As filed with the Securities and Exchange Commission on June 24, 2010
 
Registration No. 333-164785

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

AMENDMENT NO. 1
to
FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

AVANYX THERAPEUTICS, INC.
(Name of issuer in its charter)

 
Delaware
2834
27-0801073
 
 
(State or jurisdiction of
incorporation or
organization)
(Primary Standard
Industrial
Classification
Code Number)
(IRS Employer
Identification No.)
 

12 Appleton Circle
Newton, Massachusetts 02459
617-614-7943
(Address and telephone number of principal executive offices
and principal place of business or intended principal place of business)

David H. Platt, Ph.D, Chief Executive Officer/Chief Financial Officer/Chairman
12 Appleton Circle
Newton, Massachusetts 02459
617-614-7943
(Name, address and telephone number of agent for service)

Copies to:
 
David E. Dryer, Esq.
Mark A. Katzoff, Esq.
Seyfarth Shaw LLP
2 Seaport Lane
Boston, Massachusetts 02210
Phone: (617) 946-4800
Fax: (617) 946-4801
 
Approximate date of proposed sale to the public:  as soon as practicable after the effective date of this Registration Statement.

If any of the Securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. (X)
 
 
 
 
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of earlier effective registration statement for the same offering. (  )

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. (  )

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. (  )

If delivery of the Prospectus is expected to be made pursuant to Rule 434, check the following box. (  )

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

Large accelerated filer   o
Accelerated filer   o
   
Non-accelerated filer   o
(Do not check if a smaller reporting company)
Smaller reporting company   þ
 
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
 
 
 
 
 
The information in this prospectus is not complete and may be changed. The Company may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
 
 
Subject to Completion, dated June 24, 2010
 
 
Preliminary Prospectus

AVANYX THERAPEUTICS, INC.

15,000,000 SHARES OF COMMON STOCK

We are a Delaware corporation formed on August 24, 2009 for the purpose of developing, manufacturing and marketing therapeutic drugs with a focus on glyco-pathology, a specialized field involving understanding the importance of Glycoproteins in biochemistry and progression of diseases.  Before this offering, there has been no public market for our common stock and our common stock is not listed on any national securities exchange nor are quotes for our common stock available in any over-the-counter market.  This offering is our initial public offering of 15,000,000 shares of our common stock at a public offering price of $ 2.00 per share.  It is our intention to seek a market maker to publish quotations for our shares on the over-the-counter bulletin board (the “OTCBB”), however, we have no agreement or understanding with any potential market makers and there can be no assurance that a public market for our shares will develop.
 
SHARES OF AVANYX THERAPEUTICS, INC. INVOLVE A HIGH DEGREE OF RISK.  WE URGE YOU TO READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE 5, ALONG WITH THE REST OF THIS PROSPECTUS RELATING TO RISKS ASSOCIATED WITH THE SECURITIES OFFERED BY THIS PROSPECTUS HEREIN.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.  ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
THE DATE OF THIS PROSPECTUS IS JUNE 24 , 2010
 
 
 
 
 
 
TABLE OF CONTENTS

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PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this Prospectus.  To understand this offering fully, you should read the entire Prospectus carefully.  Unless the context otherwise requires, references contained in this Prospectus to the “Company,” “Avanyx,” “we,” “us,” or “our” shall mean Avanyx Therapeutics, Inc., a Delaware corporation formed on August 24, 2009.

Overview
 
Our primary business is the development, manufacture and marketing of therapeutic drugs with a focus on glyco-pathology, a specialized field involving understanding the importance of glycoproteins in biochemistry and progression of diseases.  Our pharmaceutical agents are intended for intravenous administration into the circulatory system and targeting acute and late stage diseases that, we believe, have great unmet medical need.
 
We intend to develop and manufacture IPOXYN™, a glyco-protein-based therapeutic agent that incorporates our proprietary processes and patented technology.   Our IPOXYN ™ anti-hypoxia drug consists of a stabilized glycoprotein composition containing oxygen-rechargeable iron, targeting both human and animal tissues and organ systems deprived of oxygen and in need of metabolic support.  We will contract with outside vendors to produce sufficient IPOXYN™ to complete our pre-clinical pharmacokinetic, safety and efficacy studies in support of an investigative new drug (“IND”) filing in the United States and Europe in 2011.  We hope to be able to commence marketing IPOXYN™ for veterinary applications, which we view as a potentially lucrative market, in 2011 in various locations around the world.
 
Approval of IPOXYN ™ for veterinary use requires the filing of a New Animal Drug Application (NADA) with, and approval by the Center for Veterinary Medicine Division of, the FDA.  The requirements for approval are similar to those for new human drugs, exclusive of human trials.  Obtaining NADA approval often requires safety and efficacy clinical field trials in the applicable species and disease, after submission of an Investigational New Animal Drug Application, which for non-food animals becomes effective upon acceptance for filing.  We have not conducted any clinical trials or filed any applications with the FDA with respect to IPOXYN ™.

Our shares of common stock are not listed on any national securities exchange nor are quotes for our common stock available in any over-the-counter market.  Prior to this offer, there has been no public market for the Company’s common stock.  There can be no assurance that a market for such securities will develop.

Our independent auditors noted in their report accompanying our financial statements for the year ending December 31, 2009 that the Company’s limited resources and operating history, as well as operating losses raise substantial doubt about the Company’s ability to continue as a going concern.  As of March 31, 2010, we had a cumulative net loss of $2,891,357, of which $2,740,000 was related to patents, know-how and management advisory services recorded in exchange for 10,000,000 shares of our common stock.  As of March 31, 2010, the Company had $19,026 cash on hand, which was provided by our CEO.  We do not currently have sufficient capital resources to fund operations.  To stay in business and to continue the development of IPOXYN ™ we will need to raise additional capital through public or private sales of our securities, debt financing or short term bank loans, or a combination of the foregoing.   We believe that if we can raise $5,000,000 in this offering it will be sufficient to provide working capital for the next year and we will be able to complete clinical trials of IPOXYN ™ in preparation for filing an NADA for veterinary use.

We have not applied to register the shares in any state.  An exemption from registration will be relied upon in the states where the shares are distributed and may only be traded in such jurisdictions after compliance with applicable securities laws.  There can be no assurances that the shares will be eligible for sale or resale in such jurisdictions. We may apply to register the shares in several states for secondary trading; however we are under no requirement to do so.

 
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The following summary is qualified in its entirety by the detailed information appearing elsewhere in this Prospectus.  The securities offered hereby are speculative and involve a high degree of risk. See "Risk Factors."
 
 

 
 
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THE OFFERING

Share of Common
Stock to be Offered:
 
15,000,000 shares
   
Common Stock Outstanding
Before The Offering:
10,031,236 shares
   
Common Stock Outstanding
After The Offering:
25,031,236 shares
 
 
Offering Price
The offering price of the shares has been arbitrarily determined by us based on estimates of the price that purchasers of speculative securities, such as the shares, will be willing to pay considering the nature and capital structure of our Company, the experience of our officers and Directors and the market conditions for the sale of equity securities in similar companies.  The offering price of the shares bears no relationship to the assets, earnings or book value of us, or any other objective standard of value.  For purposes of calculating the registration fee for the common stock included in this Prospectus, we have used an estimated public offering price of $ 2.00 per share.  This is an arbitrary price and we can offer no assurances that the $ 2.00 price bears any relation to the value of the shares as of the date of this Prospectus.
 
 
Use of Proceeds:
We intend to use the net proceeds from this offering to continue to develop IPOXYN ™, to build a management team, for general corporate purposes and working capital.
 
 
Transfer Agent and Registrar
for our Shares:
Continental Stock Transfer & Trust Company
 
117 Battery Place, 8th Floor
 
New York, New York  10004
 
Phone:  212-509-4000
 
Fax:  212-509-5150
 
 
No Market:
No assurance is provided that a market will be created for our securities in the future, or at all.  If in the future a market does exist for our securities, it is likely to be highly illiquid and sporadic.
 
 
Address:
12 Appleton Circle
Newton, Massachusetts 02459
 
 
Telephone Number:
617-614-7943
 
 
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SUMMARY FINANCIAL DATA

You should read the summary financial information presented below for the period from inception (August 24, 2009) through December 31, 2009 and the three months ended March 31, 2010.  The summary financial data below has been derived from our audited financial statements as of December 31, 2009 and our unaudited financial statements as of March 31, 2010.  You should read this summary financial information in conjunction with our management’s discussion and analysis of financial condition and results of operations and our audited financial statements and related notes thereto, each appearing elsewhere in this Prospectus.
 
 
December 31, 2009
 
March 31, 2010
(unaudited)
 
     
     
 
Total Assets
  $ 23,530     $ 19,026  
                 
Stockholder’s deficit
  $ (127,821 )   $ (131,357 )
                 
 
Period from inception
(August 24, 2009)
through December 31, 2009
 
Three months ended
March 31, 2010
(unaudited)
 
         
         
 
Loss from Operations
  $ (2,877,821 )   $ (13,536 )
 
 
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RISK FACTORS

The securities offered herein are highly speculative.  You should carefully consider the following risk factors and other information in this Prospectus.  If any of the following risks actually occur, our business and financial results could be negatively affected to a significant extent, and you may lose all or part of your investment.

The Company considers the following to be all the material risks to an investor regarding this offering. The Company  should be viewed as a high-risk investment and speculative in nature. An investment in our common stock may result in a complete loss of the invested amount. Please consider the following risk factors before deciding to invest in our common stock.
 
RISKS RELATED TO OUR COMPANY

THE AUDITORS REPORT ON OUR FINANCIAL STATEMENT EXPRESSES SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.  IF WE DO NOT RECEIVE ADDITIONAL FUNDING, WE WOULD HAVE TO CURTAIL OR CEASE DEVELOPMENT STAGE OPERATIONS.

Our independent auditors noted in their report accompanying our financial statements for the year ended December 31, 2009 that the Company’s limited resources and operating history, as well as operating losses raise substantial doubt about the Company’s ability to continue as a going concern.  For the period from inception on August 29, 2009 through March 31, 2010, we had a net loss of $2,891,357 , of which $2,740,000 was related to patents, know-how and management advisory services recorded in exchange for 10,000,000 shares of our common stock .  As of March 31, 2010, the Company had $19,026 cash on hand.  We do not currently have sufficient capital resources to fund operations.  To stay in business, we will need to raise additional capital through public or private sales of our securities, debt financing or short-term bank loans, or a combination of the foregoing.

We will need additional capital to fully implement our business, operating and development plans.  However, additional funding from an alternate source or sources may not be available to us on favorable terms, if at all.  To the extent that money is raised through the sale of our securities, the issuance of those securities could result in dilution to our existing security holders.  If we raise money through debt financing or bank loans, we may be required to secure the financing with some or all of our business assets, which could be sold or retained by the creditor should we default in our payment obligations.  If we fail to raise sufficient funds, we would have to curtail or cease operations.

Management has developed what it believes is a viable plan to continue as a going concern.  The plan relies upon our ability to obtain additional sources of capital and financing.  We believe that if we can raise $5,000,000 in this offering it will be sufficient to provide working capital for the next year.  Our Chief Executive Officer intends to provide us with minimal cash to fund critical needs until we are able to raise additional capital from this offering or another offering but there is no guarantee that he will do so or will do so for any extended period of time.  Presently we do not have any existing sources or plans for financing other than this offering and our Chief Executive Officer.   If we are unable to receive additional financing, we may be required to cease operations.

WE ARE A DEVELOPMENT STAGE COMPANY WITH NO OPERATING HISTORY WHICH MAKES IT DIFFICULT TO EVALUATE OUR CURRENT BUSINESS AND FUTURE PROSPECTUS AND MAY INCREASE THE RISK OF YOUR INVESTMENT.

We are a development-stage company with no operating history, and our proposed operations are subject to all of the risks inherent in establishing a new business enterprise.  The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the formation of a new business, the development of new technologies or those subject to clinical testing, and the competitive and regulatory environment in which we will operate.  We have no products available for sale, and none are expected to be commercially available for at least eighteen months, if at all.  We may never obtain Food and Drug Administration (“FDA”) approval of our products in development and, even if we do so and are also able to commercialize our products, we may never generate revenue sufficient to become profitable.  Our failure to generate revenue and profit would likely cause our securities to decrease in value and/or become worthless.

 
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ADDITIONAL FINANCING REQUIRED TO IMPLEMENT OUR BUSINESS PLAN MAY NOT BE AVAILABLE ON FAVORABLE TERMS OR AT ALL, AND WE MAY HAVE TO ACCEPT FINANCING TERMS THAT WOULD ADVERSELY AFFECT OUR SHAREHOLDERS.

We will need to continue to conduct significant research, development, testing and regulatory compliance activities that, together with projected general and administrative expenses, we expect will result in substantial operating losses for the foreseeable future.  Accordingly, we do not expect to be generating sales or other revenue and will remain dependent on outside sources of financing until that time and we will need to raise funds from additional financing.  We have no commitments for any financing at this time, and any financing commitments may result in dilution to our existing stockholders.  We may have difficulty obtaining additional funding, and we may have to accept terms that would adversely affect our stockholders.  For example, the terms of any future financings may impose restrictions on our right to declare dividends or on the manner in which we conduct our business.  Additionally, we may raise funding by issuing convertible notes, which if converted into shares of our common stock would dilute our then shareholders interests.  Lending institutions or private investors may impose restrictions on a future decision by us to make capital expenditures, acquisitions or significant asset sales.  If we are unable to raise additional funds, we may be forced to curtail or even abandon our business plan.

OUR ABILITY TO GROW AND COMPETE IN THE FUTURE WILL BE ADVERSELY AFFECTED IF ADEQUATE CAPITAL IS NOT AVAILABLE.

The ability of our business to grow and compete depends on the availability of adequate capital, which in turn depends in large part on our cash flow from operations and the availability of equity and debt financing.  Our cash flow from operations may not be sufficient or we may not be able to obtain equity or debt financing on acceptable terms or at all to implement our growth strategy.  As a result, adequate capital may not be available to finance our current growth plans, take advantage of business opportunities or respond to competitive pressures, any of which could harm our business.

OUR PRODUCTS ARE BASED ON NOVEL, UNPROVEN TECHNOLOGIES.
 
Our drug candidates in development are based on novel unproven technologies using proprietary carbohydrate compounds in combination with FDA approved drugs currently used in the treatment of ischemia, anemia and trauma and other diseases.  Carbohydrates are difficult to synthesize, and we may not be able to synthesize carbohydrates that would be usable as delivery vehicles for the anti-hypoxia drugs we are working with or other therapeutics we intend to develop.  None of our products have commenced human clinical trials. Although we have completed certain animal studies that we believe were successful, pre-clinical results in animal studies are not necessarily predictive of outcomes in human clinical trials. Clinical trials are expensive, time-consuming and may not be successful.  They involve the testing of potential therapeutic agents, or effective treatments, in humans, typically in three phases, to determine the safety and efficacy of the products necessary for an approved drug.  Many products in human clinical trials fail to demonstrate the desired safety and efficacy characteristics.  Even if our products progress successfully through initial human testing, they may fail in later stages of development. We may engage others to conduct our clinical trials, including clinical research organizations and, possibly, government-sponsored agencies.  These trials may not start or be completed as we forecast, or may not achieve desired results.

 
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WE MAY BE UNABLE TO COMMERCIALIZE OUR PRODUCTS.
 
Even if our current and anticipated products achieve positive results in clinical trials, we may be unable to commercialize them. Potential products may fail to receive necessary regulatory approvals, be difficult to manufacture on a large scale, be uneconomical to produce, fail to achieve market acceptance, or be precluded from commercialization by proprietary rights of third parties. Our inability to commercialize out products would substantially impair the viability of our company.
 
WE HAVE ESTABLISHED PREFERRED STOCK WHICH CAN BE DESIGNATED BY THE COMPANY'S BOARD OF DIRECTORS WITHOUT SHAREHOLDER APPROVAL.

The Company has authorized 5,000,000 shares of preferred stock. The shares of preferred stock of the Company may be issued from time to time in one or more series, each of which shall have a distinctive designation or title as shall be determined by the Board of Directors of the Company ("Board of Directors") prior to the issuance of any shares thereof. The preferred stock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as adopted by the Board of Directors. Because the Board of Directors is able to designate the powers and preferences of the preferred stock without the vote of a majority of the Company's shareholders, shareholders of the Company will have no control over what designations and preferences the Company's preferred stock will have. If preferred stock is designated and issued, then depending upon the designation and preferences, the holders of the shares of Series A Preferred Stock may exercise voting control over the Company. As a result of this, the Company's shareholders will have no control over the designations and preferences of the preferred stock and as a result the operations of the Company.

OUR MANAGEMENT AND ONE SIGNIFICANT SHAREHOLDER COLLECTIVELY OWN A SUBSTANTIAL MAJORITY OF OUR COMMON STOCK.

Collectively, our sole officer, our directors and one significant shareholder own or exercise voting and investment control over 99% of our outstanding common stock and will continue to own 40% of the outstanding equity of the Company assuming all of the shares being offered are sold.  As a result, investors may be prevented from affecting matters involving the Company, including:
 
• the composition of our Board of Directors and, through it, any determination with respect to our business direction and policies, including the appointment and removal of officers;
 
• any determinations with respect to mergers or other business combinations;
 
• our acquisition or disposition of assets; and
 
• our corporate financing activities.
 
Furthermore, this concentration of voting power could have the effect of delaying, deterring or preventing a change of control or other business combination that might otherwise be beneficial to our stockholders. This significant concentration of share ownership may also adversely affect the trading price for our common stock because investors may perceive disadvantages in owning stock in a company that is controlled by a small number of stockholders.

WE ARE DEPENDENT UPON OUR SOLE OFFICER FOR MANAGEMENT AND DIRECTION AND THE LOSS OF THIS PERSON COULD ADVERSELY AFFECT OUR OPERATIONS AND RESULTS.

Our only current officer is David Platt.  We are dependent upon Dr. Platt for implementation of our proposed expansion strategy and execution of our business plan. The loss of Dr. Platt could have a material adverse effect upon its results of operations and financial position. We do not maintain “key person” life insurance for Dr. Platt.  The loss of Dr. Platt could delay or prevent the achievement of our business objectives.
 
 
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STATE SECURITIES LAWS MAY LIMIT SECONDARY TRADING, WHICH MAY RESTRICT THE STATES IN WHICH AND CONDITIONS UNDER WHICH YOU CAN SELL SHARES.

Secondary trading in our common stock will not be possible in any state until the common stock is qualified for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in the state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of, the common stock in any particular state, the common stock could not be offered or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our common stock, the liquidity for the common stock could be significantly impacted.

OUR LACK OF OPERATING EXPERIENCE MAY CAUSE US DIFFICULTY IN MANAGING OUR GROWTH WHICH COULD LEAD TO OUR INABILITY TO IMPLEMENT OUR BUSINESS PLAN.

We have limited experience in manufacturing or procuring products in commercial quantities, conducting other later-stage phases of the regulatory approval process, selling pharmaceutical products, or negotiating, establishing and maintaining strategic relationships. Any growth of our company will require us to expand our management and our operational and financial systems and controls. If we are unable to do so, our business and financial condition would be materially harmed. If rapid growth occurs, it may strain our operational, managerial and financial resources.

WE WILL DEPEND ON THIRD PARTIES TO MANUFACTURE AND MARKET OUR PRODUCTS AND TO DESIGN TRIAL PROTOCOLS, ARRANGE FOR AND MONITOR THE CLINICAL TRIALS, AND COLLECT AND ANALYZE DATA.

We do not have, and do not now intend to develop, facilities for the manufacture of any of our products for clinical or commercial production. In addition, we are not a party to any long-term agreement with any of our suppliers, and accordingly, we have our products manufactured on a purchase-order basis from one of two primary suppliers. We will need to develop relationships with manufacturers and enter into collaborative arrangements with licensees or have others manufacture our products on a contract basis. We expect to depend on such collaborators to supply us with products manufactured in compliance with standards imposed by the FDA and foreign regulators.

In addition, we have limited experience in marketing, sales or distribution, and we do not intend to develop a sales and marketing infrastructure to commercialize our pharmaceutical products. If we develop commercial products, we will need to rely on licensees, collaborators, joint venture partners or independent distributors to market and sell those products.

Moreover, as we develop products eligible for clinical trials, we contract with independent parties to design the trial protocols, arrange for and monitor the clinical trials, collect data and analyze data. In addition, certain clinical trials for our products may be conducted by government-sponsored agencies and will be dependent on governmental participation and funding. Our dependence on independent parties and clinical sites involves risks including reduced control over the timing and other aspects of our clinical trials.

WE ARE EXPOSED TO PRODUCT LIABILITY, PRE-CLINICAL AND CLINICAL LIABILITY RISKS WHICH COULD PLACE A SUBSTANTIAL FINANCIAL BURDEN UPON US, SHOULD WE BE SUED, BECAUSE WE DO NOT CURRENTLY HAVE PRODUCT LIABILITY INSURANCE OR GENERAL INSURANCE COVERAGE.

Our business exposes us to potential product liability and other liability risks that are inherent in the testing, manufacturing and marketing of pharmaceutical formulations and products. Such claims may be asserted against us. In addition, the use in our clinical trials of pharmaceutical formulations and products that our potential collaborators may develop and the subsequent sale of these formulations or products by us or our potential collaborators may cause us to bear a portion of or all product liability risks. A successful liability claim or series of claims brought against us could have a material adverse effect on our business, financial condition and results of operations.

 
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Since we do not currently have any FDA-approved products or formulations, we do not currently have any product liability insurance covering commercialized products. We may not be able to obtain or maintain adequate product liability insurance on acceptable terms, if at all, or such insurance may not provide adequate coverage against our potential liabilities. Furthermore, our current and potential partners with whom we have collaborative agreements or our future licensees may not be willing to indemnify us against these types of liabilities and may not themselves be sufficiently insured or have sufficient liquidity to satisfy any product liability claims. Claims or losses in excess of any product liability insurance coverage that may be obtained by us could have a material adverse effect on our business, financial condition and results of operations.

In addition, we may be unable to obtain or to maintain clinical trial or directors and officers liability insurance on acceptable terms, if at all.  Any inability to obtain and/or maintain insurance coverage on acceptable terms could prevent or limit the commercialization of any products we develop.

IF USERS OF OUR PROPOSED PRODUCTS ARE UNABLE TO OBTAIN ADEQUATE REIMBURSEMENT FROM THIRD-PARTY PAYERS, OR IF NEW RESTRICTIVE LEGISLATION IS ADOPTED, MARKET ACCEPTANCE OF OUR PROPOSED PRODUCTS MAY BE LIMITED AND WE MAY NOT ACHIEVE REVENUES.

The continuing efforts of government and insurance companies, health maintenance organizations and other payers of healthcare costs to contain or reduce costs of health care may affect our future revenues and profitability, and the future revenues and profitability of our potential customers, suppliers and collaborative partners and the availability of capital. For example, in certain foreign markets, pricing or profitability of prescription pharmaceuticals is subject to government control. In the U.S., given recent federal and state government initiatives directed at lowering the total cost of health care, the U.S. Congress and state legislatures will likely continue to focus on health care reform, the cost of prescription pharmaceuticals and on the reform of the Medicare and Medicaid systems. While we cannot predict whether any such legislative or regulatory proposals will be adopted, the announcement or adoption of such proposals could materially harm our business, financial condition and results of operations.

Our ability to commercialize our proposed products will depend in part on the extent to which appropriate reimbursement levels for the cost of our proposed formulations and products and related treatments are obtained by governmental authorities, private health insurers and other organizations, such as HMOs. Third-party payers are increasingly challenging the prices charged for medical drugs and services. Also, the trend toward managed health care in the U.S. and the concurrent growth of organizations such as HMOs, which could control or significantly influence the purchase of health care services and drugs, as well as legislative proposals to reform health care or reduce government insurance programs, may all result in lower prices for or rejection of our products.

THERE ARE RISKS ASSOCIATED WITH OUR RELIANCE ON THIRD PARTIES FOR MARKETING, SALES AND DISTRIBUTION INFRASTRUCTURE AND CHANNELS.

We expect that we will be required to enter into agreements with commercial partners to engage in sales, marketing and distribution efforts around our products in development. We may be unable to establish or maintain third-party relationships on a commercially reasonable basis, if at all. In addition, these third parties may have similar or more established relationships with our competitors. If we do not enter into relationships with third parties for the sales and marketing of our proposed products, we will need to develop our own sales and marketing capabilities.

We may be unable to engage qualified distributors. Even if engaged, these distributors may:
 
 
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        •     fail to satisfy financial or contractual obligations to us;
        •     fail to adequately market our products;
        •     cease operations with little or no notice to us; or
        •      offer, design, manufacture or promote competing formulations or products.

If we fail to develop sales, marketing and distribution channels, we would experience delays in generating sales and incur increased costs, which would harm our financial results.

WE WILL BE SUBJECT TO RISKS IF WE SEEK TO DEVELOP OUR OWN SALES FORCE.

If we choose at some point to develop our own sales and marketing capability, our experience in developing a fully integrated commercial organization is limited. If we choose to establish a fully integrated commercial organization, we will likely incur substantial expenses in developing, training and managing such an organization. We may be unable to build a fully integrated commercial organization on a cost effective basis, or at all. Any such direct marketing and sales efforts may prove to be unsuccessful. In addition, we will compete with many other companies that currently have extensive and well-funded marketing and sales operations. Our marketing and sales efforts may be unable to compete against these other companies. We may be unable to establish a sufficient sales and marketing organization on a timely basis, if at all.

IF WE ARE UNABLE TO CONVINCE PHYSICIANS AS TO THE BENEFITS OF OUR PROPOSED PRODUCTS, WE MAY INCUR DELAYS OR ADDITIONAL EXPENSE IN OUR ATTEMPT TO ESTABLISH MARKET ACCEPTANCE.

Broad use of our proposed products may require physicians to be informed regarding our proposed products and the intended benefits Inability to carry out this physician education process may adversely affect market acceptance of our proposed products. We may be unable to timely educate physicians regarding our proposed products in sufficient numbers to achieve our marketing plans or to achieve product acceptance. Any delay in physician education may materially delay or reduce demand for our products. In addition, we may expend significant funds toward physician education before any acceptance or demand for our proposed products is created, if at all.


RISKS RELATED TO OUR INDUSTRY
 
WE WILL NEED REGULATORY APPROVALS TO COMMERCIALIZE OUR PRODUCTS.

We are required to obtain approval from the FDA in order to sell our products in the U.S. and from foreign regulatory authorities in order to sell our products in other countries. The FDA’s review and approval process is lengthy, expensive and uncertain. Extensive pre-clinical and clinical data and supporting information must be submitted to the FDA for each indication for each product candidate in order to secure FDA approval. Before receiving FDA clearance to market our proposed products, we will have to demonstrate that our products are safe and effective on the patient population and for the diseases that are to be treated. Clinical trials, manufacturing and marketing of drugs are subject to the rigorous testing and approval process of the FDA and equivalent foreign regulatory authorities. The Federal Food, Drug and Cosmetic Act and other federal, state and foreign statutes and regulations govern and influence the testing, manufacture, labeling, advertising, distribution and promotion of drugs and medical devices. As a result, regulatory approvals can take a number of years or longer to accomplish and require the expenditure of substantial financial, managerial and other resources. The FDA could reject an application or require us to conduct additional clinical or other studies as part of the regulatory review process. Delays in obtaining or failure to obtain FDA approvals would prevent or delay the commercialization of our product candidates, which would prevent, defer or decrease our receipt of revenues. In addition, if we receive initial regulatory approval, our product candidates will be subject to extensive and rigorous ongoing domestic and foreign government regulation.
 
 
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DATA OBTAINED FROM CLINICAL TRIALS ARE SUSCEPTIBLE TO VARYING INTERPRETATIONS, WHICH COULD DELAY, LIMIT OR PREVENT REGULATORY CLEARANCES.

Data already obtained, or in the future obtained, from pre-clinical studies and clinical trials do not necessarily predict the results that will be obtained from later pre-clinical studies and clinical trials. Moreover, pre-clinical and clinical data is susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials, even after promising results in earlier trials. The failure to adequately demonstrate the safety and effectiveness of a proposed formulation or product under development could delay or prevent regulatory clearance of the potential drug, resulting in delays to commercialization, and could materially harm our business. Our clinical trials may not demonstrate sufficient levels of safety and efficacy necessary to obtain the requisite regulatory approvals for our drugs, and thus our proposed drugs may not be approved for marketing.

OUR COMPETITIVE POSITION DEPENDS ON PROTECTION OF OUR INTELLECTUAL PROPERTY.

Development and protection of our intellectual property are critical to our business. All of our intellectual property, patented or otherwise, has been invented and/or developed by employees of our CEO, David Platt.  If we do not adequately protect our intellectual property, competitors may be able to practice our technologies. Our success depends in part on our ability to obtain patent protection for our products or processes in the U.S. and other countries, protect trade secrets, and prevent others from infringing on our proprietary rights.
 
Since patent applications in the U.S. are maintained in secrecy for at least portions of their pendency periods (published on U.S. patent issuance or, if earlier, 18 months from earliest filing date for most applications) and since other publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain that we are the first to make the inventions to be covered by our patent applications. The patent position of biopharmaceutical firms generally is highly uncertain and involves complex legal and factual questions. The U.S. Patent and Trademark Office has not established a consistent policy regarding the breadth of claims that it will allow in biotechnology patents.
 
Some or all of our patent applications may not issue as patents or the claims of any issued patents may not afford meaningful protection for our technologies or products. In addition, patents issued to us or our licensors may be challenged and subsequently narrowed, invalidated or circumvented. Patent litigation is widespread in the biotechnology industry and could harm our business. Litigation might be necessary to protect our patent position or to determine the scope and validity of third-party proprietary rights, and we may not have the required resources to pursue such litigation or to protect our patent rights.
 
Although we will require our scientific and technical employees and consultants to enter into broad assignment of inventions agreements, and all of our employees, consultants and corporate partners with access to proprietary information to enter into confidentiality agreements, these agreements may not be honored.  Currently, we do not have any scientific or technical employees.  We have consultants and a network of uniquely experienced researchers, clinicians and drug developers, none of whom have signed or been asked to sign any agreements.
 
PRODUCTS WE DEVELOP COULD BE SUBJECT TO INFRINGEMENT CLAIMS ASSERTED BY OTHERS.

We cannot assure that products based on our patents or intellectual property that we license from others will not be challenged by a third party claiming infringement of its proprietary rights. If we were not able to successfully defend our patents or licensed rights, we may have to pay substantial damages, possibly including treble damages, for past infringement.
 
 
11
 
 
WE FACE INTENSE COMPETITION IN THE BIOTECHNOLOGY AND PHARMACEUTICAL INDUSTRIES.

The biotechnology and pharmaceutical industries are intensely competitive. We face direct competition from U.S. and foreign companies focusing on pharmaceutical products, which are rapidly evolving. Our competitors include major multinational pharmaceutical and chemical companies, specialized biotechnology firms and universities and other research institutions. Many of these competitors have greater financial and other resources, larger research and development staffs and more effective marketing and manufacturing organizations, than we do. In addition, academic and government institutions are increasingly likely to enter into exclusive licensing agreements with commercial enterprises, including our competitors, to market commercial products based on technology developed at such institutions. Our competitors may succeed in developing or licensing technologies and products that are more effective or less costly than ours, or succeed in obtaining FDA or other regulatory approvals for product candidates before we do. Acquisitions of, or investments in, competing pharmaceutical or biotechnology companies by large corporations could increase such competitors’ financial, marketing, manufacturing and other resources.
 
THE MARKET FOR OUR PROPOSED PRODUCTS IS RAPIDLY CHANGING AND COMPETITIVE, AND NEW DRUGS AND NEW TREATMENTS WHICH MAY BE DEVELOPED BY OTHERS COULD IMPAIR OUR ABILITY TO MAINTAIN AND GROW OUR BUSINESS AND REMAIN COMPETITIVE.

The pharmaceutical and biotechnology industries are subject to rapid and substantial technological change. Developments by others may render our proposed products noncompetitive or obsolete, or we may be unable to keep pace with technological developments or other market factors. Technological competition from pharmaceutical and biotechnology companies, universities, governmental entities and others diversifying into the field is intense and is expected to increase.

As a pre-revenue company engaged in the development of drug technologies, our resources are limited and we may experience technical challenges inherent in such technologies. Competitors have developed or are in the process of developing technologies that are, or in the future may be, the basis for competition. Some of these technologies may have an entirely different approach or means of accomplishing similar therapeutic effects compared to our proposed products. Our competitors may develop drugs that are safer, more effective or less costly than our proposed products and, therefore, present a serious competitive threat to us.
 
The potential widespread acceptance of therapies that are alternatives to ours may limit market acceptance of our proposed products, even if commercialized. Many of our targeted diseases and conditions can also be treated by other medication. These treatments may be widely accepted in medical communities and have a longer history of use. The established use of these competitive drugs may limit the potential for our technologies, formulations and products to receive widespread acceptance if commercialized.
 
HEALTH CARE COST CONTAINMENT INITIATIVES AND THE GROWTH OF MANAGED CARE MAY LIMIT OUR RETURNS.

Our ability to commercialize our products successfully may be affected by the ongoing efforts of governmental and third-party payers to contain the cost of health care. These entities are challenging prices of health care products and services, denying or limiting coverage and reimbursement amounts for new therapeutic products, and for FDA-approved products considered experimental or investigational, or which are used for disease indications without FDA marketing approval.
 
Even if we succeed in bringing any products to the market, they may not be considered cost-effective and third-party reimbursement might not be available or sufficient. If adequate third-party coverage is not available, we may not be able to maintain price levels sufficient to realize an appropriate return on our investment in research and product development. In addition, legislation and regulations affecting the pricing of pharmaceuticals may change in ways adverse to us before or after any of our proposed products are approved for marketing.

 
12
 

RISKS RELATING TO OUR SECURITIES

THE LACK OF A BROKER OR DEALER TO CREATE OR MAINTAIN A MARKET IN OUR STOCK COULD ADVERSELY IMPACT THE PRICE AND LIQUIDITY OF OUR SECURITIES.

We have no agreement with any broker or dealer to act as a market maker for our securities and as a result, we may not be successful in obtaining any market makers. Thus, no broker or dealer will have an incentive to make a market for our stock. The lack of a market maker for our securities could adversely influence the market for and price of our securities, as well as your ability to dispose of, or to obtain accurate information about, and/or quotations as to the price of, our securities.
 
STOCK PRICES FOR PHARMACEUTICAL AND BIOTECHNOLOGY COMPANIES ARE VOLATILE.
 
The market price for securities of pharmaceutical and biotechnology companies historically has been highly volatile, and the market from time to time has experienced significant price and volume fluctuations that are unrelated to the operating performance of such companies. Fluctuations in the trading price or liquidity of our common stock may adversely affect, among other things, the interest in our stock by purchasers on the open market and our ability to raise capital.

WE LACK A MARKET FOR OUR COMMON STOCK, WHICH MAKES OUR SECURITIES VERY SPECULATIVE.

We currently lack a market for the Company’s common stock. Because of this, it is hard to determine exactly how much our securities are worth. As a result of the lack of market, it is hard to judge how much the securities you may purchase as a result of this Prospectus are worth and it is possible that they will become worthless.

WE HAVE NOT PAID ANY CASH DIVIDENDS IN THE PAST AND HAVE NO PLANS TO ISSUE CASH DIVIDENDS IN THE FUTURE, WHICH COULD CAUSE THE VALUE OF OUR COMMON STOCK TO HAVE A LOWER VALUE THAN OTHER SIMILAR COMPANIES WHICH DO PAY CASH DIVIDENDS.

We have not paid any cash dividends on our common stock to date and do not anticipate any cash dividends being paid to holders of our common stock in the foreseeable future. While our dividend policy will be based on the operating results and capital needs of the business, it is anticipated that any earnings will be retained to finance our future expansion. As we have no plans to issue cash dividends in the future, our common stock could be less desirable to other investors and as a result, the value of our common stock may decline, or fail to reach the valuations of other similarly situated companies who have historically paid cash dividends in the past.

IF THERE IS A MARKET FOR OUR COMMON STOCK, OUR STOCK PRICE MAY BE VOLATILE.

If there's a market for our common stock, we anticipate that such market would be subject to wide fluctuations in response to several factors, including, but not limited to:

 
(1)
actual or anticipated variations in our results of operations;
 
(2)
our ability or inability to generate new revenues;
 
(3)
increased competition; and
 
(4)
conditions and trends in the pharmaceutical industry and/or the market for Avanyx Therapeutics pharmaceutical products in general.
 
 
13
 
 
Further, if our common stock is traded on the over the counter bulletin board, as is our intention, our stock price may be impacted by factors that are unrelated or disproportionate to our operating performance. These market fluctuations, as well as general economic, political and market conditions, such as recessions, interest rates or international currency fluctuations may adversely affect the market price of our common stock.

INVESTORS MAY FACE SIGNIFICANT RESTRICTIONS ON THE RESALE OF OUR COMMON STOCK DUE TO FEDERAL REGULATIONS OF PENNY STOCKS.

If our common stock is quoted on the OTC Bulletin Board, it will be subject to the requirements of Rule 15(g)-9, promulgated under the Securities Exchange Act as long as the price of our common stock is below $5.00 per share. Under such rule, broker-dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements, including a requirement that they make an individualized written suitability determination for the purchaser and receive the purchaser's consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990, also requires additional disclosure in connection with any trades involving a stock defined as a penny stock. Generally, the Commission defines a penny stock as any equity security not traded on an exchange or quoted on NASDAQ that has a market price of less than $5.00 per share. The required penny stock disclosures include the delivery, prior to any transaction, of a disclosure schedule explaining the penny stock market and the risks associated with it. Such requirements could severely limit the market liquidity of the securities and the ability of purchasers to sell their securities in the secondary market.
 
 
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains a number of “forward-looking statements”.  Specifically, all statements other than statements of historical facts included in this prospectus regarding our financial position, business strategy and plans and objectives of management for future operations are forward-looking statements. These forward-looking statements are based on the beliefs of management at the time these statements were made, as well as assumptions made by and information currently available to management. When used in this prospectus and the documents incorporated by reference herein, the words “anticipate,” “believe,” “estimate,” “expect,” “may,” “will,” “continue” and “intend,” and words or phrases of similar import, as they relate to our financial position, business strategy and plans, or objectives of management, are intended to identify forward-looking statements. These statements reflect our current view with respect to future events and are subject to risks, uncertainties and assumptions related to various factors.

You should understand that the following important factors, in addition to those discussed in our periodic reports to be filed with the SEC under the Exchange Act, could affect our future results and could cause those results to differ materially from those expressed in such forward-looking statements:
 
 
•
We may be unable to raise the capital we will need to maintain operations and fulfill our business objectives .
 
 
•
We are subject to extensive and costly regulation by the FDA, which must approve our product candidates in development and could restrict the sales and marketing of such products in development.
 
 
•
We may be unable to achieve commercial viability and acceptance of our proposed products.
 
 
•
We may be unable to improve upon, protect and/or enforce our intellectual property.
 
 
•
We may be unable to enter into strategic partnerships for the development, commercialization, manufacturing and distribution of our proposed product candidates.
 
 
14
 
 
 
•
We are subject to significant competition.
 
 
•
As a public company, we must implement additional and expensive finance and accounting systems, procedures and controls as we grow our business and organization to satisfy new reporting requirements, which will increase our costs and require additional management resources.

Although we believe that our expectations are reasonable, we cannot assure you that those expectations will prove to be correct. Should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described in this prospectus and the documents incorporated by reference herein as anticipated, believed, estimated, expected or intended.
 
Except for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or any other reason.  All subsequent forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to herein.  In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus and the documents incorporated by reference herein might not occur.
 

 
 
15
 
 
USE OF PROCEEDS

Our offering is being made in a direct public offering, without any involvement of underwriters or broker-dealers on a no minimum, 15,000,000 share maximum offering basis.  Selling all of the shares in the offering could result in $30,000,000 gross proceeds and estimated net proceeds of approximately $ 29,930,000.   We intend to use the proceeds from this offering for the further development, testing and approval of IPOXYN ™ .  More specifically, and consistent with FDA requirements, we intend to use the proceeds from this offering to manufacture IPOXYN ™ under Good Manufacturing Practice (GMP) through contract manufacturing in appropriate facilities overseen by us, and to conduct animal pharmacokinetic and toxicity testing in rats and dogs for at least 28 days, with histopathology testing to screen for the distribution of IPOXYN ™ in the animals’ livers, hearts, kidneys and other organs.  The GMP and the animal toxicity tests are combined for a full submission to the FDA and become part of the Investigational New Drug (IND) and/or investigational new animal drug (INAD) applications.  We also intend to use the proceeds from this offering to build a management team and for general corporate purposes and working capital.

DIVIDEND POLICY

To date, we have not declared or paid any dividends on our outstanding shares. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock. Although we intend to retain our earnings to finance our operations and future growth, our Board of Directors will have discretion to declare and pay dividends in the future. Payment of dividends in the future will depend upon our earnings, capital requirements and other factors, which our Board of Directors may deem relevant.

LEGAL PROCEEDINGS
 
  From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.

 
 
 
16
 
 
DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS

 
Our board of directors, executive officers and key employees are as follows:
 
 
Name
 
 
Age as of
March 31, 2010
 
Position
David Platt, Ph.D.
 
56
 
Chief Executive Officer, Chief Financial Officer,
President, Treasurer and Chairman
Dale H. Conaway, D.V.M.
 
55
 
Director
Rom E. Eliaz
 
38
 
Director
Carl L. Lueders
 
60
 
Director
 
 
David Platt, Ph.D. is   our Chief Executive Officer, Chief Financial Officer, President, Treasurer and Chairman.  From 2001 to February 2009, Dr. Platt was Chief Executive Officer and Chairman of the Board of Directors of Pro-Pharmaceuticals, Inc., a public company with shares traded on the OTCBB that he co-founded and for which he was the co-developer of their core technology.  From 1995 to 2000, Dr. Platt was Chief Executive Officer and Chairman of the Board of Directors of SafeScience Inc., a company he founded. From 1992 to 1995, Dr. Platt was the Chief Executive Officer, Chairman of the Board and a founder of International Gene Group, Inc., the predecessor company to SafeScience. Dr. Platt received a Ph.D. in Chemistry in 1988 from Hebrew University in Jerusalem. In 1989, Dr. Platt was a research fellow at the Weizmann Institute of Science, Rehovot, Israel, and from 1989 to 1991, was a research fellow at the Michigan Foundation (re-named Barbara Ann Karmanos Institute). From 1991 to 1992, Dr. Platt was a research scientist with the Department of Internal Medicine at the University of Michigan. Dr. Platt has published peer-reviewed articles and holds many patents, primarily in the field of carbohydrate chemistry.
 
Dale H. Conaway, D.V.M. , a Director of the Company since September 2009, is the Chief Veterinary Medical Officer for the Office of Research Oversight, an office within the Veterans Health Administration under the U.S. Department of Veterans Affairs. From 2001 to 2006, Dr. Conaway was the Deputy Regional Director (Southern Region). From 1998 to 2001, Dr. Conaway served as Manager of the Equine Drug Testing and Animal Disease Surveillance Laboratories for the Michigan Department of Agriculture. From 1994 to 1998, he was Regulatory Affairs Manager for the Michigan Department of Public Health Vaccine Production Division. Dr. Conaway received a D.V.M. degree from Tuskegee Institute and an M.S. degree in pathology from the College of Veterinary Medicine at Michigan State University.  Mr. Conaway also serves on the Board of Directors of Pro-Pharmaceuticals.
 
Dr. Rom E. Eliaz , Ph.D., MBA, a Director of the Company since September 2009, has been a President and CEO of JJ Pharma Inc. since September 2009. He has also been CEO and Managing Director, Elrom Ventures Corp. since May 2007 and a strategic partner in The Colmen Group since June 2009.  From January 2007 to October 2007 Dr. Eliaz was a Senior Director of Development at, Intradigm Corp. From March 2004 to December 2006 Dr. Eliaz was a Director of Development, Pfizer Inc., (Rinat Neuroscience)
 
Carl L. Lueders , a Director of the Company since September 2009, has a broad range of experience in finance, operations, short- and long-term planning, forecasting, performance measurement, SEC reporting, and controls. He is currently Chief Financial Officer (CFO) for Micronetics, Inc. a manufacturer of microwave and radio frequency products for commercial wireless, defense and aerospace products.  Prior to that he was CFO for Pro-Pharmaceuticals and before that CFO for R.F. Morse & Son, a privately held agri-based company. Prior to that Mr. Lueders spent 22 years with publicly held Polaroid in various finance positions, including Vice President and Controller, Treasurer and acting Chief Financial Officer. Mr. Lueders is a CPA and received his B.A. in Economics from the University of Massachusetts at Amherst and his M.B.A. from Babson College.

 
17
 
 
Our Directors are elected annually and each holds office until the annual meeting of the shareholders of the Company and until their respective successors are elected and qualified. Our officers, including any officers we may elect moving forward,   will hold their positions at the pleasure of the Board of Directors, absent any employment agreement. In the event we employ any additional officers or directors of the Company, they may receive compensation as determined by the Company from time to time by vote of the Board of Directors. Vacancies in the Board will be filled by majority vote of the remaining directors or in the event that our sole Director vacates his position, by our majority shareholders. Our Directors may be reimbursed by the Company for expenses incurred in attending meetings of the Board of Directors.

Employment Agreement

There are not currently any employment agreements between the Company and any of its officers or directors.

Change in Control and Severance Payments

Currently, none of our executive officers is entitled to receive any payments upon a change in control or termination of employment.
 

 
 
18
 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of the shares of our common stock both prior to the this offering as of the date of this filing and on an as adjusted basis after giving effect to the issuance of the shares in this offering, (i) by each person known to be the beneficial owner of 5% or more of the outstanding shares of common stock, (ii) the Chief Executive Officer and each named executive officer listed in the Summary Compensation Table disclosed herein, (iii) our directors and (iv) all executive officers and directors of us as a group.
 
 
 
Name and Address
 
Number of Shares of
Common Stock Beneficially
Owned Prior to the Offering
Percentage of
Common Stock
Owned
Number of Shares of
Common Stock Beneficially
Owned After the Offering
Percentage of
Common Stock
Owned
  Officers and Directors
 
 
   
  David Platt, Ph.D.
Chief Executive Officer,
Chief Financial Officer,
President, Treasurer and Chairman
12 Appleton Circle
Newton, Massachusetts 02459
 8,000,000
79.8%(1)
 8,000,000
32.0%(2)
         
 
 
 
 
 
All officers and directors
as a group (5 persons)
5% Holders
8,000,000
79.8%(1)
8,000,000
32.0%(2)
None.
       
         
Offer Binder        
Via Armand Fedeli 121
Perugia PG 06132
Italy
 
2,000,000
19.94%(1)
2,000,000
8.0%(2)
 
 
 
   

 
(1)
Based on 10,031,236 shares of common stock issued and outstanding prior to this offering.

 
(2)
Assumes the issuance and sale of all 15,000,000 million shares of common stock in this offering.
 
 
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DESCRIPTION OF BUSINESS

Organizational History

Avanyx Therapeutics, Inc. was formed as a Delaware corporation (the “Company,” “we,” and “us”) on August 24, 2009.

Business Operations

Our primary business is the development, manufacture and marketing of therapeutic drugs with a focus on glyco-pathology, a specialized field involving understanding the importance of carbohydrates in biochemistry and progression of diseases.  We have developed as our initial product IPOXYN ™, a glcyo-protein based therapeutic agent using proprietary processes and patented technology. Our IPOXYN ™ anti-hypoxia drug consists of a stabilized glycoprotein composition containing oxygen-rechargeable iron, targeting both human and animal tissues and organ systems deprived of oxygen and in need of metabolic support.

We have unrestricted access, subject only to adequate funding, to both sufficient raw materials at commodity pricing and processing facilities to produce sufficient quantities of IPOXYN ™ to complete pre-clinical pharmacokinetic, safety and efficacy studies in support of an investigative new drug (“IND”) filing in the United States and Europe in 2011.  The primary raw material for IPOXYN ™ is extracted from controlled sourced bovine blood which can be obtained from multiple sources at commodity prices.  There are numerous facilities capable of processing source verified red blood cell extract.  We expect to put in place agreements for obtaining and processing these materials upon funding.

In addition to potential uses for human patients, we also intend to file a registration for IPOXYN ™ for veterinary applications.  We are unaware of any drug currently on the market for animals that can deliver oxygen, and there is only limited “blood banking” for animals despite a constant need. IPOXYN ™ can serve as the only available oxygen delivery mechanism for animals suffering ischemia or traumatic and surgical blood loss events.

We hope to be able to commence marketing IPOXYN ™ for veterinary applications, which we view as a potentially lucrative market, in 2011 in various locations around the world. We estimate that there are at least 15,000 small animal veterinary practices in the United States, another 4,000 mixed animal practices treating small and large animals in the United States and approximately 22,000 small animal practices in Europe. We believe that the average veterinary practice treats only a small percentage of canine anemia cases with red blood cell transfusion. The remaining animals receive either cage rest or treatment such as fluid administration, iron supplements, nutritional supplements or inspired oxygen. The FDA Center for Veterinary Medicine approved a bio similar product to IPOXYN ™ named Oxyglobin in 1998 and the European Commission approved Oxyglobin in 1999, in both cases for the treatment of canine anemia, regardless of the cause of the anemia. Based upon the prior, limited efforts of the now bankrupt third party that developed Oxyglobin, we believe that the potential veterinary market for IPOXYN ™ in the United States alone could exceed $250,000,000 annually within a few years after introduction.

Our pharmaceutical agents are intended for intravenous administration into the circulatory system to target acute and late stage diseases that, we believe, have a great unmet medical need.  Hypoxia conditions, which we intend to treat with IPOXYN ™, result from a lack of oxygen supply to living cells.  Hypoxia will lead to ischemia, inflammation and the death of living cells.  Ischemia is a restriction in blood supply, generally due to factors in the blood vessels, with resultant damage or dysfunction of tissue.  Diabetic foot ulcer, which occurs in 15% of patients with diabetes and precedes more than 80% of all lower leg amputations, is one of the major complications of diabetes mellitus. Two major risk factors that cause diabetic foot ulcer are diabetic neuropathy and micro/macro ischemia.  Increases in mortality among diabetic patients observed over the past 20 years are considered to be due to the development of macro and micro vascular complications including the failure of the wound healing process.  A failure of effective treatment of wounds in this population can often lead to infection, tissue death and amputation of the lower leg and foot as the only treatment option.  We believe that IPOXYN ™ represents a potentially effective treatment.

 
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Our Strengths and Strategies.

Leverage extensive regulatory expertise. Dr. Platt, a PhD. chemical engineer, has approximately 20 years experience in the development of therapeutic drugs and holds many patents.  He has been substantially involved in the FDA approval process for a number of drugs, and we anticipate that his expertise shall be crucial as we develop our drugs through the trial and approval process.

Focus on novel therapeutic opportunities provided by carbohydrates. We believe our company is one of the pioneers focused on development of carbohydrate-based anti hypoxia therapeutic. As a result of their structural complexity, carbohydrates have not received as much scientific attention as nucleic acids and proteins. Carbohydrate molecules, which are essential to the transmission and recognition of cellular information, have been shown to play an important role in major diseases including cancer, cardiovascular disease, Alzheimer’s disease, inflammatory disease and viral infections. We believe this offers a largely untapped area for treatment by utilizing hemoglobin as modified by carbohydrate chemistry to deliver oxygen to cells in a hypoxic condition.
 
Scientific Overview - Hypoxia
 
Hypoxic conditions are detrimental to maintaining normal functionality in all living tissues. In mammals, red blood cells (RBCs) deliver oxygen throughout the body using hemoglobin, a protein responsible for carrying and releasing oxygen to the body's tissues. Under normal conditions, approximately 98% of oxygen is delivered by hemoglobin in the RBCs, while less than two percent is dissolved in the plasma, the fluid part of the blood.
 
As the heart pumps blood, RBCs take up oxygen in the lungs and carry it to various parts of the body. Blood travels through progressively smaller blood vessels to the capillaries, some of which are so narrow that RBCs can only pass through them in single file. Most of the oxygen release occurs in the capillaries. Oxygen depleted RBCs return to the lungs to be reloaded. Adequate blood flow, pressure and RBC counts are crucial to this process. Hypoxia, or oxygen deprivation, even for several minutes, can result in cell damage, organ dysfunction and, if prolonged, death.
 
The causes of inadequate tissue oxygenation generally can be classified into three major categories:
 
Ischemia -- inadequate RBC flow for tissue oxygenation. Ischemia may be caused by obstructed or constricted blood vessels and can lead to stroke, heart attack or other organ or tissue dysfunction.
 
Cardiopulmonary failure -- impaired function of the heart or lungs.  Cardiopulmonary failure may be caused by the inability of the heart to pump sufficient quantities of blood to meet the needs of the tissues or the failure of the lungs to oxygenate blood adequately.
 
Anemia -- insufficient RBCs in circulation. This condition can be caused by chronic disorders affecting RBCs functionality or production like chemotherapy and radiation for treatment of cancer, or blood born diseases like bone marrow diseases. Anemia may be also caused by acute blood loss from accidental injury or surgery.
 
The standard therapy for acute anemia resulting from blood loss is infusion of RBCs mainly from supplies of donated blood. For prophylactic or long term treatment of anticipated or chronic anemia, medications that stimulate the creation of new RBCs are frequently used.
 
Presently, there is no substitute for human blood to deliver oxygen to the body; and transfusions involve certain risks and limitations.  Despite the effort by blood banks around the world to screen the blood supply for HIV, hepatitis and other blood borne diseases, there is a continuing risk of an unsafe blood supply in many parts of the world; donated blood continues to carry the risk of disease transmission.
 
 
21
 
 
Blood compatibility and handling and storage requirements and limitations, limit the use of RBCs transfusions to hospital environment only. Shortages of certain types of blood thus occur due to seasonal factors or disasters. Since RBCs’ oxygen-delivering capacity breaks down with storage (approximately 75% capacity remains after eight days of storage) their shelf-life is less than 42 days, limiting the ability for significant stockpiles of RBCs. In addition, for ischemic conditions due to constricted blood vessels where normal passage of RBCs is restricted or due to impaired heart or lung function, RBCs transfusions are generally not effective.
 
IPOXYN ™
 
IPOXYN ™ is designed for delivery as an intravenous solution, with the expectation that it can reverse an inadequate supply of oxygen and support various metabolic functions in the body in a manner and with effects similar to those resulting from the infusion of RBCs - but without the limitations of compatibility, availability, short shelf life, volume and logistical challenges commonly associated with transfusions of whole blood.  Other intravenous fluids commonly used in emergency trauma to restore blood volume, such as Ringer’s lactate or saline, are not designed to and do not effectively carry oxygen.  We have not conducted any clinical trials to confirm the efficacy of, or filed any applications with the FDA with respect to, IPOXYN ™.   IPOXYN ™ will not be ready for commercialization until these steps are completed.
 
We are planning to introduce this product in clinical trials for hypoxic medical conditions. Hypoxia promotes resistance to conventional treatments, as well as treatments for other diseases. IPOXYN™ has the potential to greatly improve survival of patients in multiple indications in which hypoxia is a factor.  Hypoxia is condition in which cells lack sufficient oxygen supply to support metabolic function.  It is widely known through research that lack of oxygen will result in a cascade of biochemical reactions which promote resistance to many helpful therapeutic substances and which interfere with the body’s own repair mechanisms. Antibiotices for the treatment of infection are less effective when hypoxic conditions are involved. Similarly, hypoxic cancer cells are resistant to chemotherapy treatments; most chemotherapy drugs rely on rapid cell division which requires normal oxygenation of cells, but in a hypoxic condition, cells divide slowly and therefore resist many chemotherapy treatments.
 
Another unmet clinical need is in various acute ischemic conditions, where hypoxia can develop from a local restriction of constrained blood vessels, or poor and compromised flow which leads to insufficient supply of oxygen by otherwise well-oxygenated and distributed RBCs, e.g. cerebral ischemia, ischemic heart disease and intrauterine hypoxia which is an unchallenged cause of perinatal death. In these cases IPOXYN™ , as a rechargeable soluble oxygen delivery agent, may not be restrained whereas well-oxygenated RBCs may be prevented from flow and delivery of oxygen.  This is so because RBCs are large biological structures compared to the size of IPOXYN ™, which is a modified single-protein function oxygen carrier.  In ischemic and hypoxic conditions, RBCs may not be able to penetrate the small vessels which have lost their integrity to support RBC distribution and thus oxygen availability. Due to its small molecular size, IPOXYN ™ can carry and distribute oxygen widely without risk of clot formation and flow stoppage.
 
In veterinary medicine applications, IPOXYN ™ will be used as an oxygen delivery agent similar to a blood substitute for ischemia and trauma, as well as for blood loss during surgery.
 
Status of development of IPOXYN ™
 
We are still in the process of developing IPOXYN™ and have not performed any pre-clinical studies, conducted clinical trials or filed any applications with the FDA with respect to IPOXYN™.
 
 
22
 
 
Competitive Products
 
Many biotechnology and pharmaceutical companies are developing new technologies for the treatment of hypoxia and other diseases.  The standard therapy for reversing hypoxia due to acute blood loss may be blood infusion, RBCs or hyperbaric oxygen. Hyperbaric medicine, also known as hyperbaric oxygen therapy (HBOT), is the medical terminology for using oxygen at a level higher than atmospheric pressure. There are many conditions being treated using this approach including acute blood loss (Hart GB, Lennon PA, Strauss MB. (1987) "Hyperbaric oxygen in exceptional acute blood-loss anemia". J. Hyperbaric Med 2 (4): 205–210). In the United States, HBOT is recognized as a reimbursable treatment for 14 "approved" conditions and an HBOT session can cost anywhere from $200 in private clinics, to over $1,000 in hospitals.  The sessions require the use of a heavy chamber. The most common intervention in hypoxic patients is RBC transfusion. The need for intervention to reduce hypoxia can also be affected by medical conditions such as ischemia or cardiopulmonary failure, claudication (cramping caused by blocked arteries in the leg), poor perfusion and other indications, where a combination of below optimal flow and capacity are compromising oxygen delivery.
 
When compared to RBC transfusion we believe IPOXYN™ has the following advantages:
 
●      
Availability: ready available, with an over two year shelf-life, much longer than the 2 weeks for RBCs and easier to perfuse.
 
●      
Stability: stored at room temperature for months while maintaining its full capacity for oxygen delivery and release and logistical convenience
 
●      
Sterile: when manufactured and processed consistently through good manufacturing practices, free of infectious agents and unnecessary elements.
 
●      
Compatibility : safe for all in a wide range of conditions and does not require pre-infusion typing or testing for compatibility.
 
●      
Critical care : IPOXYN™ can be safely applied outside the hospital to treat prevent ischemic conditions in cases like shock and trauma, heart attack or stroke where low flow or suspended local flow are disrupted.  A readily available infusion package makes it a straightforward tool for emergency medical teams to use on site and save a patient’s life, where time is of the essence for survival.
 
●      
Molecular structure : Chemically IPOXYN™ features a small molecular size compared to RBCs, so it possesses better flow characteristics and circumvents constricted vessels that restricts flow of RBCs and thus the supply of oxygen to tissues and organs.
 
●      
Oxygenation : Due to its high solubility, it has high capacity and faster exchange of oxygen in tissues, as well as facilitating the release of oxygen from RBCs for overall unparallel efficiency.
 
For chronic anemia situations, erythropoietin based formulations are available from two suppliers. Erythropoietin stimulates the erythropoietic system in the bone marrow to produce its own RBCs. These products are slow acting, and only administered in anticipation of blood loss during surgery, and are not effective for temporary use or in emergency situations when acute blood lost requires RBCs infusion to deliver oxygen.
 
The fields of treatment of oxygen deprived states have been approached in many ways for the past 70 years. These include such techniques at high oxygen concentration, hyperbaric chambers, and well as the more mechanical approaches of vessel dilation and blood thinning.  All have met with minor measures of improvement. In the early 1980’s a number of companies focused on creating specific oxygen carriers that were either (a) blood derived elements, (b) synthetics consisting of Perfluro chemicals or (c) elements created using recombinant and molecular engineering approach (red cell modifiers).  Companies including Baxter, Abbot, and Biopure, for example, used the blood derived approach, Green Cross, Alliance Pharmaceuticals and Synthetic blood focused on synthetics, and Somatogen and Allos Therapeutics tried recombinant and molecular engineering.  All of these approaches were early attempts to meet a need whose main focus has been on a “blood substitute”.   Our approach is fundamentally different. Instead of a blood substitute, we are offering a new chemical entity that will deliver oxygen to hypoxic cells.
 
 
23
 
 
We expect IPOXYN™ to compete with traditional therapies and with other oxygen delivery pharmaceuticals.  Some of our competitors and potential competitors may have greater financial and other resources to develop, manufacture and market their products. We believe the most immediate competition comes from companies currently conducting clinical trials of investigational hemoglobin solutions. Privately held Sangart Inc. uses hemoglobin extracted from human red blood cells as the raw material for its products. Sangart reports that it has completed a 90-patient clinical safety trial in Sweden in patients undergoing hip replacement and is conducting a single-center Phase 2 safety trial in the U.S. in cancer patients undergoing radical prostatectomies. It appears that a privately held company may begin a Phase 2 trial of a human-derived hemoglobin solution in the U.S. for treatment of cardiogenic shock.
 
We are aware of other companies researching the use of hemoglobin as a therapeutic, including programs in China and Japan. We believe that these programs are in the preclinical stage of development, although China’s government-funded initiative may enter clinical testing as early as this year.  In the field of perfluorocarbons, publicly traded Synthetic Blood International Inc. has recently completed an open-label, proof-of-concept Phase 2a clinical trial in eight patients with traumatic brain injury. Alliance Pharmaceutical Corporation has received regulatory authorization in France to initiate a Phase 2 clinical trial to prevent post-operative ileus resulting from hypoxia during major surgery. We believe that the Russian open joint-stock company Scientific and Production Firm “Perftoran” has received regulatory approval to market its perfluorocarbon in Russia, Ukraine, Kazakhstan and Mexico.  In 2009 a company called OPK Biotech bought certain assets of now defunct Biopure Corporation and continues to develop Hemopure for human use and Oxyglobin for veterinary use; neither product is currently being sold.   In the area of cardiovascular we expect competition from medical devices and drugs on the market or currently under development. For example, privately held KAI Pharmaceuticals Inc. has reported the completion of a Phase 1/2 clinical trial of its protein kinase C (PKC) inhibitor to reduce ischemia and reperfusion injury during treatment of acute myocardial infarction.  We believe that our use of bovine red blood cells for the production of IPOXYN™ is an advantage over products made from donated human red blood cells stored for a long period of time and other competitive approaches because of the availability, abundance, ability to control source, cost and relative safety of bovine red blood cells.
 
Marketing
 
We believe IPOXYN ™ is a safe and effective intervention for reversing acute hypoxia, fulfilling an unmet clinical need; and that IPOXYN ™ can alleviate acute deficiency of oxygen and avert further life threatening complications and muscle and tissue death which can result from a sustained deficiency of oxygen.  Our belief about the safety and efficacy of IPOXYN ™ is based on preliminary GLP testing of a material bio-similar to IPOXYN ™, where it was found that such bio-similar formulation had no material toxicity on a small group of animals.  We understand that this testing of GLP produced bio-similar materials or, for that matter, pre clinical testing, will not necessarily predict levels of toxicity and efficacy in humans.  However, if clinical trials ultimately support this belief, in many clinical situations IPOXYN ™ could become a significant new management tool to moderate the inconsistencies of RBC transfusion and become the treatment of choice in critical situations when RBCs are not immediately available.
 
In addition to the expansive and broad application development in the field of human medical management, we envision a sizable market in the veterinary field and expect to make a registration filing for this market as soon as we can complete pre-clinical safety and efficacy studies. Pre-clinical safety and efficacy studies under Good Manufacturing Practices have not yet been initiated by the Company.
 
 
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Preliminary data from animal testing conducted by third parties suggests successful use of IPOXYN™ in hypoxia and critical anemic situations, where hypoxic conditions were critical to animal survival. Early experiments with dogs suggest intervention with IPOXYN™  will significantly improved survival in induced canine anemia models. This veterinary treatment of canine anemia will be our first target for seeking early regulatory approval in the European Union. As there is substantial commonality between the metabolic functions of humans and other mammals, animal testing becomes a starting point for many clinical development programs that can directly translate into clinical development programs for humans.  The third party testing described here was conducted by a company that developed a bio-similar product to IPOXYN ™.  Testing included repeated intravenous infusions of the product in dogs that was reported in well documented literature and regulatory filings, and the testing did not result in reported mortality/morbidity of the subject animals. Reports concerning anemic dogs infused with the bio-similar product showed increased plasma hemoglobin levels resulting in an increase of the oxygen carrying capacity of the treated animals.  We have no agreements with the third party that conducted these toxicity tests, or its successors.
 
We intend to engage a medical advisory board consisting of leading physicians who have participated in relevant clinical studies and who are leaders in the field as well as and other physician-specialists that will guide us in other indications. We do not currently have agreements with any potential candidates for such board.  We may seek to enter into licensing or co-marketing agreements for parts or all of the world in order to avail the Company of the marketing expertise of one or more seasoned pharmaceutical companies. Alternatively, we could also engage "contract" sales organizations from vendors, contract pharmaceutical companies that supply sales services.
 
Similarly in the veterinary market, we can engage wholesale distributors on national or regional levels. Marketing programs may include web based advertising, direct mail, educational seminars, conference calls and attendance at trade shows. We may establish a core group of veterinary practices that will start to use the product regularly. These veterinarians can serve as effective advocates of the product when interacting with other veterinarians.

Subsidiaries

We currently have no subsidiaries.

Employees

Other than Dr. Platt, we currently have no full-time employees.  Dr. Platt does not have an employment agreement with the Company.
 
Facilities
 
We do not currently lease or own any properties.
 
Manufacturing
 
We expect to have access to a pilot-scale manufacturing facility with adequate capacity to produce IPOXYN™ for clinical trials and market introduction following European Medicines Evaluation Agency (EMEA) / FDA approval, but no agreement for such access is currently in place. We intend to only utilize manufacturing facilities that we believe are fully compliant with Good Manufacturing Practices (GMP) as required by the regulatory authorities in Europe or the United States.

Dependence on One or a Few Major Customers

We currently have no customers.

 
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Patents, Trademarks and Licenses

Patents, trademarks, trade secrets, technological know-how and other proprietary rights are important to our business.
 
Our proprietary technologies embodied in IPOXYN™ include claims under patent number 6,245,316 (Enhancement of Delivery of Radioimaging and Radioprotective Agents) which expires in 2018, and a provisional patent relating to a Hybrid Hemoglobin Molecule and Methods of Use,   Application No. 61/285,281, both of which were assigned to the Company by our CEO.
 
Our CEO also has assigned the trademarks IPOXYN™ (U.S. Trademark Application No. 77754473) and Avanyx Therapeutics™ (U.S. Trademark Application No. 77806120) to the Company.
 
It is not economically practicable to determine in advance whether our products, product components, manufacturing processes or the uses infringe the patent rights of others. It is likely that, from time to time, we will receive notices from others of claims or potential claims of intellectual property infringement or we may be called upon to defend a customer, vendee or licensee against such third-party claims. Responding to these kinds of claims, regardless of merit, could consume valuable time, result in costly litigation or cause delays, all of which could harm our business.
 
Responding to these claims could also require us to enter into royalty or licensing agreements with third parties claiming infringement. Such royalty or licensing agreements, if available, may not be available on terms acceptable to us.
 
Government Regulation
 
New drug or biological drug approval for clinical use requires extensive research, manufacturing, pre-clinical and clinical studies, packaging, labeling, advertising, promotion, export and marketing, among other things. IPOXYN™  will be subject to extensive regulation by governmental authorities in the United States and other countries. As a therapeutic product administered by intravenous infusion, it will be regulated as a drug or biologic drug and will require extensive safety and efficacy studies for regulatory approval before it may be commercialized.
 
           Drug Approval Process
 
In the United States, IPOXYN™ is regulated as a biologic and will require a Biologics License Application for the manufacturing facility and the quality control system. Before final approval for marketing could occur, the following steps must be completed: preclinical safety animal studies, GMP manufacturing, submission of Investigational New Drug, or IND application for extensive clinical trials to show proof of concept to significant health benefit  In addition, well-controlled randomized human clinical trials are required to support a submission of Biologics License Application.
 
Registration for marketing is comprehensively reviewed by the FDA for the Biologics License Application and followed by FDA inspection of the manufacturing facilities for full compliance with current Good Manufacturing Practices, which includes elaborate audit of documentation and quality assurance procedures. The testing and approval process requires substantial time, effort and financial resources. After initial approval for certain disease, a supplemental approval is generally required for each proposed new disease or indication, often accompanied by clinical data similar to that submitted with the original Biologics License Application.
 
After approval and during clinical studies FDA can put the drug on "clinical hold."  In such case, the IND sponsor and the FDA must resolve any outstanding concerns before the use of the drug can proceed.  FDA may stop marketing, or clinical trials, or particular types of trials, by imposing a clinical hold because of safety concerns and potential risk to patients.
 
 
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Clinical trials involve the administration of the investigational products to healthy volunteers or patients under the supervision of a qualified principal investigator consistent with an informed consent. Each clinical protocol is submitted, reviewed and approved by an independent Institutional Review Board, or IRB, or Ethical Committee (EC) at participating hospital at which the study will be conducted. The IRB/EC will consider, among other things; ethical factors, safety to human subjects and the possible liability of the institution.
 
Clinical trials typically are conducted in three sequential phases, but the phases may overlap. In Phase I, the initial introduction of the drug into human subjects, the drug is usually tested for safety or adverse effects, dosage tolerance, absorption, metabolism, distribution, excretion and pharmacodynamics.
 
Phase II clinical trials usually involve studies in a limited patient population to evaluate the efficacy of the drug for specific, targeted indications, determine dosage tolerance and optimal dosage and identify possible adverse effects and safety risks.
 
Phase III clinical trials generally further evaluate clinical efficacy and test further for safety within an expanded patient population and at multiple clinical sites.
 
Phase IV clinical trials are conducted after approval to gain additional experience from the treatment of patients in the intended therapeutic indication. If the FDA approves a product while a company has ongoing clinical trials that were not necessary for approval, a company may be able to use the data from these clinical trials to meet all or part of any Phase IV clinical trial requirement. These clinical trials are often referred to as Phase III/IV post-approval clinical trials.
 
The results of the preclinical studies and clinical trials, together with detailed information on the manufacture and composition of the product, are submitted to the FDA in the application requesting approval to market the product. Before approving a Biologics License Application, the FDA will inspect the facilities at which the product is manufactured and will not approve the product unless the manufacturing facility is in compliance with current Good Manufacturing Practices. The FDA may delay approval of a Biologics License Application if applicable regulatory criteria are not satisfied, require additional testing or information, and/or require postmarketing testing and surveillance to monitor safety or efficacy of a product. It may also limit the indicated uses for which an approval is given.

New Drug Approval for Veterinary Use
 
The use of new drugs for companion animals requires the filing of a New Animal Drug Application, or NADA with, and approval by, the FDA. The requirements for approval are similar to those for new human drugs, exclusive of human trials.  Obtaining NADA approval often requires safety and efficacy clinical field trials in the applicable species and disease, after submission of an Investigational New Animal Drug Application, or INADA, which for non-food animals becomes effective upon acceptance for filing.

Pervasive and Continuing Regulation
 
Any FDA approvals that may be granted will be subject to continual review, and newly discovered or developed safety or efficacy data may result in withdrawal of products from marketing. Moreover, if and when such approval is obtained, the manufacture and marketing of our products remain subject to extensive regulatory requirements administered by the regulatory bodies, including compliance with current Good Manufacturing Practices, serious adverse event reporting requirements and the FDA's general prohibitions against promoting products for unapproved or "off-label" uses.
 
We are subject to inspection and market surveillance by the FDA for compliance with these regulatory requirements. Failure to comply with the requirements can, among other things, result in warning letters, product seizures, recalls, fines, injunctions, suspensions or withdrawals of regulatory approvals and termination of marketing. Any such enforcement action could have a material adverse effect on us. Unanticipated changes in existing regulatory requirements, state and local work and environmental laws or the adoption of new requirements could also have a material adverse effect on us.
 
 
27
 

Foreign Regulation
 
We will be subject to a variety of regulations governing clinical trials and sales of our products in the United States and outside the United States. Whether or not FDA approval has been obtained, approval of a product by the comparable non-U.S. regulatory authorities must be obtained prior to the commencement of marketing of the product in any country.
 
The approval process varies from country to country and can be complicated and time consuming; the time needed to secure approval may be longer or shorter than that required for FDA approval. For example the European Union requires approval of a Marketing Authorization Application by the European Medicines Evaluation Agency. These applications require the completion of extensive preclinical, clinical studies and manufacturing and controls information.

Reimbursement
 
Our ability to successfully commercialize our human product will also depend on the extent to which reimbursement of the cost of such product and related treatment will be approved by the government health administration authorities, private health insurers and other health providers’ organizations.  Significant uncertainty exists as to the reimbursement status of newly approved health care products. As third-party payors are increasingly challenging the price of medical products, there can be no assurance that adequate reimbursement of the cost will be available to enable us to maintain price levels sufficient for realization of an appropriate return on its investment.
 
Recently the public and the federal government have focused significant attention on reforming the health care system in the United States. A number of health care reform measures have been suggested, including price controls on therapeutics. Public discussion of such measures is likely to continue, and concerns about the potential effects of different possible proposals have been reflected in the volatility of the stock prices of companies in the health care and related industries.

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

The following discussion should be read in conjunction with our financial statements.

Overview

We are a development-stage company that was formed on August 24, 2009.

Our CEO and founder has contributed a provisional patent, a patent and know-how fair valued at $2,200,000.  There are primarily three approaches to determining the fair value:

1.    
The income approach which is based on earnings and cash flow.
2.    
The market approach which compares the subject to similar business and,
3.    
The asset or cost approach which is based on the value of the assets net of liabilities of the business.
 

We selected the income approach, specifically the avoided cost method which, while considered a form of the income approach, considers components of the cost approach while capturing investment attributes of an income approach, where the value of assets is greater than its historical cost basis.  This method attempts to estimate the cost that we would have incurred to acquire the provisional patent, patent and know-which have been contributed to us.  The cost build-up approach is often used for embryonic technology or other assets where no specific market application or future benefit stream can be identified and/or quantified.  In order to address the issue of an investment return on development of assets under a cost based approach, we considered the required rate of return that an investor would require at this early stage of development based on a venture capital return profile.  In that regard, we selected a required rate of return of 40% which, based upon venture capital studies, is the low end of the range for first stage or early stage development companies.

 
28
 
 
We applied this avoided cost approach, by taking costs to create the assets, considering any economic obsolescence and then after calculating these amounts, deducting income taxes, applied an investment return of 40%, as discussed above, to these after tax costs to arrive at a value of the asset prior to a tax amortization benefit from IRC tax code section 197 to arrive at the fair value of assets contributed to the Company.

The result of applying the methodology described above is as follows: The provisional patent applies carbohydrate chemistry to the toxicity effects of blood substitutes and has been fair valued at $1,725,000.  The patent was issued in 2001 entitled “Enhancement of Delivery of Radioimaging and Radioprotective Agents” and has been fair valued at $330,000.  The know-how consists of expertise in manufacturing process, clinical trial process and FDA approval process and has been fair valued at $880,000.

We estimated that the development cost for the provisional patent was the equivalent of five person years plus support costs.  We estimated that the development cost for the patent was the equivalent of one person year plus support cost and the development cost for the know-how was the equivalent of four person years.  Support costs include legal, laboratory, materials, filing fees and other costs necessary to develop this technology.

We must raise new capital to continue our business operations and intend to use the assets contributed by our CEO to raise capital.  Our CEO intends to provide minimal cash to fund critical needs until shares are sold to raise capital.  We anticipate the need for approximately $5,000,000 in additional funding to support the planned expansion of our operations over the next approximately 12 months.

Results of Operations

Three months ended March 31, 2010

General and administrative expense for the three months ending March 31, 2010 was $12,486.

We had no research and development expense for the three months ending March 31, 2010.

We had no revenue for the three months ending March 31, 2010.

Period from Inception (August 24, 2009) through December 31, 2009

General and administrative expense for the period from inception through December 31, 2009 was $676,894. Of this amount, $540,000 is the value of the common stock issued to an advisor to the Company who will provide strategic management advisory services to us.  This amount was fair valued using the cost approach applying a required rate of return of 40%. The remaining $136,894 consists primarily of legal and accounting fees associated with the start up and S-1 filing for the Company.

Research and development expense of $2,200,000 consists of a patent and a provisional patent and know-how assigned to us by our Chief Executive Officer.  The patent, provisional patent and know-how were fair valued using the cost approach applying a required rate of return of 40%.  These amounts were expensed due to the uncertainty concerning our future profitability.

Due to our early stage of development and the uncertainty concerning our future profitability a full valuation allowance has been taken related to our deferred tax asset of $272,959.

We had no revenue for the period from inception through December 31, 2009.

 
29
 
 
Liquidity and Capital Resources

As of March 31, 2010, we had cash of $19,026, accounts payable and accrued expenses of $69,587, and an advance payable to our CEO of $80,796, all of which were current liabilities.  The $80,796 will be repaid to our CEO once we raise cash or March 31, 2011, whichever comes first.

We have not yet received any revenues from our development stage operations, nor have we otherwise engaged in any business operations. The absence of revenues and known adequate, available financing results in an uncertainty regarding the Company’s ability to continue as a going concern.

Management has plans to seek additional capital through private placements and public offerings of its common stock.  The Company has submitted this Registration Statement on Form S-1 to the Securities and Exchange Commission (“SEC”) to register and sell in a self-directed offering 15,000,000 shares of newly issued common stock.

There can be no assurance that the Company will be successful in accomplishing its objectives.  Without such additional capital, the Company may be required to cease operations.

Our CEO intends to continue to provide minimal cash to fund critical needs until shares are sold to raise capital.  Our CEO contributed a patent, a provisional patent, pending trademark applications and know-how valued approximately $2.2 million at the time of contribution and received 8,000,000 shares of Company common stock.  We intend to use these assets to raise the capital required to fund operations.

Other than our CEO’s intention to provide minimal cash, we have no current commitment from our officers and directors or any of our shareholders, to supplement our operations or provide us with financing in the future. If we are unable to raise additional capital from conventional sources and/or additional sales of stock in the future, we may be forced to curtail or cease our operations. Even if we are able to continue our operations, the failure to obtain financing could have a substantial adverse effect on our business and financial results. In the future, we may be required to seek additional capital by selling debt or equity securities, and we may be required to cease operations, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. The sale of additional equity or debt securities, if accomplished, may result in dilution to our then shareholders. We provide no assurance that financing will be available in amounts or on terms acceptable to us, or at all.

Contractual obligations

We do not currently have any material contractual obligations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

DESCRIPTION OF PROPERTY

We do not currently own or lease office space or any other real property.  Our Chief Executive Officer operates out of a home office.

CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS

During the last two fiscal years, we have not entered into any material transactions or series of transactions that would be considered material in which any officer, director or beneficial owner of 5% or more of any class of our capital stock, or any immediate family member of any of the preceding persons, had a direct or indirect material interest. There are no transactions presently proposed, except as follows:

 
30
 
 
1.
On August 24, 2009 we granted 8,000,000 shares of our common stock to David Platt, our Chief Executive Officer, in exchange for a patent, a provisional patent, trademarks and know-how valued at approximately $2.2 million.  In furtherance of this arrangement, on December 10, 2009, Dr. Platt executed assignments of an issued patent, a provisional patent and two trademarks in favor of the Company.
   
2.
On August 24, 2009 we granted 2,000,000 shares of our common stock to Offer Binder, in exchange for $10,000 and management advisory services valued at $540,000.
   
3.
Currently, we use our Chief Executive Officer’s residence as our corporate office, and we do not pay rent or other fees in connection with such use.
 

 
 
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DIRECTOR AND EXECUTIVE COMPENSATION

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the Company’s chief executive officer and chief financial since the Company’s inception (August 24, 2009), regardless of compensation level.  The Company’s chief executive officer and chief financial is the only officer of the Company for whom compensation disclosure is required pursuant to instruction 1 to Item 402(a)(3) of Regulation S-K.

Summary Compensation Table
 
Name and Principal Position
Year
 
Salary
 
 
Bonus
 
 
Stock Awards
 
 
Total
Compensation
 
David Platt, Ph.D., Chief Executive Officer
and Chief Financial Officer
2009
 
$
-
 
 
$
-
 
 
$
-
 
 
$
-
 


Outstanding Equity Awards at Fiscal Year End

There were no outstanding unvested stock options held by the Company’s chief executive officer and chief financial officer at December 31, 2009.
 
Director Compensation

No compensation was earned by or paid to the directors since the Company’s inception (August 24, 2009).
 
Employment Contracts

There are no employment contracts between the Company and its sole officer.

Corporate Governance

The Company may create separate audit and compensation committees of its board when the board determines it to be advisable.

Code of Ethics. A code of business conduct and ethics is a written standard designed to deter wrongdoing and to promote (a) honest and ethical conduct, (b) full, fair, accurate, timely and understandable disclosure in regulatory filings and public statements, (c) compliance with applicable laws, rules and regulations, (d) the prompt reporting violation of the code and (e) accountability for adherence to the code. We are not currently subject to any law, rule or regulation requiring that we adopt a code of ethics; however, we intend to adopt one in the near future.

Audit Committee. The Board of Directors has not yet established a separate audit committee, and the functions of the audit committee are currently performed by our Board of Directors as a whole in accordance with Section 3(a)(58) of the Exchange Act. We are not currently subject to any law, rule or regulation requiring that we establish or maintain a separate audit committee.

Board of Directors Independence. Our Board of Directors consists of five members. We are not currently subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include “independent” directors. Four of the members of the Board of Directors are “independent” as defined in Section 4200(a)(15) of NASDAQ Stock Market Rules.

 
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Audit Committee Financial Expert. The Board of Directors has determined that Carl L. Lueders is an “audit committee financial expert” who is “independent” as defined in Item 407(d)(5) of Regulation S-K of the Securities Exchange Act of 1934, as amended.

Nominating Committee. We have not yet established a nominating committee. Our Board of Directors, sitting as a board, performs the role of a nominating committee. We are not currently subject to any law, rule or regulation requiring that we establish a nominating committee.

Compensation Committee. We have not yet established a compensation committee. Our Board of Directors, sitting as a board, performs the role of a compensation committee. We are not currently subject to any law, rule or regulation requiring that we establish a compensation committee. We intend to establish a compensation committee if the Board determines it to be advisable or we are otherwise required to do so by applicable law, rule or regulation.

Indemnification Agreements

None.

Director Independence

Four of the members of the board of directors are “independent” as defined under the rules of the NASDAQ Stock Market.
 
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.
 

 
 
33
 
 
DESCRIPTION OF CAPITAL STOCK

We have authorized capital stock consisting of 100,000,000 shares of common stock, $.001 par value per share ("Common Stock") and 5,000,000 shares of preferred stock, $.001 par value per share ("Preferred Stock"). As of March 31, 2010, we had 10,020,000 shares of common stock issued and outstanding and no shares of Preferred Stock issued and outstanding.

COMMON STOCK

Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of shareholders.  Directors are appointed by a plurality of the votes present at any special or annual meeting of shareholders (by proxy or in person), and a majority of the votes present at any special or annual meeting of shareholders (by proxy or in person) shall determine all other matters.  The holders of outstanding shares of common stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends at such times and in such amounts as the board from time to time may determine.  There is no cumulative voting of the election of directors then standing for election.  The common stock is not entitled to pre-emptive rights and is not subject to conversion or redemption.  Upon liquidation, dissolution or winding up of our company, the assets legally available for distribution to stockholders are distributable ratably among the holders of the common stock after payment of liquidation preferences, if any, on any outstanding payment of other claims of creditors.  Each outstanding share of common stock is, and all shares of common stock to be outstanding upon completion of this Offering will be, duly and validly issued, fully paid and non-assessable.

PREFERRED STOCK

Shares of Preferred Stock may be issued from time to time in one or more series, each of which shall have such distinctive designation or title as shall be determined by our Board of Directors ("Board of Directors") prior to the issuance of any shares thereof.  Preferred Stock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class or series of Preferred Stock as may be adopted from time to time by the Board of Directors prior to the issuance of any shares thereof.  The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all the then outstanding shares of our capital stock entitled to vote generally in the election of the directors, voting together as a single class, without a separate vote of the holders of the Preferred Stock, or any series thereof, unless a vote of any such holders is required pursuant to any Preferred Stock Designation.

Additionally, while it is not possible to state the actual effect of the issuance of any shares of Preferred Stock on the rights of holders of the common stock until the Board of Directors determines the specific rights of the holders of any shares of Preferred Stock, such rights may be superior to those associated with our common stock, and may include:

o
Restricting dividends on the common stock;

o
Rights and preferences including dividend and dissolution rights, which are superior to our common stock;

o
Diluting the voting power of the common stock;

o
Impairing the liquidation rights of the common stock; or
 
o
Delaying or preventing a change in control of the Company without further action by the stockholders.

Provisions of the Company’s Charter or By-Laws which would delay, deter or prevent a change in control of the Company

 
34
 
 
There are no special provisions of the Company’s Certificate of Incorporation or By-Laws which would specifically delay, deter or prevent a change in control of the Company.  Additionally, the Company has 5,000,000 shares of preferred stock authorized and undesignated.  Shares of preferred stock designated by our Board of Directors in the future may have voting powers superior to our common stock, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as adopted by the Board of Directors.  Such preferred stock, if authorized in the future, may contain provisions (including voting rights) which could delay, deter or prevent a change in control of the Company.

SHARES AVAILABLE FOR FUTURE SALE

Assuming that all 15,000,000 shares in this offering are issued and sold, we will have 25,031,236 shares of common stock outstanding.  Of those 25,031,236 shares of common stock outstanding, only the 15,000,000 shares issued in this offering will be freely tradable without restriction or further registration under the Securities Act, except for any shares held by an “affiliate” of us, which will be subject to the resale limitations of Rule 144 promulgated under the Securities Act.

Rule 144 governs resale of "restricted securities" for the account of any person (other than an issuer), and restricted and unrestricted securities for the account of an "affiliate" of the issuer. Restricted securities generally include any securities acquired directly or indirectly from an issuer or its affiliates which were not issued or sold in connection with a public offering registered under the Securities Act. An affiliate of the issuer is any person who directly or indirectly controls, is controlled by, or is under common control with, the issuer. Affiliates of the Company may include its directors, executive officers, and persons directly or indirectly owning 10% or more of the outstanding common stock. Under Rule 144, non-affiliates are able to sell restricted securities pursuant to Rule 144, after six months, subject to certain conditions, including if the Company is current in its reporting obligations with the Commission and remains current for an additional period of six months, and thereafter after one year, with no volume or reporting obligations.

Under Rule 144, affiliates are able to sell restricted securities pursuant to Rule 144 after six months, subject to certain conditions, including if the Company is current in its reporting obligations with the Commission and remains current for an additional period of six months, as well as other requirements described below. Resales by the Company's affiliates of restricted and unrestricted common stock are subject to volume limitation, aggregation, broker transaction, notice filing requirements, and requirements concerning publicly available information about the Company ("Applicable Requirements"). The volume limitations provide that a person (or persons who must aggregate their sales) cannot, within any three-month period, sell more than the greater of one percent of the then outstanding shares, or the average weekly reported trading volume during the four calendar weeks preceding each such sale.

PLAN OF DISTRIBUTION
 
We are offering for sale a maximum of 15,000,000 shares of our common stock in a self-underwritten offering directly to the public at a price of $2.00 per share. There is no minimum amount of shares that we must sell in our direct offering, and therefore no minimum amount of proceeds will be raised. No arrangements have been made to place funds into escrow or any similar account. Upon receipt, offering proceeds will be deposited into our operating account and used to conduct our business and operations. We are offering the shares without any underwriting discounts or commissions. The purchase price is $2.00 per share. If all 15,000,000 shares are not sold within 180 days from the date hereof the offering for the balance of the shares will terminate and no further shares will be sold.
 
Our offering price of $2.00 per share was arbitrarily decided upon by our management and is not based upon earnings or operating history, does not reflect our actual value, and bears no relation to our earnings, assets, book value, net worth, or any other recognized criteria of value. No independent investment banking firm has been retained to assist in determining the offering price for the shares. Such offering price was not based on the price of the issuance to our founders. Accordingly, the offering price should not be regarded as an indication of any future price of our stock.
 
 
35
 
 
We anticipate applying for trading of our common stock on the over-the-counter (OTC) Bulletin Board upon the effectiveness of the registration statement of which this prospectus forms a part. To have our securities quoted on the OTC Bulletin Board we must:  (1) be a company that reports its current financial information to the Securities and Exchange Commission, banking regulators or insurance regulators; and (2) has at least one market maker who completes and files a Form 211 with FINRA OTC Compliance Unit. The OTC Bulletin Board differs substantially from national and regional stock exchanges because it (1) operates through communication of bids, offers and confirmations between broker-dealers, rather than one centralized market or exchange; and, (2) securities admitted to quotation are offered by one or more broker-dealers rather than “specialists” which operate in stock exchanges. We have not yet engaged a market maker to assist us to apply for quotation on the OTC Bulletin Board and we are not able to determine the length of time that such application process will take. Such time frame is dependent on comments we receive, if any, from FINRA regarding our Form 211 application. Upon effectiveness of this registration we will seek out a market maker.
 
There is currently no market for our shares of common stock. There can be no assurance that a market for our common stock will be established or that, if established, such market will be sustained. Therefore, purchasers of our shares registered hereunder may be unable to sell their securities, because there may not be a public market for our securities. As a result, you may find it more difficult to dispose of, or obtain accurate quotes of our common stock. Any purchaser of our securities should be in a financial position to bear the risks of losing their entire investment.
 
Shares in This Offering Will Be Sold By Our Officers and Directors
 
This is a self-underwritten offering with no minimum sale requirement.  Our officers and directors will sell the Shares directly to the public, with no commission or other remuneration payable to them for any Shares that are sold by them.  Dr. Platt will register as the issuer-agent in those states requiring such registration.  In offering the securities on our behalf, they will rely on the safe harbor from broker-dealer registration set out in Rule 3a4-1 under the Securities Exchange Act of 1934.
 
Rule 3a4-1 sets forth those conditions under which a person associated with an Issuer may participate in the offering of the Issuer’s securities and not be deemed to be a broker-dealer. Those conditions are as follows:
 
a.
Our officers and directors are not subject to a statutory disqualification, as that term is defined in Section 3(a)(39) of the Act, at the time of their participation; and
 
b.
Our officers and directors will not be compensated in connection with their participation by the payment of commissions or other remuneration based either directly or indirectly on transactions in securities; and
 
c.
Our officers and directors are not, nor will they be at the time of their participation in the offering, an associated person of a broker-dealer; and
 
Our officers and directors meet the conditions of paragraph (a)(4)(ii) of Rule 3a4-1 of the Exchange Act, in that they (A) primarily perform, or intend primarily to perform at the end of the offering, substantial duties for or on behalf of our Company, other than in connection with transactions in securities; and (B) are not a broker or dealer, or have been associated person of a broker or dealer, within the preceding twelve months; and (C) have not participated in selling and offering securities for any Issuer more than once every twelve months other than in reliance on Paragraphs (a)(4)(i) and (a)(4)(iii).
 
There are no current plans or arrangements to enter into any contracts or agreements to sell the Shares with a broker or dealer.  However, we may enter into such agreements and pay commissions and expenses of up to 10% of all proceeds raised by brokers, dealers, finders or selling agents who may participate in this offering.
 
 
36
 
 
Our officers, directors, control persons and affiliates of same do not intend to purchase any shares in this offering.
 
Under the securities laws of certain states, the Shares may be sold in such states only through registered or licensed brokers or dealers or persons exempt from such registration.  In addition, in certain states the Shares may not be sold unless the Shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.  We will only offer and sell the Shares in those states where we register or qualify the Shares for sale or where an exemption from such registration or qualification requirement is available and we have complied with such exemption.
 
We intend to sell our shares in the states of                     .  However we may expand the offering into additional states should the officers deem it appropriate to do so.
 
Terms of the Offering
 
The shares will be sold at the fixed price of $2.00 per share until the completion of this offering.  There is no minimum amount of subscription required per investor, and subscriptions, once received, are irrevocable.
 
This offering will commence on the effective date of this Prospectus and continue for a period not to exceed 180 days (the “Expiration Date”).
 
Deposit of Offering Proceeds
 
This is a “best efforts” offering and, as such, we will be able to spend any of the proceeds.  The funds will be transferred to our business account for use in the implementation of our business plans
 
Procedures and Requirements For Subscription
 
If you decide to subscribe for any shares in this offering, you will be required to execute a Subscription Agreement and tender it, together with a check or certified funds to us.  Subscriptions, once received by the Company, are irrevocable.  All checks for subscriptions should be made payable to the Company.  There is no minimum purchase requirement.
 
DILUTION OF THE PRICE YOU PAY FOR YOUR SHARES
 
We are offering our Common Stock at a price per share that is significantly more than the price per share paid by the current stockholders of our Common Stock.  We are offering for sale up to an additional 15,000,000 shares of Common Stock.  If you purchase Shares in this Offering you will experience immediate and substantial dilution.
 
Dilution represents the difference between the price per share paid by purchasers in this Offering and the net tangible book value per share.  Net tangible book value per share represents our net tangible assets (our total assets less our total liabilities), divided by the number of shares of Common Stock outstanding at the time of the offering.  Our net tangible book value as of March 31, 2010 was $(131,857).  Based upon 10,020,000 issued and outstanding shares of Common Stock on March 31, 2010, our net tangible book value per share was ($0.01).  After giving effect to the sale of all 15,000,000 Shares being offered in this Offering at $2.00 per share and the payment of expenses up to 10% of the proceeds related to the Offering, our pro forma net tangible book value would be $26,869,643 and our net tangible book value per share would be $1.07 which represents an immediate increase in net tangible book value of $1.08 per share and an immediate dilution to the purchasers of Shares in this Offering of $0.01 per share (or 0.1 %).
 
 
37
 
 
The following table illustrates the pro forma per share dilution described above assuming 1,000,000, 5,000,000 or 15,000,000 shares are sold:
 
   
1,000,000
Shares Sold
   
5,000,000
Shares Sold
   
15,000,000
Shares Sold
 
Offering Price per share
  $ 2.00     $ 2.00     $ 2.00  
Net tangible book value per share before the offering
  $ (0.01 )   $ (0.01 )   $ (0.01 )
Increase per share attributable to purchase of stock by investors
  $ 0.16     $ 0.60     $ 1.08  
Pro forma net tangible book value per share after the offering
  $ 0.15     $ 0.59     $ 1.07  
                         
Dilution per share to new investors
  $ 0.01     $ 0.01     $ 0.01  
                         
Percentage dilution per share
    8.0 %     2.2 %     1.2 %

 
The table below indicates the relative aggregate cash investment and stock ownership of new investors in this Offering, assuming the sale of 1,000,000 shares, 5,000,000 shares or 15,000,000 shares:
 
   
Investment
   
%
   
Stock Ownership
   
%
 
Sale of 1,000,000 Shares
                       
Current Stockholders
  $ 2,760,000       58.0 %     10,020,000       90.0 %
New Investors
  $ 2,000,000       42.0 %     1,000,000       10.0 %
    $ 4,760,000       100 %     11,020,000       100 %
Sale of 5,000,000 shares
                               
Current Stockholders
  $ 2,760,000       21.6 %     10,020,000       66.7 %
New Investors
  $ 10,000,000       78.4 %     5,000,000       33.3 %
    $ 12,760,000       100 %     15,020,000       100 %
Sale of 15,000,000 shares
                               
Current Stockholders
  $ 2,760,000       8.4 %     10,020,000       40.0 %
New Investors
  $ 30,000,000       91.6 %     15,000,000       60.0 %
    $ 32,760,000       100 %     25.020,000       100 %

 
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DETERMINATION OF PRICE

The offering of 15,000,000 shares of our common stock described in this Prospectus will represent approximately 60% of our outstanding common stock. For purposes of calculating the registration fee for the common stock included in this Prospectus, we have used an estimated public offering price of $2.00 per share.  This is an arbitrary price and we can offer no assurances that the $2.00 price per share bears any relation to the value of the shares as of the date of this Prospectus.

MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS

No established public trading market exists for our common stock. We have no shares of common stock subject to outstanding options or warrants to purchase, or securities convertible into, our common stock.  Except for this offering, there is no common stock that is being, or has been proposed to be, publicly offered.

Holders of Common Stock
 
As of the date of this prospectus,we have four stockholders. Our primary stockholders are Dr. David Platt, our chairman of the board, chief executive officer and chief financial officer and Offer Binder, who own 8,000,000 and 2,000,000 shares respectively of our common stock, or an aggregate of 10,000,000 of our 10,031,236 outstanding shares.
 
Dividends
 
There have been no cash dividends declared on our common stock since our company was formed. Dividends are declared at the sole discretion of our Board of Directors. Our intention is not to declare cash dividends and retain all cash for our operations.

ADDITIONAL INFORMATION
 
  We have filed a registration statement on Form S-1 with the Securities and Exchange Commission for our common stock offered in this offering. This Prospectus does not contain all of the information set forth in the registration statement. You should refer to the registration statement and its exhibits for additional information. Whenever we make references in this Prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for the copies of the actual contract, agreement or other document.

 
39
 
 
Our fiscal year ends on December 31. We plan to furnish our shareholders annual reports containing audited financial statements and other appropriate reports, where applicable. In addition, we intend to become a reporting company and file annual, quarterly, and current reports, and other information with the SEC, where applicable. You may read and copy any reports, statements, or other information we file at the SEC's public reference room at 100 F. Street, N.E., Washington D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our SEC filings are also available to the public on the SEC's Internet site at http\\www.sec.gov.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party by reason of such person being or having been a director, officer, employee or agent of the corporation. Section 145 of the Delaware General Corporation Law also provides that expenses (including attorneys’ fees) incurred by a director or officer in defending an action may be paid by a corporation in advance of the final disposition of an action if the director or officer undertakes to repay the advanced amounts if it is determined such person is not entitled to be indemnified by the corporation. The Delaware General Corporation Law provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise.  The Company’s Bylaws provide that, to the fullest extent permitted by law, the Company shall indemnify and hold harmless any person who was or is made or is threatened to be made a party or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that such person, or the person for whom he is the legally representative, is or was a director or officer of the Company, against all liabilities, losses, expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such proceeding.

Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions, or (iv) for any transaction from which the director derived an improper personal benefit.  The Company’s Certificate of Incorporation provides for such limitation of liability.

The Company’s By-laws provide for the indemnification of, and advancement of expenses to, directors and officers of the Company (and, at the discretion of the Board of Directors of the Company, employees and agents of the Company to the extent that Delaware law permits the Company to provide indemnification to such persons) in excess of the indemnification and advancement otherwise permitted under Section 145 of the DGCL, subject only to limits created by applicable Delaware law (statutory or non-statutory), with respect to actions for breach of duty to the Company, its stockholders and others. The provision does not affect directors’ responsibilities under any other laws, such as the federal securities laws or state or federal environmental laws.

The Company intends to enter into agreements with its directors and executive officers, that will require the Company to indemnify such persons to the fullest extent permitted by law, against expenses, judgments, fines, settlements and other amounts incurred (including attorneys’ fees), and advance expenses if requested by such person, in connection with investigating, defending, being a witness in, participating, or preparing for any threatened, pending, or completed action, suit, or proceeding or any alternative dispute resolution mechanism, or any inquiry, hearing, or investigation (collectively, a “Proceeding”), relating to any event or occurrence that takes place either prior to or after the execution of the indemnification agreement, related to the fact that such person is or was a director or officer of the Company, or while a director or officer is or was serving at the request of the Company as a director, officer, employee, trustee, agent, or fiduciary of another foreign or domestic corporation, partnership, joint venture, employee benefit plan, trust, or other enterprise, or was a director, officer, employee, or agent of a foreign or domestic corporation that was a predecessor corporation of the Company or of another enterprise at the request of such predecessor corporation, or related to anything done or not done by such person in any such capacity, whether or not the basis of the Proceeding is alleged action in an official capacity as a director, officer, employee, or agent or in any other capacity while serving as a director, officer, employee, or agent of the Company. Indemnification is prohibited on account of any Proceeding in which judgment is rendered against such persons for an accounting of profits made from the purchase or sale by such persons of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of any federal, state, or local laws. The indemnification agreements also set forth certain procedures that will apply in the event of a claim for indemnification thereunder.

 
40
 
 
Insurance. The Company may purchase and maintain insurance on behalf of any person who is or was a director, officer or employee of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise against liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Company would have the power to indemnify him against liability under the provisions of this section.  The Company currently maintains such insurance.

Settlement by the Company. The right of any person to be indemnified is subject always to the right of the Company by its Board of Directors, in lieu of such indemnity, to settle any such claim, action, suit or proceeding at the expense of the Company by the payment of the amount of such settlement and the costs and expenses incurred in connection therewith.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a director, officer or controlling person in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to the court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

At present, there is no pending litigation or proceeding involving any of our directors, officers or employees as to which indemnification is sought, nor are we aware of any threatened litigation or proceeding that may result in claims for indemnification.
 
LEGAL MATTERS

Certain legal matters with respect to the issuance of shares of common stock offered hereby will be passed upon by Seyfarth Shaw LLP, Boston, Massachusetts.
 
 
41
 
 
EXPERTS

The financial statements of the Company as of December 31, 2009 and for the period from inception (August 24, 2009) to December 31, 2009, included in this Prospectus and Registration Statement have been audited by Caturano and Company P.C., independent registered public accountants, as set forth in their report thereon appearing elsewhere herein and have been so included in reliance upon the report given on the authority of such firm as experts in accounting and auditing.

FINANCIAL STATEMENTS

The Financial Statements required by Article 8 of Regulation S-X are stated in U.S. dollars and are prepared in accordance with Accounting Principles Generally Accepted in the United States of America (“US GAAP”). The following financial statements pertaining to Avanyx Therapeutics, Inc. are filed as part of this Prospectus.
 

 
 
42
 
 
Avanyx Therapeutics, Inc.
(A Development Stage Company)
FINANCIAL STATEMENTS

 
Contents
Page(s)
 
 
Financial Statements for the Three Months Ended March 31, 2010 and the Period from Inception (August 24, 2009) to March 31, 2010
 
   
F-2
 
 
F-3
 
 
F-4
 
 
F-5
 
 
F-6
   
Financial Statements for the Period from Inception (August 24, 2009) to December 31, 2009
 
   
F-10
 
 
F-11
 
 
F-12
 
 
F-13
 
 
F-14
 
 
F-15
 
 
 
F-1
 
 
Avanyx Therapeutics, Inc.
 
(A Development Stage Company)
 
 
March 31, 2010 and December 31, 2009 (Unaudited)
 
   
             
   
March 31, 2010
   
December 31, 2009
 
ASSETS
           
             
Cash
  $ 19,026     $ 23,530  
Total current assets
    19,026       23,530  
                 
Total assets
  $ 19,026     $ 23,530  
                 
                 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
Current liabilities:
               
Accounts payable
  $ 36,216     $ 48,254  
Accrued expenses
    33,371       53,350  
Advances - related party
    80,796       49,747  
Total current liabilities
    150,383       151,351  
                 
                 
Stockholders’ deficit:
               
Preferred stock, $0.001 par value, 5,000,000 shares authorized,
               
  none issued and outstanding
    -       -  
Common stock, $0.001 par value, 45,000,000 shares authorized,
               
  10,020,000 and 10,000,000 shares issued and outstanding at March 31, 2010 and                
  December 31, 2009 respectively
    10,020       10,000  
Additional paid-in capital
    2,749,980       2,740,000  
Deficit accumulated during the development stage
    (2,891,357 )     (2,877,821 )
Total stockholders’ deficit
    (131,357 )     (127,821 )
                 
Total liabilities and stockholders’ deficit
  $ 19,026     $ 23,530  
 
 
The accompanying notes are an integral part of these financial statements.
 
 
F-2
 
 
Avanyx Therapeutics, Inc.
 
(A Development Stage Company)
 
 
Three months ended March 31, 2010 and the period from inception  
(August 24, 2009) through March 31, 2010 (Unaudited)
 
             
   
Three Months
Ended
March 31, 2010
   
Period From
Inception
(August 24, 2009)
to March 31, 2010
 
Operating expenses:
           
General and administrative
  $ 12,486     $ 689,380  
Research and development
    -       2,200,000  
Total operating expenses
    12,486       2,889,380  
                 
Inerest expense-related party
    1,050       1,977  
                 
Net loss
  $ (13,536 )   $ (2,891,357 )
                 
                 
Net loss per share - basic and diluted
  $ (0.00 )        
                 
Weighted average shares outstanding - basic and diluted
    10,000,222          
 
 
The accompanying notes are an integral part of these financial statements.
 
 
F-3
 
 
Avanyx Therapeutics, Inc.
 
(A Development Stage Company)
 
Statement of Changes in Stockholders' Deficit
 
For the Period from Inception (August 24, 2009) to March 31, 2010 (Unaudited)
 
   
                               
               
Additional
   
Deficit Accumulated
   
Total
 
   
Common Stock
   
Paid-in
   
During the
   
Stockholders'
 
   
Shares
   
Amount
   
Capital
   
Development Stage
   
Deficit
 
                               
Inception, August 24, 2009
    -     $ -     $ -     $ -     $ -  
                                         
Issuance of common stock
    10,000,000       10,000       2,740,000       -       2,750,000  
                                         
Net loss
    -       -       -       (2,877,821 )     (2,877,821 )
                                         
Balance, December 31, 2009     10,000,000     $ 10,000     $ 2,740,000     $  (2,877,821 )    $  (127,821 ) 
                                         
Issuance of common stock     20,000       20       9,980       -       10,000  
                                         
Net loss     -       -       -       (13,536 )      (13,356 ) 
                                         
Balance, March 31, 2010
    10,020,000     $ 10,020     $ 2,749,980     $ (2,891,357 )   $ (131,357 )
 
 
The accompanying notes are an integral part of these financial statements.
 
 
 
F-4
 
 
Avanyx Therapeutics, Inc.
 
(A Development Stage Company)
 
 
Three months ended March 31, 2010 and the period from inception  
(August 24, 2009) through March 31, 2010 (Unaudited)
 
             
   
Three Months
Ended
March 31, 2010
   
Period From
Inception
(August 24, 2009)
to March 31, 2010
 
             
Cash flows from operating activities:
           
Net loss
  $ (13,536 )   $ (2,891,357 )
Adjustments to reconcile net loss to cash
               
  used in operating activities:
               
Non-cash compensation expense
    -       540,000  
Non-cash patent and provisional patent expense
    -       2,200,000  
Increase in:
               
Accounts payable
    (12,038 )     36,216  
Accrued expenses
    (19,979 )     33,371  
                 
Net cash used in operating activities
    (45,553 )     (81,770 )
                 
Cash flows from financing activities
               
Advances - related party
    31,049       80,796  
Proceeds from investment in capital stock - related party
    -       10,000  
Proceeds from investment in capital stock
    10,000       10,000  
Net cash provided by financing activities
    41,049       100,796  
                 
Net increase (decrease) in cash and cash equivalents
    (4,504 )     19,026  
                 
Cash and cash equivalents, beginning of period
    23,530       -  
                 
Cash and cash equivalents, end of period
  $ 19,026     $ 19,026  
                 
Supplemental disclosure of cash flow information:
               
                 
Cash paid during the period for:
               
Interest
  $ -     $ -  
                 
Income taxes
  $ -     $ -  
                 
Supplemental disclosure of non-cash financing activities:
               
Issuance of stock for patents and provisional patents
  $ -     $ 2,200,000  
                 
Issuance of stock for services
  $ -     $ 540,000  
 
 
The accompanying notes are an integral part of these financial statements.
 
 
F-5
 
AVANYX THERAPEUTICS, INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
Three Months Ended March 31, 2010 and the Period from Inception (August 24, 2009) to March 31, 2010
 
1.             GENERAL ORGANIZATION AND BUSINESS

Avanyx Therapeutics (the “Company”) was incorporated under the laws of the state of Delaware on August 24, 2009.  The Company’s initial focus is to develop products intended to treat oxygen deprivation in tissue and organs.  Oxygen deprivation is present in conditions such as Anemia, Ischemia and Trauma.  The Company’s initial BLOODBOOSTER™ product, called IPOXIN™, is designed to deliver oxygen to affected sites.  The Company’s initial objective is to obtain near-term toxicity data in a Phase I clinical trial with the Food and Drug Administration (“FDA”).

The Company has minimal operations and is considered to be in the development stage as of March 31, 2010.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  The Company is a recently formed entity with limited resources and operating history.   As shown in the accompanying financial statements, the Company has incurred net losses of $2,891,357 for the cumulative period from August 24, 2009 (inception) to March 31, 2010 and has negative working capital of $131,357.  The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its new business opportunities.

Management has plans to seek additional capital through private placements and public offerings of its common stock.  The Company has commenced a capital formation activity to submit a Registration Statement on Form S-1 to the Securities and Exchange Commission (“SEC”) to register and sell in a self-directed offering 15,000,000 shares of newly issued common stock.
 There can be no assurance that the Company will be successful in accomplishing its objectives.  Without such additional capital, the Company may be required to cease operations.

These conditions raise substantial doubt about the Company's ability to continue as a going concern.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.


2.             SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

Basis of Presentation
 
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q. It is suggested that these consolidated condensed financial statements be read in conjunction with the Company’s  financial statements for its year ended December 31, 2009 included its Form S-1. In the opinion of management, the statements contain all adjustments, including normal recurring adjustments necessary in order to present fairly the financial position as of March 31, 2010 and the results of operations for the three months ended March 31, 2010 and the period from inception (August 24, 2009) through March 31, 2010.
 
 
F-6
 
AVANYX THERAPEUTICS, INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
Three Months Ended March 31, 2010 and the Period from Inception (August 24, 2009) to March 31, 2010

2.              SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES …continued
 
The year-end balance sheet data was derived from the audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.
 
The results disclosed in the Statements of Operations for the three months ended March 31, 2010 are not necessarily indicative of the results to be expected for the full fiscal year.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 expenses during the reporting period.  Actual results could differ from those estimates.
 
Loss per Share

Basic net loss per share is computed based on the net loss for the period divided by the weighted average actual shares outstanding during the period. Diluted net loss per share is computed based on the net loss for the period divided by the weighted average number of common shares and common equivalent shares outstanding during each period unless the effect of such common equivalent shares would be anti-dilutive. Common stock equivalents represent the dilutive effect of the assumed exercise of certain outstanding stock options using the treasury stock method.   There were no dilutive financial instruments issued or outstanding for the period ending March 31, 2010.

Fair Value of Financial Instruments

The Company estimates the fair value of financial instruments using the available valuation methods. Considerable judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be indicative of the amounts the Company could realize in a current market exchange. As of March 31, 2010, the carrying value of accounts payable and related party advances approximated fair value due to their short-term nature.


3.             STOCKHOLDERS’ EQUITY

The Company is authorized to issue up to 5,000,000 shares of its $0.001 par value preferred stock and up to 45,000,000 shares of its $0.001 par value common stock.

Preferred Stock

No shares of preferred stock have been issued and the terms of such preferred stock have not been designated by the Board of Directors.
 
 
F-7
 
AVANYX THERAPEUTICS, INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
Three Months Ended March 31, 2010 and the Period from Inception (August 24, 2009) to March 31, 2010
 
3.              STOCKHOLDERS’ EQUITY …continued

Common Stock

On August 26, 2009, the Company issued 10,000,000 shares of its $0.001 par value common stock to its two founders at a fair value of $2,750,000.  Eight million shares were issued to the Company’s Chief Executive Officer (CEO), Chairman of the Board of Directors and co-founder, in exchange for a patent, a provisional patent and know-how fair valued at $2,200,000 or approximately $0.28 per share.  This amount was recorded as research and development expense in the accompanying statement of operations.  The patent and provisional patent were assigned to the Company on December 10, 2009.  The remaining 2,000,000 shares were issued to the co-founder for $10,000 in cash and management advisory services rendered.  The shares were valued using the approximately $0.28 per share value described above resulting in an assigned value of $550,000.  This amount was recorded as general and administrative expense in the accompanying statement of operations.

On March 31, 2010 the Company issued 20,000 shares of its $0.001 par value common stock for $10,000 in cash.  On April 9, 2010, the Company issued 11,236 shares of common stock in exchange for $11,236. No other issuances of preferred or common stock have been made.

 
4.              RELATED PARTY TRANSACTIONS

The CEO advanced $78,820 to the Company to fund start-up costs.  This advance will be repaid to the CEO once the Company raises sufficient capital or March 31, 2011, whichever comes first.  Advances by the CEO carry interest at the rate of 6.5%.  As of March 31, 2010 $1,976 had been recorded as interest expense-related party and included in Advances-related party.  The CEO intends to fund the Company’s start-up costs in this manner until the Company raises sufficient capital.  Office services are provided without charge by the CEO.  Such costs are immaterial to the financial statements and, accordingly, have not been reflected therein.
 
 
5.             PROVISION FOR INCOME TAXES

Temporary differences that give rise to significant deferred tax assets as of March 31, 2010 are as follows:
 
Start-up costs
  $ 21,786  
Net operating loss carryforward
    256,623  
Valuation allowance
    (278,409 )
         
Net deferred tax asset
  $ -  

As of March 31, 2010, the Company had a deferred tax asset of $21,786 related to start-up costs which are amortizable for tax purposes.  Such costs have not yet commenced amortizing at March 31, 2010.  The Company also had a deferred tax asset of $256,623 related to net operating loss carryforwards.

The primary factors affecting the Company’s income tax rate for the three months ended March 31, 2010 are as follows:

 
F-8
 
AVANYX THERAPEUTICS, INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
Three Months Ended March 31, 2010 and the Period from Inception (August 24, 2009) to March 31, 2010
 
5.              PROVISION FOR INCOME TAXES …continued
 
Tax benefit at U.S. statutory rate
    (34.0 %)
State tax benefit
    ( 6.3 %)
Valuation allowance
    40.3 %
      0.0 %

 
The Company applies the provisions of FASB ASC 740-10, Income Taxes, (originally issued as FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes ).  The Company has not recognized any liability for unrecognized tax benefits and does not believe there is any uncertainty with respect to its tax position.  The Company’s policy with respect to unrecognized tax benefits is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.

 
6.             SUBSEQUENT EVENTS

The Company has evaluated events and transactions that occurred between December 31, 2009 and June 24, 2010, the date the financial statements were available to be issued, for possible disclosure and recognition in the financial statements.
 
 
 
F-9
 
 
 
 

To the Board of Directors and stockholdersof
Avanyx Therapeutics, Inc.
Newton, Massachusetts

We have audited the accompanying balance sheet of Avanyx Therapeutics, Inc. (a development stage company) as of December 31, 2009, and the related statements of operations, changes in stockholders’ deficit and cash flows for the period from August 24, 2009 (date of inception) to December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 Avanyx Therapeutics, Inc. as of December 31, 2009, and the results of its operations and its cash flows for the period from August 24, 2009 (date of inception) to December 31, 2009 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 1 to the financial statements, the Company’s limited resources and operating history, as well as operating losses raise substantial doubt about its ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

CATURANO AND COMPANY, P.C.

June 24, 2010
Boston, Massachusetts
 
 
 
F-10
 
 
Avanyx Therapeutics, Inc.
 
(A Development Stage Company)
 
 
December 31, 2009
 
   
       
ASSETS
     
       
Cash
  $ 23,530  
Total current assets
    23,530  
         
Total assets
  $ 23,530  
         
LIABILITIES AND STOCKHOLDERS' DEFICIT
       
Current liabilities:
       
Accounts payable
  $ 48,254  
Accrued expenses
    53,350  
Total current liabilities
    101,604  
         
Advances - related party
    49,747  
         
Total liabilities
    151,351  
         
         
Stockholders’ deficit:
       
Preferred stock, $0.001 par value, 5,000,000 shares authorized,
       
  none issued and outstanding
    -  
Common stock, $0.001 par value, 45,000,000 shares authorized,
       
  10,000,000 shares issued and outstanding
    10,000  
Additional paid-in capital
    2,740,000  
Deficit accumulated during the development stage
    (2,877,821 )
Total stockholders’ deficit
    (127,821 )
         
Total liabilities and stockholders’ deficit
  $ 23,530  
 
 
The accompanying notes are an integral part of these financial statements.
 
 
F-11
 
 
Avanyx Therapeutics, Inc.
 
(A Development Stage Company)
 
 
For the Period from Inception (August 24, 2009) to December 31, 2009
 
   
       
       
Operating expenses:
     
General and administrative
  $ 676,894  
Research and development
    2,200,000  
Total operating expenses
    2,876,894  
         
Interest expense-related party
    927  
         
Net loss
  $ (2,877,821 )
         
         
Net loss per share - basic and diluted
  $ (0.30 )
         
Weighted average shares outstanding - basic and diluted
    9,736,842  
 
 
The accompanying notes are an integral part of these financial statements.
 
 
F-12
 
 
Avanyx Therapeutics, Inc.
 
(A Development Stage Company)
 
 
For the Period from Inception (August 24, 2009) to December 31, 2009
 
   
                               
               
Additional
   
Deficit Accumulated
   
Total
 
   
Common Stock
   
Paid-in
   
During the
   
Stockholders'
 
    Shares     Amount     Capital     Development Stage     Deficit  
                               
Inception, August 24, 2009
    -     $ -     $ -     $ -     $ -  
                                         
Issuance of common stock
    10,000,000       10,000       2,740,000       -       2,750,000  
                                         
Net loss
    -       -       -       (2,877,821 )     (2,877,821 )
                                         
Balance, December 31, 2009
    10,000,000     $ 10,000     $ 2,740,000     $ (2,877,821 )   $ (127,821 )
 
 
The accompanying notes are an integral part of these financial statements.
 
 
 
F-13
 
 
Avanyx Therapeutics, Inc.
 
(A Development Stage Company)
 
 
For the Period from Inception (August 24, 2009) to December 31, 2009
 
   
       
       
Cash flows from operating activities:
     
Net loss
  $ (2,877,821 )
Adjustments to reconcile net loss to cash
       
  used in operating activities:
       
Non-cash compensation expense
    540,000  
Non-cash patent and provisional patent expense
    2,200,000  
Increase in:
       
Accounts payable
    48,254  
Accrued expenses
    53,350  
Net cash used in operating activities
    (36,217 )
         
Cash flows from financing activities
       
Investment in capital stock - related party
    10,000  
Proceeds from advances - related party
    49,747  
Net cash provided by financing activities
    59,747  
         
Net increase in cash and cash equivalents
    23,530  
         
Cash and cash equivalents, beginning of period
    -  
         
Cash and cash equivalents, end of period
  $ 23,530  
         
Supplemental disclosure of cash flow information:
       
         
Cash paid during the period for:
       
Interest
  $ -  
         
Income taxes
  $ -  
         
Supplemental disclosure of non-cash financing activities:
       
Issuance of stock for patents and provisional patents
  $ 
2,200,000
 
         
Issuance of stock for services
  $
540,000
 
 
 
The accompanying notes are an integral part of these financial statements.
 
 
 
F-14
 
AVANYX THERAPEUTICS, INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
Period from Inception (August 24, 2009) to December 31, 2009  
 
1.             GENERAL ORGANIZATION AND BUSINESS

Avanyx Therapeutics (the “Company”) was incorporated under the laws of the state of Delaware on August 24, 2009.  The Company’s initial focus is to develop products intended to treat oxygen deprivation in tissue and organs.  Oxygen deprivation is present in conditions such as Anemia, Ischemia and Trauma.  The Company’s initial BLOODBOOSTER™ product, called IPOXIN™, is designed to deliver oxygen to affected sites.  The Company’s initial objective is to obtain near-term toxicity data in a Phase I clinical trial with the Food and Drug Administration (“FDA”).

The Company has minimal operations and is considered to be in the development stage as of December 31, 2009.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  The Company is a recently formed entity with limited resources and operating history.   As shown in the accompanying financial statements, the Company has incurred net losses of $2,877,821 for the period from August 24, 2009 (inception) to December  31, 2009 and has negative working capital of $78,074.  The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its new business opportunities.

Management has plans to seek additional capital through private placements and public offerings of its common stock.  The Company has commenced a capital formation activity to submit a Registration Statement on Form S-1 to the Securities and Exchange Commission (“SEC”) to register and sell in a self-directed offering 15,000,000 shares of newly issued common stock.  There can be no assurance that the Company will be successful in accomplishing its objectives.  Without such additional capital, the Company may be required to cease operations.

These conditions raise substantial doubt about the Company's ability to continue as a going concern.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.


2.             SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

Basis of Presentation

The financial statements have been prepared in conformity with accounting principles generally accepting in the United States of America.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 expenses during the reporting period.  Actual results could differ from those estimates.

 
F-15
 
AVANYX THERAPEUTICS, INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
Period from Inception (August 24, 2009) to December 31, 2009

2.              SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES …continued

Cash and Cash Equivalents

For purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid investments with original maturities of 90 days or less at the time of acquisition to be cash equivalents.

The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (“FDIC”).

Loss per Share

Basic net loss per share is computed based on the net loss for the period divided by the weighted average actual shares outstanding during the period. Diluted net loss per share is computed based on the net loss for the period divided by the weighted average number of common shares and common equivalent shares outstanding during each period unless the effect of such common equivalent shares would be anti-dilutive. Common stock equivalents represent the dilutive effect of the assumed exercise of certain outstanding stock options using the treasury stock method.   There were no dilutive financial instruments issued or outstanding for the period ending December 31, 2009.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Under this 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. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or be 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. A valuation allowance is provided when it is more likely than not that some portion of the gross deferred tax asset will not be realized.

Fair Value of Financial Instruments

The Company estimates the fair value of financial instruments using the available valuation methods. Considerable judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be indicative of the amounts the Company could realize in a current market exchange. As of December 31, 2009, the carrying value of accounts payable, accrued expenses and advances - related party approximated fair value due to their short-term nature.

Fiscal Year-end

The Company has adopted a fiscal year-end of December 31.

 
3.             STOCKHOLDERS’ EQUITY

The Company is authorized to issue up to 5,000,000 shares of its $0.001 par value preferred stock and up to 45,000,000 shares of its $0.001 par value common stock.

Preferred Stock

No shares of preferred stock have been issued and the terms of such preferred stock have not been designated by the Board of Directors.

 
F-16
 
AVANYX THERAPEUTICS, INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
Period from Inception (August 24, 2009) to December 31, 2009
 
3.              STOCKHOLDERS’ EQUITY …continued

Common Stock

On August 26, 2009, the Company issued 10,000,000 shares of its $0.001 par value common stock to its two founders at a fair value of $2,750,000.  Eight million shares were issued to the Company’s Chief Executive Officer (CEO), Chairman of the Board of Directors and co-founder, in exchange for a patent, a provisional patent and know-how fair valued at $2,200,000 or approximately $0.28 per share.  This amount was recorded as research and development expense in the accompanying statement of operations.  The patent and provisional patent were assigned to the Company on December 10, 2009.  The remaining 2,000,000 shares were issued to the co-founder for $10,000 in cash and management advisory services rendered.  The shares were valued using the approximately $0.28 per share value described above resulting in an assigned value of $550,000.  This amount was recorded as general and administrative expense in the accompanying statement of operations.

No other issuances of preferred or common stock were made through December 31, 2009.  On March 31, 2010, the Company issued 20,000 shares of common stock for $10,000 cash to an investor.  On April 9, 2010, the Company issued 11,236 shares of common stock in exchange for $11,236.

 
4.              RELATED PARTY TRANSACTIONS

The CEO advanced $48,820 to the Company to fund start-up costs.  This advance will be repaid to the CEO once the Company raises sufficient capital or March 11, 2011, whichever comes first.  Advances by the CEO carry interest at the rate of 6.5%.  At December 31, 2009 $927 had been recorded as interest expense-related party and included in Advances-related party.  The CEO intends to fund the Company’s start-up costs in this manner until the Company raises sufficient capital.  Office services are provided without charge by the CEO.  Such costs are immaterial to the financial statements and, accordingly, have not been reflected therein.
 
 
5.             PROVISION FOR INCOME TAXES

Temporary differences that give rise to significant deferred tax assets as of December 31, 2009 are as follows:
 
Start-up costs
  $ 21,786  
Net operating loss carryforward
    251,172  
Valuation allowance
    (272,959 )
         
Net deferred tax asset
  $ -  
 

As of December 31, 2009 , the Company had a deferred tax asset of $21,786 related to start-up costs which are amortizable for tax purposes.  The Company also had a deferred tax asset of $251,172 related to operating loss carryforwards.

The primary factors affecting the Company’s income tax rate are as follows:
 
Tax benefit at U.S. statutory rate
    (34.0 %)
State tax benefit
    (1.5 %)
Permanent differences
    26.0 %
Valuation allowance
    9.5 %
      0.0 %
 
 
F-17
 
AVANYX THERAPEUTICS, INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
Period from Inception (August 24, 2009) to December 31, 2009

The Company applies the provisions of FASB ASC 740-10, Income Taxes, (originally issued as FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes ).  The Company has not recognized any liability for unrecognized tax benefits and does not believe there is any uncertainty with respect to its tax position.  The Company’s policy with respect to unrecognized tax benefits is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.

 
6.             SUBSEQUENT EVENTS

Other than issuances of common stock discussed in Note 3 “Stockholders Equity”, there are no subsequent events.  The Company has evaluated events and transactions that occurred between December 31, 2009 and June 24, 2010,  the date the financial statements were available to be issued, for possible disclosure and recognition in the financial statements.

 
7.             RECENT ACCOUNTING PRONOUNCEMENTS

In June 2009, the FASB issued FASB Statement No. 168, The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles .  This Statement establishes the FASB Accounting Standards Codification™ (“Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP.  Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants.  The purpose of the Codification is to simplify U.S. GAAP, without change, by consolidating the numerous accounting rules into logically organized topics.  The Codification will enable users to quickly identify the guidance that applies to a specific accounting issue and is expected to streamline accounting research. It affects the way companies reference U.S. GAAP in financial statements and in their accounting policies. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009.  The Company has adopted the provisions of this statement.

In May 2009, the FASB issued FASB Statement No. 165, Subsequent Events , (codified as FASB ASC 855, Subsequent Events .  Topic 855 establishes general standards of accounting for and disclosing events that occur after the balance sheet date but before financial statements are issued or are available to be issued.  The standard dictates:
 
§  
The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements;
 
§  
The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements;
 
§  
The disclosures that an entity should make about events or transactions that occurred after the balance sheet date.

The standard is effective for interim or annual financial periods ending after June 15, 2009.  The Company has adopted the provisions of this standard.

 In June 2009, the FASB issued FASB Statement No. 166, Accounting for Transfers of Financial Assets – An Amendment of FASB Statement No. 140 , (codified as FASB ASC 860, Transfers and Servicing ).  This content requires more information about transfers of financial assets, includi ng securitization transactions, and where entities have continuing exposure to the risks related to transferred financial assets. It eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures.  The pending content will be effective at the start of a reporting entity’s first fiscal year beginning after November 15, 2009, or, for the Company, January 1, 2010.  The Company does not expect adoption of this content to have an impact on the Company’s financial position, results or operations or cash flows.
 
 
F-18
 
AVANYX THERAPEUTICS, INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
Period from Inception (August 24, 2009) to December 31, 2009
 
7.              RECENT ACCOUNTING PRONOUNCEMENTS …continued
 
In June 2009, the FASB issued FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R) (codified as FASB ASC 810, Consolidation .   This content changes the way entities account for special-purpose entities.  FASB Statement No. 167 is a revision to FASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest Entities .  It changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other entity’s purpose and design and the reporting entity’s ability to direct the activities of the other entity that most significantly impact the other entity’s economic performance.   The pending content requires a number of new disclosures. It will be effective at the start of a reporting entity’s first fiscal year beginning after November 15, 2009, or, for the Company, January 1, 2010.  The Company does not expect adoption of this content to have an impact on the Company’s financial position, results or operations or cash flows.
 
 
 
F-19
 
 
DEALER PROSPECTUS DELIVERY OBLIGATION
Until ninety (90) days after the later of (1) the effective date of the registration statement or (2) the first date on which the securities are offered publicly, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a Prospectus. This is in addition to the dealers’ obligation to deliver a Prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
 
 
 
43
 
 
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the expenses in connection with this registration statement. All of such expenses are estimates, other than the filing fees payable to the Securities and Exchange Commission.

Description
 
Amount to be Paid
 
 
 
 
 
 
Filing Fee - Securities and Exchange Commission
 
$
1,674.00
 
Attorney's fees and expenses
 
 
30,000.00
*
Accountant's fees and expenses
 
 
30,000.00
*
Transfer agent's and registrar fees and expenses
 
 
1,500.00
*
Printing and engraving expenses
 
 
1,500.00
*
Miscellaneous expenses
 
 
5,326.00
*
Total
 
$
70,000.00
*

*  Estimated
 
 
ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party by reason of such person being or having been a director, officer, employee or agent of the corporation. Section 145 of the Delaware General Corporation Law also provides that expenses (including attorneys’ fees) incurred by a director or officer in defending an action may be paid by a corporation in advance of the final disposition of an action if the director or officer undertakes to repay the advanced amounts if it is determined such person is not entitled to be indemnified by the corporation. The Delaware General Corporation Law provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise.  The Company’s Bylaws provide that, to the fullest extent permitted by law, the Company shall indemnify and hold harmless any person who was or is made or is threatened to be made a party or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that such person, or the person for whom he is the legally representative, is or was a director or officer of the Company, against all liabilities, losses, expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such proceeding.

Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions, or (iv) for any transaction from which the director derived an improper personal benefit.  The Company’s Certificate of Incorporation provides for such limitation of liability.

The Company’s By-laws provide for the indemnification of, and advancement of expenses to, directors and officers of the Company (and, at the discretion of the Board of Directors of the Company, employees and agents of the Company to the extent that Delaware law permits the Company to provide indemnification to such persons) in excess of the indemnification and advancement otherwise permitted under Section 145 of the DGCL, subject only to limits created by applicable Delaware law (statutory or non-statutory), with respect to actions for breach of duty to the Company, its stockholders and others. The provision does not affect directors’ responsibilities under any other laws, such as the federal securities laws or state or federal environmental laws.

 
44
 
 
The Company intends to enter into agreements with its directors and executive officers, that will require the Company to indemnify such persons to the fullest extent permitted by law, against expenses, judgments, fines, settlements and other amounts incurred (including attorneys’ fees), and advance expenses if requested by such person, in connection with investigating, defending, being a witness in, participating, or preparing for any threatened, pending, or completed action, suit, or proceeding or any alternative dispute resolution mechanism, or any inquiry, hearing, or investigation (collectively, a “Proceeding”), relating to any event or occurrence that takes place either prior to or after the execution of the indemnification agreement, related to the fact that such person is or was a director or officer of the Company, or while a director or officer is or was serving at the request of the Company as a director, officer, employee, trustee, agent, or fiduciary of another foreign or domestic corporation, partnership, joint venture, employee benefit plan, trust, or other enterprise, or was a director, officer, employee, or agent of a foreign or domestic corporation that was a predecessor corporation of the Company or of another enterprise at the request of such predecessor corporation, or related to anything done or not done by such person in any such capacity, whether or not the basis of the Proceeding is alleged action in an official capacity as a director, officer, employee, or agent or in any other capacity while serving as a director, officer, employee, or agent of the Company. Indemnification is prohibited on account of any Proceeding in which judgment is rendered against such persons for an accounting of profits made from the purchase or sale by such persons of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of any federal, state, or local laws. The indemnification agreements also set forth certain procedures that will apply in the event of a claim for indemnification thereunder.

Insurance. The Company may purchase and maintain insurance on behalf of any person who is or was a director, officer or employee of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise against liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Company would have the power to indemnify him against liability under the provisions of this section.  The Company currently maintains such insurance.

Settlement by the Company. The right of any person to be indemnified is subject always to the right of the Company by its Board of Directors, in lieu of such indemnity, to settle any such claim, action, suit or proceeding at the expense of the Company by the payment of the amount of such settlement and the costs and expenses incurred in connection therewith.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a director, officer or controlling person in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to the court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

At present, there is no pending litigation or proceeding involving any of our directors, officers or employees as to which indemnification is sought, nor are we aware of any threatened litigation or proceeding that may result in claims for indemnification.

 
45
 
 
ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

On August 24, 2009 we granted 8,000,000 shares of our common stock to David Platt in consideration for his assignment of a patent, a provisional patent, trademarks and know-how valued at approximately $2.2 Million, and 2,000,000 shares of our common stock to Offer Binder valued at $550,000.

Each of the grants was made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act for transactions not involving a public offering.

On March 31, 2010, we sold 20,000 shares of our stock to a foreign national for an aggregate price of $10,000.

On April 9, 2010, we sold 11,236 shares of our stock to a foreign national for an aggregate price of $11,236.

Each of the sales to foreign nationals was made in reliance on the exemption from registration provided by Regulation S promulgated under the Securities Act for transactions deemed to occur outside of the United States.
 
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Exhibit 3.1
Certificate of Incorporation, as amended
Exhibit 3.2*
Bylaws*
Exhibit 5.1**
Opinion and consent of Seyfarth Shaw LLP re: the legality of the shares being registered
Exhibit 10.1
Technology Assignment Agreement dated as of August 24, 2009 by and between the Company and David Platt
Exhibit 10.2
Avanyx Therapeutics, Inc. 2010 Stock Plan
Exhibit 10.3 Promissory Note dated as of February 9, 2010 issued by the Company to David Platt
Exhibit 23.1
Consent of Caturano and Company, P.C.
Exhibit 23.2**
Consent of Seyfarth Shaw LLP (included in Exhibit 5.1)
 
* 
Previously Filed as an exhibit to this Form S-1 Registration Statement.
** 
To be filed as an exhibit to this Form S-1 Registration Statement by amendment.
 
ITEM 17.  UNDERTAKINGS

The undersigned registrant hereby undertakes:

1.
To file, during any period in which offers or sales are being made, a post effective amendment to this Registration Statement:
 
a.
To include any prospectus required by Section 10(a)(3) of the Securities Act;

b.
To reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and rise represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and

c.
To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material changes to such information in the Registration Statement.
 
2.
For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.
 
 
46
 
 
3.
To file a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.
 
4.
For determining liability of the undersigned issuer under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned issuer undertakes that in a primary offering of securities of the undersigned issuer pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned issuer will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
 
i.
Any preliminary prospectus or prospectus of the undersigned issuer relating to the offering required to be filed pursuant to Rule 424;
 
ii.
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned issuer or used or referred to by the undersigned issuer;
 
iii.
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned issuer or its securities provided by or on behalf of the undersigned issuer; and
 
iv.
Any other communication that is an offer in the offering made by the undersigned issuer to the purchaser.
 
5.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer of controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
 
6.
For determining any liability under the Securities Act, treat the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant under Rule 424(b)(1) or (4) or 497(h) under the Securities Act as part of this registration statement as of the time the Commission declared it effective.
 
7.
For determining any liability under the Securities Act, treat each post-effective amendment that contains a form of prospectus as a new registration statement for the securities offered in the registration statement, and that offering of the securities at that time as the initial bona fide offering of those securities.
 
8.
That, for the purpose of determining liability under the Securities Act to any purchaser:
 
a.
If the issuer is relying on Rule 430B:
 
1.              
Each prospectus filed by the undersigned issuer pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
 
 
47
 
 
2.              
Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or
 
b.
If the issuer is subject to Rule 430C:
 
Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
 
 
48
 
 
SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all the requirements of filing on Form S-1 and authorized this Registration Statement to be signed on its behalf by the undersigned in the City of Newton, Massachusetts, on June 24, 2010.

 
AVANYX THERAPEUTICS, INC.
 
 
 
 
 
/s/   David Platt
 
 
 
Chief Executive Officer (Principal Executive Officer)
 
Chief Financial Officer (Principal Accounting Officer)

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints David Platt as true and lawful attorney-in-fact and agent with full power of substitution and resubstitution and for him/her and in his/her name, place and stead, in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this Registration Statement, as well as any new registration statement filed to register additional securities pursuant to Rule 462(b) under the Securities Act, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates stated.

Signature
Title
Date
 
 
 
/s/ David Platt
Director , Chief Executive Officer
June 24, 2010
 
(Principal Executive Officer) and
 
 
 Chief Financial Officer
 
 
(Principal Financial and Accounting Officer)
 
   
 
/s/ Dale H. Conaway*
Director
June 24, 2010
 
 
 
/s/ Carl L. Lueders*
Director
June 24, 2010
     
/s/ Rom Eliaz*
Director
June 24, 2010

*by David Platt, under Power of Attorney
 
 
49
Exhibit 3.1
 
 
CERTIFICATE OF INCORPORATION
 
OF
 
AVANYX THERAPEUTICS, INC.
 
 
FIRST.  The name of the Corporation is Avanyx Therapeutics, Inc.
 
SECOND.  The address of the Corporation’s registered office in the State of Delaware is 160 Greentree Drive, Suite 101, in the City of Dover, County of Kent, 19904.  The name of its registered agent at such address is National Registered Agents, Inc.
 
THIRD.  The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
 
FOURTH.  The total number of shares of all classes of stock which the Corporation shall have authority to issue is Thirty Million (30,000,000)   shares, consisting of (i) Twenty Five Million (25,000,000)   shares of Common Stock, $.001   par value per share (“Common Stock”), and (ii) Five Million (5,000,000)   shares of Preferred Stock, $.001 par value per share (“Preferred Stock”).
 
The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation:
 
I.            COMMON STOCK
 
A.            General .  The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights of the holders of the Preferred Stock of any series as may be designated by the Board of Directors upon any issuance of the Preferred Stock of any series.
 
B.            Voting .  At all meetings of stockholders (and in actions in lieu of meetings) the holders of the Common Stock are entitled to one vote for each share held.  There shall be no cumulative voting.
 
C.            Dividends .  Dividends may be declared and paid on the Common Stock from funds lawfully available therefor as and when determined by the Board of Directors and subject to any preferential dividend or other rights of any then outstanding Preferred Stock.
 
D.            Liquidation .  Upon the dissolution or liquidation of the Corporation, whether voluntary or involuntary, holders of Common Stock will be entitled to receive all assets of the Corporation available for distribution to its stockholders, subject to any preferential rights of any then outstanding Preferred Stock.
 
II.            PREFERRED STOCK
 
 
Certificate of Incorporation
Page 1
 
 
 
 
 
 
Preferred Stock may be issued from time to time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors of the Corporation as hereinafter provided.  Any share of Preferred Stock redeemed, purchased or acquired by the Corporation may be reissued except as otherwise provided by law.  Different series of Preferred Stock shall not be construed to constitute different classes of shares for the purposes of voting by classes unless expressly provided.
 
Authority is hereby expressly granted to the Board of Directors from time to time to issue the Preferred Stock in one or more series, and in connection with the creation of any such series, by resolution or resolutions providing for the issue of the shares thereof, to determine and fix such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional, preemptive or other special rights, and qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be stated and expressed in such resolutions, all to the full extent now or hereafter permitted by the General Corporation Law of Delaware.  Without limiting the generality of the foregoing, the resolutions providing for issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to the Preferred Stock of any other series to the extent permitted by law.  No vote of the holders of the Preferred Stock or the Common Stock shall be a prerequisite to the issuance of any shares of any series of the Preferred Stock authorized by and complying with the conditions of the Certificate of Incorporation, the right to have such vote being expressly waived by all present and future holders of the capital stock of the Corporation.
 
FIFTH.  The name and business address of the sole incorporator is: David Platt, 12 Appleton Street, Newton, MA  02459.
 
SIXTH.  In furtherance of, and not in limitation of, powers conferred by statute, it is further provided:
 
A.           The Board of Directors of the Corporation may adopt, amend or repeal the By-laws of the Corporation at any time after the original adoption of the By-laws according to Section 109 of the General Corporation Law of the State of Delaware; provided, however, that any amendment to provide for the classification of directors of the Corporation for staggered terms pursuant to the provisions of subsection (d) of Section 141 of the General Corporation Law of the State of Delaware shall be set forth in an amendment to this Certificate of Incorporation, in an initial By-law, or in a By-law adopted by the stockholders of the Corporation entitled to vote.
 
B.           Election of directors need not be by written ballot unless the By-laws of the Corporation shall so provide.
 
C.           The books and records of the Corporation may be kept at such place within or without the State of Delaware as the By-laws of the Corporation may provide or as may be designated from time to time by the Board of Directors.
 
 
 
Certificate of Incorporation
Page 2
 
 
 
 
 
 
D.           The business of the Corporation shall be conducted by the officers of the Corporation under the supervision of the Board of Directors.
 
SEVENTH.  Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for the Corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs.  If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.
 
EIGHTH.  A director of the Corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived any improper personal benefit.  If the Delaware General Corporation Law is amended after approval by the stockholders of this Article to authorize corporation action further eliminating or limiting the personal liability of directors then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law as so amended.  Any repeal or modification of the foregoing provisions of this Article EIGHTH by the stockholders of the corporation shall not adversely affect any right or protection of a director of the corporation existing at the time, or increase the liability of any director of this Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.
 
NINTH.  The Corporation shall, to the maximum extent permitted from time to time under the law of the State of Delaware, indemnify and upon request shall advance expenses to any person who is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit, proceeding or claim, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was or has agreed to be a director or officer of the Corporation or while a director or officer is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of any corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys’ fees and expenses), judgments, fines, penalties and amounts paid in settlement incurred in connection with the investigation, preparation to defend or defense of such action, suit, proceeding or claim; provided , however , that the foregoing shall not require the Corporation to indemnify or advance expenses to any person in connection with any action, suit, proceeding or claim initiated by or on behalf of such person or any counterclaim against the Corporation initiated by or on behalf of such person.  Such indemnification shall not be exclusive of other indemnification rights arising under any by-law, agreement, vote of directors or stockholders or otherwise and shall inure to the benefit of the heirs and legal representatives of such person.  Any person seeking indemnification under this Article NINTH shall be deemed to have met the standard of conduct required for such indemnification unless the contrary shall be established.  Any repeal or modification of the foregoing provisions of this Article NINTH shall not adversely affect any right or protection of a director or officer of the Corporation with respect to any acts or omissions of such director or officer occurring prior to such repeal or modification.
 
 
Certificate of Incorporation
Page 3
 
 
 
 
 
 
TENTH.  The provisions of Section 203 of the General Corporation Law shall not apply to this Corporation.
 
ELEVENTH.  Except as otherwise provided in the provisions establishing a class of stock, the number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares of Common Stock then outstanding) by the affirmative vote of the holders of a majority of the voting power of the Corporation entitled to vote irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of the State of Delaware.
 
TWELFTH.  Notwithstanding any provision of law, the Corporation may, by contract, grant to some or all of the security holders of the Corporation preemptive rights to acquire stock of the Corporation, but no stockholders shall have any preemptive rights except as specifically granted.
 
THIRTEENTH.  The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute and this Certificate of Incorporation (as it may, from time to time, be amended, altered or changed), and all rights conferred upon stockholders herein are granted subject to this reservation.
 
 
Certificate of Incorporation
Page 4
 
 
 
 
 
 
IN WITNESS WHEREOF, the undersigned sole incorporator has executed this Certificate of Incorporation this 24 th day of August, 2009.
 


/s/ David Platt _____________________________
David Platt, Incorporator
 
 
 
Certificate of Incorporation
Signature Page
 
 
 
 
 

 
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
AVANYX THERAPEUTICS, INC.


AVANYX THERAPEUTICS, INC. a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “ Corporation ”), DOES HEREBY CERTIFY:

FIRST:  That, by unanimous written consent of the directors of the Corporation, a resolution approving an amendment to the Certificate of Incorporation of the Corporation to increase the authorized stock of the Corporation was duly adopted and declared to be advisable.  The resolution setting forth the amendment is as follows:
 

 
RESOLVED :
That the Certificate of Incorporation of AVANYX Therapeutics, Inc. be amended by changing Article 4 thereof so that, as amended, said Article shall be and read as follows:
 

 
 
“The total number of shares of all classes of stock which the Corporation shall have authority to issue is Fifty Million (50,000,000) shares, consisting of (i) Forty Five Million (45,000,000) shares of Common Stock, $0.001 par value per share (“Common Stock”), and (ii) Five Million (5,000,000) shares of Preferred Stock, $.001 par value per share (“Preferred Stock”).”
 

SECOND:  That in lieu of a meeting and vote of the stockholders, the stockholders have given written consent to said amendment in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware.

THIRD:  That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, I have signed this Certificate of Amendment on behalf of the Corporation as of this 17 th day of December, 2009.



/s/ David Platt, Ph.D.  
David Platt, Ph.D., President
 
 
 
 
 

 
CERTIFICATE OF AMENDMENT
 
TO THE
CERTIFICATE OF INCORPORATION
OF
AVANYX THERAPEUTICS, INC.


AVANYX THERAPEUTICS, INC. a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “ Corporation ”), DOES HEREBY CERTIFY:

FIRST:  That, by unanimous written consent of the directors of the Corporation, a resolution approving an amendment to the Certificate of Incorporation of the Corporation to increase the authorized stock of the Corporation was duly adopted and declared to be advisable.  The resolution setting forth the amendment is as follows:
 

 
RESOLVED :
                     That the Certificate of Incorporation of AVANYX Therapeutics, Inc. be amended by changing Article 4 thereof so that, as amended, said Article shall be and read as follows:
 

 
 
“The total number of shares of all classes of stock which the Corporation shall have authority to issue is One Hundred Five Million (105,000,000) shares, consisting of (i) One Hundred Million (100,000,000) shares of Common Stock, $0.001 par value per share (“Common Stock”), and (ii) Five Million (5,000,000) shares of Preferred Stock, $.001 par value per share (“Preferred Stock”).”
 

SECOND:  That in lieu of a meeting and vote of the stockholders, the stockholders have given written consent to said amendment in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware.

THIRD:  That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, I have signed this Certificate of Amendment on behalf of the Corporation as of this 16 th day of June, 2010.



/s/ David Platt, Ph.D.  
David Platt, Ph.D., President

Exhibit 10.1
 
TECHNOLOGY ASSIGNMENT AGREEMENT
 
THIS TECHNOLOGY ASSIGNMENT AGREEMENT (this “Agreement”) is entered as of August 24, 2009, by and between Avanyx Therapeutics, Inc., a Delaware corporation (the “Company”), and David Platt, an individual (“Founder”).
 
1.               Assignment
 
Founder hereby assigns, in consideration of the mutual promises and covenants set forth herein, to the Company exclusively throughout the world all rights, title and interests (whether or not now existing) Founder owns in the (i) subject matter referred to in Exhibit A (“Technology”), (ii) all precursors, portions and work in progress with respect thereto and all inventions, works of authorship, mask works, technology, information, know-how, materials and tools relating thereto or to the development, support or maintenance thereof, and (iii) all copyrights, patent rights, trade secret rights, trademark rights, mask works rights, sui generis   database rights and all other intellectual and industrial property rights of any sort and all business, contract rights, causes of action, and goodwill in, incorporated or embodied in, used to develop, or related to any of the foregoing (collectively “Intellectual Property”).
 
2.               Consideration
 
2.1       The Company agrees to issue to Founder 8,000,000 shares of common stock of the Company on the date of this Agreement.  Such shares shall be the only consideration required of the Company with respect to the subject matter of this Agreement.
 
2.2     The assignment and stock issuance hereunder is intended to qualify for tax-free treatment under Section 351 of the Internal Revenue Code of 1986, as amended.
 
3.               Further Assurances; Moral Rights; Competition; Marketing
 
3.1       Founder agrees to assist the Company in every proper way to evidence, record and perfect the assignment as provided in Section 1 and to apply for and obtain recordation of and from time to time enforce, maintain, and defend the assigned rights.  If the Company is unable for any reason whatsoever to secure the Founder’s signature to any document it is entitled to under this Section 3.1, Founder hereby irrevocably designates and appoints the Company and its duly authorized officers and agents, as his agents and attorneys-in-fact with full power of substitution to act for and on his behalf and instead of Founder, to execute and file any such document or documents and to do all other lawfully permitted acts to further the purposes of the foregoing with the same legal force and effect as if executed by Founder.
 
3.2     To the extent allowed by law, the assignment as provided in Section 1 includes all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as “moral rights,” “artist’s rights,” “droit moral” or the like (collectively “Moral Rights”).  To the extent Founder retains any such Moral Rights under applicable law, Founder hereby ratifies and consents to, and provides all necessary ratifications and consents to, any action that may be taken with respect to such Moral Rights by or authorized by the Company; Founder agrees not to assert any Moral Rights with respect thereto.  Founder will confirm any such ratifications, consents, and agreements from time to time as requested by the Company.
 
 
 
 
 
 
4.               Confidential Information
 
Founder will not use or disclose anything assigned to the Company hereunder or any other technical or business information or plans of the Company, except to the extent Founder (i) can document that it is generally available (through no fault of Founder) for use and disclosure by the public without any charge, license or restriction, or (ii) is permitted to use or disclose such information or plans pursuant to agreement by and between Founder and the Company.  Founder recognizes and agrees that there is no adequate remedy at law for a breach of this Section 4, that such a breach would irreparably harm the Company and that the Company is entitled to equitable relief (including, without limitations, injunctions) with respect to any such breach or potential breach in addition to any other remedies.
 
5.                Warranty
 
Founder represents and warrants to the Company that the Founder (i) was the owner of certain rights, title and interest in the Intellectual Property and the Technology, (ii) has not assigned, transferred, licensed, pledged or otherwise encumbered any Intellectual Property or the Technology or agreed to do so, (iii) has full power and authority to enter into this Agreement and to make the assignment as provided in Section 1, (iv) is not aware of any violation, infringement or misappropriation of any third party’s rights (or any claim thereof) by the Intellectual Property or the Technology, (v) was not acting within the scope of employment by any third party when conceiving, creating or otherwise performing any activity with respect to anything purportedly assigned in Section 1, and (vi) is not aware of any questions or challenges with respect to the patentability or validity of any claims of any existing patents or patent applications relating to the Intellectual Property.
 
6.               Miscellaneous
 
This Agreement is not assignable or transferable by Founder without the prior written consent of the Company; any attempt to do so shall be void.  The Company shall be free to transfer this Agreement to a third party.  Any notice, report, approval or consent required or permitted hereunder shall be in writing and will be deemed to have been duly given if delivered personally or mailed by first-class, registered or certified U.S. mail, postage prepaid to the respective addresses of the parties as set below (or such other address as a party may designate by ten (10) days notice).  No failure to exercise, and no delay in exercising, on the part of either party, any privilege, any power or any rights hereunder will operate as a waiver thereof, nor will any single or partial exercise of any right or power hereunder preclude further exercise of any other right hereunder.  If any provision of this Agreement shall be adjudged by any court of competent jurisdiction to be unenforceable or invalid, that provision shall be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and enforceable.  This Agreement shall be deemed to have been made in, and shall be construed pursuant to the laws of The Commonwealth of Massachusetts and the United States without regard to conflicts of laws provisions thereof.  The prevailing party in any action to enforce this Agreement shall be entitled to recover costs and expenses including, without limitation, attorneys’ fees.  The terms of this Agreement are confidential to the Company and no press release or other written or oral disclosure of any nature regarding the compensation terms of this Agreement shall hereafter be made by Founder without the Company’s prior written approval; however, approval for such disclosure shall be deemed given to the extent such disclosure is required to comply with governmental rules.  Any waivers or amendments shall be effective only if made in writing and signed by a representative of the respective parties authorized to bind the parties.  This Agreement may be executed in any number of counterparts, each of which, when executed by both parties to this Agreement shall be deemed to be an original, and all of which counterparts together shall constitute one and the same instrument.  Both parties agree that this Agreement is the complete and exclusive statement of the mutual understanding of the parties and supersedes and cancels all previous written and oral agreements and communications relating to the subject matter of this Agreement.
 
 
 
2
 
 
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first indicated above.
 
COMPANY:

AVANYX THERAPEUTICS, INC.


By: /s/ David Platt                                                                            
       David Platt, President


FOUNDER:
 
/s/ David Platt                                                                            
David Platt.
 
 
 
3
 
 
EXHIBIT A
 
to
 
TECHNOLOGY ASSIGNMENT AGREEMENT
 
Patent: Enhancement of Delivery of Radioimaging and Radioprotective  Agents, Filing Date 10/07/98, Issue Date 6/12/2001

Trademarks:                      IPOXYN:  Application No. 77754473; Filing date 06/08/09
           AVANYX THERAPEUTICS  Application No. 77806120; Filing Date 8/17/09
 
 
Exhibit 10.2
 
AVANYX THERAPEUTICS, INC.
2010 STOCK PLAN

1.             Establishment, Purpose and Term of Plan .
 
1.1            Establishment. The AVANYX Therapeutics, Inc. 2010 Stock Plan (the “Plan”) was originally adopted by the Company effective as of June 16, 2010 (the “Effective Date”).
 
1.2            Purpose . The purpose of the Plan is to advance the interests of the Participating Company Group and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group. The Company intends that Awards granted pursuant to the Plan be exempt from or comply with Section 409A of the Code (including any amendments or replacements of such Section), and the Plan shall be so construed.
 
1.3            Term of Plan . The Plan shall continue in effect until its termination by the Committee; provided, however, that, to the extent required by applicable law, all Awards shall be granted, if at all, within ten (10) years from the Effective Date.
 
2.             Definitions and Construction .
 
2.1            Definitions . Whenever used herein, the following terms shall have their respective meanings set forth below:
 
(a)            “ Affiliate ” means (i) an entity, other than a Parent Corporation, that directly, or indirectly through one or more intermediary entities, controls the Company or (ii) an entity, other than a Subsidiary Corporation, that is controlled by the Company directly or indirectly through one or more intermediary entities. For this purpose, the term “control” (including the term “controlled by”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of the relevant entity, whether through the ownership of voting securities, by contract or otherwise; or shall have such other meaning assigned such term for the purposes of registration on Form S-8 under the Securities Act.
 
(b)             “ Award ” means any Option, Restricted Stock Award, Restricted Stock Unit Award, Stock Appreciation Right, Performance Unit Award, Performance Share Award, Cash-Based Award, or Other Stock-Based Award granted under the Plan.
 
(c)             “ Award Agreement ” means a written or electronic agreement between the Company and a Participant setting forth the terms, conditions and restrictions of the Award granted to the Participant.
 
(d)             “ Board ” means the Board of Directors of the Company.
 
(e)            “ Cash-Based Award ” means an Award, denominated in cash, granted to a Participant as described in Section 11.
 
(f)             “ Cause ” means, unless such term or an equivalent term is otherwise defined with respect to an Award by the Participant’s Award Agreement or by a written contract of employment or service, any of the following: (i) the Participant’s theft, dishonesty, willful misconduct, breach of fiduciary duty for personal profit, or falsification of any Participating Company documents or records; (ii) the Participant’s material failure to abide by a Participating Company’s code of conduct or other policies (including, without limitation, policies relating to confidentiality and reasonable workplace conduct); (iii) the Participant’s unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or corporate opportunity of a Participating Company (including, without limitation, the Participant’s improper use or disclosure of a Participating Company’s confidential or proprietary information); (iv) any intentional act by the Participant which has a material detrimental effect on a Participating Company’s reputation or business; (v) the Participant’s repeated failure or inability to perform any reasonable assigned duties after written notice from a Participating Company of, and a reasonable opportunity to cure, such failure or inability; (vi) any material breach by the Participant of any employment, service, non-disclosure, non-competition, non-solicitation or other similar agreement between the Participant and a Participating Company, which breach is not cured pursuant to the terms of such agreement; or (vii) the Participant’s conviction (including any plea of guilty or nolo contendere ) of any criminal act involving fraud, dishonesty, misappropriation or moral turpitude, or which impairs the Participant’s ability to perform his or her duties with a Participating Company.
 
(g)            “ Change in Control ” means, the occurrence of any of the following:
 
(i)            any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total combined voting power of the Company’s then-outstanding securities entitled to vote generally in the election of Directors; provided, however, that the following acquisitions shall not constitute a Change in Control: (1) an acquisition by any such person who on the Effective Date is the beneficial owner of more than fifty percent (50%) of such voting power, (2) any acquisition directly from the Company, including, without limitation, a public offering of securities, (3) any acquisition by the Company, (4) any acquisition by a trustee or other fiduciary under an employee benefit plan of a Participating Company or (5) any acquisition by an entity owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the voting securities of the Company; or
 
 
 
 
 
 
(ii)            an Ownership Change Event or series of related Ownership Change Events (collectively, a “ Transaction ” ) in which the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding securities entitled to vote generally in the election of Directors or, in the case of an Ownership Change Event described in Section 2.1(cc)(iii), the entity to which the assets of the Company were transferred (the “ Transferee ” ), as the case may be;
 
provided, however, that a Change in Control shall be deemed not to include a transaction described in subsections (i) or (ii) of this Section in which a majority of the members of the board of directors of the continuing, surviving or successor entity, or parent thereof, immediately after such transaction is comprised of Incumbent Directors. Notwithstanding the foregoing, to the extent that any amount constituting Section 409A Deferred Compensation would become payable under this Plan by reason of a Change in Control, such amount shall become payable only if the event constituting a Change in Control would also constitute a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A.  For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary corporations or other business entities. The Committee shall have the right to determine whether multiple sales or exchanges of the voting securities of the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive.
 
(h)            “ Code ” means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated thereunder.
 
(i)            “ Committee ” means the Compensation Committee and such other committee or subcommittee of the Board, if any, duly appointed to administer the Plan and having such powers in each instance as shall be specified by the Board. If, at any time, there is no committee of the Board then authorized or properly constituted to administer the Plan, the Board shall exercise all of the powers of the Committee granted herein, and, in any event, the Board may in its discretion exercise any or all of such powers.  For purposes of Awards intended to satisfy Section 162(m) of the Code, a committee must be composed of not less than two (2) non-employee directors, within the meaning of Rule 16b-3 of the Exchange Act, and “outside directors,” as defined in Treasury Regulation § 1.162-27.
 
(j)             “ Company ” means AVANYX Therapeutics, Inc., a Delaware corporation, or any successor corporation thereto.
 
(k)             “ Consultant ” means a person engaged to provide consulting or advisory services (other than as an Employee or a Director) to a Participating Company.
 
(l)             “ Covered Employee ” means any key Employee who is or may become a “covered employee,” as defined in Section 162(m) of the Code, and who is designated, either as an individual Employee or class of Employees, by the Committee within the shorter of: (i) ninety (90) days after the beginning of the Performance Period, or (ii) twenty-five percent (25%) of the Performance Period has elapsed, as a “Covered Employee” under this Plan for such applicable Performance Period.
 
(m)            “ Director ” means a member of the Board.
 
(n)             “ Disability ” means the total and permanent disability of a person as defined in Section 22(e)(3) of the Code, provided that in the case of Awards other than an Incentive Stock Option, the Committee in its discretion may determined whether a permanent and total disability exists in accordance with uniform and nondiscriminatory standards adopted by the Committee from time to time.
 
(o)             “ Dividend Equivalent Right ” means the right of a Participant, granted at the discretion of the Committee or as otherwise provided by the Plan, to receive a credit for the account of such Participant in an amount equal to the cash dividends paid on one share of Stock for each share of Stock represented by an Award held by such Participant.
 
(p)             “ Employee ” means any person treated as an employee (including an Officer or a Director who is also treated as an employee) in the records of a Participating Company. The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such individual’s employment or termination of employment, as the case may be. For purposes of an individual’s rights, if any, under the terms of the Plan as of the time of the Company’s determination of whether or not the individual is an Employee, all such determinations by the Company shall be final, binding and conclusive as to such rights, if any, notwithstanding that the Company or any court of law or governmental agency subsequently makes a contrary determination as to such individual’s status as an Employee.
 
 
 
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(q)            “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
 
(r)            “ Exchange Program ” means a program under which (i) outstanding Awards are surrendered or cancelled in exchange for Awards of the same type (which may have lower exercise prices and different terms), Awards of a different type, and/or cash, (ii) Participants have the opportunity to transfer any outstanding Awards to a financial institution or other person or entity selected by the Committee, and/or (iii) the exercise price of an outstanding Award is reduced.  The Committee will determine the terms and conditions of any Exchange Program in its sole discretion.
 
(s)             “ Fair Market Value ” means, as of any date, the value of a share of Stock or other property as determined by the Committee, in its discretion, or by the Company, in its discretion, if such determination is expressly allocated to the Company herein, subject to the following:
 
(i)            If, on such date, the Stock is listed on a national or regional securities exchange or market system, the Fair Market Value of a share of Stock shall be the closing price of a share of Stock (or the mean of the closing bid and asked prices of a share of Stock if the Stock is so quoted instead) as quoted on such national or regional securities exchange or market system, as reported in The Wall Street Journal or such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or market system, the date on which the Fair Market Value shall be established shall be the last day on which the Stock was so traded prior to the relevant date, or such other appropriate day as shall be determined by the Committee, in its discretion.
 
(ii)           If, on such date, the Stock is not listed on a national or regional securities exchange or market system, the Fair Market Value of a share of Stock shall be as determined by the Committee using an average Stock price over a five-day trading period determined by the Committee prior to the commencement of such five-day trading period, and subject to the applicable requirements, if any, of Section 409A of the Code.
 
(t)             “ Incentive Stock Option ” means an Option granted to an Employee under Section 6 that is designated as an Incentive Stock Option (as set forth in the Award Agreement) and that is intended to meet the requirements of Section 422 of the Code, or any successor provision.
 
(u)            “ Incumbent Director ” means a director who either (i) is a member of the Board as of the Effective Date or (ii) is elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination, but who was not elected or nominated in connection with an actual or threatened proxy contest relating to the election of directors of the Company.
 
(v)            “ Insider ” means an Officer, a Director of the Company or other person whose transactions in Stock are subject to Section 16 of the Exchange Act.
 
(w)            “ Insider Trading Policy ” means the written policy of the Company pertaining to the purchase, sale, transfer or other disposition of the Company’s equity securities by Directors, Officers, Employees or other service providers who may possess material, nonpublic information regarding the Company or its securities.
 
(x)            “Net-Exercise” means a procedure by which the Company will reduce the number of shares of Stock issued upon exercise of an Option by the largest whole number of shares of Stock with an aggregate Fair Market Value on the date of exercise that is equal to or less than the aggregate exercise price and will receive cash from the Participant to the extent of any remaining balance of the aggregate exercise price.
 
(y)             “ Nonstatutory Stock Option ” means an Option granted to a Participant under Section 6 that is not intended to be (as set forth in the Award Agreement) or which does not qualify as an Incentive Stock Option.
 
(z)             “ Officer ” means any person designated by the Board as an officer of the Company.
 
(aa)           “ Option ” means a right granted under Section 6 to purchase Stock pursuant to the terms and conditions of the Plan. All Options may be Incentive Stock Options or Nonstatutory Stock Options.
 
(bb)          “ Other Stock-Based Award ” means an equity-based or equity-related Award not otherwise described by the terms of this Plan, granted pursuant to Section 11.
 
 
 
3
 
 
(cc)             “ Ownership Change Event ” means the occurrence of any of the following with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company).
 
(dd)             “ Parent Corporation ” means any present or future “parent corporation” of the Company, as defined in Section 424(e) of the Code.
 
(ee)             “ Participant ” means any eligible person who has been granted one or more Awards.
 
(ff)             “ Participating Company ” means the Company or any Parent Corporation, Subsidiary Corporation or Affiliate.  
 
(gg)             “ Participating Company Group ” means, at any point in time, all entities collectively which are then Participating Companies.
 
(hh)            “ Performance Award ” means an Award of Performance Shares or Performance Units.
 
(ii)            “ Performance-Based Compensation ” means compensation under an Award that is intended to satisfy the requirements of Section 162(m) of the Code for certain performance-based compensation paid to Covered Employees.  Notwithstanding the foregoing, nothing in this Plan shall be construed to mean that an Award which does not satisfy the requirements for performance-based compensation under Section 162(m) of the Code does not constitute performance-based compensation for other purposes, including Section 409A of the Code.
 
(jj)            “ Performance-Based Exception ” means the exception for Performance-Based Compensation from the tax deductibility limitations of Section 162(m) of the Code.
 
(kk)            “ Performance Measures ” means measures as described in Section 19 on which the performance goals are based and which are approved by the Company’s stockholders pursuant to this Plan in order to qualify Awards as Performance-Based Compensation.
 
(ll)            “ Performance Period ” means the period of time during which the performance goals must be met in order to determine the degree of payout and/or vesting with respect to an Award.
 
(mm)            “ Performance Share ” means an Award granted to a Participant pursuant to Section 10, denominated in fully paid Shares, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria or Performance Measure(s), as applicable, have been achieved.
 
(nn)            “ Performance Unit ” means an Award granted to a Participant pursuant to Section 10, denominated in units, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria or Performance Measure(s), as applicable, have been achieved.
 
(oo)            “ Restricted Stock Award ” means Stock granted to a Participant pursuant to Section 7.
 
(pp)             “ Restricted Stock Unit ” means a right granted to a Participant pursuant to Section 8 to receive a share of Stock on a date determined in accordance with the provisions of such Section and the Participant’s Award Agreement.
 
(qq)             “ Rule 16b-3 ” means Rule 16b-3 under the Exchange Act, as amended from time to time, or any successor rule or regulation.
 
(rr)             “ Section 409A ” means Section 409A of the Code.
 
(ss)             “ Section 409A Deferred Compensation ” means compensation provided pursuant to the Plan that constitutes deferred compensation subject to and not exempted from the requirements of Section 409A.
 
(tt)             “ Securities Act ” means the Securities Act of 1933, as amended.
 
(uu)             “ Service ” means a Participant’s employment or service with the Participating Company Group, whether in the capacity of an Employee, a Director or a Consultant. A Participant’s Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders Service to the Participating Company Group or a change in the Participating Company for which the Participant renders such Service, provided that there is no interruption or termination of the Participant’s Service. Furthermore, a Participant’s Service shall not be deemed to have terminated if the Participant takes any military leave, sick leave, or other bona fide leave of absence approved by the Company. However, if any such leave taken by a Participant exceeds ninety (90) days, then on the ninety-first (91st) day following the commencement of such leave the Participant’s Service shall be deemed to have terminated, unless the Participant’s right to return to Service is guaranteed by statute or contract. Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, a leave of absence shall not be treated as Service for purposes of determining vesting under the Participant’s Award Agreement. A Participant’s Service shall be deemed to have terminated either upon an actual termination of Service or upon the corporation for which the Participant performs Service ceasing to be a Participating Company. Subject to the foregoing, the Company, in its discretion, shall determine whether the Participant’s Service has terminated for purposes of Awards granted under the Plan, and the effective date of and reason for such termination.
 
 
 
4
 
 
(vv)             “ Stock ” means the common stock of the Company, as adjusted from time to time in accordance with Section 4.3.  
 
(ww)            “ Stock Appreciation Right ” means an Award granted to a Participant pursuant to Section 9.
 
(xx)             “ Subsidiary Corporation ” means any present or future “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code.
 
(yy)             “ Vesting Conditions ” mean those conditions established in accordance with the Plan prior to the satisfaction of which shares subject to an Award remain subject to forfeiture or a repurchase option in favor of the Company exercisable for the Participant’s monetary purchase price, if any, for such shares upon the Participant’s termination of Service.
 
2.2            Construction . Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
 
3.             Administration .
 
3.1            Administration by the Committee. The Plan shall be administered by the Committee. All questions of interpretation of the Plan, of any Award Agreement or of any other form of agreement or other document employed by the Company in the administration of the Plan or of any Award shall be determined by the Committee, and such determinations shall be final, binding and conclusive upon all persons having an interest in the Plan or such Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or Award Agreement or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest therein.
 
3.2            Authority of Officers . Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, determination or election.
 
3.3            Administration with Respect to Insiders. With respect to participation by Insiders in the Plan, at any time that any class of equity security of the Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements, if any, of Rule 16b-3.
 
3.4            Powers of the Committee . In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Committee shall have the full and final power and authority, in its discretion:
 
(a)            to determine the persons to whom, and the time or times at which, Awards shall be granted and the number of shares of Stock to be subject to each Award;
 
(b)            to determine the type of Award granted;  
 
(c)            to determine the Fair Market Value of shares of Stock or other property;
 
(d)            to determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and any shares acquired pursuant thereto, including, without limitation, (i) the exercise or purchase price of shares pursuant to any Award, (ii) the method of payment for shares purchased pursuant to any Award, (iii) the method for satisfaction of any tax withholding obligation arising in connection with Award, including by the withholding or delivery of shares of Stock, (iv) the timing, terms and conditions of the exercisability or vesting of any Award or any shares acquired pursuant thereto, (v)  the time of the expiration of any Award, (vi) the effect of the Participant’s termination of Service on any of the foregoing, and (vii) all other terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto not inconsistent with the terms of the Plan;
 
(e)            to determine whether an Award will be settled in shares of Stock, cash, or in any combination thereof;
 
(f)            to approve one or more forms of Award Agreement;
 
 
 
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(g)            to amend, modify, extend, cancel or renew any Award or to waive any restrictions or conditions applicable to any Award or any shares acquired upon the exercise thereof;
 
(h)           to accelerate, continue, extend or defer the exercisability of any Award or the vesting of any shares acquired upon the exercise thereof, including with respect to the period following a Participant’s termination of Service;
 
(i)            to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt sub-plans or supplements to, or alternative versions of, the Plan, including, without limitation, as the Committee deems necessary or desirable to comply with the laws or regulations of or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose citizens may be granted Awards;
 
(j)            to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement and to make all other determinations and take such other actions with respect to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with the provisions of the Plan or applicable law;
 
(k)           to institute, subject to Board approval and without further approval from the Company’s stockholders, an Exchange Program and determine the terms and conditions thereof;
 
(l)           to establish and/or amend, without further approval from the Company’s stockholders, subplans and schedules with such terms and conditions necessary or appropriate to satisfy local law, regulations and customs; and
 
(m)           to determine whether any corporate event or transaction that results in the sale, spin-off or transfer of a Subsidiary, business group, operating unit, division, or similar organization constitutes a termination of employment (or services), and, if so, the effective date of such termination, for purposes of Awards granted under the Plan.
 
3.5            Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or the Committee or as officers or employees of the Participating Company Group, members of the Board or the Committee and any officers or employees of the Participating Company Group to whom authority to act for the Board, the Committee or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same.
 
3.6            Consideration.   The Committee may provide the method for payment for shares of Stock purchased pursuant to an Award under any of the following methods as determined by the Committee, in its sole discretion: (a) in cash or its equivalent; (b) by tendering (either by actual delivery or attestation) to the Company for repurchase previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the Award price together with an assignment of the proceeds of the Stock repurchase to pay the Award price (provided that any such repurchase of Stock shall be subject to applicable laws); (c) by a cashless (broker-assisted) exercise; (d) by deducting from the shares of Stock issuable to a Participant upon the exercise or settlement of an Award; (e) by Net-Exercise, (f) by promissory note (except for an executive officer or director or equivalent thereof, as prohibited under the Sarbanes-Oxley Act of 2002), (g) by a combination of (a), (b), (c), (d), (e) and/or (f); or (h) any other method approved or accepted by the Committee in its sole discretion.
 
4.             Shares Subject to Plan .
 
4.1            Maximum Number of Shares Issuable . Subject to adjustment as provided in Sections 4.2 and 4.3, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be 5,000,000 which shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof.  The maximum number of shares of Stock that may be issued as Incentive Stock Options is 5,000,000.
 
4.2            Share Counting. If an outstanding Award for any reason lapses, expires or is terminated or canceled without having been exercised or settled in full, or if shares of Stock acquired pursuant to an Award subject to forfeiture or repurchase are forfeited or repurchased by the Company, then the shares of Stock allocable to the terminated portion of such Award or such forfeited or repurchased shares of Stock shall again be available for issuance under the Plan.  Shares withheld or reacquired by the Company in satisfaction of tax withholding obligations pursuant to Section 14.2 shall again be available for issuance under the Plan.  If the exercise price of an Option is paid by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Participant, or by means of a Net-Exercise, or if shares of Stock are withheld from the shares of Stock issuable to a Participant upon the exercise or settlement of an Award, then such shares shall again be available for issuance under the Plan.  Shares of Stock shall not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash.
 
 
 
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4.3            Adjustments for Changes in Capital Structure . Subject to any required action by the stockholders of the Company, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting normal cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number and class of shares subject to the Plan and to any outstanding Awards, in the maximum share limitations, and in the exercise or purchase price per share of any outstanding Awards in order to prevent dilution or enlargement of Participants’ rights under the Plan. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.” If a majority of the shares which are of the same class as the shares that are subject to outstanding Awards are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the “ New Shares ”), the Committee may unilaterally amend the outstanding Awards to provide that such Awards are for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise or purchase price per share of, the outstanding Awards shall be adjusted in a fair and equitable manner as determined by the Committee, in its discretion. Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number, and the exercise price per share shall be rounded up to the nearest whole cent. In no event may the exercise price of any Award be decreased to an amount less than the par value, if any, of the stock subject to the Award. The Committee in its sole discretion, may also make such adjustments in the terms of any Award to reflect, or related to, such changes in the capital structure of the Company or distributions as it deems appropriate. The adjustments determined by the Committee pursuant to this Section shall be final, binding and conclusive.
 
5.             Eligibility and Option Limitations .
 
5.1            Persons Eligible for Awards . Awards may be granted only to Employees, Consultants and Directors.  Incentive Stock Options may be granted only to Employees of the Company or of any parent or subsidiary corporation (as permitted under Sections 422 and 424 of the Code).
 
5.2            Participation in Plan . Awards are granted solely at the discretion of the Committee. Eligible persons may be granted more than one Award. However, eligibility in accordance with this Section shall not entitle any person to be granted an Award, or, having been granted an Award, to be granted an additional Award.
 
6.             Stock Options .
 
Options shall be evidenced by Award Agreements specifying the number of shares of Stock covered thereby and the terms, conditions and restrictions for such Award, in such form as the Committee shall from time to time establish. Award Agreements evidencing Options may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
 
6.1            Exercise Price . The exercise price for each Option shall be established in the discretion of the Committee; provided, however, that the exercise price per share for an Option shall be not less than one hundred percent (100%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option. Notwithstanding the foregoing, an Option may be granted with an exercise price lower than the minimum exercise price set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner that would qualify under the provisions of Sections 424(a) and 409A of the Code.  With respect to an Employee who owns, directly or indirectly, more than ten percent (10%) of the total combined voting power of all classes of the stock of the Company, and Subsidiary Corporation, or any Affiliate, the exercise price of Stock subject to an Incentive Stock Option shall be at least equal to one hundred ten percent (110%) of the Fair Market Value of such Stock on the effective date of grant.
 
6.2            Exercisability and Term of Options . Options shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such Option; provided, however, that no Option shall be exercisable after the expiration of ten (10) years after the effective date of grant of such Option. Subject to the foregoing, unless otherwise specified by the Committee in the grant of an Option, any Option granted hereunder shall terminate ten (10) years after the effective date of grant of the Option, unless earlier terminated in accordance with its provisions.  With respect to an Employee who owns, directly or indirectly, more than ten percent (10%) of the total combined voting power of all classes of the stock of the Company, and Subsidiary Corporation, or any Affiliate, no such Incentive Stock Option shall be exercisable later than the day before the fifth (5 th ) anniversary of the effective date of grant of such Incentive Stock Option.
 
 
 
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6.3            Payment of Exercise Price .  Payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option may be made by any method determined by the Committee, in its sole discretion, and set forth in the Award Agreement.  Notwithstanding the foregoing, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or attestation would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.  The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options notwithstanding that such program or procedures may be available to other Participants.
 
6.4            Effect of Termination of Service .
 
(a)             Option Exercisability. Subject to earlier termination of the Option as otherwise provided herein and unless otherwise provided by the Committee, an Option shall terminate immediately upon the Participant’s termination of Service to the extent that it is then unvested and shall be exercisable after the Participant’s termination of Service to the extent it is then vested only during the applicable time period determined in accordance with this Section and thereafter shall terminate:
 
(i)             Disability. If the Participant’s Service terminates because of the Disability of the Participant, the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participant’s Service terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the expiration of six (6) months after the date on which the Participant’s Service terminated, but in any event no later than the date of expiration of the Option’s term as set forth in the Award Agreement evidencing such Option (the “ Option Expiration Date ” ).
 
(ii)             Death. If the Participant’s Service terminates because of the death of the Participant, then the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participant’s Service terminated, may be exercised by the Participant’s legal representative or other person who acquired the right to exercise the Option by reason of the Participant’s death at any time prior to the expiration of six (6) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.
 
(iii)             Termination for Cause. Notwithstanding any other provision of the Plan to the contrary, if the Participant’s Service is terminated for Cause, the Option shall terminate in its entirety and cease to be exercisable immediately upon such termination of Service or act.
 
(iv)             Other Termination of Service. If the Participant’s Service terminates for any reason, except Disability, death or Cause, the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participant’s Service terminated, may be exercised by the Participant at any time prior to the expiration of ninety (90) days (three (3) months in the case of Incentive Stock Options) after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.
 
(b)             Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of an Option within the applicable time periods set forth in Section 6.4(a) is prevented by the provisions of Section 15 below, the Option shall remain exercisable until thirty (30) days after the date such exercise first would no longer be prevented by such provisions, but in any event no later than the Option Expiration Date.
 
6.5            Transferability of Options. During the lifetime of the Participant, an Option shall be exercisable only by the Participant or the Participant’s guardian or legal representative. An Option shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Option, an Option shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S-8 under the Securities Act.  
 
6.6            Incentive Stock Option Limit.   To the extent that the aggregate Fair Market Value of the shares of Stock with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options.  For purposes of this Section, Incentive Stock Options shall be taken into account in the order in which they were granted.  The Fair Market Value of the shares of Stock shall be determined as of the time the Option with respect to such Shares is granted.
 
6.7            Notification of Disqualifying Dispositions.    If any Participant makes any disposition of shares of Stock issued pursuant to the exercise of an Incentive Stock Option under the circumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten (10) calendar days thereof.
 
 
 
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6.8            162(m) Limit.   For purposes of the Performance-Based Exception, no Participant will be granted an Option covering more than 50,000 shares of Stock during any fiscal year.  Notwithstanding the limitation in previous sentence, an Employee may be granted Options covering up to an additional 150,000 shares of Stock in connection with his or her initial service as an Employee.
 
7.             Restricted Stock Awards.
 
Restricted Stock Awards shall be evidenced by Award Agreements specifying the number of shares of Stock subject to the Award and the terms, conditions and restrictions for such Award, in such form as the Committee shall from time to time establish. Award Agreements evidencing Restricted Stock Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
 
7.1            Types of Restricted Stock Awards Authorized. Restricted Stock Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more performance goals.
 
7.2            Purchase Price. If required by applicable state corporate law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock subject to a Restricted Stock Award.
 
7.3            Payment of Purchase Price. Except as otherwise provided below, payment of the purchase price for the number of shares of Stock being purchased pursuant to Section 7.2 shall be made (a) in cash or by check or cash equivalent, (b) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (c) by any combination thereof.
 
7.4            Vesting and Restrictions on Transfer. Shares issued pursuant to any Restricted Stock Award may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. During any period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, such shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of other than pursuant to an Ownership Change Event or as provided in Section 7.7. The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Award that, if the satisfaction of Vesting Conditions with respect to any shares subject to such Restricted Stock Award would otherwise occur on a day on which the sale of such shares would violate the provisions of the Insider Trading Policy, then satisfaction of the Vesting Conditions automatically shall be determined on the next trading day on which the sale of such shares would not violate the Insider Trading Policy. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.
 
7.5            Voting Rights; Dividends and Distributions. Except as provided in this Section, Section 7.4 and any Award Agreement, during any period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, the Participant shall have all of the rights of a stockholder of the Company holding shares of Stock, including the right to vote such shares and to receive all dividends and other distributions paid with respect to such shares. However, in the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.3, any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant is entitled by reason of the Participant’s Restricted Stock Award shall be immediately subject to the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which such dividends or distributions were paid or adjustments were made.
 
7.6            Effect of Termination of Service. The effect of termination of employment on a Participant’s Restricted Stock Award shall be set forth in the Award Agreement evidencing such Restricted Stock Award.
 
7.7            Nontransferability of Restricted Stock Award Rights. Rights to acquire shares of Stock pursuant to a Restricted Stock Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or the laws of descent and distribution. All rights with respect to a Restricted Stock Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.
 
7.8            Section 83(b) Election.   The Committee may provide in an Award Agreement that a Restricted Stock Award is conditioned upon the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code.  If a Participant makes an election pursuant to Section 83(b) of the Code concerning a Restricted Stock Award, the Participant shall be required to file promptly a copy of such election with the Company.
 
 
 
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7.9            162(m) Limit.   For purposes of the Performance-Based Exception, no Participant will be granted an aggregate of more than 50,000 shares of Restricted Stock during any fiscal year.  Notwithstanding the limitation in previous sentence, an Employee may be granted up to an additional 150,000 shares of Restricted Stock in connection with his or her initial service as an Employee.
 
8.             Restricted Stock Unit Awards.
 
Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying the number of Restricted Stock Units subject to the Award and the terms, conditions and restrictions for such Award, in such form as the Committee shall from time to time establish. Award Agreements evidencing Restricted Stock Units may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:  
 
8.1            Grant of Restricted Stock Unit Awards. Restricted Stock Unit Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more performance goals.
 
8.2            Purchase Price. No monetary payment (other than applicable tax withholding, if any) shall be required as a condition of receiving a Restricted Stock Unit Award, the consideration for which shall be services actually rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable state corporate law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock issued upon settlement of the Restricted Stock Unit Award.
 
8.3            Vesting. Restricted Stock Unit Awards may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Unit Award that, if the satisfaction of Vesting Conditions with respect to any shares subject to the Award would otherwise occur on a day on which the sale of such shares would violate the provisions of the Insider Trading Policy, then satisfaction of the Vesting Conditions automatically shall be determined on the first to occur of (a) the next trading day on which the sale of such shares would not violate the Insider Trading Policy or (b) the later of (i) the last day of the calendar year in which the original vesting date occurred or (ii) the last day of the Company’s taxable year in which the original vesting date occurred.
 
8.4            Voting Rights, Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to shares of Stock represented by Restricted Stock Units until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Restricted Stock Unit Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date such Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated. Such Dividend Equivalent Rights, if any, shall be paid by crediting the Participant with additional whole Restricted Stock Units as of the date of payment of such cash dividends on Stock. The number of additional Restricted Stock Units (rounded to the nearest whole number) to be so credited shall be determined by dividing (a) the amount of cash dividends paid on such date with respect to the number of shares of Stock represented by the Restricted Stock Units previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date. Such additional Restricted Stock Units shall be subject to the same terms and conditions and shall be settled in the same manner and at the same time as the Restricted Stock Units originally subject to the Restricted Stock Unit Award. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.3, appropriate adjustments shall be made in the Participant’s Restricted Stock Unit Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of the Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Vesting Conditions as are applicable to the Award.
 
8.5            Effect of Termination of Service. The effect of termination of employment on a Participant’s Restricted Stock Unit Award shall be set forth in the Award Agreement evidencing such Restricted Stock Unit Award.
 
 
 
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8.6            Settlement of Restricted Stock Unit Awards. The Company shall issue to a Participant on the date on which Restricted Stock Units subject to the Participant’s Restricted Stock Unit Award vest or on such other date determined by the Committee, in its discretion, and set forth in the Award Agreement one (1) share of Stock (and/or any other new, substituted or additional securities or other property pursuant to an adjustment described in Section 8.4) for each Restricted Stock Unit then becoming vested or otherwise to be settled on such date, subject to the withholding of applicable taxes, if any. If permitted by the Committee, the Participant may elect, consistent with the requirements of Section 409A, to defer receipt of all or any portion of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section, and such deferred issuance date(s) and amount(s) elected by the Participant shall be set forth in the Award Agreement. Notwithstanding the foregoing, the Committee, in its discretion, may provide in any Award Agreement for settlement of any Restricted Stock Unit Award by payment to the Participant in cash of an amount equal to the Fair Market Value on the payment date of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section.
 
8.7            Nontransferability of Restricted Stock Unit Awards. The right to receive shares pursuant to a Restricted Stock Unit Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to a Restricted Stock Unit Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.
 
8.8            162(m) Limit.   For purposes of the Performance-Based Exception, no Participant will be granted an aggregate of more than 50,000 Restricted Stock Units during any fiscal year.  Notwithstanding the limitation in previous sentence, an Employee may be granted up to an additional 150,000 Restricted Stock Units in connection with his or her initial service as an Employee.
 
9.             Stock Appreciation Rights .
 
Stock Appreciation Rights shall be evidenced by Award Agreements specifying the number of Stock Appreciation Rights granted to the Participant and the terms, conditions and restrictions for such Award, in such form as the Committee shall from time to time establish.  Award Agreements evidencing Stock Appreciation Rights may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
 
9.1            Grant Price.   The grant price for each Stock Appreciation Right shall be established in the discretion of the Committee; provided, however, that the grant price per share for a Stock Appreciation Right shall be not less than one hundred percent (100%) of the Fair Market Value of a share of Stock on the effective date of grant of the Stock Appreciation Right.
 
9.2            Exercisability and Term of Stock Appreciation Right.   Stock Appreciation Rights shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such Stock Appreciation Right; provided, however, that no Stock Appreciation Right shall be exercisable after the expiration of ten (10) years after the effective date of grant of such Stock Appreciation Right.  Subject to the foregoing, unless otherwise specified by the Committee in the grant of a Stock Appreciation Right, any Stock Appreciation Right granted hereunder shall terminate ten (10) years after the effective date of grant of the Stock Appreciation Right, unless earlier terminated in accordance with its provisions.
 
9.3            Settlement of Stock Appreciation Rights.   Upon the exercise of a Stock Appreciation Right, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying: (i) the excess of the Fair Market Value of a share of Stock on the date of exercise over the grant price; by (ii) the number of shares of Stock with respect to which the Stock Appreciation Right is exercised.  At the discretion of the Committee, the payment upon Stock Appreciation Right exercise may be in cash, fully paid shares of Stock, or any combination thereof, or in any other manner approved by the Committee in its sole discretion.  The Committee’s determination regarding the form of Stock Appreciation Right payout shall be set forth in the Award Agreement evidencing such Stock Appreciation Right.
 
9.4            Effect of Termination of Service.   The effect of termination of employment on a Participant’s right to exercise a Stock Appreciation Right shall be set forth in the Award Agreement evidencing such Stock Appreciation Right.
 
9.5            Other Restrictions.   The Committee shall impose such other conditions and/or restrictions on any shares of Stock received upon exercise of a Stock Appreciation Right granted pursuant to the Plan as it may deem advisable or desirable, including but not limited to a requirement that the Participant hold the shares of Stock received upon exercise of a Stock Appreciation Right for a specified period of time.
 
 
 
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9.6            162(m) Limit.   For purposes of the Performance-Based Exception, no Participant will be granted Stock Appreciation Rights covering more than 50,000 shares of Stock during any fiscal year.  Notwithstanding the limitation in previous sentence, an Employee may be granted Stock Appreciation Rights covering up to an additional 150,000 shares of Stock in connection with his or her initial service as an Employee.
 
10.             Performance Awards .
 
Performance Awards shall be evidenced by Award Agreements specifying whether the Award is for Performance Shares or Performance Units, the number of shares of Stock or units covered thereby, and the terms, conditions and restrictions for such Award, in such form as the Committee shall from time to time establish.  Award Agreements evidencing Performance Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
 
10.1            Value of Performance Shares/Performance Units.   Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the effective date of grant of the Performance Share Award.  Each Performance Unit shall have an initial value that is established by the Committee at the time of grant.  The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or number of Performance Shares/Performance Units that will be paid out to the Participant.
 
10.2            Earning of Performance Shares/Performance Units.   Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Shares/Performance Units shall be entitled to receive payout on the value and number of Performance Shares/Performance Units earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved.
 
10.3            Form and Timing of Payment of Performance Shares/Performance Units.   Payment of earned Performance Shares/Performance Units shall be as determined by the Committee and as evidenced in the Award Agreement.  Subject to the terms of this Plan, the Committee, in its sole discretion, may pay earned Performance Shares/Performance Units in the form of cash or in fully paid shares of Stock (or in a combination thereof) equal to the value of the earned Performance Shares/Performance Units at the close of the applicable Performance Period, or as soon as practicable after the end of the Performance Period.  Any Shares may be granted subject to any restrictions deemed appropriate by the Committee.  The determination of the Committee with respect to the form of payout of such Performance Awards shall be set forth in the Award Agreement pertaining to the grant of the Performance Award.
 
10.4            Effect of Termination of Service.   The effect of termination of employment on a Participant’s right to receive payment for any Performance Shares/Performance Units shall be set forth in the Award Agreement evidencing such Performance Award.
 
10.5            162(m) Limit.   For purposes of the Performance-Based Exception, no Participant will be granted Performance Units having an initial value greater than $500,000 and no Participant will receive more than 50,000 Performance Shares during any fiscal year.  Notwithstanding the limitation in previous sentence, an Employee may be granted up to an additional 150,000 Performance Shares in connection with his or her initial service as an Employee.
 
11.            Cash-Based Awards and Other Stock-Based Awards .
 
Cash-Based Awards and Other Stock-Based Awards shall be evidenced by Award Agreements, in such form as the Committee shall from time to time establish.  Award Agreements evidencing such Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
 
11.1            Cash-Based Awards.   The Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms as the Committee may determine.  Each Cash-Based Award shall specify a payment amount or payment range as determined by the Committee.
 
11.2            Other Stock-Based Awards.   The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted shares of Stock) in such amounts and subject to such terms and conditions as the Committee shall determine.  Each Other Stock-Based Award shall be expressed in terms of shares of Stock or units based on shares of Stock, as determined by the Committee.  Such Awards may involve the transfer of actual fully paid shares of Stock to Participants, or payment in cash or otherwise of amounts based on the value of shares of Stock and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
 
 
 
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11.3            Performance Goals.   The Committee may establish performance goals at its discretion.  If the Committee exercises its discretion to establish performance goals, the number and/or value of Cash-Based Awards and Other Stock-Based Awards that will be paid out to the Participant will depend on the extent to which the performance goals are met, and provided the cash or services received by the Company in exchange for shares of Stock shall have a value not less than the aggregate par value of any shares of Stock issued as part of such Other Stock-Based Award.
 
11.4            Payment of Cash-Based Awards and Other Stock-Based Awards.   Payment, if any, with respect to a Cash-Based Award or Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash or fully paid shares of Stock as the Committee determines.
 
11.5            Effect of Termination of Service. The effect of termination of employment on a Participant’s Cash-Based Award or Other Stock-Based Award shall be set forth in the Award Agreement evidencing such Cash-Based Award or Other Stock-Based Award.
 
12.            Standard Forms of Award Agreements .
 
12.1            Award Agreements . Each Award shall comply with and be subject to the terms and conditions set forth in the appropriate form of Award Agreement approved by the Committee and as amended from time to time. No Award or purported Award shall be a valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement. Any Award Agreement may consist of an appropriate form of Notice of Grant and a form of Agreement incorporated therein by reference, or such other form or forms, including electronic media, as the Committee may approve from time to time.
 
12.2            Authority to Vary Terms . The Committee shall have the authority from time to time to vary the terms of any standard form of Award Agreement either in connection with the grant or amendment of an individual Award or in connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of any such new, revised or amended standard form or forms of Award Agreement are not inconsistent with the terms of the Plan.
 
13.             Change in Control .
 
13.1            Effect of Change in Control on Awards . Subject to the requirements and limitations of Section 409A if applicable, the Committee may provide for any one or more of the following:
 
(a)             Accelerated Vesting . The Committee may, in its discretion, provide in any Award Agreement or, in the event of a Change in Control, may take such actions as it deems appropriate to provide for the acceleration of the exercisability, vesting and/or settlement in connection with such Change in Control of each or any outstanding Award or portion thereof and shares acquired pursuant thereto upon such conditions, including termination of the Participant’s Service prior to, upon, or following such Change in Control, to such extent as the Committee shall determine.
 
(b)             Assumption, Continuation or Substitution.   In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the " Acquiror " ), may, without the consent of any Participant, either assume or continue the Company’s rights and obligations under each or any Award or portion thereof outstanding immediately prior to the Change in Control or substitute for each or any such outstanding Award or portion thereof a substantially equivalent award with respect to the Acquiror’s stock, as applicable. For purposes of this Section, if so determined by the Committee, in its discretion, an Award denominated in shares of Stock shall be deemed assumed if, following the Change in Control, the Award confers the right to receive, subject to the terms and conditions of the Plan and the applicable Award Agreement, for each share of Stock subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled; provided, however, that if such consideration is not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise or settlement of the Award, for each share of Stock subject to the Award, to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control. If any portion of such consideration may be received by holders of Stock pursuant to the Change in Control on a contingent or delayed basis, the Committee may, in its sole discretion, determine such Fair Market Value per share as of the time of the Change in Control on the basis of the Committee’s good faith estimate of the present value of the probable future payment of such consideration. Any Award or portion thereof which is neither assumed or continued by the Acquiror in connection with the Change in Control nor exercised or settled as of the time of consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control.  
 
 
 
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(c)             Cash-Out of Awards. The Committee may, in its discretion and without the consent of any Participant, determine that, upon the occurrence of a Change in Control, each or any Award or a portion thereof outstanding immediately prior to the Change in Control and not previously exercised or settled shall be canceled in exchange for a payment with respect to each vested share (and each unvested share, if so determined by the Committee) of Stock subject to such canceled Award in (i) cash, (ii) stock of the Company or of a corporation or other business entity a party to the Change in Control, or (iii) other property which, in any such case, shall be in an amount having a Fair Market Value equal to the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control, reduced by the exercise or purchase price per share, if any, under such Award. If any portion of such consideration may be received by holders of Stock pursuant to the Change in Control on a contingent or delayed basis, the Committee may, in its sole discretion, determine such Fair Market Value per share as of the time of the Change in Control on the basis of the Committee’s good faith estimate of the present value of the probable future payment of such consideration. In the event such determination is made by the Committee, the amount of such payment (reduced by applicable withholding taxes, if any) shall be paid to Participants in respect of the vested portions of their canceled Awards as soon as practicable following the date of the Change in Control and in respect of the unvested portions of their canceled Awards in accordance with the vesting schedules applicable to such Awards.
 
13.2            Federal Excise Tax Under Section 4999 of the Code .
 
(a)             Excess Parachute Payment. In the event that any acceleration of vesting pursuant to an Award and any other payment or benefit received or to be received by a Participant would subject the Participant to any excise tax pursuant to Section 4999 of the Code due to the characterization of such acceleration of vesting, payment or benefit as an “excess parachute payment” under Section 280G of the Code, the Participant may elect, in his or her sole discretion, to reduce the amount of any acceleration of vesting called for under the Award in order to avoid such characterization.
 
(b)             Determination by Independent Accountants. To aid the Participant in making any election called for under Section 13.2(a), no later than the date of the occurrence of any event that might reasonably be anticipated to result in an “excess parachute payment” to the Participant as described in Section 13.2(a), the Company shall request a determination in writing by independent public accountants selected by the Company (the “ Accountants ”). As soon as practicable thereafter, the Accountants shall determine and report to the Company and the Participant the amount of such acceleration of vesting, payments and benefits which would produce the greatest after-tax benefit to the Participant. For the purposes of such determination, the Accountants may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Participant shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make their required determination. The Company shall bear all fees and expenses the Accountants may reasonably charge in connection with their services contemplated by this Section 13.2(b).  
 
14.             Tax Withholding .
 
14.1            Tax Withholding in General . The Company shall have the right to deduct from any and all payments made under the Plan, or to require the Participant, through payroll withholding, cash payment or otherwise, to make adequate provision for, the federal, state, local and foreign taxes, if any, required by law to be withheld by the Participating Company Group with respect to an Award or the shares acquired pursuant thereto. The Company shall have no obligation to deliver shares of Stock, to release shares of Stock from an escrow established pursuant to an Award Agreement, or to make any payment in cash under the Plan until the Participating Company Group’s tax withholding obligations have been satisfied by the Participant.
 
14.2            Withholding in Shares . The Company shall have the right, but not the obligation, to deduct from the shares of Stock issuable to a Participant upon the exercise or settlement of an Award, or to accept from the Participant the tender of, a number of whole shares of Stock having a Fair Market Value, as determined by the Company, equal to all or any part of the tax withholding obligations of the Participating Company Group. The Fair Market Value of any shares of Stock withheld or tendered to satisfy any such tax withholding obligations shall not exceed the amount determined by the applicable minimum statutory withholding rates.
 
15.             Compliance with Law .
 
15.1            Securities Laws.   The grant of Awards and the issuance of shares of Stock pursuant to any Award shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities and the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, no Award may be exercised or shares issued pursuant to an Award unless (a) a registration statement under the Securities Act shall at the time of such exercise or issuance be in effect with respect to the shares issuable pursuant to the Award or (b) in the opinion of legal counsel to the Company, the shares issuable pursuant to the Award may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to issuance of any Stock, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
 
 
 
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15.2            Currency Laws.   The grant of Awards and the issuance of shares of Stock or payment of cash pursuant to any Award shall be compliance with all applicable requirements of foreign law with respect to currency exchange and currency transfer.
 
16.             Compliance with Section 409A.
 
16.1            Awards Subject to Section 409A . The provisions of this Section shall apply to any Award or portion thereof that is or becomes subject to Section 409A, notwithstanding any provision to the contrary contained in the Plan or the Award Agreement applicable to such Award. Awards subject to Section 409A include, without limitation:
 
(a)            Any Nonstatutory Stock Option having an exercise price per share less than the Fair Market Value determined as of the date of grant of such Option or that permits the deferral of compensation other than the deferral of recognition of income until the exercise or transfer of the Option or the time the shares acquired pursuant to the exercise of the option first become substantially vested.
 
(b)            Any Restricted Stock Award that either provides by its terms, or under which the Participant makes an election, for settlement of all or any portion of the Award either (i) on one or more dates following the end of the Short-Term Deferral Period (as defined below) or (ii) upon or after the occurrence of any event that will or may occur later than the end of the Short-Term Deferral Period.
 
Subject to U.S. Treasury Regulations promulgated pursuant to Section 409A (“Section  409A Regulations ”) or other applicable guidance, the term “ Short-Term Deferral Period ” means the period ending on the later of (i) the 15th day of the third month following the end of the Company’s fiscal year in which the applicable portion of the Award is no longer subject to a substantial risk of forfeiture or (ii) the 15th day of the third month following the end of the Participant’s taxable year in which the applicable portion of the Award is no longer subject to a substantial risk of forfeiture. For this purpose, the term “ substantial risk of forfeiture ” shall have the meaning set forth in Section 409A Regulations or other applicable guidance.
 
16.2            Deferral and/or Distribution Elections . Except as otherwise permitted or required by Section 409A or Section 409A Regulations or other applicable guidance, the following rules shall apply to any deferral and/or distribution elections (each, an “ Election ”) that may be permitted or required by the Committee pursuant to an Award subject to Section 409A:
 
(a)            All Elections must be in writing and specify the amount (or an objective, nondiscretionary formula determining the amount) of the distribution in settlement of an Award being deferred, as well as the time and form of distribution as permitted by this Plan.
 
(b)            All Elections shall be made by the end of the Participant’s taxable year prior to the year in which services commence for which an Award may be granted to such Participant; provided, however, that if the Award qualifies as “performance-based compensation” for purposes of Section 409A (and is based on a performance period of at least 12 consecutive months), then the Election may be made no later than six (6) months prior to the end of the performance period, provided that the Participant’s service is continuous from the later of the beginning of the performance period or the date on which the performance goals are established through the date such election is made and provided further that no election may be made after the compensation has become readily ascertainable (as provided by Section 409A Regulations).
 
(c)            Elections shall continue in effect until a written election to revoke or change such Election is received by the Company, except that a written election to revoke or change such Election must be made prior to the last day for making an Election determined in accordance with paragraph (b) above or as permitted by Section 16.3.  
 
16.3            Subsequent Elections . Except as otherwise permitted or required by Section 409A Regulations or other applicable guidance, any Award subject to Section 409A which permits a subsequent Election to delay the distribution or change the form of distribution in settlement of such Award shall comply with the following requirements:
 
(a)            No subsequent Election may take effect until at least twelve (12) months after the date on which the subsequent Election is made;
 
 
 
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(b)            Each subsequent Election related to a distribution in settlement of an Award not described in Section 16.4(b), 16.4(c) or 16.4(f) must result in a delay of the distribution for a period of not less than five (5) years from the date such distribution would otherwise have been made; and
 
(c)            No subsequent Election related to a distribution pursuant to Section 16.4(d) shall be made less than twelve (12) months prior to the date of the first scheduled payment under such distribution.
 
16.4            Distributions Pursuant to Deferral Elections . Except as otherwise permitted or required by Section 409A Regulations or other applicable guidance, no distribution in settlement of an Award subject to Section 409A may commence earlier than:
 
(a)            The Participant’s separation from service (as defined by Section 409A Regulations);
 
(b)            The date the Participant becomes Disabled (as defined below);
 
(c)            The Participant’s death;
 
(d)            A specified time (or pursuant to a fixed schedule) that is either (i) specified by the Committee upon the grant of an Award and set forth in the Award Agreement evidencing such Award or (ii) specified by the Participant in an Election complying with the requirements of Section 16.2 and/or 16.3, as applicable;
 
(e)            A change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company (as defined by Section 409A Regulations); or
 
(f)            The occurrence of an Unforeseeable Emergency (as defined by Section 409A Regulations).
 
Notwithstanding anything else herein to the contrary, to the extent that a Participant is a “Specified Employee” (as defined by Section 409A Regulations) of the Company, no distribution pursuant to Section 16.4(a) in settlement of an Award subject to Section 409A may be made before the date (the “ Delayed Payment Date ”) which is six (6) months after such Participant’s date of separation from service, or, if earlier, the date of the Participant’s death. All such amounts that would, but for this paragraph, become payable prior to the Delayed Payment Date shall be accumulated and paid on the Delayed Payment Date.  
 
16.5            Unforeseeable Emergency . The Committee shall have the authority to provide in any Award subject to Section 409A for distribution in settlement of all or a portion of such Award in the event that a Participant establishes, to the satisfaction of the Committee, the occurrence of an Unforeseeable Emergency. In such event, the amount(s) distributed with respect to such Unforeseeable Emergency cannot exceed the amounts reasonably necessary to satisfy such Unforeseeable Emergency plus amounts necessary to pay taxes or penalties reasonably anticipated as a result of such distribution(s), after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship), or by cessation of deferrals under the Plan. All distributions with respect to an Unforeseeable Emergency shall be made in a lump sum within 90 days of the occurrence of Unforeseeable Emergency and following the Committee’s determination that an Unforeseeable Emergency has occurred.
 
The occurrence of an Unforeseeable Emergency shall be judged and determined by the Committee. The Committee’s decision with respect to whether an Unforeseeable Emergency has occurred and the manner in which, if at all, the distribution in settlement of an Award shall be altered or modified, shall be final, conclusive, and not subject to approval or appeal.
 
16.6            Disabled . The Committee shall have the authority to provide in any Award subject to Section 409A for distribution in settlement of such Award in the event that the Participant becomes Disabled. A Participant shall be considered “ Disabled ” if either:
 
(a)            the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or
 
(b)            the Participant is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Participant’s employer.
 
All distributions payable by reason of a Participant becoming Disabled shall be paid in a lump sum or in periodic installments as established by the Participant’s Election, commencing within 90 days following the date the Participant becomes Disabled. If the Participant has made no Election with respect to distributions upon becoming Disabled, all such distributions shall be paid in a lump sum within 90 days following the date the Participant becomes Disabled.
 
 
 
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16.7            Death . If a Participant dies before complete distribution of amounts payable upon settlement of an Award subject to Section 409A, such undistributed amounts shall be distributed to his or her beneficiary under the distribution method for death established by the Participant’s Election, or, if the Participant has made no Election with respect to distributions upon death, in a lump sum, within 90 days following the Participant’s death and following receipt by the Committee of satisfactory notice and confirmation of the Participant’s death.  
 
16.8            No Acceleration of Distributions . Notwithstanding anything to the contrary herein, this Plan does not permit the acceleration of the time or schedule of any distribution under this Plan pursuant to any Award subject to Section 409A, except as provided by Section 409A and Section 409A Regulations.
 
17.             Amendment or Termination of Plan .
 
The Committee may amend, suspend or terminate the Plan at any time. However, without the approval of the Company’s stockholders, there shall be no amendment of the Plan that would require approval of the Company’s stockholders under any applicable law, regulation or rule, including the rules of any stock exchange or market system upon which the Stock may then be listed. No amendment, suspension or termination of the Plan shall affect any then outstanding Award unless expressly provided by the Committee. Except as provided by the next sentence, no amendment, suspension or termination of the Plan may adversely affect any then outstanding Award without the consent of the Participant. Notwithstanding any other provision of the Plan or any Award Agreement to the contrary, the Committee may, in its sole and absolute discretion and without the consent of any Participant, amend the Plan or any Award Agreement, to take effect retroactively or otherwise, as it deems necessary or advisable for the purpose of conforming the Plan or such Award Agreement to any present or future law, regulation or rule applicable to the Plan, including, but not limited to, Section 409A of the Code and all applicable guidance promulgated thereunder.
 
18.             Miscellaneous Provisions .
 
18.1            Repurchase Rights . Shares issued under the Plan may be subject to one or more repurchase options, or other conditions and restrictions as determined by the Committee in its discretion at the time the Award is granted. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.
 
18.2            Forfeiture Events.
 
(a)            The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of Service for Cause or any act by a Participant, whether before or after termination of Service, that would constitute Cause for termination of Service.
 
(b)            If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, any Participant who knowingly or through gross negligence engaged in the misconduct, or who knowingly or through gross negligence failed to prevent the misconduct, and any Participant who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the twelve- (12-) month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document embodying such financial reporting requirement.
 
(c)           All outstanding Awards and shares of Stock issued pursuant to an Award held by a Participant will be forfeited in their entirety (including as to any portion of an Award or shares of Stock subject thereto that are vested or as to which any repurchase or resale rights or forfeiture restrictions in favor of the Company or its designee with respect to such Shares have previously lapsed) if the Participant, without the consent of the Company, while employed or in service, as the case may be, or within twelve (12) months after termination of employment or service, establishes an employment or similar relationship with a competitor of a Participating Company or engages in any similar activity (including passive investment, but excluding ownership of 1% or less of the shares of a competitor) that is in conflict with or adverse to the interests of a Participating Company, as determined by the Committee in its sole discretion; provided, that if a Participant has sold shares of Stock issued upon exercise or settlement of an Award within six (6) months prior to the date on which the Participant would otherwise have been required to forfeit such shares of Stock or the Award under this subsection as a result of the Participant’s competitive or similar acts, then the Company will be entitled to recover any and all profits realized by the Participant in connection with such sale.
 
 
 
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(d)             All outstanding Awards and shares of Stock issued pursuant to an Award held by a Participant will be forfeited in their entirety (including as to any portion of an Award or shares of Stock subject thereto that are vested or as to which any repurchase or resale rights or forfeiture restrictions in favor of the Company or its designee with respect to such Shares have previously lapsed) if the Participant, without the consent of the Company, while employed or in service, as the case may be, or within twelve (12) months after termination of employment or service, solicits any employee, client, or vendor to engage in employment or similar relationship with a competitor of a Participating Company or to engage in any similar activity (including passive investment) that is in conflict with or adverse to the interests of a Participating Company, as determined by the Committee in its sole discretion; provided, that if a Participant has sold shares of Stock issued upon exercise or settlement of an Award within six (6) months prior to the date on which the Participant would otherwise have been required to forfeit such shares of Stock or the Award under this subsection as a result of the Participant’s acts, then the Company will be entitled to recover any and all profits realized by the Participant in connection with such sale.
 
18.3            Provision of Information. Each Participant shall be given access to information concerning the Company equivalent to that information generally made available to the Company’s common stockholders.
 
18.4            Rights as Employee, Consultant or Director . No person, even though eligible pursuant to Section 5, shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. Nothing in the Plan or any Award granted under the Plan shall confer on any Participant a right to remain an Employee, Consultant or Director or interfere with or limit in any way any right of a Participating Company to terminate the Participant’s Service at any time. To the extent that an Employee of a Participating Company other than the Company receives an Award under the Plan, that Award shall in no event be understood or interpreted to mean that the Company is the Employee’s employer or that the Employee has an employment relationship with the Company.
 
18.5            Rights as a Stockholder . A Participant shall have no rights as a stockholder with respect to any shares covered by an Award until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such shares are issued, except as provided in Section 4.3 or another provision of the Plan.
 
18.6            Delivery of Title to Shares. Subject to any governing rules or regulations, the Company shall issue or cause to be issued the shares of Stock acquired pursuant to an Award and shall deliver such shares to or for the benefit of the Participant by means of one or more of the following: (a) by delivering to the Participant evidence of book entry shares of Stock credited to the account of the Participant, (b) by depositing such shares of Stock for the benefit of the Participant with any broker with which the Participant has an account relationship, or (c) by delivering such shares of Stock to the Participant in certificate form.
 
18.7            Fractional Shares . The Company shall not be required to issue fractional shares upon the exercise or settlement of any Award.
 
18.8            Retirement and Welfare Plans . Neither Awards made under this Plan nor shares of Stock or cash paid pursuant to such Awards shall be included as “compensation” for purposes of computing the benefits payable to any Participant under any Participating Company’s retirement plans (both qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing such benefits.  
 
18.9            Severability . If any one or more of the provisions (or any part thereof) of this Plan shall be held invalid, illegal or unenforceable in any respect, such provision shall be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions (or any part thereof) of the Plan shall not in any way be affected or impaired thereby.
 
18.10            No Constraint on Corporate Action . Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise affect the Company’s or another Participating Company’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or another Participating Company to take any action which such entity deems to be necessary or appropriate.
 
18.11            Unfunded Obligation. Participants shall have the status of general unsecured creditors of the Company. Any amounts payable to Participants pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974. No Participating Company shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Participant account shall not create or constitute a trust or fiduciary relationship between the Committee or any Participating Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s creditors in any assets of any Participating Company. The Participants shall have no claim against any Participating Company for any changes in the value of any assets which may be invested or reinvested by the Company with respect to the Plan.
 
 
 
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18.12            Choice of Law . Except to the extent governed by applicable federal law, the validity, interpretation, construction and performance of the Plan and each Award Agreement shall be governed by the laws of the State of Delaware, without regard to its conflict of law rules.
 
18.13            Nontransferability of Awards.   Unless otherwise determined by the Committee, Awards may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or the laws of descent and distribution, and may be exercised during the lifetime of the Participant, only by the Participant or the Participant’s guardian or legal representative.
 
19.             Compliance with Section 162(m) .
 
The Company intends that the Awards granted to Covered Employees shall satisfy the requirements of the Performance-Based Exception, unless otherwise determined by the Committee when the Award is granted.  Accordingly, the terms of this Plan, including the definition of Covered Employee and other terms used therein, shall be interpreted in a manner consistent with Section 162(m) of the Code and regulations thereunder.  Notwithstanding the foregoing, because the Committee cannot determine with certainty whether a given Participant will be a Covered Employee with respect to a fiscal year that has not yet been completed, the term Covered Employee as used herein shall mean only a person designated by the Committee as likely to be a Covered Employee with respect to a fiscal year.  If any provision of the Plan or any Award Agreement designated as intended to satisfy the Performance-Based Exception does not comply or is inconsistent with the requirements of Section 162(m) of the Code or regulations thereunder, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements, and no provision shall be deemed to confer upon the Committee or any other person sole discretion to increase the amount of compensation otherwise payable in connection with such Award upon attainment of the applicable performance objectives.  Payment of any amount that the Company reasonably determines would not be deductible by reason of Section 162(m) of the Code shall be deferred until the earlier of the earliest date on which the Company reasonably determines that the deductibility of the payment will not be so limited, or the year following the termination of employment.
 
19.1            Performance Measures.   The performance goals upon which the payment or vesting of an Award to a Covered Employee that is intended to qualify as Performance-Based Compensation shall be limited to the following Performance Measures:
 
 
(a)
Financial Goals.
       
 
 
(i)
Revenues
       
 
 
(ii)
EBITDA
       
 
 
(iii)
Net Income
       
 
 
(iv)
Earnings per share
       
 
 
(v)
Debt level
       
 
 
(vi)
Cost reduction targets
       
 
 
(vii)
Cash flow from operations
       
 
 
(viii)
Equity ratios
       
 
 
(ix)
Interest generated on cash
       
 
 
(x)
Weighted average cost of capital
       
 
 
(xi)
Return on assets
       
 
 
(xii)
Return on investment
       
 
 
(xiii)
Capital raised from sales of equity
       
 
 
(xiv)
Bank loan lines
 
 
 
19
 
 
 
 
(xv)
Capital raised from sales of debt
       
 
 
(xvi)
Expenses
       
 
 
(xvii)
Working capital
       
 
 
(xviii)
Operating or profit margin
       
 
 
(xix)
Return on equity or capital employed
       
 
 
(xx)
Booking and billing
       
 
 (b)
Corporate and Other Goals.
       
 
 
(i)
Total stockholder return
       
 
 
(ii)
Goals related to acquisitions
       
 
 
(iii)
Investments
       
 
 
(iv)
Satisfactory internal or external audits
       
 
 
(v)
Achievement of balance sheet or income statement objectives
       
 
 
(vi)
Market share
       
 
 
(vii)
Assets
       
 
 
(viii)
Asset sale targets
       
 
 
(ix)
Number of new customers
       
 
 
(x)
Increase in customer size
       
 
 
(xi)
Employee retention/attrition rates
       
 
 
(xii)
Improvement of financial ratings
       
 
 
(xiii)
Charge-offs
       
 
 
(xiv)
Fair Market Value of Stock
       
 
 
(xv)
Regulatory compliance
       
 
 
(xvi)
Major exchange listing
       
 
(c)
Operating Goals.
       
 
 
(i)
Operating efficiency
       
 
 
(ii)
Ability of MIS to meet agreed targets
       
 
 
(iii)
Objective customer satisfaction measures
       
 
 
(iv)
Limit on mistakes in SCM
 
Any Performance Measure(s) may be used to measure the performance of the Company, any Subsidiary Corporation, or an Affiliate as a whole or any business unit of the Company, any Subsidiary Corporation, or an Affiliate or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator companies, or published or special index that the Committee, in its sole discretion, deems appropriate.  The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Section.
 
Notwithstanding the foregoing, for each Award designed to qualify for the Performance-Based Exception, the Committee shall establish and set forth in the Award the applicable performance goals for that Award no later than the latest date that the Committee may establish such goals without jeopardizing the ability of the Award to qualify for the Performance-Based Exception and the Committee shall be satisfied that the attainment of such Performance Measure(s) shall represent value to the Company in an amount not less than the par value of any related Performance Shares.
 
19.2            Evaluation of Performance.   Subject to Section 19.3, the Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a Performance Period: (a) asset write-downs and other asset revaluations, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (d) any reorganization and restructuring programs, (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year, (f) acquisitions or divestitures, (g) foreign exchange gains and losses, and (h) changes in material liability estimates.  To the extent such inclusions or exclusions affect Awards to Covered Employees, they shall be prescribed in a form that meets the requirements of Section 162(m) of the Code for deductibility.
 
 
 
20
 
 
19.3            Adjustment of Performance-Based Compensation.   The degree of payout and/or vesting of Awards designed to qualify for the Performance-Based Exception shall be determined based upon the written certification of the Committee as to the extent to which the performance goals and any other material terms and conditions precedent to such payment and/or vesting have been satisfied.  The Committee shall have the sole discretion to adjust the determinations of the value and degree of attainment of the pre-established performance goals; provided, however, that the performance goals applicable to Awards which are designed to qualify for the Performance-Based Exception, and which are held by Covered Employees, may not be adjusted so as to increase the payment under the Award (the Committee shall retain the sole discretion to adjust such performance goals upward, or to otherwise reduce the amount of the payment and/or vesting of the Award relative to the pre-established performance goals).
 
19.4            Committee Discretion.   In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Measures without obtaining stockholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining stockholder approval.  In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the Committee may make such grants without satisfying the requirements of Section 162(m) of the Code and base vesting on Performance Measures other than those set forth in Section 19.1.
 
 
21
 
Exhibit 10.3
 
PROMISSORY NOTE
 
 
$78,820.28 Made as of February 9, 2010
 
For value received, Avanyx Therapeutics, Inc., (the “ Company ”) a Delaware corporation having a principal place of business located at 12 Appleton Circle, Newton, MA 02459, hereby promises to pay David Platt, an individual residing at 12 Appleton Circle, Newton, MA 02459 (the “ Holder ”), the original principal sum of Seventy Eight Thousand Eight Hundred Twenty Dollars and Twenty Eight Cents ($78,820.28) (the “ Principal Amount ”), together with interest accruing daily and compounding annually on the unpaid principal balance commencing on the date hereof or on the date of any earlier advance, as the case may be, at a rate equal to six and one half percent (6.5%) per annum until the Principal Amount and all interest accrued thereon and all other amounts owed under this Promissory Note (this “ Note ”) are paid.  The unpaid Principal Amount, together with any then unpaid accrued interest and all other amounts owed hereunder, shall be due and payable upon the earliest to occur of March 31, 2011 or an Event of Default (as defined in Section 1 hereof).  Any amounts due and payable hereunder shall be sent by wire transfer in accordance with any instructions included and delivered to the Company or by check sent by mail to the address of the Holder as designated by the Holder to the Company in lawful money of the United States of America.
 
This note reflects loans from Holder to the Company in the amounts of $20,000 on August 24, 2009, $28,820.28 on October 1, 2009 and $30,000 on February 9, 2010.
 
1.    Events of Default .   The outstanding balance of this Note shall be immediately due, without notice or demand by the Holder, in case of any of the following events (each, an “ Event of Default ”):   (a) the filing by or against the Company of any petition under the U.S. Bankruptcy Code (or the filing of any similar petition under the insolvency law or similar law of any jurisdiction) which petition shall have remained undismissed for a period of more than 90 days;(b) the suspension or discontinuance of the business or operations of the Company; or (c) the making by the Company of an assignment or trust mortgage for the benefit of creditors or the appointment of a receiver, custodian or similar agent with respect to, or the taking by any such person of possession of, all or substantially all of the property of the Company.
 
2.    Prepayment .   This Note may be repaid without penalty at any time.
 
3.    Waivers .   The Company and all endorsers of this Note hereby waive notice, presentment, protest and notice of dishonor.
 
4.    Attorneys’ Fees .   In the event any party is required to engage the services of any attorneys for the purpose of enforcing this Note, or any provision thereof, the prevailing party shall be entitled to recover its reasonable expenses and costs in enforcing this Note, including reasonable attorneys’ fees.
 
5.    Transfer .   This Note and any rights hereunder may not be assigned, conveyed or transferred, in whole or in part, by the Holder without the prior written approval of the Company, said approval not to be unreasonably withheld.  The rights and obligations of the Company and the Holder under this Note shall be binding upon and benefit their respective permitted successors, assigns, heirs, administrators and transferees.
 
 
 
 
 
6.    Governing Law .   This Note shall be governed by and construed under the internal laws of The Commonwealth of Massachusetts as applied to agreements among Massachusetts residents entered into and to be performed entirely within The Commonwealth of Massachusetts, without reference to principles of conflict of laws or choice of laws.
 
7.    Headings .   The headings and captions used in this Note are used only for convenience and are not to be considered in construing or interpreting this Note. All references in this Note to sections and exhibits shall, unless otherwise provided, refer to sections hereof and exhibits attached hereto, all of which exhibits are incorporated herein by this reference.
 
8.    Notices . Unless otherwise provided, any notice required or permitted under this Note shall be given in writing and shall be deemed effectively given (i) at the time of personal delivery, if delivery is in person; (ii) one (1) business day after deposit with an overnight courier for United States deliveries, or two (2) business days after such deposit for deliveries outside of the United States, with proof of delivery from the courier requested; or (iii) three (3) business days after deposit in the United States mail by certified mail (return receipt requested) for United States deliveries when addressed to the party to be notified at the address indicated for the Holder party written above or, in the case of the Company, to the address first written above, or at such other address as the Company may designate by giving ten (10) days’ advance written notice to the Holder.
 
9.    Amendments and Waivers . This Note and the other documents delivered pursuant hereto or thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof.  Any term of this Note may be amended and the observance of any term may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the Holder.
 
10.         Severability . If one or more provisions of this Note are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Note and the balance of the Note shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.
 
11.         Counterparts .  This Note may be executed in one or more counterparts, which collectively shall constitute one and the same instrument.
 
 
 
 
 
 
IN WITNESS WHEREOF , the Company has caused this Note to be signed in its name as of the date first above written.
 
AVANYX THERAPEUTICS, INC.
 
 
By: /s/David Platt
 
 
Name:  David Platt
Title: President
Exhibit 23.1
 
LOGO
 
 
 
 
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


As independent registered public accountants, we hereby consent to the use of the report of Caturano and Company, P.C. dated February 5, 2010, relating to the financial statements of AVANYX Therapeutics, Inc. as December 31, 2009 and for the period from inception (August 24, 2009) to December 31, 2009 (which report expresses an unqualified opinion and includes explanatory paragraphs relating to the substantial doubt about the Company’s ability to continue as a going concern) included in, and to all references to our Firm included in or made a part of, this Registration Statement on Form S-1.
 
 
/s/ Caturano and Company, P.C.
Caturano and Company, P.C.


Boston, Massachusetts
June 24, 2010

 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
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