Item 1B. Unresolved Staff Comments.

None

Item 2. Properties.

On January 19, 2007, we entered into a Lease Agreement for approximately 4,162 square feet of office space in Montvale, New Jersey. The lease is for a term of three years, which commenced on February 26, 2007, and we have the opportunity to extend the lease for two additional three-year terms by providing written notice to the landlord. The basic monthly rent is $8,151, together with a security deposit of $15,261. We consider our property to be generally in good condition, well maintained and generally suitable and adequate to carry on our business for the foreseeable future.

Item 3. Legal Proceedings.

We are not a party to any litigation, and management is not aware of any contemplated proceeding by any governmental authority against us.

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

 

No matters were submitted to a vote of our security holders during the fourth quarter of the year ended December 31, 2007.

 

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PART II

Item 5.

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

Market Information

Our common stock is traded on the American Stock Exchange under the symbol “SYI.” The following table sets forth, for the periods indicated, the high and low sales price for our common stock, as reported by the American Stock Exchange:

2007		High			Low
First Quarter		$	7.50		$	4.00
Second Quarter			5.00			2.50
Third Quarter			4.51			2.40
Fourth Quarter			3.23			1.75
2006			High			Low
First Quarter		$	16.00		$	9.00
Second Quarter			14.00			8.00
Third Quarter			10.50			6.50
Fourth Quarter			9.50			7.00

 

The market prices for securities of biotechnology and pharmaceutical companies, including ours, have historically been highly volatile, and the market has from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. Factors, such as fluctuations in our operating results, announcements of technological innovations or new therapeutic products by us or others, clinical trial results, developments concerning agreements with collaborators, governmental regulation, developments in patent or other proprietary rights, public concern as to the safety of drugs developed by us or others, future sales of substantial amounts of common stock by existing stockholders and general market conditions, can have an adverse effect on the market price of the common stock.

Stockholders

As of March 19, 2008, there were 104 holders of the common stock. On March 18, 2008, the last sale price reported on the American Stock Exchange for the common stock was $2.30 per share.

Dividends

We have neither paid nor declared dividends on our common stock since our inception and do not plan to pay dividends in the foreseeable future. Any earnings that we may realize will be retained to finance our growth.

Unregistered Sales of Securities

Not applicable.

Issuer Purchases of Equity Securities

Not applicable.

Item 6. Selected Financial Data.

Not applicable.

 

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

We are a product-based biotechnology company engaged in the development of diagnostic tests and drugs to identify and treat diabetic patients at high risk for the development of cardiovascular disease. We have identified several promising product candidates that we believe represent novel approaches for diagnosis and treatment in some of the largest pharmaceutical markets. Currently we are advancing the development and commercialization of a diagnostic product and two of our drug candidates are in Phase 2 clinical trials.

We are developing a diagnostic kit to identify the subset of patients with diabetes who are at increased risk for cardiovascular disease. The technology underlying this kit relates to a serum protein called haptoglobin, or Hp. A common variant of this protein, known as Hp 2-2, which is found in 40% of the population, is associated with increased cardiovascular risk in diabetic patients. Further, it has been shown that this protein variant may identify those diabetic patients for whom daily use of vitamin E could potentially reduce the rate of heart attack by 50% annually. We are developing a kit to identify this high risk variant of haptoglobin. Any successful commercialization of such a kit could generate revenues for us in future years and could help focus the development of one of our therapeutic product candidates, ALT-2074, described below.

We are also managing a discovery and development program aiming to produce small molecule drugs that mimic, the enzyme glutathione peroxidase. We believe that GPx is one of the only enzyme in the human body that reduce oxidized lipids. By recreating the activity of this enzyme in a small molecule we may be able to treat diseases in which oxidized lipids are thought to play a significant role.

One of our GPx mimetics, ALT-2074, is in Phase 2 clinical trials. Our intention is to focus this product candidate on the treatment of diabetic patients with Hp2-2. These patients have a markedly elevated rate of heart failure and death following a heart attack, which may relate to elevated levels of oxidized lipids and consequent atherosclerosis. Our goal for ALT-2074 is to develop it for use in the treatment of acute coronary syndrome (“ACS”) and explore its anti-atherosclerotic activity in Hp2-2, diabetic patients.

Our two ongoing Phase 2 studies of ALT-2074 are designed to prepare for a pivotal study. Our first study uses ALT-2074 in Hp2-2, diabetic patients. The drug or placebo is being administered orally in ascending doses for 28 days as we track inflammatory biomarkers and functional improvement in cholesterol efflux. Results from this study are anticipated in the second quarter of 2008. In addition, we are conducting a Phase 2 clinical trial in diabetic patients undergoing angioplasty to see whether ALT-2074 can protect heart muscle that is not receiving adequate blood supply. We expect to complete this study in the second quarter of 2008 as well.

 

We are developing a second compound, Alagebrium chloride or alagebrium (formerly ALT-711). Alagebrium is an Advanced Glycation End-product Crosslink Breaker being developed for diastolic heart failure and diabetic nephropathy. Alagebrium has demonstrated potential efficacy in two clinical trials in heart failure, as well as in animal models of heart failure, nephropathy, hypertension and erectile dysfunction. These diseases represent rapidly growing markets of unmet medical needs, particularly common among diabetic patients. The compound has been tested in approximately 1,000 patients, which represents a sizeable human safety database, in a number of Phase 2 clinical studies.

Future Development Plans

Since we have been able to complete our Series B Preferred Stock Financing, as described elsewhere in this annual report, we are proceeding with several studies involving ALT-2074 and alagebrium.  With respect to ALT-2074, in addition to the myocardial protection study, and the Phase II biomarker study designed to correlate the dose and schedule of ALT-2074 with an effect on inflammatory biomarker levels and various components of cholesterol, we are considering other clinical development activities. 

In January 2008 we announced the signing of an agreement with privately-held Novel Therapeutic Technologies, Inc. to provide us with formulation work for a topical cream formulation of ALT-2074, for the treatment of psoriasis. This work will be performed under the guidance of Elka Tuoituo, M.D. at the Hebrew University in Jerusalem, Israel. ALT-2074 may have potential in the treatment of plaque psoriasis because ALT-2074 can block TNF-α activated expression of cell adhesion molecules, I-CAM and V-CAM, which may be essential for cellular migration. TNF- α is an established target for drug development in psoriasis and other autoimmune diseases. We have identified sites in Israel to perform a planned Phase 2 clinical trial beginning in mid-2008, pending approval from the Ministry of Health in Israel.

 

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With respect to alagebrium, we plan, among other things, to initiate a second Phase 2 study to examine the impact of alagebrium on heart function.  As previously reported, we also expect that alagebrium will be studied in a clinical trial of patients with Type I diabetes and microalbuminuria (protein in the urine), funded by the Juvenile Diabetes Research Foundation.

We continue to evaluate potential pre-clinical and clinical studies in other therapeutic indications in which alagebrium and ALT-2074 may address significant unmet needs. For alagebrium, in addition to our anticipated clinical studies in heart failure, we have conducted preclinical studies focusing on atherosclerosis; Alzheimer's disease; photoaging of the skin; eye diseases, including age-related macular degeneration (“AMD”), and glaucoma; and other diabetic complications, including renal diseases.

Since our inception in October 1986, we have devoted substantially all of our resources to research, drug discovery and development programs. To date, we have not generated any revenues from the sale of products and may not generate any such revenues for a number of years, if at all. We have incurred an accumulated deficit of $263,092,520 as of December 31, 2007, and expect to incur net losses, potentially greater than losses in prior years, for a number of years. 

We have financed our operations through proceeds from public offerings of common stock, private placements of common and preferred equity and debt securities, revenue from former collaborative relationships, reimbursement of certain of our research and development expenses by our collaborative partners, investment income earned on cash and cash equivalent balances and short-term investments and the sale of a portion of our New Jersey State net operating loss carryforwards and research and development tax credit carryforwards.

Our business is subject to significant risks including, but not limited to, (1) our ability to obtain and maintain sufficient financial resources to conduct and continue enrollment in our clinical studies of ALT-2074 and alagebrium, (2) the risks inherent in our research and development efforts, including clinical trials and the length, expense and uncertainty of the process of seeking regulatory approvals for our product candidates, (3) uncertainties associated with obtaining and enforcing our patents and with the patent rights of others, (4) uncertainties regarding government healthcare reforms and product pricing and reimbursement levels, (5) technological change and competition, (6) manufacturing uncertainties, and (7) dependence on collaborative partners and other third parties. Even if our product candidates appear promising at an early stage of development, they may not reach the market for numerous reasons. These reasons include the possibilities that the products will prove ineffective or unsafe during preclinical or clinical studies, will fail to receive necessary regulatory approvals, will be difficult to manufacture on a large scale, will be uneconomical to market or will be precluded from commercialization by proprietary rights of third parties. These risks and others are discussed under the heading “Item 1A - Risk Factors.”

Results of Operations

Years Ended December 2007 and 2006

License and Other Revenue

In 2007 and 2006, license and other revenue included $50,000 received from a licensing agreement with Avon Products, Inc.

Investment Income

Investment income for 2007 and 2006 was $459,000 and $188,000, respectively. Income was derived from interest earned on cash and cash equivalents, other income, and short-term investments. Investment income in 2007 was higher than in 2006 due to higher cash balances as a result of the financing in July of 2007.

 

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Operating Expenses

Total expenses increased to $9,963,000 in 2007 from $6,551,000 in 2006, excluding in-process research and development of $11,379,000. Total expenses consisted primarily of research and development expenses in 2007 and of general and administrative expenses in 2006. The $11,379,000 in-process research and development charge in 2006 was a result of the merger with HaptoGuard. Research and development expenses were $6,167,000 in 2007 and $1,896,000 in 2006. These expenses consisted primarily of third-party expenses associated with preclinical and clinical studies, manufacturing costs, including the development and preparation of clinical supplies, personnel and personnel-related expenses and an allocation of facility expense.

Research and development expenses increased to $6,167,000 in 2007 from $1,896,000 in 2006, excluding in-process research and development, an increase of $4,271,000, or 225%. This was primarily related to the increase in clinical trial costs and manufacturing expenses as a result of the increase in clinical trial and preclinical work. The 2007 results include $3,377,000 in clinical trial costs, $1,447,000 of patent and patent related costs, $382,000 in personnel and personnel-related costs, $369,000 in discovery, $209,000 in preclinical expenses, $153,000 in consulting expense, $88,000 in trial-related insurance, $84,000 in facility allocation and $71,000 for Haptoglobin diagnostics, which was offset by miscellaneous expenses of $13,000.

General and administrative expenses were $3,797,000 in 2007, which is a decrease from $4,655,000 in 2006. The decrease in 2007 was related to the absence of severance costs offset by the increase in corporate expense primarily in the areas of administrative, legal, public relations and investor relations.

At December 31, 2007, we had available federal net operating loss carryforwards of approximately $181,775,000, which expire in various amounts from the years 2008 through 2027, and state net operating loss carryforwards of approximately $81,007,000, which expire in the years 2008 through 2014. In addition, at December 31, 2007, we had federal research and development tax credit carryforwards of approximately $7,085,000 and state research and development tax credit carryforwards of approximately $1,866,000.

Net Loss

 

We had net losses of $16,093,000, and $17,680,000 in 2007 and 2006, respectively. Included in the net loss applicable to common stockholders for 2007 and 2006 were preferred stock dividends of $3,854,000 and $2,653,000, respectively.

Liquidity and Capital Resources

 

We had cash and cash equivalents at December 31, 2007, of $15,646,000 compared to $1,479,000 at December 31, 2006, an increase of $14,167,000. Cash used in operating activities for the year ended December 31, 2007, totaled $7,947,000 and consisted primarily of research and development expenses, personnel and related costs, and facility expenses. Cash used in investing activities totaled $417,000 for the year ended December 31, 2007 and included $400,000 for the purchase of Oxis common stock. Cash provided by financing activities for the year ended December 31, 2007 was $22,531,000 and arose from the completion of the debt financing and the July 2007 preferred stock financing.

In April 2007, we entered into a Series B Preferred Stock and Warrant Purchase Agreement with institutional investors who purchased, on July 25, 2007, $25,000,000 of newly created Series B Preferred Stock and warrants to purchase shares of Series B Preferred Stock. The issuance of $25,000,000 of our Series B Preferred Stock includes the conversion of $6,000,000 of previously issued convertible promissory notes plus all accrued and unpaid interest thereon, which were cancelled upon the closing of the financing (See Note 9 to the consolidated financial statements - Convertible Notes Payable). The closing of this financing was subject to the satisfaction of various conditions, including stockholder approval (See Note 10 to the consolidated financial statements -- Series B Preferred Stock and Warrant Purchase Agreement).

On July 20, 2007, at our annual meeting of stockholders, our stockholders approved the issuance of securities pursuant to the Series B Preferred Stock and Warrant Purchase Agreement. At the closing of the financing on July 25, 2007, we issued 10,000,000 shares of our Series B Preferred Stock and warrants to purchase 2,500,000 shares of Series B Preferred Stock. The Series B Preferred Stock accrues dividends at 8.0% per year on the original issue price of $2.50 per share for a period of five years from the date on which the shares of Series B Preferred Stock were issued. The warrants are exercisable for a period of five years commencing on July 25, 2007 at an exercise price of $2.50 per share (See Note 10 to the consolidated financial statements - Series B Preferred Stock and Warrant Purchase Agreement).

 

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We submitted a Plan of Compliance to AMEX on November 6, 2006, outlining our operational plan and strategic objectives, and amended our Plan of Compliance on January 3, 2007 and January 5, 2007. The Plan of Compliance was prepared in response to a letter received from AMEX on October 9, 2006, indicating we were below certain continued listing standards. These standards were (i) Section 1003(a)(i) of the AMEX Company Guide, as a result of the Company’s stockholder’s equity of less than $2,000,000 and losses from continuing operations and/or net losses in two out of its three most recent fiscal years; (ii) Section 1003(a)(ii) of the AMEX Company Guide, as a result of the Company’s stockholder’s equity of less than $4,000,000 and losses from continuing operations and/or net losses in three out of its four most recent fiscal years; and (iii) Section 1003(a)(iii) of the AMEX Company Guide, as a result of the Company’s stockholder’s equity of less than $6,000,000 and losses from continuing operations and/or net losses in its five most recent fiscal years. To date, we have not regained compliance with such continued listing standards, but we are working towards achieving that goal consistent with our Plan of Compliance. On September 20, 2007, we received a notice from the staff of AMEX, that we have resolved the continued listing deficiencies, but pursuant to the AMEX Company Guide, our plan period will remain open until we have been able to demonstrate compliance with the continued listing standards for two consecutive quarters. We expect to regain compliance by the end of the first quarter of 2008.

We do not have any approved products and currently derive cash from sales of our securities, sales of our New Jersey state net operating loss carryforwards and interest on cash and cash equivalents. We are highly susceptible to conditions in the global financial markets and in the pharmaceutical industry. Positive and negative movement in those markets will continue to pose opportunities and challenges to us. Previous downturns in the market valuations of biotechnology companies and of the equity markets more generally have restricted our ability to raise additional capital on favorable terms.

We expect to utilize cash and cash equivalents to fund our operating activities, including continued development of ALT-2074 and alagebrium and development of a diagnostic kit. Based on our projected spending levels, the remaining cost of these trials and the development of such a diagnostic kit, which are expected to continue into 2009, exclusive of our internal cost, is estimated to be $4.5 million. The cost includes executed, but cancelable, agreements with outside organizations. The amount and timing of our future capital requirements will depend on numerous factors, including the timing of resuming our research and development programs, if at all, the number and characteristics of product candidates that we pursue, the conduct of preclinical tests and clinical studies, the status and timelines of regulatory submissions, the costs associated with protecting patents and other proprietary rights, the ability to complete strategic collaborations and the availability of third-party funding, if any.

We will require, over the longer term, substantial additional funding to pursue development and commercialization of ALT-2074, alagebrium and our other product candidates and to continue our operations. We believe that satisfying these capital requirements over the long term will require successful commercialization of our product candidates. However, it is uncertain whether any product candidates will be approved or will be commercially successful.

Selling securities to satisfy our capital requirements may have the effect of materially diluting the current holders of our outstanding stock. We may also seek additional funding through corporate collaborations and other financing vehicles. There can be no assurances that such funding will be available at all or on terms acceptable to us. If funds are obtained through arrangements with collaborative partners or others, we may be required to relinquish rights to our technologies or product candidates and alter our plans for the development of our product candidates. If we are unable to obtain the necessary funding, we may be forced to cease operations. There can be no assurance that the products or technologies acquired in the merger will result in revenues to the combined company or any meaningful return on investment to our stockholders.

 

Critical Accounting Policies 

Effective January 1, 2007, we adopted Financial Accounting Standards Board (“FASB”) Interpretation 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109.” The interpretation contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109, “Accounting for Income Taxes.” The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement.

 

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We have sustained losses since inception which has generally resulted in a zero percent effective tax rate; hence, we have not incurred any interest or penalties. Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of tax expense. At December 31, 2007, we had an $88,500,000  deferred tax asset which was fully offset by a valuation allowance due to its history of losses.

In addition, we have net operating loss carryfowards (“NOLs”) that were subject to substantial annual restrictions due to the ownership change limitations provided by the Internal Revenue Code. The Company’s analysis as of December 31, 2007, resulted in severe limitation on federal NOL carryfowards for future use. However, given our history of losses and our fully reserved deferred tax assets, this evaluation has not had a material impact on our consolidated financial statements.

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment,” (“SFAS 123R”), which replaces “Accounting for Stock-Based Compensation,” (“SFAS 123”) and supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values beginning with the first annual reporting period that begins after December 15, 2005. Under SFAS 123R, the pro forma disclosures previously permitted under SFAS 123 are no longer an alternative to financial statement recognition.

We account for employee stock-based compensation, awards issued to non-employee directors, and stock options issued to consultants and contractors in accordance with SFAS 123R, SFAS No. 148 “Accounting for Stock-Based Compensation—Transition and Disclosure” and Emerging Issues Task Force Issue No. 96-18, “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling Goods or Services.” For the year ended December 31, 2007, we recognized research and development consulting expenses of $2,732.

We have adopted the new standard, SFAS 123R, effective January 1, 2006 and have selected the Black-Scholes method of valuation for share-based compensation. We have adopted the modified prospective transition method which requires that compensation cost be recorded, as earned, for all unvested stock options and restricted stock outstanding at the beginning of the first quarter of adoption of SFAS 123R, and is recognized over the remaining service period after the adoption date based on the options’ original estimate of fair value. For the year ended December 31, 2007, we recognized share-based employee compensation cost of $367,268 in accordance with SFAS 123R, which was recorded as general and administrative expenses.

 

Research and Development

 

        Research and development expense consists of costs incurred in connection with developing and advancing our drug discovery technology and identifying and developing our product candidates. We charge all research and development expenses to operations as incurred.

 

        Our research and development expense consists of:

 

·

internal costs associated with research, preclinical and clinical activities;

 

·

payments to third-party contract research organizations, investigative sites and consultants in connection with our preclinical and clinical development programs;

 

·

costs associated with drug formulation and supply of drugs for clinical trials;

 

·

personnel related expenses, including salaries, stock-based compensation, benefits and travel; and

 

·

overhead expenses, including rent.

 

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We currently have two lead products in clinical development, and we are also developing a diagnostic kit. On July 25, 2007, we completed a $25 million financing, which has enabled us to resume our Phase 2 clinical trials. We have not been tracking our clinical development costs on a project by project basis because we only had one product in clinical development until June 2006 and were forced to curtail research activities due to lack of funding until July 2007. We plan to keep track of our clinical development costs on a project by project basis going forward and will provide applicable by project disclosures in our first Quarterly Report on Form 10-Q for fiscal year 2008.

 

   We do not know if we will be successful in developing our product candidates. While expenses associated with the development of our current clinical programs are expected to be substantial and to increase over time, we believe that accurately projecting total program-specific expenses through commercialization is not possible at this time due to the following factors: the timing and amount of these expenses will depend upon the costs associated with potential future clinical trials of our product candidates, and the related expansion of our research and development organization, regulatory requirements, advancement of our preclinical programs and product manufacturing costs, many of which cannot be determined with accuracy at this time based on our stage of development. This is due to the numerous risks and uncertainties associated with the duration and cost of clinical trials, which vary significantly over the life of a project as a result of unanticipated events arising during clinical development, including those with respect to:

 

· the number of clinical sites included in the trial;

 

· the length of time required to enroll suitable subjects;

· the number of subjects that ultimately participate in the trials; and

· the efficacy and safety results of our clinical trials and the number of additional required clinical trials.

 

Our expenditures are subject to additional uncertainties, including the terms and timing of regulatory approvals and the expense of filing, prosecuting, defending or enforcing any patent claims or other intellectual property rights. In addition, we may obtain unexpected or unfavorable results from our clinical trials. We may elect at any time to discontinue, delay or modify clinical trials of some product candidates or focus on others. A change in the outcome of any of the foregoing variables in the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or other regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in any of our clinical trials, we would be required to expend significant additional financial resources and time on the completion of clinical development. Additionally, future commercial and regulatory factors beyond our control will evolve and therefore impact our clinical development programs and plans over time. Due to the risks and uncertainties described above, we cannot currently estimate when material net cash flows from significant projects may commence, if at all.

 

Revenue Recognition

Our revenue recognition policy is consistent with the criteria set forth in Staff Accounting Bulletin 104 -“Revenue Recognition in Financial Statements” (“SAB 104”) for determining when revenue is realized or realizable and earned. In accordance with the requirements of SAB 104, we recognize revenue when (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the seller’s price is fixed or determinable; and (4) collectability is reasonably assured.

Due to the immaterial nature of our current licensing revenues, we have recognized revenues from non-refundable, up-front license fees as received which approximates the straight-line basis.

New Accounting Pronouncements

 

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosure requirements about fair value measurements. We believe that the adoption of SFAS No. 157 will not have a material impact on our consolidated financial statements.

In June 2007, the EITF issued EITF Issue No. 07-3, “Accounting for Nonrefundable Advance Payments for Goods or Services to be Used in Future Research and Development Activities”.  The consensus requires companies to defer and capitalize prepaid, nonrefundable research and development payments to third parties over the period that the research and development activities are performed or the services are provided, subject to an assessment of recoverability.  EITF Issue No. 07-3 is effective for new contracts entered into in fiscal years beginning after December 15, 2007, including interim periods within those fiscal years. We do not expect the adoption of EITF Issue No. 07-3 to have a material impact on our financial statements.

 

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In November 2007, the EITF issued EITF Issue No. 07-1, “Accounting for Collaborative Arrangements Related to the Development and Commercialization of Intellectual Property”.  Companies may enter into arrangements with other companies to jointly develop, manufacture, distribute, and market a product. Often the activities associated with these arrangements are conducted by the collaborators without the creation of a separate legal entity (that is, the arrangement is operated as a “virtual joint venture”). The arrangements generally provide that the collaborators will share, based on contractually defined calculations, the profits or losses from the associated activities. Periodically, the collaborators share financial information related to product revenues generated (if any) and costs incurred that may trigger a sharing payment for the combined profits or losses. The consensus requires collaborators in such an arrangement to present the result of activities for which they act as the principal on a gross basis and report any payments received from (made to) other collaborators based on other applicable GAAP or, in the absence of other applicable GAAP, based on analogy to authoritative accounting literature or a reasonable, rational, and consistently applied accounting policy election. EITF Issue No. 07-1 is effective for collaborative arrangements in place at the beginning of the annual period beginning after December 15, 2007.  As our collaborative agreements do not incorporate such revenue- and cost-sharing arrangements, we do not expect the adoption of EITF Issue No. 07-1 to have a material impact on our financial statements.

In December 2007, the FASB issued SFAS 141 (Revised), “Business Combinations” (“SFAS 141R”). SFAS 141R requires most identifiable assets, liabilities, noncontrolling interests, and goodwill acquired in a business combination to be recorded at fair value. SFAS 141R applies to all business combinations, including combinations among mutual entities and combinations by contract alone. Under SFAS 141R, all business combinations will be accounted for by applying the acquisition method. SFAS 141R is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Earlier application of SFAS 141R is prohibited.

 

In December 2007, the FASB issued SFAS No. 160 (“SFAS 160”), “Noncontrolling interests in Consolidated Financial Statements”, an amendment of ARB No. 51. SFAS 160 is based on the economic entity concept of consolidated financial statements, under which all residual economic interest holders in an entity have an equity interest in the consolidated entity, even if the residual interest is relative to only a portion of the entity. SFAS 160 requires that a noncontrolling interest in a consolidated subsidiary be displayed in the consolidated statement of financial position as a separate component of equity because the FASB concluded that noncontrolling interests meet the definition of equity of the consolidated entity. SFAS 160 is effective for the first annual reporting period on or after December 15, 2008, and earlier adoption is prohibited. We are currently evaluating the effect that the adoption of SFAS 160 will have on our consolidated results of operations and financial condition.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 expands the use of fair value accounting but does not affect existing standards that require assets or liabilities to be carried at fair value. Under SFAS 159, a company may elect to use fair value to measure various assets and liabilities including accounts receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable, guarantees and issued debt. If the use of fair value is elected, any upfront costs and fees related to the item must be recognized in earnings and cannot be deferred. The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company has similar instruments that it elects not to measure based on fair value. At the adoption date, unrealized gains and losses on existing items for which fair value has been elected are reported as a cumulative adjustment to beginning retained earnings. Subsequent to the adoption of SFAS 159, changes in fair value are recognized in earnings. SFAS 159 is effective for our fiscal year 2008. We are currently evaluating the impact, if any, of SFAS 159 on our Consolidated Financial Statements.

 

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Our exposure to market risk for changes in interest rates relates primarily to our investment in marketable securities. We do not use derivative financial instruments in our investments. In 2007, all of our investments resided in money market accounts. Accordingly, we do not believe that there is any material market risk exposure with respect to derivative or other financial instruments that would require disclosure under this Item.

Item 8.  Financial Statements and Supplementary Data.

 

Not applicable.

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

Not applicable.

Item 9AT. Controls and Procedures.

a) Evaluation of Disclosure Controls and Procedures. Our management has evaluated, with the participation of our Chief Executive Officer and our principal financial and accounting officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the fiscal year covered by this Annual Report on Form 10-K. Based upon that evaluation, the Chief Executive Officer and the principal financial and accounting officers have concluded that as of the end of such fiscal year, our current disclosure controls and procedures were effective. The Chief Executive Officer and principal financial and accounting officers believe that our current disclosure controls and procedures are adequate to ensure that information required to be disclosed in the reports we file under the Exchange Act is recorded, processed, summarized and reported on a timely basis.

b) Material Weaknesses and Changes in Internal Controls. During the review of our financial statements for the three- and six-month periods ended June 30, 2007, our independent registered public accounting firm identified a material weakness regarding our internal control over the recording of an obligation related to the restructuring of an agreement related in part to the financing and an obligation to purchase an investment during the second quarter ended June 30, 2007. As defined by the Public Company Accounting Oversight Board Auditing Standards No. 5,   a material weakness is a significant deficiency, or combination of significant deficiencies, that results in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected. Since this material weakness was identified by our independent registered public accounting firm in connection with its review of our financial statements for the three- and six-month periods ended June 30, 2007, the transactions subject to these issues have been correctly accounted for and disclosed by us and no restatement of any previously filed financial statements was required. On November 14, 2007, we hired a Controller/principal financial and accounting officer who has assisted in maintaining progress on several projects focused on assessing contractual agreements, better understanding and documenting our processes, and implementing certain preventative or detective controls to address key risks. Management has tested its internal controls with regards to the process of reviewing agreements and feels that this procedure has been remediated to ensure continued compliance.

c) Except for the change in controls described above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarterly period covered by this Annual Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

d) This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this Annual Report.

 

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Management’s Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. However, all internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and reporting.

 

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2007. In making this assessment, management used the criteria set forth by the Committee of the Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework and the Guidance for Smaller Public Companies as published by COSO in June 2006. Based on our assessment, management believes that we maintained effective internal control over financial reporting as of December 31, 2007, based on those criteria.

Item 9B. Other Information.

Not applicable.

 

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The response to this Item is incorporated by reference from the discussion responsive thereto under the captions “Management,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Code of Business Conduct and Ethics,” and “Corporate Governance Matters” in our Proxy Statement for the 2008 Annual Meeting of Stockholders.

Our Code of Business Conduct and Ethics is posted on our web site. Disclosure regarding any amendments to, or waivers from, provisions of the Code of Conduct and Ethics that apply to our directors, principal executive and financial officers will be included in a Current Report on Form 8-K within four business days following the date of the amendment or waiver, unless website posting of such amendments or waivers is permitted by the Rules of the American Stock Exchange.

Item 11. Executive Compensation.

The response to this Item is incorporated by reference from the discussion responsive thereto under the captions “Executive Compensation,” and “Compensation Committee Report” in our Proxy Statement for the 2008 Annual Meeting of Stockholders.

 

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

The response to this Item is incorporated by reference from the discussion responsive thereto under the captions “Security Ownership of Certain Beneficial Owners and Management,” and “Equity Compensation Plan Information,” in our Proxy Statement for the 2008 Annual Meeting of Stockholders.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The response to this Item is incorporated by reference from the discussion responsive thereto under the captions “Certain Relationships and Related Transactions” and “Corporate Governance” in our Proxy Statement for the 2008 Annual Meeting of Stockholders.

Item 14. Principal Accounting Fees and Services.

The response to this Item is incorporated by reference from the discussion responsive thereto under the caption “Independent Public Accountants” in our Proxy Statement for the 2008 Annual Meeting of Stockholders.

 

Item 15. Financial Statements and Exhibits.

(a) Consolidated Financial Statements.

Our audited consolidated financial statements and the Report of Independent Registered Public Accounting Firm are included in this Annual Report on Form 10-K. Reference is made to the “Index to Consolidated Financial Statements” on page 40.

(b) Exhibits.

The exhibits required to be filed are listed on the “Exhibit Index” attached hereto, which is incorporated herein by reference.

 

38

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized this 31st day of March, 2008.

 

	SYNVISTA THERAPEUTICS, INC.
	By:	/s/ Noah Berkowitz
		Noah Berkowitz, M.D., Ph.D. President and Chief Executive Officer

 

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

Signature		Title		Date
/s/ Noah Berkowitz  Noah Berkowitz, M.D., Ph.D.		President and Chief Executive Officer (principal executive officer)		March 31, 2008
/s/ Alex D’Amico  Alex D’Amico, CPA		Controller (principal accounting officer)		March 31, 2008
/s/ Wendy A. Milici  Wendy A. Milici		Director of Finance (principal financial officer)		March 31, 2008
/s/ John F. Bedard  John F. Bedard		Director		March 31, 2008
/s/ Wayne P. Yetter  Wayne P. Yetter		Director		March 31, 2008
/s/ Mary C. Tanner  Mary C. Tanner		Director		March 31, 2008

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

		Page
Report of Independent Registered Public Accounting Firm - J.H. Cohn LLP			41
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 2007 and 2006			42
Consolidated Statements of Operations for the years ended
December 31, 2007 and 2006			43
Consolidated Statements of Changes in Stockholders’ Equity for the years ended
December 31, 2007 and 2006			44
Consolidated Statements of Cash Flows for the years ended
December 31, 2007 and 2006			45
Notes to Consolidated Financial Statements			46

40

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Board of Directors and Stockholders

Synvista Therapeutics, Inc

We have audited the accompanying consolidated balance sheets of Synvista Therapeutics, Inc and subsidiary as of December 31, 2007 and 2006, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Synvista Therapeutics, Inc and subsidiary as of December 31, 2007 and 2006, and their results of operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ J.H. Cohn LLP

Roseland, New Jersey

March 26, 2008

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SYNVISTA THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

 

		December 31,			December 31,
		2007			2006
ASSETS
Current Assets:
Cash and cash equivalents		$	15,646,225		$	1,478,780
Other current assets			234,338			314,156
Total current assets			15,880,563			1,792,936
Property and equipment, net			17,096			10,500
Other assets			807,646			501,889
Total assets		$	16,705,305		$	2,305,325
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable		$	1,503,355		$	809,492
Accrued expenses			458,731			253,022
Preferred stock dividends payable			875,000			—
Total current liabilities			2,837,086			1,062,514
Commitments and contingencies			-			-
Stockholders' Equity:
Preferred stock, $.01 par value; 15,000,000 shares authorized,
400,000 shares designated as Series A, none issued and outstanding
12,500,000 shares designated as 8% Series B convertible preferred stock,
10,000,000 shares issued and outstanding at December 31, 2007, and 0
at December 31, 2006			100,000			-
Common stock, $.01 par value; 300,000,000 shares
authorized and 2,586,377 shares issued
and outstanding			25,864			25,864
Additional paid-in capital			276,834,875			244,362,808
Accumulated deficit			(263,092,520	)		(243,145,861	)
Total stockholders' equity			13,868,219			1,242,811
Total liabilities and stockholders' equity		$	16,705,305		$	2,305,325

The accompanying notes are an integral part of these consolidated financial statements.

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SYNVISTA THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
		Year Ended
		December 31
		2007			2006
License and other revenue		$	51,066		$	62,069
Operating expenses:
Research and development			6,166,622			1,896,204
In-process research and development			-			11,379,348
General and administrative			3,796,726			4,654,689
Total operating expenses			9,963,348			17,930,241
Loss from operations			(9,912,282	)		(17,868,172	)
Investment income			458,789			188,435
Interest expense			(6,639,529	)		-
Net loss			(16,093,022	)		(17,679,737	)
Preferred stock dividends - Series B			875,000			-
Preferred stock dividends - Series G and Series H			-			2,652,679
Deemed dividends to Series B preferred stockholders on beneficial conversion feature			2,978,637			-
Net loss applicable to common shares		$	(19,946,659	)	$	(20,332,416	)
Net loss per common share:
Basic and diluted		$	(7.71	)	$	(11.12	)
Weighted average common shares outstanding:
Basic and diluted			2,586,377			1,828,688

The accompanying notes are an integral part of these consolidated financial statements.

 

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SYNVISTA THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
														Additional						Total
		Preferred Stock						Common Stock						Paid-in			Accumulated			Stockholders'
		Shares			Amount			Shares			Amount			Capital			Deficit			Equity
Balance, December 31, 2005			5,561		$	56			1,159,934		$	11,600		$	228,793,449		$	(222,813,445	)	$	5,991,660
Net loss			-			-			-			-			-			(17,679,737	)		(17,679,737	)
Private placement of common stock			-			-			219,208			2,192			2,473,814			-			2,476,006
Issuance of Series G and H preferred stock dividends			238			2			-			-			2,652,677			(2,652,679	)		-
Common stock issued in connection with the merger			-			-			747,981			7,480			8,792,520			-			8,800,000
Preferred stock converted to common stock as a result of the merger			(5,799	)		(58	)		269,847			2,698			(2,640	)		-			-
Assumption of HaptoGuard vested stock options															235,000						235,000
Private placement of common stock			-			-			189,407			1,894			1,328,126			-			1,330,020
Stock-based compensation			-			-			-			-			66,745			-			66,745
Options issued for consulting services			-			-			-			-			5,122			-			5,122
Compensation costs related to restricted stock			-			-			-			-			17,995			-			17,995
Balance, December 31, 2006			-			-			2,586,377			25,864.00			244,362,808.00			(243,145,861.00	)		1,242,811.00
Net loss			-			-			-			-			-			(16,093,022	)		(16,093,022	)
Warrants issued and embedded beneficial conversion feature associated with debt financing			-			-			-			-			6,000,000			-			6,000,000
Issuance of shares of preferred stock through private placement at $2.50 per share			7,534,246			75,342			-			-			18,760,274			-			18,835,616
Issuance of shares of preferred stock through debt conversion at $2.50 per share			2,465,754			24,658			-			-			6,139,726			-			6,164,384
Costs incurred in connection with the private placement, including the issuance of warrants			-			-			-			-			(1,837,954	)		-			(1,837,954	)
Deemed dividends to Series B preferred stockholders on beneficial conversion feature			-			-			-			-			2,978,637			(2,978,637	)		-
Series B preferred stock dividend payable																		(875,000	)		(875,000	)
Stock-based compensation			-			-			-			-			367,268			-			367,268
Options issued for consulting services			-			-			-			-			2,732			-			2,732
Compensation costs related to restricted stock			-			-			-			-			61,384			-			61,384
Balances, December 31, 2007			10,000,000		$	100,000			2,586,377		$	25,864		$	276,834,875		$	(263,092,520	)	$	13,868,219

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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SYNVISTA THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 

		Years ended December 31,
		2007			2006
Cash Flows from Operating Activities:
Net loss		$	(16,093,022	)	$	(17,679,737	)
Adjustments to reconcile net loss to cash
used in operating activities:
Stock-based compensation			367,268			66,745
Options issued for consulting services			2,732			5,122
Compensation costs related to restricted stock			61,384			17,995
Non-cash interest expense			164,384			-
In-process research and development			-			11,379,348
Amortization of debt discount			6,000,000			-
Amortization of deferred financing costs			466,413			-
Depreciation and amortization			10,508			49,116
Changes in operating assets and liabilities:
Other current assets			79,818			(408,026	)
Other assets			94,243			(501,889	)
Accounts payable and accrued expenses			899,572			(366,949	)
Net cash used in operating activities			(7,946,700	)		(7,438,275	)
Cash Flows from Investing Activities:
Capital expenditures			(17,104	)
Restricted cash			-			150,000
Acquisition costs, net of cash acquired			-			(1,621,929	)
Payments for securities purchased under the Oxis agreement			(400,000	)		-
Net cash used in investing activities			(417,104	)		(1,471,929	)
Cash Flows from Financing Activities:
Proceeds from debt financing			6,000,000			0
Proceeds from issuance of common stock			-			3,806,026
Proceeds from issuance of preferred stock			18,835,616			0
Payments for private placement costs			(1,837,954	)		0
Payments for debt financing costs			(466,413	)		-
Net cash provided by financing activities			22,531,249			3,806,026
Net increase(decrease) in cash and cash equivalents			14,167,445			(5,104,178	)
Cash and cash equivalents, beginning of year			1,478,780			6,582,958
Cash and cash equivalents, end of year		$	15,646,225		$	1,478,780
Supplemental disclosures of non-cash investing and financing activities:
Common stock and other equity consideration issued as a result of the merger		$	-		$	9,035,058
Warrants issued and embedded conversion feature associated
with debt financing		$	6,000,000		$	-
Beneficial conversion feature on convertible Series B preferred stock		$	13,616,625		$	-
Deemed dividends to Series B preferred stockholders on beneficial conversion		$	2,978,637		$	-
Series B stock dividends payable		$	875,000		$	-
Preferred stock issued pursuant to conversion of debt and accrued interest		$	6,164,384		$	-
Fair value of warrants issued to placement agents for private placement allocable
to private placement		$	1,619,256		$	-

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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SYNVISTA THERAPEUTICS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 - Organization and Summary of Significant Accounting Policies

Basis of Presentation

On July 20, 2007, the stockholders of Alteon Inc. approved changing the name of the company from Alteon Inc. to Synvista Therapeutics, Inc. (the “Company” or “Synvista”).  The name change became effective on July 25, 2007.

On July 20, 2007, the Company’s stockholders approved an amendment to its certificate of incorporation to, among other things, effect a reverse stock split of the Company’s common stock. On July 25, 2007, a 1:50 reverse stock split of the Company’s common stock became effective. Accordingly, all share, warrant, option and per share information for all periods presented reflect the reverse stock split.

Organization and Business

Synvista is a product-based biopharmaceutical company engaged in the development of small molecule drugs to treat and prevent cardiovascular disease and diabetes. The Company has identified several product candidates that represent what the Company believes to be novel approaches to some of the largest pharmaceutical markets. Synvista has advanced one of these products into Phase 2 clinical trials. By acquiring HaptoGuard, Inc. (“HaptoGuard”) in July 2006, Synvista expanded its portfolio with another compound in Phase 2 clinical development for cardiovascular complications of diabetes.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Synvista Therapeutics, Inc and its wholly-owned subsidiary, HaptoGuard, Inc. All inter-company accounts and transactions have been eliminated in consolidation.

Reclassifications

Certain prior period balances have been reclassified to conform to the current presentation.

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 revenues and expenses during the reporting period. Actual results could differ from those estimates.

Estimates are used for, but not limited to: accrued expenses, income tax valuation allowances and assumptions utilized within the Black-Scholes option pricing model and the model itself. Accounting estimates require the use of judgment regarding uncertain future events and their related effects and, accordingly, may change as additional information is obtained.

Cash and Cash Equivalents

Cash and cash equivalents include cash and highly-liquid investments that have a maturity of less than three months at the time of purchase.

 

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SYNVISTA THERAPEUTICS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Financial Instruments

Financial instruments reflected in the balance sheets are recorded at cost, which approximates fair value for cash equivalents and accounts payable.

Revenue Recognition

Our revenue recognition policy is consistent with the criteria set forth in Staff Accounting Bulletin 104 -“Revenue Recognition in Financial Statements” (“SAB 104”) for determining when revenue is realized or realizable and earned. In accordance with the requirements of SAB 104, we recognize revenue when (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the seller’s price is fixed or determinable; and (4) collectability is reasonably assured.

Due to the immaterial nature of the Company’s current licensing revenues, it has recognized revenues from non-refundable, up-front license fees as received which approximates the straight-line basis.

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the useful lives of owned assets, which range from three to five years.

Research and Development

 

Research and development expenses consist primarily of costs associated with determining feasibility, licensing and preclinical and clinical testing of the Company’s licensed pharmaceutical candidates, including salaries and related personnel costs, certain legal expenses, fees paid to consultants and outside service providers for drug manufacture and development, and other expenses. Expenditures for research and development are charged to operations as incurred.

Stock-Based Compensation 

The Company has stockholder-approved stock incentive plans for employees, directors, officers and consultants.

The Company follows SFAS No. 123(R), “Share-Based Payment,” (“SFAS 123(R)”) for employee options and used the modified prospective transition method. SFAS 123(R) revised SFAS 123 to eliminate the option to use the intrinsic value method and required the Company to expense the fair value of all employee options over the vesting period. Under the modified prospective transition method, the Company recognized compensation cost for the year ended December 31, 2006, which includes compensation cost related to share-based payments granted on or after January 1, 2006, based on the grant date fair value estimated in accordance with SFAS 123(R).

Options granted to consultants and other non-employees are accounted for in accordance with EITF No. 96-18 "Accounting for Equity Instruments That Are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services."  Accordingly, such options are recorded at fair value at the date of grant and subsequently adjusted to fair value at the end of each reporting period until such options vest, and the fair value of the options, as adjusted, is charged to consulting expense over the related vesting period.  For the year ended December 31, 2007, the Company recognized research and development consulting expenses of $2,732.

For the year ended December 31, 2007, the Company recognized share-based employee compensation cost of $367,268 in accordance with SFAS 123(R), which was recorded as general and administrative expense. This expense related to the granting of stock options to employees, directors and officers on or after January 1, 2006. None of this expense resulted from the grants of stock options prior to January 1, 2006. The Company recognized compensation expense related to these stock options, taking into consideration a forfeiture rate of approximately two and one-half percent based on historical experience, on a straight-line basis over the vesting period. The Company did not capitalize any share-based compensation cost.

 

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SYNVISTA THERAPEUTICS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

As of December 31, 2007, the total compensation cost related to non-vested option awards not yet recognized is $1,603,738. The weighted average period over which it is expected to be recognized is approximately 2.72 years.

As noted above, the Company has stockholder-approved stock incentive plans for employees under which it has granted non-qualified and incentive stock options. Options granted under these plans must be at a price per share not less than the fair market value per share of common stock on the date the option is granted. The options generally vest over a four-year period and expire ten years from the date of grant.

 

Recently Issued Accounting Pronouncements

 

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosure requirements about fair value measurements. We believe that the adoption of SFAS No. 157 will not have a material impact on its consolidated financial statements.

In June 2007, the EITF issued EITF Issue No. 07-3, “Accounting for Nonrefundable Advance Payments for Goods or Services to be Used in Future Research and Development Activities”.  The consensus requires companies to defer and capitalize prepaid, nonrefundable research and development payments to third parties over the period that the research and development activities are performed or the services are provided, subject to an assessment of recoverability.  EITF Issue No. 07-3 is effective for new contracts entered into in fiscal years beginning after December 15, 2007, including interim periods within those fiscal years. The Company does not expect the adoption of EITF Issue No. 07-3 to have a material impact on its financial statements.

In November 2007, the EITF issued EITF Issue No. 07-1, “Accounting for Collaborative Arrangements Related to the Development and Commercialization of Intellectual Property”.  Companies may enter into arrangements with other companies to jointly develop, manufacture, distribute, and market a product. Often the activities associated with these arrangements are conducted by the collaborators without the creation of a separate legal entity (that is, the arrangement is operated as a “virtual joint venture”). The arrangements generally provide that the collaborators will share, based on contractually defined calculations, the profits or losses from the associated activities. Periodically, the collaborators share financial information related to product revenues generated (if any) and costs incurred that may trigger a sharing payment for the combined profits or losses. The consensus requires collaborators in such an arrangement to present the result of activities for which they act as the principal on a gross basis and report any payments received from (made to) other collaborators based on other applicable GAAP or, in the absence of other applicable GAAP, based on analogy to authoritative accounting literature or a reasonable, rational, and consistently applied accounting policy election. EITF Issue No. 07-1 is effective for collaborative arrangements in place at the beginning of the annual period beginning after December 15, 2007.  As the Company’s collaborative agreements do not incorporate such revenue- and cost-sharing arrangements, it does not expect the adoption of EITF Issue No. 07-1 to have a material impact on its financial statements.

In December 2007, the FASB issued SFAS 141 (Revised), “Business Combinations” (“SFAS 141R”). SFAS 141R requires most identifiable assets, liabilities, noncontrolling interests, and goodwill acquired in a business combination to be recorded at fair value. SFAS 141R applies to all business combinations, including combinations among mutual entities and combinations by contract alone. Under SFAS 141R, all business combinations will be accounted for by applying the acquisition method. SFAS 141R is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Earlier application of SFAS 141R is prohibited.

 

In December 2007, the FASB issued SFAS No. 160 (“SFAS 160”), “Noncontrolling interests in Consolidated Financial Statements”, an amendment of ARB No. 51. SFAS 160 is based on the economic entity concept of consolidated financial statements, under which all residual economic interest holders in an entity have an equity interest in the consolidated entity, even if the residual interest is relative to only a portion of the entity. SFAS 160 requires that a noncontrolling interest in a consolidated subsidiary be displayed in the consolidated statement of financial position as a separate component of equity because the FASB concluded that noncontrolling interests meet the definition of equity of the consolidated entity. SFAS 160 is effective for the first annual reporting period on or after December 15, 2008, and earlier adoption is prohibited. The Company is currently evaluating the effect that the adoption of SFAS 160 will have on its consolidated results of operations and financial condition.

 

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SYNVISTA THERAPEUTICS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 expands the use of fair value accounting but does not affect existing standards that require assets or liabilities to be carried at fair value. Under SFAS 159, a company may elect to use fair value to measure various assets and liabilities including accounts receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable, guarantees and issued debt. If the use of fair value is elected, any upfront costs and fees related to the item must be recognized in earnings and cannot be deferred. The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company has similar instruments that it elects not to measure based on fair value. At the adoption date, unrealized gains and losses on existing items for which fair value has been elected are reported as a cumulative adjustment to beginning retained earnings. Subsequent to the adoption of SFAS 159, changes in fair value are recognized in earnings. SFAS 159 is effective for our fiscal year 2008. The Company is currently evaluating the impact, if any, of SFAS 159 on its Consolidated Financial Statements.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and net operating loss and tax credit carryforwards. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.

Net Loss Per Share Applicable to Common Stockholders

Basic net loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares outstanding during the year. Diluted net loss per share is the same as basic net loss per share applicable to common stockholders, since the assumed exercise of stock options and warrants and the conversion of preferred stock would be antidilutive. The amount of potentially dilutive shares excluded from the calculation as of December 31, 2007 and 2006 was 4,411,702 and 667,442 shares, respectively.

NOTE 2 - Liquidity

The Company has devoted substantially all of its resources to research, drug discovery and development programs. To date, it has not generated any revenues from the sale of products and does not expect to generate any such revenues for a number of years, if at all. As a result, Synvista has incurred net losses since inception, has an accumulated deficit of $263,092,520 at December 31, 2007, and expects to incur net losses, potentially greater than losses in prior years, for a number of years.

The Company has financed its operations through proceeds from the sale of common and preferred equity securities, debt securities, revenue from former collaborative relationships, reimbursement of certain its research and development expenses by collaborative partners, investment income earned on cash and cash equivalent balances and short-term investments and in years prior from the sale of a portion of the Company’s New Jersey state net operating loss carryforwards and research and development tax credit carryforwards.

 

49

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SYNVISTA THERAPEUTICS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

In April 2007, the Company entered into a Series B Preferred Stock and Warrant Purchase Agreement with institutional investors who purchased on July 25, 2007, $25,000,000 of newly created Series B Preferred Stock and warrants to purchase shares of Series B Preferred Stock. The issuance of $25,000,000 of the Company’s Series B Preferred Stock includes the conversion of $6,000,000 of previously issued convertible promissory notes plus all accrued and unpaid interest thereon, which were cancelled upon the closing of the financing (See Note 9 - Convertible Notes Payable). The closing of this financing was subject to the satisfaction of various conditions, including stockholder approval (See Note 10 — Series B Preferred Stock and Warrant Purchase Agreement).

As of December 31, 2007, the Company had working capital of $13,043,477, including $15,646,225 of cash and cash equivalents. During 2007, the Company approved the issuance of securities pursuant to the Series B Preferred Stock and Warrant Purchase Agreement. At the closing of the financing on July 25, 2007, the Company issued 10,000,000 shares of its Series B Preferred Stock and warrants to purchase 2,500,000 shares of Series B Preferred Stock to the Buyers, raising net proceeds of approximately $22,531,000 (See Note 10 - Series B Preferred Stock and Warrant Purchase Agreement). The Company’s cash used in operating activities for the years ended December 31, 2007 and 2006 was $7,946,700 and $7,438,275, respectively.

Synvista expects to utilize cash and cash equivalents to fund its operating activities, including continued development of ALT-2074 and alagebrium. The amount and timing of the Company’s future capital requirements will depend on numerous factors, including the progress of its research and development programs, the number and characteristics of product candidates that the Company pursues, the conduct of preclinical tests and clinical studies, the status and timelines of regulatory submissions, the costs associated with protecting patents and other proprietary rights, the ability to complete strategic collaborations and the availability of third-party funding, if any.

The Company anticipates that it will require substantial new funding in 2009 to pursue development and commercialization of alagebrium and its other product candidates and to continue its operations. Synvista believes that satisfying these capital requirements over the long term will require successful commercialization of its product candidates. However, it is uncertain whether any products will be approved or will be commercially successful.

Selling securities to satisfy its capital requirements may have the effect of materially diluting the current holders of the Company’s outstanding stock. The Company may also seek additional funding through corporate collaborations and other financing vehicles. There can be no assurances that such funding will be available at all or on terms acceptable to the Company. If funds are obtained through arrangements with collaborative partners or others, the Company may be required to relinquish rights to its technologies or product candidates and alter its plans for the development of its product candidates. If the Company is unable to obtain the necessary funding, it will likely be forced to cease operations.

NOTE 3 - Other Current Assets

		December 31,
		2007			2006
Deferred financing costs		$	—		$	49,200
Prepaid insurance			223,166			242,615
Prepaid other			11,172			22,341
		$	234,338		$	314,156

50

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SYNVISTA THERAPEUTICS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 4 - Property and Equipment

		December 31,
		2007			2006
Laboratory equipment		$	24,650		$	24,650
Furniture and equipment			218,627			218,627
Leasehold improvements			7,480			—
Computer equipment			168,521			159,529
			419,278			402,806
Less: Accumulated depreciation and amortization			(402,182	)		(392,306	)
		$	17,096		$	10,500

NOTE 5 - Other Assets

		December 31,
		2007			2006
Prepaid insurance - non-current		$	392,386		$	501,889
Security deposit			15,260			—
Oxis common stock			400,000			—
		$	807,646		$	501,889

NOTE 6 - Collaborative Research and Development Agreements

Oxis International, Inc.

On April 2, 2007, the Company entered into an Amended and Restated Exclusive License Agreement with Oxis International, Inc. (“OXIS”) that includes a worldwide exclusive license granted by Oxis to the Company and covering a family of orally bioavailable organoselenium compounds that have shown anti-oxidant and anti-inflammatory properties in clinical and preclinical studies, and which changes certain rights and obligations under its previous agreement with Oxis. Among other changes, the amended agreement broadens the field of its license to all uses of the licensed technology and eliminates the exclusive right of Oxis to act as a supplier of licensed product to the Company. Royalty and milestone payments also are changed in the amended agreement, including the addition of a right to reduce royalty payments to Oxis in the event a royalty on a licensed product is payable to a third party.

The amended agreement also requires that the Company make certain fixed payments to Oxis of up to $500,000 over six months, which have been made, and enter into a share purchase agreement for the purchase of $500,000 of newly issued shares of Oxis common stock at a premium over the then current market price. In August 2007, the Company acquired 2,083,333 shares of Oxis pursuant to the share purchase agreement for $500,000, of which $100,000 premium was expensed at the date of the acquisition. The investment is accounted for at cost and included in other assets as of December 31, 2007, since it is a restricted security. These shares must be held for a period of not less than 18 months. The investment has been accounted for at cost and included in other assets. All other amounts have been paid as of December 31, 2007. The Company further committed to a minimum investment in a development program from licensed products.

Bio-Rap Ltd.

Synvista also entered into a license agreement with BIO-RAP Ltd. (“BIO-RAP”), on its own and on behalf of the Rappaport Family Institute for Research in the Medical Sciences, in July 2004. Under this agreement, Synvista received an exclusive, worldwide, royalty-bearing license, with the right to grant sublicenses, to certain technology, patents and technology relating to products in the field of testing and/or measurement for diagnostic predictive purposes of vascular or cardiac diseases.  Synvista is obligated to make annual research funding payments to BIO-RAP and pay a portion of BIO-RAP’s direct overhead costs. Synvista is also obligated to make future payments upon achievement of certain milestones, including FDA-related milestones, as well as royalty payments on sales, net of various customary discounts, attributable to therapeutic products derived from the technology being licensed to Synvista by BIO-RAP. Synvista has a first right to acquire a license to any of the technology developed as part of the research conducted pursuant to the agreement.  If Synvista exercises this right but the parties acting in good faith fail to reach an agreement in respect of such license then Synvista has a right of first refusal to license the research technology on the same terms offered by BIO-RAP to a third party.

 

51

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SYNVISTA THERAPEUTICS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

On April 1, 2007, the Company entered into an amendment of the Company’s License and Research Agreement with BIO-RAP. Among other changes, the amendment extends to all fields the Company’s rights to sell therapeutic and diagnostic product pursuant to the licenses granted in that agreement.  The amendment also will result in an increase in annual research funding provided by the Company to BIO-RAP, and in the Company making certain defined payments to BIO-RAP over the course of the next 18 months. Other payments due to BIO-RAP based on the Company’s sales of diagnostic products or grant of sublicense rights, including royalties, milestone payments and payments attributable to sublicense revenue, are significantly reduced. The amendment gives the Company the right to further reduce royalty payments on diagnostic products on making a one-time payment within eight years, and to further reduce payments resulting from sublicense revenue on making a one-time payment made within the next five years. In addition, under the amendment the Company assumes all of BIO-RAP’s right and interest in a license with ARUP Laboratories at the University of Utah (“ARUP”). ARUP will, in the future, be a sublicensee of the Company.

Genentech, Inc.

As part of a stock adjustment in the context of Synvista’s merger with HaptoGuard in July 2006, Synvista issued to Genentech, Inc. (“Genentech”), rights to collect milestones and royalties on net sales of alagebrium.  Further, as part of this adjustment, Genentech also was given a right of first negotiation on ALT-2074 if Synvista were to seek a licensing partner for the drug.

Picower Institute for Medical Research

On November 6, 2002, Synvista entered into an agreement, effective as of April 15, 2002, with The Picower Institute for Medical Research, or The Picower, which terminated its License Agreement dated as of September 5, 1991. Pursuant to this termination agreement, The Picower assigned to Synvista all of its patents, patent applications and other technology related to A.G.E.s and Synvista agreed to prosecute and maintain the patents and patent applications. Synvista will pay The Picower royalties on any sales of products falling within the claims of these patents and patent applications until they expire or are allowed to lapse.

The Company has also entered into various arrangements with independent research laboratories to conduct studies in conjunction with the development of the Company's technology. The Company pays for this research and receives certain rights to inventions or discoveries that may arise from this research.

NOTE 7 - Accrued Expenses

Accrued expenses consisted of the following:

		December 31,
		2007			2006
Research and development		$	293,372		$	99,747
Professional fees			104,621			69,572
Other			60,738			83,703
		$	458,731		$	253,022

 

52

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SYNVISTA THERAPEUTICS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 8 - Commitments and Contingencies

Commitments

On January 19, 2007, Synvista signed a three-year lease, which commenced February 26, 2007, for office space in Montvale, New Jersey. This facility lease includes two, three-year renewal options. Rent expense for the years ended December 31, 2007 and 2006 was $130,882 and $270,180, respectively.

As of December 31, 2007, future minimum rentals under an operating lease, which has initial or remaining non-cancelable term in excess of one year is as follows:

		Operating Leases
2008		$	97,807
2009			97,807
2010			12,226
		$	207,840

The Company has an employment agreement with a key executive, which provides severance benefits. If the Company was to terminate the agreement, it would be subject to an obligation totaling $300,000.

Contingencies

In the ordinary course of its business, the Company may from time to time be subject to claims and lawsuits.

NOTE 9 - Convertible Notes Payable

On June 1, 2007, the Company entered into an omnibus amendment (the “Omnibus Amendment”) with the holders of the Company’s Senior Secured Convertible Promissory Notes, dated January 11, 2007 (the “Notes”). The Omnibus Amendment amended the following documents: (i) the Note and Warrant Purchase Agreement, dated January 11, 2007 (the “Note Purchase Agreement”), (ii) the Notes, and (iii) the warrants issued to the holders of the Notes, each dated January 11, 2007 (the “Warrants”). Pursuant to the Omnibus Amendment, the Note Purchase Agreement was amended to provide for the issuance of an additional $3,000,000 of indebtedness by the Company. In order to provide for such additional indebtedness, the Notes, in the original principal amount of $3,000,000, were cancelled and replaced with amended and restated senior convertible promissory notes in an aggregate principal amount of $6,000,000 (the “New Notes”). Each New Note accrued interest at a rate of 8% per annum. The New Notes increased certain penalties contained in the Notes if the proposed preferred stock financing transaction between the Company and the holders of the Notes was not closed by July 31, 2007, as follows: the Company would have been obligated to pay to the holders of the New Notes a $6,000,000 penalty in addition to the outstanding principal and interest that would become due under the New Notes on July 31, 2007, and the Company would have been obligated to pay the holders 30% of any amount received by the Company from financing, sale or licensing transactions completed prior to June 30, 2009, subject to a cap of $8,000,000.

On July 20, 2007, at the Company’s annual meeting of stockholders, stockholders of the Company approved the issuance of shares of the Company’s Series B Preferred Stock. The Series B Preferred Stock accrues dividends at a rate of 8.0% per year for a period of five years from the date on which the shares of Series B Preferred Stock were issued. Pursuant to the terms of the Note Purchase Agreement, upon the closing of the financing on July 25, 2007, as more fully discussed in Note 10 - Series B Preferred Stock and Warrant Purchase Agreement, the New Notes plus accrued and unpaid interest thereon were converted into shares of the Company’s Series B Preferred stock and thereafter were cancelled.

In connection with the Note Purchase Agreement, the Company also issued to the holders of the Notes (the “Buyers”) warrants to purchase 514,689 shares of the Company’s common stock, which were exercisable for a period of five years commencing on January 11, 2007 at an exercise price of $0.01 per share. These common stock warrants expired upon the closing of the sale of the Company’s Series B Preferred Stock.

 

53

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SYNVISTA THERAPEUTICS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The Company determined the initial carrying value of the New Notes by a two-step allocation process: first to the associated Warrants and second, to an embedded conversion option. First, the Company allocated the proceeds from the sale of the New Notes between the New Notes and the Warrants based upon their relative fair values, which resulted in recording a discount on the New Notes. The value of the Warrants was computed using the Black-Scholes option pricing model. Second, in accordance with Emerging Issues Task Force (EITF) No. 00-27, “Application of Issue 98-5 to Certain Convertible Instruments,” after allocating the Note proceeds as described above, the Company calculated the embedded conversion price and used it to measure the intrinsic value of the embedded conversion option. Since the conversion price was less than the fair value of the Company’s common stock at the closing date, an embedded conversion option was recorded as additional paid-in capital.

All of the proceeds were allocated to the Warrants and embedded beneficial conversion feature. This amount was being amortized as non-cash interest expense with a corresponding increase to the New Notes over the term of the New Notes. The fair value of the beneficial conversion feature and the Warrants substantially exceeded the face value of the New Notes.

For the year ended December 31, 2007, the Company recorded $6,000,000 of non-cash interest expense related to the accretion of these New Notes.

Contemporaneously with the execution and delivery of the Note Purchase Agreement and the issuance by the Company to the Buyers of the Notes and the Warrants, the parties executed (i) a Security and Guaranty Agreement (the “Security Agreement”), pursuant to which the Company and its wholly-owned subsidiary HaptoGuard agreed to provide to the Buyers a first priority security interest in certain Collateral (as this term is defined in the Security Agreement) to secure the Company’s obligations under the Agreement and the New Notes, and (ii) an Intellectual Property Security Agreement (“Intellectual Property Security Agreement”), pursuant to which the Company and HaptoGuard agreed to provide to the Buyer a first priority security interest in certain IP Collateral (as this term is defined in the Intellectual Property Security Agreements) to collateralize the Company’s obligations under the Agreement and the New Notes. The Security Agreement and the security interest in certain Collateral terminated upon the conversion of the New Notes. 

NOTE 10 - Series B Preferred Stock and Warrant Purchase Agreement

On April 5, 2007, the Company entered into a Series B Preferred Stock and Warrant Purchase Agreement (the “Series B Agreement”) with institutional investors (the “Buyers”). Pursuant to the terms and subject to the conditions contained in the Series B Agreement, the Company agreed to issue and sell to the Buyers, and the Buyers agreed to purchase from the Company $25,000,000 of its newly created Series B Preferred Stock, $0.01 par value per share and warrants to purchase shares of the Company’s Series B Preferred Stock.

On June 1, 2007 the Company entered into Amendment No. 1 to the Series B Preferred Stock and Warrant Purchase Agreement (“Amendment No. 1 to the SPA”) by the Company and the Buyers, which amends the Series B Agreement. Pursuant to Amendment No. 1 to the SPA, the per share price at which the Series B Preferred Stock of the Company will be sold in the proposed preferred stock financing, was fixed at a price of $0.05 (prior to the reverse stock split) per share. Prior to entering into Amendment No. 1 to the SPA, the price per share at which the Series B Preferred Stock of the Company was sold in the financing was to be within a range between $0.05 and $0.075 (each prior to the implementation of the reverse stock split) and was to be determined following the requisite shareholder vote regarding the financing and the reverse stock split, as set forth in the Series B Agreement.

On July 20, 2007, at the Company’s annual meeting of stockholders, stockholders of the Company approved the issuance of securities pursuant to the Series B Agreement. At the closing of the financing on July 25, 2007, the Company issued 10,000,000 shares of its Series B Preferred Stock and warrants to purchase 2,500,000 shares of Series B Preferred Stock to the Buyers. The Series B Preferred Stock accrues dividends at a rate of 8.0% per year on the original issue price of $2.50 per share for a period of five years from the date on which the shares of Series B Preferred Stock were issued. The warrants are exercisable for a period of five years commencing on July 25, 2007 at an exercise price of $2.50 per share.

 

54

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SYNVISTA THERAPEUTICS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

On July 25, 2007, upon the closing of the financing, the Notes, in an aggregate principal amount of $6,000,000, plus all accrued but unpaid interest thereon, were automatically converted pursuant to their terms into that number of shares of Series B Preferred Stock equal to the principal plus all accrued but unpaid interest on the New Notes divided by the price per share at which the Series B Preferred Stock was sold, and thereafter the New Notes were cancelled and are of no further force or effect, and the warrants to purchase an aggregate of 514,689 shares of the Company’s common stock that were issued to the purchasers in such financing terminated and are of no further force or effect.

On the date of issuance, the Company adjusted its balance sheet to reduce the value of the Series B Convertible Preferred Stock by $9,445,299 and the warrants by $4,171,326. The Company used the Black Scholes model to value the Series B warrants. For purposes of calculating the fair value of the warrants the Company used a risk free rate of return of 4.88% and a volatility percentage of 114%. In accordance with EITF 98-5 and ETIF 00-27 the intrinsic value of the beneficial conversion feature is considered a deemed dividend to the preferred shareholders and is amortized over a period of the security’s earliest conversion date. Pursuant to Amendment No.1 to the Registration Rights Agreement, the Company will register the securities at various times over a two year period for resale by the investors, which is when the preferred stock will be convertible. To amortize the beneficial conversion feature the Company charged the accumulated deficit account and increased additional paid in capital for the amount of the deemed dividend.

In July 2007, the Company increased its number of authorized shares to 315,000,000, of which 300,000,000 is $0.01 par value common stock and 15,000,000 is $0.01 par value Preferred Stock. Series B Preferred Stock dividends are payable annually in cash or in shares of preferred stock at a rate of 8% of the Series B Original Issue Price of $2.50 for each share of Series B preferred stock for five years from the Original Issue Date of July 25, 2007. Each holder of the Series B Preferred Stock shall be entitled to vote one-half the number of whole shares of common stock into which the shares of Series B Preferred Stock held by the holder are convertible as of the record date for any meeting of the Company’s stockholders.

The Series B Preferred Stock is subject to a mandatory conversion based on a Triggering Event. At such time when (A) (i) the thirty day prior trailing average Closing Price of the common stock for the entire six months preceding such time is equal to at least the Series B Original Issue Price, and (ii) one and one-half years have elapsed after the Company has had declared effective by the Securities and Exchange Commission and continuously maintained for such one and one-half year period the effectiveness of a shelf registration statement providing for the resale of all of the common stock underlying the Series B Preferred Stock and those certain warrants issued in connection with the Series B Preferred Stock under the Series B Purchase Agreement, an equivalent of $7,500,000 (measured as of the Series B Original Issue Date) of the Series B Preferred Stock shall (a) automatically be converted into shares of common stock, at the then effective Series B Conversion Price (determined to be $0.05), and (b) such shares may not be reissued by the Company, or (B) (i) the thirty day prior trailing average Closing Price of the common stock for the entire six months preceding such time is equal to at least two times the Series B Original Issue Price, and (ii) one and one half years have elapsed after the Company has had declared effective by the Securities and Exchange Commission and continuously maintained for such one and one-half year period the effectiveness of a shelf registration statement providing for the resale of all of the common stock underlying the Series B Preferred Stock and those certain warrants issued in connection with the Series B Preferred Stock, the remainder of the outstanding Series B Preferred Stock shall (a) automatically be converted into shares of common stock, at the then effective Series B Conversion Price.

The Company engaged Rodman & Renshaw, LLC (“Rodman and Renshaw”) as placement agent for the Company for the offering. For its services, the Company paid Rodman & Renshaw a cash commission of $1,312,187 and issued a warrant to Rodman and Renshaw to purchase 600,000 shares of the Company’s common stock with an exercise price of $2.50 per share. The warrant issued is exercisable immediately and will expire on July 25, 2012. The Company used the Black Scholes model to value the common stock warrants. For purposes of calculating the fair value of the warrants the Company used a risk free rate of 4.88% and a volatility percentage of 114%. The fair value of the warrants using the Black Scholes model is $1,619,256.

 

55

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SYNVISTA THERAPEUTICS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The obligations of Synvista and the Buyers to complete the Series B preferred stock financing were subject to the satisfaction or, to the extent legally permissible, waiver of certain conditions. The more significant conditions included: (i) approval by the Synvista stockholders of the issuance of securities in the Financing pursuant to the Agreement; (ii) the approval by the Synvista stockholders and the consummation of a reverse stock split of the Company’s issued and outstanding common stock within a range of 1:50 to 1:100, with the final ratio to be determined by the Board of Directors and reasonably acceptable to the Buyers; (iii) approval by the Synvista stockholders and the filing with the Secretary of State of the State of Delaware of Synvista’s Amended and Restated Certificate of Incorporation; and (iv) approval by the Synvista stockholders of an amendment to the Company’s equity incentive plan in order to reserve up to an additional 1,060,000 (53,000,000 prior to the implementation of the reverse stock split) shares of common stock for issuance thereunder.

In connection with the closing of the financing, Synvista entered into an Amendment No. 1 to the Registration Rights Agreement (“Amendment”) with the Buyers. The Amendment amends the Registration Rights Agreement dated July 25, 2007, by extending the schedule under which the Company is required to file registration statements with the Securities and Exchange Commission for the resale of the shares of common stock issuable upon conversion of the shares of Series B Preferred Stock issued to the Buyers, as well as upon conversion of the shares of Series B Preferred Stock underlying the warrants issued to the Buyers. The Amendment also grants the Buyers additional piggy-back registration rights in the event of an underwritten public offering of the Company’s securities and demand registration rights at the option of a majority of the Buyers. The Amendment also relieves the Company of its obligation to pay the Buyers liquidated damages in certain circumstances, as described in the Amendment.

NOTE 11 -- Stockholders' Equity

Common/Preferred Stock Issuances

On July 20, 2007, at the Company’s annual meeting of stockholders, stockholders of the Company approved the issuance of securities pursuant to the Series B Agreement. At the closing of the financing on July 25, 2007, the Company issued 10,000,000 shares of its Series B Preferred Stock and warrants to purchase 2,500,000 shares of Series B Preferred Stock to the Buyers. The Series B Preferred Stock accrues dividends of 8.0% per year on the original issue price of $2.50 per share for a period of five years from the date on which the shares of Series B Preferred Stock were issued. The warrants are exercisable for a period of five years commencing on July 25, 2007 at an exercise price of $2.50 per share. (Note 10 - Series B Preferred Stock and Warrant Purchase Agreement).

In September 2006, Synvista completed a private placement of Units, consisting of common stock and warrants, for net proceeds, after expenses and fees, of approximately $1,300,000. Each Unit consists of one share of Synvista common stock and one warrant to purchase one share of Synvista common stock, comprising a total of approximately 190,000 shares of Synvista common stock and warrants to purchase approximately 190,000 shares of Synvista common stock. The Units were sold at a price of $7.50 per Unit, and the warrants are exercisable for a period of five years, commencing six months from the date of issuance, at an exercise price of $9.38 per share. Rodman & Renshaw, LLC served as placement agent in the transaction and received a 6% placement fee which was paid in Units. In connection with this offering, certain warrants previously issued in 2000 (the “2000 Warrants”) were repriced from $50.00 to $7.50 per share pursuant to antidilution provisions connected to the warrants.

In April 2006, Synvista completed a private placement of Units, consisting of common stock and warrants, for gross proceeds of approximately $2,600,000. Each Unit consisted of one share of Synvista common stock and one warrant to purchase one share of Synvista common stock, comprising a total of 206,800 shares of Synvista common stock and warrants to purchase 206,800 shares of Synvista common stock. The Units were sold at a price of $12.50 per Unit, and the warrants will be exercisable for a period of five years commencing six months from the date of issue at a price of $15.00 per share. Rodman & Renshaw, LLC served as placement agent in the transaction and received a 6% placement fee that was paid in cash and warrants.

 

56

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SYNVISTA THERAPEUTICS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In January 2005, Synvista completed a public offering of 190,476 shares of common stock at $52.50 per share, which provided net proceeds of approximately $9,532,000. In connection with this offering, the Company issued a five-year warrant to purchase 6,247 shares of common stock at $68.50 per share.

In July 2004, Synvista completed a public offering of 160,000 shares of common stock at $50.00 per share, which provided net proceeds of $7,581,318. In connection with this offering, the Company issued a five-year warrant to purchase 5,450 shares of common stock at $65.00 per share.

The following table summarizes the outstanding warrants:

Warrants Outstanding at December 31, 2007
		Exercise Price
Warrants		Per Warrant
219,208		$	15.00
6,248			68.50
5,450			65.00
199,810			9.00
3,100,000			2.50
3,530,716

 

Stock Option Plan

In March 2005, the Company’s Board of Directors approved the adoption of a new stock plan, the “2005 Stock Plan.” Upon shareholder approval of the 2005 Stock Plan at the Company’s 2005 annual meeting, the two existing stock option plans were terminated. On July 21, 2007, the Company’s stockholders approved an amendment to the 2005 Stock Plan, which was previously approved by the Company’s Board of Directors, providing for an increase in the number of shares available under the 2005 Stock Plan from 10,000,000 shares to 63,000,000 shares, an increase of 53,000,000 shares. The options have a maximum term of ten years and vest over a period to be determined by the Company’s Board of Directors (generally over a four-year period) and are issued at an exercise price equal to the fair market value of the shares at the date of grant. The 2005 Stock Plan expires on April 19, 2015 or may be terminated at an earlier date by vote of the shareholders or the Board of Directors of the Company. Under the 2005 Stock Plan, the Company granted directors options to purchase an aggregate of 70,000 shares of common stock at an average exercise price of $4.13 for the year ended December 31, 2007.

The plan is administered by a committee of the Board of Directors, which may grant either non-qualified or incentive stock options. The committee determines the exercise price and vesting schedule at the time the option is granted. Options vest over a four-year period and expire 10 years from date of grant. Each option entitles the holder to purchase one share of common stock at the indicated exercise price. The plan also provides for certain antidilution and change in control rights, as defined.

 

57

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SYNVISTA THERAPEUTICS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the activity in the Company’s stock options:

		Shares			Weighted average exercise price			Weighted Average Remaining Contractual Term (years)			Aggregate Intrinsic Value
Outstanding at
December 31, 2005			129,730		$	76.38
Granted			38,400			7.50
Assumed			56,336			-
Exercised			-			-
Cancelled			(8,662	)		123.05
Outstanding at
December 31, 2006			215,804			62.25
Granted			674,500			2.86
Assumed			-			0
Exercised			-			0
Cancelled			(13,598	)		98.57
Outstanding at
December 31, 2007			876,706		$	16.00			8.22		$	-
Vested and expected to vest at
December 31, 2007			861,472		$	16.22			8.20		$	-
Options exercisable at
December 31, 2007			250,581		$	48.12			5.67		$	-
Weighted-average
fair value of options
granted during the
year ended December 31, 2007		$	2.46

 

The Company estimated the fair value of each option award on the date of grant using the Black-Scholes model. The Company based expected volatility on historical volatility. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The Company estimated the expected term of stock options using historical exercise and employee forfeiture experience.

The following table shows the weighted average assumptions the Company used to develop the fair value estimates for the determination of the compensation charges:

		December 31
		2007			2006
Expected volatility			106.93	%		140.67	%
Dividend yield			-			-
Expected term (in years)			8.36			6.51
Risk-free interest rate			4.31	%		4.63	%

 

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SYNVISTA THERAPEUTICS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair values of options granted during the last two years are as follows:

		2007			2006
Fair value of each option granted/assumed		$	2.46		$	7.50
Total number of options granted/assumed			674,500			94,736
Total fair value of options granted/assumed		$	1,659,270		$	710,520

 

The following table summarizes information regarding stock options outstanding and exercisable at December 31, 2007: 

 

		Options Outstanding at December 31, 2007									Options Exercisable at December 31, 2007
					Weighted			Weighted						Weighted
Range of					Average			Average						Average
Exercise		Number			Remaining			Exercise			Number			Exercise
Prices		Outstanding			Contractual Life (Years)			Price			Exercisable			Price
$ 2.67 - $ 2.67			553,000			9.76		$	2.67			80,500		$	2.67
3.00 - 4.00			110,000			9.68			3.36			0			0.00
4.40 - 8.00			119,037			6.01			6.96			55,412			7.95
10.00 - 130.00			90,009			1.96			65.02			90,009			65.02
143.75 - 197.50			11,516			1.92			180.62			11,516			180.62
207.50 - 207.50			440			3.16			207.50			440			207.50
219.00 - 219.00			4,100			0.42			219.00			4,100			219.00
222.50 - 222.50			2,800			5.42			222.50			2,800			222.50
231.25 - 231.25			1,464			0.56			231.25			1,464			231.25
350.00 - 350.00			4,340			1.78			350.00			4,340			350.00
$ 2.67 - $350.00			876,706			8.22			16.00			250,581			48.12

Expenses recorded for options granted to consultants totaled $2,732 and $5,122 in 2007 and 2006, respectively.

Restricted Stock

The Company granted awards of restricted stock to its Board of Directors. The awards vest at various periods ranging from one to three years. There were no restricted stock shares granted during the year ended December 31, 2007. There were 19,200 shares of restricted stock granted during the year ended December 31, 2006, of which 3,200 which were forfeited. The Company recognized compensation cost of $61,384 and $17,995, which was recorded as general and administrative expense for the year ended December 31, 2007 and 2006, respectively.

 

59

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SYNVISTA THERAPEUTICS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the status of the Company’s non-vested shares as of December 31, 2006 and changes during the year ended December 31, 2007 is presented below:

Nonvested Shares		Shares			Weighted average grant date fair value
Nonvested at
January 1, 2006			-		$	-
Granted			19,200			7.50
Vested			-			-
Forfeited			3,200			7.50
Nonvested at
December 31, 2006			16,000			7.50
Granted			-			-
Vested			8,520			7.50
Forfeited			3,200			-
Nonvested at
December 31, 2007			4,280		$	7.50

As of December 31, 2007, there was $16,600 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted. That cost is expected to be recognized over a weighted-average period of 1.55 years. The total fair value of shares vested during the year ended December 31, 2007 was $63,900. Of the 8,520 shares of restricted stock that vested, the vesting of 4,280 shares had been accelerated by the Board of Directors.

NOTE 12 — Savings and Retirement Plan

The Company maintains a savings and retirement plan under Section 401(k) of the Internal Revenue Code that allows eligible employees to annually contribute a portion of their annual salary to the plan. In 1998, the Company began making discretionary contributions of 25% of an employee’s contribution up to a maximum of 5% of the employee’s base salary, as defined. The Company made contributions of $8,132 and $15,835 for the years ended December 31, 2007 and 2006, respectively.

 

60

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SYNVISTA THERAPEUTICS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 13 -- Income Taxes

The components of the deferred tax assets and the valuation allowance are as follows:

		December 31,
		2007			2006
Net operating loss carryforwards		$	9,700,000		$	60,500,000
Research and development credits			4,333,000			8,400,000
Capitalized research and development expenses			12,700,000			12,800,000
Other temporary differences			200,000			500,000
Gross deferred tax assets			26,933,000			82,200,000
Valuation allowance			(26,933,000	)		(82,200,000	)
Net deferred tax assets		$	---		$	---

The effective tax rate varied from the statutory rate, as follows:

		December 31,
		2007			2006
Statutory federal income tax rate			(34.0	)%		(34.0	)%
State income tax rate (net of federal)			(6.0	)%		(6.0	)%
In-process research and development			---	%		26.0	%
Limitations on federal net operating loss carryforwards			354.0	%		2.0	%
Limitations on federal research and development credits			29.0	%		---
True up adjustments			---			(2.0	)%
Effect of a change in valuation allowance			(343.0	)%		12.0	%
Effective tax rate			---	%		---	%

The Company completed a §382 and §383 analyses for the year ended December 31, 2007. Based on these analyses, there were limitations on future federal net operating loss carryforwards and research and development credit carryforwards of approximately $167,515,000 and $4,606,000, respectively. The Company believes it has available federal net operating loss carryforwards of approximately $14,260,000, which expire in the years 2008 through 2027 and state net operating loss carryforwards of approximately $81,007,000, which expire in the years 2008 through 2014. In addition, the Company has federal research and development tax credit carryforwards of approximately $2,480,000 and state research and development tax credit carryforwards of approximately $1,853,000. The amount of federal net operating loss and research and development tax credit carryforwards that can be utilized in any one period was limited by federal income tax regulations since a cumulative change in ownership of more than 50% occurred within a three-year period.

 

The Company adopted the provisions of Financial Standards Accounting Board Interpretation No. 48 “Accounting for Uncertainty in Income Tax” ("FIN 48") an interpretation of FASB Statement No. 109 ("SFAS 109") on January 1, 2007. As a result of the implementation of FIN 48, the Company recorded no adjustment for the unrecognized income tax benefits. At the adoption date of FIN 48, January 1, 2007 and also at December 31, 2007, the Company had no unrecognized tax benefits.

 

The utilization of the Company’s net operating losses was subject to substantial limitations since a change of ownership has occurred, as defined under Section 382 of the Internal Revenue Code.  Such limitation has resulted in the expiration of the net operating loss carryforwards before their utilization. Based on a §382 analysis completed by the Company, it believes that under this definition, a change in ownership has occurred. The net valuation allowance decreased by $55,267,000 for the year ended December 31, 2007 compared to 2006. The majority of the change in the valuation allowance relates to a reduction in the federal net operating loss carryfowards and federal research and development due to limitations under Sections 382 and 383, respectively.

61

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SYNVISTA THERAPEUTICS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 - Subsequent Event

On January 17, 2008, Synvista entered into a License Agreement (the “Agreement”) with Novel Therapeutic Technology Inc. (“NTT”). The Agreement states that NTT will develop a formulation of the Company’s product candidate ALT-2074. The Agreement also states that NTT will grant the Company an exclusive worldwide license to the product formulation developed as well as to the intellectual property rights resulting under the Agreement. An insignificant upfront payment was made in January 2008. The Company will also make specified payments to NTT upon the occurrence of certain milestone events in the clinical development of the product formulated under the Agreement. In addition, the Company would also have to pay NTT royalties on any sales of the developed product and a separate fee if any of the rights granted under the Agreement are sublicensed by the Company.

The license granted under the Agreement will be terminated upon the earlier to occur of (i) the date the Company notifies NTT that it does not intend to proceed further with development of formulation of ALT-2074 subject to the Agreement, (ii) the date the Company notifies NTT that it does not intend to continue to commercialize the products developed pursuant to the Agreement, and (iii) the later of (a) the expiration of the last valid patent covering the formulation of the Company’s intellectual property pursuant to the Agreement, which, absent the Agreement, would infringe an existing patent, or (b) 15 years from the date of the first commercial sale of a product pursuant to the Agreement.

 

62

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EXHIBIT INDEX

Exhibit
No.		Description of Exhibit
2.1		Agreement and Plan of Merger by and among Alteon Inc., Alteon Merger Sub, Inc., HaptoGuard, Inc. and Genentech, Inc., dated as of April 19, 2006. (Incorporated by reference to Annex A to the Company’s Schedule 14A filed on June 22, 2006, SEC File Number 000-16043.)
3.1		Restated Certificate of Incorporation, as amended. (Incorporated by reference to Exhibit 3.1 to the Company's Report on Form 10-Q filed on November 10, 1999, SEC File Number 000-19529.)
3.2		Certificate of the Voting Powers, Designations, Preference and Relative Participating, Optional and Other Special Rights and Qualifications, Limitations or Restrictions of Series F Preferred Stock of Alteon Inc. (Incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, SEC File Number 001-16043.)
3.3		Certificate of Retirement of Alteon Inc., dated September 10, 2000. (Incorporated by reference to Exhibit 3.1 to the Company's Report on Form 10-Q filed on November 10, 1999, SEC File Number 000-19529.)
3.4		Certificate of Designations of Series G Preferred Stock of Alteon Inc. (Incorporated by reference to Exhibit 3.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, SEC File Number 000-19529.)
3.5		Certificate of Amendment of Certificate of Designations of Series G Preferred Stock of Alteon Inc. (Incorporated by reference to Exhibit 3.4 to the Company's Report on Form 10-Q filed on August 14, 1998, SEC File Number 000-19529.)
3.6		Certificate of Designations of Series H Preferred Stock of Alteon Inc. (Incorporated by reference to Exhibit 3.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, SEC File Number 000-19529.)
3.7		Amended Certificate of Designations of Series H Preferred Stock of Alteon Inc. (Incorporated by reference to Exhibit 3.6 to the Company's Report on Form 10-Q filed on August 14, 1998, SEC File Number 000-19529.)
3.8		Certificate of Retirement of Alteon Inc., dated November 20, 2000. (Incorporated by reference to Exhibit 3.8 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, SEC File Number 001-16043.)
3.9		Certificate of Amendment to Restated Certificate of Incorporation of Alteon Inc., dated June 7, 2001. (Incorporated by reference to Exhibit 3.8 to the Company’s Report on Form 10-Q filed on August 14, 2001, SEC File Number 001-16043.)
3.10		Amended and Restated By-Laws of Synvista Theraputics, Inc. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on 8-K filed on December 7, 2007, SEC File Number 001- 16043.)
3.11		Certificate of Amendment to Restated Certificate of Incorporation of Alteon Inc., dated September 17, 2004. (Incorporated by reference to Exhibit 3.1 to the Company’s Report on Form 10-Q filed on November 9, 2004, SEC File Number 001-16043.)
3.12		Amended Certificate of Designations of Series G Preferred Stock of Alteon Inc., dated October 6, 2004. (Incorporated by reference to Exhibit 3.2 to the Company’s Report on Form 10-Q filed on November 9, 2004, SEC File Number 001-16043.)
3.13		Amended Certificate of the Voting Powers, Designations, Preferences and Relative Participating, Optional and Other Special Rights and Qualifications, Limitations or Restrictions or Series F Preferred Stock of Alteon Inc. (Incorporated by reference to Exhibit 3.1.1 to the Company’s Report on Form 10- Q filed on August 9, 2005, SEC File Number 001-16043.)

 

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EXHIBIT INDEX

Exhibit
No.		Description of Exhibit
3.14		Certificate of Amendment to Restated Certificate of Incorporation of Alteon Inc., dated October 24, 2005. (Incorporated by reference to Exhibit 3.14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, SEC File Number 001-16043.)
3.15		Certificate of Amendment to the Corrected Certificate of Designations of Series G Preferred Stock of Alteon Inc., dated July 20, 2006. (Incorporated by reference to Exhibit 3.14 to the Company’s Registration Statement on Form S-8 filed on September 5, 2006, SEC File Number 333-137115.)
3.16		Certificate of Amendment to the Corrected Certificate of Designations of Series H Preferred Stock of Alteon Inc., dated July 20, 2006. (Incorporated by reference to Exhibit 3.15 to the Company’s Registration Statement on Form S-8 filed on September 5, 2006, SEC File Number 333-137115.)
3.17		Form of Amended and Restated Certificate of Incorporation of the Company. (Incorporated by Reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on April 11, 2007, SEC File No. 001-16043.)
3.18		Amended and Restated Certificate of Incorporation of the Company dated July 23, 2007. (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, SEC File Number 001-16043.)
4.1		Stockholders' Rights Agreement between Alteon Inc. and Registrar and Transfer Company, as Rights Agent, dated as of July 27, 1995. (Incorporated by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, SEC File Number 001-16043.)
4.2		Amendment to Stockholders' Rights Agreement between Alteon Inc. and Registrar and Transfer Company, as Rights Agent, dated as of April 24, 1997. (Incorporated by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K filed on May 9, 1997, SEC File Number 000-19529.)
4.3		Registration Rights Agreement between Alteon Inc. and the investors named on the signature page thereof, dated as of April 24, 1997. (Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on May 9, 1997, SEC File Number 000-19529.)
4.4		Form of Common Stock Purchase Warrant. (Incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on May 9, 1997, SEC File Number 000-19529.)
4.5		Amendment to Stockholders' Rights Agreement between Alteon Inc. and Registrar and Transfer Company, as Rights Agent, dated as of December 1, 1997. (Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on December 10, 1997, SEC File Number 000- 19529.)
4.6		Registration Rights Agreement, dated September 29, 2000. (Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on October 5, 2000, SEC File Number 001- 16043.)
4.7		Form of Series 1 Common Stock Purchase Warrant. (Incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on October 5, 2000, SEC File Number 001-16043.)
4.8		Form of Series 2 Common Stock Purchase Warrant. (Incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed on October 5, 2000, SEC File Number 001-16043.)
4.9		Notice of Appointment of The American Stock Transfer & Trust Company as successor Rights Agent, dated August 29, 2002, pursuant to Stockholders’ Rights Agreement, dated as of July 27, 1995. (Incorporated by reference to Exhibit 4.4 of the Company’s Report on Form 10-Q filed on November13, 2002, SEC File Number 001-16043.)

 

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EXHIBIT INDEX

Exhibit
No.		Description of Exhibit
4.10		Form of Common Stock Purchase Warrant, dated July 2, 2004. (Incorporated by reference to Exhibit 4.10 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, SEC File Number 000-16043.)
4.11		Form of Common Stock Purchase Warrant, dated January 5, 2005. (Incorporated by reference to Exhibit 4.11 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, SEC File Number 000-16043.)
4.12		Amended and Restated Stockholder Rights Agreement between Alteon Inc. and American Stock Transfer & Trust Company as Rights Agent, dated as of July 27, 2005. (Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 8-A/A filed on July 27, 2005, SEC File Number 001-16043.)
4.13		Registration Rights Agreement by and between Alteon Inc. and the Purchasers named therein, dated as of April 19, 2006. (Incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-3 filed on May 31, 2006, SEC File No. 333-134584.)
4.14		Form of Common Stock Purchase Warrant issued to Investors pursuant to the Securities Purchase Agreement by and between Alteon Inc. and the Purchasers named therein, dated as of April 19, 2006. (Incorporated by reference to Exhibit 10.27 to the Company’s Registration Statement on Form S-3 filed on May 31, 2006, SEC File No. 333-134584.)
4.15		Registration Rights Agreement by and between Alteon Inc. and the Purchasers named therein, dated as of September 13, 2006. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 19, 2006, SEC File No. 001-16043.)
4.16		Form of Common Stock Purchase Warrant issued to Investors pursuant to the Securities Purchase Agreement by and between the Company and the Purchasers named therein, dated as of September 13, 2006. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on September 19, 2006, SEC File No. 001-16043.)
4.17		Registration Rights Agreement among Alteon Inc. and the Purchasers named therein, dated as of January 11, 2007. (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on January 16, 2007, SEC File No. 001-16043.)
4.18		Form of Senior Convertible Secured Promissory Note issued to Lenders pursuant to the Note and Warrant Purchase Agreement, dated as of January 11, 2007. (Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on January 16, 2007, SEC File No. 001- 16043.)
4.19		Form of Common Stock Purchase Warrant issued to Lenders pursuant to the Note and Warrant Purchase Agreement, dated as of January 11, 2007. (Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on January 16, 2007, SEC File No. 001-16043.)
4.20		Amendment No. 1 Stockholder Rights Agreement by and between Synvista Therapeutics, Inc. and American Stock Transfer & Trust Company, dated as of January 11, 2007. (Incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on January 16, 2007, SEC File No. 001-16043.)
4.21		Form of Registration Rights Agreement among Synvista Therapeutics, Inc. and each Purchaser identified on the signature pages thereto. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on April 11, 2007, SEC File No. 001-16043.)

 

 

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EXHIBIT INDEX

Exhibit
No.		Description of Exhibit
4.22		Form of Preferred Stock Purchase Warrant to be issued to the Purchasers pursuant to the Series B Preferred Stock and Warrant Purchase Agreement, dated as of April 5, 2007. (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on April 11, 2007, SEC File No. 001-16043.)
4.23		Amendment No. 1 to Registration Rights Agreement dated May 14, 2007 by and among the Company and the Purchasers identified on the signature pages to that certain Registration Rights Agreement dated as of January 11, 2007. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 18, 2007, SEC File Number 001-16043.)
4.24		Amendment No. 1 to Registration Rights Agreement dated September 7, 2007 by and among the Company and the Purchasers identified on the signature pages to that certain Registration Rights Agreement dated as of July 25, 2007. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 13, 2007, SEC File Number 001-16043.)
10.1†		Amended and Restated 1987 Stock Option Plan. (Incorporated by reference to Exhibit 10.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, SEC File Number 000-19529.)
10.2†		Amended 1995 Stock Option Plan. (Incorporated by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, SEC File Number 001-16043.)
10.3		Form of Employee's or Consultant's Invention Assignment, Confidential Information and Non- Competition Agreement executed by all key employees and consultants as employed or retained from time to time. (Incorporated by Reference to Exhibit 10.1 to the Company's Registration Statement on Form S-1, SEC File Number 33-42574, which became effective on November 1, 1991.)
10.4†		Alteon Inc. Change in Control Severance Benefits Plan. (Incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, SEC File Number 001-16043.)
10.5		Preferred Stock Investment Agreement between Alteon Inc. and the investors named on the signature page thereof, dated as of April 24, 1997. (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 9, 1997, SEC File Number 000-19529.)
10.6		Common Stock and Warrants Purchase Agreement among Alteon Inc. and EGM Medical Technology Fund, L.P., EGM Technology Offshore Fund, Narragansett I, L.P., Narragansett Offshore, Ltd., S.A.C. Capital Associates, LLC, SDS Merchant Fund, LP and Herriot Tabuteau, dated as of September 29, 2000. (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on October 5, 2000, SEC File Number 001-16043.)
10.7		Stock Purchase Agreement between Alteon Inc. and the Purchasers named therein, dated January 4, 2002. (Incorporated by reference to the Company’s Current Report on Form 8-K filed on January 7, 2002, SEC File Number 001-16043.)
10.8		Stock Purchase Agreement between Alteon Inc. and the Purchasers named therein, dated December 20, 2002. (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on December 24, 2002, SEC File Number 001-16043.)
10.9		Stock Purchase Agreement, dated October 15, 2003. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 20, 2003, SEC File Number 001-16043.)
10.10		Amendment to Stock Purchase Agreement, dated October 24, 2003. (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on November 13, 2003, SEC File Number 001-16043.)

 

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Exhibit No.		Description of Exhibit
10.11*†		Alteon Inc. Description of Director Compensation Arrangements.
10.12*†		Alteon Inc. Description of Executive Officer Compensation Arrangements.
10.13†		Alteon Inc. 2005 Stock Plan. (Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on July 6, 2005, SEC File Number 001-16043.)
10.14†		Form of Employee’s Stock Option Grant Agreement. (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 9, 2005, SEC File Number 001-16043.)
10.15†		Form of Director’s Formula Award Non-Qualified Stock Option Grant Agreement. (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on August 9, 2005, SEC File Number 001-16043.)
10.16		Form of Consultant’s Non-Qualified Stock Option Grant Agreement. (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on August 9, 2005, SEC File Number 001-16043.)
10.17		Notice of Option Acceleration. (Incorporated by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, SEC File Number 001-16043.)
10.18†		Alteon Inc. Severance Plan and Summary Plan Description. (Incorporated by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, SEC File Number 001-16043.)
10.19		Voting Agreement by and between the stockholders named therein, HaptoGuard, Inc. and Alteon Inc., dated as of April 19, 2006. (Incorporated by reference to Annex B to the Company’s Schedule 14A filed on June 22, 2006, SEC File Number 000-16043.)
10.20†		Employment Agreement between HaptoGuard, Inc. and Noah Berkowitz, dated March 1, 2005. (Incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed on July 25, 2006, SEC File Number 000-16043.)
10.21†		Alteon Inc. Stock Plan as amended on July 19, 2006. (Incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-8 filed on September 5, 2006, SEC File Number 333-137115.)

 

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EXHIBIT INDEX

Exhibit No.		Description of Exhibit
10.22		Securities Purchase Agreement among Alteon Inc. and each Purchaser identified on the signature pages thereto, dated as of September 13, 2006. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 19, 2006, SEC File No. 001-16043.)
10.23		Convertible Note and Warrant Purchase Agreement among Alteon Inc. and each Lender identified on the signature pages thereto, dated as of January 11, 2007. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 16, 2007, SEC File No. 001-16043.)
10.24		Security & Guaranty Agreement by and between Alteon Inc., HaptoGuard, Inc., and Baker Bros Advisors, LLC, dated as of January 11, 2007. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on January 16, 2007, SEC File No. 001-16043.)
10.25		Intellectual Property Security Agreement by and between Alteon Inc., HaptoGuard, Inc., and Baker Bros Advisors, LLC., dated as of January 11, 2007. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on January 16, 2007, SEC File No. 001-16043.)
10.26		Lease Agreement by and between Alteon Inc. and DS Montvale, LLC, dated as of January 19, 2007. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 22, 2007, SEC File No. 001-16043.)
10.27		Letter Amendment to Employment Agreement between HaptoGuard, Inc. and Noah Berkowitz, dated as of February 1, 2007. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 2, 2007, SEC File Number 000-16043.)
10.28		Waiver and Acknowledgement, dated as of March 30, 2007, by the Lenders identified in the Convertible Note and Warrant Purchase Agreement, dated as of January 11, 2007. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 5, 2007, SEC File Number 000-16043.)
10.29		Series B Preferred Stock and Warrant Purchase Agreement among Alteon Inc. and each Purchaser identified on the signature pages thereto, dated as of April 5, 2007. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 11, 2007, SEC File No. 001-16043.)
10.30†		Employment Agreement between HaptoGuard, Inc. and Malcolm MacNab, M.D., Ph.D. dated February 7, 2005. (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, SEC File Number 001-16043.)
10.31		Omnibus Amendment dated June 1, 2007 by and among the Company and the purchasers identified on the signature pages to that certain Note and Warrant Purchase Agreement dated as of January 11, 2007. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 7, 2007, SEC File Number 001-16043.)
10.32		Amendment No. 1 to Series B Preferred Stock and Warrant Purchase Agreement dated June 1, 2007 by and among the Company and the purchasers identified on the signature pages to that certain Series B Preferred Stock and Warrant Purchase Agreement dated as of April 5, 2007. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 7, 2007, SEC File Number 001-16043.)
10.33		Amended and Restated Exclusive License Agreement entered into as of April 2, 2007 by and between the Company and OXIS International. (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, SEC File Number 001-16043.)

 

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EXHIBIT INDEX

Exhibit No.		Description of Exhibit
10.34		License and Research Agreement entered into as of July 12, 2004 by and between HaptoGuard, Inc. and BIO-RAP Technologies Ltd. (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, SEC File Number 001-16043.)
10.35		Consulting Agreement by and between the Company and Malcolm MacNab, M.D., Ph.D. dated as of January 1, 2008. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 7, 2007, SEC File Number 000-16043.)
21.1*		Subsidiaries of Synvista Therapeutics, Inc.
23.1*		Consent of J.H. Cohn LLP.
31.1*		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

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* Filed herewith.

† Denotes a management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(a) to this Form 10-K.

 

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