Tamir Biotechnology, Inc. - FORM 10-K

Attached files

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EX-31.1 - EXHIBIT 31.1 - Tamir Biotechnology, Inc.	ex31-1.htm
EX-31.2 - EXHIBIT 31.2 - Tamir Biotechnology, Inc.	ex31-2.htm
EX-23.2 - EXHIBIT 23.2 - Tamir Biotechnology, Inc.	ex23-2.htm
EX-23.1 - EXHIBIT 23.1 - Tamir Biotechnology, Inc.	ex23-1.htm
EX-32.1 - EXHIBIT 32.1 - Tamir Biotechnology, Inc.	ex32-1.htm
EX-10.57 - EXHIBIT 10.57 - Tamir Biotechnology, Inc.	ex10-57.htm
EX-10.56 - EXHIBIT 10.56 - Tamir Biotechnology, Inc.	ex10-56.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________

FORM 10-K

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

For the fiscal year ended July 31, 2010

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

For the transition period from __________ to __________

0-11088

Commission file number

TAMIR BIOTECHNOLGY, INC.

(Exact name of registrant as specified in its charter)

Delaware	22-2369085
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

11 Deer Park Drive, Suite 204, Princeton Corporate Plaza, Monmouth Junction, NJ

(Address of principal executive offices)

08852

(Zip Code)

Registrant’s telephone number, including area code: (732) 652-4525

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated Filer o Accelerated Filer o Non-accelerated Filer o Smaller Reporting Company x

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates based upon the reported last sale price of the common stock on January 31, 2010, the end of the registrant’s second fiscal quarter, was approximately $7,519,000. As of October 25, 2010 there were 47,323,880 shares of common stock, par value $.001 per share, outstanding.

Documents Incorporated by Reference

None

TABLE OF CONTENTS

PART I			Page

	ITEM 1.	Business	5

	ITEM 2.	Properties	17

	ITEM 3.	Legal Proceedings	17

	ITEM 4.	Reserved	18

PART II

	ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18

	ITEM 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20

	ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	27

	ITEM 8.	Financial Statements and Supplementary Data	27

	ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	27

	ITEM 9A.	Controls and Procedures	28

	ITEM 9B.	Other Information	29

PART III

	ITEM 10.	Directors, Executive Officers and Corporate Governance	29

	ITEM 11.	Executive Compensation	34

	ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	46

	ITEM 13.	Certain Relationships and Related Transactions and Director Independence	48

	ITEM 14.	Principal Accounting Fees and Services	49

PART IV

	ITEM 15.	Exhibits and Financial Statement Schedules	50

The following trademarks appear in this annual report on Form 10-K: ONCONASE® is the registered trademark of Tamir Biotechnology, Inc., exclusively for its anti-cancer agent, Alimtaâ is the registered trademark of Eli Lilly, Zolinzaâ is the registered trademark of Merck & Co., Avastin® is the registered trademark of Genentech and Ganciclovir® is a registered trademark of Roche.

This annual report on Form 10-K includes forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We have based these forward looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. These forward looking statements are subject to a number of risks, uncertainties, and assumptions about us, including, among other things:

·	the failure to obtain regulatory approval of our lead product;

·	the failure to achieve positive results in clinical trials;

·	competitive factors;

·	available financial resources and the ability to secure adequate funding for development projects;

·	the ability to attract and retain qualified management;

·	relationships with pharmaceutical and biotechnology companies;

·	the ability to develop safe and efficacious drugs;

·	variability of royalty, license, and other revenue;

·	the failure to satisfy the performance obligations in our agreements;

·	the ability to enter into future collaborative agreements;

·	uncertainty regarding our patents and patent rights (including the risk that we may be forced to engage in costly litigation to protect such patent rights and the material harm to us if there were an unfavorable outcome of any such litigation);

·	governmental regulation;

·	technological change;

·	changes in industry practices;

·	the ability of our senior secured creditors to realize their security interest in all of our assets and to demand repayment of amounts owed to such creditors;

·	certain limitations on our ability to use a portion of the proceeds from our October 2009 private financing;

·	uncertainty regarding the outcome of legal proceeding including the risk that we may be forced to engage in lengthy, time-consuming and expensive litigation and the material adverse effect to us of any unfavorable outcome of any such litigation;

·	one-time events.

In addition, in this annual report on Form 10-K, the words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressions, as they relate to us, our business, or our management, are intended to identify forward looking statements. All of our forward looking statements are qualified in their entirety by reference to the factors discussed in this annual report under the heading ITEM 1A.—RISK FACTORS, and any documents incorporated by reference that describe risks and factors that could cause results to differ materially from those projected in these forward looking statements.

We caution you that the risk factors contained herein are not exhaustive. We operate in a continually changing business climate which can be expected to impact our forward looking statements, whether as a result of new information, future events, or otherwise, after the date of this annual report. In light of these risks and uncertainties, the forward looking events and circumstances discussed in this annual report may not occur and actual results could differ materially from those anticipated or implied in the forward looking statements. Accordingly, you should not rely on forward looking statements as a prediction of actual results.

All information in this annual report is as of October 29, 2010, unless otherwise noted and we undertake no obligation to update this information.

PART I

ITEM 1. BUSINESS.

BUSINESS OVERVIEW

Tamir Biotechnology, Inc. (formerly known as Alfacell Corporation) is a Delaware corporation incorporated on August 24, 1981. We are a biopharmaceutical company primarily engaged in the discovery and development of a new class of therapeutic drugs for the treatment of cancer and other pathological conditions. Our proprietary drug discovery and development program consists of novel therapeutics which are being developed from amphibian ribonucleases (RNases).

RNases are biologically active enzymes that split RNA molecules. RNases are enzymes which play important roles in nature, including the embryonic development of an organism and regulation of various cell functions. RNA is an essential bio-chemical cellular component necessary to support life. There are various types of RNA, all of which have specific functions in a living cell. They help control several essential biological activities, namely; regulation of cell proliferation, maturation, differentiation and cell death. Therefore, they are believed to be good candidates for the development of therapeutics for cancer and other life-threatening diseases, including HIV and autoimmune diseases, that require anti-proliferative and apoptotic, or programmed cell death, properties.

ONCONASE® (ranpirnase) is a novel amphibian ribonuclease, unique among the superfamily of pancreatic ribonuclease, isolated from the eggs of the Rana pipiens (the Northern Leopard frog). Ranpirnase is the smallest known protein belonging to the superfamily of pancreatic ribonuclease and has been shown, on a molecular level, to re-regulate the unregulated growth and proliferation of cancer cells. Unlike most anti-cancer agents that attack all cells regardless of phenotype (malignant versus normal) and cause severe toxicities, ONCONASE® is not an indiscriminate cytotoxic drug (cell killing agent). ONCONASE® primarily affects exponentially growing malignant cells, with activity controlled through unique and specific molecular mechanisms.

The molecular mechanisms which determine the apoptotic cell death induced by ranpirnase have been identified. tRNA (transfer RNA), rRNA (ribosomal RNA), mRNA (messenger RNA) and miRNA (micro RNA) are all different types of RNA with specific functions in a living cell. Ranpirnase preferentially degrades tRNA and targets miRNA, leaving rRNA and mRNA apparently undamaged. The RNA damage induced by ranpirnase appears to represent a “death signal”, or triggers a chain of molecular events culminating in the activation of proteolytic enzyme cascades which, in turn, induces disintegration of the cellular components and finally leads to cell death. It has been shown that there is a protein synthesis inhibition-independent component, which, together with the changes induced by the protein synthesis inhibition, results in tumor cell death.

ONCONASE®, our lead drug product candidate, has been evaluated in human clinical trials for the treatment of various forms of cancer. Our most recent clinical trial for ONCONASE® was a confirmatory Phase IIIb registration trial that was designed to evaluate the efficacy, safety and tolerability of the combination of ONCONASE® and doxorubicin as compared to doxorubicin alone in the treatment of patients with unresectable (inoperable) malignant mesothelioma (“UMM”), a rare and deadly form of lung cancer. Enrollment in the Phase IIIb trial was completed in September 2007. In May 2008, we reported that the preliminary statistical analysis of data from our ONCONASE® confirmatory Phase IIIb clinical trial did not meet statistical significance for the primary endpoint of survival in UMM. However, a statistically significant improvement in survival was seen in the treatment of UMM patients who failed one prior chemotherapy regimen, a predefined primary data set for this sub-group of patients in the trial, which represents a currently unmet medical need. The Food and Drug Administration or the FDA, recommended that an additional clinical trial be conducted in UMM patients that have failed one prior chemotherapy regimen, prior to filing a New Drug Application or NDA. At this time we intend to explore opportunities involving further clinical trials for ONCONASE® for the UMM indication as a second line therapy. Other indications are being pursued, including lung cancer and other solid tumors and currently, we expect to use the proceeds we received from the private financing we closed in October 2009 to initiate a Phase II clinical trial of ONCONASE® for the treatment of non-small cell lung cancer in patients who have reached maximum progression after receiving two cycles of Alimta in combination with carboplatinum. We anticipate enrolling the first patient for this trial in late 2010.

We believe that ONCONASE®, as well as another group of our amphibian RNases known as Amphinases, may also have applications in a variety of other areas in addition to those being investigated currently in our clinical development program. Amphinase is currently in the pre-clinical research and development stage.

We are a development stage company as defined in the Accounting Standards Codification (“ASC”) Topic “Development Stage Entities”. We are devoting substantially all of our present efforts to establishing a new business and developing new drug products. Our planned principal operations of marketing and/or licensing new drugs have not commenced and, accordingly, we have not derived any significant revenue from these operations.

MARKET OVERVIEW

According to the American Cancer Society (“ACS”) 2009 Cancer Facts and Figures, cancer is the second leading cause of death in the United States, accounting for one in every four deaths. The ACS 2009 Cancer Facts and Figures also estimates that doctors will diagnose over 1.5 million new cases of cancer in the United States in 2009. The National Institutes of Health or NIH estimate that the annual cost of cancer in 2008 was approximately $228.1 billion, including $93.2 billion in direct medical costs and $18.8 billion for morbidity costs, which includes the cost of lost productivity.

Cancer is characterized by uncontrolled cell division resulting in the growth of a mass of cells commonly known as a tumor. Cancerous tumors can arise in almost any tissue or organ and cancer cells, if not eradicated, spread, or metastasize, throughout the body. Cancer is believed to occur as a result of a number of factors, including hereditary and environmental factors.

For the most part, cancer treatment depends on the type of cancer and the stage of disease progression. Generally, staging is based on the size of the tumor and whether the cancer has metastasized or spread. Following diagnosis, solid tumors are typically surgically removed or the patient is given radiation therapy. Chemotherapy is the principal treatment for tumors that are likely to, or have, metastasized. Chemotherapy involves the administration of drugs which are designed to kill cancer cells, affect the growth of tumors, or reduce bloodflow to tumors, in an effort to reduce or eliminate cancerous tumors.

Because in most cases cancer is fatal, cancer specialists attempt to attack the cancer aggressively, with as many therapies as available and with as high a dose as the patient can tolerate. Since traditional chemotherapy attacks both normal and cancerous cells, treatment often tends to result in complicating side effects. Additionally, cells which have been exposed to several rounds of chemotherapy develop a resistance to the cancer drugs that are being administered. This is known as “multi-drug resistance.” The side effects of chemotherapy often limit the effectiveness of treatment. Cancers often recur and mortality rates remain high. Despite large sums of money spent on cancer research, current treatments are largely inadequate and improved anti-cancer agents are needed.

We believe that the products we currently have under development could be used to target a broad range of solid tumors. The table below shows the incidence and mortality estimated for the year 2009 for various types of solid tumor cancers that our products could be designed to treat:

Cancer Indication	New Cases	Deaths
Lung	219,440	159,390
Breast	194,280	40,610
Brain	22,070	12,920
Esophageal	16,470	14,530

Source: National Cancer Institute

Competition

There are many companies with resources significantly greater than ours that are currently marketing approved drug products that treat, and are developing new drug products that are designed to treat, several of the cancers and viruses that we may seek to treat with our products. The drug products currently marketed or developed by these companies may prove to be more effective that the products we seek to develop.

We are not aware, however, of any product currently being marketed that has the same mechanism of action as our proposed anti-tumor agent, ONCONASE®. Search of scientific literature reveals no published information that would indicate that others are currently employing this method or producing such an anti-tumor agent. However, we cannot assure you that others may not develop new treatments that are more effective than ONCONASE®.

BUSINESS STRATEGY

Our goal is to become a leading biopharmaceutical company focused on discovering and developing innovative anti-cancer and anti-viral treatments based on our proprietary RNase technology platform. Our strategy consists of the following key elements:

Focus on the growing cancer market

Cancer is the second leading cause of death in the United States, yet there remain unmet needs, and current treatments remain ineffective and inadequate for some populations. Given the life-threatening nature of cancer, the FDA has adopted procedures to accelerate the approval of cancer drugs. We intend to continue to use our expertise in the field of cancer research to target this significant market opportunity for cancer drug development.

In December 2009, we sent four of our compounds (ONCONASE®, P31, rAmphinase 2, natural Amphinase 3) to the National Cancer Institute (NCI) for their sixty cell line screening study. In February 2010, the results of the one dose screening study performed at NCI resulted in positive anti-cancer activity across several different cancer cell lines tested. Due to the one dose positive results, NCI recommended further screening of our compounds at five different dose levels. In June 2010, NCI reported the results of the sixty cell line screening at five different dose levels. These results were quite positive, and our compounds were recommended for further pre-clinical and clinical evaluation. We have initiated discussions with NCI and are currently seeking support for further pre-clinical and clinical development of our compounds.

Focus on the growing anti-viral market

In November 2009, we entered into an agreement with the National Institute of Allergy and Infectious Diseases (NIAID) to screen our compounds (ONCONASE®, P31, rAmphinase 2) for its potential anti-viral activity. In July 2010, scientists supported by NIAID reported positive in vitro results after testing our compounds for Dengue fever and Yellow fever. According to the scientists supported by NIAID, these results have rarely been seen before. Currently there is no therapy available to treat Dengue and Yellow fever post-infection. Further in vitro studies for Severe Acute Respiratory Syndrome (SARS) virus, and Cytomegalovirus (CMV), have also yielded positive results. In the case of CMV, a virus that is a member of the herpesvirus family, our compounds were compared to Ganciclovir, a drug marketed by Roche. Results confirmed that two of our compounds were between three and eleven times more potent than Ganciclovir in a head-to-head comparison. Moreover, our compounds did not display the level of toxicity inherent with any of the drugs approved by the FDA for CMV disease. None of the approved drugs for this indication are well tolerated by patients. In 2008, the market for CMV drugs was $600 million with Ganciclovir controlling over 90% of the market. Industry observers estimate that sales for CMV disease would top one billion dollars if there were a drug available that was both safe and effective. Based upon the results of the in vitro studies conducted to date, we anticipate starting in vivo studies sometime in the first quarter of 2011. Subject to the availability of funding, further testing on other viruses is currently on-going.

Develop our existing product portfolio

We currently have a portfolio of clinical and pre-clinical drug product candidates under development for potential use as anti-cancer, anti-viral, and other therapeutics. We intend to further develop these drug product candidates both by utilizing our internal resources and by continuing to collaborate with other companies and leading governmental and academic research institutions.

Commercialize pharmaceutical products focused on cancer in selected markets

Our current strategy is to partner with third parties to market our future products to oncologists, virologists, and other key specialists involved in the treatment of cancer and viruses. We may also elect to develop an appropriately-sized internal oncology sales and marketing capability in the United States. This group may function as a standalone operation or in a supportive, co-promotion capacity in collaboration with a partner.

RESEARCH AND DEVELOPMENT PROGRAM

Research and development expenses for the fiscal years ended July 31, 2010 and 2009 were approximately $517,000 and $3,268,000, respectively. Our research and development programs focus primarily on the clinical and pre-clinical research and development of therapeutics from our pipeline of amphibian RNases.

Clinical Development Program

ONCONASE® was most recently evaluated as a treatment for UMM in an international, centrally randomized, confirmatory Phase IIIb registration trial. Malignant mesothelioma is a rare cancer, primarily affecting the pleura (lining of the lungs), and is usually associated with asbestos exposure. The first Phase III trial of ONCONASE® in UMM was completed in 2000. The most recent confirmatory Phase IIIb registration trial was closed to patient accrual in September 2007.

The confirmatory Phase IIIb registration trial was a randomized and controlled clinical trial designed to evaluate the efficacy, safety and tolerability of the combination of ONCONASE® and doxorubicin as compared to doxorubicin alone, and powered to reach a statistically significant difference in overall survival between the ONCONASE® + doxorubicin treatment group and the doxorubicin treatment group at 316 evaluable events. Patients were stratified based on Cancer Adult Leukemia Group B (“CALGB”) Group (1 to 4) and histology and then assigned treatment using a centralized randomization plan. The primary endpoint of the trial was overall patient survival. The following data sets were analyzed for efficacy as per the statistical analysis plan for this clinical trial:

All patients randomized who received at least one dose of study therapy (evaluable patients),

Previously treated patients,

All patients randomized,

All patients who completed 6 cycles of therapy per protocol, and

All patients with identical inclusion criteria as used in the Alimta submission.

In addition, secondary endpoints that were analyzed in accordance with the Phase IIIb clinical trial statistical analysis plan included:

Tumor response rates,

Progression free survival,

Patient assessment of symptoms associated with malignant mesothelioma,

Investigator assessment of malignant mesothelioma symptoms,

Narcotic pain medication usage,

Lung function, and

Performance status.

In May 2008, we reported that the results of the preliminary statistical analysis of data from our ONCONASE® confirmatory Phase IIIb clinical trial did not meet statistical significance for the primary endpoint of survival in UMM. However, a statistically significant improvement in survival was seen in the treatment of UMM patients who failed one prior chemotherapy regimen, one of the predefined primary sub-group data sets for patients in the trial, which represents a currently unmet medical need. At the pre-NDA meeting with the FDA in January 2009, the FDA recommended that an additional clinical trial be conducted in UMM patients that have failed one prior chemotherapy regimen, prior to filing an NDA.

A Phase I/II program to evaluate a new dose and administration schedule of ONCONASE® was initiated in 2005 to attempt to take advantage of potentially increased efficacy with higher and more frequent doses of ONCONASE®. The Phase I portion of this program is complete and currently, we are in the process of initiating a Phase II clinical trial in non-small cell lung cancer (NSCLC) for patients who have reached maximum progression after receiving two cycles of Alimta in combination with carboplatinum regimens before the end of 2010.

Pre-Clinical Research Program

Our drug discovery and pre-clinical research programs form the basis for the development of specific recombinant RNases for chemically linking drugs and other compounds such as monoclonal antibodies, growth factors, etc., as well as developing gene fusion products with the goal of targeting various molecular functions. These programs provide for joint design and generation of new products with outside collaborators. Through these collaborations, we may own these new products along with, or we may grant an exclusive license to, the collaborating partner(s).

The multiple effects of biological activity of ONCONASE®, as well as several of our other compounds has led to research in areas of cancer biology. Two important areas associated with significant market opportunities are radiation therapy and control of tumor angiogenesis, or new tumor blood vessel formation. Many types of cancers undergo radiation therapy at early stages of the disease; however, success of such treatment is often limited. We believe any agent capable of enhancing tumor radiosensitivity has great market potential. Moreover, since the growth of essentially all types of cancer is dependent on new blood vessel formation, any agent that has anti-angiogenic activity, we believe, is most desirable.

In September 2010, we rented a lab space for the purpose of isolating and purifying both natural and recombinant amphinases. These compounds have never undergone full screening for their potential anti-cancer and anti-viral activities. Additionally, we intend to conduct further research for conjugation of our proteins with other molecules which are known to play an important role required for targeted therapies.

Ranpirnase Conjugates and Fusion Proteins

The concept of targeting potent toxins as effector molecules to kill cancer or other specifically targeted cells has been extensively evaluated over the last two decades. An immunotoxin is an antibody linked to a toxic molecule that is used to destroy specific cells. Several immunotoxins containing bacterial and plant toxins or other biotoxins, have been evaluated in human clinical trials. Efficacy has always been limited due to the high incidence of immunogenicity, or an immune response, and other intolerable toxicities, including death. Conjugation of ranpirnase to targeting ligands, or binding to other molecules, appears to eliminate this safety problem in pre-clinical studies.

A Cooperative Research and Development Agreement (CRADA) with the National Cancer Institute, or NCI, has produced RN321, a conjugate of ranpirnase with a monoclonal antibody, that has demonstrated activity against non-Hodgkin’s lymphoma in preclinical studies. The relative benefit of killing targeted tumor cells versus non-targeted healthy cells, or the therapeutic index, is greater than 200,000-fold with this conjugate. This CRADA has been concluded and data published.

We have also developed a variety of uniquely designed versions of ONCONASE® and amphinase conjugates. These compounds target the EGF receptors and neo-vascularization (tumor blood vessel formation) which have potential clinical application in a broad spectrum of solid tumors.

Novel Amphibian Ribonucleases (Amphinases)

We have also discovered another series of proteins, collectively named amphinases that may have therapeutic uses. These proteins are bioactive in that they have an effect on living cells and organisms and have both anti-cancer and anti-viral activity. All of the proteins characterized to date are RNases. Preclinical testing of the new candidates collectively called amphinases showed them to be similarly active to ranpirnase. Their chemical structure makes them ideal candidates for genetic engineering of designer products.

These compounds have undergone screening by the National Institute of Allergy and Infectious Diseases (NIAID) against various RNA viruses and by outside collaborators. One of these compounds, AC-03-636 has been determined to be active in yellow fever, Hepatitis C and Dengue fever. The same compound has been evaluated at Johns Hopkins University in a sustained time release formulation for the treatment of brain tumors, or gliomas.

Evaluation Of ONCONASE® As A Radiation Enhancer

The p53 gene is a tumor-suppressor gene, which means that if it malfunctions, tumors may be more likely to develop. Published preclinical studies have demonstrated that ONCONASE® causes an increase in both tumor blood flow and in median tumor oxygen partial pressure, causing tumor cells to become less resistant to radiation therapy regardless of the presence or absence of the functional p53 tumor-suppressor gene. In pre-clinical research at the University of Pennsylvania, ONCONASE®, when combined with radiation therapy, enhanced the radiation-sensitivity to treatment in NSCLC tumor cells without causing the common radiation-induced tissue damage to non-tumor cells. ONCONASE® inhibited sub-lethal damage repair, or SLDR and potentially lethal damage repair, or PLDR in these animal models. We believe these findings further expand the profile of ONCONASE® in vivo activities and its potential clinical utility and market potential.

ONCONASE® As a Resistance-Overcoming and Apoptosis-Enhancing Agent

The Fas (CD95) cell surface receptor (and its Fas ligand FasL) has been recognized as an important “death” receptor involved in the induction of the “extrinsic” pathway of apoptosis. The apoptotic pathways have been the preferred target for new drug development in cancer, autoimmune, and other therapeutic areas.

The Thoracic Surgery Branch of the NCI confirmed the synergy between ranpirnase and soluble Fas ligand, or sFasL in inducing significant apoptosis in sFasL-resistant Fas+tumor cells. These results provided rationale for using ONCONASE® as a potential treatment of FasL-resistant tumors and possibly other disorders such as the autoimmune lympho-proliferative syndrome (ALPS).

Evaluation Of ONCONASE® And Other Compounds As An Anti-Viral Agent

The ribonucleolytic activity was the basis for testing ONCONASE® as a potential anti-viral agent against HIV. The NIH has performed an independent in vitro screen of ONCONASE® against the HIV virus type 1. The results showed ONCONASE® to inhibit replication of HIV by up to 99.9% after a four-day incubation period at concentrations not toxic to uninfected cells. In vitro findings by the NIH revealed that ONCONASE® significantly inhibited production of HIV in several persistently infected human cell lines, preferentially breaking down viral RNA while not affecting normal cellular ribosomal RNA and messenger RNAs, which are essential to cell function.

Moreover, the NIAID also screened ONCONASE® for anti-HIV activity. ONCONASE® demonstrated highly significant anti-HIV activity in the monocyte/macrophage, or anti-viral, system. Ranpirnase may inhibit viral replication at several points during the life cycle of HIV, including its early phases. Ranpirnase may inhibit replication of all different HIV-1 subtypes. These properties of ranpirnase are particularly relevant in view of the extremely high and exponentially increasing rate of mutations of HIV that occur during infection, and which are primarily responsible for the development of resistance to several currently available anti-viral drugs. At present, over 50% of clinical isolates of HIV are resistant to both reverse transcriptase, mechanisms which combat viral replication, and protease inhibitors drugs, a class of anti-viral drugs. An additional 25%, while being sensitive to protease inhibitors, are resistant to reverse transcriptase inhibitor drugs.

In November 2009, we entered into an agreement with the National Institute of Allergy and Infectious Diseases (NIAID) to screen three of our compounds (ONCONASE®, P31, rAmphinase 2) for their potential anti-viral activity. In July 2010, scientists supported by NIAID reported positive in vitro results after testing our compounds for Dengue fever and Yellow fever. According to the scientists supported by NIAID, these results have rarely been seen before. Currently there is no therapy available to treat Dengue and Yellow fever post-infection. Further in vitro studies for Severe Acute Respiratory Syndrome (SARS) virus, and Cytomegalovirus (CMV), have also yielded remarkable results. In the case of CMV, a virus that is a member of the herpesvirus family, our compounds were compared to Ganciclovir, a drug marketed by Roche. Results confirmed that two of our compounds were between three and eleven times more potent than Ganciclovir in a head-to-head comparison. Moreover, our compounds did not display the level of toxicity inherent with any of the drugs approved by the FDA for CMV disease. None of the approved drugs for this indication are well tolerated by patients. In 2008, the market for CMV drugs was $600 million with Ganciclovir controlling over 90% of the market. Industry observers estimate that sales for CMV disease would top one billion dollars if there were a drug available that was both safe and effective. Due to these compelling results, we anticipate starting in vivo studies sometime in the first quarter of 2011. Further testing on other viruses is currently on-going.

COMMERCIAL RELATIONSHIPS

License Agreements

In January 2008, we entered into a U.S. License Agreement for ONCONASE® with Par Pharmaceutical, Inc. (“Par”). Under the terms of the License Agreement, Strativa Pharmaceuticals (“Strativa”), the proprietary products division of Par, received exclusive marketing, sales and distribution rights to ONCONASE® for the treatment of cancer in the United States and its territories. We retained all rights and obligations for product manufacturing, clinical development and obtaining regulatory approvals, as well as all rights for those non-U.S. jurisdictions in which we have not currently granted any such rights or obligations to third parties. We received a cash payment of $5 million upon the signing of the License Agreement and were entitled to additional development and sales milestone payments and double-digit royalties on net sales of ONCONASE®.

On September 8, 2009, we entered into a Termination and Mutual Release Agreement (the “Termination Agreement”) with Par pursuant to which our License Agreement and Supply Agreement with Par were terminated. The License Agreement was terminated and all rights under the license granted to Par revert back to us under the Termination Agreement. Under the Supply Agreement, we had agreed to supply all of Par’s requirements for ONCONASE®. Pursuant to the Termination Agreement, Par will be entitled to a royalty of 2% of net sales of ONCONASE® or any other ranpirnase product developed by us for use in the treatment of cancer in the United States and its territories commencing with the first sale of such product and terminating upon the later to occur of the 12th anniversary of the first sale and the date of expiration of the last valid claim of a pending application or issued patent owned or controlled by us with respect to such product.

Marketing and Distribution Agreements

Megapharm Ltd.

In May 2008, we entered into an exclusive marketing, sales and distribution agreement with Megapharm Ltd. for the commercialization of ONCONASE® in Israel. Under the agreement, we are eligible to receive 50% of net sales in the territory. We will be responsible for the manufacture and supply of ONCONASE® to Megapharm, while Megapharm will be responsible for all activities and costs related to regulatory filings and commercial activities in the territory.

BL&H Co. Ltd.

In January 2008, we entered into a marketing and distribution agreement with BL&H Co. Ltd. for the commercialization of ONCONASE® in Korea, Taiwan and Hong Kong. Under the agreement, we received a $100,000 up-front fee and are eligible to receive additional cash milestones and 50% of net sales in the territory. We will be responsible for the manufacture and supply of ONCONASE® to BL&H, while BL&H will be responsible for all activities and costs related to regulatory filings and commercial activities in the territory.

US Pharmacia

In July 2007, we entered into a Distribution and Marketing Agreement (the “Distribution Agreement”), with USP Pharma Spolka Z.O.O. (the “Distributor”), an affiliate of US Pharmacia, pursuant to which the Distributor was granted exclusive rights for the marketing, sales, and distribution of ONCONASE® for use in oncology in Poland, Belarus, Ukraine, Estonia, Latvia, and Lithuania (the “Territory”) for an initial term that ends upon the earlier of (i) 10 years from the first commercial sale in the Territory and (ii) the date all of the patents covering the product in the Territory expire. We received an up-front payment of $100,000 and will also be entitled to receive milestone payments based on the achievement of certain regulatory approvals and certain sales goals. In addition, we will receive a royalty on net sales as well as a transfer price for product sold by us to the Distributor. We will be responsible for making regulatory filings with and seeking marketing approval of ONCONASE® in the Territory and manufacturing and supplying ONCONASE® to the Distributor. The Distributor will be responsible for all commercial activities and related costs in the Territory.

In connection with the Distribution Agreement, we also entered into a Securities Purchase Agreement, with Unilab LP, an affiliate of US Pharmacia, pursuant to which we issued a total of 553,360 shares of restricted common stock for approximately $1.4 million, or $2.53 per share.

GENESIS Pharma S.A.

In December 2006, we entered into a Distribution and Marketing Agreement with GENESIS Pharma S.A. (“GENESIS”), pursuant to which GENESIS was granted exclusive rights for the marketing, sales, and distribution of ONCONASE® for use in oncology in Greece, Cyprus, Bulgaria, Romania, Slovenia, Croatia, Serbia, and the Former Yugoslavian Republic of Macedonia (the “Region”) for an initial term that ends upon the earlier of (i) 10 years from the first commercial sale in the Region and (ii) the date all of the patents covering the product in the Region expire. We will retain ownership of all intellectual property relating to ONCONASE® and responsibility for all regulatory filings with EMEA in the European Union (EU), with GENESIS providing assistance with regard to regulatory filings in the non-EU countries included in this agreement. We will also be responsible for manufacturing and supplying the product to GENESIS, which will distribute the product. GENESIS will have lead responsibility for all ONCONASE® commercialization activities and will manage all operational aspects of the marketing, sales and distribution of the product in the Region. We are entitled to receive milestone payments based on the achievement of certain regulatory approvals and certain sales goals. In addition, we will receive a royalty on net sales as well as a transfer price for product sold by us to GENESIS.

Manufacturing

In January 2008, we entered into a Purchase and Supply Agreement (the “Supply Agreement”) with Scientific Protein Laboratories LLC (“SPL”). Under the Supply Agreement, SPL will manufacture and be our exclusive supplier for the bulk drug substance used to make ONCONASE®. The term of the Supply Agreement shall be ten years and we have the right to terminate the Supply Agreement at any time without cause on two years prior notice to SPL.

Additionally, we contract with Ben Venue Laboratories Inc. (“Ben Venue”) for vial filling and with Bilcare Global Clinical Supplies, Americas (“Bilcare”), Aptuit, Inc. (“Aptuit”) and Catalent Pharma Solutions, Inc. (“Catalent”) for the labeling, storage and shipping of ONCONASE® for use in clinical trials. Other than these arrangements we do not have specific arrangements for the manufacture of ONCONASE®.

Products manufactured for use in clinical trials and for commercial sale must be manufactured in compliance with Current Good Manufacturing Practices (“CGMP”). SPL, Ben Venue, Aptuit and Catalent are all licensed or approved by the appropriate regulatory agencies and all work is performed in accordance with CGMP. For the foreseeable future, we intend to rely on these manufacturers and related service providers, or substitute vendors, if necessary, to manufacture our product. We believe, however, that there are substantial alternative providers for the services for which we contract. For those relationships where we have not entered into formal agreements, we utilize the services of these third party contractors solely on an as needed basis with prices and terms customary for companies in businesses that are similarly situated. In order to replace an existing manufacturer, we must amend our Investigational New Drug application to notify the appropriate regulatory agencies of the change. We are dependent upon our contract manufacturers to comply with CGMP and to meet our production requirements. It is possible that our contract manufacturers may not comply with CGMP or deliver sufficient quantities of our products on schedule, or that we may be unable to find suitable and cost effective alternative providers if necessary.

Raw Materials

The major active ingredient derived from leopard frog eggs is the protein ranpirnase. We believe we have sufficient egg inventory on hand to produce enough ONCONASE® for our future clinical trials and early commercialization. In addition, we have successfully produced ranpirnase in small proof-of-concept size batches using recombinant technology. However, this technology requires additional testing and FDA approval and it may be determined to not be more cost effective than current methods of production.

Patents and Proprietary Technology

We have sought to protect our technology by applying for, and obtaining, patents and trademark registrations. We have also relied on trade secrets and know-how to protect our proprietary technology. We continue to develop our portfolio of patents, trade secrets, and know how. We have obtained, and continue to apply for, patents concerning our RNase-based technology.

In addition, we have filed (and we intend to continue to file) foreign counterparts to certain U.S. patent applications. Generally, we apply for patent protection in the United States, Europe, Japan, and certain other foreign countries.

We own the following U.S. patents:

Patent No.	Issue Date	Subject Matter	Expiration **
5,529,775	June 1996	covers combinations of ONCONASE® with certain other pharmaceuticals	June 2013
5,728,805	Mar. 1998	covers a family of variants of ONCONASE®	June 2013
5,540,925	July 1996	covers combinations of ONCONASE® with certain other pharmaceuticals	July 2013
5,559,212	Sept. 1996	covers the amino acid sequence of ONCONASE®	Sept. 2013
5,595,734	Jan. 1997	covers combinations of ONCONASE® with certain other pharmaceuticals	Jan. 2014
6,649,392 B1*	Nov. 2003	covers a family of recombinant variants of ONCONASE®	Apr. 2016
6,649,393 B1*	Nov. 2003	covers nucleic acids encoding recombinant variants of ONCONASE® and methodology for producing such variants	Apr. 2016
6,290,951 B1	Sept. 2001	covers alteration of the cell cycle in vivo, particularly for inducing apoptosis of tumor cells	Aug. 2018
6,239,257 B1	May 2001	covers a family of variants of ONCONASE®	Dec. 2018
6,175,003 B1	Jan. 2001	covers the genes of ONCONASE® and a variant of ONCONASE®	Sept. 2019

Patent No.	Issue Date	Subject Matter	Expiration **
6,423,515 B1	July 2002	covers methodology for synthesizing gene sequences of ONCONASE® and a genetically engineered variant of ONCONASE®	Sept. 2019
7,229,824 B1***	June 2007	covers a vector containing DNA encoding a genetically engineered Amphinase	May 2024
7,556,952 B2	July 2009	covers a gene encoding a genetically engineered Amphinase	July 2023
7,556,951 B2	July 2009	covers a gene encoding a genetically engineered Amphinase , and a vector containing DNA encoding a genetically engineered Amphinase	July 2023
7,556,953 B2	July 2009	covers a gene encoding a genetically engineered Amphinase, and a vector containing DNA encoding a genetically engineered Amphinase	July 2023
7,442,535 B2	October 2008	covers a fusion protein containing a genetically engineered Amphinase	July 2023
7,585,655 B2	September 2009	covers a gene encoding a genetically engineered Amphinase, and a vector containing DNA encoding it	July 2023
7,442,536 B2	October 2008	covers genetically engineered Amphinases	July 2023
7,585,654 B2	September 2009	covers a vector containing DNA encoding a genetically engineered Amphinase, and a gene encoding a genetically engineered Amphinase	July 2023
7,473,542 B2	January 2009	Covers a fusion protein containing a genetically engineered Amphinase	July 2023
7,763,449 B2	July 2010	covers a vector containing DNA encoding a genetically engineered Amphinase, and a gene encoding a genetically engineered Amphinase	July 2023

*We own this patent jointly with the U.S. Government. We do not pay maintenance fees to keep this patent in force.

Tamir now uses the term “Amphinase” to describe a family of proteins. ONCONASE®, and proteins in the Amphinase family, belong to the same superfamily of Ribonucleases. Amphinase proteins were previously referred to as ‘variants” of ONCONASE®.

We own the following foreign patents in Europe (European patents are validated in selected European nations), Japan and Singapore:

Patent No.	Subject Matter	Expiration **
EP 0 500 589 JP 2972334	cover combinations of ONCONASEâ with certain other pharmaceuticals	Oct. 2010
EP 0 656 783 JP 3655628	covers combinations of ONCONASEâ with certain other pharmaceuticals	July 2013
EP 0 837 878 JP 3779999	covers a variant of ONCONASEâ and a method of producing it	June 2016
EP 1 141 004 JP 4516216	covers a family of variants of ONCONASE®	December 2019
SG 118886	covers Amphinases and methods of making them	May 2024

**Assumes timely payment of all applicable maintenance fees and annuities; excludes term extensions that do or may apply.

***Includes a term extension of 312 days under 35 U.S.C. §154(b).

We also have patent applications pending in the United States, Europe, Japan, and other foreign countries.

The scope of protection afforded by patents for biotechnological inventions can be uncertain, and such uncertainty may apply to our patents as well. The patent applications we have filed, or that we may file in the future, may not issue as patents. Our patents may not give us a competitive advantage, may be wholly or partially invalidated or held unenforceable, or may be held not to have been infringed by products that compete with our products. Patents owned by others may adversely affect our ability to do business. Furthermore, others may independently develop products that are similar to our products or that duplicate our products, and may design around the claims of our patents. Although we believe that our patents and patent applications are of substantial value to us, we cannot assure you that such patents and patent applications will be of commercial benefit to us, will adequately protect us from competing products or will not be challenged, declared invalid, or found not to have been infringed by competing products. We also rely on proprietary know-how and on trade secrets to develop and maintain our competitive position. Others may independently develop or obtain access to such know-how or trade secrets. Although our employees and consultants having access to proprietary information are required to sign agreements that require them to keep such information confidential, our employees or consultants may breach these agreements or these agreements may be held to be unenforceable.

Government Regulation

The manufacturing and marketing of pharmaceutical products in the United States require the approval of the FDA under the Federal Food, Drug and Cosmetic Act. Similar approvals by comparable regulatory agencies are required in most foreign countries. The FDA has established mandatory procedures and safety standards that apply to the clinical testing, manufacturing and marketing of pharmaceutical products in the United States. Obtaining FDA approval for a new therapeutic may take many years and involve substantial expenditures. State, local and other authorities also regulate pharmaceutical manufacturing facilities.

As the initial step in the FDA regulatory approval process, preclinical studies are conducted in laboratory dishes and animal models to assess the drug's efficacy and to identify potential safety problems. Moreover manufacturing processes and controls for the product are required. The manufacturing information along with the results of these studies is submitted to the FDA as a part of the Investigational New Drug Application, or IND, which is filed to obtain approval to begin human clinical testing. The human clinical testing program typically involves up to three phases. Data from human trials as well as other regulatory requirements such as chemistry, manufacturing and controls, pharmacology and toxicology sections, are submitted to the FDA in an NDA or Biologics License Application, or BLA. Preparing an NDA or BLA involves considerable data collection, verification and analysis. A similar process in accordance with EMEA regulations in Europe and with TGA regulations in Australia is required to gain marketing approval. Moreover, a commercial entity must be established and approved by the EMEA in a member state of the EU at least three months prior to filing the Marketing Authorization Application, or MAA.

We have not received United States or other marketing approval for any of our product candidates and may not receive any approvals. We may encounter difficulties or unanticipated costs in our effort to secure necessary governmental approvals, which could delay or preclude us from marketing our products.

With respect to patented products, delays imposed by the governmental approval process may materially reduce the period during which we may have the exclusive right to exploit them.

Environmental Matters

Our operations are subject to comprehensive regulation with respect to environmental, safety and similar matters by the United States Environmental Protection Agency and similar state and local agencies. Failure to comply with applicable laws, regulations and permits can result in injunctive actions, damages and civil and criminal penalties. If we expand or change our existing operations or propose any new operations, we may need to obtain additional or amend existing permits or authorizations. We spend time, effort and funds in operating our facilities to ensure compliance with environmental and other regulatory requirements.

Such efforts and expenditures are common throughout the biotechnology industry and generally should have no material adverse effect on our financial condition. The principal environmental regulatory requirements and matters known to us requiring or potentially requiring capital expenditures by us do not appear likely, individually or in the aggregate, to have a material adverse effect on our financial condition. We believe that we are in compliance with all current laws and regulations.

Employees

As of July 31, 2010, we had four full time employees, of whom three were engaged in clinical and pre-clinical research and development activities and one was engaged in administration and management. Two employees hold Ph.D. degrees. All of our employees have entered into confidentiality agreements with us. We consider relations with our employees to be good. None of our employees are covered by a collective bargaining agreement.

Available Information

Copies of our annual report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through our website (www.tamirbio.com) as soon as reasonably practicable after we electronically file the material with, or furnish it to, the Securities and Exchange Commission (the “SEC”). You may read and copy any document we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. Our SEC filings are also available to the public at the SEC’s website at http://www.sec.gov. Additionally, we have also adopted a Code of Business Conduct and Ethics applicable to all officers, directors, and employees, which is also available on our website.

ITEM 2. PROPERTIES.

In March 2007, we entered into a lease for 15,410 square feet in an industrial office building located in Somerset, New Jersey to replace our facility in Bloomfield, New Jersey as our principal office. The lease term commenced on July 3, 2007 and is scheduled to terminate on November 30, 2017. The average monthly rental obligation over the full term of the lease is approximately $25,000. In January 2010, we vacated this facility. In February 2010, the landlord, I&G Garden State, LLC ("I&G"), withdrew the remaining balance of the Company’s secured irrevocable letter of credit which was placed in March 2007 in the amount of approximately $81,000. On February 5, 2010, I&G commenced an action against us. The lawsuit seeks unspecified damages for an alleged breach of a lease agreement dated March 14, 2007 between us and I&G. On or before November 1, 2010, we entered into a Settlement Agreement and Mutual Release with I&G whereas I&G agreed to receive $200,000 in consideration of the full release in full and and complete settlement of all claims made by I&G.

On January 15, 2010, Mr. Muniz, as an individual, entered into a quarterly lease agreement with I&G for office space at the fourth floor of 300 Atrium Drive, Somerset, NJ, which space we will occupy as our new office. The lease expired on September 30, 2010 but was renewable for successive three-month periods upon thirty days prior notice and payment of $15,790.50 for the following three months’ rent. We did not renew this lease upon its expiration.

On September 28, 2010, we entered into an office lease agreement effective as of October 1, 2010, with Princeton Corporate Plaza, LLC for $3,794 per month including expenses. We leased 2,046 square feet of office and laboratory space in the building located at 11 Deer Park Drive, Suite 204, in the township of South Brunswick in the County of Middlesex, State of New Jersey. The new office replaced 300 Atrium Drive, Somerset, New Jersey 08873 as our principal executive offices. The lease term began on October 1, 2010, ending on September 30, 2011. We believe that this facility is sufficient for our needs in the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS.

On October 1, 2010, Robert Love, a former Chief Financial Officer and alleged shareholder of the Company, filed an amended complaint in Love v. Alfacell Corp. et al., Case No. 3:09-cv-05199-MLC-LHG (the “Amended Complaint”), against the Company and certain of its current and former directors in the United States District Court, District of New Jersey, asserting violations of federal and state securities laws, direct and derivative common law claims for fraud and breach of fiduciary duty, a direct claim for negligent misrepresentation and derivative claims for gross negligence and corporate waste in connection with the Company’s Phase IIIb clinical trial for ONCONASE®. The Amended Complaint alleges that the Company misled shareholders by issuing allegedly false projections of when the required number of patient deaths would occur in the Phase IIIb trial. The Amended Complaint seeks compensatory damages of no less than $350,000, punitive damages of no less than $20 million, and an accounting and constructive trust. The Company believes that the claims are meritless and intends to defend the case vigorously.

Premier Research Group filed and served a lawsuit against the Company in the Superior Court of New Jersey, Law Division, Essex County, on or about July 26, 2009, seeking the recovery of professional fees that arose from clinical trials purportedly performed in Europe by Premier Research Group as assignee of a contract between Tamir Biotechnology, Inc. and IMFORM GmbH dated October 27, 2005. An Answer with Separate Defenses and Counterclaim was filed on or about July 30, 2009. In August 2010, both parties entered into a Stipulation of Settlement Agreement (“Stipulation”) whereby the Company will make a payment to Premier in the amount of $100,000 which will be accepted as a payment in full if paid in accordance with the terms of the Stipulation. The settlement will be paid every 60 days in four equal installments commencing on or before August 6, 2010, ending on or before February 7, 2011.

I & G Garden State, LLC (“I&G”) filed and served a complaint against the Company in the Superior Court of New Jersey Law Division, Special Civil Part Landlord-Tenant Section, Somerset County, on or about October 30, 2009, for non-payment of rent and failure to maintain security deposit. The complaint seeks to have the Company vacate the property. On November 13, 2009, the Company and I&G mutually agreed that the Company would vacate the property on or before December 31, 2009. In January 2010, the Company vacated the facility as per mutual agreement. In February 2010, I&G withdrew the remaining balance of the Company’s secured irrevocable letter of credit which was placed in March 2007 in the amount of approximately $81,000. On February 5, 2010, I&G commenced an action against the Company. The lawsuit seeks unspecified damages for an alleged breach of a lease agreement dated March 14, 2007 between the Company and I & G. On or before November 1, 2010, the Company and I&G entered into a Settlement Agreement and Mutual Release whereas I&G agreed to receive $200,000 in consideration of the release in full and complete settlement of all claims made by I&G.

ITEM 4. RESERVED.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Our common stock has been quoted on the Pink Sheets since our delisting from the Nasdaq Capital Market, or Nasdaq, on January 6, 2009 for failure to comply with the $35 million minimum market value requirement under Marketplace Rule 4310(c)(3)(B) or the $1 per share minimum bid price requirement under Marketplace Rule 4310(c)(4). In addition, we also did not meet the $2.5 million minimum stockholders’ equity requirement under Marketplace Rule 4310(c)(3)(A) or the requirement for a minimum net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years under Marketplace Rule 4310(c)(3)(C). Our common stock remains thinly traded at times and you may be unable to sell our common stock during times when the trading market is limited. As of October 25, 2010, there were approximately 968 stockholders of record of our common stock.

Prior to January 6, 2009, our common stock was listed on Nasdaq and had traded under the symbol "ACEL" since September 9, 2004. Before September 9, 2004, our common stock was traded on the OTC Bulletin Board (OTCBB).

The following table sets forth the range of high and low sale prices of our common stock for the two fiscal years ended July 31, 2010 and 2009. The prices were obtained from Pink Sheets and Nasdaq, and are believed to be representative of inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions.

	High		Low
Year Ended July 31, 2010:
First Quarter	$	0.35	$	0.18
Second Quarter		0.30		0.14
Third Quarter		0.35		0.11
Fourth Quarter		0.30		0.13

Year Ended July 31, 2009:
First Quarter		0.85	$	0.40
Second Quarter		0.54		0.08
Third Quarter		0.20		0.06
Fourth Quarter		0.52		0.11

Dividends

We have not paid dividends on our common stock since inception, and we do not plan to pay dividends in the foreseeable future. Any earnings we may realize will be retained to finance our growth. Additionally, pursuant to the terms of the Senior Secured Notes issued in connection with our October 2009 private financing, we are not permitted to declare or pay any cash dividends or distributions on its outstanding capital stock for so long as the Senior Secured Notes are outstanding.

Equity Compensation Plan Information

The information called for by Item 5(a) relating to compensation plan information is incorporated herein by reference to Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stock Matters of this annual report on Form 10-K.

Recent Sales of Unregistered Securities

None

Issuer Purchases of Equity Securities

There were no repurchases of our equity securities made by us or on our behalf, or by any “affiliated purchasers” during the quarter ended July 31, 2010.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our financial condition and results of operations should be read together with our consolidated financial statements and notes to those statements included in Item 8 of Part II of this annual report on Form 10-K.

Overview

We are a biopharmaceutical company engaged in the research, development, and commercialization of drugs for life threatening-diseases, such as malignant mesothelioma and other cancers. Our corporate strategy is to become a leader in the discovery, development, and commercialization of novel ribonuclease (RNase) therapeutics for cancer and other life-threatening diseases.

Since our inception in 1981, we have devoted the vast majority of our resources to the research and development of ONCONASE®, our lead drug candidate, as well as other related drug candidates. In recent years we have focused our resources towards the completion of the clinical program for ONCONASE® in patients suffering from unresectable malignant mesothelioma, or UMM.

During our fiscal year ended July 31, 2010, our efforts were primarily focused on the completion of our confirmatory Phase IIIb clinical trial for UMM and preparation of the remaining components of our NDA. As we previously reported, the results of the preliminary statistical analysis of the data from the confirmatory Phase IIIb clinical trial for ONCONASE® in patients suffering from UMM did not meet statistical significance for the primary endpoint of survival in UMM. However, a statistically significant improvement in survival was seen in the treatment of UMM patients who failed one prior chemotherapy regimen, a currently unmet medical need and one of the predefined primary sub-group data sets for patients in the trial. At the pre-NDA meeting with the FDA in January 2009, the FDA recommended that an additional clinical trial be conducted in UMM patients that have failed one prior chemotherapy regimen, prior to filing an NDA. At this time, we intend to explore opportunities involving further clinical trials for ONCONASE® for the UMM indication as a second line therapy. Other indications are being pursued including lung cancer and other solid tumors and currently we expect to use the proceeds we received from the private financing we closed in October 2009 to initiate a Phase II clinical trial of ONCONASE® for the treatment of non-small cell lung cancer in patients who have reached maximum progression after receiving two cycles of Alimta in combination with carboplatinum. We anticipate accruing the first patient for this trial in late 2010.

During the fiscal year ended July 31, 2010, we completed a sale of 65 Units in a private financing to certain investors pursuant to a securities purchase agreement (the “Securities Purchase Agreement”) entered into on October 19, 2009. Each Unit consists of (i) $50,000 principal amount of Senior Secured Notes convertible into shares of the Company’s common stock at a price of $0.15 per share, (ii) Series A Warrants to purchase in the aggregate that number of shares of common stock initially issuable upon conversion of the aggregate amount of the Senior Secured Notes issued as part of the Unit, at an exercise price of $0.15 per share with a three year term and (iii) Series B Warrants to purchase in the aggregate that number of shares of common stock initially issuable upon conversion of the aggregate amount of the Senior Secured Notes issued as part of the Unit, at an exercise price of $0.25 per share with a five year term. The closing of the private financing occurred on October 19, 2009, and we received an aggregate of $3,250,000 in gross proceeds. (See Notes to the Financial Statements – Note 6)

During the fiscal year ended July 31, 2010, at the annual stockholders’ meeting, our stockholders approved an amendment to our Certificate of Incorporation, as amended, changing the name of the company from Alfacell Corporation to Tamir Biotechnology, Inc. and increasing our authorized common stock from 100,000,000 to 250,000,000 shares.

Almost all of the $73.1 million of research and development expenses we have incurred since our inception has gone toward the development of ONCONASE® and related drug candidates. For the fiscal years 2010 and 2009, our research and development expenses were approximately $0.5 million and $3.3 million, respectively, almost all of which were used for the development of ONCONASE® and related drug candidates.

We have incurred losses since inception and we have not received FDA approval of any of our drug candidates. We expect to continue to incur losses for the foreseeable future as we continue our efforts to receive marketing approval for our drug candidates, which includes the sponsorship of human clinical trials. Until we are able to consistently generate revenue through the sale of drug or non-drug products, we anticipate that we will be required to fund the development of our pre-clinical compounds and drug product candidates primarily by other means, including, but not limited to, licensing the development or marketing rights to some of our drug candidates to third parties, collaborating with third parties to develop our drug candidates, or selling Company issued securities.

We fund the research and development of our products primarily from cash receipts resulting from the sale of our equity securities and convertible debentures in registered offerings and private placements. Additionally, we have raised capital through other debt financings, the sale of our tax benefit and research and development credits, interest income and financing received from Kuslima Shogen, our former Chief Executive Officer. During the fiscal year ended July 31, 2010, we received gross proceeds of $3.25 million from a private financing and $646,649 from the sale of our tax benefit. These proceeds will be used to continue our operations, explore strategic alternatives and initiate a Phase II clinical study for non-small cell lung cancer in patients who have reached maximum progression on their current chemotherapy regimens. We have incurred losses since inception and, to date, we have generated only small amounts of capital from commercial agreements for ONCONASE®.

Results of Operations

Fiscal Year Ended July 31, 2010, as compared to Fiscal Year Ended July 31, 2009

Research and development expense for fiscal year 2010 was $0.5 million compared to $3.3 million for fiscal year 2009, a decrease of approximately $2.8 million, or 84%. The decrease was primarily related to decreased expenses of approximately $1.9 million related to costs incurred in fiscal year 2009 for the ONCONASE® rolling NDA submission for our Phase IIIb clinical trial for malignant mesothelioma; and decreased compensation expense of approximately $0.9 million from reduction in force and decreased share-based compensation.

General and administrative expense for fiscal year 2010 was approximately $1.7 million compared to approximately $2.4 million for fiscal year 2009, a decrease of approximately $0.7 million, or 34%. This decrease was primarily related to decreased compensation expense of approximately $0.4 million from decreased share-based compensation expense, retirement of Kuslima Shogen, our former chief executive officer and resignation of Lawrence Kenyon, our former chief financial officer. Public relations-related costs and other general office expenses also decreased by approximately $0.3 million due to our reduced operations in fiscal year 2010.

Investment income for fiscal year 2010 was approximately $1,000 compared to $26,000 for fiscal year 2009, a decrease of $25,000. The decrease was due to lower balances of cash and cash equivalents on hand during the fiscal year 2010 as compared to the same period in 2009.

Interest expense for the fiscal year ended July 31, 2010 increased by approximately $12.6 million compared to the same period last year. This increase was directly due to the beneficial conversion feature of the convertible debenture and warrants we issued in October 2009, the original recognition of and the change in valuation of the derivative liability.

We have incurred net losses during each year since our inception. The net loss for fiscal year 2010 was approximately $14.2 million as compared to $4.5 million in fiscal year 2009. The cumulative loss from the date of inception, August 24, 1981 to July 31, 2010, amounted to $123 million. Such losses are attributable to the fact that we are still in the development stage and, accordingly, have not derived sufficient revenues from operations to offset the development stage expenses.

Liquidity and Capital Resources

We have reported cumulative net losses of approximately $31 million for the three most recent fiscal years ended July 31, 2010. The net losses from date of inception, August 24, 1981 to July 31, 2010, amounts to approximately $123 million. As of July 31, 2010, we have a working capital deficit of approximately $15 million.

We have financed our operations since inception primarily through the sale of our equity securities and convertible debentures in registered offerings and private placements. Additionally, we have raised capital through other debt financings, the sale of our state tax benefit and research products, and investment income and financing received from Kuslima Shogen, our former Chief Executive Officer. As of July 31, 2010, we had approximately $0.3 million in cash and cash equivalents. We currently believe that our cash reserves including the $1.2 million restricted cash intended for future clinical trials can support our activities through April 2011, based upon our reduced operations.

The primary use of our cash will be to fund our clinical and pre-clinical research and development efforts for ONCONASEâ. The most significant expenses will be incurred for the Phase II clinical study for non-small cell lung cancer. Additional expenses are also expected to be incurred as we continue to move our drug product candidates towards the next phase of clinical and pre-clinical development. We will need to obtain additional financing in order to continue our operations. Given current market conditions, it may be very difficult, if not impossible, to obtain such financing. In order to continue our operations we will need to pursue strategic alternatives for the further development of ONCONASE®.

During the fiscal year ended July 31, 2010, we completed a sale of 65 Units in a private financing to certain investors pursuant to a securities purchase agreement (the “Securities Purchase Agreement”) entered into on October 19, 2009. Each Unit consists of (i) $50,000 principal amount of Senior Secured Notes convertible into shares of the Company’s common stock at a price of $0.15 per share, (ii) Series A Warrants to purchase in the aggregate that number of shares of common stock initially issuable upon conversion of the aggregate amount of the Senior Secured Notes issued as part of the Unit, at an exercise price of $0.15 per share with a three year term and (iii) Series B Warrants to purchase in the aggregate that number of shares of common stock initially issuable upon conversion of the aggregate amount of the Senior Secured Notes issued as part of the Unit, at an exercise price of $0.25 per share with a five year term. The closing of the private financing occurred on October 19, 2009, and the Company received an aggregate of $3,250,000 in gross proceeds.

Pursuant to the terms of the Securities Purchase Agreement, certain investors party thereto are permitted to appoint a designee to the Board of Directors (the “Board”) within a reasonable period of time following the closing of the private financing. In addition, as a condition to closing the private financing, each member of the Board other than David Sidransky, Chairman of the Board, and Charles Muniz, agreed to resign from the Board upon the request of Dr. Sidransky made at any time following the closing of the private financing and prior to December 31, 2009. Donald Conklin and Kuslima Shogen resigned from the Board during the fiscal year ended July 31, 2010. Stephen Carter did not seek reelection at our annual meeting of the stockholders, which occurred on April 27, 2010.

In connection with the private financing, we entered into the Investor Rights Agreement with each of the investors. The Investor Rights Agreement provides that we will file a “resale” registration statement covering all of the shares issuable upon conversion of the Senior Secured Notes and the shares issuable upon exercise of the Warrants, up to the maximum number of shares able to be registered pursuant to applicable SEC regulations, by May 1, 2010, which date was extended from February 16, 2010 pursuant to an amendment to the Investor Rights Agreement we entered into with the investors on February 26, 2010 and reported on Form 8-K we filed on March 4, 2010. In accordance with the Investor Rights Agreement, on April 30, 2010, the Company filed with the SEC a “resale” registration statement on Form S-1. If any of the securities issuable upon conversion or exercise, respectively, of the Senior Secured Notes and Warrants are unable to be included on the initial “resale” registration statement, we agreed to file subsequent registration statements until all the securities have been registered. Under the terms of the Investor Rights Agreement, we are obligated to maintain the effectiveness of the “resale” registration statement until all securities therein are sold or otherwise may be sold by non-affiliates pursuant to Rule 144 of the Securities Act, without restrictions. A cash penalty of 1% per month will be triggered in the event we fail to file or obtain the effectiveness of a registration statement prior to the deadlines set forth in the Investor Rights Agreement, which deadlines were extended by the amendment to the Investor Rights Agreement, or if we cease to be current in filing our periodic reports with the SEC. The aggregate penalty accrued with respect to each investor may not exceed 6% of the original purchase price paid by that investor, or 12% if the only effectiveness failure is our failure to be current in our periodic reports with the SEC.

On July 31, 2010, we entered into a second amendment to the Investor Rights Agreement with the investors, pursuant to which the investors waived their right to receive penalties in respect of all matters occurring prior to the date of the second amendment, which included our failure to obtain the effectiveness of a registration statement within the deadlines set forth in the Investor Rights Agreement. In addition, the second amendment postponed the investors right to require the company to file a "resale" registration statement covering all of the shares issuable upon conversion of the Senior Secured Notes and the shares issuable upon exercise of the Warrants until after our next financing which yields gross proceeds to us of at least $3,250,000. In the event of such a financing, and following a written demand made by the holders of the majority of the registrable securities, we must file, within 90 days of our receipt of the demand notice, either a new "resale" registration statement registered the shares or amend the registration statement we filed on April 30, 2010. A copy of the second amendment is filed as Exhibit 10.55 to this annual report on Form 10-K.

In connection with the private placement, we also entered into an escrow agreement whereby certain investors placed $1,600,000 of the proceeds paid for their Units in an escrow account pursuant to the terms of the Securities Purchase Agreement. Such amounts can be disbursed from the escrow account only to satisfy obligations we owed to clinical research organizations, hospitals, doctors and other vendors and service providers associated with the clinical trials which we intend to conduct for our ONCONASEâ product. The escrow agreement shall terminate on the earlier of the date that all funds have been disbursed from the escrow account or April 19, 2011, at which time any remaining funds will be disbursed to us.

In connection with our private financing completed in October 2009, we issued $3.25 million of Senior Secured Notes convertible into shares of our common stock at a price of $0.15 per share. The Senior Secured Notes mature on the earlier of (i) October 19, 2012; (ii) the closing of a public or private offering of our debt or equity securities subsequent to the date of issuance resulting in gross proceeds of at least $8,125,000 other than a transaction involving a stockholder who holds 5% or more of our outstanding capital stock as of the date of issuance; or (iii) on the demand of the holder of the Senior Secured Note upon our consummation of a merger, sale of substantially all of our assets, or the acquisition by any entity, person or group of 50% or more of our voting power. Interest accrues on the principal amount outstanding under the Senior Secured Notes at 5% per annum, and is due upon maturity. Upon an event of default under the Notes, the interest rate shall increase to 7%. The Senior Secured Notes are not prepayable for a period of one year following the issuance thereof. The Senior Secured Notes are secured by a senior security interest and lien on all of our right, title and interest to all of the assets owned by us as of the closing of the private financing or thereafter acquired pursuant to the terms of a security agreement we entered into with each of the investors.

For so long as the Senior Secured Notes are outstanding, we are not permitted, among other restrictions, to liquidate or dissolve, consolidate with or merge into or with any other corporation, to sell our assets, other than in the ordinary course of business, redeem or repurchase any outstanding equity or debt securities, create or incur any indebtedness which is not subordinate to the Senior Secured Notes or create liens on our assets with certain exceptions.

Our audited financial statements for the fiscal year ended July 31, 2010, were prepared under the assumption that we will continue our operations as a going concern. We were incorporated in 1981 and have a history of losses and negative cash flows from operating activities. As a result, our independent registered public accounting firm in their audit report has expressed substantial doubt about our ability to continue as a going concern. Continued operations are dependent on our ability to raise additional capital from various sources such as those described above. Such capital raising opportunities may not be available or may not be available on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty.

We may seek to satisfy future funding requirements through public or private offerings of securities or with collaborative or other arrangements with corporate partners. Additional financing or strategic transactions may not be available when needed or on terms acceptable to us, if at all. If adequate financing is not available, we may be required to delay, scale back, or eliminate certain of our research and development programs, relinquish rights to certain of our technologies, drugs or products, or license third parties to commercialize products or technologies that we would otherwise seek to develop ourselves.

Off-Balance Sheet Arrangements

We have no debt, no exposure to off-balance sheet arrangements, no special purpose entities, nor activities that include non-exchange-traded contracts accounted for at fair value as of July 31, 2010.

Critical Accounting Policies

In December 2001, the SEC requested that all registrants discuss their most "critical accounting policies" in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations. The SEC indicated that a "critical accounting policy" is one which is both important to the portrayal of the company's financial condition and results and requires management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The accounting policies set forth below have been considered critical because changes to certain judgments, estimates and assumptions could significantly affect our financial statements.

Use of Estimates

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

Revenue Recognition

We recognize revenue in accordance with Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition,” issued by the staff of the SEC. Under SAB No. 104, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred and/or services have been rendered, the sales price is fixed or determinable, and collectibility is reasonably assured.

We enter into marketing and distribution agreements, which contain multiple deliverables. We evaluate whether these deliverables constitute separate units of accounting to which total arrangement consideration is allocated. A deliverable qualifies as a separate unit of accounting when the item delivered to the customer has standalone value, there is objective and reliable evidence of fair value of items that have not been delivered to the customer, and, if there is a general right of return for the items delivered to the customer, delivery or performance of the undelivered items is considered probable and substantially in the control of the company. Arrangement consideration is allocated to units of accounting on a relative fair-value basis or the residual method if the company is unable to determine the fair value of all deliverables in the arrangement. Consideration allocated to a unit of accounting is limited to the amount that is not contingent upon future performance by the company. Upon determination of separate units of accounting and allocated consideration, the general criteria for revenue recognition are applied to each unit of accounting.

Research and Development

Research and development costs are expensed as incurred. These costs include, among other things, consulting fees and costs related to the conduct of human clinical trials. We also allocate indirect costs, consisting primarily of operational costs for administering research and development activities, to research and development expenses.

Share-Based Compensation

In December 2004, the Financial Accounting Standards Board (“FASB”) issued amended guidance on accounting for “Stock Compensation”. The amended guidance requires all share-based payments, including stock option grants to employees, to be recognized as an operating expense in the statement of operations. The expense is recognized over the requisite service period based on fair values measured on the date of grant. We adopted the amended guidance on Stock Compensation effective August 1, 2005 using the modified prospective method and, accordingly, prior period amounts have not been restated. Under the modified prospective method, the fair value of all new stock options issued after July 31, 2005 and the unamortized fair value of unvested outstanding stock options at August 1, 2005 are recognized as expense as services are rendered.

Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Recoveries from other parties are recorded when realized.

Recently Issued Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board issued the FASB Accounting Standards Codification (the “Codification”). Effective July 1, 2009, the Codification became the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP), superseding existing rules and related literature issued by FASB, the American Institute of Certified Public Accountants (“AICPA”) and Emerging Issues Task Force (“EITF”). The Codification also eliminates the previous U.S. GAAP hierarchy and establishes one level of authoritative GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. All other literature is considered non-authoritative. The Codification, which has not changed GAAP, was effective for interim and annual periods ended after September 15, 2009. We adopted the Codification for the quarter ended October 31, 2009. Other than the manner in which accounting guidance is referenced, the adoption of the Codification had no impact on our financial statements.

In December 2007, FASB issued new accounting guidance related to the accounting for business combinations and related disclosures. This guidance establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree, and any goodwill acquired in a business combination. It also establishes disclosure requirements to enable the evaluation of the nature and financial effects of a business combination. The guidance is to be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We adopted this guidance, effective August 1, 2009, and it did not have any effect on our financial statements.

In February 2008, FASB issued amended guidance to delay the fair value measurement and expanded disclosures about fair value measurements for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until fiscal years beginning after November 15, 2008. Effective August 1, 2009, we adopted the guidance related to fair value measurements for nonfinancial assets and nonfinancial liabilities and the adoption of such guidance did not have any effect on our financial statements.

In June 2008, FASB issued guidance for determining whether an equity-linked financial instrument (or embedded feature) is indexed to an entity’s own stock, which would qualify as a scope exception to derivative classification under ASC Topic, “Derivatives and Hedging”. The guidance is effective for fiscal years beginning after December 15, 2008 and early adoption for an existing instrument is not permitted. The Company adopted this guidance, effective August 1, 2009. The adoption had no impact on our previously accounted for equity-linked financial instruments that were considered to be indexed to its own equity. Refer to Note 6 for the result of the adoption on the equity-linked instruments included within the Securities Purchase Agreement entered into on October 19, 2009.

In August 2009, FASB issued amended guidance on the measurement of liabilities at fair value. The guidance provides clarification that in circumstances in which a quoted market price in an active market for an identical liability is not available, the fair value of a liability be measured using one or more of the valuation techniques that uses the quoted price of an identical liability when traded as an asset or, if unavailable, quoted prices for similar liabilities or similar assets when traded as assets. If none of this information is available, an entity should use a valuation technique in accordance with existing fair valuation principles. This guidance is effective for the first reporting period (including interim periods) after issuance. We adopted this guidance in the quarter ended October 31, 2009. The adoption had no impact on our financial statements.

In October 2009, FASB issued amended guidance for separating consideration in multiple-deliverable arrangements. It eliminates the requirement under previous guidance that all undelivered elements have vendor-specific objective evidence (VSOE) or third-party evidence (TPE) of fair value before recognizing a portion of revenue related to the delivered items, and establishes that revenue be allocated to each element based on its relative selling price, as determined by VSOE, TPE, or the entity’s estimated selling price if neither of the aforementioned is available. Additionally, the amended guidance eliminates the residual method of allocation and expands required disclosures about multiple-element revenue arrangements. It will be effective prospectively for revenue arrangements entered into beginning January 1, 2011, with early adoption permitted. We are currently evaluating the impact that the adoption of this guidance will have, if any, on our financial statements.

In January 2010, the FASB issued a new guidance, “Improving Disclosures about Fair Value Measurements” (ASU 2010-06). This provision amends previous provisions that require reporting entities to make new disclosures about recurring and nonrecurring fair value measurements including the amounts of and reasons for significant transfers into and out of Level 1 and Level 2 fair value measurements and separate disclosure of purchases, sales, issuances, and settlements in the reconciliation of Level 3 fair value measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2010. The adoption of this guidance did not have a material impact on our results of operations or financial condition.

In April 2010, the FASB issued a new guidance “Revenue Recognition – Milestone Method”. This provision provides guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. A vendor can recognize consideration that is contingent upon achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. The following criteria must be met for a milestone to be considered substantive. The consideration earned by achieving the milestone should 1) be commensurate with either the level of effort required to achieve the milestone or the enhancement of the value of the item delivered as a result of a specific outcome resulting from the vendor’s performance to achieve the milestone; 2) related solely to past performance; 3) be reasonable relative to all deliverables and payment terms in the arrangement. No bifurcation of an individual milestone is allowed and there can be more than one milestone in an arrangement. Accordingly, an arrangement may contain both substantive and non substantive milestones. This guidance is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. The adoption of this guidance does not have a material impact on our financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As of July 31, 2010, we were exposed to market risks, primarily changes in U.S. interest rates. As of July 31, 2010, we held total cash and cash equivalents of approximately $0.3 million. All cash equivalents have a maturity less than 90 days. Declines in interest rates over time would reduce our interest income from our investments.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The response to this Item is submitted as a separate section of this report commencing on Page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

There have been no changes in or disagreements with accountants on accounting or financial disclosures in the past two fiscal years.

On December 1, 1993, certain stockholders of Armus Harrison & Co., or AHC, terminated their association with AHC, or the AHC termination, and AHC ceased performing accounting and auditing services, except for limited accounting services to be performed on our behalf. In June 1996, AHC dissolved and ceased all operations. The report of J.H. Cohn LLP with respect to our financial statements from inception to July 31, 2008 is based on the report of KPMG LLP from August 1, 1992 to July 31, 2002 and of AHC for the period from inception to July 31, 1992, although AHC has not consented to the use of such report herein and will not be available to perform any subsequent review procedures with respect to such report. Accordingly, investors will be barred from asserting claims against AHC under Section 18 of the Exchange Act on the basis of the use of such report in any annual report on Form 10-K into which such report is incorporated by reference. In addition, in the event any persons seek to assert a claim against AHC for false or misleading financial statements and disclosures in documents previously filed by us, such claim will be adversely affected and possibly barred. Furthermore, as a result of the lack of a consent from AHC to the use of its audit report herein, or to its incorporation by reference into an annual report on Form 10-K, our officers and directors will be unable to rely on the authority of AHC as experts in auditing and accounting in the event any claim is brought against such persons under Section 18 of the Exchange Act based on alleged false and misleading Financial Statements and disclosures attributable to AHC. The discussion regarding certain effects of the AHC termination is not meant and should not be construed in any way as legal advice to any party and any potential purchaser should consult with his, her or its own counsel with respect to the effect of the AHC termination on a potential investment in our common stock or otherwise.

ITEM 9A. CONTROLS AND PROCEDURES.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act are controls and other procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

It should be noted that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures. These limitations include the possibility of human error, the circumvention or overriding of the controls and procedures and reasonable resource constrains. In addition, the design of any system of control is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Accordingly, our controls and procedures, by their nature, only provide reasonable assurance regarding achieving the management's control objectives.

As of the end of the period covered by this annual report on Form 10-K, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based upon the foregoing evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding the required disclosures.

MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Internal control over financial reporting is a process designed by, under the supervision of our principal executive and principal financial officers, or persons performing similar functions, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements in accordance with GAAP.

Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with the authorizations of our management and directors; and (3) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Our internal control over financial reporting is designed to provide reasonable, but not absolute, assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. There are inherent limitations to the effectiveness of any system of internal control over financial reporting. These limitations include the possibility of human error, the circumvention or overriding of the system and reasonable resource constraints. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In connection with the preparation of our annual financial statements, management, including our Chief Executive Officer and Chief Financial Officer, has undertaken an assessment of the effectiveness of our internal control over financial reporting as of July 31, 2010, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of those controls.

Based on this assessment, management has concluded that our internal controls over financial reporting were effective as of July 31, 2010, in that they ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

There has been no change in the Company's internal control over financial reporting during the quarter ended July 31, 2010 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Board of Directors

Name	Age	Director Since	Current Position With Company
Charles Muniz	55	2009	President, Chief Executive Officer, Chief Financial Officer and Director
John P. Brancaccio	62	2004	Director
David Sidransky, M.D.	50	2004	Chairman of the Board
Paul M. Weiss, Ph.D.	52	2003	Director

Executive Officers

Name		Age		Current Position With Company		Officer Since (1)
Charles Muniz		55		President, Chief Executive Officer, Chief Financial Officer and Director		2009

(1) Officers of Tamir hold office until their successors are elected and qualified or until their earlier removal, death or resignation.

Business Experience of Directors and Executive Officers

The Company’s Directors and Executive Officers have provided the following information about their principal occupation, business experience and other matters.

Charles Muniz joined us on April 3, 2009 as our President, Chief Operating Officer and Chief Financial Officer and a member of our Board of Directors and entered into an employment agreement with us to serve as our President, Chief Executive Officer (“CEO”) and Chief Financial Officer on October 19, 2009. From 2007 until he joined Tamir, Mr. Muniz was a consultant to a wide variety of clients focusing primarily on the strategic use of operations and technology. Prior to consulting, he was President and Chief Executive Officer of Digital Creations Corp., a company he founded which sold high-end systems, work stations, peripherals, networking and software products, from 1989 to 2007. Mr. Muniz attended Pace University in New York and majored in Business Administration. Through his experience as our Chief Executive Officer as well as his history with our company, in connection with his service on our Board of Directors, Mr. Muniz provides critical insights into our challenges, opportunities and operations, reflecting his detailed knowledge of our company, employees, customers, technology and industry.

John P. Brancaccio joined the Board in January 2004. Since April 2004, Mr. Brancaccio has been the chief financial officer of Accelerated Technologies, Inc., an incubator for venture backed medical device companies. He also serves on the boards of Callisto Pharmaceuticals, Inc., Synergy Pharmaceuticals, Inc. and TrovaGene, Inc., all of which are publicly traded biopharmaceutical companies where he is chairman of their respective audit committees and a member of their respective compensation and nominating committees. He was the secretary and treasurer of Memory Pharmaceuticals Corporation from December 2003 to March 2004 after serving in the capacity of their acting chief financial officer from May 2002 to December 2003. Prior to Memory Pharmaceuticals, Mr. Brancaccio held the positions of chief financial officer and chief operating officer of Eline Group, a publicly traded entertainment and media company, where he oversaw the roll up of several related companies into the group and completed private equity financing placements. Prior to joining Eline Group, he held a number of senior executive positions in public and private companies including Atlantic Pharmaceuticals, Zambon Corporation, Deven International and Health Learning Systems. During his tenure with these companies he participated in initial public offerings and negotiation of licensing and development agreements within both the pharmaceutical and biotechnology industries. He is a retired Certified Public Accountant and a graduate of Seton Hall University. Because of his strong background of service on the boards of various biopharmaceutical and life sciences companies and his involvement in capital raising and strategic transactions in our industry, we believe that Mr. Brancaccio provides a unique perspective and useful insight to our board as we review our growth strategy and strategic initiatives.

David Sidransky, M.D., joined the Board in May 2004, was elected Chairman of the Board in January 2008 and is the Chairman of our Scientific Advisory Board. Dr. Sidransky is a founder of several private biotechnology companies and has served on scientific advisory boards of numerous private and public companies, including Medimmune, Telik, Roche and Amgen. He was formerly on the board of scientific counselors at the National Institute of Dental and Craniofacial Research (NIDCR) and a member of the Recombinant DNA advisory committee at the National Institute of Health NIH (RAC). He served on the board of directors of ImClone Systems, Zila Inc, and Xenomics and is now chairman of the board of Champions Biotechnology Inc. Dr. Sidransky is on numerous editorial boards and has served as senior editor of several cancer related journals. Currently, Dr. Sidransky is the Director of the Head and Neck Cancer Research Division at Johns Hopkins University School of Medicine. In addition, he is Professor of Oncology, Otolaryngology-Head and Neck Surgery, Cellular & Molecular Medicine, Urology, Genetics, and Pathology at John Hopkins University and Hospital. Dr. Sidransky is certified in Internal Medicine and Medical Oncology by the American Board of Medicine. He has over 400 peer-reviewed publications, has contributed more than 60 cancer reviews and chapters, and also has numerous issued biotechnology patents. He has been the recipient of many awards and honors, including the 1997 Sarstedt International Prize from the German Society of Clinical Chemistry, the 1998 Alton Ochsner Award Relating Smoking and Health by the American College of Chest Physicians and the 2004 Hinda Rosenthal Award by the American Association of Cancer Research. Dr. Sidransky received his B.A. from Brandeis University and his M.D. from the Baylor College of Medicine. Because of his strong background of service on the boards of various biopharmaceutical and life sciences companies and his involvement in capital raising and strategic transactions in our industry, we believe that Dr. Sidransky provides a unique perspective and useful insight to our board as we review our growth strategy and strategic initiatives.

Paul Weiss, Ph.D., joined the Board in February 2003. Since October 2007, Dr. Weiss has been a Managing Director at Venture Investors, LLC, a Madison, Wisconsin-based venture capital group focusing on early-stage life sciences companies. Prior to joining Venture Investors, LLC, Dr. Weiss was President of the Gala Biotech business unit of Cardinal Health (now Catalent Pharma Solutions) from February 2002 until October 2007. He had served as a director on Gala’s Board from 1998 to 2001, when he joined the management team as Senior Vice President of Business Development. He later became President of Gala and remained so during the acquisition of Gala by Cardinal Health in 2003 and then the acquisition of Gala (and other Cardinal Health businesses) by The Blackstone Group in 2007. Prior to joining Gala, from 1998 to 2001, Dr. Weiss was Vice President of Technology and Product Licensing at 3-Dimensional Pharmaceuticals (3DP), which went public in 2001 and was later acquired by Johnson & Johnson. Prior to joining 3DP, Dr. Weiss was Director of Licensing for Wyeth Pharmaceuticals. Dr. Weiss holds a Ph.D. in Biochemistry and an MBA from the University of Wisconsin-Madison and a B.Sc. in Biochemistry from the Carleton University Institute of Biochemistry in Ottawa, Ontario. Because of his strong background of service on the boards of various biopharmaceutical and life sciences companies and his involvement in capital raising and strategic transactions in our industry, we believe that Dr. Weiss provides a unique perspective and useful insight to our board as we review our growth strategy and strategic initiatives.

Family Relationships

There are no family relationships among any of the Company’s directors or executive officers.

Independent Directors

The Board has determined that the following directors are “independent” under Nasdaq Marketplace Rule 4200(a)(15): John P. Brancaccio, David Sidransky, M.D. and Paul M. Weiss, Ph.D. The Board has also determined that the following directors (who are members of the Audit Committee) are “independent” in accordance with Section 10A(m)(3) of the Exchange Act: John P. Brancaccio, David Sidransky, M.D. and Paul M. Weiss, Ph.D.

Board Committee Membership

The Board has standing Compensation, Corporate Governance and Nominating, Audit, Research and Clinical Oversight, and Commercial and Business Development Oversight Committees. The current membership of the standing committees is set forth in the following table:

Name	Compensation Committee	Corporate Governance and Nominating Committee	Audit Committee	Research and Clinical Oversight Committee	Commercial and Business Development Oversight Committee
Charles Muniz
John P. Brancaccio	**	*	**
David Sidransky, M.D.	*	**	*	**	*
Paul M. Weiss, Ph.D.	*	*	*	*	**

____________________________

* Member

** Chair

Compensation Committee. All of the members of Tamir’s Compensation Committee are considered “independent directors” in accordance with Nasdaq Marketplace Rule 4200(a)(15). In fiscal year 2010, the Compensation Committee met twice.

On June 28, 2004, the Board adopted Tamir Biotechnology, Inc.’s Compensation Committee Charter, a copy of which is maintained on our website at www.tamirbio.com. According to its charter, the Compensation Committee shall consist of at least three members, each of whom shall be non-employee directors who have been determined by the Board to meet the independence requirements of the Nasdaq Stock Market.

The Compensation Committee Charter describes the primary functions of the Compensation Committee as follows:

Review and approve executive compensation on an annual basis, including the corporate goals and objectives to be used in evaluating the performance of the CEO and determining the CEO’s compensation;

Review trends in management compensation, oversee the development of new compensation plans and, when necessary, approve the revision of existing plans;

Oversee management’s decisions concerning compensation and performance for non-executive officers;

Review the Company’s incentive compensation and other share-based plans and recommend change to such plans to the Board as needed;

Administer stock plans and benefit programs and approve any amendments to existing plans;

Recommend director compensation;

Evaluate compliance with the Company’s compensation plans and policies; and

Review the compensation policy for all of Tamir’s employees.

Corporate Governance and Nominating Committee. All of the members of Tamir’s Corporate Governance and Nominating Committee are considered “independent directors” in accordance with Nasdaq Marketplace Rule 4200(a)(15). In fiscal year 2010, the Corporate Governance and Nominating Committee did not meet.

The Corporate Governance and Nominating Committee was formed by the Board for the purpose of considering future nominees to the Board. On November 28, 2007, the Board adopted Tamir Biotechnology, Inc.’s Corporate Governance and Nominating Committee Charter, a copy of which is maintained on our website at www.tamirbio.com. According to its charter, the Corporate Governance and Nominating Committee shall be comprised of at least three directors, each of whom shall meet the independence requirements of the Nasdaq Stock Market.

The Corporate Governance and Nominating Committee Charter describes the primary functions of the Corporate Governance and Nominating Committee as follows:

Identify and evaluate individuals qualified to serve as members of the Board (including individuals nominated by stockholders in proposals made in writing to the Company’s Secretary that are timely received and that contain sufficient background information concerning the nominee to enable proper judgment to be made as to the nominee’s qualifications);

Recommend for the Board’s selection nominees for election as directors of the Company at the next annual or special meeting of stockholders at which directors are to be elected or to fill any vacancies then existing on the Board;

Cause to be prepared and recommend to the Board the adoption of corporate governance guidelines and from time to time, review and assess the guidelines and recommend changes for approval by the Board;

From time to time, review and assess the Code of Business Conduct and Ethics and recommend changes for approval by the Board;

Make recommendations to the Board regarding issues of management succession; and

Conduct annual reviews and assessments of the adequacy of the Corporate Governance and Nominating Committee Charter and recommend any proposed changes to the Board for approval.

Audit Committee. All of the members of Tamir’s Audit Committee are considered “independent directors” in accordance with Nasdaq Marketplace Rule 4200(a)(15) and Section 10A(m)(3) of the Securities Exchange Act. Tamir’s Board has determined that Mr. Brancaccio qualifies as an “audit committee financial expert” as defined by Item 407 of Regulation S-K. In fiscal year 2010, the Audit Committee met four times.

On November 25, 2008, the Board adopted the Amended and Restated Audit Committee Charter, a copy of which is maintained on our website at www.tamirbio.com. According to its charter, the Audit Committee shall be comprised of at least three directors, each of whom shall meet the independence requirements of the Nasdaq Stock Market and Section 10A(m)(3) of the Exchange Act, and each of whom shall not have participated in the preparation of the financial statements of the Company at any time during the past three years. The Audit Committee’s purpose, duties and responsibilities under its charter include those specified in the listing standards of the Nasdaq Stock Exchange for audit committees.

The Audit Committee Charter describes the primary functions of the Audit Committee as follows:

Appoint, evaluate and, as the Committee may deem appropriate, terminate and replace our independent registered public accounting firm;

Monitor the independence of our independent registered public accounting firm;

Determine the compensation to be paid to our independent registered public accounting firm;

Review with management and our independent registered public accounting firm the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Company’s financial statements;

Review the experience and qualifications of the Company’s senior finance executives as well as senior members of the independent registered public accounting firm team and the quality control procedures thereof;

Pre-approve all audit services and permitted non-audit services to be performed by our independent registered public accounting firm and establish policies and procedures for the engagement of our independent registered public accounting firm to provide permitted non-audit services;

Conduct annual reviews and assessments of the adequacy of the Audit Committee Charter and the continued independence of the independent registered public accounting firm and recommend any proposed changes to the Board for approval;

Advise the Board with respect to the Company’s policies and procedures regarding compliance with applicable laws and regulations and with the Company’s Code of Business Conduct and Ethics;

Review all related-party transactions for potential conflict of interest situations and approve such related-party transactions;

Establish procedures for the confidential and anonymous receipt, retention and treatment of complaints regarding the Company’s accounting, internal controls and auditing matters; and

Report to the Board on all of the foregoing matters.

Research and Clinical Oversight Committee. The Research and Clinical Oversight Committee (“Research Committee”) was established in February 2007 and is chaired by David Sidransky, M.D. All of the members of Tamir’s Research Committee are considered “independent directors” in accordance with Nasdaq Marketplace Rule 4200(a)(15).

The primary function of the Research Committee is to work closely with management and the Scientific Advisory Board to provide support and direction to the Company’s research and development programs. The Research Committee functions as an advisory committee and does not hold formal committee meetings or take formal committee actions.

Commercial and Business Development Oversight Committee. The Commercial and Business Development Oversight Committee (“Development Committee”) was established in February 2007 and is chaired by Paul Weiss, Ph.D. All of the members of Tamir’s Development Committee are considered “independent directors” in accordance with Nasdaq Marketplace Rule 4200(a)(15).

The primary function of the Development Committee is to assist management in pursuing commercial and business development opportunities for the products currently in development. The Development Committee functions as an advisory committee and does not hold formal committee meetings or take formal committee actions.

Section 16(a) Beneficial Ownership Reporting Compliance

Based upon a review of filings with the SEC and written representations of certain reporting persons that no other reports were required, we believe that during fiscal year 2010 all of our directors, executive officers and beneficial owners of more than 10% of any class of equity securities complied on a timely basis with the reporting requirements of Section 16(a) of the Exchange Act, except for the Form 4 filed by Dr. Sidransky in May 2010, which was not timely filed.

Code of Ethics

Tamir has adopted a written Code of Business Conduct and Ethics (“Code of Ethics”) that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer, and controller and to all its other employees. These standards are a guide to help ensure that all our employees live up to our high ethical standards. A copy of the Code of Ethics is maintained on our website at www.tamirbio.com.

We intend to post on our website, any amendment to or waiver from any provision in our Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, and that relates to any element of the standards enumerated in the rules of the SEC.

ITEM 11. EXECUTIVE COMPENSATION.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the fiscal year ended July 31, 2010, the members of the Board who served on the Compensation Committee were Messrs. John P. Brancaccio, Donald R. Conklin and Paul M. Weiss, Ph.D. Mr. Conklin resigned from the Board on January 2, 2010. As of July 31, 2010 all such directors were independent directors and have never been officers of Tamir. As of the date of this annual report on Form 10-K, Mr. Brancaccio and Dr. Weiss are independent directors and have never been officers of Tamir. During the fiscal year ended July 31, 2010, no executive officer of Tamir served on the compensation committee or board of directors of any other entity which had any executive officer who also served on the Compensation Committee or Board of Tamir.

COMPENSATION DISCUSSION AND ANALYSIS

Compensation Philosophy

Tamir’s compensation program is based on the philosophy that the interests of our employees should be closely aligned with those of our stockholders. The Company’s compensation program is based on the following principles:

Compensation opportunities should attract the best talent, motivate individuals to perform at their highest levels, reward outstanding achievement and retain the leadership and skills necessary for building long-term stockholder value;

Compensation should include a bonus potential which is tied directly to operating objectives; and

Compensation should include a long-term incentive award generally in the form of stock option grants to increase ownership in the Company and encourage executives to manage from the perspective of owners of the Company.

The Compensation Committee believes that the compensation program for executive officers should reward the achievement of the short-term and long-term objectives of the Company, and that compensation should be related to the value created for its stockholders. However, given the highly volatile nature of biotechnology company stocks it would be impracticable for the Company to tie executive compensation solely to stock performance. In making its compensation decisions, the Compensation Committee generally reviews the progress made by the individual officer in attaining his or her individual performance goals and the progress made by the Company in its drug development programs, while keeping the Company’s stock performance in mind. Generally, performance tied to the long-term objectives of the Company or the overall business objectives of the Company are rewarded with equity compensation, whereas performance tied to short-term goals of the Company, or individual performance, is rewarded with cash compensation. As different elements of the Company’s compensation have different underlying rationale and policy, determinations the Compensation Committee made with regard to one compensation element have not influenced decisions it made with respect to other compensation elements it contemplated or awarded. For example, the factor that our CEO may receive a bonus if the performance objectives are satisfied and may receive additional value through his stock options if the Company’s stock performs well has not influenced the determination as to the base salary of our CEO.

The Company’s compensation philosophy was last reviewed by the Board in May 2007, at which time two new compensation programs were approved by the Board, the Incentive Bonus Program and the Annual Milestones bonus program. These two bonus programs were approved by the Board because they each met the Company’s desire to reward and encourage executive officers and employees for not only causing the Company to meet its primary objectives but also to meet certain short-term objectives within a timeline prescribed by management. See “Incentive Compensation” below for details relating to these two programs.

Role of the Compensation Committee

The Compensation Committee currently consists of Messrs. John P. Brancaccio, Chairman, and Paul M. Weiss Ph.D. All committee members have been and currently are non-employee directors as defined under Rule 16b-3 of the Exchange Act and satisfy the director independence standards of the Nasdaq Stock Market and the definition of “outside director” under Section 162(m) of the Internal Revenue Code. No special expertise in compensation matters is required for appointment to the Compensation Committee.

The Compensation Committee is responsible for all components of the Company’s executive compensation program and for administering all stock option plans including the 2004 Stock Incentive Plan, under which stock option grants may be made to executive officers. On an annual basis, the Compensation Committee reviews and approves the corporate goals and objectives relevant to the compensation for the CEO and other executive officers, if any. The Compensation Committee evaluates at least once a year, the CEO and executive officers’ performance in light of these established goals and objectives and based upon these evaluations will set the CEO’s and executive officers’ annual compensation, including salary, bonus, incentive and equity compensation.

Role of Consultants and Market Review

The Compensation Committee possesses the authority under its charter to hire advisors to provide it with information as needed in making compensation decisions. The Compensation Committee did not use a compensation consultant for fiscal year 2010.

Role of Management

While the Compensation Committee determines overall compensation philosophy, it relies on the CEO and other executive officers, if any, to make recommendations in accordance with such compensation philosophy. The Company’s CEO and CFO, if any, provide the Board and the Compensation Committee with feedback on the performance of the Company’s non-executive officers and make compensation recommendations to the Compensation Committee for its approval. In 2010, the CEO attended the Compensation Committee’s meetings to provide his perspectives on competition in the industry and the needs of the business, information regarding the Company’s performance and other advice specific to their areas of expertise. However, the CEO did not attend meetings where his compensation and/or performance was discussed. Once a recommendation has been approved by the Compensation Committee, it is sent to the Board for ratification. Upon ratification by the Board, the execution and administration of the recommendation may be delegated by the Compensation Committee to management as the Compensation Committee deems appropriate.

Mr. Muniz has been our only executive since he joined the Company on April 3, 2009. At the time he joined the Company, the Compensation Committee agreed to pay him a consulting fee of $3,500 per week plus cost of travel between his home state of Florida and our office in New Jersey. On October 19, 2009, the Company entered into an Employment Agreement (the “Employment Agreement”) with Mr. Muniz to serve as the Company’s President, Chief Executive Officer and Chief Financial Officer. Under his Employment Agreement, Mr. Muniz will receive an annual base salary of $300,000 plus cost of travel between his home state of Florida and our office in New Jersey. and is entitled to receive cash incentive compensation or annual stock option awards as determined by the Board or the Compensation Committee of the Board from time to time. In addition, Mr. Muniz is entitled to participate in any and all employee benefit plans established and maintained by the Company for executive officers of the Company. Pursuant to the Employment Agreement, Mr. Muniz received an option (the “Option”), granted under and in accordance with the Company’s 2004 Stock Incentive Plan, to purchase an aggregate of 500,000 shares of Common Stock exercisable for ten years from the date the Option is granted. The Option shall vest in equal amounts on each of the first, second and third year anniversary of the grant so long as Mr. Muniz remains employed by the Company. The exercise price of the Option equals the fair market value of the Common Stock on the date of grant.

The Employment Agreement continues in effect for two years following the date of the agreement and automatically renews for successive one-year periods, unless Mr. Muniz’s employment is terminated by him or by the Company. In the event that Mr. Muniz’s employment is terminated by the Company for any reason, then Mr. Muniz is entitled to receive his earned but unpaid base salary and incentive compensation, unpaid expense reimbursements, accrued but unused vacation and any vested benefits under any employee benefit plan of the Company. In the event that Mr. Muniz’s employment is terminated by the Company without “Cause” or by Mr. Muniz for “Good Reason” (as such terms are defined in the Employment Agreement), and provided Mr. Muniz executes a release in favor of the Company, then in addition to the above mentioned payments and benefits, Mr. Muniz is entitled to receive an amount equal to his then current annual base salary, payable in equal installments over 12 months in accordance with the Company’s payroll practice, and all medical and health benefits for 18 months following the termination date. In addition, in the event Mr. Muniz’s employment is terminated without Cause or for Good Reason within 12 months following a Change in Control (as defined in the Employment Agreement), and provided Mr. Muniz executes a release in favor of the Company, in lieu of the severance described above, Mr. Muniz is entitled to receive a lump cash payment equal to his then current annual base salary, all medical and health benefits for 18 months following the termination date and full acceleration of vesting of all unvested stock options and other share-based awards. Mr. Muniz’s Employment Agreement requires him to refrain from competing with the Company and from hiring our employees and soliciting our customers for a period of one year following the termination of his employment with the Company for any reason. The Employment Agreement was filed as Exhibit 10.5 to the Company’s Form 8-K filed with the SEC on October 20, 2009.

Executive Compensation Components

Compensation for the Company’s executive officers includes the following components:

Base Salary. Fixed annual compensation that is certain as to payment and provides continuous income to meet ongoing living costs. This component is intended to ensure that Tamir is able to retain executives capable of achieving the Company’s strategic and business objectives. The Compensation Committee reviews executive officers’ salaries annually and will make adjustments based on its expectations of that officer’s performance as compared to the officer’s actual performance and what the Compensation Committee’s expectations are for that officer’s future performance. Additionally, the Compensation Committee factors in cost of living adjustments as well as the Company’s overall performance and stock performance. As described on our annual report on Form 10-K for the fiscal year 2008, in 2008, the Compensation Committee also utilized a study of market compensation levels prepared by an independent compensation consultant in order to evaluate the executive’s compensation, including base salaries. Such a study was used by the Compensation Committee in setting base salaries for the Company’s fiscal year 2008. Such study was not used in previous years, except for fiscal year 2008 and was not used in fiscal year 2010.

In light on the Company’s financial difficulties, lack of executive leadership and inability to conduct a thorough market-based analysis of executive compensation, the Compensation Committee determined that Mr. Muniz, the Company’s sole executive officer, should receive the same base compensation package, in all material respects, as his predecessor, Kuslima Shogen.

Stock Option Grants. Long-term incentive plan which offers eligible Company officers and employees incentives to put forth maximum efforts for the success of the Company’s business, to afford executive officers an opportunity to acquire a proprietary interest in the Company and to relate the compensation of officers to the value they create for the Company’s stockholders. Currently, all share-based awards are granted under the 2004 Stock Incentive Plan, which was approved by the Board of Directors and stockholders of the Company in November 2003 and in January 2004, respectively. The 2004 Stock Incentive Plan provides for the grant of stock options and other share-based awards to employees, officers, consultants, independent contractors and directors providing services to Tamir and its subsidiaries as determined by the Board or by the Compensation Committee. The types of awards that may be granted under the 2004 Stock Incentive Plan are stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalents, other stock grants, other share-based awards and any combination thereof. Stock options are granted based on the fair market value of a share on the date of grant of such option. The terms, time and method of the options are determined at the sole discretion of the Compensation Committee.

At the time he joined the Company in April 2009, Mr. Muniz did not receive any share-based compensation. After completion of the Company’s financing in October 2009, pursuant to his Employment Agreement, Mr. Muniz received stock options to purchase a total of 500,000 shares of Common Stock. The Compensation Committee determined that this was an appropriate grant in light of prior grants made to the Company’s former CEO, Mr. Muniz’s success in obtaining financing for the Company in very difficult market conditions and the need to provide Mr. Muniz with additional incentive to create further value for the Company’s stockholders.

Incentive Compensation. The primary purpose is to align the interests of the executive officers with those of the stockholders by rewarding executive officers for creating stockholder value over the long-term. The 2004 Stock Incentive Plan provides for the award of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalents, and other stock grants or stock based awards.

Other Benefits. The CEO is eligible to participate in the Company’s 401(k) plan, health and dental coverage, life insurance, disability insurance, paid time off and paid holidays on the same terms as are available to all employees generally. Other benefits which have previously been made available to the CEO, though not our current CEO, are the payment of reasonable costs of temporary housing, reasonable airfare associated with relocation and relocation assistance. We have previously provided the CEO with a monthly auto allowance and paid the premiums on a life insurance policy for the CEO where the Company was not the beneficiary of that life insurance policy, however, these benefits are not presently utilized by our current CEO. These awards are designed to be competitive with overall market practices, and are in place to attract and retain the personnel needed in the business.

Post-termination Agreements. Other than severance payments provided for in Mr. Muniz’s Employment Agreement and Ms. Shogen’s Retirement Agreement, as described in the annual report on Form 10-K/A filed with the SEC on November 30, 2009, the Company does not utilize post-termination agreements. In addition, under grants awarded pursuant to the 2004 Stock Incentive Plan, the recipients of such grants have received Stock Option Agreements which contain provisions that allow for the awarded options to become fully vested and immediately exercisable or exercisable during the six months following a change in control but in no event beyond the option period provided in the Stock Option Agreement; provided, however, that the terms of Mr. Muniz’s Employment Agreement, as described above, supersede the terms set forth in his Stock Option Agreement. Per the Company’s standard Stock Option Agreement, a change in control is deemed to occur if (i) a person, as defined by Section 13(d) and 14(d) of the Exchange Act, becomes the beneficial owner, directly or indirectly, of securities representing 20% or more of the combined voting power of the Company’s then outstanding shares (except that ownership by the McCash Family Limited Partnership must be 50% to qualify as a change in control); (ii) during any 12 month period, the individuals who were, at the beginning of such period, a majority of the Board cease to be a majority of the Board; (iii) the Company’s stockholders approve a merger or consolidation with another corporation except where the Company remains in control after such merger or consolidation or where the merger or consolidation was effected to recapitalize the Company and no one person acquired more than 50% of the combined voting power of the Company; or (iv) the stockholders of the Company approve a plan of complete liquidation or enter into an agreement for the sale or disposition of all or substantially all of the assets of the Company.

Additionally, under the terms of the Stock Option Agreements issued under the 2004 Stock Incentive Plan, if there is a termination of service due to the death, total disability or retirement of the optionee on or after age 65 after seven years of service with the Company, then the options become fully exercisable at the time of death, total disability or retirement, as the case may be, and may be exercised by the optionee or optionee’s estate during the six months following the month of optionee’s death, total disability or retirement but in no event beyond the option period provided in the Stock Option Agreement. If there is a termination of employment due to voluntary resignation then to the extent options are exercisable as of the date of the termination, such options may be exercised within six months of the date of termination of employment. If there is termination for cause, then to the extent options are exercisable as of the date of the termination, such options may be exercised within 30 days of the date of termination. “Cause” is defined as (i) frequent and unjustifiable absenteeism other than optionee’s illness or physical or mental disability; (ii) fraud or dishonesty materially injurious to the Company; (iii) gross or willful misconduct or willful neglect to act which is committed or omitted by optionee in bad faith; (iv) gross breach of optionee’s fiduciary duties which has a materially injurious effect on the Company; (v) optionee’s conviction as a felon; or (vi) optionee’s willful or continuous neglect or refusal to perform his or her duties. If there is termination for any reason other than those described above, then to the extent options are exercisable as of the date of the termination, such options may be exercised within 12 months of the date of termination of employment.

Under grants awarded pursuant to the Company’s 1997 and 1993 Stock Option Plans, prior to a dissolution or liquidation of the Company or a merger or consolidation where the Company is not the surviving corporation, the optionee has the right to exercise all outstanding options. If the optionee terminates employment, then to the extent options are exercisable as of the date of termination, such options may be exercised within 190 days of the date of termination of employment. If the Board determines that the optionee engaged in activities or employment contrary to the best interest of the Company, then the Board can cancel the options within 190 days of the termination of employment. If an optionee dies while still in service to the Company, then to the extent options are exercisable as of the date of death, such options may be exercised.

The rationale for the acceleration of the options under the 2004 Stock Incentive Plan, and the 1997 and 1993 Stock Option Plans upon a change in control of the Company is to ensure that officers are motivated to pursue creating or obtaining the maximum value for stockholders and to encourage officers to remain with the Company after a change in control has occurred.

Kuslima Shogen, the Company’s former CEO and scientific founder, retired on March 31, 2009. On April 25, 2008, Tamir entered into a retirement agreement with Ms. Shogen which was filed as Exhibit 99.1 to the Company’s Form 8-K filed with the SEC on April 28, 2008 (the “Retirement Agreement”). Under the terms of the Retirement Agreement, during the two year period commencing April 1, 2008, Ms. Shogen was entitled to receive periodic payments at the rate of $300,000 per year. The options to purchase the Company’s common stock held by Ms. Shogen on the date of her retirement remained exercisable after Ms. Shogen’s retirement in accordance with their terms. No change was made to the terms of such existing options under the Retirement Agreement, except the Compensation Committee of the Company’s Board of Directors amended the Company’s 1993 Stock Option Plan and 1997 Stock Option Plan to allow such options to be transferred by Ms. Shogen to members of her family. The Compensation Committee agreed to give Ms. Shogen the ability to transfer her existing options granted under the 2004 Stock Incentive Plan to members of her family. If Ms. Shogen elects COBRA continuation coverage after her retirement date, the Company will pay for Ms. Shogen’s COBRA insurance continuation premiums until the earliest of the second anniversary of her retirement date and the date Ms. Shogen is no longer eligible for COBRA insurance overage under applicable law or the date on which Ms. Shogen becomes eligible for Medicare. In the event Ms. Shogen becomes ineligible for COBRA coverage under the Company’s insurance plans for any reason other than her death prior to the second anniversary of her retirement date, the Company will make a lump sum cash payment to Ms. Shogen equal to the amount of the premiums the Company would have had to pay to maintain Ms. Shogen’s coverage under the Company’s insurance plans had Ms. Shogen remained eligible for coverage under such plans for the period commencing on the date Ms. Shogen became ineligible for such coverage and ending on the second anniversary of her retirement date.

Pursuant to the terms of the Retirement Agreement, Ms. Shogen also agreed to terminate the Royalty Agreement dated July 24, 1991, as amended on April 16, 2001 by and between the Company and Ms. Shogen and filed as Exhibit 10.37 to the Company’s Form 10-Q filed with the SEC on March 12, 2007 (the “Royalty Agreement”). The terms of the Royalty Agreement are described in Note 12 to the Financial Statements on pages F-44 through F-45 of the Company’s Form 10-K for the fiscal year 2008. In exchange for termination of the Royalty Agreement, the Company agreed to make the following payments and awards to Ms. Shogen:

A lump sum payment of $500,000 made within ten business days of the date of the Retirement Agreement, from which Tamir was entitled to deduct the amount of the outstanding principal and accrued interest of $187,410 owed by Ms. Shogen to Tamir as of the date of the Retirement Agreement.

If the NDA for ONCONASE® for the treatment of malignant mesothelioma is approved by the FDA, Ms. Shogen would receive a one time payment equal to 5% of the initial milestone payment payable to the Company by Par Pharmaceutical Inc. (“Par”) pursuant to the License Agreement dated as of January 14, 2008 by and between the Company and Par (the “License Agreement”).

If the NDA for ONCONASE® for the treatment of malignant mesothelioma is approved by the FDA, Ms. Shogen would also receive a payment of $350,000 on each of the first and second anniversaries of the date of such approval for a total payment of $700,000.

An option (the “Option”) to purchase an aggregate of 1,000,000 shares of the Company’s common stock under the 2004 Stock Incentive Plan at an exercise price equal to the fair market value of the common stock as of the date of the Retirement Agreement as determined under such plan. The Option has a term of ten years and will become exercisable only upon the approval of the NDA for ONCONASE® for the treatment of malignant mesothelioma is approved by the FDA. As the result of the option to purchase 250,000 shares of common stock granted under the 2004 Stock Incentive Plan to Ms. Shogen on March 5, 2008 in connection with the Company’s execution of the License Agreement and in order to enable the Company to grant this Option to Ms. Shogen, the Board of Directors amended the annual award limitation for a participant in the 2004 Stock Incentive Plan for 2008 as it relates to Ms. Shogen from 1,000,000 shares to 1,250,000 shares.

Payments equal to 15% of any royalties payable with respect to net sales which are received by Tamir pursuant to any and all license agreements entered into by Tamir for the marketing and distribution of ONCONASE® and any other products derived from amphibian source extract, produced either as a natural, synthesized, and/or genetically engineered drug which are covered by the claims of any issued patent owned or controlled by Tamir which is issued and valid as of December 31, 2007 (the “Licensed Products”) and 5% of net sales of Licensed Products which Tamir books on its financial statements but only to the extent that the aggregate annual net sales of Licensed Products upon which such royalty payments are received by Tamir and annual net sales of Licensed Products booked by Tamir when combined are in excess of $100 million in a year. In the event either or both of the aggregate annual net sales of Licensed Products upon which Tamir receives royalties and the annual net sales of Licensed Products which Tamir books on its financial statements are less than $100 million, but when combined such aggregate annual net sales exceed $100 million, the payments to be received by Ms. Shogen in that year will be paid with respect to the amount of such aggregate net sales that exceeds $100 million and pro rated between the 15% Ms. Shogen is entitled to receive on royalties received by Tamir and the 5% Ms. Shogen is entitled to receive on net sales booked by Tamir based upon the percentage of the total net sales of the Licensed Products that year represented by aggregate net sales upon which Tamir receives a royalty and the net sales booked by Tamir. Ms. Shogen’s rights to receive these payments shall terminate when all claims under the relevant patents which cover the Licensed Products have expired.

On September 14, 2009, the Company entered into an amendment (the “Amendment”) to the Retirement Agreement amending certain terms. Under the Retirement Agreement, Ms. Shogen was entitled to receive periodic payments during the two year period commencing April 1, 2008 at the rate of $300,000 per year. Pursuant to the Amendment, the periodic payments were reduced to $150,000 per year. Under the Retirement Agreement, Ms. Shogen was entitled to receive continuing payments equal to 15% of any royalties received by Tamir pursuant to any and all license agreements entered into by Tamir for the marketing and distribution of Licensed Products. Under the Amendment, the amount of such royalties related to net sales of Licensed Products to be received by Ms. Shogen has been reduced to 5%. Under the Retirement Agreement, Ms. Shogen was entitled to receive continuing payments equal to 5% of net sales of Licensed Products booked by Tamir on its financial statements. Under the Amendment, the amount of net sales of License Products booked by Tamir to be received by Ms. Shogen has been reduced to 2% of net sales. Under the Amendment, in the event Tamir obtains marketing approval for ONCONASE® from the Food and Drug Administration or the European Medicines Agency, Ms. Shogen will be entitled to receive an additional payment equal to the difference between the periodic payments actually paid to Ms. Shogen during the two year period commencing April 1, 2008 and $600,000, the original aggregate amount of periodic payments to which Ms. Shogen was entitled under the Retirement Agreement. Such additional payment may be made by Tamir, at its option, in cash, Tamir common stock or a combination of both. Except as specifically amended in the Amendment, all terms and conditions of the Retirement Agreement remain in full force and effect.

The following table summarizes the estimated value of the stock options for each named executive officer derived from the terms of the 2004 Stock Incentive Plan, the 1997 Stock Option Plan and the 1993 Stock Option Plan assuming that a triggering event took place on the last business day of our most recently completed fiscal year, July 31, 2010 and that the price per share of our common stock is the closing market price as of that date.

Name		Death or Total Disability(1)			Voluntary Termination or Termination for Cause(1)			Change in Control(1)
Charles Muniz		$0			0			$0

____________________________

(1)

These amounts represent the aggregate in-the-money value of stock options which would become vested as a direct result of the termination event or change in control before the applicable stated vesting date. The stated vesting date is the date at which an award would have vested absent such termination event or change in control. This calculation of value does not attribute any additional value to stock options based on their remaining terms and does not discount the value of awards based on the portion of the vesting period elapsed at the date of the termination event or change in control. These amounts represent the intrinsic value of stock options, based on a closing stock price of $0.29 on July 31, 2010.

Pension Plans. The Company does not have pension plans for its employees, executive officers or directors.

Non-Qualified Deferred Compensation Plans. The Company does not have non-qualified deferred compensation plans for its employees, executive officers or directors.

Tax and Accounting Considerations

Deductibility of Executive Compensation. In making compensation decisions affecting the executive officers, the Compensation Committee considers the Company’s ability to deduct under applicable federal corporate income tax law compensation payments made to executives. Specifically, the Compensation Committee considers the requirements and impact of Section 162(m) of the Internal Revenue Code, which generally disallows a tax deduction for annual compensation in excess of $1 million paid to our named executive officers. Certain compensation that qualifies under applicable tax regulations as “performance-based” compensation is specifically exempted from this deduction rule. The Compensation Committee cannot assure that it will be able to fully deduct all amounts of compensation paid to persons who are named executive officers in the future. Further, because the Compensation Committee believes it is important to preserve flexibility in designing its compensation programs, it has not adopted a policy that all compensation must qualify as deductible under Section 162(m). The cash compensation that the Company paid to each of its named executive officers during 2009 was below $1 million. We believe that stock options granted to named executive officers under the 1997 Stock Option Plan and the 2004 Stock Incentive Program would qualify as “performance-based compensation” and therefore are Section 162(m) qualified.

Accounting for Share Based Compensation. On August 1, 2005, the Company adopted the fair value recognition provisions of the Financial Accounting Standards Board (“FASB”) amended guidance on accounting for Stock Compensation, to account for all stock grants under all of its stock plans.

Summary Compensation Table

The following table provides a summary of cash and non-cash compensation for each of the last three fiscal years ended July 31, 2010 and 2009 with respect to the persons serving as Tamir’s Chief Executive Officer and the persons serving as Tamir’s only other executive officer, the Chief Financial Officer, during the year ended July 31, 2010 (“Named Executive Officers”).

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)(1)	Option Awards ($)(1)	Non-Equity Incentive Plan Compensation	Non-Qualified Deferred Compensation Earnings ($)	All Other Compensation(2)	Total ($)
Charles Muniz	2010	$275,038 (4)	-	-	$142,500	-	-	$23,521(5)	$441,059
President, Chief Executive Officer and Chief Financial Officer(3)	2009	$87,500 (6)	-	-	-	-	-	$11,041(7)	$98,541

____________________________

(1)

These amounts represent the dollar amount recognized for financial statement reporting purposes the grant date fair value of stock options granted to the named executive officers in accordance with the FASB amended guidance on accounting for Stock Compensation. The grant date fair value was estimated using the Black-Scholes stock option pricing model in accordance with the FASB amended guidance on accounting for Stock Compensation. Pursuant to the SEC rules, the amounts exclude the impact of estimated forfeitures related to service-based vesting conditions. Valuation assumptions used in the calculation are as disclosed in this annual report on Form 10-K for the year ended July 31, 2010.

(2)	Excludes perquisites and other personal benefits that in the aggregate do not exceed $10,000. These amounts consist of Tamir’s annual contributions to a 401(k) plan unless otherwise noted.

(3)	Mr. Muniz was appointed as the Company’s President, Chief Operating Officer, Chief Financial Officer and director to the Board on April 3, 2009.

(4)

Mr. Muniz initially began consulting with the Company on February 9, 2009. On April 3, 2009, Mr. Muniz was appointed as the Company’s President, Chief Operating Officer and Chief Financial Officer. Given the Company’s difficult financial condition, Mr. Muniz continued to receive consulting payments from the date he first began consulting with the Company continuing through October 19, 2009. These amounts represent consulting fee from August 1, 2009 to October 16, 2009 which amounted to $38,500 and his wages from October 19, 2009 to July 31, 2010 amounted to $236,538.

(5)	This amount consists of travel cost between Mr. Muniz’ home state of Florida and New Jersey totaling $9,550 and health insurance reimbursement of $13,971 for fiscal year 2010.

(6)	These amounts represent consulting fee from his first day of employment through July 31, 2009.

(7)	This amount consists of travel cost between Mr. Muniz’ home state of Florida and New Jersey for a period of six months totaling $5,218 and health insurance reimbursement of $5,823 for fiscal year 2009.

Grants of Plan-Based Awards in Fiscal Year 2010

The following table contains information concerning the grant of stock options under equity and non-equity incentive plans to the Named Executive Officers during the fiscal year ended July 31, 2010:

Estimated Future Payouts Under Non-Equity Incentive Plan Awards

Estimated Future Payouts Under Equity Incentive Plan Awards

All Other Stock Awards: Number of Shares of Stock or Units

(#)

All Other Option Awards: Number of Securities Underlying Options

(#)

Exercise or Base Price of Option Awards ($/Sh)

Grant Date Fair Value of Stock and Option Awards(1)

Name

Grant

Date

Threshold

($)

Target

($)

Maximum

($)

Award

Unit

Threshold

($)

Target

($)

Maximum

($)

Charles Muniz

10/19/09

n/a

500,000

$0.34

$142,500

(1)

The grant date fair value was estimated using the Black-Scholes stock option pricing model in accordance with the FASB amended guidance on accounting for Stock Compensation. Pursuant to the SEC rules, the amounts exclude the impact of estimated forfeitures related to service-based vesting conditions. Valuation assumptions used in the calculation are as disclosed in this annual report on Form 10-K for the year ended July 31, 2010.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth the information with respect to the Named Executive Officers concerning the exercisable and unexercisable stock option awards held as of July 31, 2010(1):

Name		Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)		Option Exercise Price ($)		Option Expiration Date
Charles Muniz		-		500,000		-		$0.34		10/19/19

____________________________

(1)	The Company does not have stock awards as part of its compensation program, therefore the columns entitled “Stock Awards” have been omitted from this table.

Option Exercises and Stocks Vested

The Named Executive Officers did not exercise options during fiscal year 2010 and the Company did not grant stock awards as part of its compensation program.

Non-Employee Directors’ Compensation

In February 2007, the Board adopted a non-employee director compensation policy whereby each member of the Board who was not an employee of Tamir will receive $15,000 per year in consideration of the member’s serving on the Board, payable in four equal quarterly installments. This cash compensation ceased in January 2009. In addition, each non-employee director will be granted an annual retainer of 20,000 options on the last trading day of December for each year under the 2004 Stock Incentive Plan. The Chairman of the Board will receive an option bonus equal to the number of options received by the Chairman for his board and committee memberships. Committee chairpersons receive 10,000 options for each committee chaired while each committee member receives 5,000 options for each committee on which he serves. The exercise price of the options will be equal to the closing price of the Common Stock on the date of the grant. The options will vest on the first anniversary of the date of the grant provided that the option holder remains a director as of such anniversary date and the options will terminate on the sixth anniversary of the date of the grant.

As described in the Form 8-K filed by the Company on October 20, 2009, the Company closed on a private placement of convertible promissory notes and warrants in which the Company received $3,250,000 in gross proceeds on October 19, 2009. As a condition to the closing of such financing, each member of the Board other than David Sidransky, Chairman of the Board, and Mr. Muniz agreed to resign from the Board upon the request of Dr. Sidransky made at any time following the closing and prior to December 31, 2009. In connection with such condition, the Board amended the vesting of the options granted on December 31, 2008 to non-employee directors, except for Dr. Sidransky, to be accelerated in full upon their resignation as requested by the Chairman of the Board. Additionally, with the exception of Dr. Sidransky, the terms of the options granted to non-employee directors on February 8, 2007, December 31, 2007 and December 31, 2008 were amended to provide that if the non-employee director leaves the Board, the option will be exercisable for two years, instead of one year, from the date such non-employee director leaves the Board any time between October 19, 2009 and December 31, 2009.

Donald R. Conklin and Kuslima Shogen resigned from the Board following a written request from Dr. Sidransky on January 2, 2010 and January 29, 2010, respectively. Stephen K. Carter, M.D did not stand for reelection at the Annual Meeting on April 27, 2010.

Under our director compensation policies, directors who also serve as executive officers do not receive additional compensation for their service on our Board.

The exercise price and vesting schedules for the regular and discretionary option grants described above are set forth in the table titled “Directors’ Stock Options” below. The total compensation paid to independent directors for their service as directors of the Company for fiscal year 2010 is set forth in the table titled “Directors’ Compensation” below.

During the fiscal year ended July 31, 2010, the following independent or non-employee directors were compensated as follows for their service as directors of the Company:

Directors’ Stock Options

During the fiscal year ended July 31, 2010, the following independent or non-employee directors were granted options under Tamir’s 2004 Stock Incentive Plan as described above:

Name	Number of Options Granted	Exercise Price of Options Granted
John P. Brancaccio	125,000(1)(2)	$0.26
Stephen K. Carter, M.D.*	-	-
Donald R. Conklin+	-	-
Kuslima Shogen (3)	11,667(3)	$0.34
David Sidransky, M.D.	180,000(1)(4)	$0.26
Paul M. Weiss, Ph.D.	125,000(1)(5)	$0.26

____________________________

*	Did not stand for reelection at the Annual Meeting on April 27, 2010.

+	Resigned from the Board on January 2, 2010.

(1)

All the options listed here were granted on April 28, 2010 which will vest on December 31, 2010, provided that the option holder continuously remained a director until such time, and expire on December 31, 2015. The exercise price of these options was the closing price of the Company’s Common Stock on the date of the grant.

(2)	Mr. Brancaccio’s options are the result of his serving on the as Chairman of the Audit and Compensation Committees.

(3)	Ms. Shogen’s options are the result of her serving as a member of the Board after her retirement. These options expire on Oct 19, 2014, vested immediately and the exercise price was the closing price of the Company’s Common Stock on the date of grant. Ms. Shogen resigned on January 29, 2010.

(4)	Dr. Sidransky’s options are the result of his serving as Chairman of the Board, Chairman of the Corporate Governance and Nominating Committee, Chairman of the Research and Clinical Oversight Committee and a member of the Commercial and Business Development Oversight Committee.

(5)	Dr. Weiss’ options are the result of his serving on the Compensation Committee, the Corporate Governance and Nominating Committee, the Audit Committee, the Research and Clinical Oversight Committee.

Directors’ Compensation

During the fiscal year ended July 31, 2010, the following independent or non-employee directors were compensated as follows for their service as directors of the Company:

Name	Fees Earned or Paid in Cash ($)	Stock Awards(1) ($)	Option Awards(1) ($)	Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
John P. Brancaccio	$ 0	-	$24,875	-	-	-	$24,875
Stephen K. Carter, M.D.*	$ 0	-	-	-	-	-	-
Donald R. Conklin+	$ 0	-	-	-	-	-	-
Kuslima Shogen++	$ 0	-	$2,812	-	-	-	$2,812
David Sidransky, M.D.	$ 0	-	$35,820	-	-	-	$35,820
Paul Weiss, Ph.D.	$ 0	-	$24,875	-	-	-	$24,875

____________________________

*	Did not stand for reelection at the Annual Meeting on April 27, 2010.
+	Resigned from the Board on January 2, 2010.
++	Resigned from the Board on January 29, 2010.
(1)	These amounts represent the dollar amount recognized for financial statement reporting purposes for the fair value of stock options granted to non-employee directors for fiscal year 2010. The grant date fair value of the options was estimated using the Black-Scholes stock option pricing model in accordance with the FASB amended guidance on accounting for Stock Compensation. Valuation assumptions used in the calculation are as disclosed in this annual report on Form 10-K for the year ended July 31, 2010.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth the information with respect to the independent or non-employee directors concerning exercisable and unexercisable stock options held as of July 31, 2010(1):

Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price ($)	Option Expiration Date
John P. Brancaccio	20,000	-	$4.38	12/30/10
	20,000	-	$1.89	12/30/11
	20,000	-	$1.60	12/30/12
	15,000	-	$1.49	02/08/13
	35,000	-	$1.72	12/31/13
	35,000	-	$0.24	12/31/14
	-	125,000(2)	$0.26	12/31/15
Stephen K. Carter, M.D.*	20,000	-	$4.38	11/03/10
	20,000	-	$1.89	11/03/10
	20,000	-	$1.60	11/03/10
	5,000	-	$1.49	04/27/12
	25,000	-	$1.72	04/27/12
	25,000		$0.24	04/27/12
Donald R. Conklin+	10,000	-	$1.49	01/02/12
	30,000	-	$1.72	01/02/12
	30,000	-	$0.24	01/02/12
Kuslima Shogen++	11,667	-	$0.34	10/19/14
	-	1,000,000(3)	$2.00	04/25/18
David Sidransky, M.D.	20,000	-	$4.38	12/30/10
	20,000	-	$1.89	12/30/11
	20,000	-	$1.60	12/30/12
	70,000	-	$1.49	02/08/13
	90,000	-	$1.72	12/31/13
	90,000	-	$0.24	12/31/14
		180,000(2)	$0.26	12/31/15
Paul M. Weiss, Ph.D.	20,000	-	$4.38	12/30/10
	20,000	-	$1.89	12/30/11
	20,000	-	$1.60	12/30/12
	30,000	-	$1.49	02/08/13
	50,000	-	$1.72	12/31/13
	50,000		$0.24	12/31/14
	-	125,000(2)	$0.26	12/31/15

____________________________

*	Is not standing for reelection at the Annual Meeting.

+	Resigned from the Board on January 2, 2010.

++	Resigned from the Board on January 29, 2010.

(1)	The Company does not have stock awards as part of its compensation program, therefore the columns entitled “Stock Awards” have been omitted from this table.

(2)	These options will vest on December 31, 2010, provided that the option holder continuously remained a director as of December 31, 2010.

(3)	These performance options are only exercisable upon the meeting of the conditions set out in Ms. Shogen’s Retirement Agreement as previously described.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

The Compensation Committee has overall responsibility for evaluating and approving the Company’s executive officer compensation plans, policies and programs, including compensation of the Chief Executive Officer. During the fiscal year ended July 31, 2010 the Compensation Committee consisted of three independent directors. Our compensation program, both for our executive officers as well as for all employees, is based on the philosophy that the interests of our employees should be closely aligned with those of our stockholders. As with many other biotechnology companies, Tamir's current level of development and the highly volatile nature of biotechnology stocks in general makes executive compensation, which is normally based on sales and earnings goals, or strictly based on stock performance, impracticable. In determining compensation, the Compensation Committee generally reviews the progress made by the individual officer in attaining his or her individual goals and the progress made by the Company in its drug development programs. In addition, the Compensation Committee keeps the Company's stock performance in mind when making compensation decisions. Finally, the Compensation Committee generally reviews and takes into account competitive factors regarding compensation. Our compensation program is based on the following principles:

Compensation opportunities should attract the best talent, motivate individuals to perform at their highest levels, reward outstanding achievement, and retain the leadership and skills necessary for building long-term stockholder value;

Compensation should include a bonus potential which is tied directly to operating objectives; and

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis as required by Item 402(b) of Regulation S-K with management. Based on these reviews and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s annual meeting proxy statement on Schedule 14A.

This report is respectfully submitted by the members of the Compensation Committee of the Board.

		John P. Brancaccio, Chairman
		David Sidransky, M.D.
		Paul M. Weiss, Ph.D.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Security Ownership of Certain Beneficial Owners

Name and address of beneficial owner or identity of group	Amount and Nature of Beneficial Ownership	Percent of shares outstanding(1)

Charles Muniz(2) c/o Tamir Biotechnology, Inc. 300 Atrium Drive Somerset, NJ 08873	20,609,998(3)	30.6%
Knoll Capital Management LP, Fred Knoll and Europa International, Inc. (4) 666 Fifth Avenue, Suite 3702 New York, NY 10103	18,280,520(5)	29.1%
McCash Family Limited Partnership N3810 S. Grand Oak Drive Iron Mountain, MI 49801	3,421,452(6)	7.2%
James O. McCash, and the James O. McCash Trust N3820 S. Grand Oak Drive Iron Mountain, MI 49801	2,910,820(7)	6.1%

____________________________

(1)	The percentage of stock outstanding for each stockholder is calculated by dividing (i) the number of shares deemed to be beneficially held by such stockholder as of the date of the calculation by (ii) the sum of (A) the number of shares of Common Stock outstanding as of the date of the calculation, plus (B) the number of shares issuable upon conversion of securities convertible into shares of Common Stock and upon exercise of options or warrants held by such stockholder which were convertible or exercisable as of the date of the calculation or which will become exercisable within 60 days after the date of the calculation.
(2)	Mr. Muniz is the Company’s President, Chief Executive Officer, Chief Financial Officer and a Director.
(3)	Includes 300,000 shares of Common Stock owned by Mr. Muniz’ wife and 19,999,998 shares subject to a convertible note and warrants which are currently convertible or exercisable or which will become convertible or exercisable within 60 days after July 31, 2010.
(4)	Knoll Capital Management LP, Fred Knoll and Europa International, Inc. filed a Schedule 13D on December 7, 2009 with the Securities and Exchange Commission (the “SEC”) as joint filers.
(5)	Includes 15,214,286 shares subject to a convertible note and warrants which are currently convertible or exercisable or will become convertible or exercisable within 60 days of July 31, 2010 held by Europa International Inc. and 214,286 shares subject to warrants which are currently exercisable or will become exercisable within 60 days of July 31, 2010 held by Knoll Special Opportunities Fund II Master Fund Ltd. This information concerning the stock ownership of Knoll Capital Management LP, Fred Knoll and Europa International, Inc. was obtained from the Schedule 13D filed by them with the SEC on December 7, 2009 and other information known to the Company.
(6)	This information concerning the stock ownership of the McCash Family Limited Partnership was obtained from the Schedule 13D/A filed with the SEC on January 8, 2007 and other information known to the Company.
(7)	This information concerning the stock ownership of the James O. McCash, and the James O. McCash Trust was obtained from the Schedule 13G/A filed with the SEC on February 5, 2008 and other information known to the Company.

Security Ownership of Management

Name and address of beneficial owner or identity of group(1)	Position	Amount and Nature of Beneficial Ownership(2)	Percent of shares outstanding(3)
Charles Muniz	President, Chief Executive Officer, Chief Financial Officer and Director	20,609,998(4)	30.6%
John P. Brancaccio	Director	151,300(5)	*
David Sidransky, M.D.	Chairman of the Board	355,000(6)	*
Paul M. Weiss, Ph.D.	Director	230,090(7)	*
All Named Executive Officers and directors as a group (4 persons)		21,346,388(8)	31.4%

____________________________

*	Represents less than 1% of Tamir’s outstanding Common Stock.
(1)	Unless otherwise indicated below, the persons in the above table have sole voting and investment power with respect to all shares beneficially owned by them. The address of all Named Executive Officers and directors is c/o Tamir Biotechnology, Inc., 300 Atrium Drive, Somerset, New Jersey, 08873.
(2)	All shares listed are Common Stock. Except as discussed below, none of these shares are subject to rights to acquire beneficial ownership, as specified in Rule 13d-3(1) under the Exchange Act, and the beneficial owner has sole voting and investment power, subject to community property law where applicable.
(3)	The percentage of stock outstanding for each stockholder is calculated by dividing (i) the number of shares deemed to be beneficially held by such stockholder as of July 31, 2010 by (ii) the sum of (A) the number of shares of Common Stock outstanding as of July 31, 2010 plus (B) the number of shares issuable upon exercise of options or warrants held by such stockholder which were exercisable as of July 31, 2010 or which will become exercisable within 60 days after July 31, 2010.

(4)	Includes 300,000 shares of Common Stock owned by Mr. Muniz’ wife and 19,999,998 shares subject to a convertible note and warrants which are currently convertible or exercisable or which will become convertible or exercisable within 60 days after July 31, 2010.
(5)	Includes 145,000 shares underlying options which are currently exercisable or which will become exercisable within 60 days after July 31, 2010.
(6)	Includes 310,000 shares underlying options which are currently exercisable or which will become exercisable within 60 days after July 31, 2010.
(7)	Includes 6,535 shares of Common Stock owned by Mr. Weiss’ wife and 190,000 shares underlying options which are currently exercisable or which will become exercisable within 60 days after July 31, 2010.
(8)	Includes all shares owned beneficially by the directors and the executive officers named in the table.

The following table provides information as of July 31, 2010 on our equity based compensation plans that may be issued upon the exercise of stock options:

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders	3,535,467	$ 1.45	5,175,333

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

Related Party Transactions

The Company recognizes that related party transactions can create the appearance that Company decisions are made based on factors other than the Company’s best interest or the best interest of the Company’s stockholders. Related party transactions can also create potential or actual conflicts of interest between the Company and the related party. For purposes of Item 404 of Regulation S-K, related person transactions are transactions which exceed $120,000 in the aggregate or 1% of the average of the Company’s total assets at year end for the last three completed fiscal years, to which the Company and a related party with a direct or indirect material interest, participated. The Company’s Code of Business Conduct and Ethics requires that any such related party transactions be specifically approved by the Audit Committee. In addition directors, officers and employees must notify the Ethics Officer or the Chair of the Audit Committee of the existence of any actual or potential conflicts of interest. The Audit Committee performs a review of related party transactions as part of its review of the annual report on Form 10-K for the fiscal year ended July 31, 2010.

The Company was a party to the following transactions in which the amount involved exceeded $120,000 and in which any executive officers, directors, holders of more than 5% of our capital stock and members of such person’s immediate families had or will have a direct or indirect material interest.

On October 20, 2009, the Company completed a sale of 65 units (the “Units”) in a private placement (the “Offering”) to certain investors pursuant to a securities purchase agreement entered into on October 19, 2009. Each Unit consists of (i) $50,000 principal amount of 5% Senior Secured Convertible Promissory Notes (collectively, the “Notes”) convertible into shares of the Company’s Common Stock, (ii) Series A Common Stock Purchase Warrants (the “Series A Warrants”) to purchase in the aggregate that number of shares of Common Stock initially issuable upon conversion of the aggregate amount of Notes issued as part of the Unit, at an exercise price of $0.15 per share with a three year term and (iii) Series B Common Stock Purchase Warrants (the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase in the aggregate that number of shares of Common Stock initially issuable upon conversion of the aggregate amount of Notes issued as part of the Unit, at an exercise price of $0.25 per share with a five year term. The closing of the Offering occurred on October 19, 2009 and the Company received an aggregate of $3,250,000 in gross proceeds. Charles Muniz, the Company’s President, Chief Executive Officer, Chief Financial Officer and director, subscribed for 20 Units, certain trusts and individuals related to James O. McCash, a beneficial owner of more than five percent of the Company’s voting securities, subscribed for an aggregate of 20 Units, Europa International Inc., an affiliate of Knoll Capital Management LP, a beneficial owner of more than five percent of the Company’s voting securities, subscribed for 15 Units. The relevant documentation and additional description of the Offering were filed with the SEC on Form 8-K on October 20, 2009. The Company’s entry into an employment agreement with Mr. Muniz upon terms reasonably acceptable to the investors in the Offering was a condition to the Closing.

In addition, see the discussion of the Retirement Agreement and arrangements related thereto by and between the Company and the Company’s CEO, Kuslima Shogen, set forth above in the Post-Termination Agreement subsection of the “Compensation and Discussion Analysis”.

In December 2009, the Company engaged Champions Biotechnology, Inc. to provide certain services for approximately $99,900. The Company’s non-executive Chairman of the Board of Directors, Dr. David Sidransky, is also the chairman of the board of directors as well as a principal stockholder of Champions Biotechnology, Inc. As of July 31, 2010, the agreed amount was paid in full.

Director Independence

Please see the sections entitled Independent Directors and Board Committee Membership in Item 10 “Directors, Executive Officers and Corporate Governance” above for disclosures on Board independence and committee membership.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

In accordance with the requirements of the Sarbanes-Oxley Act of 2002 and the Audit Committee Charter, all audit and audit-related work and all non-audit work performed by the independent registered public accounting firm, J.H. Cohn LLP, is approved in advance by the Audit Committee, including the proposed fees for such work. The Audit Committee is informed of each service actually rendered that was approved through its pre-approval process.

Audit Fees

Audit fees paid by Tamir to J.H. Cohn LLP for the audit of the financial statements included in Tamir’s annual report on Form 10-K, auditors’ review of the financial statements included in Tamir’s Quarterly Reports on Form 10-Q, work related to Tamir’s registration statements and consultation on accounting topics for the years ended July 31, 2010 and 2009 totaled approximately $124,000 and $101,000, respectively.

Audit-Related Fees

None.

Tax Fees

None.

All Other Fees

None.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)(1) and (2)	The response to these portions of Item 15 is submitted as a separate section of this report commencing on page F-1.
(a)(3)	Exhibits (numbered in accordance with Item 601 of Regulation S-K).

Exhibit No.	Item Title	Filed Herewith or Incorporated by Reference

3.1	Certificate of Incorporation, dated June 12, 1981 (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1, File No. 333-112865, filed on February 17, 2004)	*
3.2	Amendment to Certificate of Incorporation, dated February 18, 1994 (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1, File No. 333-112865, filed on February 17, 2004)	*
3.3	Amendment to Certificate of Incorporation, dated December 26, 1997 (incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form S-1, File No. 333-112865, filed on February 17, 2004)	*
3.4	Amendment to Certificate of Incorporation, dated January 14, 2004 (incorporated by reference to Exhibit 3.4 to the Company’s Registration Statement on Form S-1, File No. 333-112865, filed on February 17, 2004)	*
3.5	Certificate of Designation for Series A Preferred Stock, dated September 2, 2003 (incorporated by reference to Exhibit 3.5 to the Company’s Registration Statement on Form S-1, File No. 333-112865, filed on February 17, 2004)	*
3.6	Certificate of Elimination of Series A Preferred Stock, dated February 3, 2004 (incorporated by reference to Exhibit 3.6 to the Company’s Registration Statement on Form S-1, File No. 333-112865, filed on February 17, 2004)	*
3.7	Certificate of Amendment to Certificate of Incorporation, dated April 27, 2010 (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, filed on April 30, 2010)	*
3.8	By-Laws (incorporated by reference to Exhibit 3.4 to Registration Statement on Form S-1, File No. 333-111101, filed on December 11, 2003)	*
4.1	Form of Note	*
4.2	Form of Series A Common Stock Purchase Warrant	*
4.3	Form of Series B Common Stock Purchase Warrant	*
10.1	1993 Stock Option Plan and Form of Option Agreement (incorporated by reference to Exhibit 10.10 to Registration Statement on Form SB-2, File No. 33-76950, filed on August 1, 1994)	*
10.2	1997 Stock Option Plan (incorporated by reference to Exhibit 10.2 to Registration Statement on Form S-1, File No. 333-111101, filed on December 11, 2003)	*

Exhibit No.	Item Title	Filed Herewith or Incorporated by Reference

10.2.1	Amendment No. 1 to 1997 Stock Option Plan (incorporated by reference to Exhibit 10.2.1 to the Company’s Quarterly Report on Form 10-Q, filed on June 9, 2008)	*
10.3	2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-1, File No. 333-112865, filed on February 17, 2004)	*
10.3.1	Amendment No. 1 to 2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.3.1 to the Company’s Quarterly Report on Form 10-Q, filed on June 9, 2008)	*
10.4	Form of Subscription Agreement and Warrant Agreement used in Private Placements completed in February 2000 (incorporated by reference to Exhibit 10.21 to the Company’s annual report on Form 10-K, filed on October 30, 2000)	*
10.5	Form of Subscription Agreement and Warrant Agreement used in the August and September 2000 Private Placements (incorporated by reference to Exhibit 10.24 to the Company’s Quarterly Report on Form 10-Q, filed on December 15, 2000)	*
10.6	Form of Subscription Agreement and Warrant Agreement used in the April 2001 Private Placements (incorporated by reference to Exhibit 10.23 to Registration Statement on Form S-1, File No. 333-38136, filed on July 30, 2001)	*
10.7	Form of Convertible Note entered into in April 2001 (incorporated by reference to Exhibit 10.24 to Registration Statement on Form S-1, File No. 333-38136, filed on July 30, 2001)	*
10.8	Form of Subscription Agreement and Warrant Agreement used in the July 2001 Private Placements (incorporated by reference to Exhibit 10.25 to Registration Statement on Form S-1, File No. 333-38136, filed on July 30, 2001)	*
10.9	Form of Subscription Agreement and Warrant Agreement used in the August and October 2001 private placement (incorporated by reference to Exhibit 10.26 to Registration Statement on Form S-1, File No. 333-38136, filed on December 14, 2001)	*
10.10	Form of Subscription Agreement and Warrant Agreement used in the September 2001, November 2001 and January 2002 private placements (incorporated by reference to Exhibit 10.27 to Registration Statement on Form S-1, File No. 333-38136, filed on February 21, 2002)	*
10.11	Warrant issued in the February 2002 private placement (incorporated by reference to Exhibit 10.28 to Registration Statement on Form S-1, File No. 333-38136, filed on February 21, 2002)	*
10.12	Form of Subscription Agreement and Warrant Agreement used in the March 2002, April 2002 and May 2002 private placements (incorporated by reference to Exhibit 10.29 to Registration Statement on Form S-1, File No. 333-89166, filed on May 24, 2002)	*
10.13	Form of Subscription Agreement and Warrant Agreement used in the June 2002 and October 2002 private placements (incorporated by reference to Exhibit 10.30 to the Post-Effective Amendment to Registration Statement on Form S-1, File No. 333-38136, filed on March 3, 2003)	*
10.14	Form of Note Payable and Warrant Certificate entered into April, June, July, September, November and December 2002 (incorporated by reference to Exhibit 10.31 to the Post-Effective Amendment to Registration Statement on Form S-1, File No. 333-38136, filed on March 3, 2003)	*
10.15	Form of Note Payable and Warrant Certificate entered into November 2001, January, March and May 2003 (incorporated by reference to Exhibit 10.23 to the Company’s annual report on Form 10-K, filed on October 29, 2003)	*
10.16	Form of Subscription Agreement and Warrant Agreement used in the February 2003 and April through August 2003 private placements (incorporated by reference to Exhibit 10.24 to the Company’s annual report on Form 10-K, filed on October 29, 2003)	*

Exhibit No.

Item Title

Filed Herewith or Incorporated by Reference

10.17	Form of Amended Notes Payable which amends the November 2001, April 2002, June 2002, July 2002, September 2002, November 2002 December 2002, January 2003, March 2003 and May 2003 notes payable (incorporated by reference to Exhibit 10.27 to The Company’s annual report on Form 10-K, filed on October 29, 2003)	*
10.18	Securities Purchase Agreement and Warrant Agreement used in September 2003 private placement and Form of Warrant Certificate issued on January 16, 2004 and January 29, 2004 to SF Capital Partners Ltd. (incorporated by reference to Exhibit 10.25 to the Company’s annual report on Form 10-K, filed on October 29, 2003)	*
10.19	Registration Rights Agreement used in September 2003 private placement with SF Capital Partners Ltd. (incorporated by reference to Exhibit 10.26 to the Company’s annual report on Form 10-K, filed on October 29, 2003)	*
10.20	Form of Securities Purchase Agreement used in May 2004 private placement with Knoll Capital Fund II, Europa International, Inc. and Clifford and Phyllis Kalista JTWROS (incorporated by reference to Exhibit 4.3 to Registration Statement on Form S-1, File No. 333-112865, filed on May 18, 2004)	*
10.21	Form of Registration Rights Agreement used in May 2004 private placement with Knoll Capital Fund II, Europa International, Inc. and Clifford and Phyllis Kalista JTWROS (incorporated by reference to Exhibit 4.4 to Registration Statement on Form S-1, File No. 333-112865, filed on May 18, 2004)	*
10.22	Form of Warrant Certificate issued on May 11, 2004 to Knoll Capital Fund II, Europa International, Inc. and Clifford and Phyllis Kalista JTWROS (incorporated by reference to Exhibit 4.5 to Registration Statement on Form S-1, File No. 333-112865, filed on May 18, 2004)	*
10.23	Form of Stock Option Agreement issued to the Company’s Board of Directors under the Company’s 1997 Stock Option Plan (incorporated by reference to Exhibit 10.23 to the Company’s quarterly report on Form 10-Q filed on June 9, 2005)	*
10.24	Form of Stock Option Agreement issued to the Company’s Executive Officers under the Company’s 1997 Stock Option Plan (incorporated by reference to Exhibit 10.24 to the Company’s quarterly report on Form 10-Q filed on June 9, 2005)	*
10.25	Separation Agreement and General Release with Andrew Savadelis dated May 26, 2005 (incorporated by reference to Exhibit 10.25 to the Company’s annual report on Form 10-K, filed on October 15, 2005)	*
10.26	Securities Purchase Agreement used in May 2005 private placement with Jeffrey D’Onofrio dated May 1, 2006 (incorporated by reference to Exhibit 10.26 to the Company’s annual report on Form 10-K, filed on October 16, 2006)	*
10.27	Form of Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on July 19, 2006)	*
10.28	Registration Rights Agreement dated July 17, 2006 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed on July 19, 2006)	*
10.29	Agreement to Amend Knoll Warrant dated July 17, 2006 (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K, filed on July 19, 2006)	*
10.30	Form of Amended Knoll Warrant (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K, filed on July 19, 2006)	*
10.31	Agreement to Amend SF Capital Warrant dated July 17, 2006 (incorporated by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K, filed on July 19, 2006)	*
10.32	Form of Amended Warrant for SF Capital Partners, Ltd. (incorporated by reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K, filed on July 19, 2006)	*
10.33	Securities Purchase Agreement dated July 17, 2006 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on July 19, 2006)	*

Exhibit No.

Item Title

Filed Herewith or Incorporated by Reference


10.34	Form of Stock Option Agreement for Executive Officers under the Company's 2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.34 to the Company’s Quarterly Report on Form 10-Q, filed on March 12, 2007)	*
10.35	Offer letter agreement with Lawrence A. Kenyon dated January 16, 2007 (incorporated by reference to Exhibit 10.35 to the Company’s Quarterly Report on Form 10-Q, filed on March 12, 2007)	*
10.36	Summary of the Company's Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.36 to the Company’s Quarterly Report on Form 10-Q, filed on March 12, 2007)	*
10.37	Royalty Agreement between the Company and Kuslima Shogen, dated July 24, 1991 and Amendment to Royalty Agreement, dated April 16, 2001 (incorporated by reference to Exhibit 10.37 to the Company’s Quarterly Report on Form 10-Q, filed on March 12, 2007)	*
10.38	Office Lease Agreement, dated March 14, 2007, between I&G Garden State, LLC and the Company (incorporated by reference to Exhibit 10.38 to the Company’s Quarterly Report on Form 10-Q, filed on June 18, 2007)	*
10.39	Form of Distribution and Marketing Agreement, dated July 25, 2007, between the Company and USP Pharma Spolka Z.O.O. (incorporated by reference to Exhibit 10.39 to the Company’s Quarterly Report on Form 10-Q, filed on October 15, 2007)	*^
10.40	Form of Securities Purchase Agreement, dated July 25, 2007, between the Company and Unilab LP. (incorporated by reference to Exhibit 10.40 to the Company’s Quarterly Report on Form 10-Q, filed on October 15, 2007)	*
10.41	License Agreement, dated January 14, 2008, between the Company and Par Pharmaceutical, Inc. (incorporated by reference to Exhibit 10.41 to the Company’s Quarterly Report on Form 10-Q, filed on March 7, 2008)	*^
10.42	Supply Agreement, dated January 14, 2008, between the Company and Par Pharmaceutical, Inc. (incorporated by reference to Exhibit 10.42 to the Company’s Quarterly Report on Form 10-Q, filed on March 7, 2008)	*
10.43	Purchase and Supply Agreement, dated January 14, 2008, between the Company and Scientific Protein Laboratories LLC (incorporated by reference to Exhibit 10.43 to the Company’s Quarterly Report on Form 10-Q, filed on March 7, 2008)	*
10.44	Amendment No. 1 to 1993 Stock Option Plan (incorporated by reference to Exhibit 10.44 to the Company’s Quarterly Report on Form 10-Q, filed on June 9, 2008)	*
10.45	Retirement Agreement, dated April 25, 2008, between the Company and Kuslima Shogen (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed on April 28, 2008)	*~
10.46	Securities Purchase Agreement dated October 19, 2009 by and among the Company and the investors named therein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on October 20, 2009)	*
10.47	Amendment to Securities Purchase Agreement dated February 26, 2010 by and among the Company and the investors named therein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on March 4, 2010)	*
10.48	Investors Rights Agreement dated October 19, 2009 by and among the Company and the investors named therein (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on October 20, 2009)	*
10.49	Amendment to Investor Rights Agreement dated February 26, 2010 by and among the Company and the investors named therein (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on March 4, 2010)	*
10.50	Security Agreement dated October 19, 2009 by and among the Company, the agent named therein and the secured parties named therein (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on October 20, 2009)	*

Exhibit No.		Item Title		Filed Herewith or Incorporated by Reference

10.51	Escrow Agreement by and among the Company and the parties named therein dated October 19, 2009 (incorporated by reference to Exhibit 10.4 to the Company’s Current Report 8-K, filed on October 20, 2009)	*
10.52	Employment Agreement by and between the Company and Charles Muniz dated October 19, 2009 (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed on October 20, 2009)	*~
10.53	Termination Agreement between the Company and Par Pharmaceutical, Inc. (incorporated by reference to Exhibit 10.51 to the Company’s Quarterly Report on Form 10-Q, filed on November 13, 2009)	*
10.54	Amendment to the Retirement Agreement, dated April 25, 2008, between the Company and Kuslima Shogen (incorporated by reference to Exhibit 10.52 to the Company’s Quarterly Report on Form 10-Q, filed on November 13, 2009)	*
10.55	Amendment to each 5% Senior Secured Convertible Promissory Note by and between the Company and the holders thereof dated February 26, 2010 (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed on March 4, 2010)	*
10.56	Amendment to Investors Rights Agreement dated July 31, 2010 by and among the Company and the investors named therein	+
10.57	Office Lease Agreement, dated September 28, 2010, between Princeton Corporate Plaza, LLC and the Company	+
21.1	Subsidiaries of Registrant	*
23.1	Consent of J.H. Cohn LLP	+
23.2	Consent of KPMG LLP	+
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	+
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	+
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	+

* +	Previously filed; incorporated herein by reference Filed herewith

^	Portions of this exhibit have been redacted and filed separately with the SEC pursuant to a confidential treatment request.

~	Management contract or compensatory plan or arrangement.

SIGNATURE

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.

	TAMIR BIOTECHNOLOGY, INC.


Dated: October 29, 2010	By:	/s/ CHARLES MUNIZ
		Charles Muniz, Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Dated: October 29, 2010	/s/ CHARLES MUNIZ
	Charles Muniz, Chief Executive Officer, President,
	Chief Financial Officer (Principal Executive Officer,
	Principal Financial Officer and Principal Accounting Officer) and Director


Dated: October 29, 2010	/s/ DAVID SIDRANSKY
	David Sidransky, M.D., Chairman of the Board


Dated: October 29, 2010	/s/ JOHN P. BRANCACCIO
	John P. Brancaccio, Director


Dated: October 29, 2010	/s/ PAUL M. WEISS
	Paul M. Weiss, Ph.D., Director

Tamir Biotechnology, Inc.

Index to Financial Statements

	Page

Audited Financial Statements:

Report of Independent Registered Public Accounting Firm: J.H. Cohn LLP	F - 2

Report of Independent Registered Public Accounting Firm: KPMG LLP	F - 3

Independent Auditors’ Report of Armus, Harrison & Co.	F - 5

Balance Sheets - July 31, 2010 and 2009	F - 6

Statements of Operations - Years ended July 31, 2010 and 2009,
and the Period from August 24, 1981
(Date of Inception) to July 31, 2010	F - 7

Statement of Stockholders’ Equity (Deficiency)
Period from August 24, 1981
(Date of Inception) to July 31, 2010	F - 8

Statements of Cash Flows - Years ended July 31, 2010 and 2009,
and the Period from August 24, 1981
(Date of Inception) to July 31, 2010	F - 15

Notes to Financial Statements - Years ended July 31, 2010 and
2009 and the Period from August 24, 1981
(Date of Inception) to July 31, 2010	F - 18

F - 1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Tamir Biotechnology, Inc.

We have audited the accompanying balance sheets of Tamir Biotechnology, Inc. (a development stage company) as of July 31, 2010 and 2009, and the related statements of operations, stockholders’ equity (deficiency) and cash flows for the years then ended and for the period from August 24, 1981 (date of inception) to July 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements of Tamir Biotechnology, Inc. for the period from August 24, 1981 to July 31, 2002 were audited by other auditors whose reports dated November 4, 2002 and December 9, 1992, except for Note 18 which is as of July 19, 1993 and Note 3 which is as of October 28, 1993, expressed unqualified opinions on those statements with explanatory paragraphs relating to the Company’s ability to continue as a going concern.

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

In our opinion, based on our audits and, for the effect on the period from August 24, 1981 (date of inception) to July 31, 2010 of the amounts for the period from August 24, 1981 (date of inception) to July 31, 2002, on the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Tamir Biotechnology, Inc. as of July 31, 2010 and 2009, and its results of operations and cash flows for the years then ended and for the period from August 24, 1981 (date of inception) to July 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations, has a working capital deficit and negative cash flows from operating activities that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ J.H. Cohn LLP

Roseland, New Jersey

October 29, 2010

F - 2

Report Of Independent Registered Public Accounting Firm

The Stockholders and Board of Directors

Tamir Biotechnology, Inc.:

We have audited the statements of operations, stockholders' equity (deficiency), and cash flows for the period from August 24, 1981 (date of inception) to July 31, 2002 (not presented herein) of Tamir Biotechnology, Inc. (a development stage company). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Tamir Biotechnology, Inc. for the period from August 24, 1981 to July 31, 1992 were audited by other auditors who have ceased operations and whose report dated December 9, 1992, except as to note 18 which is July 19, 1993 and note 3 which is October 28, 1993, expressed an unqualified opinion on those statements with an explanatory paragraph regarding the Company's ability to continue as a going concern.

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

In our opinion, based on our audit and, for the effect on the period from August 24, 1981 to July 31, 2002 of the amounts for the period from August 24, 1981 to July 31, 1992, on the report of other auditors who have ceased operations, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows for the period from August 24, 1981 to July 31, 2002 (not presented herein) of Tamir Biotechnology, Inc. in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations, has a working capital deficit and has limited liquid resources which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ KPMG LLP

Short Hills, New Jersey

November 4, 2002

F - 3

On December 1, 1993, certain shareholders of Armus Harrison & Co. (“AHC”) terminated their association with AHC (the “AHC termination”), and AHC ceased performing accounting and auditing services, except for limited accounting services to be performed on behalf of the Company. In June 1996, AHC dissolved and ceased all operations. The report of AHC with respect to the financial statements of the Company from inception to July 31, 1992 is included herein, although AHC has not consented to the use of such report herein and will not be available to perform any subsequent review procedures with respect to such report. Accordingly, investors will be barred from asserting claims against AHC under Section 11 of the Securities Act of 1933, as amended (the “Securities Act”) on the basis of the use of such report in any registration statement of the Company into which such report is incorporated by reference. In addition, in the event any persons seek to assert a claim against AHC for false or misleading financial statements and disclosures in documents previously filed by the Company, such claim will be adversely affected and possibly barred. Furthermore, as a result of the lack of a consent from AHC to the use of its audit report herein, or, to its incorporation by reference into a registration statement or other filings, the officers and directors of the Company will be unable to rely on the authority of AHC as experts in auditing and accounting in the event any claim is brought against such persons under Section 11 of the Securities Act based on alleged false and misleading financial statements and disclosures attributable to AHC. The discussion regarding certain effects of the AHC termination is not meant and should not be construed in any way as legal advice to any party and any potential purchaser should consult with his, her or its own counsel with respect to the effect of the AHC termination on a potential investment in the Common Stock of the Company or otherwise.

F - 4

Independent Auditors’ Report

Board of Directors

Tamir Biotechnology, Inc.

Bloomfield, New Jersey

We have audited the balance sheets of Tamir Biotechnology, Inc. (a Development Stage Company) as of July 31, 1992 and 1991, as restated, and the related statements of operations, stockholders’ deficiency, and cash flows for the three years ended July 31, 1992, as restated, and for the period from inception August 24, 1981 to July 31, 1992, as restated. In connection with our audit of the 1992 and 1991 financial statements, we have also audited the 1992, 1991 and 1990 financial statement schedules as listed in the accompanying index. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion the financial statements referred to above present fairly in all material respects, the financial position of Tamir Biotechnology, Inc. as of July 31, 1992 and 1991, as restated, and for the three years ended July 31, 1992, as restated, and for the period from inception August 24, 1981 to July 31, 1992, as restated, and the results of operations and cash flows for the years then ended in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liability in the normal course of business. As shown in the statement of operations, the Company has incurred substantial losses in each year since its inception. In addition, the Company is a development stage company and its principal operation for production of income has not commenced. The Company’s working capital has been reduced considerably by operating losses, and has a deficit net worth. These factors, among others, as discussed in Note 2 to the Notes of Financial Statements, indicates the uncertainties about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and the amount or classification of liabilities that might be necessary should the Company be unable to continue its existence.

	/s/ Armus, Harrison & Co.
	Armus, Harrison & Co.

Mountainside, New Jersey

December 9, 1992

Except as to Note 18 which

is July 19, 1993 and Note 3

which is October 28, 1993

F - 5

TAMIR BIOTECHNOLOGY, INC.

(A Development Stage Company)

Balance Sheets

July 31, 2010 and 2009

	2010			2009
ASSETS

Current assets:
Cash and cash equivalents	$	321,253		$	129,194
Prepaid clinical trial expenses		372,216			–
Prepaid expenses		105,233			54,494
Restricted cash		1,228,236			–
Total current assets		2,026,938			183,688
Property and equipment, net of accumulated depreciation and amortization of $378,435 in 2010 and $377,134 in 2009		32,594			108,018
Other assets		–			266,280
Deferred financing costs		182,063			–

Total assets	$	2,241,595		$	557,986

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY

Current liabilities:
Accounts payable	$	507,892		$	407,273
Accrued clinical trial expenses		295,150			459,911
Accrued professional service fees		374,361			350,486
Accrued compensation expense		136,634			207,245
Derivative liability		15,479,366			–
Current portion of obligations under capital lease		5,353			4,299
Other accrued expenses		200,152			2,890
Total current liabilities		16,998,908			1,432,104
Other liabilities:
Accounts payable, net of current portion		444,223			444,223
Obligations under capital lease, net of current portion		7,288			12,641
Accrued retirement benefits		231,250			335,250
Deferred rent		12,386			284,134
Convertible debt, less discount of $2,413,014 (related party, $251,093)		836,986			–
Accrued interest, convertible debt (related party, $37,664)		125,548			–
Deferred revenue		5,200,000			5,200,000
Total other liabilities		6,857,681			6,276,248
Total liabilities		23,856,589			7,708,352

Commitments and Contingencies

Stockholders’ deficiency:
Preferred stock, $.001 par value. Authorized and unissued, 1,000,000 shares at July 31, 2010 and 2009		–			–
Common stock $.001 par value. Authorized 250,000,000 shares and 100,000,000 shares at July 31, 2010 and 2009, respectively; issued and outstanding 47,313,880 shares at July 31, 2010 and 2009		47,314			47,314
Capital in excess of par value		101,456,909			101,734,572
Deficit accumulated during development stage		(123,119,217	)		(108,932,252	)
Total stockholders’ deficiency		(21,614,994	)		(7,150,366	)

Total liabilities and stockholders’ deficiency	$	2,241,595		$	557,986

See accompanying notes to financial statements.

F - 6

TAMIR BIOTECHNOLOGY, INC.

(A Development Stage Company)

Statements of Operations

Years ended July 31, 2010 and 2009

and the Period from August 24, 1981

(Date of Inception) to July 31, 2010

	2010			2009			August 24, 1981 (date of inception) to July 31, 2010

Sales	$	18,750		$	–		$	572,239

Operating expenses:
Cost of sales		–			–			336,495
Research and development		517,870			3,268,348			73,099,750
General and administrative		1,703,497			2,431,121			42,667,386

Total operating expenses		2, 221,367			5,699,469			116, 103,631

Loss from operations		(2,202,617	)		(5,699,469	)		(115,531,392	)

Investment income		1,132			25,633			2,303,213
Other income		–			–			99,939
Interest expense:
Related parties, net		(51,075	)		–			(1,198,622	)
Debt discount and fair value adjustment – derivative security		(12,455,267	)		–			(12,455,267	)
Others		(125,787	)		(5,427	)		(3,008,993	)

Loss before state tax benefit		(14, 833,614	)		(5,679,263	)		(129,791,122	)

State tax benefit		646,649			1,139,867			6,671,905

Net loss	$	(14, 186,965	)	$	(4,539,396	)	$	(123,119,217	)

Loss per basic and diluted common share	$	(0.30	)	$	(0.10	)

Weighted average number of shares outstanding – basic and diluted		47,313,000			47,313,000

See accompanying notes to financial statements.

F - 7

TAMIR BIOTECHNOLOGY, INC.

(A Development Stage Company)

Statement of Stockholders' Equity (Deficiency)

Period from August 24, 1981

(Date of Inception) to July 31, 2010

	Common Stock
	Number of Shares		Amount			Capital In Excess of par Value			Common Stock to be Issued		Deficit Accumulated During Development Stage			Subscription Receivable		Deferred compensation, restricted stock		Total Stockholders’ Equity (Deficiency)

Issuance of shares to officers and stockholders for equipment, research and development, and expense reimbursement	712,500		$	713		$	212,987		$	—	$	—		$	—	$	—	$	213,700
Issuance of shares for organizational legal service	50,000			50			4,950			—		—			—		—		5,000
Sale of shares for cash, net	82,143			82			108,418			—		—			—		—		108,500
Adjustment for 3 for 2 stock split declared September 8, 1982	422,321			422			(422	)		—		—			—		—		—
Net loss	—			—			—			—		(121,486	)		—		—		(121,486	)
Balance at July 31, 1982	1,266,964			1,267			325,933			—		(121,486	)		—		—		205,714
												—
Issuance of shares for equipment	15,000			15			13,985			—		—			—		—		14,000
Sale of shares to private investors	44,196			44			41,206			—		—			—		—		41,250
Sale of shares in public offering, net	660,000			660			1,307,786			—		—			—		—		1,308,446
Issuance of shares under stock grant program	20,000			20			109,980			—		—			—		—		110,000
Exercise of warrants, net	1,165			1			3,494			—		—			—		—		3,495
Net loss	—			—			—			—		(558,694	)		—		—		(558,694	)
Balance at July 31, 1983	2,007,325			2,007			1,802,384			—		(680,180	)		—		—		1,124,211

Exercise of warrants, net	287,566			287			933,696			—		—			—		—		933,983
Issuance of shares under stock grant program	19,750			20			101,199			—		—			—		—		101,219
Issuance of shares under stock bonus plan for directors and consultants	130,250			131			385,786			—		—			—		—		385,917
Net loss	—			—			—			—		(1,421,083	)		—		—		(1,421,083	)
Balance at July 31, 1984	2,444,891			2,445			3,223,065			—		(2,101,263	)		—		—		1,124,247

Issuance of shares under stock grant program	48,332			48			478,057			—		—			—		—		478,105
Issuance of shares under stock bonus plan for directors and consultants	99,163			99			879,379			—		—			—		—		879,478
Shares canceled	(42,500	)		(42	)		(105,783	)		—		—			—		—		(105,825	)
Exercise of warrants, net	334,957			335			1,971,012					—			—		—		1,971,347
Net loss	—			—			—			—		(2,958,846	)		—		—		(2,958,846	)
Balance at July 31, 1985	2,884,843			2,885			6,445,730			—		(5,060,109	)		—		—		1,388,506

Issuance of shares under stock grant program	11,250			12			107,020			—		—			—		—		107,032
Issuance of shares under stock bonus plan for directors and consultants	15,394			15			215,385			—		—			—		—		215,400
Exercise of warrants, net	21,565			21			80,977			—		—			—		—		80,998
Net loss	—			—			—			—		(2,138,605	)		—		—		(2,138,605	)
Balance at July 31, 1986 (carried forward)	2,933,052			2,933			6,849,112			—		(7,198,714	)		—		—		(346,669	)

F - 8

TAMIR BIOTECHNOLOGY, INC.

(A Development Stage Company)

Statement of Stockholders' Equity (Deficiency), Continued

	Common Stock
	Number of Shares	Amount		Capital In Excess of par Value		Common Stock to be Issued		Deficit Accumulated During Development Stage			Subscription Receivable		Deferred compensation, restricted stock			Total Stockholders’ Equity (Deficiency)

Balance at July 31, 1986 (brought forward)	2,933,052	$	2,933	$	6,849,112	$	—	$	(7,198,714	)	$	—	$	—		$	(346,669	)

Exercise of warrants, net	14,745		15		147,435		—		—			—		—			147,450
Issuance of shares under stock bonus plan for directors and consultants	5,000		5		74,995		—		—			—		—			75,000
Issuance of shares for services	250,000		250		499,750		—		—			—		—			500,000
Sale of shares to private investors, net	5,000		5		24,995		—		—			—		—			25,000
Net loss	—		—		—		—		(2,604,619	)		—		—			(2,604,619	)
Balance at July 31, 1987	3,207,797		3,208		7,596,287		—		(9,803,333	)		—		—			(2,203,838	)

Issuance of shares for legal and consulting services	206,429		207		724,280		—		—			—		—			724,487
Issuance of shares under employment incentive program	700,000		700		2,449,300		—		—			—		(2,450,000	)		—
Issuance of shares under stock grant program	19,000		19		66,481		—		—			—		—			66,500
Exercise of options, net	170,000		170		509,830		—		—			—		—			510,000
Issuance of shares for litigation settlement	12,500		12		31,125		—		—			—		—			31,137
Exercise of warrants, net	63,925		64		451,341		—		—			—		—			451,405
Sale of shares to private investors	61,073		61		178,072		—		—			—		—			178,133
Amortization of deferred compensation, restricted stock	—		—		—		—		—			—		449,167			449,167
Net loss	—		—		—		—		(3,272,773	)		—		—			(3,272,773	)
Balance at July 31, 1988	4,440,724		4,441		12,006,716		—		(13,076,106	)		—		(2,000,833	)		(3,065,782	)
							—
Sale of shares for litigation settlement	135,000		135		1,074,703		—		—			—		—			1,074,838
Conversion of debentures, net	133,333		133		399,867		—		—			—		—			400,000
Sale of shares to private investors	105,840		106		419,894		—		—			—		—			420,000
Exercise of options, net	1,000		1		3,499		—		—			—		—			3,500
Issuance of shares under employment agreement	750,000		750		3,749,250		—		—			—		(3,750,000	)		—
Issuance of shares under the 1989 Stock Plan	30,000		30		149,970		—		—			—		(150,000	)		—
Amortization of deferred compensation, restricted stock	—		—		—		—		—			—		1,050,756			1,050,756
Net loss	—		—		—		—		(2,952,869	)		—		—			(2,952,869	)
Balance at July 31, 1989	5,595,897		5,596		17,803,899		—		(16,028,975	)		—		(4,850,077	)		(3,069,557	)

Issuance of shares for legal and consulting services	52,463		52		258,725		—		—			—		—			258,777
Issuance of shares under the 1989 Stock Plan	56,000		56		335,944		—		—			—		(336,000	)		—
Sale of shares for litigation settlement	50,000		50		351,067		—		—			—		—			351,117
Exercise of options at, net	105,989		106		345,856		—		—			—		—			345,962

F - 9

TAMIR BIOTECHNOLOGY, INC.

(A Development Stage Company)

Statement of Stockholders' Equity (Deficiency), Continued

	Common Stock
	Number of Shares	Amount		Capital In Excess of par Value		Common Stock to be Issued		Deficit Accumulated During Development Stage			Subscription Receivable		Deferred compensation, restricted stock			Total Stockholders’ Equity (Deficiency)

Sale of shares to private investors	89,480	$	90	$	354,990	$	—	$	—		$	—	$	—		$	355,080
Issuance of shares under employment agreement	750,000		750		3,749,250		—		—			—		(3,750,000	)		—
Conversion of debentures, net	100,000		100		499,900		—		—			—		—			500,000
Amortization of deferred compensation, restricted stock	—		—		—		—		—			—		3,015,561			3,015,561
Net loss	—		—		—		—		(4,860,116	)		—		—			(4,860,116	)
Balance at July 31, 1990	6,799,829		6,800		23,699,631		—		(20,889,091	)		—		(5,920,516	)		(3,103,176	)

Exercise of options, net	16,720		16		108,664		—		—			—		—			108,680
Issuance of shares for legal consulting services	87,000		87		358,627		—		—			—		—			358,714
Issuance of shares under the 1989 Stock Plan	119,000		119		475,881		—		—			—		(476,000	)		—
Amortization of deferred compensation, restricted stock	—		—		—		—		—			—		2,891,561			2,891,561
Net loss	—		—		—		—		(5,202,302	)		—		—			(5,202,302	)
Balance at July 31, 1991	7,022,549		7,022		24,642,803		—		(26,091,393	)		—		(3,504,955	)		(4,946,523	)

Exercise of options at, net	1,000		1		3,499		—		—			—		—			3,500
Sale of shares to private investors	70,731		71		219,829		—		—			—		—			219,900
Conversion of debentures, net	94,000		94		469,906		—		—			—		—			470,000
Issuance of shares for services	45,734		46		156,944		—		—			—		—			156,990
Issuance of shares under the 1989 Stock Plan	104,000		104		285,896		—		—			—		(286,000	)		—
Amortization of deferred compensation, restricted stock	—		—		—		—		—			—		3,046,726			3,046,726
Net loss	—		—		—		—		(4,772,826	)		—		—			(4,772,826	)
Balance at July 31, 1992	7,338,014		7,338		25,778,877		—		(30,864,219	)		—		(744,229	)		(5,822,233	)

Sale of shares to private investors	352,667		353		735,147		—		—			—		—			735,500
Issuance of shares for legal services	49,600		50		132,180		—		—			—		—			132,230
Issuance of shares for services	5,000		5		9,995		—		—			—		(10,000	)		—
Issuance of shares under the 1989 Stock Plan	117,000		117		233,883		—		—			—		(234,000	)		—
Amortization of deferred compensation, restricted stock	—		—		—		—		—			—		664,729			664,729
Net loss	—		—		—		—		(2,357,350	)		—		—			(2,357,350	)
Balance at July 31, 1993	7,862,281		7,863		26,890,082		—		(33,221,569	)		—		(323,500	)		(6,647,124	)

Conversion of debentures, net	425,400		425		1,701,575		—		—			—		—			1,702,000
Sale of shares to private investors, net	743,000		743		1,710,048		—		—			—		—			1,710,791
Conversion of short-term borrowings	72,800		73		181,927		—		—			—		—			182,000
Issuance of shares for services	16,200		16		43,334		—		—			—		—			43,350

F - 10

TAMIR BIOTECHNOLOGY, INC.

(A Development Stage Company)

Statement of Stockholders’ Equity (Deficiency), Continued

	Common Stock
	Number of Shares	Amount		Capital In Excess of par Value			Common Stock to be Issued			Deficit Accumulated During Development Stage			Subscription Receivable			Deferred compensation, restricted stock			Total Stockholders’ Equity (Deficiency)

Issuance of shares under the 1989 Stock Plan, for services	5,000	$	5	$	14,995		$	—		$	—		$	—		$	—		$	15,000
Issuance of options to related parties upon conversion of accrued interest, payroll and expenses	—		—		3,194,969			—			—			—			—			3,194,969
Repurchase of stock options from related party	—		—		(198,417	)		—			—			—			—			(198,417	)
Issuance of options upon conversion of accrued interest	—		—		142,441			—			—			—			—			142,441
Common stock to be issued	—		—		—			50,000			—			—			—			50,000
Amortization of deferred compensation, restricted stock	—		—		—			—			—			—			265,000			265,000
Net loss	—		—		—			—			(2,234,428	)		—			—			(2,234,428	)
Balance at July 31, 1994	9,124,681		9,125		33,680,954			50,000			(35,455,997	)		—			(58,500	)		(1,774,418	)

Sale of shares to private investors, net	961,000		961		2,023,241			(50,000	)		—			—			—			1,974,202
Conversion of short-term borrowings	17,600		17		43,983			—			—			—			—			44,000
Issuance of shares for services	30,906		31		77,234			—			—			—			—			77,265
Exercise of options, net	185,000		185		437,015			—			—			—			—			437,200
Common stock to be issued	—		—		—			339,008			—			—			—			339,008
Common stock to be issued, for services	—		—		—			4,800			—			—			—			4,800
Amortization of deferred compensation, restricted stock	—		—		—			—			—			—			58,500			58,500
Net loss	—		—		—			—			(1,993,123	)		—			—			(1,993,123	)
Balance at July 31, 1995	10,319,187		10,319		36,262,427			343,808			(37,449,120	)		—			—			(832,566	)

Sale of shares to private investors, net	2,953,327		2,953		8,969,655			(339,008	)		—			—			—			8,633,600
Issuance of shares for services	19,995		20		70,858			(4,800	)		—			—			—			66,078
Exercise of options, net	566,700		567		1,657,633			—			—			—			—			1,658,200
Sale of warrants	—		—		12,084			—			—			—			—			12,084
Issuance of options/warrants for services	—		—		50,872			—			—			—			—			50,872
Common stock to be issued	—		—		—			258,335			—			—			—			258,335
Subscription receivable	—		—		—			—			—			(254,185	)		—			(254,185	)
Net loss	—		—		—			—			(2,942,152	)		—			—			(2,942,152	)
Balance at July 31, 1996	13,859,209		13,859		47,023,529			258,335			(40,391,272	)		(254,185	)		—			6,650,266

Sale of shares to private investors, net	112,000		112		503,888			—			—			—			—			504,000
Issuance of options for services	—		—		76,504			—			—			—			—			76,504
Exercise of options, net	729,134		729		2,620,359			(258,335	)		—			254,185			—			2,616,938
Exercise of warrants, net	147,450		148		737,102			—			—			—			—			737,250
Net loss	—		—		—			—			(5,018,867	)		—			—			(5,018,867	)
Balance at July 31, 1997 (carried forward)	14,847,793		14,848		50,961,382			—			(45,410,139	)		—			—			5,566,091

F - 11

TAMIR BIOTECHNOLOGY, INC.

(A Development Stage Company)

Statement of Stockholders' Equity (Deficiency), Continued

	Common Stock
	Number of Shares	Amount		Capital In Excess of par Value		Common Stock to be Issued		Deficit Accumulated During Development Stage			Subscription Receivable		Deferred compensation, restricted stock		Total Stockholders’ Equity (Deficiency)

Balance at July 31, 1997 (brought forward)	14,847,793	$	14,848	$	50,961,382	$	—	$	(45,410,139	)	$	—	$	—	$	5,566,091

Sale of shares to private investors, net	2,337,150		2,337		4,199,877		—		—			—		—		4,202,214
Issuance of options for services	—		—		199,954		—		—			—		—		199,954
Exercise of warrants, net	4,950		5		11,080		—		—			—		—		11,085
Issuance of shares for services, net	50,000		50		99,950		—		—			—		—		100,000
Net loss	—		—		—		—		(6,387,506	)		—		—		(6,387,506	)
Balance at July 31, 1998	17,239,893		17,240		55,472,243		—		(51,797,645	)		—		—		3,691,838

Issuance of options for services	—		—		205,593		—		—			—		—		205,593
Issuance of shares for services, net	46,701		46		16,359		—		—			—		—		16,405
Net loss	—		—		—		—		(3,156,636	)		—		—		(3,156,636	)
Balance at July 31, 1999	17,286,594		17,286		55,694,195		—		(54,954,281	)		—		—		757,200

Sale of shares to private investors, net	875,000		875		547,417		—		—			—		—		548,292
Exercise of options, net	95,000		95		45,755		—		—			—		—		45,850
Issuance of shares for services, net	174,965		175		92,009		—		—			—		—		92,184
Vesting of options previously issued for services	—		—		146,912		—		—			—		—		146,912
Net loss	—		—		—		—		(1,722,298	)		—		—		(1,722,298	)
Balance at July 31, 2000	18,431,559		18,431		56,526,288		—		(56,676,579	)		—		—		(131,860	)
Sale of shares to private investors, net	863,331		863		955,561		—		—			—		—		956,424
Exercise of options, net	165,555		166		83,565		—		—			—		—		83,731
Issuance of shares for services, net	11,800		12		10,018		—		—			—		—		10,030
Exercise of convertible debentures, net	330,000		330		296,670		—		—			—		—		297,000
Issuance of warrants with convertible debt	—		—		178,807		—		—			—		—		178,807
Issuance of options for services	—		—		160,426		—		—			—		—		160,426
Net loss	—		—		—		—		(2,294,936	)		—		—		(2,294,936	)
Balance at July 31, 2001	19,802,245		19,802		58,211,335		—		(58,971,515	)		—		—		(740,378	)
Sale of shares to private investors, net	2,622,122		2,623		1,047,925		—		—			—		—		1,050,548
Exercise of stock options and warrants	186,000		186		92,814		—		—			—		—		93,000
Issuance of shares for services, net	78,340		78		64,048		—		—			—		—		64,126
Exercise of convertible debentures, net	72,214		72		64,921		—		—			—		—		64,993
Vesting of options previously issued for services	—		—		173,436		—		—			—		—		173,436
Net loss	—		—		—		—		(2,591,162	)		—		—		(2,591,162	)
Balance at July 31, 2002 (carried forward)	22,760,921		22,761		59,654,479		—		(61,562,677	)		—		—		(1,885,437	)

F - 12

TAMIR BIOTECHNOLOGY, INC.

(A Development Stage Company)

Statement of Stockholders' Equity (Deficiency), Continued

	Common Stock
	Number of Shares	Amount		Capital In Excess of par Value		Common Stock to be Issued		Deficit Accumulated During Development Stage			Subscription Receivable		Deferred compensation, restricted stock		Total Stockholders’ Equity (Deficiency)

Balance at July 31, 2002 (brought forward)	22,760,921	$	22,761	$	59,654,479	$	—	$	(61,562,677	)	$	—	$	—	$	(1,885,437	)

Sale of shares to private investors, net	1,315,000		1,315		652,312		—		—			—		—		653,627
Exercise of stock options and warrants	764,000		764		376,896		—		—			—		—		377,660
Issuance of shares for payment of accounts payable	186,208		186		94,037		—		—			—		—		94,223
Issuance of options for services rendered	—		—		75,521		—		—			—		—		75,521
Vesting of options previously issued for services	—		—		10,038		—		—			—		—		10,038
Issuance of warrants in connection with debt issuances	—		—		594,219		—		—			—		—		594,219
Net loss	—		—		—		—		(2,411,532	)		—		—		(2,411,532	)
Balance at July 31, 2003	25,026,129		25,026		61,457,502		—		(63,974,209	)		—		—		(2,491,681	)
Sale of shares to private investors, net	3,035,200		3,036		10,732,942		—		—			—		—		10,735,978
Exercise of stock options and warrants	3,100,160		3,100		4,155,397		—		—			—		—		4,158,497
Issuance of shares for payment of accounts payable	14,703		15		52,161		—		—			—		—		52,176
Issuance of shares for conversion of subordinated debentures	3,042,817		3,043		924,829		—		—			—		—		927,872
Issuance of shares for services rendered	128,876		128		288,372		—		—			—		—		288,500
Issuance of options for services rendered	—		—		280,612		—		—			—		—		280,612
Net loss	—		—		—		—		(5,070,307	)		—		—		(5,070,307	)
Balance at July 31, 2004	34,347,885		34,348		77,891,815		—		(69,044,516	)		—		—		8,881,647
Exercise of stock options and warrants, net	438,372		438		306,717		—		—			—		—		307,155
Issuance of shares and warrants for conversion of subordinated debentures	1,744,978		1,745		462,754		—		—			—		—		464,499
Issuance of shares for services rendered	3,000		3		13,497		—		—			—		—		13,500
Issuance of options and warrants for services rendered	—		—		16,789		—		—			—		—		16,789
Net loss	—		—		—		—		(6,461,920	)		—		—		(6,461,920	)
Balance at July 31, 2005	36,534,235		36,534		78,691,572		—		(75,506,436	)		—		—		3,221,670
Sale of shares to private investors, net	6,632,099		6,632		10,977,288		—		—			—		—		10,983,920
Exercise of stock options and warrants, net	1,122,827		1,123		1,347,201		—		—			—		—		1,348,324
Issuance of stock options and warrants for services rendered	—		—		1,489,264		—		—			—		—		1,489,264
Net loss	—		—		—		—		(7,810,175	)		—		—		(7,810,175	)
Balance at July 31, 2006 (carried forward)	44,289,161		44,289		92,505,325		—		(83,316,611	)		—		—		9,233,003

F - 13

TAMIR BIOTECHNOLOGY, INC.

(A Development Stage Company)

Statement of Stockholders' Equity (Deficiency), Continued

	Common Stock
	Number of Shares	Amount		Capital In Excess of par Value			Common Stock to be Issued		Deficit Accumulated During Development Stage			Subscription Receivable		Deferred compensation, restricted stock		Total Stockholders’ Equity (Deficiency)

Balance at July 31, 2006 (brought forward)	44,289,161	$	44,289	$	92,505,325		$	—	$	(83,316,611	)	$	—	$	—	$	9,233,003
Sale of shares to private investors, net	553,360		553		1,368,104			—		—			—		—		1,368,657
Exercise of stock options and warrants, net	1,438,359		1,439		1,504,261			—		—			—		—		1,505,700
Share-based compensation expense	—		—		2,426,264			—		—			—		—		2,426,264
Net loss	—		—		—			—		(8,755,144	)		—		—		(8,755,144	)
Balance at July 31, 2007	46,280,880		46,281		97,803,954			—		(92,071,755	)		—		—		5,778,480
Exercise of stock options and warrants, net	996,000		996		686,044			—		—			—		—		687,040
Share-based compensation expense	—		—		2,298,975			—		—			—		—		2,298,975
Net loss	—		—		—			—		(12,321,101	)		—		—		(12,321,101	)
Balance at July 31, 2008	47,276,880		47,277		100,788,973			—		(104,392,856	)		—		—		(3,556,606	)
Exercise of stock options and warrants, net	37,000		37		13,183			—		—			—		—		13,220
Share-based compensation expense	—		—		932,416			—		—			—		—		932,416
Net loss	—		—		—			—		(4,539,396	)		—		—		(4,539,396	)
Balance at July 31, 2009	47,313,880		47,314		101,734,572			—		(108,932,252	)		—		—		(7,150,366	)

Share-based compensation expense	—		—		333,422			—		—			—		—		333,422
Derivative liability	—		—		(611,085	)		—		—			—		—		(611,085	)
Net loss	—		—		—			—		(14,186,965	)		—		—		(14,186,965	)
Balance at July 31, 2010	47,313,880	$	47,314	$	101,456,909		$	—	$	(123,119,217	)	$	—	$	—	$	(21,614,994	)

See accompanying notes to financial statements.

F - 14

TAMIR BIOTECHNOLOGY, INC.

(A Development Stage Company)

Statements of Cash Flows

Years ended July 31, 2010 and 2009

and the Period from August 24, 1981

(Date of Inception) to July 31, 2010

	2010			2009			August 24, 1981 (date of inception) to July 31, 2010
Cash flows from operating activities:
Net loss	$	(14,186,965	)	$	(4,539,396	)	$	(123,119,217	)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on sale of marketable equity securities		--			--			(25,963	)
Depreciation and amortization		78,172			35,103			1,823,766
Loss on disposal of property and equipment		--			--			18,926
Loss on lease termination		--			--			30,964
Share-based compensation expense		333,422			932,416			14,197,354
(Decrease) increase in deferred rent		(271,748	)		16,466			(85,578	)
Amortization of debt discount		836,986			--			1,431,205
Fair value of derivative liability		11,618,281			--			11,618,281
Amortization of deferred financing costs		44,705			--			44,705
Amortization of deferred compensation		--			--			11,442,000
Changes in assets and liabilities:
Decrease (increase) in prepaid expenses		(422,955	)		110,765			(537,316	)
Decrease in loans receivable, related party		--			--			96,051
Decrease (increase) in restricted cash		(961,956	)		83,720			(1,228,236	)
Increase in loans and interest payable, related party		51,075			--			795,614
Increase (decrease) in accounts payable		100,619			(400,982	)		1,458,750
Increase in accrued payroll and expenses, related parties		--			--			2,348,145
(Decrease) increase in accrued retirement benefits		(188,692	)		(94,308	)		329,000
Increase (decrease) in accrued expenses		144,930			(686,013	)		1,701,903
Increase in deferred revenue		--			--			5,200,000
Net cash used in operating activities		(2,824,126	)		(4,542,229	)		(72,459,646	)
Cash flows from investing activities:
Purchase of marketable equity securities		--			--			(290,420	)
Purchase of short-term investments		--			--			(1,993,644	)
Proceeds from sale of marketable equity securities		--			--			316,383
Proceeds from sale of short-term investments		--			--			1,993,644
Capital expenditures		(2,748	)		--			(1,607,814	)
Patent costs		--			--			(97,841	)
Net cash used in investing activities		(2,748	)		--			(1,679,692	)

F - 15

TAMIR BIOTECHNOLOGY, INC.

(A Development Stage Company)

Statements of Cash Flows, Continued

	2010			2009			August 24, 1981 (date of inception) to July 31, 2010
Cash flows from financing activities:
Proceeds from short-term borrowings	$	--		$	--		$	874,500
Payment of short-term borrowings		--			--			(653,500	)
Increase in loans payable, related party, net		--			--			2,628,868
Proceeds from bank debt and other long-term debt, net of deferred debt costs		--			--			3,667,460
Reduction of bank debt and long-term debt		--			--			(2,966,568	)
Increase in deferred financing costs		(226,768	)		--			(226,768	)
Payment of capital lease obligation		(4,299	)		(3,453	)		(11,137	)
Proceeds from issuance of common stock, net		--			--			53,102,893
Proceeds from exercise of stock options and warrants, net		--			13,220			14,080,850
Proceeds from issuance of convertible debentures, related party		1,000,000			--			1,297,000
Proceeds from issuance of convertible debentures, unrelated party		2,250,000			--			2,666,993
Net cash provided by financing activities		3,018,933			9,767			74,460,591
Net increase (decrease) in cash and cash equivalents		192,059			(4,532,462	)		321,253
Cash and cash equivalents at beginning of period		129,194			4,661,656			--
Cash and cash equivalents at end of period	$	321,253		$	129,194		$	321,253

Supplemental disclosure of cash flow information – interest paid	$	6,609		$	5,427		$	1,729,869

Noncash investing and financing activities:
Issuance of convertible subordinated debenture for loan payable to officer	$	-		$	-		$	2,725,000

Issuance of common stock upon the conversion of convertible subordinated debentures, related party	$	-		$	-		$	3,242,000

Conversion of short-term borrowings to common stock	$	-		$	-		$	226,000

Conversion of accrued interest, payroll and expenses by related parties to stock options	$	-		$	-		$	3,194,969

Repurchase of stock options from related party	$	-		$	-		$	(198,417	)

Conversion of accrued interest to stock options	$	-		$	-		$	142,441

Conversions of accounts payable to common stock	$	-		$	-		$	506,725

F - 16

TAMIR BIOTECHNOLOGY, INC.

(A Development Stage Company)

Statements of Cash Flows, Continued

	2010		2009		August 24, 1981 (date of inception) to July 31, 2010

Conversion of notes payable, bank and accrued interest to long-term debt	$	-	$	-	$	1,699,072

Conversion of loans and interest payable, related party and accrued payroll and expenses, related parties to long-term accrued payroll and other, related party	$	-	$	-	$	1,863,514

Issuance of common stock and warrants upon the conversion of convertible subordinated debentures and accrued interest, other	$	-	$	-	$	1,584,364

Issuance of common stock for services rendered	$	-	$	-	$	2,460

Lease incentive allowance	$	-	$	-	$	67,000

Derivative liability – warrant reclassification	$	611,085	$	-	$	611,085

Issuance of warrants with notes payable	$	-	$	-	$	594,219

Acquisition of equipment through capital lease obligation	$	-	$	-	$	23,778

See accompanying notes to financial statements.

F - 17

TAMIR BIOTECHNOLOGY, INC.

(A Development Stage Company)

Notes to Financial Statements

Years ended July 31, 2010 and 2009

and the Period From August 24, 1981

(Date of Inception) to July 31, 2010

(1) Summary of Significant Accounting Policies

Business Description

Tamir Biotechnology, Inc. (formerly known as Alfacell Corporation) (the "Company") was incorporated in Delaware on August 24, 1981 for the purpose of engaging in the discovery, investigation and development of a new class of anti-cancer drugs and anti-viral agents. The Company is a development stage company as defined in the Accounting Standards Codification (“ASC”) “Development Stage Entities.” The Company is devoting substantially all of its present efforts to establishing its business. Its planned principal operations have not commenced and, accordingly, no significant revenue has been derived therefrom.

The Company is engaged in the research, development, and commercialization of drugs for the treatment of various forms of cancer and other life threatening diseases. As of July 31, 2010, the Company is pursuing various available strategic alternatives to raise additional funds. The Company plans to continue the further development of its drug product candidates, which requires substantial capital for research, product development, and market development activities. The Company has not yet initiated marketing of a commercial drug product. Future product development will require clinical testing, regulatory approval, and substantial additional investment prior to commercialization. The future success of the Company is dependent on its ability to make progress in the development of its drug product candidates and, ultimately, upon its ability to attain future profitable operations through the successful manufacturing and marketing of those drug product candidates. There can be no assurance that the Company will be able to obtain the necessary financing or regulatory approvals to be able to successfully develop, manufacture, and market its products, or attain successful future operations. Accordingly, the Company’s future success is uncertain.

In addition, uncertainty exists as to the Company’s ability to protect its rights to patents and its proprietary information. There can also be no assurance that research and discoveries by others will not render some or all of the Company’s technology or drug product candidates noncompetitive or obsolete. Nor can there be any assurance that unforeseen problems will not develop with the Company’s technologies or applications, or that the Company will be able to address successfully technological challenges it encounters in its research and development programs. While the Company maintains insurance to cover the use of its drug product candidates in clinical trials, it does not maintain insurance covering the sale of its products nor is there any assurance that it will be able to obtain or maintain such insurance on acceptable terms or with adequate coverage against potential liabilities.

Use of Estimates

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

Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The carrying value of these investments approximates their fair market value due to their short maturity and liquidity. The Company maintains cash deposits with banks that at times exceed applicable insurance limits.

F - 18

Property and Equipment

Property and equipment is recorded at cost and is depreciated using the straight-line method over the estimated useful lives of the respective assets. Maintenance and repairs that do not extend the life of assets are charged to expense when incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in operations for the period in which the transaction takes place. Total depreciation and amortization expense for the years ended July 31, 2010 and 2009 was $78,172 and $35,103, respectively.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted cash flows expected to be generated by the asset. If the carrying amount exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount exceeds the fair value of the asset.

Other Assets

Other assets consist of the following:

		2010				2009
Lease security deposit held by a bank as collateral for a standby letter of credit in favor of the Company. The cash held by the bank is restricted as to use for the term of the standby letter of credit. In February 2010, this amount was drawn by the landlord as a court judgment in their favor.			-			$	266,280

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Management provides valuation allowances against the deferred tax assets for amounts which are not considered “more likely than not” to be realized.

Revenue Recognition

The Company recognizes revenue in accordance with Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition” issued by the staff of the SEC. Under SAB No. 104, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred and/or services have been rendered, the sales price is fixed or determinable, and collectibility is reasonably assured.

The Company enters into marketing and distribution agreements, which contain multiple deliverables. Under the provisions of ASC, “Revenue Recognition - Multiple Deliverable Revenue Arrangements”, the Company evaluates whether these deliverables constitute separate units of accounting to which total arrangement consideration is allocated. A deliverable qualifies as a separate unit of accounting when the item delivered to the customer has standalone value, there is objective and reliable evidence of fair value of items that have not been delivered to the customer, and, if there is a general right of return for the items delivered to the customer, delivery or performance of the undelivered items is considered probable and substantially in the control of the Company. Arrangement consideration is allocated to units of accounting on a relative fair-value basis or the residual method if the Company is unable to determine the fair value of all deliverables in the arrangement. Consideration allocated to a unit of accounting is limited to the amount that is not contingent upon future performance by the Company. Upon determination of separate units of accounting and allocated consideration, the general criteria for revenue recognition are applied to each unit of accounting.

F - 19

The Company has entered into an agreement with USP Pharma Spolka Z.O.O. (USP) to market, sell and distribute ONCONASE® in Poland and other countries in Eastern Europe. The Company received a $0.1 million upfront nonrefundable fee in July 2007 and is entitled to receive future additional fees, milestone payments and royalties. USP is responsible for all commercial costs in the territory. The Company has agreed to provide or arrange for contract manufacture of a commercial supply of ONCONASE® upon receipt of marketing approval in the territory. The up-front nonrefundable fee received by the Company will be recognized ratably as revenue once the general criteria for revenue recognition has been met for the unit of accounting to which the fee has been allocated.

In January 2008, the Company entered into a marketing and distribution agreement with BL&H Co. Ltd. for the commercialization of ONCONASE® in Korea, Taiwan and Hong Kong. Under the agreement, the Company received a $0.1 million up-front fee and are eligible to receive additional cash milestones and 50% of net sales in the territory. The Company will be responsible for the manufacture and supply of ONCONASE® to BL&H, while BL&H will be responsible for all activities and costs related to regulatory filings and commercial activities in the territory.

In January 2008, the Company entered into a U.S. License Agreement for ONCONASE® with Par Pharmaceutical, Inc. (“Par”). Under the terms of the License Agreement, Strativa Pharmaceuticals (“Strativa”), the proprietary products division of Par, received exclusive marketing, sales and distribution rights to ONCONASE® for the treatment of cancer in the United States and its territories. The Company retained all rights and obligations for product manufacturing, clinical development and obtaining regulatory approvals, as well as all rights for those non-U.S. jurisdictions in which the Company has not currently granted any such rights or obligations to third parties. The Company received a cash payment of $5 million upon the signing of the License Agreement and would have been entitled to additional development and sales milestone payments and double-digit royalties on net sales of ONCONASE®.

On September 8, 2009, the Company and Par entered into a Termination and Mutual Release Agreement (the “Termination Agreement”) pursuant to which the Company’s License Agreement and Supply Agreement with Par were terminated. The License Agreement was terminated and all rights under the license granted to Par revert back to the Company under the Termination Agreement. Under the Supply Agreement, the Company had agreed to supply all of Par’s requirements for ONCONASE®. Pursuant to the Termination Agreement, Par will be entitled to a royalty of 2% of net sales of ONCONASE® or any other ranpirnase product developed by the Company for use in the treatment of cancer in the United States and its territories commencing with the first sale of such product and terminating upon the later to occur of the 12th anniversary of the first sale and the date of expiration of the last valid claim of a pending application or issued patent owned or controlled by the Company with respect to such product.

The Company has evaluated both the License Agreement and the Termination Agreement and has determined that the Company is obligated to provide royalty payments in the event the Company has net sales. As such, as of July 31, 2010, the Company has not recognized into income any of the $5 million upfront payment received under the License Agreement.

Research and Development

Research and development costs are expensed as incurred. These costs include, among other things, consulting fees and costs related to the conduct of human clinical trials. The Company also allocates indirect costs, consisting primarily of operational costs for administering research and development activities, to research and development expenses.

Share-Based Compensation

In December 2004, the Financial Accounting Standards Board (“FASB”) issued amended guidance on accounting for Stock Compensation. The amended guidance requires all share-based payments, including stock option grants to employees, to be recognized as an operating expense in the statement of operations. The expense is recognized over the requisite service period based on fair values measured on the date of grant. The Company adopted the amended guidance on Stock Compensation effective August 1, 2005 using the modified prospective method and, accordingly, prior period amounts have not been restated. Under the modified prospective method, the fair value of all new stock options issued after July 31, 2005 and the unamortized fair value of unvested outstanding stock options at August 1, 2005 are recognized as expense as services are rendered.

F - 20

Shares, warrants and options have been issued to non-employees for services. The fair value of such securities is recorded as an expense and additional paid-in capital in stockholders’ equity (deficiency) over the applicable service periods using variable accounting through the vesting date based on the fair value of the securities at the end of each period or the vesting date.

The Company recorded the following share-based compensation expense for employees based on the fair value of stock options:

	Year Ended July 31,
	2010		2009

Research and development	$	16,808	$	347,257
General and administrative		316,614		585,159
Total share-based compensation expense	$	333,422	$	932,416
Basic and diluted loss per common share	$	0.01	$	.02

At July 31, 2008, the Company reversed a total of $1,225,112 compensation expense related to 1,072,489 performance stock options issued to employees in May 2007. The Company assessed that the performance condition tied to these stock options is deemed improbable; therefore, no compensation expense should be recognized in accordance to the guidance on accounting for Stock Compensation.

The fair value of the stock options at the grant date was estimated using the Black-Scholes option pricing model based on the weighted-average assumptions as noted in the following table. The risk-free interest rate for periods approximating the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected stock price volatility is based on historical volatility of the Company’s stock price. For post July 31, 2005 grants, the expected term until exercise is derived using the “simplified” method as allowed under the provisions of the SEC’s SAB No. 110, “Disclosures about Fair Value of Financial Instruments” and represents the period of time that options granted are expected to be outstanding.

	2010	2009

Expected dividend yield	0%	0%
Risk-free interest rate	2.17%	1.00%
Expected volatility	120.63%	102.13%
Expected term (years)	4.66	3.5
Weighted average fair value of options at grant date	$ 0.25	$ 0.16
Weighted average fair value exercise price	$ 0.30	$ 0.16

As of July 31, 2010, there was approximately $774,000 of total unrecognized compensation expense related to unvested options granted to employees that is expected to be recognized over a weighted average period of 2.35 years.

Accounting For Warrants Issued With Convertible Debt

The Company accounts for the intrinsic value of beneficial conversion rights arising from the issuance of convertible debt instruments with non-detachable conversion rights that are in-the-money at the commitment date pursuant to the consensuses of ASC “Debt: Debt With Conversion and Other Options”. Such value is allocated to additional paid–in capital and the resulting debt discount is charged to interest expense over the terms of the notes payable. Such value is determined after first allocating an appropriate portion of the proceeds received to warrants or any other detachable instruments included in the exchange.

Leases

With respect to our operating leases, the Company applies the provisions of FASB Topic “Accounting for Leases”, recognizing rent expense on a straight-line basis over the lease term due to escalating lease payments and landlord incentives.

F - 21

Contingencies

Fair Value of Financial Instruments

Financial instruments consist primarily of cash and cash equivalents, accounts payable and convertible debt. The carrying value of these financial instruments approximates fair value due to the relative short term nature of these investments and the carrying value of the convertible debt approximates their fair value due to the recent issuance of the convertible debt.

Recent Accounting Pronouncements

In June 2009, the FASB issued the FASB Accounting Standards Codification (the “Codification”). Effective July 1, 2009, the Codification became the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP), superseding existing rules and related literature issued by FASB, the American Institute of Certified Public Accountants (“AICPA”) and Emerging Issues Task Force (“EITF”). The Codification also eliminates the previous U.S. GAAP hierarchy and establishes one level of authoritative GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. All other literature is considered non-authoritative. The Codification, which has not changed GAAP, was effective for interim and annual periods ended after September 15, 2009. The Company adopted the Codification for the quarter ended October 31, 2009. Other than the manner in which accounting guidance is referenced, the adoption of the Codification had no impact on the Company’s financial statements.

In December 2007, FASB issued new accounting guidance related to the accounting for business combinations and related disclosures. This guidance establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree, and any goodwill acquired in a business combination. It also establishes disclosure requirements to enable the evaluation of the nature and financial effects of a business combination. The guidance is to be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company adopted this guidance, effective August 1, 2009, and it did not have any effect on the Company’s financial statements.

In February 2008, FASB issued amended guidance to delay the fair value measurement and expanded disclosures about fair value measurements for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until fiscal years beginning after November 15, 2008. Effective August 1, 2009, the Company adopted the guidance related to fair value measurements for nonfinancial assets and nonfinancial liabilities and the adoption of such guidance did not have any effect on the Company’s financial statements.

In June 2008, FASB issued guidance for determining whether an equity-linked financial instrument (or embedded feature) is indexed to an entity’s own stock, which would qualify as a scope exception to derivative classification under ASC Topic “Derivatives and Hedging”. The guidance is effective for fiscal years beginning after December 15, 2008 and early adoption for an existing instrument is not permitted. The Company adopted this guidance, effective August 1, 2009. The adoption had no impact on the Company’s previously accounted for equity-linked financial instruments that were considered to be indexed to its own equity. Refer to Note 6 for the result of the adoption on the equity-linked instruments included within the Securities Purchase Agreement entered into on October 19, 2009.

In August 2009, FASB issued amended guidance on the measurement of liabilities at fair value. The guidance provides clarification that in circumstances in which a quoted market price in an active market for an identical liability is not available, the fair value of a liability be measured using one or more of the valuation techniques that uses the quoted price of an identical liability when traded as an asset or, if unavailable, quoted prices for similar liabilities or similar assets when traded as assets. If none of this information is available, an entity should use a valuation technique in accordance with existing fair valuation principles. This guidance is effective for the first reporting period (including interim periods) after issuance. The Company adopted this guidance in the quarter ended October 31, 2009. The adoption had no impact on the Company’s financial statements.

F - 22

In October 2009, FASB issued amended guidance for separating consideration in multiple-deliverable arrangements. It eliminates the requirement under previous guidance that all undelivered elements have vendor-specific objective evidence (VSOE) or third-party evidence (TPE) of fair value before recognizing a portion of revenue related to the delivered items, and establishes that revenue be allocated to each element based on its relative selling price, as determined by VSOE, TPE, or the entity’s estimated selling price if neither of the aforementioned is available. Additionally, the amended guidance eliminates the residual method of allocation and expands required disclosures about multiple-element revenue arrangements. It will be effective prospectively for revenue arrangements entered into beginning January 1, 2011, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this guidance will have, if any, on the Company’s financial statements.

In January 2010, the FASB issued a new guidance, Improving Disclosures about Fair Value Measurements (ASU 2010-06). This provision amends previous provisions that require reporting entities to make new disclosures about recurring and nonrecurring fair value measurements including the amounts of and reasons for significant transfers into and out of Level 1 and Level 2 fair value measurements and separate disclosure of purchases, sales, issuances, and settlements in the reconciliation of Level 3 fair value measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2010. The adoption of this guidance did not have a material impact on the Company’s results of operations or financial condition.

In April 2010, the FASB issued a new guidance Revenue Recognition – Milestone Method. This provision provides guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. A vendor can recognize consideration that is contingent upon achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. The following criteria must be met for a milestone to be considered substantive. The consideration earned by achieving the milestone should 1) be commensurate with either the level of effort required to achieve the milestone or the enhancement of the value of the item delivered as a result of a specific outcome resulting from the vendor’s performance to achieve the milestone; 2) related solely to past performance; 3) be reasonable relative to all deliverables and payment terms in the arrangement. No bifurcation of an individual milestone is allowed and there can be more than one milestone in an arrangement. Accordingly, an arrangement may contain both substantive and non substantive milestones. This guidance is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. The adoption of this guidance does not have a material impact on the Company’s financial statements.

(2)

Liquidity

The Company has reported net losses of $14,187,000 and $4,539,000 and negative cash flows from operating activities of $2,824,000 and $4,542,000 for fiscal years ended July 31, 2010 and 2009, respectively. As of July 31, 2010, the Company had net working capital deficit of $14,972,000, and cash and cash equivalents of $321,000. The loss from date of inception, August 24, 1981, to July 31, 2010 amounts to $123,119,000. Until and unless the Company’s operations generate significant revenues and cash flow, the Company will attempt to continue to fund operations from cash on hand and through the sources of capital described below. The Company’s long-term continued operations will depend on its ability to raise additional funds through various potential sources such as equity and debt financing, convertible debentures, collaborative agreements, strategic alliances, sale of tax benefits, revenues from the commercial sale of ONCONASE®, licensing of its proprietary RNase technology and its ability to realize revenues from its technology and its drug candidates via out-licensing agreements with other companies. The Company is also pursuing available strategic alternatives which focuses on, but not be limited to, strategic partnership transactions, and could include a possible sale of the Company. Such additional funds and various alternatives may not become available as the Company may need them or be available on terms acceptable to the Company. Insufficient funds could require the Company to delay, scale back, or eliminate one or more of its research and development programs or to license third parties to commercialize drug product candidates or technologies that the Company would otherwise seek to develop without relinquishing its rights thereto. The Company expects that its cash balances as of July 31, 2010 will be sufficient to support its activities through April 2011. There can be no assurance that the Company will be able to raise the capital it needs on terms which are acceptable, if at all. The Company may also obtain additional capital through the exercise of outstanding options and warrants and the sale of its tax benefit, although it cannot provide any assurance of such exercises or sale or the amount of capital it will receive, if any.

F - 23

The Company’s audited financial statements for the fiscal year ended July 31, 2010 were prepared under the assumption that the Company will continue its operations as a going concern. Continued operations are dependent on the Company’s ability to raise various sources of capital described above. Such capital formation activities may not be available or may not be available on reasonable terms. The Company’s financial statements do not include any adjustments that may result from the outcome of this uncertainty.

(3) Restricted Cash

Restricted cash is an escrow account held by a bank which can only disburse funds to satisfy obligations of the Company owed to clinical research organizations, hospitals, doctors and other vendors and service providers associated with the clinical trials which the Company intends to conduct for its ONCONASE® product. The escrow agreement governing the account shall terminate on the earlier of the date that all funds have been disbursed from the escrow account or April 19, 2011, at which time any remaining funds will be disbursed to the Company.

(4) Net Loss Per Common Share

The following table sets forth the computation of basic and diluted net loss per common share:

	Year Ended July 31,
	2010			2009

Numerator:
Net loss	$	(14,186,965	)	$	(4,539,396	)
Denominator:
Weighted average number of common shares outstanding		47,313,000			47,313,000
Loss per common share - basic and diluted	$	(0.30	)	$	(0.10	)
Potentially dilutive securities:
Warrants		49,784,000			8,495,650
Convertible notes (principal & interest)		22,503,651			-
Stock options		3,535,467			4,771,650
Total potentially dilutive securities		75,823,118			13,267,300

As the Company has incurred a net loss for all periods presented, basic and diluted per common share amounts are the same, since the inclusion of all potentially dilutive securities would be anti-dilutive.

(5)	Property and Equipment

Property and equipment, at cost, consists of the following at July 31:

	2010			2009

Laboratory equipment	$	276,202		$	276,202
Office equipment		111,049			118,172
Leasehold improvements		23,778			90,778
Less accumulated depreciation and amortization		(378,435	)		(377,134	)
Property and equipment, net	$	32,594		$	108,018

F - 24

During the fiscal year ended July 31, 2010, the Company wrote off the following unusable property and equipment:

	Cost		Accumulated Depreciation		Net Book Value

Office equipment	$	9,872	$	4,442	$	5,430
Leasehold improvements		67,000		16,616		50,384
Total	$	76,872	$	21,058	$	55,814

(6) Convertible Notes and Warrants

On October 19, 2009, the Company completed a sale of 65 units (the “Units”) in a private placement (the “Offering”) to certain investors pursuant to a securities purchase agreement (the “Securities Purchase Agreement”). Each Unit consists of (i) $50,000 principal amount of 5% Senior Secured Convertible Promissory Notes (collectively, the “Notes”) convertible into shares of the Company’s common stock, par value $.001 per share (“Common Stock”), (ii) Series A Common Stock Purchase Warrants (the “Series A Warrants”) to purchase in the aggregate that number of shares of Common Stock initially issuable upon conversion of the aggregate amount of Notes issued as part of the Unit, at an exercise price of $0.15 per share with a three year term and (iii) Series B Common Stock Purchase Warrants (the “Series B Warrants”, together with the Series A Warrants, the “Warrants”) to purchase in the aggregate that number of shares of Common Stock initially issuable upon conversion of the aggregate amount of Notes issued as part of the Unit, at an exercise price of $0.25 per share with a five year term. The closing of the Offering occurred on October 19, 2009 (the “Closing”) and the Company received an aggregate of $3,250,000 in gross proceeds.

The Notes mature on the earlier of (i) October 19, 2012; (ii) the closing of a public or private offering of the Company’s debt or equity securities subsequent to the date of issuance resulting in gross proceeds of at least $8,125,000 other than a transaction involving a stockholder who holds 5% or more of the Company’s outstanding capital stock as of the date of issuance; or (iii) on the demand of the holder of the Note upon the Company’s consummation of a merger, sale of substantially all of its assets, or the acquisition by any entity, person or group of 50% or more of the voting power of the Company. Interest accrues on the principal amount outstanding under the Notes at 5% per annum, and is due upon maturity. Upon an event of default under the Notes, the interest rate shall increase to 7%. On April 27, 2010, the stockholders approved an amendment to the certificate of incorporation increasing the number of authorized shares of capital stock of the Company to cover the conversion of the Notes and exercise of the Warrants. The amendment was filed on the same date. The Notes are convertible into Common Stock at the option of the holder of the Note at a price of $0.15 per share at any time prior to the date on which the Company makes payment in full of all amounts outstanding under the Note. The Notes are not prepayable for a period of one year following the issuance thereof. The Notes are secured by a senior security interest and lien on all of the Company’s right, title and interest to all of the assets owned by the Company as of the Closing or thereafter acquired pursuant to the terms of a security agreement (the “Security Agreement”) entered into by the Company with each of the investors. The Warrants are exercisable immediately following the Closing.

In connection with the Offering, the Company entered into an investor rights agreement (the “Investor Rights Agreement”) with each of the investors. The Investor Rights Agreement provides that the Company will file a “resale” registration statement (the “Initial Registration Statement”) covering all of the shares issuable upon conversion of the Notes (the “Note Shares”) and the shares issuable upon exercise of the Warrants (the “Warrant Shares”, together with the Note Shares, the “Securities”), up to the maximum number of shares able to be registered pursuant to applicable Securities and Exchange Commission (“SEC”) regulations, within 120 days of the Closing (the “Filing Deadline”). On February 26, 2010, the Company and the investors amended the Investor Rights Agreement (the “Rights Agreement Amendment”) to extend the Filing Deadline to May 1, 2010, which Rights Agreement Amendment was filed with the Form 8-K filed by the Company on March 4, 2010. In accordance with the Investor Rights Agreement, on April 30, 2010, the Company filed with the SEC a “resale” registration statement on Form S-1. If any Securities are unable to be included on the Initial Registration Statement, the Company has agreed to file subsequent registration statements until all the Securities have been registered. Under the terms of the Investor Rights Agreement, the Company is obligated to maintain the effectiveness of the “resale” registration statement until all securities therein are sold or otherwise may be sold by non-affiliates pursuant to Rule 144, without restrictions. A cash penalty at 1% per month will be triggered in the event the Company fails to file or obtain the effectiveness of a registration statement prior to the deadlines set forth in the Investor Rights Agreement, which deadlines were extended by the Rights Agreement Amendment, or if the Company ceases to be current in filing its periodic reports with the SEC. The aggregate penalty accrued with respect to each investor may not exceed 6% of the original purchase price paid by that investor, or 12% if the only effectiveness failure is the Company’s failure to be current in its periodic reports with the SEC.

On July 31, 2010, the Company entered into a second amendment to the Investor Rights Agreement with the investors, pursuant to which the investors waived their right to receive penalties in respect of all matters occurring prior to the date of the second amendment, which included the Company’s failure to obtain the effectiveness of a registration statement within the deadlines set forth in the Investor Rights Agreement. In addition, the second amendment postponed the investors right to require the Company to file a "resale" registration statement covering all of the shares issuable upon conversion of the Senior Secured Notes and the shares issuable upon exercise of the Warrants until after the Company’s next financing which yields gross proceeds of at least $3,250,000. In the event of such a financing, and following a written demand made by the holders of the majority of the registrable securities, the Company must file, within 90 days of its receipt of the demand notice, either a new "resale" registration statement registered the shares or amend the registration statement the Company filed on April 30, 2010.

F - 25

In connection with the Offering, the Company also entered into an escrow agreement (the “Escrow Agreement”) whereby certain investors placed $1,600,000 of the proceeds paid for their Units in an escrow account pursuant to the terms of the Securities Purchase Agreement. Such amounts can be disbursed from the escrow account only to satisfy obligations of the Company owed to clinical research organizations, hospitals, doctors and other vendors and service providers associated with the clinical trials which the Company intends to conduct for its ONCONASE® product. The Escrow Agreement shall terminate on the earlier of the date that all funds have been disbursed from the escrow account and April 19, 2011, at which time any remaining funds will be disbursed to the Company.

Charles Muniz, the Company’s President, Chief Executive Officer and Chief Financial Officer, subscribed for 20 Units; certain trusts and individuals related to James O. McCash, a beneficial owner of more than five percent of the Company’s voting securities, subscribed for an aggregate of 20 Units; Europa International Inc., a beneficial owner of more than five percent of the Company’s voting securities, subscribed for 15 Units; and Unilab LP, an affiliate of US Pharmacia, an affiliate of the Company’s distributor for ONCONASE® in Eastern Europe and a current stockholder, subscribed for 10 units. These investors are party to the Securities Purchase Agreement, the Investor Rights Agreement, the Security Agreement and the Escrow Agreement. The Company’s entry into an employment agreement with Mr. Muniz upon terms reasonably acceptable to the investors in the Offering was a condition to the Closing.

The Company concluded that it should account for the warrants and conversion options embedded in the Notes in accordance with ASC Topic “Derivatives and Hedging”. Accordingly, the Company determined that the warrants and the conversion options embedded in the Notes should be accounted for as free standing derivatives that will be measured at fair value and classified as liabilities at the closing of the Offering. Each subsequent reporting period, the Company will mark to market the warrants and conversion feature of Notes with any change in fair value recorded through the statement of operations. This accounting treatment is due to the fact that the settlement terms of the warrants and conversion feature of the Notes do not allow them to qualify for equity presentation due to down-round protection. Accordingly, on October 19, 2009, in connection with the closing of the Offering, the convertible feature of the Notes were recorded as a derivative liability of approximately $6.1 million and the Series A and Series B warrants were recorded as a derivative liability of approximately $6.1 million each, respectively.

At the closing for the Offering, the fair value of the conversion feature, approximately $6.1 million, exceeded the proceeds of $3.25 million. The difference of approximately $2.9 million was charged to expense as the change in the fair market value of the conversion liability. Accordingly, the Company recorded an initial discount of $3.25 million equal to the face value of the Notes, which will be amortized over the three-year term, using the straight-line method.

At July 31, 2010, the Company accounted for the conversion feature using the fair value method, with the resultant gain recognition recorded in the statement of operations. At July 31, 2010, the fair value of the conversion feature liability was approximately $5.2 million, comprised of the $6.1 million recorded at the closing for the Offering and $0.9 million gain recorded to mark to market the liability at July 31, 2010. The conversion feature was valued at October 19, 2009 and July 31, 2010 using the Black-Scholes valuation model and the following assumptions:

	October 19, 2009	July 31, 2010

Volatility	126%	153.71%
Risk-free interest rate	1.50%	0.55%
Remaining contractual life (years)	3.0	2.22

At the Closing, the Company recorded the Series A and Series B warrants as liabilities at their fair values of approximately $6.1 million each, based upon the Black-Scholes valuation model. The warrants will be accounted for using mark-to-market accounting and charged to the statement of operations in a manner similar to the conversion feature at each reporting date.

At July 31, 2010, the Company accounted for the warrant liabilities using the fair value method, with the resultant gain recognition recorded in the statement of operations. At July 31, 2010, the fair value of the Series A and Series B warrant liabilities were approximately $5.2 million and $5.1 million, respectively. The fair value of the Series A warrant is comprised of the $6.1 million recorded at the closing for the Offering and approximately $0.9 million gain recorded to mark to market the liability at July 31, 2010. The fair value of the Series B warrant is comprised of the $6.1 million recorded at the closing for the Offering and approximately $1.0 million gain recorded to mark to market the liability at July 31, 2010.

F - 26

The Series A and Series B warrant liabilities were valued at October 19, 2009 and July 31, 2010 using the Black-Scholes valuation model and the following assumptions:

	Series A Warrants		Series B Warrants
	October 19, 2009	July 31, 2010	October 19, 2009	July 31, 2010

Volatility	126%	153.71%	113.17%	123.44%
Risk-free interest rate	1.50%	0.55%	2.36%	1.22%
Remaining contractual life (years)	3.0	2.22	5.0	4.22

In addition, the Company evaluated the classification of all non-employee share commitments issued outside of the plans which existed prior to the Offering (the “Prior Non-Employee Commitments”). As a result, at October 19, 2009, the Company reclassified $747,235 from equity to liability for all Prior Non-Employee Commitments and has included this amount as a part of derivative liability. The Company marked to market the Prior Non-Employee Commitments at April 27, 2010 and recorded a gain of $611,085 for the change in fair value from October 19, 2009 to April 27, 2010. On April 27, 2010, the Company’s stockholders approved an amendment to the Company’s certificate of incorporation increasing the amount of authorized shares to cover all existing share commitments therefore, the marked-to-market liabilities for Prior Non-Employee Commitments were reclassified to equity in the amount of $136,150.

(7) Stockholders' Equity

On September 1, 1981, the Company issued 712,500 shares of common stock (1,068,750 shares adjusted for the stock split on September 8, 1982) to officers and stockholders in exchange for equipment, research and development services, stock registration costs, reimbursement of expenses and other miscellaneous services. The common stock issued for services was recorded at the estimated fair value of services rendered based upon the Board of Directors' determination and ratification of the value of services. Equipment received in exchange for common stock was recorded at the transferor's cost. Common stock issued for reimbursement of expenses was recorded based upon expenses incurred. All values assigned for expenses and services rendered were charged to operations except for stock registration costs, which were charged against proceeds.

On July 30, 1982, the Company sold 82,143 shares of common stock (123,214 shares adjusted to reflect the stock split on September 8, 1982) to a private investor at a price of $1.40 per share, resulting in net proceeds to the Company of approximately $108,500.

On September 8, 1982, the Company declared a 3-for-2 stock split. Shares previously issued by the Company were restated in accordance with the stock split.

On September 8, 1982, the Company issued 15,000 shares of common stock to an officer and stockholder in exchange for equipment. The equipment received in exchange for the common stock was recorded at the transferor's cost.

On November 1, 1982 and January 3, 1983, the Company sold 28,125 and 16,071 shares of common stock, respectively, to private investors at $.93 per share, resulting in net proceeds to the Company of approximately $41,250.

On January 17, 1983, the Company sold 660,000 shares of its common stock and 330,000 common stock purchase warrants in a public offering at a price of $2.50 per share, resulting in net proceeds to the Company of approximately $1,308,446. The warrants were to expire 12 months after issuance; however, the Company extended the expiration date to July 16, 1984. During the fiscal years ended July 31, 1983 and 1984, the net proceeds to the Company from the exercise of the warrants amounted to $934,000. Each common stock purchase warrant was not detachable from its common stock or exercisable until six months after the issuance date of January 17, 1983. Each warrant entitled the holder to purchase one share of common stock at an exercise price of $3.00 after six months and prior to nine months after issuance. The exercise price increased to $3.50 after nine months and prior to 12 months after issuance.

F - 27

In connection with the public offering, the Company sold 60,000 five-year purchase warrants to the underwriters at a price of $.001 per warrant. Each warrant entitled the holder to purchase one share of common stock at an exercise price of $3.00. Pursuant to the antidilution provisions of the warrants, the underwriters received warrants to purchase 67,415 shares at an exercise price of $2.67 per share. By July 31, 1986, all such warrants were exercised and the Company received proceeds of approximately $180,000.

On February 22, 1984, the Company filed a registration statement with the Securities and Exchange Commission for the issuance of two series of new warrants, each to purchase an aggregate of 330,000 shares (hereinafter referred to as one-year warrants and two-year warrants). The one-year warrants had an exercise price of $6.50 per share and expired July 17, 1985. The two-year warrants had an exercise price of $10.00 per share and were to expire July 17, 1986. However, the Company extended the expiration date to August 31, 1987. The one-year warrants and two-year warrants were issued as of July 17, 1984 on a one-for-one basis to those public offering warrant holders who exercised their original warrants, with the right to oversubscribe to any of the warrants not exercised. During the fiscal years ended July 31, 1985, 1986, 1987 and 1988, the Company received net proceeds of approximately $2,471,000 as a result of the exercise of the warrants.

On January 2, 1987, the Company issued 250,000 shares of common stock to officers and stockholders, including the President and Chief Executive Officer, in recognition of services performed for the Company. The fair value of such shares was recorded as compensation expense.

On February 3, 1987, the Company sold 5,000 shares of common stock to a private investor for $5.00 per share, resulting in net proceeds to the Company of approximately $25,000.

On September 1, 1987, the Board of Directors approved new wage contracts for three officers. The contracts provided for the issuance of 700,000 shares of common stock as an inducement for signing. The fair value of these shares was recorded as deferred compensation and was amortized over the term of the employment agreements. The contracts also provided for the issuance of 1,500,000 shares of common stock in 750,000 increments upon the occurrence of certain events. These shares were issued during the fiscal years ended July 31, 1989 and 1990 and the fair value of such shares was recorded as deferred compensation and was amortized over the remaining term of the employment agreements. The contracts also provided for five-year options to purchase 750,000 shares of common stock at $3.00 per share; options for the purchase of 170,000 shares were exercised on June 16, 1988 and the remaining options for the purchase of 580,000 shares expired on September 2, 1992.

During the fiscal year ended July 31, 1988, the Company issued 206,429 shares of common stock for payment of legal and consulting services. The Company also issued 12,500 shares of common stock in connection with the settlement of certain litigation. The fair value of such shares was charged to operations.

During the fiscal year ended July 31, 1988, the Company sold 61,073 shares of common stock to private investors at $2.92 per share resulting in net proceeds to the Company of approximately $178,133.

On September 21, 1988, the Company entered into a stipulation of settlement arising from a lawsuit wherein it agreed to pay a total of $250,000 in 12 monthly installments. Under the agreement, the Company authorized the issuance on September 7, 1988 and October 18, 1988 of 85,000 and 50,000 shares, respectively, to an escrow account to secure payment of the $250,000 due under the stipulation of settlement. During the fiscal year ended July 31, 1989, the Company issued and sold the 135,000 shares of common stock for $1,074,838. On February 14, 1989, the Board of Directors authorized the issuance of an additional 50,000 shares. During the year ended July 31, 1990, the shares were sold for $351,117. The proceeds from the above transactions were used to pay the settlement and related legal costs, reduce loans from and interest due to the Company's Chief Executive Officer, and for working capital.

During the fiscal year ended July 31, 1989, the Company sold 105,840 shares of common stock to private investors at $3.97 per share resulting in net proceeds to the Company of approximately $420,000.

During the fiscal year ended July 31, 1990, the Company issued 52,463 shares of common stock for payment of legal and consulting services and 50,000 shares of common stock in connection with the settlement of certain litigation. The fair value of the common stock was charged to operations.

F - 28

During the fiscal year ended July 31, 1990, the Company sold 89,480 shares of common stock to private investors at $3.97 per share resulting in net proceeds to the Company of approximately $355,080.

During the fiscal year ended July 31, 1991, the Company issued 87,000 shares of common stock for payment of legal and consulting services. The fair value of the common stock was charged to operations.

During the fiscal year ended July 31, 1992, the Company sold 70,731 shares of common stock to private investors at $2.75 to $3.50 per share resulting in net proceeds to the Company of approximately $219,900.

During the fiscal year ended July 31, 1992, the Company issued 45,734 shares of common stock as payment for services rendered to the Company. The fair value of the common stock was charged to operations.

During the fiscal years ended July 31, 1992 and 1990, 94,000 and 50,000 shares of common stock, respectively, were issued to the Company's Chief Executive Officer upon the conversion of outstanding debentures.

During the fiscal year ended July 31, 1993, the Company sold 352,667 shares of common stock to private investors at prices ranging from $2.00 to $3.00 per share resulting in net proceeds to the Company of approximately $735,500. In addition, the private investors were granted options to purchase common stock totaling 587,167 shares at prices ranging from $3.00 to $7.00. During the fiscal years ended July 31, 1995 and 1996, 322,500 and 228,833 options expired, respectively. A total of 42,167 options due to expire on July 31, 1995 were extended to July 31, 1996 and their exercise price was reduced to $2.50. During the fiscal year ended July 31, 1996, 35,834 options were exercised resulting in net proceeds to the Company of approximately $89,600.

During the fiscal year ended July 31, 1993, the Company issued 54,600 shares of common stock as payment for legal and other services performed for the Company. The fair value of 49,600 shares was charged to operations. The remaining 5,000 shares were recorded as deferred compensation and were amortized over a one-year period, beginning in February 1993, in accordance with the agreement entered into with the recipient.

During the fiscal year ended July 31, 1994, the Company issued 7,000 shares of common stock as payment for services performed for the Company. The fair value of the common stock was charged to operations.

During the fiscal year ended July 31, 1994, the Company sold 25,000 shares of common stock to a private investor at $2.00 per share resulting in net proceeds to the Company of $50,000. In addition, the private investor was granted options to purchase common stock totaling 25,000 shares at $4.00 per common share. These options were exercised in September 1996 resulting in net proceeds to the Company of $100,000.

During the fiscal year ended July 31, 1994, the Company sold 800,000 shares of common stock to private investors at $2.50 per share resulting in net proceeds to the Company of $1,865,791. In addition, the private investors were granted warrants to purchase common stock totaling 800,000 shares at $5.00 per common share. Warrants for the purchase of 147,450 shares were exercised during fiscal 1997 resulting in net proceeds to the Company of $737,250. The remaining 652,550 warrants expired during fiscal 1997.

During the fiscal year ended July 31, 1994, 400,000 shares of common stock were issued to the Company's Chief Executive Officer upon the conversion of outstanding debentures.

During the fiscal year ended July 31, 1994, 25,400 shares of common stock were issued upon the conversion of other outstanding debentures.

In September 1994, the Company completed a private placement resulting in the issuance of 288,506 shares of common stock and three-year warrants to purchase 288,506 shares of common stock at an exercise price of $5.50 per share. The warrants expired during fiscal 1998. The common stock and warrants were sold in units consisting of 20,000 shares of common stock and warrants to purchase 20,000 shares of common stock. The price per unit was $50,000. The Company received proceeds of approximately $545,000, net of costs associated with the placement of approximately $55,000 and the conversion of certain debt by creditors of $121,265 into equivalent private placement units of 17,600 shares for conversion of short-term borrowings and 30,906 shares issued for services rendered. In October 1994, an additional two units at $50,000 per unit were sold to a private investor under the same terms as the September 1994 private placement resulting in the issuance of 40,000 shares of common stock and warrants to purchase 40,000 shares of common stock. The warrants expired during fiscal 1998.

F - 29

During the fiscal year ended July 31, 1995, 185,000 shares of common stock were issued upon the exercise of stock options by unrelated parties, resulting in net proceeds to the Company of $437,200. The exercise prices of the options ranged from $2.27 to $2.50, which had been reduced from $3.50 and $5.00, respectively, during fiscal 1995.

During the fiscal year ended July 31, 1995, the Company sold 681,000 shares of common stock to private investors resulting in net proceeds to the Company of approximately $1,379,000. The shares were sold at prices ranging from $2.00 to $2.25.

During the fiscal year ended July 31, 1995, the Company sold 139,080 shares of common stock and 47,405 three-year warrants to purchase shares of common stock at an exercise price of $4.00 per share to private investors. The stock and warrants were sold at prices ranging from $2.25 to $2.73 per share and resulted in net proceeds to the Company of $343,808, of which $4,800 was for services rendered. The common shares were issued to the investors subsequent to July 31, 1995.

On August 4, 1995, the Company issued 6,060 shares of common stock as payment for services rendered to the Company. The fair value of the common stock was charged to operations.

On September 29, 1995, the Company completed a private placement resulting in the issuance of 1,925,616 shares of common stock and three-year warrants to purchase an aggregate of 55,945 shares of common stock at an exercise price of $4.00 per share. Of these shares 1,935 were issued for services rendered to the Company. The common stock was sold alone at per share prices ranging from $2.00 to $3.70, and in combination with warrants at per unit prices ranging from $4.96 to $10.92, which related to the number of warrants contained in the unit. The Company received proceeds of approximately $4.1 million, including $1,723,000 for approximately 820,000 shares received during the fiscal year ended July 31, 1995. The warrants expired in October 1998.

As consideration for the extension of the Company's term loan agreement with its bank, the Company granted the bank a warrant to purchase 10,000 shares of common stock at an exercise price of $4.19. The warrants were issued as of October 1, 1995 and expired on August 31, 1997.

In June 1996, the Company sold in a private placement 1,515,330 shares of common stock and three-year warrants to purchase 313,800 shares of common stock at an exercise price of $7.50 per share. Of these shares, 12,000 were issued for services rendered to the Company. The common stock was sold alone at a per share price of $3.70, in combination with warrants at a per unit price of $12.52 and warrants were sold alone at a per warrant price of $1.42. Each unit consisted of three shares of common stock and one warrant. The Company received proceeds of approximately $5.7 million. The warrants expired during the fiscal year 2000.

In June 1996, the Company issued 10,000 five-year stock options as payment for services rendered. The options vested immediately and had an exercise price of $4.95 per share. The Company recorded research and development expense of $28,260, which was the fair value of the stock options on the date of issuance. The options expired during the fiscal year ended July 31, 2001.

During the fiscal year ended July 31, 1996, 207,316 shares of common stock were sold from October 1995 to April 1996 at per share prices ranging from $3.60 to $4.24 resulting in proceeds of approximately $808,000.

During the fiscal year ended July 31, 1996, 656,334 stock options were exercised by both related and unrelated parties resulting in net proceeds of approximately $1.9 million to the Company. Of these shares, 89,634 were issued subsequent to July 31, 1996. The exercise prices of the options ranged from $2.50 to $3.87 per share.

In August 1996, the Company issued 10,000 stock options with an exercise price of $4.69 per share exercisable for five years as payment for services to be rendered. An equal portion of these options vested monthly for one year commencing September 1, 1996. The Company recorded general and administrative expense of $27,900, which was the fair value of the stock options on the date of issuance. The options expired during the fiscal year ended July 31, 2002.

F - 30

In March 1997, the Company issued 112,000 shares of common stock at $4.50 per share in a private placement to an investor resulting in net proceeds of $504,000 to the Company.

In May 1997, the Company issued 100,000 stock options to Dr. Stephen Carter, a director, with an exercise price of $5.20 per share as payment for serving as Chairman of the Scientific Advisory Board (the “SAB”). These options vested as follows: 10,000 vested immediately, 10,000 after one full calendar year, 10,000 annually for each of the following three years and 50,000 on May 13, 2002. The Company recorded a total research and development expense of $353,400, which was the fair value on the date of issuance of that portion of the stock options that had vested as of July 31, 2002. Of these options, 40,000 expired as of the fiscal year ended July 31, 2005.

During the fiscal year ended July 31, 1997, 639,500 stock options were exercised by both related and unrelated parties resulting in net proceeds of approximately $2.6 million to the Company. The exercise prices of the options ranged from $2.45 to $4.00 per share.

During the fiscal year ended July 31, 1997, 147,450 warrants were exercised by both related and unrelated parties resulting in net proceeds of approximately $737,250 to the Company. The exercise price of the warrants was $5.00 per share.

In October 1997, the Company issued 75,000 stock options to a director with an exercise price of $3.66 per share as payment for non-board related services to be rendered. These options vested as follows: 10,000 vested immediately; 10,000 after one full calendar year; 10,000 annually for each of the following three years; and 25,000 on October 31, 2002. A total general and administrative expense of $185,600 was amortized on a straight –line basis over a five-year period, which commenced in October 1997. Of these options, 30,000 expired as of the fiscal year ended July 31, 2005.

In October 1997, the Company issued 12,000 five-year stock options to a consultant with an exercise price of $3.91 per share as payment for services to be rendered. An equal portion of these options vested monthly and were amortized over a one-year period which commenced in October 1997. In May 1998, the Company terminated the services of the consultant, which resulted in the cancellation of 5,000 options. The Company recorded a total research and development expense for the remaining 7,000 options in the amount of $15,800, based upon the fair value of such options on the date of issuance, amortized on a straight-line basis over the vesting period of the grant. These options expired during the fiscal year ended July 31, 2003.

On December 9, 1997, the stockholders authorized the amendment of the Company’s Certificate of Incorporation to increase the number of authorized shares of common stock, par value $.001 from 25,000,000 shares to 40,000,000 shares.

On December 9, 1997, the stockholders approved the 1997 Stock Option Plan (the “1997 Plan”). The total number of shares of common stock authorized for issuance upon exercise of options granted under the 1997 Plan was 2,000,000. Options are granted at fair market value on the date of the grant and generally are exercisable in 20% increments annually over five years starting one year after the date of grant and terminate five years from their initial exercise date.

On January 23, 1998, the SEC declared effective a registration statement on Form S-3 for the offer and sale by certain stockholders of up to 3,734,541 shares of common stock. Of these shares (i) an aggregate of 2,737,480 shares were issued to private placement investors in private placement transactions which were completed during the period from March 1994 through March 1997 (the “Earlier Private Placements”), (ii) an aggregate of 409,745 shares were issuable upon exercise of warrants which were issued to private placement investors in the Earlier Private Placements and (iii) an aggregate of 587,316 shares may be issued, or have been issued, upon exercise of options which were issued to option holders in certain other private transactions. As a result of the delisting of the Company’s Common Stock from the Nasdaq SmallCap Market, the Company no longer qualified for the use of a Form S-3 registration statement for this offering when it filed its annual report on Form 10-K for the fiscal year ended July 31, 1999 and thus, this registration statement was no longer effective. The Company filed a registration statement on Form S-1 to register these shares, which was declared effective in February 2002.

F - 31

In February 1998, the Company completed a Private Placement primarily to institutional investors, which resulted in the issuance of 1,168,575 units at a unit price of $4.00. Each unit consisted of two (2) shares of the Company’s common stock, par value $.001 per share and one (1) three-year warrant to purchase one (1) share of common stock at an exercise price of $2.50 per share. The Company received net proceeds of approximately $4,202,000. The placement agent received warrants to purchase an additional 116,858 units comprised of the same securities sold to investors at an exercise price of $4.40 per unit as part of its compensation. In May 2001, the expiration date of these warrants was extended from May 19, 2001 to August 17, 2001. The warrants expired on August 17, 2001.

In March 1998, the Company converted an outstanding payable into 50,000 shares of the Company’s Common Stock. The fair value of the Common Stock approximated the outstanding payable amount of $100,000.

In March 1998, the Company issued 75,000 stock options to a director with an exercise price of $2.80 per share as payment for non-board related services rendered. These options vested as follows: 10,000 vested immediately; 10,000 after one full calendar year; 10,000 annually for each of the following three years; and 25,000 on March 24, 2003. A total general and administrative expense of $138,100 was amortized on a straight-line basis over a five-year period, which commenced in March 1998. As of July 31, 2003, the expense was fully amortized and recorded, based upon the fair value of such 75,000 options on the date of issuance, amortized on a straight-line basis over the vesting period of the grant. Of these options, 10,000 expired during the fiscal year ended July 31, 2003 and 65,000 were exercised during the fiscal year ended July 31, 2004.

On April 20, 1998 the SEC declared effective a registration statement on Form S-3 for the offer and sale by certain stockholders of up to 3,918,299 shares of common stock. Of these shares (i) an aggregate of 2,337,150 shares of common stock were issued to the private placement investors in the February 1998 Private Placement, (ii) an aggregate of 1,168,575 shares may be issued upon exercise of the Warrants which were issued to the private placement investors in the February 1998 Private Placement, (iii) 350,574 shares may be issued upon the exercise of the Placement Agent Warrant which was issued to the placement agent in the February 1998 Private Placement and the Warrants issuable upon exercise of the Placement Agent Warrant, (iv) 50,000 shares of common stock were issued to a Supplier in connection with conversion of an outstanding accounts payable, and (v) 12,000 shares may be issued upon the exercise of options which were issued as payment for services to be rendered. As a result of the delisting of the Company’s common stock from the Nasdaq SmallCap Market, the Company no longer qualified for the use of a Form S-3 registration statement for this offering when it filed its annual report on Form 10-K for the fiscal year ended July 31, 1999 and thus, this registration statement was no longer effective. The Company filed a registration statement on Form S-1 to register these shares, which was declared effective in February 2002.

During the fiscal year ended July 31, 1998, the Company issued 833 three-year stock options as payment for services rendered in August 1997. The options vested thirty days from the issuance date and had an exercise price of $4.47 per share. The total general and administrative expense recorded for these options was $1,700, based upon the fair value of such options on the date of issuance. These options expired in August 2000.

During the fiscal year ended July 31, 1998, the Company issued 15,000 three-year stock options with an exercise price of $4.15 per share as payment for services. An equal portion of these options vested monthly and a total general and administrative expense of $30,000 was amortized over a one-year period which commenced September 1997. The Company also issued 5,000 three-year stock options with an exercise price of $4.15 per share as payment for services. Of these options, 833 vested monthly for five months commencing September 30, 1997 and 835 vested on the last day of the sixth month. Total general and administrative expense of $9,700 was amortized over a six-month period which commenced September 1997. As of July 31, 1998, the Company recorded general and administrative expense of $37,100, based upon the fair value of the 20,000 stock options on the date of the issuance, amortized on a straight-line basis over the vesting periods of the grants. These options expired three years after they vested.

During the fiscal year ended July 31, 1998, 4,950 shares of common stock were issued upon the exercise of warrants by unrelated parties, resulting in net proceeds of approximately $11,100 to the Company. The exercise prices of the warrants ranged from $2.20 to $2.50 per share.

On October 1, 1998 (the “Effective Date”), the Company entered into an agreement with a consultant (the “Agreement”), resulting in the issuance of 200,000 five-year stock options with an exercise price of $1.00 per share as payment for services to be rendered. These options vested as follows: an aggregate of 20,000 vested on October 1, 1999; an aggregate of 2,500 of such options vested on the last day of each month over the first twelve months after the Effective Date of the Agreement; the remaining 150,000 options vested on the third anniversary of the Effective Date of the Agreement. The Company recorded approximately $49,300 of general and administrative expense based upon the fair value of the vested options through July 31, 2000. During the fiscal year ended July 31, 2000, the Agreement was terminated which resulted in the cancellation of 150,000 options. The remaining 50,000 options were exercised during the fiscal year ended July 31, 2004, which resulted in gross proceeds of $50,000 to the Company.

F - 32

During the fiscal year ended July 31, 1999, the Company issued 5,000 three-year stock options as payment for services rendered. The total general and administrative expense recorded for these options was $4,200, based upon the fair value of such options on the date of issuance. These options were exercised during the fiscal year ended July 31, 2000, which resulted in gross proceeds of $7,150 to the Company.

During the fiscal year ended July 31, 1999, the Company issued 40,701 shares of common stock for payment of legal services. The fair value of the common stock in the amount of $16,631 was charged to operations.

During the fiscal year ended July 31, 1999, the Company issued 6,000 shares of common stock for payment of services rendered. The fair value of the common stock in the amount of $2,460 was charged to operations.

During the fiscal year ended July 31, 2000, the Company issued 174,965 shares of common stock for payment of services rendered. The fair value of the common stock in the amount of $92,184 was charged to operations.

During the fiscal year ended July 31, 2000, the Company issued 95,000 shares of common stock upon the exercise of stock options by unrelated parties, which resulted in gross proceeds of $45,850 to the Company. The exercise prices of the options ranged from $0.43 to $1.43.

During the fiscal year ended July 31, 2000, the Company sold an aggregate of 875,000 shares of common stock to private investors at prices ranging from $0.50 to $1.00 per share resulting in net proceeds of $548,300 to the Company. In addition, the private investors were granted warrants to purchase an aggregate of 875,000 shares of common stock, inclusive of additional warrants issued so that all investors in the private placements received substantially the same securities, at per share exercise prices ranging from $1.03 to $4.55. These warrants expired in May 2003 and May 2005.

During the fiscal year ended July 31, 2001, the Company issued 11,800 shares of common stock for payment of services rendered. The fair value of the common stock in the amount of $10,030 was charged to operations.

During the fiscal year ended July 31, 2001, the Company sold an aggregate of 863,331 shares of common stock to private investors at prices ranging from $0.90 to $1.50 per share resulting in net proceeds of $956,000 to the Company. In addition, the private investors were granted warrants to purchase an aggregate of 696,665 shares of common stock at per share exercise prices ranging from $1.50 to $3.00. The warrants will expire during the period commencing July 2004 and ending in October 2006. Of these warrants, 418,887 expired and 277,778 were exercised.

During the fiscal year ended July 31, 2001, the Company issued 165,555 shares of common stock upon the exercise of stock options by related parties, which resulted in gross proceeds of $83,700 to the Company. The per share exercise prices of the options ranged from $0.29 to $0.85.

During the fiscal year ended July 31, 2001, the Company issued 50,000 five-year stock options to a director as payment for non-board related services. These options vested immediately and had an exercise price of $0.90 per share. The Company recorded general and administrative expense of $31,600, which was the fair market value of the options using the Black-Scholes options-pricing model on the date of issuance. These options were exercised during the fiscal year ended July 31, 2004.

During the fiscal year ended July 31, 2001, the Company issued 330,000 shares of common stock upon the conversion of convertible notes from related parties at $0.90 per share. In addition, upon conversion, the related parties were granted three-year warrants to purchase an aggregate of 330,000 shares of common stock at an exercise price of $2.50 per share. The estimated value of these warrants in the amount of $108,900 was recorded by the Company as interest expense during the fiscal year ended July 31, 2001. In October 2001, the board of directors approved a change of the 330,000 warrants from three-year warrants to five-year warrants and the exercise price from $2.50 per share to $1.50 per share to conform with private placements to unrelated parties. These warrants were exercised as of July 31, 2006.

F - 33

During the fiscal year ended July 31, 2002, the Company issued 72,214 shares of common stock upon the conversion of convertible notes from unrelated parties at $0.90 per share. In addition, upon conversion, the unrelated parties were granted five-year warrants to purchase an aggregate of 72,214 shares of common stock at an exercise price of $1.50 per share. The estimated value of these warrants in the amount of $32,200 was recorded by the Company as interest expense during the fiscal year ended July 31, 2002. These options were exercised during the fiscals years ended July 31, 2007 and 2006.

During the fiscal year ended July 31, 2002, the Company issued 78,340 shares of common stock in settlement of accounts payable in the amount of $64,126. In addition, one of the vendors was granted five-year warrants to purchase 55,556 shares of common stock at an exercise price of $1.50 per share. The settled accounts payable amount was credited to equity as the value of the common stock and warrants.

During the fiscal year ended July 31, 2002, the Company issued an aggregate of 85,221 five-year stock options as payment for services rendered. The options vested immediately and had a per share exercise prices of $0.75 as to 70,000 stock options and $0.94 as to 15,221 stock options. The Company recorded an aggregate total of $40,747 non-cash expenses for these options, based upon the fair value on the date of the issuance as estimated by the Black-Scholes options-pricing model. These options were exercised as of July 31, 2005.

During the fiscal year ended July 31, 2002, the Company sold an aggregate of 2,622,122 shares of common stock to private investors at prices ranging from $0.35 to $0.90 per share resulting in net proceeds of $1,050,000 to the Company. In addition, the private investors were granted warrants to purchase an aggregate of 2,673,422 shares of common stock at per share exercise prices ranging from $0.75 to $1.50. The warrants will expire during the period commencing August 2006 and ending in September 2007. As of July 31, 2008, 1,733,638 of these warrants were exercised and 939,784 warrants expired.

During the fiscal year ended July 31, 2002, the Company issued warrants to purchase 1,500,000 shares of common stock to Roan Meyers Associates L.P. for an aggregate warrant purchase price of $1,500 in connection with the engagement of Roan Meyers to render advisory services. Of these warrants, 250,000 were exercisable at $.50 per share, 650,000 were exercisable at $1.00 per share and 600,000 were exercisable at $1.50 per share. In February 2002, the Company recorded an expense equal to the fair market value of the first 500,000 warrants which vested immediately, based upon the fair value of such warrants as estimated by Black-Scholes pricing model ($153,300), less the $1,500 received from the sale of the warrants. The remaining 1,000,000 warrants were to become exercisable if Roan Meyers was successful in helping the Company raise capital. However, Roan Meyers was not successful in raising additional capital from a third party. During the fiscal year ended July 31, 2002, Roan Meyers exercised warrants to purchase an aggregate of 186,000 shares of common stock, at an exercise price of $0.50 per share, resulting in aggregate gross proceeds of $93,000 to the Company. During the fiscal year ended July 31, 2003, the vesting of the 600,000 warrants was amended to vest immediately and the exercise price was amended from $1.50 to $0.50 per share due to the price change of the Company’s common stock. Roan Meyers exercised these warrants and was issued 600,000 shares of common stock. The Company also issued 40,000 shares of common stock upon the exercise of warrants by Roan Meyers at an exercise price of $.50 per share. The Company realized aggregate gross proceeds of $320,000 from these capital raising transactions. During the fiscal year ended July 31, 2004, the exercise price of 250,000 warrants was amended from $1.00 to $0.50 per share due to the price change of the Company’s common stock and the vesting of the 400,000 warrants was amended to vest immediately. Roan Meyers exercised the remaining 674,000 warrants which resulted in the issuance of 674,000 shares of common stock by the Company. The Company realized gross proceeds of $537,000 in this capital raising transaction.

During the fiscal year ended July 31, 2002, the Company issued an aggregate of 75,000 five-year stock options to unrelated parties as an incentive for lending the Company an aggregate of $75,000, which was repaid during the quarter. The options vested immediately and have an exercise price of $1.50 per share. The total non-cash interest expense recorded for these options was $25,615, based upon the fair value of such option on the date of issuance as estimated by the Black-Scholes options-pricing model. Of these options, 25,000 were exercised and 50,000 expired.

F - 34

During the fiscal year ended July 31, 2002, the Company issued a note payable to an unrelated party in an aggregate amount of $300,000. The note was due in thirty days bearing interest at 8% per annum. In addition, the lender received warrants to purchase 300,000 shares of common stock at an exercise price of $0.60 per share. The total non-cash interest expense recorded for these warrants was $40,690, based upon the fair value of such option on the date of issuance as estimated by the Black-Scholes options-pricing model. The notes were extended for eighteen months at a conversion price of $0.40 per share plus a five-year warrant for each share of the Company’s common stock issued upon conversion at an exercise price of $1.00 per share. These notes were converted into shares of the Company’s common stock and warrants in fiscal year 2004.

During the fiscal year ended July 31, 2003, the Company issued an aggregate of 764,000 shares of common stock upon the exercise of warrants and stock options by unrelated parties which resulted in gross proceeds of approximately $378,000 to the Company.

During the fiscal year ended July 31, 2003, the Company issued an aggregate 186,208 shares of common stock in settlement of accounts payable in the aggregate amount of $94,223. In addition, one of the vendors was granted five-year options to purchase 50,000 shares of common stock at an exercise price of $1.25 per share. The Company recorded $17,581 non-cash research and development expenses for these options, based upon the fair value on the date of the issuance as estimated by the Black-Scholes options-pricing model. The settled accounts payable amount was credited to equity as the value of the common stock and options.

During the fiscal year ended July 31, 2003, the Company issued 25,000 five-year stock options to an unrelated party as an incentive for lending the Company an aggregate of $25,000, which was fully paid as of April 30, 2003. The stock options vested immediately and have an exercise price of $0.23 per share. The total non-cash interest expense recorded for these stock options was $2,503. In addition, the Company issued 140,000 five-year stock options for services rendered. These stock options vested immediately and have exercise prices of $0.84 and $1.25 per share. The total non-cash charge relating to these options was $55,437. The total value of these options was based upon the fair value of such options on the date of issuance as estimated by the Black-Scholes options-pricing model. Of these options, 20,000 were exercised during the fiscal year ended July 31, 2004.

During the fiscal year ended July 31, 2003, the Company issued 8% convertible notes payable to unrelated parties with principal balances totaling an aggregate of $915,000. These notes payable were due to mature on various dates from April 2004 through May 2005 and were convertible into the Company’s common stock at conversion prices ranging from $0.20 to $0.50 per share and an equal number of five year warrants with an exercise price of $1.00 per share. With the issuance of the notes payable, the Company issued to the unrelated parties five year warrants to purchase an aggregate of 665,000 shares of the Company’s common stock, at an exercise price of $0.60 per share. In addition, the Company issued on the due date of the notes payable five year warrants to purchase an aggregate of 915,000 shares of the Company’s common stock at per share exercise prices of $1.00 and $1.10. The Company valued these warrants at a total of $219,259 based on the fair value determined by using the Black-Scholes method relative to the fair value of the notes payable. At the issuance dates of the notes payable, the fair market values of the Company’s shares exceeded the effective conversion prices. Accordingly, the Company initially increased additional paid-in capital by $219,259 for the relative fair value of the warrants and reduced the carrying value of the notes payable for the same amount for the debt discount attributable to the fair value of the warrants. The Company also increased its additional paid-in capital and debt discount by $374,960 for beneficial conversion rights issued in connection with the issuances of these notes.

During the fiscal year ended July 31, 2003, the Company sold an aggregate of 1,315,000 shares of common stock to private investors at prices ranging from $0.20 to $0.73 per share resulting in net proceeds of $653,627 to the Company. In addition, the private investors were granted warrants to purchase an aggregate of 1,315,000 shares of common stock at per share exercise prices ranging from $1.00 to $1.50. The warrants will expire during the period commencing January 2008 and ending in October 2008. As of July 31, 2008, 965,000 of these warrants were exercised and 150,000 expired.

On January 14, 2004, at the Company’s annual meeting of stockholders, the Company’s stockholders approved an amendment to the Company’s Certificate of Incorporation, as amended, to increase the number of shares of common stock authorized from 40,000,000 to 100,000,000. Since no notes payable had been converted as of such date, the terms of the Company’s notes payable relating to conversion and exercise which were amended to authorize conversion to Series A Preferred Stock because there were an insufficient number of authorized shares of common stock available for issuance upon conversion, reverted to their original terms so that they were again convertible into shares of common stock, rather than shares of Series A Preferred Stock.

F - 35

On January 14, 2004, at the Company’s annual meeting of stockholders, the Company’s stockholders approved the 2004 Stock Incentive Plan (the “2004 Plan”). The total number of shares of common stock authorized for issuance under the 2004 Plan is 8,500,000.

During the fiscal year ended July 31, 2004, the Company issued an aggregate of 120,000 shares of common stock to private investors resulting in aggregate gross proceeds of $60,000 to the Company. In addition, the private investors were granted five-year warrants to purchase 120,000 shares of common stock at an exercise price of $1.25 per share.

During the fiscal year ended July 31, 2004, the Company issued 3,996 five-year stock options to a consultant as payment for services rendered. The options vested immediately and have a per share exercise price of $0.60. The Company recorded a total of $5,235 of non-cash expenses for these options, based upon the fair value on the date of the issuance as estimated by the Black-Scholes options pricing model. These options were exercised during the fiscal year ended July 31, 2004 resulting in gross proceeds of $2,398 to the Company.

During the fiscal year ended July 31, 2004, the Company entered into a two-part financing agreement with SF Capital Partners, Ltd. for the private placement of 1,704,546 shares of common stock and warrants to purchase 852,273 shares of common stock, at an exercise price of $1.50 per share. As consideration, the Company received $1,500,000. In addition, the Company granted SF Capital Partners, Ltd. a warrant to invest an additional $1,500,000 to purchase the Company’s common stock at an exercise price based upon a 20-day trailing average of the closing price per share of the Company’s common stock (the “Additional Warrants”). During the fiscal year ended July 31, 2004, SF Capital Partners, Ltd. exercised the Additional Warrants at a 20-day trailing average exercise price of $3.96 which resulted in gross proceeds of $1,500,000 and the issuance of 379,170 shares of common stock and an Exercise Warrant to purchase an additional 189,585 shares of common stock at a per share exercise price of $4.75. The Company also issued an aggregate of 53,876 shares of restricted common stock to a third party as finder’s fee. During the fiscal year ended July 31, 2006, the exercise price of the Exercise Warrant to purchase an additional 189,585 shares of common stock was reduced from $4.75 to $2.88 per share. As of July 31, 2007, none of these options were exercised.

During the fiscal year ended July 31, 2004, the Company issued 25,000 five-year stock options to a board member as payment for non-board related services and 110,000 five-year stock options to various consultants for services rendered. The options vested immediately and have a per share exercise price of $3.46. The Company recorded a total of $275,377 non-cash expenses for these options, based upon the fair value on the date of the issuance as estimated by the Black-Scholes options pricing model. As of July 31, 2007, 5,000 of these options were exercised.

During the fiscal year ended July 31, 2004, the Company issued an aggregate of 14,703 restricted shares of common stock as payment of accounts payable in the amount of $52,176.

During the fiscal year ended July 31, 2004, the Company issued an aggregate of 75,000 restricted shares of common stock as payment for services rendered in an aggregate amount of $288,500.

During the fiscal year ended July 31, 2004, the Company issued 1,210,654 shares of common stock to an existing institutional investor, resulting in gross proceeds of $10,000,000 to the Company. In addition, the institutional investor was granted five-year warrants to purchase 1,210,654 shares of Common Stock at an exercise price of $12.39 per share. The Company paid a 5% finder’s fee to a third party in connection with the private placement, which included a five-year warrant to purchase 60,533 shares of common stock at an exercise price of $12.39 per share. During the fiscal year ended July 31, 2006, the exercise price of the warrants to purchase an aggregate of 1,185,000 shares of common stock was reduced from $12.39 to $2.88 per share.

During the fiscal year ended July 31, 2004, the Company increased its outstanding shares by 40,000 shares of common stock for replacement of previously issued stock.

During the fiscal year ended July 31, 2004, the Company issued an aggregate of 3,042,817 shares of restricted common stock and five-year warrants to purchase 3,733,839 shares of common stock with exercise prices ranging from $1.00 to $1.10 per share upon the conversion of notes payable and accrued interest in the amount of approximately $927,872.

F - 36

During the fiscal year ended July 31, 2004, the Company issued an aggregate of 2,676,994 shares of common stock upon the exercise of warrants by unrelated parties and stock options by unrelated parties, employees, a director and former director at per share exercise prices ranging from $0.26 to $4.74. The Company realized aggregate gross proceeds of $2,656,099 from these exercises.

During the fiscal year ended July 31, 2004, the Company incurred an aggregate of $824,022 of costs relating to various private placements.

During the fiscal year ended July 31, 2005, the Company issued an aggregate of 1,744,978 shares of common stock and five-year warrants to purchase an aggregate of 2,044,978 shares of common stock with an exercise price of $1.00 per share upon the conversion of notes payable and its accrued interest in an aggregate amount of $464,499.

During the fiscal year ended July 31, 2005, the Company issued an aggregate of 438,372 shares of common stock upon the exercise of stock options and warrants by unrelated parties, employees and a director at per share exercise prices ranging from $0.26 to $1.91. The Company realized aggregate net proceeds of $307,155 from these exercises.

During the fiscal year ended July 31, 2005, the Company issued 3,000 shares of restricted common stock as payment for services rendered. A non-cash expense of $13,500 was recorded by the Company for these shares, based upon the fair value of the common stock at the date of issuance.

During the fiscal year ended July 31, 2005, the Company issued 12,500 warrants to a vendor in consideration for services to be rendered. 5,000 of these warrants which vested immediately have an exercise price of $2.50 per share and 7,500 warrants which vested on the 91st day from the grant date have an exercise price of $3.50 per share. These warrants will expire 24 months from the date the registration statement registering the shares underlying the warrants is declared effective or 36 months from the date of grant, whichever comes first. These warrants expired during the fiscal year ended July 31, 2008. The Company recorded a total of $13,552 of non-cash expense for these warrants, based upon the fair value at July 31, 2005 as estimated by the Black-Scholes option pricing model.

During the fiscal year ended July 31, 2005, the Company issued an aggregate of 20,000 ten-year stock options to consultants as payment for continuing services. The options will vest 25% each year starting on the first anniversary of the commencement of the services of the consultants provided they remain as consultants on the relevant vesting dates. The stock options have an exercise price of $2.05 per share. The Company recorded a total of $3,237 of non-cash expense for these options, based upon the fair value at July 31, 2005 as estimated by the Black-Scholes option pricing model. During the fiscal year ended July 31, 2006, the Company recorded under EITF 96-18, a total of $15,066 of non-cash expense for these options.

During the fiscal year ended July 31, 2006, the Company issued an aggregate of 1,122,827 shares of common stock upon the exercise of warrants and stock options by unrelated parties, consultants, employees, directors and an executive officer at per share exercise prices ranging from $0.26 to $3.46. The Company realized aggregate gross proceeds of $1,348,324 from these exercises.

During the fiscal year ended July 31, 2006, the Company issued 25,000 ten-year stock options to a consultant as payment for services rendered. The options vested immediately and have an exercise price of $1.32 per share. The Company recorded a total of $23,166 of non-cash expense for these options.

During the fiscal year ended July 31, 2006, the Company issued 25,000 ten-year stock options to a consultant as payment for services rendered. The options vested immediately and have an exercise price of $3.37 per share. The Company recorded a total of $58,387 of non-cash expense for these options.

During the fiscal year ended July 31, 2006, the Company issued 50,000 five-year stock options to a consultant as payment for services to be rendered. These options vest over a one year period, 50% of which vested immediately and 12.5% will vest equally for the next four quarters following the grant date. The stock options have an exercise price of $2.04 per share and are subject to variable accounting under EITF 96-18. The fair value of these options is being expensed over the service period. During the fiscal year ended July 31, 2006, the Company recorded a total of $74,253 of non-cash expense for these options.

F - 37

During the fiscal year ended July 31, 2006, the Company issued 174,927 shares of restricted common stock to a private investor resulting in gross proceeds of $600,000 to the Company for a purchase price of $3.43 per share.

During the fiscal year ended July 31, 2006, the Company completed a private placement to various institutional investors which resulted in the issuance of an aggregate of 6,457,172 shares of restricted common stock for a purchase price of $1.75 per share. The institutional investors also received warrants to purchase up to an additional 6,457,172 shares of common stock of the Company. The fair value of the warrants at the grant date was approximately $12,962,000 as estimated using the Black-Scholes options pricing model. The warrants have a term of five years and were issued in two separate series. The first series of warrants (to purchase 3,228,590 shares of common stock) are exercisable beginning on January 19, 2007, and the second series of warrants (to purchase 3,228,582 shares of common stock) are also exercisable beginning on January 19, 2007. Both sets of warrants have an exercise price equal to $2.88 per share. If the Company enters into a strategic corporate collaboration as outlined in the second series of warrants by December 31, 2006, the second series of warrants will be cancelled upon notification by the Company to the holders of the warrants that it has entered into such an agreement prior to such date. The Company did not enter in such agreement by the specified time therefore, the second series of warrants were not canceled. The Company received net proceeds of approximately $10,384,000 from this private placement. The Company filed a registration statement on Form S-3 to register the resale of the shares and the shares issuable upon exercise of the warrants, which was declared effective in August 2006. If the Company had failed to file the registration statement, request effectiveness of the registration statement, respond to comments of the Securities and Exchange Commission, or cause the registration statement to be declared effective in a timely manner in accordance with the provisions of the registration rights agreement between the Company and the investors, or if the registration statement ceases to remain effective, or the investors are otherwise not permitted to utilize the prospectus in the registration statement to resell the securities for more than 15 consecutive calendar days or more than an aggregate of 25 calendar days during any 12-month period (which need not be consecutive calendar days), then the Company must pay to each investor an amount, in cash, as partial liquidated damages and not as a penalty, equal to 2% of the aggregate purchase price paid by such investor for any securities registered on the registration statement that are then held by such investor monthly until the failure is cured. However, the Company shall not be required to pay partial liquidated damages to the investor in excess of 10% of the purchase price such investor paid for the registered securities. If the Company fails to pay any partial liquidated damages in full within seven days after the date payable, the Company will pay interest thereon to the investor at a rate of 18% per annum (or such lesser maximum amount that is permitted to be paid by applicable law), accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full.

During the fiscal year ended July 31, 2007, the Company issued an aggregate of 295,800 shares of its common stock upon the exercise of stock options by an officer, employees and unrelated parties at per share exercise prices ranging from $0.23 to $2.16. The Company realized aggregate gross proceeds of $352,256 from these exercises.

During the fiscal year ended July 31, 2007, the Company issued an aggregate of 1,142,559 shares of its common stock upon the exercise of warrants by related and unrelated parties at per share exercise prices ranging from $0.60 to $2.88. The Company realized aggregate gross proceeds of $1,153,444 from these exercises.

During the fiscal year ended July 31, 2007, the Company issued an aggregate of 130,000 ten-year stock options to various consultants for services rendered. The options vested immediately and have an exercise price of $1.71 per share. The Company recorded the total fair value of $176,800 of non-cash expense for these options upon issuance.

During the fiscal year ended July 31, 2007, the Company issued 10,000 ten-year stock options to a consultant for serving in the Scientific Advisory Board. The options vested immediately and have an exercise price of $1.49 per share. The Company recorded the total fair value of $11,660 of non-cash expense for these options upon issuance.

F - 38

In July 2007, the Company and USP Pharma Spolka Z.O.O. ("USP") entered into a Distribution and Marketing Agreement (the "Agreement"). The Agreement appoints USP as the Company’s exclusive distributor in Poland, Lithuania, Estonia, Latvia, Belarus and the Ukraine in the field of Oncology. Included in the Agreement is an up-front fee as consideration for the appointment of USP as the Company’s distributor in the defined territory. Based upon its review of SAB No. 101, “Revenue Recognition in Financial Statements”, and SAB No. 104, “Revenue Recognition”, the Company has determined that the up-front fee is to be recognized on a straight line basis over the term of the Agreement. The term of the Agreement is defined as the earlier of ten (10) years after the first commercial sale or the expiration of the patents covering the Company’s product in the defined territory. The Agreement also includes multiple milestone payments and the payment of royalties. The milestone payments are to be paid to the Company upon the attainment of those milestones as defined in the Agreement. The royalty payments by USP to the Company are based on a fixed percentage of net sales. No revenue has been recognized for the up-front fee, milestone achievements and royalties in the accompanying financial statements. In connection with the Distribution Agreement, the Company and Unilab LP, an affiliate of US Pharmacia, entered into a Securities Purchase Agreement, (the "Purchase Agreement"), pursuant to which the Company issued an aggregate of 553,360 shares of its restricted common stock for purchase price of $2.53 per share. The Company realized gross proceeds of $1,400,000. The securities sold pursuant to the Purchase Agreement have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States in the absence of an effective registration statement or exemption from registration requirements.

During the fiscal year ended July 31, 2008, the Company issued an aggregate of 760,000 shares of its common stock upon the exercise of warrants by unrelated parties at per share exercise prices ranging from $0.60 to $1.25. The Company realized aggregate gross proceeds of $541,500 from these exercises.

During the fiscal year ended July 31, 2008, the Company issued an aggregate of 236,000 shares of its common stock upon the exercise of stock options by an officer and employees at per share exercise prices ranging from $0.26 to $1.58. The Company realized aggregate gross proceeds of $145,540 from these exercises.

During the fiscal year ended July 31, 2008, the Company issued an aggregate of 265,000 stock options to the independent members of its board of directors with an exercise price of $1.72 per share and a six-year exercise term. The aggregate grant date fair market value of these options, $275,865, is being amortized over the one-year vesting period. The Company recognized an aggregate compensation expense of $154,705 and $121,160 for the fiscal years ended July 31, 2008 and 2009, respectively.

During the fiscal year ended July 31, 2008, the Company issued an aggregate of 40,000 stock options to various non-employee consultants for services rendered. The options vested immediately, have an exercise price of $1.75 per share and a ten-year exercise term. The aggregate grant date fair market value of these options, $52,840, was recognized as an expense by the Company during the fiscal year ended July 31, 2008.

During the fiscal year ended July 31, 2008, the Company issued an aggregate of 330,000 stock options to various non-employee consultants for serving as the Company’s scientific advisors and research collaborators and for contributions made on behalf of the Company’s pre-clinical and clinical research programs. Of these options, 110,000 vested immediately, 50% of the balance will vest after one year and the remaining 50% of the balance will vest after two years. The options have an exercise price of $1.75 per share and a ten-year term. Under the variable accounting provisions of EITF 96-18, the aggregate grant date fair market value of these options, $456,730, is being amortized over the vesting period and is being re-measured as of each reporting period. The aggregate re-measured fair market value of these options was estimated to be $189,872 and $174,153, for the fiscal years ended July 31, 2008 and 2009, respectively. These options fully vested during the fiscal year ended July 31, 2010 with the aggregate re-measured fair value of $192,296.

During the fiscal year ended July 31, 2008, the Company issued 250,000 stock options to its CEO, Kuslima Shogen, with an exercise price of $2.18 per share and a ten-year exercise term. The options, which were granted as a bonus for entering into an agreement for the marketing rights to ONCONASE® in the U.S., vested immediately and have a grant date fair market value of $405,000 which was recognized as an expense by the Company during the fiscal year ended July 31, 2008. These options expired during the fiscal year ended July 31, 2010.

During the fiscal year ended July 31, 2008, the Company entered into a retirement agreement (see Note 12) with Kuslima Shogen, its CEO. Under the terms of the agreement, the Company issued 1,000,000 stock options with an exercise price of $2.00 per share. The options have a ten-year contractual term and will become exercisable only upon the approval of an ONCONASE® NDA by the United States Food and Drug Administration (“FDA”) for the treatment of malignant mesothelioma. The grant date fair market value of these options, $1,900,000, is being amortized over the estimated vesting period. The Company recognized compensation expense of $429,762, $619,762 and $179,048 for the fiscal years ended July 31, 2008, 2009 and 2010, respectively.

During the fiscal year ended July 31, 2009, the Company issued an aggregate of 37,000 shares of its common stock upon the exercise of stock options by various employees at per share exercise prices ranging from $0.26 to $0.54. The Company realized aggregate gross proceeds of $13,220 from these exercises.

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During the fiscal year ended July 31, 2009, the Company issued an aggregate of 265,000 stock options to the independent members of its board of directors with an exercise price of $0.24 per share and a six-year exercise term. The aggregate grant date fair market value of these options in the amount of $42,400 is being amortized over the one-year vesting period. Of these options, 35,000 shares were forfeited as of July 31, 2009. The Company recognized an aggregate compensation expense of $21,128 and $37,522 for the fiscal years ended July 31, 2009 and 2010, respectively.

On April 27, 2010, at the Company’s annual stockholders’ meeting, the Company’s stockholders approved an amendment to the Company’s Certificate of Incorporation, as amended, to increase the number of shares of common stock authorized from 100,000,000 to 250,000,000.

During the fiscal year ended July 31, 2010, the Company issued 11,667 stock options to its former member of the board of directors with an exercise price of $0.34 per share and a five-year exercise term. The grant date fair market value of these options in the amount of $2,812 was recognized as an expense for the fiscal year ended July 31, 2010.

During the fiscal year ended July 31, 2010, the Company issued an aggregate of 430,000 stock options to the independent members of its board of directors with an exercise price of $0.26 per share and a sixty-eight month exercise term. The aggregate grant date fair market value of these options in the amount of $85,570 is being amortized over the eight-month vesting period. The Company recognized an aggregate compensation expense of $31,447 for the fiscal year ended July 31, 2010.

(8)	Common Stock Warrants

The following table summarizes the activity of common stock warrants issued in connection with the private placements and conversion of notes payable completed in fiscal years 2009 and 2010:

	Warrants	Exercise Price	Expiration
Outstanding at July 31, 2008	14,862,534	1.00 - 12.39	8/13/08 to 7/17/11
Expired	(6,366,884)	1.00 – 12.39	8/13/08 to 7/15/09
Outstanding at July 31, 2009	8,495,650	1.00 - 2.88	9/14/09 to 7/17/11
Expired	(2,044,978)	1.00	9/14/09 to 5/6/10
Issued to related parties in connection with conversion of notes payable	13,333,332	0.15 – 0.25	10/19/12 to 10/19/14
Issued to unrelated parties in connection with conversion of notes payable	29,999,996	0.15 – 0.25	10/19/12 to 10/19/14
Outstanding at July 31, 2010	49,784,000	$0.15 - $2.88	7/17/11 to 10/19/14
Exercisable at July 31, 2010	49,784,000	$0.15 - $2.88	7/17/11 to 10/19/14

(9) Stock Options

2004 Stock Incentive Plan

The Company's stockholders approved the 2004 Stock Incentive Plan (the “2004 Plan”) for the issuance of up to 8,500,000 shares, which provides that common stock and stock options may be granted to employees, directors and consultants. The 2004 Plan provides for the granting of stock options, stock appreciation rights, restricted shares, or other share based awards to eligible employees and directors, as defined in the 2004 Plan. Options granted under the 2004 Plan will have an exercise price equal to the market value of the Company’s common stock on the date of the grant. The term, vesting period and time and method of exercise of options granted under the 2004 Plan are fixed by the Board of Directors or a committee thereof.

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1997 Stock Option Plan

The Company’s stockholders approved the 1997 stock option plan for the issuance of options for up to 2,000,000 shares, which provides that options may be granted to employees, directors and consultants. Options are granted at market value on the date of the grant and generally are exercisable in 20% increments annually over five years starting one year after the date of grant and terminate five years from their initial exercise date. This plan expired in May 2007 except to the extent there are outstanding options.

1993 Stock Option Plan

The Company's stockholders approved the 1993 stock option plan for the issuance of options for up to 3,000,000 shares, which provides that options may be granted to employees, directors and consultants. Options are granted at market value on the date of the grant and generally are exercisable in 20% increments annually over five years starting one year after the date of grant and terminate five years from their initial exercise date. This plan expired in November 2003 except to the extent there are outstanding options.

Option Activity

The following table summarizes stock option activity for the period August 1, 2008 to July 31, 2010:

	Shares Available for Grant		Options Outstanding			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Balance July 31, 2008	3,926,983			6,353,067			2.69
Granted	(265,000	)		265,000			0.24
Exercised	--			(37,000	)		0.36
Cancelled/Expired	1,058,005			(1,512,905	)		2.74
Forfeited	292,512			(296,512	)		1.42
Balance July 31, 2009	5,012,500			4,771,650			2.64
Granted	(941,667	)		941,667			0.30
Cancelled/Expired	1,096,500			(2,169,850	)		3.56
Forfeited	8,000			(8,000	)		1.29
Balance July 31, 2010	5,175,333			3,535,467		$	1.45	6.03	$	25,000
Exercisable at July 31, 2009				3,415,650		$	3.02	2.14	$	3,030
Exercisable at July 31, 2010				1,605,467		$	1.78	4.13	$	12,100

(10) Income Taxes

The Company accounts for income taxes under the provisions of ASC Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect for all years in which the temporary differences are expected to reverse.

New Jersey has enacted legislation permitting certain corporations located in New Jersey to sell a portion of its state tax loss carryforwards and state research and development credits in order to obtain state tax benefits. For the state fiscal year 2010 (July 1, 2009 to June 30, 2010), the Company had approximately $723,000 of total available state tax benefit that was saleable. In February 2010, the Company received approximately $647,000 from the sale of its total available state tax benefit, which was recognized as state tax benefit in the fiscal year ended July 31, 2010. For the state fiscal year 2009 (July 1, 2008 to June 30, 2009), the Company had approximately $1,274,000 of total available state tax benefit that was saleable. On December 1, 2008, the Company received approximately $1,140,000 from the sale of its total available state tax benefit, which was recognized as state tax benefit in the fiscal year ended July 31, 2009. For the state fiscal year 2011 (July 1, 2010 to June 30, 2011), the Company did not qualify to participate in the program.

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At July 31, 2010 and 2009, the tax effects of temporary differences that give rise to the deferred tax assets are as follows:

Deferred tax assets:	2010			2009
Excess of book over tax depreciation and amortization	$	9,727		$	(2,867	)
Stock options		2,724,202			2,628,892
Deferred revenue		2,080,000			2,080,000
Temporary differences		5,475,673			479,020
Federal and state net operating loss carryforwards		23,277,136	*		23,641,138	*
Research and experimentation credit carryforwards		2,329,646	*		2,578,601	*
Total gross deferred tax assets		35,896,384			31,404,784
Valuation allowance		(35,896,384	)		(31,404,784	)
Net deferred tax assets	$	—		$	—

* Net of amount sold pursuant to New Jersey state tax legislation.

A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The tax benefit assumed using the federal statutory tax rate of 34% has been reduced to the actual benefits reflected on the statements of operations due principally to the aforementioned valuation allowance. In 2010 and 2009 the valuation allowance increased by $4,492,000 and $348,000, respectively.

At July 31, 2010, the Company has federal net operating loss carryforwards of approximately $67,510,000 that expire in the years 2011 to 2030 (approximately $20,431,000 expires in the years 2011 to 2015) and state net operating loss carryforwards of approximately $5,394,000 that expire in years 2018 to 2019. The Company also has federal research and experimentation tax credit carryforwards of approximately $2,210,000 that expire in the years 2011 to 2030 (approximately $623,000 expires in the years 2011 to 2015) and state research and experimentation tax credits of approximately $119,000 that expire in the years 2024 to 2025. Ultimate utilization/availability of such net operating losses and credits is dependent upon the Company’s ability to generate taxable income in future periods and may be significantly curtailed if a significant change in ownership occurs in accordance with the provisions of the Tax Reform Act of 1986.

Effective August 1, 2007, the Company adopted ASC Accounting for Uncertainty In Income Taxes which clarifies the accounting and disclosure for uncertainty in income taxes. The adoption of this interpretation did not have any material impact on the Company’s financial statements, as there were no unrecognized tax benefits as of August 1, 2007 or during the fiscal years ended July 31, 2010 and 2009.

The Company files income tax returns in the U.S. federal jurisdiction and New Jersey. For federal income tax purposes, fiscal 2007 through 2010 tax years generally remain open for examination by the tax authorities under the normal three-year statute of limitations. For New Jersey tax purposes, fiscal 2006 through 2010 tax years generally remain open for examination under a four-year statute of limitations.

(11) Related Party Transactions

On October 19, 2009, Charles Muniz, the Company’s President, Chief Executive Officer and Chief Financial Officer, was a party to the Securities Purchase Agreement, the Investor Rights Agreement, the Security Agreement and the Escrow Agreement. The Company’s entry into an employment agreement with Mr. Muniz upon terms reasonably acceptable to the investors in the Offering was a condition to the Closing.

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(12) Commitments

Employment and Retirement Agreements

On April 28, 2008, the Company entered into a retirement agreement (the “Retirement Agreement”) with Ms. Shogen. Under the terms of the Retirement Agreement, Ms. Shogen was entitled to receive her then current annual salary of $300,000 and participate in all benefit plans available for the Company’s executives through her retirement date, which occurred on March 31, 2009 (the “Termination Date”). Ms. Shogen will receive retirement payments of $300,000 for each of the two years after the Termination Date. During the fiscal year ended July 31, 2008, the Company accrued these benefits in the amount of $612,000.

On September 14, 2009, the Company entered into an amendment (the “Amendment”) to the Retirement Agreement amending certain terms. Pursuant to the Amendment, effective as of September 14, 2009, periodic payments owed to Ms. Shogen under the Retirement Agreement during the two year period commencing April 1, 2008 will be paid at the rate of $150,000 per year, rather than $300,000 per year as originally provided in the Retirement Agreement. Under the Retirement Agreement, Ms. Shogen was entitled to receive continuing payments equal to 15% of any royalties received by the Company pursuant to any and all license agreements entered into by the Company for the marketing and distribution of Licensed Products. Under the Amendment, the amount of such royalties related to net sales of Licensed Products to be received by Ms. Shogen has been reduced to 5%. Under the Retirement Agreement, Ms. Shogen was entitled to receive continuing payments equal to 5% of net sales of Licensed Products booked by the Company on its financial statements. Under the Amendment the amount of such net sales booked by the Company has been reduced to 2%. Under the Amendment, in the event the Company obtains marketing approval for ONCONASE® from the Food and Drug Administration or the European Medicines Agency, Ms. Shogen will be entitled to receive an additional payment equal to the difference between the periodic payments actually paid to Ms. Shogen during the two year period commencing April 1, 2008 and $600,000, the original amount of periodic payments to which Ms. Shogen was entitled under the Retirement Agreement. Such additional payment may be made by the Company, at its option, in cash, the Company common stock or a combination of both. The Amendment is binding on the parties as of September 14, 2009. Except as specifically amended in the Amendment, all terms and conditions of the Retirement Agreement remain in full force and effect.

On October 19, 2009, the Company entered into an Employment Agreement (the “Employment Agreement”) with Mr. Muniz. Pursuant to the Employment Agreement, Mr. Muniz shall serve as the Company’s President, Chief Executive Officer and Chief Financial Officer. Mr. Muniz will receive an annual base salary of $300,000 and is entitled to receive cash incentive compensation or annual stock option awards as determined by the Board or the Compensation Committee of the Board from time to time. In addition, Mr. Muniz is entitled to participate in any and all employee benefit plans established and maintained by the Company for executive officers of the Company. Pursuant to the Employment Agreement, Mr. Muniz received an option (the “Option”), granted under and in accordance with the Company’s 2004 Stock Incentive Plan, to purchase an aggregate of 500,000 shares of Common Stock exercisable for ten years from the date the Option is granted. The Option shall vest in equal amounts on each of the first, second and third year anniversary of the grant so long as Mr. Muniz remains employed by the Company. The exercise price of the Option was equal to the fair market value of the Common Stock on the date of grant. The Employment Agreement continues in effect for two years following the date of the agreement and automatically renews for successive one-year periods, unless Mr. Muniz’s employment is terminated by him or by the Company. In the event that Mr. Muniz’s employment is terminated by the Company for any reason, then Mr. Muniz is entitled to receive his earned but unpaid base salary and incentive compensation, unpaid expense reimbursements, accrued but unused vacation and any vested benefits under any employee benefit plan of the Company. In the event that Mr. Muniz’s employment is terminated by the Company without “cause” or by Mr. Muniz for “good reason” (as such terms are defined in the Employment Agreement), then in addition to the above mentioned payments and benefits, Mr. Muniz is entitled to receive an amount equal to his then current annual base salary, payable in equal installments over 12 months in accordance with the Company’s payroll practice and all medical and health benefits for 18 months following the termination date. Mr. Muniz’s Employment Agreement requires him to refrain from competing with the Company and from hiring our employees and soliciting our customers for a period of one year following the termination of his employment with the Company for any reason.

Mr. Muniz is an investor in the Company’s Offering and is party to the Securities Purchase Agreement, the Investor Rights Agreement, the Security Agreement and the Escrow Agreement.

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Lease Commitment

On March 14, 2007 the Company entered into an operating lease agreement for a period of ten years to lease space to relocate its corporate headquarters and laboratories to a new location in Somerset, New Jersey. This lease expires on the tenth anniversary plus 150 days after the commencement date of the lease which expiration date is expected to be November 2017. The first rental payment occurred on July 3, 2007 which is the lease commencement date. The lease may be renewed at the option of the Company for a period of two additional terms of 60 months each. In addition, the Company has received an incentive allowance of $205,000 with an option to receive an additional incentive allowance of $105,000. As of July 31, 2007 the Company has not exercised the additional incentive allowance of $105,000. Both allowances must be used for the cost of leasehold improvements made to the premises. If all or any portion of the remaining allowance is not used by the end of the original lease term of ten years any remaining balance may not be applied to the balance of any rent due at the conclusion of the initial lease term. As part of the operating lease agreement signed on March 14, 2007 the Company agreed to enter into an irrevocable letter of credit in the amount of $350,000 as security for such operating lease. This irrevocable letter of credit is collateralized by $350,000 in cash which is recorded in “Other Assets” in fiscal year ended July 31, 2008. If no event of default occurs under the operating lease the Company may reduce its security deposit under the operating lease to $250,000 on July 1, 2011, the fourth anniversary of the lease commencement date. In the event of no default as of July 1, 2012, the fifth anniversary of the lease commencement date, the irrevocable letter of credit may be reduced to $150,000 until the initial term of the lease expires in 2017. As of July 31, 2010, the irrevocable letter of credit was reduced by $83,720 for payment of rent. Rent expense charged to operations was approximately $308,000 and $300,000 for fiscal year ended July 31, 2009 and 2008, respectively.

In June 2007, the Company entered into an operating lease agreement for its office equipment for the term of five years with a payment of approximately $1,600 per month. As part of the lease agreement, the Company agreed to terminate its existing office equipment lease. As a result of the early termination of the existing lease, the Company recognized an expense of approximately $31,000 which will be amortized using straight-line method over the term of the lease and will be charged as a reduction from the equipment rental expense. The new lease did not commence until August 2007. Rent expense charged to operations was approximately $12,000 for fiscal years ended July 31, 2010 and 2009. Under the previous lease agreement, equipment rental expense charged to operations was $12,000 for the fiscal year ended July 31, 2008.

In November 2007, the Company entered into a capital lease agreement for its building security system for the term of five years with a payment of $635 per month. The lease agreement also gives the Company the right to purchase the leased equipment at the end of the lease term for $1.00 plus applicable taxes.

In January 2010, the Company vacated its old facility pursuant to the complaint filed by its landlord, I&G in November 2009. In February 2010, I&G withdrew the remaining balance of the Company’s secured irrevocable letter of credit which was placed in March 2007 in the amount of approximately $81,000. On February 5, 2010, I&G commenced an action against the Company. The lawsuit seeks unspecified damages for an alleged breach of a lease agreement dated March 14, 2007 between the Company and I&G. On or before November 1, 2010, the Company and I&G entered into a Settlement Agreement and Mutual Release whereas I&G agreed to receive $200,000 in consideration of the release in full and complete settlement of all claims made by I&G.

On January 15, 2010, Mr. Muniz, as an individual, entered into a quarterly lease agreement with I&G for office space at the fourth floor of 300 Atrium Drive, Somerset, NJ, which space the Company will occupy as its new office. The lease expired on September 30, 2010, but was renewable for successive three-month periods upon thirty days prior notice and payment of $15,790.50 for the following three months’ rent. The Company did not renew this lease upon its expiration.

On September 28, 2010, the Company entered into an office lease agreement effective as of October 1, 2010 with Princeton Corporate Plaza, LLC for $3,794 per month including expenses. The Company leased 2,046 square feet of office and laboratory space in the building located at 11 Deer Park Drive, Suite 204, in the township of South Brunswick in the County of Middlesex, State of New Jersey. The new office replaced 300 Atrium Drive, Somerset, New Jersey 08873 as its principal executive offices. The lease term began on October 1, 2010, ending on September 30, 2011.

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Future minimum lease payments under noncancelable operating leases (with initial or remaining terms in excess of one year) as of July 31, 2010:

			Payments Due in Fiscal Year
	Total		2011		2012		2013		2014 and Thereafter
Building lease	$	245,528	$	237,940	$	7,588	$	0	$	0
Equipment lease		52,588		25,976		25,976		636		-
Total contractual cash obligations	$	298,116	$	263,916	$	33,564	$	636	$	0

Defined Contribution Retirement Plan (401(k) Plan)

Effective October 1, 1998, the Company adopted a 401(k) Savings Plan (the “Plan”). Qualified employees may participate by contributing to the Plan subject to certain Internal Revenue Service restrictions. The Company will match an amount equal to 50% of the first 6% of each participant’s contribution. The Company’s contribution is subject to a vesting schedule of 0%, 25%, 50%, 75% and 100% for employment of less than one year, one year, two years, three years and four years, respectively, except for existing employees which vesting schedule was based from the date the Plan was adopted. In April 2009, the Plan was amended to suspend the Company’s matching contribution and no contributions were made during the fiscal year ended July 31, 2010. For the fiscal years ended July 31, 2009, the Company's contributions to the Plan amounted to $17,252.

(13)	Contingencies

The Company has product liability insurance coverage for clinical trials in the U.S. and in other countries where it conducts its clinical trials. No product liability claims have been filed against the Company. If a claim arises and the Company is found liable in an amount that significantly exceeds the policy limits, it may have a material adverse effect upon the financial condition and results of operations of the Company.

On October 1, 2010, Robert Love, a former Chief Financial Officer and alleged shareholder of the Company, filed an amended complaint in Love v. Tamir Corp. et al., Case No. 3:09-cv-05199-MLC-LHG (the “Amended Complaint”), against the Company and certain of its current and former directors in the United States District Court, District of New Jersey, asserting violations of federal and state securities laws, direct and derivative common law claims for fraud and breach of fiduciary duty, a direct claim for negligent misrepresentation, and derivative claims for gross negligence and corporate waste in connection with the Company’s Phase IIIb clinical trial for ONCONASE®. The Amended Complaint alleges that the Company misled shareholders by issuing allegedly false projections of when the required number of patients deaths would occur in the Phase IIIb trial. The Amended Complaint seeks compensatory damages of no less than $350,000, punitive damages of no less than $20 million, and an accounting and constructive trust. The Company believes that the claims are meritless and intends to defend the case vigorously.

I & G Garden State, LLC (“I&G”) filed and served a complaint against the Company in the Superior Court of New Jersey Law Division, Special Civil Part Landlord-Tenant Section, Somerset County, on or about October 30, 2009, for non-payment of rent and failure to maintain security deposit. The complaint seeks to have the Company vacate the property. On November 13, 2009, the Company and I&G mutually agreed that the Company will vacate the property on or before December 31, 2009. In January 2010, the Company vacated the facility as per mutual agreement. In February 2010, I&G withdrew the remaining balance of the Company’s secured irrevocable letter of credit which was placed in March 2007 in the amount of approximately $81,000. On February 5, 2010, I&G commenced an action against the Company. The lawsuit seeks unspecified damages for an alleged breach of a lease agreement dated March 14, 2007 between the Company and I&G. On or before November 1, 2010, the Company and I&G entered into a Settlement Agreement and Mutual Release whereas I&G agreed to receive $200,000 in consideration of the release in full and complete settlement of all claims made by I&G.

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(14)	Subsequent Events

In October 2010, the Company issued 10,000 shares of its common stock upon the exercise of stock options by an employee at per a share exercise price of $0.26. The Company realized gross proceeds of $2,600 from this exercise.

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Attached files

Tamir Biotechnology, Inc. Reports

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