Fermavir Pharmaceuticals 10QSB/A 2007 Q3 Quarterly report (small business) (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB/A

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended January 31, 2007

o	TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE EXCHANGE ACT

	For the transition period from to

Commission File No.333-116480

FERMAVIR PHARMACEUTICALS, INC.

(Exact name of small business issuer as specified in its charter)

Florida		16-1639902
(State or jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

420 Lexington Avenue, Suite 445, New York, NY 10170

(Address of Principal Executive Office)

(212) 413-0802

(Issuer’s telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for a shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act:

Yes o No x

The number of shares outstanding of the Registrant’s Common Stock, $.0001 par value, as of March 19, 2007 was 20,853,231.

EXPLANATORY NOTE

This Amendment to Form 10-QSB includes restated unaudited condensed consolidated financial statements for the three and nine months ended January 31, 2007 and for the period from inception (November 15, 2002) to January 31, 2007. Such financial statements have been revised to a reduction of accounts payable and a reduction of research and development expenses of $242,460 during the three months ended January 31, 2007. This Amendment speaks as of the original filing date of our Form 10-QSB and has not been updated to reflect events occurring subsequent to the original filing date except for Financial Statement Footnote 10, Subsequent Events.

INTRODUCTORY NOTE

This Report on Form 10-QSB for FermaVir Pharmaceuticals, Inc. may contain forward-looking statements. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “intend,” “anticipate,” believe,” “estimate” and “continue” or similar words. Forward-looking statements include information concerning possible or assumed future business success or financial results. You should read statements that contain these words carefully because they discuss future expectations and plans, which contain projections of future results of operations or financial condition or state other forward-looking information. We believe that it is important to communicate future expectations to investors. However, there may be events in the future that we are not able to accurately predict or control. Accordingly, we do not undertake any obligation to update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

The forward-looking statements included herein are based on current expectations that involve a number of risks and uncertainties set forth under “Risk Factors” in our Form 10-KSB filed with the SEC on August 16, 2006. Accordingly, to the extent that this Quarterly Report contains forward-looking statements regarding the financial condition, operating results, business prospects or any other aspect of the Company, please be advised that the Company’s actual financial condition, operating results and business performance may differ materially from that projected or estimated by the Company in forward-looking statements.

PART I - FINANCIAL INFORMATION

Item 1:

Financial Statements

FermaVir Pharmaceuticals, Inc. and Subsidiary

(A Development Stage Company)

Condensed Consolidated Balance Sheets

	January 31,			April 30
	2007			2006
	(Unaudited)			(Note 2)
	(RESTATED)
Assets

Current assets:
Cash	$	503,508		$	127,121
Prepaid expenses	91,555			17,439
Total current assets	595,063			144,560

Property and equipment, net	14,599			22,490
Other assets	43,890			43,890

Total assets	$	653,552		$	210,940

Liabilities and Stockholders’ Equity (Deficiency)

Current Liabilities - Accounts payable and accrued expenses	$	202,287		$	401,743

Non-current liabilities - Deferred rent	16,507			12,157

Total liabilities	218,794			413,900

Commitments

Stockholders’ equity (deficiency):
Preferred stock, $0.001 par value, 20,000,000 shares authorized, no shares outstanding	0			0
Common stock, $0.0001 par value, 100,000,000 shares authorized, 20,853,231 and 17,575,884 issued and outstanding at January 31, 2007 and April 30, 2006, respectively	2,085			1,757
Additional paid-in capital	11,307,135			5,685,785
Deferred stock-based compensation	0			(308,615		)
Deficit accumulated during development stage	(10,874,462		)	(5,581,887		)
Total stockholders’ equity (deficiency)	434,758			(202,960		)

Total liabilities and stockholders’ equity (deficiency)	$	653,552		$	210,940

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

FermaVir Pharmaceuticals, Inc. and Subsidiary

(A Development Stage Company)

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended						Nine Months Ended						For the period November 15, 2002
	January 31						January 31						(Inception) to January
	2007			2006			2007			2006			31, 2007
	(RESTATED)						(RESTATED)						(RESTATED)
Revenues	$	0		$	0		$	0		$	0		$	0

Operating expenses:

Research and development:
Non-cash charge for stock-based compensation	14,220			0			42,660			0			72,553
Other	272,506			263,410			547,190			554,682			1,400,954
Total research and development	286,726			263,410			589,850			554,682			1,473,507

Charge for acquired in-process research and development	0			0			0			2,695,054			2,713,996

General and administrative:
Non-cash charges for:
Fair value of common stock and warrants issued to a related party in satisfaction of a contractual obligation	2,055,570			0			2,055,570			0			2,055,570
Fair value of common stock and warrants issued to a related party in excess of net cash received	99,729			0			99,729			0			99,729
Warrants issued for services	0			1,081,230			0			1,085,093			1,086,546
Stock-based compensation	39,744			21,726			102,480			38,445			144,150
Other	98,962			243,428			560,977			429,614			1,277,371
Total general and administrative	2,294,005			1,346,384			2,818,756			1,553,152			4,663,366

Total operating expenses	2,580,731			1,609,794			3,408,606			4,802,888			8,850,869

Operating loss	(2,580,731		)	(1,609,794		)	(3,408,606		)	(4,802,888		)	(8,850,869		)

Other income (expense):

Interest income	0			4,298			134			6,164			8,766
Interest expense	(1,645,218		)	(143,883		)	(1,884,103		)	(148,256		)	(2,032,359		)
Total other expense	(1,645,218		)	(139,585		)	(1,883,969		)	(142,092		)	(2,023,593		)

Net loss	$	(4,225,949	)	$	(1,749,379	)	$	(5,292,575	)	$	(4,944,980	)	$	(10,874,462	)

Net loss per common share:
Basic and diluted	$	(0.22	)	$	(0.10	)	$	(0.29	)	$	(0.12	)

Weighted average shares of common stock outstanding:
Basic and diluted	19,181,700			17,466,688			18,116,455			41,404,983

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

FermaVir Pharmaceuticals, Inc. and Subsidiary

(A Development Stage Company)

Condensed Consolidated Statements of Stockholders’ Equity (Deficiency)

(Unaudited)

																		Deficit
															Deferred			Accumulated
									Additional						Stock-			During
	Preferred Stock			Common Stock					Paid-In			Subscription			Based			Development
	Shares	Amount		Shares		Amount			Capital			Receivable			Compensation			Stage			Total

Balance, November 15, 2002 (Inception)	0	$	0	0		$	0		$	0		$	0		$	0		$	0		$	0

Issuance of common stock to founders for cash at $0.00003 per share				70,560,000		7,050			(5,050		)	(2,000		)							0

Balance, April 30, 2003	0	0		70,560,000		7,050			(5,050		)	(2,000		)	0			0			0

Payment of subscription receivable												2,000									2,000

Issuance of common stock for cash at $0.0014 per share				8,820,000		882			11,618												12,500

Net loss																		(159		)	(159		)

Balance, April 30, 2004	0	0		79,380,000		7,932			6,568			0			0			(159		)	14,341

Net loss																		(24,117		)	(24,117		)

Balance, April 30, 2005	0	0		79,380,000		7,932			6,568			0			0			(24,276		)	(9,776		)

Acquisition of FermaVir Research, Inc:

Stock issued valued at $0.70 per share				1,829,000		183			1,280,117			(5,600		)							1,274,700
Issuance of stock options to consultants									504,835												504,835
Issuance of stock options to employee									303,348						(303,348		)				0

Issuance of common stock and warrants for cash at $0.75 per share net of expenses				3,863,527		386			2,864,431												2,864,817

Issuance of common stock and warrants in exchange for note payable with a fair value of $1.55 per share and $1.06 per warrant ($23,865)				150,000		15			256,350												256,365

Issuance of stock options to employee									64,348						(64,348		)				0

Stock issued in connection with the exercise of warrants at $1.50				33,334		3			49,998												50,001

Redemption and retirement of stock at $0.011 per share				(67,679,977	)	(6,762		)	(743,238		)										(750,000		)

Issuance of warrants to consultants									1,086,546												1,086,546

Amortization of deferred stock-based compensation for employee and directors									12,482						59,081						71,563

Collection of subscription receivable												5,600									5,600

Net loss																		(5,557,611		)	(5,557,611		)

Balance, April 30, 2006	0	0		17,575,884		1,757			5,685,785			0			(308,615		)	(5,581,887		)	(202,960		)

Reclassification of deferred stock-based compensation upon adoption of SFAS 123R									(308,615		)				308,615						0

Stock based compensation expense:
Employees									119,138												119,138
Directors									26,002												26,002

Common stock issued in connection with issuance of notes payable				40,625		5			27,931												27,936

Warrants issued in connection with issuance of notes payable									460,093												460,093

Adjustment of warrant terms									64,315												64,315

Issuance of common stock and warrants with a fair value of $1,765,265 ($1.95 per share common share and 325,695 warrants at $1.52 per warrant) in exchange for notes payable with face value and accrued interest totaling $488,541				651,389		65			1,765,199												1,765,264

Issuance of common stock and warrants with a fair value of $2,146,320 ($1.95 per share common share and 396,000 warrants at $1.52 per warrant) in exchange for a contractual obligation to a related party of $594,000				792,000		79			2,146,241												2,146,320

Issuance of common stock and warrants with a fair value of $8,908,977 ($1.69 per share common share and 4,186,666 warrants at $1.28 per warrant) in exchange for net cash proceeds of $1,221,500				1,793,333		179			1,321,046												1,321,225

Net loss (RESTATED)																		(5,292,575		)	(5,292,575		)
Balance, January 31, 2007 (RESTATED)	0	$	0	20,853,231		$	2,085		$	11,307,135		$	0		$	0		$	(10,874,462	)	$	434,758

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

FermaVir Pharmaceuticals, Inc. and Subsidiary

(A Development Stage Company)

Condensed Consolidated Statement of Cash Flows

(Unaudited)

	Nine Months Ended January 31						For the period November 15, 2002 (Inception) to January
	2007			2006			31, 2007
	(RESTATED)						(RESTATED)
Operating activities:

Net loss	$	(5,292,575	)	$	(4,944,980	)	$	(10,874,462	)

Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash charges for
Value of shares and warrants issued to a related party for services	503,250			0			503,250
Value of shares and warrants issued in excess of the contractual obligation to a related party	1,552,320			0			1,552,320
Value of shares and warrants issued in excess of the carrying amount of principal and interest of notes payable in connection with repayment of those notes	1,553,928			0			1,553,928
Value of shares and warrants issued in excess of consideration received from a related party	99,729			0			99,729
Value of shares and warrants issued in excess of the principal amount repaid in connection with a note due to related party	0			143,865			143,865
Write-off of acquired in-process research and development	0			2,695,054			2,713,996
Issuance of warrants for services	0			1,085,093			1,086,546
Charge for revision of warrant terms	64,315			0			64,315
Stock-based compensation	145,140			38,445			216,703
Depreciation	7,891			2,770			12,453
Accretion of debt discount to interest expense	82,988			0			82,988
Other non-cash interest expense	57,868			0			57,868
Write-off of unamortized debt discount to interest expense in connection with amendment of notes payable	125,009			0			125,009
Changes in operating assets and liabilities:
(Increase) decrease in prepaid expenses	(74,116		)	25,300			(39,285		)
Increase in other assets	0			(43,890		)	(43,890		)
Increase (decrease) in accounts payable and accrued expenses	(108,706		)	(176,937		)	127,395
Increase in non-current liabilities	4,350			10,341			16,507

Net cash used in operating activities	(1,278,609		)	(1,164,939		)	(2,600,765		)

Investing activities:

Purchase of property and equipment	0			(27,052		)	(27,052		)
Cash acquired in acquisition	0			27,156			27,156
Cash paid in connection with acquisition transaction costs	0			0			(145,025		)

Net cash provided by (used in) investing activities	0			104			(144,921		)

Financing activities:

Proceeds from issuance of notes payable net of expenses	433,500			0			433,500
Proceeds from sale of common stock net of expenses	1,221,496			2,864,817			4,150,814
Redemption of common stock	0			(400,000		)	(400,000		)
Repayment of notes payable to related party	0			(940,720		)	(940,720		)
Collection of subscription receivable	0			0			5,600

Net cash provided by financing activities	1,654,996			1,524,097			3,249,194

Net change in cash	376,387			359,262			503,508

Cash - Beginning of period	127,121			224			0

Cash - End of period	$	503,508		$	359,486		$	503,508

Supplemental disclosure of non-cash investing and financing activities:

Issuance of notes payable:
Value attributed to common stock	$	27,936		$	0		$	27,936
Value attributed to warrants	460,093			0			460,093
Issuance of equity instruments in connection with payment of notes payable:
Value attributed to common stock	1,270,208			0			1,270,208
Value attributed to warrants	495,056			0			495,056
Issuance of equity instruments in connection with payment of obligation to a related party:
Value attributed to common stock	1,544,400			0			1,544,400
Value attributed to warrants	601,920			0			601,920
Issuance of common stock in business combination	0			1,280,300			1,280,300
Assumption of consultants’ options in connection with business combination	0			504,835			504,835
Assumption of employee options in connection with business combination	0			303,348			303,348
Net liabilities assumed in business combination	0			785,992			785,992
Note payable issued in connection with redemption of shares	0			350,000			350,000
Shares and warrants issued in connection with repayment of note payable	0			112,500			112,500

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

FermaVir Pharmaceuticals, Inc. and Subsidiary

(A Development Stage Company)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1) Business

FermaVir Pharmaceuticals, Inc. (the “Company”) was organized under the laws of the State of Florida on November 15, 2002 as Venus Beauty Supply, Inc. The Company had no operations through August 16, 2005. On that date, it acquired 100% of the outstanding common shares of FermaVir Research, Inc. (“FermaVir”), raised funds through the sale of common stock, and changed its name to FermaVir Pharmaceuticals, Inc.

Through its wholly owned subsidiary, the Company has licensed patents on a series of compounds for the treatment of viral diseases including compounds for the treatment of varicella zoster virus (“VZV”), the causative agent for shingles and chickenpox, and human cytomegalovirus (“CMV”), a member of the herpes virus group which includes the viruses that cause chicken pox, mononucleosis, herpes labialis (cold sores) and genitalis (genital herpes).

Additionally, through its wholly owned subsidiary, the Company has performed preclinical studies on its compounds and has selected a clinical candidate for development for the treatment of shingles. The Company’s clinical candidate will undergo extensive preclinical testing. The Company is conducting pharmacology and safety studies of its clinical candidate in order to file an Investigational New Drug Application (“IND”) with the Food and Drug Administration.

Upon acceptance of the IND, the Company intends to commence Phase I safety studies of its clinical candidate for the treatment of shingles in humans. In addition, the Company intends to identify from its proprietary anti-viral compounds, a clinical candidate for the treatment of CMV infections in transplant patients. The Company is also currently seeking other opportunities and technologies for in-licensing from academic, research institutions, and commercial sources which would complement and enhance its business.

The Company’s primary activities have been organizational in nature, including recruiting personnel, establishing office facilities, licensing patents, conducting research and development, performing business and financial planning, and raising capital. Since inception, the Company has not generated any revenues and, accordingly, is considered to be in the development stage.

2) Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of FermaVir Research, Inc., a 100% owned subsidiary, and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim

financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly, the consolidated financial statements do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the fiscal year ending April 30, 2007 or for any other interim period. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended April 30, 2006, which are included in the Company’s Annual Report on Form 10-KSB for such year. The condensed consolidated balance sheet as of April 30, 2006 has been derived from the audited consolidated financial statements included in the Form 10-KSB for that year.

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company has incurred losses totaling $10,874,462 from November 15, 2002 (Inception) to January 31, 2007 and has limited working capital. These factors, among others, raise substantial doubt that the Company will be able to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company has sustained operating losses since its inception and expects such losses to continue over the next several years. Management plans to continue financing the operations with a combination of equity issuances and debt arrangements. If adequate funds are not available, the Company may be required to delay, reduce the scope of, or eliminate its research or development programs, or cease operations.

Our continued operations will depend on whether we are able to raise additional funds through various potential sources, such as equity and debt financing, collaborative and licensing agreements, strategic alliances, and our ability to realize the full potential of our technology in development. Such additional funds may not become available on acceptable terms, if at all, and there can be no assurance that any additional funding that we do obtain will be sufficient to meet our needs in the long term. From November 15, 2002 (Inception) to January 31, 2007, all of our financing has been through private placements of common stock and warrants and the issuances of notes payable. We intend to continue to fund operations from cash on-hand and through the similar sources of capital previously described for the foreseeable future. We can give no assurances that any additional capital that we are able to obtain will be sufficient to meet our needs. We believe that we will continue to incur net losses and negative cash flows from operating activities for the foreseeable future. Based on the resources available to us at January

31, 2007, we will need additional equity or debt financing to sustain our operations through the balance of 2007 and we will need additional financing thereafter until we can achieve profitability, if ever. These matters raise substantial doubt about our ability to continue as a going concern.

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 the disclosure of contingent liabilities at the date of the financial statements as well as the reported expenses during the reporting periods. On an ongoing basis, management evaluates its estimates and judgments. Management bases estimates on its historical experience and on various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is provided for furniture and equipment on a straight-line basis over their estimated useful lives of five and three years, respectively.

Research and Development

Research and development expenses consist of costs incurred to further the Company’s research and development activities and include salaries and related employee benefits, costs associated with clinical trials, non-clinical activities such as testing, regulatory activities, and fees paid to external service providers and contract research organizations who conduct certain research and development activities on behalf of the Company. Research and development costs are expensed as incurred.

Accounting for Acquisitions

Acquisitions are accounted for utilizing the purchase method in accordance with Statement of Financial Accounting Standards No. 141 “Business Combinations”. Under the purchase method, assets acquired and liabilities assumed by the Company are recorded at their estimated fair values as of the date of acquisition and the results of operations of the acquired company are consolidated with those of the Company from the date of acquisition.

Computation of Net Loss Per Common Share

Basic net loss per common share is calculated by dividing net loss applicable to common shares by the weighted-average number of common shares outstanding for the period. Diluted net loss per common share is the same as basic net loss per common share because the potentially dilutive security issuances from the exercise of stock options and stock warrants would have an anti-dilutive effect on the Company’s net loss per common share during each period presented. The

amounts of potentially dilutive stock options excluded from the calculation were 2,451,000 and 2,188,000 shares at January 31, 2007 and 2006, respectively. The amounts of potentially dilutive stock warrants excluded from the calculation were 6,260,142 and 1,904,695 shares at January 31, 2007 and 2006, respectively.

Stock-Based Compensation

Effective May 1, 2006, the Company adopted Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 123 (Revised 2004), Share-Based Payments (“SFAS 123R”). SFAS 123R requires a public entity to measure the cost of employee services received in exchange for the award of equity instruments based on the fair value of the award at the date of grant. The expense is to be recognized over the period during which an employee is required to provide services in exchange for the award. See Note 7, “Adoption of Statement of Financial Accounting Standard No. 123 (Revised 2004), Share-Based Payments”, for additional disclosures regarding the adoption of SFAS 123R and the Company’s accounting for stock-based compensation expense.

3) Acquisition of FermaVir Research, Inc.

On August 16, 2005, the Company issued 1,829,000 common shares in exchange for all outstanding common shares of FermaVir Research, Inc (“FermaVir”). Additionally, the Company exchanged 1,850,000 options to purchase common stock of the Company with the holders of all outstanding options to purchase common stock of FermaVir as of that date.

After the completion of this transaction and the simultaneous financing, the shareholders of the Company owned approximately 70% of the combined company. The acquisition of FermaVir has been accounted for by the Company under the purchase method of accounting in accordance with Statement of Financial Accounting Standards No. 141 “Business Combinations”. Under the purchase method, assets acquired and liabilities assumed by the Company are recorded at their estimated fair values as of the date of acquisition and the results of operations of the acquired company are consolidated with those of the Company from the date of acquisition.

The following unaudited pro forma financial information presents the consolidated results of operations of the Company and FermaVir, as if the acquisition had occurred on May 1, 2005 instead of August 16, 2005 and includes the charge for the write-off of acquired in process research and development of $2,695,056. The pro forma information does not necessarily reflect the results of operations that would have occurred had the entities been a single company during those periods.

	Three Months			Nine Months
	Ended			Ended
	January 31, 2006			January 31, 2006

Pro forma Net loss	$	(1,754,629	)	$	(5,307,680	)

Weighted average number of common shares outstanding	17,542,550			17,768,234

Pro forma Loss per common share - Basic and fully diluted	$	(0.10	)	$	(0.30	)

4) Licensing Agreement and Commitments

On February 2, 2005, FermaVir entered into a Patent and Technology License Agreement (the “License Agreement”) with University College Cardiff Consultants Limited (“Cardiff”), an affiliate of Cardiff University located in the United Kingdom, for a series of pharmaceutical compounds for the treatment of viral diseases.

Under the terms of this License Agreement, the Company, through its wholly owned subsidiary, has the exclusive, worldwide rights to research, develop, and commercially exploit such technology during the period of existing patent protection which extends from fifteen to twenty years in targeted markets in North America, Western European nations, Japan, Australia, and New Zealand and any new related patents. Remaining obligations under this License Agreement consist of milestone payments aggregating $550,000 during the clinical trial phase of development for each product, and royalty payments based upon net sales of such products as defined in the Agreement. Additionally, the Company is obligated to make good faith expenditures of at least $2,000,000 for the clinical development of at least one pharmaceutical compound during the initial three years of the License Agreement. As of January 31, 2007, no milestone payments were due to Cardiff.

5) Stockholders’ Equity

Stock Split

On August 22, 2005, the Company effected a 35.28 for one stock split resulting in authorized capital stock of 120,000,000 shares consisting of 100,000,000 shares of common stock with

$0.0001 par value and 20,000,000 shares of preferred stock with $0.001 par value. All share and per share data have been restated for this stock split.

Financing Activities

On June 16 and July 28, 2006, the Company issued promissory notes in the aggregate principal amount of $325,000 together with warrants and received net proceeds of $298,500. The notes bear interest at 12% and mature on January 1, 2007. The warrants entitle the holder to purchase 325,000 shares of common stock at $1.00 per share and expire on June 30, 2012.

Proceeds from the issuance of these instruments were allocated to notes payable and warrants based upon the relative amounts of the face value of the notes and the estimated fair value of the warrants. This resulted in allocation of $130,835 to the notes payable (resulting in a debt discount of $194,164) and $167,665 to the warrants. The amounts allocated to warrants were accounted for as an increase to additional paid in capital. That discount is being amortized to interest expense utilizing the interest method through the scheduled maturity date of the notes. The Company recorded non-cash expense for the amortization of that discount of zero, $69,154, and $69,154 during the three and nine months ended January 31, 2007 and the period from November 15, 2002 (Inception) to January 31, 2007, respectively.

On September 22, 2006, the Company entered into an agreement with an investor under which the investor agreed to purchase $75,000 principal amount of 8% notes due January 1, 2008 (the “New Note”) and 112,500 warrants to purchase shares of the Company’s common stock for $1.00 per share until June 30, 2014 (the “2014 New Warrants”) for net proceeds of $67,500.

Additionally on September 22, 2006, the Company simultaneously entered into a Letter Agreement and Amendment Agreement (the “Amendment”) with certain investors (the “Prior Investors”) who participated in a private placement of the Company’s $325,000 principal amount 12% notes due January 1, 2007 (the “Prior Notes”) and warrants (the “Prior Warrants”) in June and July 2006 (the “Prior Placement”). Pursuant to the Letter Agreement, the Investors agreed to amend the Prior Notes by (i) extending the maturity date of the Prior Notes to January 1, 2008 (the “Maturity Date”), (ii) lowering the interest rate accruing on the principal amount of the Prior Notes from 12% per annum to 8% commencing as of September 1, 2006, (iii) increasing the financing trigger requiring mandatory redemption of the Prior Notes from two to three times the outstanding principal of the Prior Notes, and (iv) lowering the optional redemption price of 106% of the principal amount of the Prior Notes, plus accrued interest to 103% of the principal for the period from July 1, 2007 to the Maturity Date. In addition, pursuant to the Amendment, the Investors agreed to amend the Prior Warrants by extending the expiration date of the Prior Warrants from June 30, 2012 to June 20, 2014. The Amendment essentially changed the terms of the Prior Notes and Prior Warrants to be equivalent to the New Note and New Warrants,

including extending the maturity date of the Prior Notes from January 1, 2007 to January 1, 2008. In exchange for the Investors entering into the Amendment, the Company issued 40,625 shares of common stock and 162,500 New Warrants.

The amendment referred to above constitutes a material modification. Consequently the transaction was accounted for in accordance with the guidance in the consensus of Emerging Issues Task Force Issue No. 96-19, “Debtors Accounting for Modification or Exchange of Debt Instruments” as an extinguishment of the existing debt with the issuance of new debt. A loss from the extinguishment of debt of $125,009 resulted from the write-off of the unamortized debt discount relating to the original debt and is included in interest expense.

The fair value of common stock and warrants issued in connection with the modification was allocated to the instruments based on their relative fair values. This resulted in allocation of $152,522 to the notes payable (resulting in the recording of a debt discount of $247,478), $17,623 to the common stock, and $397,416 to the warrants. The amounts allocated to common stock and warrants were accounted for as an increase to additional paid in capital. The Company recorded non-cash expense for the amortization of the debt discount of $3,711, $12,839, and $12,839 for the three and nine months ended January 31, 2007 and for the period from November 15, 2002 (Inception) to January 31, 2007.

Additionally on September 22, 2006, the Company issued a warrant for the purchase of 40,000 common shares at an exercise price of $1.00 per share with a fair value of $33,897 to an advisor who provided assistance with the transactions. The fair value of the warrant was charged to interest expense.

On November 9, 2006, the Company issued a promissory note in the principal amount of $75,000 together with warrants and received net proceeds of $67,500. The notes bear interest at 8% and mature on January 1, 2008. The warrants entitle the holder to purchase 112,500 shares of common stock at price of $1.00 per share and expire on December 31, 2016. In connection with this transaction, the Company issued a warrant for the purchase of 31,250 common shares at an exercise price of $1.00 per share to an advisor who provided assistance with this transaction.

Proceeds from the issuance of these instruments were allocated to notes payable and warrants based upon the relative amounts of the face value of the notes and the estimated fair value of the warrants. This resulted in allocation of $32,688 and $34,812 to the notes payable (resulting in the recording of a debt discount of $42,312) and warrants, respectively. The amounts allocated to warrants were accounted for as an increase to additional paid in capital. The Company recorded non-cash expense for the amortization of that discount of $1,005 for each of the three and nine month periods ended January 31, 2007 and for the period from November 15, 2002 (Inception) to January 31, 2007.

Additionally on November 9, 2006, the Company entered into an Amendment Agreement (“Agreement”) with the Investors in the notes payable with principal amounts aggregating $400,000 and warrants (the “Prior Warrants”) issued in June, July and September 2006 and described above. Pursuant to the Agreement, the Investors agreed to amend (the “Amendment”) the Prior Warrants by (i) extending the term of the warrants to December 31, 2016, (ii) adding in a full ratchet anti-dilution clause for issuances or sales of common stock or common stock equivalents below the exercise price of the Prior Warrants and (iii) adding in a covenant that the Company shall file a registration statement by January 31, 2007. The fair value of the amended warrants on November 9, 2006 in excess of all amounts previously allocated to such warrants was $64,315. This amount was accounted for as an increase to additional paid in capital with a corresponding charge to interest expense.

On November 15, 2006, the Company entered into a Debt Conversion Agreement (the “Conversion Agreement”) with the Investors in the notes payable described above. Under the terms of the Conversion Agreement, the Company issued 651,389 shares of common stock and warrants to purchase 325,695 shares of common stock at $1.00 per share through December 31, 2016 with a combined fair market value of $1,765,265 in payment of notes with principal amounts aggregating $475,000 plus accrued interest and having a carrying value of $211,336. The fair market value of the common stock and warrants was accounted for as an increase to equity. The excess of that amount over the carrying value of the notes payable and accrued interest was $1,553,928 and was charged to interest expense.

Additionally on November 15, 2006, the Company entered into a Debt Conversion Agreement (the “Conversion Agreement”) with a related party. Under the terms of the Conversion Agreement, the Company issued 792,000 shares of common stock and warrants to purchase 396,000 shares of common stock at $1.00 per share through December 31, 2016 with a combined fair market value of $2,146,320 in payment of $594,000 due in connection with a consulting agreement. The fair market value of the common stock and warrants was accounted for as an increase to equity. The excess of that amount over the amount due in connection with the consulting agreement was $1,552,320 and was charged to administrative expense.

In a series of transactions from December 21, 2006 through January 26, 2007, the Company issued 1,793,333 shares of common stock and warrants to purchase 3,966,668 shares of common stock and received net proceeds of $1,221,496 at a price of $0.75 per share. The warrants have an exercise price of $1.00 per share and 266,667 of the warrants expire on December 21, 2016, 3,119,999 of the warrants expire on January 10, 2017 and 200,000 of the warrants expire on January 26, 2017. Other than pursuant to certain issuances, if the Company sells or grants any option to purchase, dispose of, or issue any common stock or common stock equivalents at an effective price per share less than the then exercise price of these

warrants while they are outstanding, then the exercise price of these warrants shall be reduced to the same amount. Included in the amounts above were 26,667 shares of common stock and warrants to purchase 53,333 shares of common stock with a combined fair market value of $117,615 which were sold to a related party. The fair market value of the common stock and warrants was accounted for as an increase to equity. The excess of that amount over the consideration received was $99,729 and was charged to other expense.

6) Stock Options and Warrants

On January 31, 2007, the Company granted options to members of management and the Board of Directors to purchase 158,000 shares of common stock at an exercise price of $1.90 for a period of 10 years. The Company estimated the fair value of these options as of the date of the grant to be $201,882 utilizing the Black-Scholes model and will record stock based compensation expense ratably over the vesting period.

7) Share Based Payments

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 123 (Revised 2004), Share-Based Payments (“SFAS 123R”). SFAS 123R requires a public entity to measure the cost of employee services received in exchange for the award of equity instruments based on the fair value of the award at the date of grant. The expense is to be recognized over the period during which an employee is required to provide services in exchange for the award. SFAS 123R is effective as of the beginning of the first interim or annual reporting period that begins after December 15, 2005 and, accordingly, the Company adopted this standard on May 1, 2006.

For all awards granted prior to May 1, 2006, the unrecognized portion of stock based compensation is being recognized as an expense on a straight line basis over the remaining requisite service period. The Company has chosen the modified prospective method for transitioning to SFAS 123R and, accordingly, the financial results for prior periods have not been restated.

Prior to May 1, 2006, the Company had employed the principles of Statement of Financial Accounting Standard No. 123, Accounting for Stock-Based Compensation (SFAS 123”). As provided for by SFAS 123, the Company had elected to record compensation expense to the extent of employee or director services rendered based on the fair value of stock options granted under the plan. The Company estimated the fair value of stock options and warrants utilizing the Black-Scholes option-pricing model and common stock utilizing its market value.

Because the Company had previously adopted FAS 123, recording stock based compensation at fair value, there was no effect upon the results of operations for the three and nine months ended January 31, 2007 for the adoption of SFAS 123R. The remaining unrecognized compensation cost related to non-vested share-based compensation arrangements for all employee stock options outstanding at January 31, 2007, as measured at the date of grant, was approximately $437,000. This amount is being expensed over the remaining requisite service period of the related options, which averages thirty-one months.

In connection with the adoption of SFAS 123R on May 1, 2006, the balance of deferred unamortized stock based compensation of $308,615 as of April 30, 2006 has been eliminated against the appropriate equity accounts during the three months ended July 31, 2006.

The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected term of the Company’s employee stock options. The expected volatility is based on the historical volatility of the stock of comparable companies. The Company has not paid any dividends on common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future. The computation of the expected option term is based on expectations regarding future exercises of options which generally vest over three years and have a ten year life.

The assumptions made in calculating the fair value of all options and warrants are as follows:

	Three months ended		Nine months ended
	January 31		January 31
	2007	2006	2007	2006
Risk free interest rate	4.8%	4.5%	.8%	4.0 to 4.5%
Dividend yield	0.0%	0.0%	0.0%	0.0%
Volatility	80.0%	80.0%	80.0%	80% to 82%
Expected life (in years)	1 to 3	1	1 to 3	1 to 5

SFAS 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Based on very limited historical experience the Company has assumed no forfeitures in the determination of stock-based compensation expense under SFAS 123R.

The Company’s determination of fair value is affected by the Company’ stock price as well as the assumptions discussed above which require judgment.

A summary of the changes in options outstanding during the nine months ended January 31, 2007 is as follows:

					Weighted
					Average
			Weighted		Remaining	Aggregate
	Number of		Average Price		Contractual	Intrinsic
	Shares		Per Share		Term (Years)	Value

Outstanding at April 30, 2006	2,248,000		$	0.97	9.0	$	288,200
Granted	203,000		1.71		9.9	—
Exercised	—
Terminated	—
Outstanding at January 31, 2007	2,451,000		$	1.03	8.4	$	2,123,450

Options exercisable at January 31, 2007	1,394,666		$	0.87	8.2	$	1,473,783

Weighted-average fair value of options granted during the nine months ended January 31, 2007	$	1.28

The following table represents all warrants issued, exercised, cancelled and outstanding during the nine months ended January 31, 2007:

	Number		Weighted Average
	Of Shares		Price per Share

Outstanding at May 1, 2006	1,754,695		$	1.45
Issued	5,472,113		0.99
Cancelled	(966,666	)	1.50
Warrants outstanding and exercisable at January 31, 2007	6,260,142		1.04

8) Related Party Transactions

On November 15, 2006, the Company entered into a Debt Conversion Agreement (the “Conversion Agreement”) and on January 10, 2007 sold common stock and warrants to related parties. A full description of such activities is included in Note 5.

9) Restatement of Prior Period Results

Due to an error consisting of an over accrual of research and development expenses, the Company has restated our financial statements for the quarter ended January 31, 2007. The following table set forth certain unaudited restated Consolidated Statement of Operations for the three and nine months ended January 31, 2007:

	Three Months Ended January 31, 2007									Nine Months Ended January 31, 2007
	As Reported			Adjustment			As Restated			As Reported			Adjustment			As Restated
Operating Expenses:
Research and development:
Other	$	514,966		$	242,460		$	272,506		$	789,650		$	242,460		$	547,190
Total research and development	529,186			242,460			286,726			832,310			242,460			589,850
Total operating expenses	2,823,191			242,460			2,580,731			3,651,066			242,460			3,408,606
Operating Loss	(2,823,191		)	242,460			(2,580,731		)	(3,651,066		)	242,460			(3,408,606		)
Net Loss	$	(4,468,409	)	$	242,460		$	(4,225,949	)	$	(5,535,035	)	$	242,460		$	(5,292,575	)

Net loss per common share:
Basic and diluted	$	(0.23	)	$	(0.01	)	$	(0.22	)	$	(0.31	)	$	(0.02	)	$	(0.29	)

	For the period November 15, 2002 (inception) to January 31, 2007
	As Reported			Adjustment		As Restated
Operating Expenses:
Research and development:
Other	$	1,643,414		$	242,460	$	1,400,954
Total research and development	1,715,967			242,460		1,473,507
Total operating expenses	9,093,329			242,460		8,850,869
Operating Loss	(9,093,329		)	242,460		(8,850,869		)
Net Loss	$	(11,116,922	)	$	242,460	$	(10,874,462	)

10) Subsequent Event

Effective on March 16, 2006, the founders of FermaVir Research, Inc. who collectively own 1,029,100 shares of the Company and fully-vested options to purchase 1,050,100 shares of the Company at $0.75 per share, granted to the Company an irrevocable, exclusive option to repurchase 926,100 of those shares and cancel warrants to purchase 945,000 shares under certain conditions in exchange for a cash payment to those founders of $214,000. Effective March 13, 2007, this arrangement was terminated by mutual agreement of all parties.

On March 19, 2007, the Company entered into an amendment with the holders of the warrants that were modified on November 15, 2006 in connection with the Conversion Agreements previously discussed. Under that amendment, the holders agreed to waive the full ratchet anti-dilution provisions and registration rights provisions in such warrants in exchange for reducing the exercise price of the warrants from $1.00 per share to $0.275 per share and increasing the number of shares issuable pursuant to such warrants from an aggregate 1,505,445 to 6,021,780. Additionally on March 19, 2007, the Company entered into an amendment to the warrants issued to the investors in the private placement conducted by the Company in December 2006 and January 2007. In exchange for waiving the full ratchet anti dilution provisions in such warrants, the exercise price of the warrants was reduced from $1.00 per share to $0.525 per share. The fair value of these amended warrants in excess of all amounts previously attributed to such warrants has been accounted for during the quarter ended April 30, 2007 as an increase to additional paid in capital with a corresponding charge to expense.

On April 9, 2007, the Company entered into a definitive Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Inhibitex, Inc. (“Inhibitex”). Under the terms of the agreement, each of the approximately 20.8 million outstanding shares of the Company’s common stock will be exchanged for 0.55 shares of Inhibitex common stock. Immediately following the transaction, the Company’s shareholders are expected to own approximately 27% of the combined entity. Inhibitex will also assume up to 13.9 million of outstanding FermaVir options and warrants at the same exchange ratio. Completion of the transaction is subject to the approval of Inhibitex and FermaVir shareholders, required regulatory approvals, and certain other conditions as set forth in the definitive agreement.

In connection with this transaction, Inhibitex agreed to purchase up to $1,500,000 in senior secured promissory notes issued by the Company (the “Notes”) through August 2007. As of the date of this document, Inhibitex has purchased $750,000 in Notes. The Notes bear interest at 12% per annum and are due upon the earlier of December 31, 2007 or the termination of the Merger Agreement. The Company must comply with certain covenants with respect to the operation of its business so long as any amounts due under the Notes are outstanding, which include a prohibition on incurring additional debt or liens without the consent of the holders of the Notes.

Item 2: Management’s Discussion and Analysis or Plan of Operation

The following discussion should be read in conjunction with our condensed consolidated financial statements and notes to those statements included elsewhere in this report. In addition to historical information, the following discussion and other parts of this report contain forward-looking information that involves risks and uncertainties.

Overview

Since inception on November 15, 2002 through January 31, 2007, we have sustained cumulative net losses of $10,874,462. Our losses have resulted primarily from research and development expenses, patent costs and legal and accounting expenses. From inception through January 31, 2007, we have not generated any revenue from operations. We expect to incur additional losses to perform further research and development activities. We do not currently have any commercial products and we do not expect to have any for the foreseeable future. Our product development efforts are in their early stages and we cannot make estimates of the costs or the time it will take to complete. The risk of completion of any program is high because of the long duration of clinical testing, regulatory approval and review cycles and uncertainty of the costs. Net cash inflows from any products developed may take several years to achieve.

Management plans to continue financing the operations with a combination of equity issuances and debt arrangements. If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate our research or development programs, or cease operations. In light of these factors, among others, our independent registered public accounting firm has stated that there is substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Plan of Operation

We are a development stage biotechnology company that has licensed patents for a series of compounds for the treatment of viral diseases including compounds for the treatment of varicella zoster virus, or VZV, the causative agent for shingles and chickenpox and human cytomegalovirus, or CMV, a member of the herpes virus group which includes the viruses that cause chickenpox, mononucleosis, herpes labialis (cold sores) and genitalis (genital herpes).

We have performed preclinical studies on a series of our compounds and have selected FV-100, prodrug of CF-1743 for development for the treatment of shingles. A prodrug is a drug which is administered in a form which enhances the pharmacology of the active compound and once administered, is metabolized in the body into an active compound. Our clinical candidate, FV-100, is currently undergoing extensive preclinical testing. We are contracting and supervising the pharmacology and safety studies of our clinical candidate in order to file an Investigational New Drug Application (IND) with the Food and Drug Administration (FDA).

Upon acceptance of the IND, we intend to commence Phase I safety studies of our clinical candidate for the treatment of shingles in humans. In addition, we intend to identify a clinical candidate for the treatment of CMV infections in transplant patients from our proprietary anti-viral compounds. We are also currently seeking other opportunities and technologies for in-licensing from academia, research institutions and commercial sources which would complement and enhance our business.

On November 30, 2005, we submitted a pre-IND submission to the FDA requesting a consultation on our proposed plan for development of CF-1743 for the treatment of shingles. In January 2006, we received a response from the FDA on our pre-IND submission. The FDA provided guidance on our preclinical and early stage clinical plans. We also filed a pre-IND submission to the FDA for FV-100 in April 2006 and received a response from the FDA in June. We are using the FDA’s guidance from both pre-IND responses in preparing an IND for our shingles drug candidate, FV-100.

On December 12, 2005, we entered into a marketing and public relations service agreement with Trilogy Capital Partners, Inc. Under the terms of the agreement, Trilogy was to be paid $12,500 per month and was issued warrants to purchase 1,000,000 shares of our common stock at an exercise price of $1.50 per share which are exercisable for a period of three years. This agreement was terminated effective June 3, 2006. On October 12, 2006, by action of the Board of Directors, we canceled the unexercised portion of the outstanding warrants issued to Trilogy and its assignees for the purchase of 966,666 shares of common stock.

Results of Operations

Three Months Ended January 31, 2007 Compared To The Three Months Ended January 31, 2006

During the three months ended January 31, 2007 and 2006, we had no revenue. We do not expect to have revenues relating to our product candidates in development for several years, if at all.

Research and development expense for the three months ended January 31, 2007 was $286,726 as compared to $263,410 for the comparable period in 2006. This increase is due to the increased levels of performance of preclinical studies for development of a treatment for shingles during the current period.

General and administrative expense for the three months ended January 31, 2007 was $2,294,005 as compared to $1,346,384 for the comparable period in 2006. This increase is primarily due to an increase of $974,340 in the value of warrants issued for services, an increase of $99,729 related to the sale of common stock & warrants below market value to a related party, and a decrease of $144,466 related to cost containment efforts in the areas of payroll and benefits, marketing expenses, legal and accounting fees, occupancy expenses, directors’ fees, and general operating expenses.

Other expense for the three months ended January 31, 2007 was $1,645,218 as compared to $139,585 for the comparable period in 2006. This increase is primarily attributable to an

increase of $1,501,335 related to financing costs for notes payable issued and subsequently converted to equity during the current period.

Net loss for the three months ended January 31, 2007 was $4,225,949 as compared to a net loss of $1,749,379 for the comparable period in 2006. This increase in net loss is attributable to the net effect of a increase in research and development expenses of $23,316, an increase in general and administrative expenses of $947,621, and an increase in other expense of $1,505,633 as described in the preceding paragraphs.

Nine Months Ended January 31, 2007 Compared To The Nine Months Ended January 31, 2006

During the nine months ended January 31, 2007 and 2006, we had no revenue. We do not expect to have revenues relating to our product candidates in development for several years, if at all.

Research and development expense for the nine months ended January 31, 2007 was $589,850 as compared to $554,682 for the comparable period in 2006. This decrease is due to the contraction of operating activities due to financial constraints.

The charge for acquired in-process research and development for the nine months ended January 31, 2007 was zero as compared to $2,695,054 for the comparable period in 2006. This decrease is due to the absence of acquisition activity during the current period.

General and administrative expense for the nine months ended January 31, 2007 was $2,818,756 as compared to $1,553,152 for the comparable period in 2006. This increase is primarily due to an increase of $970,477 in the value of warrants issued for services, an increase of $99,729 related to the sale of common stock and warrants below market value to a related party, an increase of $64,035 in stock based compensation, and an increase of $131,363 due to operations consisting of payroll and benefits, marketing expenses, legal and accounting fees, occupancy expenses, directors’ fees, and general operating expenses.

Other expense for the nine months ended January 31, 2007 was $1,883,969 as compared to $142,092 for the comparable period in 2006. This increase is primarily attributable to an increase of $1,735,847 related to financing costs for notes payable issued and subsequently converted to equity during the current period.

Net loss for the nine months ended January 31, 2007 was $5,292,575 as compared to a net loss of $4,944,980 for the comparable period in 2006. This increase in net loss is attributable to the net effect of an increase in research and development expenses of $35,186, the absence of a charge for acquired in-process research and development of $2,695,054, an increase in general and administrative expenses of $1,265,604, and an increase in other expense of $1,741,877 as described in the preceding paragraphs.

Liquidity and Capital Resources

Our cash position was $503,508 as of January 31, 2007 compared to $127,121 as of April 30, 2006. The net decrease during that period is attributable to proceeds of $1,654,996 from the issuance of notes payable and common stock and warrants net of operating disbursements of $1,278,609.

Our current liabilities totaled $202,287 as of January 31, 2007 compared to $401,743 as of April 30, 2006. These amounts reflect a decrease in activity based on financial constraints.

We had a working capital surplus of $392,776 as of January 31, 2007 compared to a working capital deficit of $257,183 as of April 30, 2006. The improvement during that period is attributable to financing activity.

From November 15, 2002 (Inception) to January 31, 2007, our operations have been financed through private placements of common stock and warrants and the issuances of notes payable and we have incurred a deficit during the development stage of $10,874,462. This loss was incurred through a combination of research and development activities, expenses supporting those activities, and a charge to expense for acquired in process research and development. We expect to continue to incur additional losses and negative cash flows from operating activities for the foreseeable future.

On November 9, 2006, we issued a promissory note in the principal amount of $75,000 together with warrants and received net proceeds of $67,500. The notes bear interest at 8% and mature on January 1, 2008. The warrants entitle the holder to purchase 112,500 shares of common stock at price of $1.00 per share and expire on December 31, 2016.

Additionally on November 9, 2006, we entered into an Amendment Agreement (“Agreement”) with certain investors (the “Investors”) holding notes payable with principal amounts aggregating $400,000 and warrants (the “Prior Warrants”) issued in June, July and September 2006. Pursuant to the Agreement, the Investors agreed to amend (the “Amendment”) the Prior Warrants by (i) extending the term of the warrants to December 31, 2016, (ii) adding in a full ratchet anti-dilution clause for issuances or sales of common stock or common stock equivalents below the exercise price of the Prior Warrants and (iii) adding in a covenant that we shall file a registration statement by January 31, 2007. As of the date of this document, such registration statement has not been filed.

On November 15, 2006, we entered into a Debt Conversion Agreement (the “Conversion Agreement”) with the Investors in the notes payable described above. Under the terms of the Conversion Agreement, we issued 651,389 shares of common stock and warrants to purchase 325,695 shares of common stock at $1.00 per share through December 31, 2016 with a combined fair value of $1,765,265 in payment of notes with principal amounts aggregating $475,000 plus accrued interest and having an aggregate carrying value of $211,336, net of debt discount.

Additionally on November 15, 2006, we entered into a Conversion Agreement with a related party. Under the terms of the Conversion Agreement, we issued 792,000 shares of common stock and warrants to purchase 396,000 shares of common

stock at $1.00 per share through December 31, 2016 with a combined fair market value of $2,146,320 in payment of $594,000 due in connection with a consulting agreement.

In a series of transactions from December 21, 2006 through January 26, 2007, we issued 1,793,333 shares of common stock and warrants to purchase 3,586,666 shares of common stock and received net proceeds of $1,221,496 at a price of $0.75 per share. The warrants have an exercise price of $1.00 per share and 266,667 of the warrants expire on December 21, 2016, 3,119,999 of the warrants expire on January 10, 2017 and 200,000 of the warrants expire on January 26, 2017. Other than pursuant to certain issuances, if we sell or grant any option to purchase, dispose of, or issue any common stock or common stock equivalents at an effective price per share less than the then exercise price of these warrants while they are outstanding, then the exercise price of these warrants shall be reduced to the same amount.

On March 19, 2007, we entered into an amendment with the holders of the warrants that were modified on November 15, 2006 in connection with the Conversion Agreements previously discussed. Under that amendment, the holders agreed to waive the full ratchet anti-dilution provisions and registration rights provisions in such warrants in exchange for reducing the exercise price of the warrants from $1.00 per share to $0.275 per share and increasing the number of shares issuable pursuant to such warrants from an aggregate 1,505,445 to 6,021,780. Additionally on March 19, 2007, we entered into an amendment to the warrants issued to the investors in the private placement conducted by us in December 2006 and January 2007. In exchange for waiving the full ratchet anti dilution provisions in such warrants, the exercise price of the warrants was reduced from $1.00 per share to $0.525 per share. The fair value of these amended warrants in excess of all amounts previously attributed to such warrants will be accounted for during the quarter ended April 30, 2007 as an increase to additional paid in capital with a corresponding charge to expense.

Our available working capital and capital requirements will depend upon numerous factors, including progress of our research and development programs, our progress in and the cost of pre-clinical and clinical testing, the timing and cost of obtaining regulatory approvals, the cost of filing and prosecuting patent claims and other intellectual property rights, competing technological and market developments, current and future licensing relationships, the status of our competitors, and our ability to establish collaborative arrangements with other organizations.

Our continued operations will depend on whether we are able to raise additional funds through various potential sources, such as equity and debt financing, collaborative and licensing agreements, strategic alliances, and our ability to realize the full potential of our technology in development. Such additional funds may not become available on acceptable terms, if at all, and there can be no assurance that any additional funding that we do obtain will be sufficient to meet our needs in the long term. Through January 31, 2007, virtually all of our financing has been through private placements of common stock and warrants. We intend to continue to fund operations from cash on-hand and through the similar sources of capital previously described for the foreseeable future. We can give no assurances that any additional capital that we are able to obtain will be sufficient to meet our needs. We believe that we will continue to incur net losses and negative cash flows from operating activities for the foreseeable future. Based on the resources available to us at January 31, 2007, we will need additional equity or debt financing to sustain our operations through the balance of 2007 and we will need additional financing thereafter until we can achieve profitability, if ever. These matters raise substantial doubt about our ability to continue as a going concern.

Critical Accounting Policies

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which 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.

The following accounting policies are critical in fully understanding and evaluating our reported financial results:

a) Accounting for Research and Developments Costs

We account for our research and development costs in accordance with Statement of Financial Accounting Standards No. 2 “Accounting for Research and Development Costs”. Accordingly, research and development costs are expensed as incurred.

b) Accounting for Acquisitions

We account for our acquisitions utilizing the purchase method in accordance with Statement of Financial Accounting Standards No. 141 “Business Combinations”. Under the purchase method, assets acquired and liabilities assumed by the Company are recorded at their estimated fair values as of the date of acquisition and the results of operations of the acquired company are consolidated with those of the Company from the date of acquisition.

c) Accounting for Stock-Based Compensation

We account for our stock options and warrants using the fair value method promulgated by Statement of Financial Accounting Standards No. 123R Share-Based Payments (“SFAS 123R”) which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services. SFAS 123R requires a public entity to measure the cost of employee services received in exchange for the award of equity instruments based on the fair value of the award at the date of grant. The expense is to be recognized over the period during which an employee is required to provide services in exchange for the award. SFAS 123R is effective as of the beginning of the first interim or annual reporting period that begins after December 15, 2005 and, accordingly, the Company adopted this standard on May 1, 2006.

Item 3: Controls and Procedures

A) Evaluation of Disclosure Controls and Procedures:

The Company’s management with the participation of the Company’s chief executive officer and chief financial officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act) as of the end of the period covered by this report. Based on such evaluation, the Company’s chief executive officer and chief financial officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective due to material weaknesses in the internal control over financial reporting described below.

1) The lack of sufficient internal accounting personnel necessary to meet the reporting requirements of a public company;

2) Insufficient written policies and procedures for accounting and financial reporting with respect to the current requirements and application of US GAAP and SEC disclosure requirements;

3) Segregation of duties, in that we had only one person performing all accounting-related duties; and

4) Lack of the appropriate “tone at the top” regarding the need to address the material weaknesses reported in previous filings.

5) Restatement of research and development expense

Notwithstanding the existence of these material weaknesses in our internal control over financial reporting, our management believes, including our Chief Executive Officer and Chief Financial Officer that the condensed consolidated financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

B) Changes in Internal Control over Financial Reporting:

In the process of conducting their review for the three and nine months ended January 31, 2007, J.H. Cohn LLP, our independent registered public accounting firm (“JHC”), identified material weaknesses in the processes and procedures with our accounting and financial reporting function which were addressed as part of the communications by JHC with our audit committee. JHC informed the audit committee that these deficiencies constituted a material weakness under standards established by the Public Company Accounting Oversight Board.

Except as described above, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting during the quarter ended January 31, 2007.

PART II - OTHER INFORMATION

Item 1: Legal Proceedings

On February 5, 2007, we commenced litigation against Trilogy Capital Partners, Inc. and MBA Holdings LLC in Supreme Court of the State of New York, County of New York alleging that Trilogy breached its Letter of Engagement with us dated December 12, 2005. MBA Holdings LLC has been named as a defendant since certain of the warrants issued to Trilogy in connection with the Letter of Engagement were assigned to MBA Holdings LLC. We are seeking to recover approximately $38,000 from Trilogy which represents the amount paid to Trilogy by us plus an unspecified amount of damages caused by the breach of contract. As of March 19, 2007, we are awaiting an answer to the complaint from Trilogy and MBA.

Item 6: Exhibits

10.1		Form of Warrant Amendment Agreement dated March 19, 2007.*

10.2		Form of Warrant Amendment Agreement No. 2 dated March 19, 2007.*

31.1		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Exchange Act.

31.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Exchange Act.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Previously Filed

SIGNATURE

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

Dated: May 25, 2007	FERMAVIR PHARMACEUTICALS, INC.

	By:	/s/ Geoffrey W. Henson
		Geoffrey W. Henson, Chief Executive Officer

	By:	/s/ Frederick Larcombe
		Frederick Larcombe, Chief Financial Officer
		(Principal Financial and Accounting Officer)

Fermavir Pharmaceuticals Inactive 10QSB/A2007 Q3 Quarterly report (small business) (amended)