000 ~~which are~~and ~~not~~mature ~~redeemable~~on byJanuary us1, ~~subject~~2009 toand ~~adjustment.~~January ~~The~~1, ~~Class A~~2008, ~~warrants~~respectively, ~~are~~parties affiliated ~~exercisable~~with ~~for additional shares of common stock~~ and/or ~~Class B~~associated ~~warrants, subject~~with toKevin ~~adjustment.~~Kimberlin Inhave ~~addition,~~a weperfected ~~may~~security ~~issue~~interest (shared upwith tothe ~~1,250,000~~2006 ~~shares~~Private ofPlacement ~~our common~~note ~~stock~~holders) toin ~~Trinity pursuant to~~ our ~~License~~intellectual property and ~~Collaboration~~other ~~Agreement~~assets. ~~In addition,~~Pursuant weto ~~will~~the ~~require~~security ~~substantial additional financings~~agreement, ~~which~~we ~~even~~must ifcomply ~~successful~~with ~~will~~covenants ~~probably~~with ~~require~~respect ~~the~~to ~~issuance~~these ofassets. ~~very~~The ~~substantial~~security ~~amounts~~interests ofand ~~potentially~~covenants ~~dilutive securities. See also “—You~~ could ~~suffer~~impair ~~substantial dilution~~our ofability ~~your~~to ~~investment~~enter asinto acollaborative ~~result of past~~ and ~~future financings~~licensing arrangements.”

~~Our~~We ~~stock~~have ~~may~~significant indebtedness ~~become~~that ~~delisted~~will ~~and~~mature ~~subject to~~soon, ~~penny~~before ~~stock~~our ~~rules,~~operations ~~which~~can repay ~~may make~~ it ~~more difficult for you to sell your securities~~.

IfWe wehave ~~are~~$5,335,000 ~~delisted~~of ~~from~~secured ~~the~~debt ~~Nasdaq~~due ~~for~~on ~~any~~January ~~reason~~1, ~~our common stock~~ ~~might~~2008 ~~be considered a penny stock under regulations of the Securities~~ and ~~Exchange~~ ~~Commission~~$3, ~~or the SEC~~155,000 ~~and~~of ifsecured sodebt ~~would~~due ~~be subject to rules that impose additional sales practice requirements~~ on ~~broker-dealers~~January ~~who~~1, ~~buy and sell our securities~~2009. ~~The~~We ~~additional~~will ~~burdens~~not ~~imposed upon broker-dealers by~~have ~~these~~any ~~requirements~~product ~~could~~revenues ~~discourage~~before ~~broker-dealers~~those ~~from effecting transactions in our common stock, which could severely limit the market liquidity of the common stock and warrants and your ability to sell our securities in the secondary market~~dates. WeThere ~~cannot~~can ~~assure~~be ~~you~~no assurance that we ~~will be able to maintain our listing on~~can ~~the~~pay, ~~Nasdaq.~~refinance ~~Being~~or ~~delisted~~extend ~~would~~this ~~also hurt our ability to raise additional financing~~debt.

~~Legal~~Our ~~proceedings~~reporting ~~could require us to spend~~of ~~substantial~~profits ~~amounts~~may ofconfuse ~~money~~investors and ~~impair~~result ~~our~~in ~~operations~~lawsuits against us.

~~Since~~Due ~~July~~to ~~2001,~~EITF ~~several~~No. ~~complaints have~~00-19, ~~been~~we ~~filed~~reported ina ~~the~~large ~~United~~net ~~States District Court~~ income for the ~~Southern~~year ~~District of~~ended ~~California~~December ~~seeking an unspecified amount of damages on behalf of an alleged class of persons~~31, ~~who purchased shares of our common stock at various times between May 17~~2006, ~~1999~~ and ~~July 6, 2001. The complaints have been consolidated into~~ a ~~single~~ ~~action~~reduced ~~under~~net ~~the~~loss ~~name~~for ~~In re Immune Response Securities Litigation by order of~~ the ~~Court~~three and ~~a consolidated,~~ ~~amended~~six ~~complaint~~months ~~was~~ended ~~filed~~June ~~in July 2003. The consolidated~~30, ~~amended complaint names us and certain of our former officers as defendants, as well as Agouron Pharmaceuticals, Inc~~2007. ~~and one of its officers.~~ ~~The consolidated, amended~~If ~~complaint~~investors ~~alleges~~fail ~~that we, Agouron and/or such officers violated federal securities laws by misrepresenting and failing~~ to ~~disclose~~understand ~~certain~~that ~~information about~~this ~~the~~net ~~results~~income ofis ~~clinical~~an ~~trials~~artifice ofwhich ~~REMUNEâ. On~~does ~~October 31, 2003 the defendants filed motions to dismiss the consolidated, amended complaint. The court has~~ not ~~yet ruled on the~~ ~~motions. Although~~reflect weour ~~intend~~unprofitable ~~to vigorously defend the actions~~operations, weour ~~cannot~~stock ~~now~~price ~~predict~~might orrise ~~determine~~temporarily ~~the outcome~~and orthen ~~resolution~~fall ofagain. ~~these~~This ~~proceedings,~~scenario ormight tothen ~~estimate~~lead ~~the~~disappointed ~~amounts~~investors ~~of, or potential range of, loss with respect~~ to ~~these~~sue ~~proceedings. In addition, the timing of the final resolution of these proceedings is uncertain. The range of possible resolutions of these proceedings could include judgments against~~ us ~~or our former officers or settlements that could require~~ ~~substantial~~on ~~payments by us, which could have~~ a ~~material~~variety ~~adverse impact on our consolidated financial position, results~~ of ~~operations~~possible ~~and~~legal ~~cash flows~~theories. These proceedings also might require substantial attention of our management team and therefore, regardless of whether we win or lose the litigation, divert their time and attention from our business and operations.

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

The approval of 66 2/3% of our voting stock is required to approve specified transactions and to take specified stockholder actions, including the calling of special meetings of stockholders and the amendment of any of the anti-takeover provisions, including those providing for a classified board of directors, contained in our certificate of incorporation. Further, ~~pursuant~~we tohave ~~the~~a ~~terms~~“poison ofpill” ~~our~~ stockholder rights plan, wewhich ~~have distributed~~would ~~a dividend of one preferred stock purchase right for each outstanding share of common stock. These rights will~~ cause substantial dilution to the ownership of a person or group that attempts to acquire us on terms not approved by our Board of Directors and may have the effect of deterring hostile takeover attempts. The substantial aggregate equity positions of Mr. Kimberlin and his affiliates ~~and/or related parties~~ would make a hostile takeover ~~attempts~~attempt very unlikely. The practical effect of these provisions is to require a party seeking control of us to negotiate with our Board of Directors, which could delay or prevent a change in control. These provisions could limit the price that investors might be willing to pay in the future for our securities and make attempts by stockholders to ~~change~~ change management more difficult.

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

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

No further disclosure required.

Item 3. Defaults Upon Senior Securities

None

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

None.

Item 5. Other Information

None

WeItem ~~have a new management team~~6. ~~If we lose our key personnel or are unable to attract and retain additional personnel, we may be unable to successfully develop our technology~~Exhibits

Since 2001, we have replaced most of the key members of our executive management. There can be no assurances that we will not lose additional members of our executive management team or, if so, whether we would be able to hire adequate replacements.

Exhibit Number		Description of Document

10.208.1 (1)		Supplement to Prospectus Dated June 15, 2007, Press release announcing discontinuation of our HIV vaccine development program

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

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

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

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

~~Additionally,~~(1) Incorporated by ~~our~~reference ~~ability~~ to ~~conduct~~the ~~business,~~Exhibit ~~raise~~of ~~additional financing~~the ~~and~~same ~~commercialize~~number ~~REMUNEâ or~~filed ~~our other products may be hindered if we lose additional executive officers or experienced personnel~~ with ~~historical knowledge of~~ our ~~business, transactions,~~December ~~science and technology. Currently~~31, ~~our most experienced executive~~2006 ~~officer~~Form ~~has been with us for less than two years~~10-K.

In addition, recruiting and retaining qualified scientific personnel to assist in scaling up our manufacturing facilities and performing future research and development work will be critical to our success. It has been particularly difficult for us to retain personnel in light of the performance of our common stock and the incurrence of substantial net operating losses. We do not have sufficient personnel to fully execute our business plan, and there is currently a shortage of skilled executives and scientists, which is likely to continue. As a result, competition for experienced executives and scientists from numerous companies and academic and other research institutions may limit our ability to hire or retain new executives and other qualified personnel on acceptable terms. If we fail to attract and retain sufficient qualified personnel, we may not be able to develop or implement our technology.21

~~Product liability exposure may expose us to significant liability~~SIGNATURES

WePursuant ~~face an inherent business risk of exposure~~ to ~~product liability and other claims and lawsuits in~~ the ~~event~~requirements ~~that~~of ~~the~~Section ~~development~~13 or ~~use~~15(d) of ~~our~~ ~~technology~~the orSecurities ~~prospective~~Exchange ~~products~~Act isof ~~alleged to have resulted in adverse effects. We may not be able to avoid significant liability exposure. We may not have sufficient insurance coverage~~1934, ~~and~~the weregistrant ~~may~~has ~~not~~duly becaused ~~able~~this ~~to obtain sufficient~~report ~~coverage at a reasonable cost. An inability~~ to ~~obtain~~be ~~product~~signed ~~liability insurance~~on atits ~~acceptable~~behalf ~~cost~~by ~~or to otherwise protect against potential product liability claims could prevent or inhibit~~ the ~~commercialization~~undersigned ofthereunto ~~our products.~~duly ~~A product liability claim could hurt our financial performance~~authorized. ~~Even if we avoid liability exposure, significant costs could be incurred that could hurt our financial performance and condition.~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk

	ORCHESTRA THERAPEUTICS, INC.

Date: October 2, 2007	By:	/s/ Michael K. Green
		Michael K. Green,
		Chief Operating Officer & Chief Financial Officer

We invest our excess cash primarily in U.S. government securities and money market accounts. These instruments have maturities of two years or less when acquired. We do not utilize derivative financial instruments, derivative commodity instruments or other market risk sensitive instruments, positions or transactions. Furthermore, our debt is at fixed rates. Accordingly, we believe that, while the instruments we hold are subject to changes in the financial standing of the issuer of such securities, we are not subject to any material risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes that affect market risk sensitive instruments.22

~~Item 4. Controls and Procedures~~Exhibit Index

Dr. John N. Bonfiglio, our principal executive officer and Mr. Michael K. Green, our principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Securities Exchange Act Rule 13a-15(e)) have concluded that, as of June 30, 2004, our disclosure controls and procedures are effective.

Exhibit Number		Description of Document

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

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

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

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

2123

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

Since July 2001, several complaints have been filed in the United States District Court for the Southern District of California seeking an unspecified amount of damages on behalf of an alleged class of persons, who purchased shares of our common stock at various times between May 17, 1999 and July 6, 2001. The complaints have been consolidated into a single action under the name In re Immune Response Securities Litigation by order of the Court and a consolidated, amended complaint was filed in July 2003. The consolidated, amended complaint names us and certain of our former officers as defendants, as well as Agouron Pharmaceuticals, Inc. and one of its officers. The consolidated, amended complaint alleges that we, Agouron and/or such officers violated federal securities laws by misrepresenting and failing to disclose certain information about the results of clinical trials of REMUNEâ. There have been no material developments in the case since our last Form 10-Q.

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

On April 30, 2004, we raised $11,850,000 in gross proceeds in connection with a private placement of 6,771,429 shares of common stock at $1.75 per share to a number of institutional investors. The investors also received five-year warrants to purchase 2,031,429 shares of common stock at $2.75 per share. In connection with this private placement, we paid $1,081,500 of commission and fees and issued additional warrants to purchase 541,714 shares of common stock at $2.75 per share to Rodman & Renshaw, Inc., the placement agent. The warrants issued to the placement agent were accounted for as non-cash offering costs of $805,000, allocated to warrants outstanding. Proceeds from the financing will be used to fund our ongoing clinical activities and for general corporate purposes.

The issuances of these securities were completed in reliance upon Section 4(2) of the Securities Act of 1933.

Item 3. Defaults Upon Senior Securities

None

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

On June 15, 2004, the Company held its Annual Meeting of Stockholders. There were issued and outstanding on April 20, 2004, the record date, 41,312,960 shares of common stock and 688,146 shares of preferred Series A stock. There were present at the meeting in person or by proxy, stockholders of the Company who were the holders of 28,189,736 shares of common stock and 688,146 shares of Series A stock entitled to vote, constituting a quorum. The following actions were taken at the meeting:

1. The following Class III directors were elected:

Kevin B. Kimberlin, 27,765,198 common shares were voted in favor of the nominee, 424,538 common shares withheld their vote; and 688,146 preferred Series A shares were voted in favor.

Kevin L. Reilly, 27,736,839 common shares were voted in favor of the nominee, 452,897 common shares withheld their vote; and 688,146 preferred Series A shares were voted in favor.

2. An amendment to the Company’s 2003 Stock Plan to increase the authorized number of shares issuable under the plan by 3,542,680 (including incorporating 1,542,680 shares from the 1989 Stock Plan) was approved. Common shares voted for the proposal were 14,672,562, with 812,432 common shares voted against, 126,139 common shares abstained and 12,578,603 common shares were broker non-votes; and 688,146 preferred Series A shares were voted in favor.

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K

a) Exhibits

Exhibit Number		Description of Document
31.1		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification pursuant to Section 1350 of Chapter 63 of U.S.C. as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification pursuant to Section 1350 of Chapter 63 of U.S.C. as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

b) Reports on Form 8-K

On May 3, 2004, we filed a Form 8-K to report (under Items 5 and 7) an event of April 30, 2004: our issuance of a press release regarding the private sale of common stock and warrants for approximately $11,850,000 of gross proceeds.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	THE IMMUNE RESPONSE CORPORATION
Date: August 5, 2004	By:	/s/ Michael K. Green
		Michael K. Green,
		Chief Financial Officer

EXHIBITS TO FORM 10-Q

THE IMMUNE RESPONSE CORPORATION

Exhibit Index

Exhibit Number		Description of Document
31.1		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification pursuant to Section 1350 of Chapter 63 of U.S.C. as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification pursuant to Section 1350 of Chapter 63 of U.S.C. as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Filing Compare · ORCHESTRA THERAPEUTICS, INC.