Omnimmune (OMMH) 10-Q 2010 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q 

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2010

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _________to _________

Commission File Number: 333-145507

OMNIMMUNE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	26-3128407
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4600 Post Oak Place, Suite 352, Houston, Texas	77027
(Address of principal executive offices)	(Zip Code)

(713) 622-8400

(Registrant’s telephone number, including area code)

N/A

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No o

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

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

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x

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

As of November 19, 2010 there were 9,355,921 shares of the issuer’s common stock outstanding.

OMNIMMUNE HOLDINGS, INC. and Subsidiaries

Quarterly Report on Form 10-Q

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	4
	Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009	4
	Consolidated Statements of Operations for the three and nine months ended September 30, 2010 and 2009	5
	Consolidated Statements of Changes in Stockholders’ Deficiency from Inception January 15, 1997 to September 30, 2010	6
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 and  2009	25
	Notes to Consolidated Financial Statements	27
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	45
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	50
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Submission of Matters to a Vote of Security Holders	53
Item 5.	Other Information	53
Item 6.	Exhibits	54
Signature		55

 EXPLANATORY NOTE

Unless otherwise indicated or the context otherwise requires, all references below in this Current Report to “we,” “us,” “our” and the “Company” are to Omnimmune Holdings, Inc., a Delaware corporation.  Omnimmune Holdings, Inc. was originally incorporated on February 22, 2007, in the State of Nevada under the name Roughneck Supplies, Inc., and upon a merger with and into Omnimmune Holdings, Inc. effective August 6, 2008, the Company changed its domicile to Delaware.  Further, on August 7, 2008, Omnimmune Corp., a Texas corporation, merged with and into the Company’s wholly owned subsidiary and Delaware Corporation, Omnimmune Acquisition Corp., after which Omnimmune Acquisition Corp. changed its name to Omnimmune Corp. (the “Merger”).  Prior to the Merger, the Company was a shell company and Omnimmune Corp. was considered the acquirer for accounting purposes in the transaction.  As a result the historical financial statements included in this report are those of Omnimmune Corp., the Texas Corporation.  Unless otherwise indicated, all financial and business information contained in this Current Report relates exclusively to the business and financial affairs of Omnimmune Holdings, Inc. and its subsidiaries.

3

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2010			2009
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	4,805		$	5,627
Prepaid insurance		38,725			25,805
Total current assets	$	43,530		$	31,432
Liabilities and stockholders' deficiency
Current liabilities
Accounts payable and accrued liabilities	$	728,948		$	906,893
Accounts payable and accrued liabilities-related parties		1,591,294			1,156,038
Lines of credit		247,279			253,059
Accrued interest, net		370,248			327,078
Accrued interest- related party		490,010			483,836
Cash advance		297,400			310,400
Notes payable, net		987,046			987,046
Total current liabilities		4,712,225			4,424,350
Long term portion of notes payable		42,306			29,374
Long term portion of notes payable - due to related parties		1,008,152			1,003,563
Total liabilities		5,762,683			5,457,287
Commitments and contingencies		-			-
Stockholders' deficiency
Common stock, $0.0001 par value; 50,000,000 shares authorized;
9,355,921 and 8,914,921 shares issued and outstanding
at September 30, 2010 and December 31, 2009		934			890
Additional paid-in capital		16,710,446			15,671,385
Common stock subscribed		1,137			1,137
Deficit accumulated during the development stage		(22,431,670	)		(21,099,267	)
Total stockholders' deficiency		(5,719,153	)		(5,425,855	)
Total liabilities and stockholders’ deficiency	$	43,530		$	31,432

See notes to consolidated financial statements.

4

OMNIMMUNE HOLDINGS, INC.

 (A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

													Cumulative from Inception
	For the Three			For the Three			For the Nine			For the Nine			(January 15, 1997)
	Months Ended			Months Ended			Months Ended			Months Ended			to
	September 30,			September 30,			September 30,			September 30,			September 30,
	2010			2009			2010			2009			2010
Revenue	$	-		$	-		$	-		$	-		$	-
Operating expenses:
General and administrative expenses		224,765			401,300			937,983			1,123,207			14,977,052
Impairment of technology licenses and equity securities		-			-			-			-			1,701,936
Total operating expenses		224,765			401,300			937,983			1,123,207			16,678,988
Operating loss		(224,765	)		(401,300	)		(937,983	)		(1,123,207	)		(16,678,988	)
Other (income) and expense:
Interest expense, net		78,730			60,865			385,737			176,371			12,161,148
Cancellation of shares previously issued for license agreement		-			-			-			-			(842,514	)
(Gain) on termination of license agreement		-						(497,072	)					(497,072	)
(Gain) loss on restructuring of debt		-			-			505,755			-			(5,068,880	)
Total other (income) expense		78,730			60,865			394,420			176,371			5,752,682
Loss before income taxes		(303,495	)		(462,165	)		(1,332,403	)		(1,299,578	)		(22,431,670	)
Provision for income taxes		-			-			-			-			-
Net loss	$	(303,495	)	$	(462,165	)	$	(1,332,403	)	$	(1,299,578	)	$	(22,431,670	)
Net loss per share – basic and diluted	$	(0.03	)	$	(0.05	)	$	(0.15	)	$	(0.15	)
Weighted average number of shares outstanding – basic and diluted		9,231,295			8,830,143			9,021,541			8,820,054

See notes to consolidated financial statements.

5

OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF

CHANGES IN STOCKHOLDERS' DEFICIENCY

(Unaudited)

	Preferred Stock						Common Stock
	Shares		Value		Additional Paid-in Capital		Shares		Value		Additional Paid-in Capital		Common Stock Subscribed		Accumulated Deficit During the Development Stage			Total Stockholders Equity
Balance at January 15, 1997 (date of inception)		-	$	-	$	-		-	$	-	$	-	$	-	$	-		$	-
Contribution of assets and liabilities by founder		11,229		112		49,888		1,055,507		106		43,466		-		-			93,572
Beneficial conversion feature of note payable for the year ended December 31, 1997		-		-		-		-		-		327,700		-		-			327,700
Loss for the year ended December 31, 1997		-		-		-		-		-		-		-		(1,366,300	)		(1,366,300	)
Balance as of December 31, 1997		11,229	$	112	$	49,888		1,055,507	$	106	$	371,166	$	-	$	(1,366,300	)	$	(945,028	)
Beneficial conversion feature of note payable for the year ended December 31, 1998		-		-		-		-		-		43,000		-		-			43,000
Loss for the year ended December 31, 1998		-		-		-		-		-		-		-		(328,534	)		(328,534	)
Balance as of December 31, 1998		11,229	$	112	$	49,888		1,055,507	$	106	$	414,166	$	-	$	(1,694,834	)	$	(1,230,562	)

6

 OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

(Continued)

	Preferred Stock						Common Stock
	Shares		Value		Additional Paid-in Capital		Shares		Value		Additional Paid-in Capital		Common Stock Subscribed		Accumulated Deficit During the Development Stage		Total Stockholders Equity
Issuance of 55,553 shares of common stock for technology license at $1.10 per share		-		-		-		55,553		5		61,837		-		-		61,842
Issuance of 5,614 shares of convertible preferred stock at $4.45 per share to investors		5,614		56		24,944		-		-		-		-		-		25,000
Issuance of 5,614 shares of convertible preferred stock at $4.45 per share to investors		5,614		56		24,944		-		-		-		-		-		25,000
Issuance of 5,614 shares of convertible preferred stock at $4.45 per share to investors		5,614		56		24,944		-		-		-		-		-		25,000
Issuance of 5,614 shares of convertible preferred stock at $4.45 per share to investors		5,614		56		24,944		-		-		-		-		-		25,000
Beneficial conversion feature of note payable for the year ended December 31, 1999		-		-		-		-		-		12,000		-		-		12,000

7

OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

(Continued)

	Preferred Stock						Common Stock
	Shares		Value		Additional Paid-in Capital		Shares		Value		Additional Paid-in Capital		Common Stock Subscribed		Accumulated Deficit During the Development Stage			Total Stockholders Equity
Loss for the year ended December 31, 1999	-		-		-			-		-		-		-		(429,692	)		(429,692	)
Balance as of December 31, 1999		33,685	$	336	$	149,664		1,111,060	$	111	$	488,003	$	-	$	(2,124,526	)	$	(1,486,412	)
Issuance of 5,614 shares of convertible preferred stock at $4.45 per share to investors		5,614		56		24,944		-		-		-		-		-			25,000
Issuance of 11,229 shares of convertible preferred stock at $4.45 per share to investors		11,229		112		49,888		-		-		-		-		-			50,000
Issuance of 5,614 shares of convertible preferred stock at $4.45 per share to investors		5,614		56		24,944		-		-		-		-		-			25,000
Issuance of 2,807 shares of common stock at $2.24 per share to a consultant for services rendered		-		-		-		2,807		-		6,250		-		-			6,250
Beneficial conversion feature of note payable for the year ended December 31, 2000		-		-		-		-		-		30,302		-		-			30,302

8

 OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

 (Continued)

	Preferred Stock						Common Stock
	Shares		Value		Additional Paid-in Capital		Shares		Value		Additional Paid-in Capital		Common Stock Subscribed		Accumulated Deficit During the Development Stage			Total Stockholders Equity
Loss for the year ended December 31, 2000		-		-		-		-		-		-		-		(422,306	)		(422,306	)
Balance as of December 31, 2000		56,142	$	560	$	249,440		1,113,867	$	111	$	524,555	$	-	$	(2,546,832	)	$	(1,772,166	)
Issuance of 1,055,507 shares of common stock at $2.24 per share in exchange for 2,500,000 shares in InVitro technology		-		-		-		1,055,507		107		59,894		-		-			60,001
Issuance of 2,807 shares of common stock at $2.24 per share to a consultant for services rendered		-		-		-		2,807		-		6,250		-		-			6,250
Issuance of 2,807 shares of common stock at $2.24 per share to a consultant for services rendered		-		-		-		2,807		-		6,250		-		-			6,250
Issuance of 2,807 shares of common stock at $2.24 per share to a consultant for services rendered		-		-		-		2,807		-		6,250		-		-			6,250

9

OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

 (Continued)

Preferred Stock			Common Stock
Shares	Value	Additional Paid-in Capital	Shares	Value	Additional Paid-in Capital	Common Stock Subscribed	Accumulated Deficit During the Development Stage	Total Stockholders Equity

Issuance of 2,807 shares of common stock at $2.24 per share to a consultant for services rendered	-	-	-	2,807	-	6,250	-	-	6,250
Issuance of 2,807 shares of common stock at $2.24 per share to a consultant for services rendered	-	-	-	2,807	-	6,250	-	-	6,250
Issuance of 2,807 shares of common stock at $2.24 per share to a consultant for services rendered	-	-	-	2,807	-	6,250	-	-	6,250
Issuance of 2,807 shares of common stock at $2.24 per share to a consultant for services rendered	-	-	-	2,807	-	6,250	-	-	6,250
Issuance of 2,807 shares of common stock at $2.24 per share to a consultant for services rendered	-	-	-	2,807	-	6,250	-	-	6,250

10

 OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

(Continued)

	Preferred Stock						Common Stock
	Shares		Value		Additional Paid-in Capital		Shares		Value		Additional Paid-in Capital		Common Stock Subscribed		Accumulated Deficit During the Development Stage		Total Stockholders Equity
Issuance of 2,807 shares of common stock at $2.24 per share to a consultant for services rendered		-		-		-		2,807		-		6,250		-		-		6,250
Issuance of 2,807 shares of common stock at $2.24 per share to a consultant for services rendered		-		-		-		2,807		-		6,250		-		-		6,250
Issuance of 2,807 shares of common stock at $2.24 per share to a consultant for services rendered		-		-		-		2,807		-		6,250		-		-		6,250
Issuance of 2,807 shares of common stock at $2.24 per share to a consultant for services rendered		-		-		-		2,807		-		6,250		-		-		6,250
Issuance of 60,665 shares of common stock at $2.24 per share for a technology license		-		-		-		60,665		7		135,060		-		-		135,067
Issuance of 5,614 shares of convertible preferred stock at $4.45 per share to investors		5,614		56		24,944		-		-		-		-		-		25,000
Issuance of 5,614 shares of convertible preferred stock at $4.45 per share to investors		5,614		56		24,944		-		-		-		-		-		25,000
Issuance of 7,018 shares of common stock at $2.24 per share to a consultant for services rendered		-		-		-		7,018		2		15,624		-		-		15,626

11

OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

(Continued)

Preferred Stock			Common Stock
Shares	Value	Additional Paid-in Capital	Shares	Value	Additional Paid-in Capital	Common Stock Subscribed	Accumulated Deficit During the Development Stage	Total Stockholders Equity

Value of 14,036 warrants issued to consultants	-		-		-	-		-		15,500		-		-			15,500
Beneficial conversion feature of note payable for the year ended December 31, 2001	-		-		-	-		-		25,000		-		-			25,000
Loss for the year ended December 31, 2001	-		-		-	-		-		-		-		(959,531	)		(959,531	)
Balance as of December 31, 2001	67,370	$	672	$	299,328	2,270,741	$	227	$	850,633	$	-	$	(3,506,363	)	$	(2,355,503	)

Issuance of 1,123 shares of convertible preferred stock at $4.45 per share to investors	1,123		11		4,989		-	-	-	-	-	5,000
Conversion of 11,229 shares convertible preferred stock into 44,915 shares of common stock at $2.24 per share	(11,229	)	(112	)	(49,888	)	44,915	4	49,996	-	-	-
Conversion of 5,614 shares convertible preferred stock into 11,229 shares of common stock at $2.22 per share	(5,614	)	(56	)	(24,944	)	11,229	2	24,998	-	-	-

12

OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

(Continued)

Preferred Stock			Common Stock
Shares	Value	Additional Paid-in Capital	Shares	Value	Additional Paid-in Capital	Common Stock Subscribed	Accumulated Deficit During the Development Stage	Total Stockholders Equity

Conversion of 5,614 shares convertible preferred stock into 11,229 shares of common stock at $2.22 per share (5,614 ) (56 ) (24,944 ) 11,229 2 24,998 - - -

Conversion of 5,614 shares convertible preferred stock into 11,229 shares of common stock at $2.22 per share	(5,614	)	(56	)	(24,944	)	11,229	1	24,999	-	-	-
Conversion of 16,843 shares convertible preferred stock into 33,686 shares of common stock at $2.24 per share	(16,843	)	(168	)	(74,832	)	33,686	3	74,997	-	-	-

Conversion of 16,843 shares convertible preferred stock into 33,686 shares of common stock at $2.24 per share	(16,843	)	(168	)	(74,832	)	33,686	3	74,997	-	-	-
Conversion of 5,614 shares convertible preferred stock into 11,229 shares of common stock at $2.22 per share	(5,614	)	(168	)	(24,944	)	11,229	1	24,999	-	-	-

13

OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

(Continued)

Preferred Stock			Common Stock
Shares	Value	Additional Paid-in Capital	Shares	Value	Additional Paid-in Capital	Common Stock Subscribed	Accumulated Deficit During the Development Stage	Total Stockholders Equity

Conversion of 1,123 shares convertible preferred stock into 2,246 shares of common stock at $2.24 per share	(1,122	)		(11	)		(4,989	)	2,246		-		5,000		-		-			-
Beneficial conversion feature of note payable for the year ended December 31, 2002	-			-			-		-		-		1,175,356		-		-			1,175,356
Loss for the year ended December 31, 2002	-			-			-		-		-		-		-		(3,061,599	)		(3,061,599	)
Balance as of December 31, 2002	-		$	-		$	-		2,430,190	$	243	$	2,330,973	$	-	$	(6,567,962	)	$	(4,236,746	)

Beneficial conversion feature of note payable for the year ended December 31, 2003	-		-		-	-		-		29,401		-		-			29,401
Loss for the year ended December 31, 2003	-		-		-	-		-		-		-		(540,986	)		(540,986	)
Balance as of December 31, 2003	-	$	-	$	-	2,430,190	$	243	$	2,360,374	$	-	$	(7,108,948	)	$	(4,748,331	)

14

OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

(Continued)

	Preferred Stock						Common Stock
	Shares		Value		Additional Paid-in Capital		Shares		Value		Additional Paid-in Capital		Common Stock Subscribed		Accumulated Deficit During the Development Stage		Total Stockholders Equity
Issuance of 1,404 shares of common stock at $2.24 to a consultant for services rendered		-		-		-		1,404		-		3,125		-		-		3,125

Issuance of 1,404 shares of common stock at $2.24 to a consultant for services rendered	-		-		-	1,404		-		3,125		-		-			3,125
Value of 26,107 warrants issued to consultants	-		-		-	-		-		93,000		-		-			93,000
Beneficial conversion feature of note payable for the year ended December 31, 2004	-		-		-	-		-		17,149		-		-			17,149
Loss for the year ended December 31, 2004	-		-		-	-		-		-		-		(1,252,796	)		(1,252,796	)
Balance as of December 31, 2004	-	$	-	$	-	2,432,998	$	243	$	2,476,773	$	-	$	(8,361,744	)	$	(5,884,728	)
Issuance of 134,746 shares of common stock at $2.24 for a technology license	-		-		-	134,746		13		299,987		-		-			300,000
Issuance of 6,661 shares at $3.74 per share for cash	-		-		-	6,661		1		24,999		-		-			25,000

15

OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

 (Continued)

Preferred Stock			Common Stock
Shares	Value	Additional Paid-in Capital	Shares	Value	Additional Paid-in Capital	Common Stock Subscribed	Accumulated Deficit During the Development Stage	Total Stockholders Equity

Beneficial conversion feature of note payable for the year ended December 31, 2005	-		-		-	-		-		72,000		-		-			72,000
Loss for the year ended December 31, 2005	-		-		-	-		-		-		-		(1,141,448	)		(1,141,448	)
Balance as of December 31, 2005	-	$	-	$	-	2,574,405	$	257	$	2,873,759	$	-	$	(9,503,192	)	$	(6,629,176	)

Issuance of 4,913 shares of common stock pursuant to an antidilution agreement	-	-	-	4,913	-	-	-	-	-
Issuance of 1,235 shares of common stock pursuant to an antidilution agreement	-	-	-	1,235	-	-	-	-	-
Issuance of 1,235 shares of common stock pursuant to an antidilution agreement	-	-	-	1,235	-	-	-	-	-
Issuance of 1,235 shares of common stock pursuant to an antidilution agreement	-	-	-	1,235	-	-	-	-	-

16

 OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

 (Continued)

Preferred Stock			Common Stock
Shares	Value	Additional Paid-in Capital	Shares	Value	Additional Paid-in Capital	Common Stock Subscribed	Accumulated Deficit During the Development Stage	Total Stockholders Equity

Issuance of 3,706 shares of common stock pursuant to an antidilution agreement	-		-		-	3,705		-		-		-		-			-
Issuance of 3,706 shares of common stock pursuant to an antidilution agreement	-		-		-	3,705		-		-		-		-			-
Issuance of 1,235 shares of common stock pursuant to an antidilution agreement	-		-		-	1,235		-		-		-		-			-
Issuance of 225 pursuant to an antidilution agreement	-		-		-	225		-		-		-		-			-
Beneficial conversion feature of note payable for the year ended	-		-		-	-		-		4,000		-		-			4,000
Loss for the year ended December 31, 2006	-		-		-	-		-		-		-		(1,076,266	)		(1,076,266	)
Balance at December 31, 2006	-	$	-	$	-	2,591,893	$	257	$	2,877,759	$	-	$	(10,579,458	)	$	(7,701,442	)

17

 OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

 (Continued)

	Preferred Stock						Common Stock
	Shares		Value		Additional Paid-in Capital		Shares		Value		Additional Paid-in Capital		Common Stock Subscribed		Accumulated Deficit During the Development Stage			Total Stockholders Equity
Issuance of 7,018 shares of common stock at $3.74 per share for services rendered		-		-		-		7,017		2		26,249		-		-			26,251
Issuance of 25,989 shares of common stock  for $3.74 per share for licensing agreement		-		-		-		25,988		2		97,204		-		-			97,206
Issuance of 25,989 shares of common stock  for $3.74 per share for licensing agreement		-		-		-		25,990		2		97,204		-		-			97,206
119,053 shares of common stock to be issued at $0.37 per share for license agreement		-		-		-		-		-		-		445,305		-			445,305
119,053 shares of common stock to be issued at $0.37 per share for license agreement		-		-		-		-		-		-		445,305		-			445,305
Beneficial conversion feature of note payable for the year ended December 31, 2007		-		-		-		-		-		6,604,430		-		-			6,604,430
Loss for the year months ended December 31, 2007		-		-		-		-		-		-		-		(2,768,669	)		(2,768,669	)

18

OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

 (Continued)

Preferred Stock			Common Stock
Shares	Value	Additional Paid-in Capital	Shares	Value	Additional Paid-in Capital	Common Stock Subscribed	Accumulated Deficit During the Development Stage	Total Stockholders Equity

Balance at December 31, 2007	-	$	-	$	-	2,650,888	$	263	$	9,702,846		$	890,610		$	(13,348,127	)	$	(2,754,408	)
Recapitalization upon reverse merger	-		-		-	3,000,000		300		(300	)		-			-			-
Issuance of 119,053 shares of common stock at $0.37 per share, previously accrued	-		-		-	119,053		12		445,293			(445,305	)		-			-

Issuance of 119,053 shares of common stock at $0.37 per share, previously accrued	-	-	-	119,053	12	445,293	(445,305	)	-	-
Issuance of 1,055,507 shares of common stock for cash at a price of $0.011 per share	-	-	-	1,055,508	106	44,690	-		-	44,796
Issuance of 100,000 shares of common stock and 20,000 warrants to purchase additional shares of common stock at a price of $0.05 per share as a discount on notes payable	-	-	-	100,000	10	55,991	-		-	56,001

19

OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

 (Continued)

Preferred Stock			Common Stock
Shares	Value	Additional Paid-in Capital	Shares	Value	Additional Paid-in Capital	Common Stock Subscribed	Accumulated Deficit During the Development Stage	Total Stockholders Equity

Issuance of 1,055,508 shares of common stock at a price of $0.03 per share to a board member for services	-	-	-	1,055,507	105	29,895	-	-	30,000
Issuance of 150,000 shares of common stock at a price of $1.25 per share to officers for services	-	-	-	150,000	15	187,485	-	-	187,500
Issuance of 137,500 shares of common stock at a price of $0.05 per share as a discount to notes payable	-	-	-	137,500	14	6,861	-	-	6,875

Sale of 707,200 shares of common stock and 707,200 warrants to purchase additional shares of common stock at a price of $2.50 per share for cash, net of costs of $359,729	-	-	-	707,200		71		1,408,200		-	-	1,408,271
Cancellation of shares issued for technology license	-	-	-	(279,788	)	(28	)	(842,486	)	-	-	(842,514	)

20

OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

 (Continued)

	Preferred Stock						Common Stock
	Shares		Value		Additional Paid-in Capital		Shares		Value		Additional Paid-in Capital		Common Stock Subscribed		Accumulated Deficit During the Development Stage		Total Stockholders Equity
Value of options to purchase 2,250,000 shares of common stock at a price of $2,50 per shares issued to board member for extension of payment terms		-		-		-		-		-		2,811,962		-		-		2,811,962
Value of warrants to purchase 75,000 shares of common stock at $2,50 per share issued to a board member for services		-		-		-		-		-		93,733		-		-		93,733
Value of warrants to 70,180 shares of common stock at $1,78 per share issued to a board member for extension of credit terms		-		-		-		-		-		129,278		-		-		129,278
Value of vested portion of options issued to officer		-		-		-		-		-		54,848		-		-		54,848
Discount to notes payable due to beneficial conversion feature		-		-		-		-		-		1,019,208		-		-		1,019,208

21

OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

 (Continued)

Preferred Stock			Common Stock
Shares	Value	Additional Paid-in Capital	Shares	Value	Additional Paid-in Capital	Common Stock Subscribed	Accumulated Deficit During the Development Stage	Total Stockholders Equity

Loss for the year ended December 31, 2008	-		-		-	-		-		-		-		(5,989,872	)		(5,989,872	)
Balance as of December 31, 2008	-	$	-	$	-	8,814,921	$	880	$	15,592,797	$	-	$	(19,337,999	)	$	(3,744,322	)

40,845 shares to be issued for the exercise of 42,108 warrants to purchase shares of common stock	-		-		-	-		-		-		1,137		-			1,137
Issuance of shares for services at a price of $0.30 per share	-		-		-	50,000		5		14,995		-		-			15,000
Issuance of shares for services at a price of $0.44 per share	-		-		-	50,000		5		21,995		-		-			22,000
Value of vested portion of 100,000 options issued to consultant	-		-		-	-		-		41,598		-		-			41,598
Loss for the year ended December 31, 2009	-		-		-	-		-		-		-		(1,761,268	)		(1,761,268	)
Balance as of December 31, 2009	-	$	-	$	-	8,914,921	$	890	$	15,671,385	$	1,137	$	(21,099,267	)	$	(5,425,855	)

22

OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

 (Continued)

Preferred Stock			Common Stock
Shares	Value	Additional Paid-in Capital	Shares	Value	Additional Paid-in Capital	Common Stock Subscribed	Accumulated Deficit During the Development Stage	Total Stockholders Equity

Discount to notes payable associated with beneficial conversion feature	-		-		-	-		-		895,100		-		-			895,100
Discount to accrued interest associated with beneficial conversion feature	-		-		-	-		-		111,845		-		-			111,845
Value of vested portion of 100,000 options issued to consultant	-		-		-	-		-		10,399		-		-			10,399
Loss for the three months ended March 31, 2010	-		-		-	-		-		-		-		(1,001,300	)		(1,001,300	)
Balance as of March 31, 2010 (unaudited)	-	$	-	$	-	8,914,921	$	890	$	16,688,729	$	1,137	$	(22,100,567	)	$	(5,409,811	)

Value of vested portion of 100,000 options issued to consultant	-		-		-	-		-		10,399		-		-			10,399
Income for the three months ended June 30, 2010	-		-		-	-		-		-		-		(27,608	)		(27,608)
Balance as of June 30, 2010 (unaudited)	-	$	-	$	-	8,914,921	$	890	$	16,699,128	$	1,137	$	(22,128,175	)	$	(5,427,020	)

See notes to consolidated financial statements.

23

OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

 (Continued)

	Preferred Stock						Common Stock
	Shares		Value		Additional Paid-in Capital		Shares		Value		Additional Paid-in Capital		Common Stock Subscribed		Accumulated Deficit During the Development Stage			Total Stockholders Equity
Issuance of 441,000 shares of common stock issued for the conversion of principal and accrued interest		-		-		-		441,000		44		4,366		-		-			4,410
Value of vested portion of 100,000  options issued to a consultant		-		-		-		-		-		6,952		-		-			6,952
Loss for the three months ended September 30, 2010		-		-		-		-		-		-		-		(303,495	)		(303,495	)
Balance as of September 30, 2010 (Unaudited)		-	$	-	$	-		9,355,921	$	934	$	16,710,446	$	1,137	$	(22,431,670	)	$	(5,719,153	)

See notes to consolidated financial statements.

24

OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine			For the Nine			Cumulative from Inception
	Months Ended			Months Ended			(January 15, 1997)
	September 30,			September 30,			to
	2010			2009			September 30, 2010
Cash flows from operating activities:
Net loss	$	(1,332,403	)	$	(1,299,578	)	$	(22,431,670	)
Adjustments to reconcile net loss to net
cash used in operating activities:
Non-cash compensation		27,750			68,199			4,112,858
Amortization of discount on notes payable		207,567			14,245			8,972,303
Amortization of discount on accrued interest		1,915			-			1,915
Impairment of technology licenses and equity securities		-			-			1,701,936
(Gain) or loss on restructuring of debt		505,755			-			(5,068,880	)
Gain on termination of license agreement		(497,072	)		-			(497,072	)
Cancellation of shares previously issued for license agreement		-			-			(842,514	)
Net change in operating assets and liabilities:
Bank overdraft		-			(6,330	)		-
Advances to related party		-			-			(10,000	)
Prepaid insurance		(12,920	)		(35,589	)		(38,725	)
Accounts payable and accrued liabilities, net		603,866			1,067,890			9,615,082
Net cash used in operating activities		(495,542	)		(178,503	)		(4,484,766	)
Cash flows from investing activities:
Cash received from settlement of technology license agreement		310,000			-			310,000
Cash portion of investment in technology license		-			-			(6,000	)
Net cash provided by investing activities		310,000			-			304,000
Cash flows from financing activities:
Proceeds from cash advances		11,000			130,400			1,017,400
Principal payments on cash advances		(4,000	)		-			(134,000	)
Proceeds from notes payable		183,500			-			1,828,474
Proceeds from the exercise of warrants		-			1,137			1,137
Principal payments on debt		-			(5,649	)		(512,993	)
Proceeds from common stock issued for cash, net of costs		-			-			1,738,271
Proceeds from (repayments) to lines of credit		(5,780	)		-			247,282
Net cash provided by financing activities		184,720			125,888			4,185,571
Net increase (decrease) in cash and cash equivalents		(822	)		(52,615	)		4,805
Cash and cash equivalents at beginning of period		5,627			52,615			-
Cash and cash equivalents at end of period	$	4,805		$	-		$	4,805

See notes to consolidated financial statements.

25

 CONSOLIDATED STATEMENTS OF CASH FLOWS

(continued)

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	16,973	$	7,411	$	91,053
Income taxes	$	-	$	-	$	-
Discount to notes payable associated with beneficial conversion feature	$	895,100	$	14,245	$	15,786,340
Discount to accrued interest associated with beneficial conversion feature	$	111,845	$	-	$	111,845
Common stock issued for services	$	-	$	37,000	$	354,875
Notes payable issued under restructure of debt	$	-	$	-	$	7,284,998
Value of warrant issued as discount on debt	$	-	$	-	$	331,510
Notes payable issued for accounts payable	$	-	$	-	$	287,768
Common stock issued for technology license	$	-	$	-	$	920,610
Common stock issued for the conversion of preferred stock	$	-	$	-	$	355,000
Notes payable issued for services	$	-	$	-	$	3,746,971
Impairment of technology licenses	$	-	$	-	$	616,908
Value of warrants issued for debt	$	-	$	-	$	12,747
Issuance of common stock for cash	$	-	$	-	$	1,408,271
(Gain) loss from the restructuring of debt	$	505,755	$	-	$	(5,071,245	)
Value of vested portion of options issued for services	$	-	$	-	$	2,908,409
Common stock issued for accounts payable	$	-	$	-	$	30,000
Cash advance converted to note payable	$	20,000	$	-	$	541,200
Capitalization of interest on debt	$	-	$	-	$	33,751
Value of warrants and options issued for services	$	-	$	31,199	$	2,905,694
Common stock issued for the conversion of notes payable and accrued interest	$	4,410	$	-	$	4,410

See notes to consolidated financial statements.

26

OMNIMMUNE HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business and Basis of Presentation

Omnimmune Holdings, Inc. (“Omnimmune” or the “Company”) is the holding company of Omnimmune Corp., a development-stage biotechnology company integrating complementary cancer therapeutic, diagnostic and prognostic technologies. Our mission is to provide a comprehensive and personalized approach to the clinical management of cancer through improved diagnostic, prognostic and therapeutic interventions.

The Company’s operating subsidiary, Omnimmune Corp., is currently a development stage company under the provisions of Financial Accounting Standards Board ASC 915-10-15. The Company, whose principal business is to act as a holding company for Omnimmune Corp., is also a development-stage company. The accounts of the Company also include those of its wholly owned subsidiary, InVitro Technologies, Inc., an inactive company.

Merger with Roughneck Supplies, Inc.

The predecessor of the Company was originally incorporated on February 22, 2007, in the State of Nevada as Roughneck Supplies, Inc. (“Roughneck”). On August 6, 2008, Roughneck merged with and into Omnimmune Holdings, Inc. On August 7, 2008, Omnimmune Corp., a privately held Texas corporation incorporated on January 15, 1997 merged with and into Omnimmune Acquisition Corp., a Delaware corporation, and a wholly-owned subsidiary of the Company formed for the purpose of the merger.  As a result, (i)  Omnimmune Corp became  a  wholly-owned subsidiary of the Company, (ii) the shareholders of Omnimmune Corp. became the majority stockholders of the Company and the shareholders prior to the merger were reduced to a minority ownership, (iii) the historical management of Roughneck resigned, and the management of Omnimmune Corp. became the management of the Company, (iv) the business of Omnimmune Corp. became the business of Omnimmune and the former business of Roughneck was eliminated, and (v) the historical financial statements of Omnimmune Corp. became the historical financial statements of the Company. Therefore, as a consequence of the two mergers, one on August 6, 2008 and one on August 7, 2008, Omnimmune (formerly Roughneck) went from being a public corporation domiciled in Nevada formerly in the business of marketing and retailing oil and gas drilling supply products with little or no continuing operations and a fiscal year end of May 31, to being a public company domiciled in Delaware in the biotechnology business in the development stage with a fiscal year end of December 31.  These transactions are described in detail in the Company’s Form 8-K filed with the SEC on August 12, 2008, as amended on August 21, 2008, August 27, 2008 and September 5, 2008, respectively.

Interim Financial Information

The accompanying unaudited interim consolidated financial statements have been prepared by the Company, in accordance with generally accepted accounting principles pursuant to Regulation S-X of the Securities and Exchange Commission.  Accordingly, these interim financial statements should be read in conjunction with the Company’s financial statements and related notes as contained in Form 10-K for the year ended December 31, 2009. In the opinion of management, the interim consolidated financial statements reflect all adjustments, including normal recurring adjustments, necessary for fair presentation of the interim periods presented. The results of the operations for the three and nine months ended September 30, 2010 are not necessarily indicat ive of the results of operations to be expected for the full year.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements the Company incurred losses from operations of $303,495 and $462,165 for the three months ended September 30, 2010 and 2009, and  $1,332,403  and $1,299,578  for the nine months ended September 30, 2010 and 2009, respectively; and $22,431,670 from inception (January 15, 1997) through September 30, 2010.  In addition, the Company’s current liabilities exceed its current assets resulting in working capital deficiency of $4,668,695 as of September 3 0, 2010. These factors among others, including the Company’s weak cash position (approximately $4,800 at September 30, 2010), its delinquencies with significant creditors, its lack of  capital to pay wages and consulting fees to its employees and consultants, as well the difficulties that the Company has had, and continues to have, remaining current with its key licensees,  indicate that the Company will be unable to continue as a going concern for a reasonable period of time absent the near-immediate infusion of substantial additional capital.

If operations and cash flows substantially improve, including through funds realized upon one or more debt or equity financing transactions, management believes that the Company can meet its critical obligations and continue in business.  However, there remains a substantial risk that management’s actions will not result in the resolution of the Company’s liquidity problems or its eventual emergence as a profitable company, and that the Company will no longer be able to remain in business as a going concern.  If circumstances developed in which the Company was unable to continue as a going concern, the Company would either seek to restructure its business and financial affairs, or wind down all business activities, and whet her through formal bankruptcy proceedings or through other appropriate corporate action.

The accompanying consolidated financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.

27

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 disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods.  Actual results could materially differ from those estimates. 

Long-lived Assets

In accordance with ASC 360-10-15, long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  ASC 360-10-15 relates to assets that can be amortized and the life determinable.  The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment.  If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable.  In the event such cash flows are not expected to be sufficient to recover the recorded asset va lues, the assets are written down to their estimated fair value.  Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value of asset less the cost to sell.  During the three and nine months ended September 30, 2010 and 2009, the Company recognized no impairment of long-lived assets.  From inception to September 30, 2010 an impairment of license agreement in the amount of $1,701,936 was recorded.

Cash and Cash Equivalents

For the purposes of the statement of cash flows, cash equivalents include highly liquid debt instruments with original maturities of three months or less which are not securing any corporate obligations.

Net Income (Loss) Per Common Share

The Company computes earnings per share under ASC 260-10-45. Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the year.  Dilutive common stock equivalents consist of shares issuable upon conversion of convertible notes and the exercise of the Company's stock options and warrants (calculated using the treasury stock method).  During the three and nine months ended September 30, 2010 and 2009, and from inception to September 30, 2010,  common stock equivalents were not considered in the calculation of the weighted average number of common shares outstanding because they would be anti-dilutive, thereby decr easing the net loss per common share.

For the three and nine months ended September 30, 2010, the following convertible securities have not been included in fully –diluted loss per share because the result would have been anti-dilutive: Options to purchase 2,350,000 shares at $2.50 per share; warrants to purchase 8,422 shares at $0.10 per share, warrants to purchase 70,180 shares at $1.78 per share, warrants to purchase 75,000 at $2.50 per share, and warrants to purchase 727,200 shares at $5.00 per share; debt convertible into 72,465,800 at $0.10 per share; cash advances convertible into 17,040,000 at $0.10 per share; debt convertible into 2,442,241  shares at $0.18 per share, and debt convertible into 2,000,000 shares at $0.50 per share.

For the three and nine months ended September 30, 2009, the following convertible securities were not included  in fully-diluted loss per share because the result would have been anti-dilutive:  Options to purchase 2,350,000 shares at $2.50 per share; warrants to purchase 8,422 shares at $0.10 per share, warrants to purchase 70,180 shares at $1.78 per share, warrants to purchase 75,000 at $2.50 per share, and warrants to purchase 727,200 shares at $5.00 per share; debt convertible into 5,368,886  shares at $0.18 per share, and debt convertible into 2,000,000 shares at $0.50 per share.

Revenue Recognition

Our policy is to recognize revenue over the period that we perform required activities under the terms of various agreements.  Revenue from transactions that do not require future performance obligations from us is recognized as contemplated in the agreements, typically upon acceptance and when collectability is reasonably assured.  Revenue resulting from the achievement of milestone events stipulated in the agreements will be recognized when the milestone is achieved.

28

Research and Development

The Company  accounts for research and development  costs in accordance with ASC 7.30-10-15. Under ASC 730-10-15, all research and development  costs must be charged to expense as  incurred.  Accordingly, internal research and development costs are expensed as incurred.  Third-party research and  development  costs are expensed  when the contracted  work has been performed or as milestone  results have been achieved. Company-sponsored research and  development  costs  related to both present and future  products  are expensed in the period  incurred.  There were no expenditures  on research and product  development for the three and nine months ended September 30, 2010 and 2009, and from inception through September 30, 2010.

Concentrations of Credit Risk

Financial  instruments and related items, which potentially  subject the Company to  concentrations  of credit risk,  consist primarily of cash, cash equivalents and related party  receivables.  The Company  places its cash and temporary cash investments with credit quality institutions.  At times, such investments may be in excess of the FDIC  insurance  limit.

Comprehensive Income

ASC 220-10-15 establishes standards for reporting and displaying of comprehensive income, its components and accumulated balances.  Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, ASC 220-10-15 requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. During the three and nine months ended September 30, 2010 and 2009 there were no items of other comprehensive income.

Stock Based Compensation

Effective January 1, 2006, the Company adopted ASC 718 utilizing the modified prospective approach. Prior to the adoption of ASC 718-10 we accounted for stock option grant in accordance with ASC 718-10 and accordingly, recognized compensation expense for stock option grants.

Under the modified prospective approach, ASC 718-10 applies to new awards and to awards that were outstanding on January 1, 2006 that are subsequently modified, repurchased or cancelled. Under the modified prospective approach, compensation cost recognized in the nine months of fiscal 2006 includes compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of ASC 718-10, and compensation cost for all share-based payments granted subsequent to January 1, 2006 based on the grant-date fair value estimated in accordance with the provisions of ASC 718-10 Prior periods were not restated to reflect the impact of adopting the new standard.

A summary of option activity under the Plan as of September 30, 2010, and changes during the period ended are presented below:

	Options		Weighted Average Exercise Price
Outstanding at December 31, 2009		2,350,000	$	2.50
Issued		-		-
Exercised		-		-
Forfeited or expired		-		-
Outstanding at September 30, 2010		2,350,000	$	2.50
Vested at September 30, 2010		2,350,000	$	2.50
Non-vested at September 30, 2010		-	$	-

Aggregate intrinsic value of options outstanding and exercisable at September 30, 2010 was $0. Aggregate intrinsic value represents the difference between the Company's closing stock price on the last trading day of the fiscal period, which was $0.02 as of September 30, 2010, and the exercise price multiplied by the number of options outstanding. As of September 30, 2010, total unrecognized stock-based compensation expense related to stock options was $0. The total fair value of options vested during the three and nine months September 30, 2010 and 2009 was $6,952 and $27,750, respectively.

29

Income Taxes

The Company has implemented the provisions of ASC 740-10-05. ASC 740-10-05 requires that income tax accounts be computed using the liability method. Deferred taxes are determined based upon the estimated future tax effects of differences between the financial reporting and tax reporting bases of assets and liabilities given the provisions of currently enacted tax laws.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carry forwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Realization of the deferred tax asset is dependent on generating sufficient taxable income in future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Due to the uncertainties as to the realization of deferred tax assets, an allowance has been provided regarding all deferred tax assets of the Company.

Fair Value of Financial Instruments

The Company measures its financial assets and liabilities in accordance with accounting principles generally accepted in the United States of America.  The estimated fair values approximate their carrying value because of the short-term maturity of these instruments or the stated interest rates are indicative of market interest rates.

Reclassifications

Certain reclassifications have been made in prior year's financial statements to conform to classifications used in the current year.

Foreign Currency

Aside from one of its license agreements, which requires milestone and other payments to be made in Euros, the Company is not involved any transactions with foreign currency implications.

Significant Recent Accounting Pronouncements

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

2. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities at September 30, 2010 and December 31, 2009 were $728,948 and $906,893, respectively, consisting of trade payables. Accounts payable and accrued liabilities – related parties at September 30, 2010 and December 31, 2009 of $1,591,294 and $1,156,038, respectively, consisting of accrued liabilities to directors and senior management for services performed. 

30

3. LINES OF CREDIT

The Company has bank loan and credit card agreements with various banks. The bank loan is jointly guaranteed by two of the Company’s shareholders.  The Company's Chief Executive Officer, Harris Lichtenstein, co-signs the credit card agreements and remains jointly liable with the Company on all outstanding amounts due for these credit card liabilities. At September 30, 2010 and December 31, 2009, the Company had the following amounts due under its loan and credit agreements:

	September 30, 2010		December 31, 2009
Bank loan	$	149,976	$	149,976
Credit cards		97,303		103,083
Total	$	247,279	$	253,059

4. ACCRUED INTEREST

During the nine months ended September 30, 2010, the Company entered into a debt restructuring agreement with a note holder.  Pursuant to the terms of this agreement, the accrued interest as of March 31, 2010 in the amount of $111,845 and principal balance of $521,200 became convertible into shares of the Company’s common stock at a price of $0.01 per share. This resulted in a beneficial conversion feature in the amount of $111,845 on the accrued interest, which is considered a discount to accrued interest.  This discount is amortized using the effective interest method and will be amortized over the remaining life of the note.  For the three and nine months ended September 30, 2010, amortization expense was $947 a nd $1,915 and was charged to interest expense.

Notes payable and accrued interest at September 30, 2010 and December 31, 2009 are summarized as follows:

	September 30,		December 31,
	2010		2009
Number of notes payable		26		16
Number of notes payable - related party		4		4
Principal amount - notes payable, net of discount	$	1,029,352	$	1,016,420
Principal amount - notes payable - related party, net of discount	$	1,008,152	$	1,003,563
Accrued interest, net of discount	$	370,248	$	327,078
Accrued interest - related party	$	490,010	$	483,836

31

Interest expense (net) consisted of the following for the three and nine months ended September 30, 2010 and 2009:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2010		2009		2010		2009
Accrued interest - notes payable	$	51,738	$	46,899	$	153,107	$	139,169
Accrued interest - notes payable – related party		2,081		2,081		6,175		6,175
Bank credit line		3,119		3,119		9,254		9,254
Amortization of discount on notes payable		18,656		6,218		207,567		14,252
Amortization of discount on accrued interest		947		110		1,915		110
Credit Cards		2,189		2,438		7,.61		7,.411
Insurance interest		-		-		658		-
Total interest	$	78,730	$	60,865	$	385,737	$	176,371

5. CASH ADVANCES

During the three and nine months ended September 30, 2010, the Company received $10,000 in new non-interest bearing, payable on demand, unsecured cash advances from  shareholders. All previous advances are demand obligations and bear no interest.

During the three months ended March 31, 2010, the Company converted $20,000 of cash advances into notes payable.

During the three months ended March 31, 2010, the Company entered into an agreement whereby $170,400 of the cash advances became convertible into shares of the Company’s common stock at a price of $0.01 per share.  This resulted in a beneficial conversion feature in the amount of $170,400, which was charged to operations during the three months ended March 31, 2010.

During the three months ended September 30, 2010, the Company repaid $4,000 of cash advances and the balance at September 30, 2010 was $297,400.

6. NOTES PAYABLE

During January 2010, the Company entered into a debt restructuring agreement with a principal note-holder, whereby the Company modified the conversion price of such holder’s outstanding convertible note in the principal amount of $521,200 from a previous conversion price of $0.18 per share to a reduced conversion price of $0.01 per share.  Pursuant to the guidance ASC 470-50-40, this modification was treated as an extinguishment of debt.  This resulted in the acceleration of the remaining discount on the original note in the amount of $505,755, which was charged to operations during the three months ended March 31, 2010 as a loss on debt restructuring.  A beneficial conversion feature was calculated on the modified note, which resulted in a discount of $521,200.  This discount is being amor tized via the effective interest method over the remaining term of the note.

The Company has convertible notes outstanding which contain provisions for the potential issuance of contingent warrants.  Pursuant to the agreements governing the convertible notes, these warrants are issuable if  the note-holders elect to convert at least 25% of the principal amount of the notes during the term of thereof.  At September 30, 2010, there are contingent 5 year warrants issuable to purchase an aggregate of 43,000 shares of the Company’s common stock at a price of $5.00 per share.

32

The following table lists the notes payable at September 30, 2010 and December 31, 2009:

	Principal balance:
	September 30, 2010		December 31, 2009
Convertible note payable to a related party in the amount of $2,000,000 dated June 14, 1994. On March 3, 2007, this note was replaced with a new note in the amount of $3,170,188, which included accrued interest in the amount of $959,089, a salary payable of $106,575, and a loss of $104,524.  On March 1, 2008, this note was replaced with a new note in the amount of $500,000, the amount of $2,670,188 was forgiven by the note holder the accrued interest on this note in the amount of $222,521is still a liability and is recorded in accrued liabilities related parties. The note signed on March 1, 2008 is a non interest bearing note, and is payable contingent upon (a) the Company’s receipt of revenues, as defined, in which case the Company will pay 2% of such revenues, as received, in satisfaction of this note; and/or (b) the sale of substantially all of the Company’s assets.  Interest in the amount of $0 was accrued on these  notes during the three  months ended September 30, 2010 and 2009, respectively.  Interest in the amount of $0 was accrued on these notes during the nine months ended June 30, 2010 and 2009, respectively.	$	500,000	$	500,000
Convertible note payable to a related party in the amount of $1,170,356 dated May 15, 2002.  On March 3, 2007, this note was replaced with a new note in the amount of $1,342,127, which included accrued interest of $379,324, and a gain of $207,553. On March 1, 2008, this note was replaced with a new note in the amount of $500,000, the amount of $842,127 was forgiven by the debt holder the accrued interest on this note in the amount of $94,206 still a liability and is recorded in accrued liabilities related parties.. The note dated March 1, 2008 is a non interest bearing note, and is payable contingent upon (a) the Company’s receipt of revenues, as defined, in which case the Company will pay 2% of such revenues, as received, in satisfaction of this note; and/or (b) the sale of substantially all of the Company’s assets. Interest in the amount of $0 was accrued on these notes during the three months ended September 30, 2010 and 2009, respectively.  Interest in the amount of $0 was accrued on these notes during the nine months ended September 30, 2010 and 2009, respectively.		500,000		500,000
Convertible note payable to a related party in the amount of $25,000 dated March 10, 2005.  On March 3, 2007, this note was replaced with a new note in the amount of $30,211, which includes accrued interest of $4,938 and a loss of $272.  On March 31, 2008, this note was replaced with a new note in the amount of $33,232, which includes accrued interest of $3,021. The note bears interest at the rate of 10% per annum, and was due in full on February 28, 2013.  This note is convertible into common stock of the Company at a conversion price of $0.1781 per share. A beneficial conversion feature in the amount of $33,232 was recorded as a discount to the note and is being amortized over the term of the note via the effective interest rate method at a rate of 8.3%. Interest in the amount of $838 was accrued on this note during the three months ended September 30, 2010 and 2009. Interest in the amount of $2,486 was accrued on this note during the nine months ended September 30, 2010 and 2009. Total accrued interest at September 30, 2010 and 2009 amounted to $8,595 and $5,272, respectively.		33,232		33,232
Convertible note payable to a related party in the amount of $37,000 dated February 26, 2005.  On March 3, 2007, this note was replaced with a new note in the amount of $44,848, which included accrued interest of $6,418, and loss of $1,430. On March 1, 2008, this note was replaced with a new note in the amount of $49,333, which includes accrued interest of $4,485.  The note bears interest at the rate of 10% per annum, and is due in full on February 1, 2013. This note is convertible into common stock of the Company at a conversion price of $1.78 per share. A beneficial conversion feature in the amount of $49,333 was recorded as a discount to the note, and is being amortized over the term of the note via the effective interest rate method at a rate of 8%. Interest in the amount of $1,243 was accrued on this note during the three months ended September 30, 2010 and 2009. Interest in the amount of $3,690 was accrued on this note during the nine months ended September 30, 2010 and 2009. Total accrued interest at September 30, 2010 and 2009 amounted to $12,758 and $7,826, respectively.		49,333		49,333
Note payable in the amount of $8,110 dated December 31, 1997.  On March 3, 2007, this note was replaced with a new note in the amount of $19,442, which included accrued interest of $7,437, and loss of $3,895. The note bears interest at the rate of 10% per annum, and became due in full and payable on February 28, 2010.  Interest in the amount of $490 was accrued on this note during the three months ended September 30, 2010 and 2009.  Interest in the amount of $1,454 was accrued on this note during the nine months ended September 30, 2010 and 2009.   Total accrued interest at September 30, 2010 and 2009 amounted to $6,972 and $5,028, respectively. During the period ended December 31, 2008, the Company exercised its right to extend the maturity date until February 28, 2010. This note is cu rrently past due and may be called by the payee at any time.		19,442		19,442

33

	Principal balance:
	September 30, 2010		December 31, 2009
Note payable in the amount of $11,932 dated December 31, 1999.  On March 3, 2007, this note was replaced with a new note in the amount of $23,641, which included accrued interest of $8,168, and a loss of $3,540. The note bears interest at the rate of 10% per annum, and became due in full and payable on February 28, 2010.  Interest in the amount of $596 was accrued on this note during the three months ended September 30, 2010 and 2009.  Interest in the amount of $1,768 was accrued on this note during the nine months ended September 30, 2010 and 2009.  Total accrued interest at September 30, 2010 and 2009 amounted to $8,478 and $6,114 respectively. During the period ended December 31, 2008, the Company exercised its right to extend the maturity date until February 28, 2010. This note is c urrently past due and may be called by the payee at any time.		23,641		23,641
Note payable in the amount of $33,860 dated December 31, 2000.  On March 3, 2007, this note was replaced with a new note in the amount of $60,971, which included accrued interest of $20,882, and a loss of $6,228. The note bears interest at the rate of 10% per annum, and became due in full and payable on February 28, 2010.  Interest in the amount of $1,537   was accrued on this note during the three months ended September 30, 2010 and 2009. Interest in the amount of $4,560 was accrued on this note during the nine months ended September 30, 2010 and 2009. Total accrued interest at September 30, 2010 and 2009 amounted to $21,866 and $15,769, respectively.  During the period ended December 31, 2008, the Company exercised its right to extend the maturity date until February 28, 2010. This no te is currently past due and may be called by the payee at any time.		60,971		60,971
Note payable in the amount of $25,000 dated February 28, 2001. On March 3, 2007, this note was replaced with a new not in the amount of $44,355, which included accrued interest in the amount of $15,014, and a loss of $4,341. On March 1, 2008, this note was replaced with a new note in the amount of $127,305, which consolidated two other notes payable to this note holder in the amounts of $41,774, and $28,603, and accrued interest of $11,573.The note bears interest at the rate of 10% per annum, and is due in full on February 28, 2013. This note is convertible into shares of common stock at a rate of $1.78 per share.  A beneficial conversion in the amount of $127,305 was recorded for this note and is being amortized over the term of the note via the effective interest rate method at a rate of 8.2%. Interest in the amount of $3,209 was accrued on this note during the three months ended September 30, 2010 and 2009. Interest in the amount of $9,522 was accrued on this note during the nine months ended September 30, 2010 and 2009. Total accrued interest at September 30, 2010 and 2009 amounted to $32,925 and $20,194, respectively.		127,305		127,305
Note payable in the amount of $16,750 dated June 1, 2002.  On March 3, 2007, this note was replaced with a new note in the amount of $45,224, which included accrued interest in the amount of $14,275, and a loss of $3,322. The note bears interest at the rate of 10% per annum, and became due in full and payable on February 28, 2010.  Interest in the amount of $1,140 was accrued on this note during the three months ended September 30, 2010 and 2009. Interest in the amount of $3,383 was accrued on this note during the nine months ended September 30, 2010 and 2009. Total accrued interest at September 30, 2010 and 2009 amounted to $16,219 and $11,696, respectively. During the period ended December 31, 2008, the Company exercised its right to extend the maturity date until February 28, 2010. This note i s currently past due and may be called by the payee at any time.		45,224		45,224
Note payable in the amount of $18,000 dated June 1, 2002.  On March 3, 2007, this note was replaced with a new note in the amount of $28,350, which included accrued interest in the amount of $8,551, and a loss of $1,798. On March 1, 2008, this note was replaced with a new note in the amount of $31,185, which includes accrued interest in the amount of $2,835. The note bears interest at the rate of 10% per annum, and is due in full on February 28, 2013. This note is convertible into shares of common stock at a rate of $1.78 per shares.  A beneficial conversion feature in the amount of $31,285 was recorded for this note and is being amortized over the term of the note via the effective interest rate method at a rate of 8.3%. Interest in the amount of $786 was accrued on this note during the three mo nths ended September 30, 2010 and 2009.  Interest in the amount of $2,332 was accrued on this note during the nine months ended September 30, 2010 and 2009.  Total accrued interest at September 30, 2010 and 2009 amounted to $8,065 and $4,947, respectively.		31,185		31,185

34

	Principal balance:
	September 30, 2010		December 31, 2009
Note payable in the amount of $62,019 dated July 1, 2005. On January 1, 2007, this note was replaced with a new note in the amount of $94,334, which included accrued interest of $9,328, and a loss of 422,987. On March 1, 2008, this note was replaced with a new note in the amount of $88,132, which includes accrued interest in the amount of $2,221. The note bears interest at the rate of 10% per annum, and is due in full on February 28, 2013.  This note is convertible into shares  of common stock at a price of $1.78 per share.  A beneficial conversion feature was recorded in the amount of $91,149 on the note. Interest in the amount of $2,221 was accrued on this note during the three months ended September 30, 2010 and 2009. Interest in the amount of $6,592 was accrued on this note during the nine months ended September 30, 2010 and 2009. Total accrued interest at September 30, 2010 and 2009 amounted to $22,043and $13,230, respectively.		88,139		88,139
Note payable in the amount of $25,000 dated October 6, 2005.  On March 3, 2007, this note was replaced with a new note in the amount of $28,603, which included interest in the amount of $3,500, and a loss of $103. On March 1, 2008, this note was consolidated into a new note in the amount of $29,025, and is due on February 28, 2013. Interest in the amount of $731 was accrued on this note during the three months ended September 30, 2010 and 2009. Interest in the amount of $2,170 was accrued on this note during the nine months ended September 30, 2010 and 2009. Total accrued interest at September 30, 2010 and 2009 amounted to $7,505 and $4,603, respectively.		29,025		29,025
Note payable in the amount of $69,806 dated March 3, 2007. On March 1, 2008, this note was replaced with a new note in the amount of $76,787, which included accrued interest in the amount of $6,981. The note bears interest at a rate of 10% per annum, and is due in full on February 28, 2013.  This note is convertible into shares (post shares) of common stock at a rate of $1.78 per share.  A beneficial conversion feature in the amount of $76,787 was recorded on the note and is being amortized over the term of the note via the effective interest rate method at a rate of 8.3%. Interest in the amount of $1,935 was accrued on this note during the three months ended September 30, 2010 and 2009.  Interest in the amount of $5,743 was accrued on this note during the nine months ended September 30, 2010 and 2009. Tot al accrued interest at September 30, 2010 and 2009 amounted to $19,799 and $12,121, respectively.		76,787		76,787
Note payable in the amount of $550,000 dated June 24, 2008.  The note bears interest at a rate of 10% per annum, and became due in full and payable on June 24, 2010.  This note becomes convertible into shares of common stock upon the closing of a qualified financing.  Interest in the amount of $13,863 was accrued during the three months ended September 30, 2010 and 2009.  Interest in the amount of $41,137 was accrued during the nine months ended September 30, 2010 and 2009.  Total accrued interest at September 30, 2010 and 2009 amounted to $124,767 and $69,767, respectively. This note is currently past due and may be called by the payee at any time.		550,000		550,000
Convertible note payable in the amount of $521,200 dated March 1, 2008. The note bears interest at a rate of 10% per annum, and is due in full on February 28, 2013. This note was originally convertible into common stock at a rate of $1.78 per share.  A beneficial conversion feature in the amount of $521,200 was recorded and is being amortized over the term of the note via the effective interest rate method at a rate of 8.3%.  During the three months ended March 31, 2010, the Company entered into a debt restructuring agreement, whereby the conversion rate for the note payable was reduced to $0.01 per share.  This restructuring agreement was accounted for as an extinguishment of debt, and the unamortized  balance of the discount of in the amount of $505,755 was charged to operations during the thre e months ended March 31, 2010.  A new discount representing the value of the beneficial conversion feature associated with the $0.01 conversion price was calculated in the amount of $521,200, and this amount was charged to additional paid-in capital.   Interest in the amount of $13,137  was accrued on this note during the three months ended September 30, 2010,  and 2009.   Interest in the amount of $38,983 was accrued on this note during the nine months ended September 30, 2010, and 2009.  Total accrued interest at September 30, 2010 and 2009 amounted to $137,976 and $85,856, respectively.		521,200		521,200
Note payable in the amount of $287,768 dated October 31, 2008. The note bears interest at a rate of 10% per annum, and was due in full on June 30, 2009.  Interest in the amount of $7,253 was accrued on this note during the three months ended September 30, 2010 and 2009. Interest in the amount of $21,523 was accrued on this note during the nine months ended September 30, 2010 and 2009. Total accrued interest at September 30, 2010 and 2009 amounted to $55,109 and $26,333, respectively. This note is currently past due and may be called by the payee at any time.		287,768		287,768
Convertible note payable in the amount of $10,000 dated January 22, 2010.  The note bears interest at the rate of 10% per annum, and is due in full on January 22, 2015. This note is convertible into common stock of the Company at a conversion price of $0.01 per share. A beneficial conversion feature in the amount of $10,000 was recorded as a discount to the note, and is being amortized over the term of the note via the effective interest rate method at a rate of 8%. Interest in the amount of $252 and $0 was accrued on this note during the three months ended September 30, 2010 and 2009, respectively. Interest in the amount of $710 and $0 was accrued on this note during the nine months ended September 30, 2010 and 2009, respectively. Total accrued interest at September 30, 2010 and 2009 amounted to $709 and $0, respec tively.		10,000		-

35

	Principal balance:
	September 30, 2010		December 31, 2009
Convertible note payable in the amount of $30,000 dated January 22, 2010.  The note bears interest at the rate of 10% per annum, and is due in full on January 22, 2015. This note is convertible into common stock of the Company at a conversion price of $0.01 per share. A beneficial conversion feature in the amount of $30,000 was recorded as a discount to the note, and is being amortized over the term of the note via the effective interest rate method at a rate of 8%. Interest in the amount of $467 and $0 was accrued on this note during the three months ended September 30, 2010 and 2009, respectively. Interest in the amount of $1,839 and $0 was accrued on this note during the nine months ended September 30, 2010 and 2009, respectively. Total accrued interest at September 30, 2010 and 2009 amounted to $1,840 and $0, re spectively. During the three months ended September 30, 2010, the note holder converted $4,200 in principal and $210 of accrued interest into 441,000 shares of common stock.		25,800		-
Convertible note payable in the amount of $55,000 dated January 22, 2010.  The note bears interest at the rate of 10% per annum, and is due in full on January 22, 2015. This note is convertible into common stock of the Company at a conversion price of $0.01 per share. A beneficial conversion feature in the amount of $55,000 was recorded as a discount to the note, and is being amortized over the term of the note via the effective interest rate method at a rate of 8%. Interest in the amount of $1,386 and $0 was accrued on this note during the three months ended September 30, 2010 and 2009, respectively. Interest in the amount of $3,827 and $0 was accrued on this note during the nine months ended September 30, 2010 and 2009, respectively. Total accrued interest at September 30, 2010 and 2009 amounted to $3,827 and $0, respectively.		55,000		-
Convertible note payable in the amount of $10,000 dated January 22, 2010.  The note bears interest at the rate of 10% per annum, and is due in full on January 22, 2015. This note is convertible into common stock of the Company at a conversion price of $0.01 per share. A beneficial conversion feature in the amount of $10,000 was recorded as a discount to the note, and is being amortized over the term of the note via the effective interest rate method at a rate of 8%. Interest in the amount of $252 and $0 was accrued on this note during the three months ended September 30, 2010 and 2009, respectively. Interest in the amount of $693 and $0 was accrued on this note during the nine months ended September 30, 2010 and 2009, respectively. Total accrued interest at September 30, 2010 and 2009 amounted to $693 and $0, respec tively.		10,000		-
Convertible note payable in the amount of $10,000 dated January 22, 2010.  The note bears interest at the rate of 10% per annum, and is due in full on January 22, 2015. This note is convertible into common stock of the Company at a conversion price of $0.01 per share. A beneficial conversion feature in the amount of $10,000 was recorded as a discount to the note, and is being amortized over the term of the note via the effective interest rate method at a rate of 8%. Interest in the amount of $252 and $0 was accrued on this note during the three months ended September 30, 2010 and 2009, respectively. Interest in the amount of $693 and $0 was accrued on this note during the nine months ended September 30, 2010 and 2009, respectively. Total accrued interest at September 30, 2010 and 2009 amounted to $693 and $0, respec tively.		10,000		-
Convertible note payable in the amount of $20,000 dated January 22, 2010.  The note bears interest at the rate of 10% per annum, and is due in full on January 22, 2015. This note is convertible into common stock of the Company at a conversion price of $0.01 per share. A beneficial conversion feature in the amount of $20,000 was recorded as a discount to the note, and is being amortized over the term of the note via the effective interest rate method at a rate of 8%. Interest in the amount of $504 and $0 was accrued on this note during the three months ended September 30, 2010 and 2009, respectively. Interest in the amount of $1,386 and $0 was accrued on this note during the nine months ended September 30, 2010 and 2009, respectively. Total accrued interest at September 30, 2010 and 2009 amounted to $1,387 and $0, re spectively.		20,000		-
Convertible note payable in the amount of $5,000 dated January 22, 2010.  The note bears interest at the rate of 10% per annum, and is due in full on January 22, 2015. This note is convertible into common stock of the Company at a conversion price of $0.01 per share. A beneficial conversion feature in the amount of $5,000 was recorded as a discount to the note, and is being amortized over the term of the note via the effective interest rate method at a rate of 8%. Interest in the amount of $126 and $0 was accrued on this note during the three months ended September 30, 2010 and 2009, respectively. Interest in the amount of $347 and $0 was accrued on this note during the nine months ended September 30, 2010 and 2009, respectively. Total accrued interest at September 30, 2010 and 2009 amounted to $347 and $0, respectively.		5,000		-
Convertible note payable in the amount of $25,000 dated January 22, 2010.  The note bears interest at the rate of 10% per annum, and is due in full on January 22, 2015. This note is convertible into common stock of the Company at a conversion price of $0.01 per share. A beneficial conversion feature in the amount of $25,000 was recorded as a discount to the note, and is being amortized over the term of the note via the effective interest rate method at a rate of 8%. Interest in the amount of $630 and $0 was accrued on this note during the three months ended September 30, 2010 and 2009, respectively. Interest in the amount of $1,733 and $0 was accrued on this note during the nine months ended September 30, 2010 and 2009, respectively. Total accrued interest at September 30, 2010 and 2009 amounted to $1,732 and $0, respect ively.		25,000		-

36

	Principal balance:
	September 30, 2010		December 31, 2009
Convertible note payable in the amount of $15,000 dated January 22, 2010.  The note bears interest at the rate of 10% per annum, and is due in full on January 22, 2015. This note is convertible into common stock of the Company at a conversion price of $0.01 per share. A beneficial conversion feature in the amount of $15,000 was recorded as a discount to the note, and is being amortized over the term of the note via the effective interest rate method at a rate of 8%. Interest in the amount of $378 and $0 was accrued on this note during the three months ended September 30, 2010 and 2009, respectively. Interest in the amount of $1,040 and $0 was accrued on this note during the nine months ended September 30, 2010 and 2009, respectively. Total accrued interest at September 30, 2010 and 2009 amounted to $1,040 and $0, respect ively.		15,000		-
Convertible note payable in the amount of $3,500 dated March 26, 2010.  The note bears interest at the rate of 10% per annum, and is due in full on March 26, 2015. This note is convertible into common stock of the Company at a conversion price of $0.01 per share. A beneficial conversion feature in the amount of $3,500 was recorded as a discount to the note, and is being amortized over the term of the note via the effective interest rate method at a rate of 8%. Interest in the amount of $88 and $0 was accrued on this note during the three months ended September 30, 2010 and 2009, respectively. Interest in the amount of $180 and $0 was accrued on this note during the nine months ended September 30, 2010 and 2009, respectively Total accrued interest at September 30, 2010 and 2009 amounted to $180 and $0, respectively.		3,500		-
Convertible note payable in the amount of $10,000 dated January 22, 2010.  The note bears interest at the rate of 10% per annum, and is due in full on January 22, 2015. This note is convertible into common stock of the Company at a conversion price of $0.01 per share. A beneficial conversion feature in the amount of $10,000 was recorded as a discount to the note, and is being amortized over the term of the note via the effective interest rate method at a rate of 8%. Interest in the amount of $252 and $0 was accrued on this note during the three months ended September 30, 2010 and 2009, respectively. Interest in the amount of $745 and $0 was accrued on this note during the nine months ended September 30, 2010 and 2009, respectively. Total accrued interest at September 30, 2010 and 2009 amounted to $745 and $0, respec tively.		10,000		-
Convertible note payable in the amount of $10,000 dated January 22, 2010.  The note bears interest at the rate of 10% per annum, and is due in full on January 22, 2015. This note is convertible into common stock of the Company at a conversion price of $0.01 per share. A beneficial conversion feature in the amount of $10,000 was recorded as a discount to the note, and is being amortized over the term of the note via the effective interest rate method at a rate of 8%. Interest in the amount of $252 and $0 was accrued on this note during the three months ended September 30, 2010 and 2009, respectively. Interest in the amount of $745 and $0 was accrued on this note during the nine months ended September 30, 2010 and 2009, respectively. Total accrued interest at September 30, 2010 and 2009 amounted to $745 and $0, respec tively.		10,000		-

Total outstanding	$	3,142,552	$	2,943,252
Less discount on notes payable		1,105,048		932,269
Total – net of discounts		2,037,504		2,010,983
Related Party – long term portion	$	1,008,152	$	1,003,563
Non-related party
Non-related party – current portion		987,046		987,046
Non-related party – long term portion	$	42,306	$	29,374

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7. EQUITY

On July 8, 2008, the Company filed an amendment to the articles of incorporation to the State of Delaware amended the number of authorized shares from 300,000,000 to 50,000,000 and the par value from $0.01 to $0.0001. At September 30, 2010 and December 31, 2009, the Company had issued and outstanding 9,355,921 and 8,914,921 shares of common stock, respectively.  

Term Sheet for Debt Restructuring and Agreed Upon Restructuring

As described in the Company’s Form 8-K filed on January 26, 2010, the Company entered into a Term Sheet (the “Term Sheet”) for Debt Financing and Agreed Upon Restructuring with Margie Chassman (“Chassman”), pursuant to which (i) a total of $203,500 in convertible debt financing was raised by the Company at a conversion price of $0.01 per share (the “Convertible Debt Financing"), (ii) the conversion price related to approximately $800,000 in existing unsecured indebtedness to Chassman was fixed at $0.01 per share, (iii) Chassman agreed to a 2-year lock-up with respect to her convertible debt and underlying stock, subject to agreed upon quarterly leakage amounts, and (iv) management and certain angel investors received limited anti-dilution protection that will result in the issuance to management of s uch additional shares as are required to maintain management’s specified collective ownership interest through the next $3.5 million in net financing and the angel investors to maintain their specified collective ownership interest through the initial round of up to $500,000 in convertible debt financing.

The number of currently issued and outstanding shares of the Company’s stock stands at 9,355,921 as of September 30, 2010.  However, based on, among other things: (i) additional shares that will be issued to management and certain angel investors through the anti-dilution protection prescribed in the Term Sheet, (ii) the adjustment in the conversion price of certain previously issued notes, and (iii) the conversion price offered to investors in the Convertible Debt Financing, the number of additional shares of common stock of the Company that could be issued or has become issuable is greatly in excess of that number and, subject to an increase in authorized share capital to permit conversion, would substantially exceed the total number of authorized shares of Common Stock of the Company.

Although contractual prohibitions contained in the convertible notes themselves and in the Term Sheet would prevent the conversion of any debt or equity securities to the extent such conversion would result in an issuance of shares in an amount greater than the number of authorized shares of the Company, once the Company’s authorized share capital is increased, existing holders of common stock could experience substantial dilution if the Company’s convertible debt holders choose to convert their debt to equity.   Management plans, in due course, to seek appropriate shareholder authorization to increase the number of authorized shares of the Company to a number sufficient to accommodate conversion of all then-outstanding debt and equity securities.

Common Stock

For the nine months ended September 30, 2010, the Company issued the following shares of common stock:

During the three months ended September 30, 2010, the Company issued 441,000 shares of common stock related to the conversion at $0.01 per share of  a convertible note  in the amount of $4,410, consisting of  $4,200 of principal and $210 of accrued interest.

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Warrants

The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company’s common stock issued to non-employees of the Company. The following table summarizes the warrants outstanding as of September 30, 2010:

Warrants Outstanding				Warrants Exercisable
Exercise Prices		Number Outstanding	Weighted Average Remaining Contractual Life (years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Remaining Contractual Life (years)
$	1.78-2.50	145,180	5.17	$	1.78-2.50	145,180	5.17
5.00		727,200	2.86		5.00	727,200	2.86
Total		872,380	3.24			872,380	3.24

The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company’s common stock issued to non-employees of the Company. The following table summarizes the warrants outstanding as of December 31, 2009: 

Warrants Outstanding				Warrants Exercisable
Exercise Prices		Number Outstanding	Weighted Average Remaining Contractual Life (years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Remaining Contractual Life (years)
$	1.78-2.50	145,180	5.42	$	1.78-2.50	145,180	5.42
5.00		727,200	3.11		5.00	727,200	3.11
Total		872,380	3.50			872,380	3.50

Transactions involving warrants are summarized as follows:

	Number of Shares		Weighted Average Price Per Share
Outstanding at December 31, 2009		872,380	$	4.54
Granted		-		-
Exercised		-		-
Cancelled or expired		-		-
Outstanding at September 30, 2010		872,380	$	4.54

The Company has convertible notes outstanding which contain provisions for the potential issuance of contingent warrants. Pursuant to the agreements governing the convertible notes, warrants are issuable if the noteholders elect to convert at least 25% of the principal amount of the notes during the term thereof. According to the applicable convertible note agreements, there are warrants issuable to purchase 120,710 shares of common stock. Upon issuance these warrants are exercisable for 5 years at a price of $1.80 per share. 

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Options

During the year ended December 31, 2008, the Company issued options to purchase 100,000 shares of common stock at a price per share of $2.50. These options were valued at an aggregate of $124,192, and vest at the following rate: 33,000 vested at the time of issuance, and the balance vest ratably over a 23 month period.  During the three and nine months ended September 30, 2010, the Company charged to operations the fair value of the vested options, or $6,952 and $27,750, respectively.

The following table summarizes the changes in options outstanding and the related prices for the shares of the Company’s common stock issued to non-employees of the Company. The following table summarizes the warrants outstanding as of September 30, 2010:

Options Outstanding					Options Exercisable
Exercise Prices		Number Outstanding		Weighted Average Remaining Contractual Life (years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Remaining Contractual Life (years)
$	2.50		2,350,000	7.52	$	2.50	2,350,000	7.52
Total			2,350,000	7.52			2,350,000	7.52

The following table summarizes the changes in options outstanding and the related prices for the shares of the Company’s common stock issued to non-employees of the Company. The following table summarizes the warrants outstanding as of December 31, 2009:

Options Outstanding					Options Exercisable
Exercise Prices		Number Outstanding		Weighted Average Remaining Contractual Life (years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Remaining Contractual Life (years)
$	2.50		2,350,000	7.77	$	2.50	2,285,791	7.77
Total			2,350,000	7.77			2,285,791	7.77

Transactions involving warrants are summarized as follows:

	Number of Shares		Weighted Average Price Per Share
Outstanding at December 31, 2009		2,350,000	$	2.50
Granted		-		-
Exercised		-		-
Cancelled or expired		-		-
Outstanding at September 30, 2010		2,350,000	$	2.50
Exercisable at September 30, 2010		2,350,000	$	2.50
Not exercisable at September 30, 2010		-	$	-

See also Note 9 regarding contingent warrants.

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8. RELATED PARTIES

Amounts due to related parties at September 30, 2010, consisted of the following:

Convertible Notes Payable to related parties

The Company has a note payable outstanding to its Chief Executive Officer in the amount of $500,000 at September 30, 2010 and December 31, 2009. The note is a non interest bearing note, and is payable contingent upon (a) the Company’s receipt of revenues, as defined, in which case the Company will pay 2% of such revenues, as received, in satisfaction of this note; and/or (b) the sale of substantially all of the Company’s assets. During the three and nine months ended September 30, 2010 and 2009, the Company accrued no interest on these notes.

The Company has a convertible note payable outstanding to Dennis Lichtenstein, a relative of the Chief Executive Officer, in the amount of $49,333 at September 30, 2010 and December 31, 2009. The note bears interest at a rate of 10% per annum. During the three months ended September 30, 2010 and 2009, the Company accrued interest in the amount of $1,243.   During the nine months ended September 30, 2010 and 2009, the Company accrued interest in the amount of $3,690.   A beneficial conversion feature in the amount of $49,333 was recorded as a discount to the note, and is being amortized over the term of the note via the effective interest rate method at a rate of 8%.  As of September 30, 2010 a discount in the amount of $44,462 remained on this note with a balance net of discount of $4,871.

The Company has a note payable outstanding to Alexander Krichevsky, an officer of the Company, in the amount of $500,000 at September 30, 2010 and December 31, 2009. The note is a non interest bearing note, and is payable contingent upon (a) the Company’s receipt of revenues, as defined, in which case the Company will pay 2% of such revenues, as received, in satisfaction of this note; and/or (b) the sale of substantially all of the Company’s assets.  During the three and nine months ended September 30, 2010 and 2009, the Company accrued no interest on these notes.

The Company has a note payable outstanding to Jennie Fay Lichtenstein, a relative of the Chief Executive Officer, in the amount of $33,232 at September 30, 2010 and December 31, 2009. This note bears interest at a rate of 10% per annum. During the three months ended September 30, 2010 and 2009, the Company accrued interest in the amount of $838.   During the nine months ended September 30, 2010 and 2009, the Company accrued interest in the amount of $2,486.   A beneficial conversion feature in the amount of $33,232 was recorded as a discount to the note and is being amortized over the term of the note via the effective interest rate method at a rate of 8.3%.  As of September 30, 2010, a discount in the amount of $29,951 remained on this note with a balance net of discount of $3,281.

Accounts Payable and Accrued Liabilities- related parties

The Company had a liability to a director for consulting fees payable in the amount of $534,000 and $15,841 in accounts payable at September 30, 2010, which was included in accounts payable and accrued liabilities - related party.

Accrued Salaries-related parties

During the nine months ended September 30, 2010, the Company has accrued the salary and payroll taxes payable to Harris Lichtenstein, the Company’s Chief Executive Officer.  Pursuant to his employment agreement with the Company, Dr. Lichtenstein is to be paid an annual salary of $245,000 and, as a result, the Company has accrued the amount of $61,250 for each quarter.  During the nine months ended September 30, 2010, the Company made payments of $41,379 to the Officer. As of September 30, 2010, the Company has accrued a total of $403,871 in accrued salary. During the nine months ended September 30, 2010, the Company made payments of payroll taxes in the amount of $5,731 as of September 30, 2010, the Company has a total of $39,544 in accrued payroll taxes.

During the nine months ended September 30, 2010, the Company has accrued the salary and payroll taxes payable to Alex Krichevsky, an officer of the Company.  Pursuant to his employment agreement with the Company Dr. Krichevsky is to be paid an annual salary of $245,000 and, as a result, the Company has accrued the amount of $61,250 for each full quarter during which he was employed by the Company.

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During the period covered by the within Report, the Company entered into a Termination Agreement with Dr. Krichevsky dated August 11, 2010, pursuant to which his employment with the Company was deemed terminated effective as of August 11, 2010.  As a result, all accruals of salary and payroll taxes for Dr. Krichevsky ceased effective as of August 11, 2010.   The termination of Dr. Krichevsky’s employment is considered by both Dr. Krichevsky and the Company to be temporary, with the understanding that he will be re-hired once the Company’s finances improve or as otherwise agreed.  In addition, Dr. Krichevsky’s employment agreement will be extended by such number of months as he was laid off by the Company, so that the total net amounts due him under his agreement will be unchanged as a result of the Termination Agreement.  Dr. Krichevsky has also agreed to continue to serve as an officer and director of the Company during the period of his layoff on a voluntary basis, with the same duties and responsibilities as existed prior to the termination.

During the nine months ended September 30, 2010, the Company made payments of $45,542 to the Officer. As of September 30, 2010, the Company has accrued a total of $349,619 in accrued salary.  During the nine months ended September 30, 2010, the Company made payments of payroll taxes in the amount of $3,972, as of September 30, 2010, the Company has a total of $34,819 in accrued payroll taxes.

Accrued Consulting Fees – related party

During the nine months ended September 30, 2010, the Company has accrued the consulting fees payable to Becker Advisors, Ltd., a consultant to the Company.  Howard Becker, an officer of the Company, is the principal of Becker Advisors, Ltd.  Pursuant to the consulting agreement, Becker Advisors, Ltd. is to be paid monthly fees of $8,600 for part-time service to the Company and, as a result, the Company has accrued the amount of $25,800 for each quarter.  In addition, under the consulting agreement, Becker Advisors is to be paid an hourly fee for all hours expended above a certain threshold amount. During the nine months ended September 30, 2010, the Company has made payments in the amount of $50,000. As of September 30, 2010, the Company has an accrual in the amount of $213,600, which is shown in accounts payable-related party on the Company's balance sheet.

There are no agreements or understandings between the Company and the aforementioned executives regarding the payment of the above salaries, taxes and consulting fees, all of which are currently past due. As of the date of this report,  none of these executives has taken any action or steps in furtherance of the formal collection of these past due amounts.

9. COMMITMENTS AND CONTINGENCIES

Lease of office space

The Company leases office space in Houston, Texas under a month to month lease calling for annual rent of $8,400.

ASRI License Agreement

The Company entered into a license agreement (the “ASRI License Agreement”) with Allegheny-Singer Research Institute (“ASRI”) on February 3, 1999, as amended. The two parties agreed to an amended and restated agreement which became effective February 1, 2005. ASRI granted the Company rights to develop, manufacture, sell, rent or lease Licensed Products in the Field (each as defined in the ASRI License Agreement). The Company agreed to pay royalties of 1-2% of net sales of all products covered in the agreement. The ASRI License Agreement gives the Company the right to sublicense to third parties. The Company agreed to pay ASRI between 5-20% of the sublicense income depending on the nature of the sublicense.  In addition, prior to the period covered by this Report, the Company has issued, and there remai ns outstanding, a total of 261,261 (post-split) shares of common stock which were transferred to ASRI under the ASRI License Agreement.

The Company and ASRI agreed to further amend the ASRI License Agreement which amendment became effective February 1, 2007. As part of the amendment, ASRI granted the Company an extension on the first payment of licensing fees from the original due date of February 1, 2007 to May 1, 2007.

The Company and ASRI agreed to further amend the license agreement, which amendment became effective June 30, 2008. ASRI granted the Company an extension of the second payment of licensing fees from the original due date of February 1, 2008 to June 30, 2008.     Thereafter, ASRI agreed to further extend from February 1, 2009 to August 1, 2009, the license fee of $50,000.  An additional license milestone payment of $50,000 became due on February 1, 2010.

As of the date of this Report, the Company has not yet paid a total of $45,000 of the $50,000 that was due on February 1, 2010, which amount is now past due, but has made all other required payments under the ASRI License Agreement.  Although no agreement has been reached with ASRI regarding the delinquent obligation, ASRI has not, as of the date of this report, declared a default under the ASRI License Agreement, after which we would have a contractual period in which to make such payment and cure the default before the ASRI License Agreement could be terminated. Should such a declaration of default be issued, there is no assurance that the Company would have sufficient wherewithal to cure the default within the prescribed cure period or to otherwise stave off the termination of the ASRI License Agreement.

During the nine months ended September 30, 2010, the Company has made payments in the amount of $55,000 in licensing fees under this agreement and has a remaining, past due balance of $45,000 still outstanding.

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Columbia License Agreement

The Company entered into a license agreement (the “Columbia License Agreement”) with Columbia University (“Columbia”) that was effective February 1, 2005, pursuant to which  Columbia granted the Company rights to develop, manufacture, sell, rent or lease Licensed Products in the Field (each as defined in the Columbia License Agreement). The Columbia License Agreement terminates on the later to occur of (i) the last to expire of the licensed patents, and (ii) ten (10) years from the date of first sale of a licensed product, in each case on a product by product basis.   Columbia received a 5% equity stake in the Company. In addition, the Company paid a nonrefundable license fee of $30,000. The agreement provided that  $15,000 was to be paid 60 days from the effective date of the agreement and the other $15,000 to be paid one year from the effective of the agreement. The Company agreed to reimburse Columbia for past expenses of $50,000, of which $25,000 has been paid and the other $25,000 is due after sales of the licensed products amount to $1,000,000. The Company agreed to pay royalties of 1-2% of net sales of all products covered in the agreement. The agreement gives the Company the right to sublicense to third parties. The Company agreed to pay Columbia between 10-20% of the sublicense income depending on the nature of the sublicense. The Company agreed to pay annual license maintenance fees according to the schedule below:

$10,000 during the fiscal year ended December 31, 2007

$20,000 during the fiscal year ending December 31, 2008

$35,000 during the fiscal year ending December 31, 2009

$50,000  on or before February 1, 2010; and $40,000 each year thereafter.

Based on previous agreements between Columbia and the Company, pursuant to which the Company’s schedule of license fee payments was amended, the Company has now made all required payments under the Columbia License Agreement with the exception of the May 2010 annual license payment of $75,000, which remains unpaid.  Although no agreement has been reached with Columbia regarding this delinquent obligation, Columbia has not, as of the date of this report, declared a default under the Columbia License Agreement, after which we would have a contractual period in which to make such payment and cure the default before the Columbia License Agreement could be terminated.   Should such a declaration of default be issued, there is no assurance that the Company would have sufficient wherewithal to cure the default w ithin the prescribed cure period or to otherwise stave off the termination of the Columbia License Agreement.

During the nine months ended September 30, 2010, the Company has made payments in the amount of $37,500 in licensing fees under this agreement and has accrued license fees in the amount of $75,000.

IGR License Agreement

The Company entered into a licensing agreement with Institut Gustave Roussy (IGR) that was effective November 1, 2007 (the “IGR License Agreement”). IGR granted the Company rights to use the Licensed Patents, Licensed Material and Licensed Information (each as defined in the IGR License Agreement).  All amounts payable under the IGR License Agreement are stated in, and calculated based on, Euros, and are paid in US Dollars at the currency exchange rate in effect at the time the payment is made.  The Company agreed to pay a one time license fee of €125,000, of which €25,000 was payable on the effective date, €50,000 was payable one year from effective date and €50,000 became due two years from effective date. In addition, the Company agreed to pay license maintenance fees acco rding to the schedule below:

€10,000 during the fiscal year ending December 31, 2008

€20,000 during the fiscal year ending December 31, 2009

€35,000 during the fiscal year ending December 31, 2010

€50,000 on or before November 1, 2011 and €50,000 every year thereafter

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Based on agreed upon modifications to the IGR License Agreement, as of January 1, 2010, the Company owed to IGR a total of  €91,634.  Based on payments of USD $65,000 (i.e., approximately €48,507)  made by the Company during the nine months ended September 30, 2010,  the total current amount owed to IGR as of September 30, 2010 under the IGR License Agreement  is approximately € 43,000.   This amount is now past due, and there has been no agreement or understanding with IGR regarding this delinquent obligation.    To date, IGR has shown a willingness to work with the Company with respect to modifying contractual terms and accepting payments after their d ue date rather than declaring a default and seeking to pursue default remedies, including termination of the IGR License Agreement.  However, IGR has not formally agreed to extend the deadline with respect to the current amount owed of € 43,000 or other amounts that will be coming due, and there is no assurance that IGR will continue to work with the Company or forbear from declaring a default or seeking to pursue remedies.  Should IGR issue a formal notice of default under the IGR License Agreement, we would have 30 days in which to pay all amounts then due and owing in order to  cure the default or the IGR License Agreement could be terminated. Should such a declaration of default be issued, there is no assurance that the Company would have sufficient wherewithal to cure the default within the prescribed cure period or to otherwise stave off the termination of the IGR License Agreement.

During the nine months ended September 30, 2010, the Company has made payments in the amount of $65,000 in licensing fees under this agreement and has accrued past due license fees in the amount of approximately €43,000 (i.e., USD $64,334).

Termination of Ohio State Licensing Agreement

The Company previously entered into a licensing agreement (the “OSU License Agreement”) with Ohio State University (OSU) that was effective April 18, 2008, pursuant to which  OSU granted the Company rights to use the Licensed Patents, Licensed Material and Licensed Information (each as defined in the OSU License Agreement). During the course of the OSU License Agreement, the Company made license and related gift payments to OSU totaling $310,000.

 As described in detail in the Company’s Form 8-K filed with the SEC on August 24, 2009, on August 17, 2009, OSU issued a formal notice (the “Notice”) to the Company of its alleged default under the OSU License Agreement based on the Company’s non-payment of certain license fees.   The Company has previously acknowledged that certain license fees called for under the OSU License Agreement have not been paid.  However, as reported by the Company in the aforementioned 8-K, the Company has disputed OSU’s characterization that it had breached the OSU License Agreement and was prepared to vigorously fight OSU’s license termination efforts.

As described in detail in the Company’s Form 8-K filed with the SEC on June 24, 2010, during the period covered by this Report, Omnimmune and OSU entered into a Termination Agreement effective as of May 21, 2010, pursuant to which the OSU License Agreement was consensually terminated. As part of that Termination Agreement, OSU repaid to Omnimmune all monies paid under the OSU License Agreement and related gift agreements, and both parties were granted general releases of all claims arising under the OSU License Agreement.

The technology that was the subject of the OSU License Agreement relates exclusively to the Company’s vaccine technology and has no direct connection to the Company’s diagnostic, prognostic and therapeutic technologies that are under license from academic institutions other than OSU.  The termination of the OSU License will have no effect on the Company’s portfolio of diagnostic, prognostic and monoclonal, anti-body-based immunotherapy technologies, which will be the Company’s primary focus going forward.

Contingent warrants issuable

The Company has convertible notes payable outstanding which contain a provision for contingent warrants that are potentially issuable. Pursuant to the convertible notes agreements that warrants are issuable if the notes holder elects to convert at least 25% of the principal amount due, during the term of the note. According to the convertible note payable agreements, there are potentially 1,207,096 warrants issuable to purchase shares of common stock. Upon issuance these warrants are exercisable for 5 years at a price of $0.1781 per share.

10. SUBSEQUENT EVENTS

The Company has evaluated events subsequent to September 30, 2010 and through the date these consolidated financial statements were issued to assess the need for potential recognition or disclosure in this report and there have been no subsequent events that warrant disclosures by the Company.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Omnimmune Holdings, Inc. (“Omnimmune” or the “Company”) is the holding company of Omnimmune Corp., a development-stage biotechnology company integrating complementary cancer therapeutic, diagnostic and prognostic technologies.  Our mission is to provide a comprehensive and personalized approach to the clinical management of cancer through improved diagnostic, prognostic and therapeutic interventions.  Omnimmune has acquired licensed rights to breakthrough diagnostic, prognostic and platform monoclonal antibody therapeutic technologies.

Omnimmune intends to play a leading role in the development of personalized cancer treatment with the selection of prophylactic and therapeutic vaccines (active immunization), monoclonal antibodies (passive immunization) and genomic-based products, which target a hormone called human chorionic gonadotropin (“hCG”).  Appropriate patient-specific passive immunotherapies will be based upon a patient’s own sequences of hCGß (human chorionic gonadotropin beta subunit), and its gene products (mRNA).  HCGß and its genes have been detected in a majority of cancers studied to date, and is a well validated, ubiquitous, and prototypical  tumor associated antigen (marker).  On this basis, hCGß has enormous potential as a target for the diagnosis and treatment of cancer patien ts.  The application of appropriate patient-specific immunotherapy will be based upon the genomic expression and translation of a patient’s own subunit marker(s), as determined by Omnimmune’s combined immuno-genomic cancer diagnostic and prognostic systems.  An immuno-genomic companion diagnostic trial is being planned by Omnimmune, and is expected to take place during the 2011 calendar year, subject to the Company obtaining sufficient financing.  Omnimmune expects that the results of that trial will be a prelude to the development of a widely applicable diagnostic system for the diagnosis, prognosis and determination of recurrence of many types of cancer.  Omnimmune plans to conduct a Phase I trial with its lead candidate anti-hCGb monoclonal antibodies based upon the results of the diagnostic trial.

Omnimmune believes that this customized diagnostic-therapeutic coupling approach represents a new paradigm for targeted therapy, and will significantly alter the way in which cancer patients will be managed in the future.

Omnimmune’s objective is to be a leader in the implementation (reduction to practice) of previously discovered and characterized vaccines and monoclonal antibodies, and in the discovery, development and commercialization of new vaccines (active immunization) and monoclonal  antibodies for diagnostic, prognostic and therapeutic (passive immunization) purposes, as well as genomic-based products targeting hCGß.

Omnimmune’s unique hCGß and related technologies, which are protected through an expanding intellectual property portfolio, have been developed at institutions including Columbia University of New York, New York (“Columbia”), The Allegheny-Singer Research Institute of the West Penn Allegheny Health System, Pittsburgh, Pennsylvania (“Allegheny”) and The Institute Gustave Roussy, Paris, France (“IGR”).

The predecessor of the Company was originally incorporated on February 22, 2007, in the state of Nevada as Roughneck Supplies, Inc. (“Roughneck”).  On August 6, 2008, Roughneck merged with and into Omnimmune Holdings, Inc. which resulted in (i) Roughneck changing its domicile from Nevada to Delaware, (ii) Roughneck changing its name from “Roughneck Supplies, Inc.” to “Omnimmune Holdings, Inc.”, (iii) Roughneck changing its fiscal year end from May 31 to December 31 and (iv) Roughneck’s shareholders becoming the stockholders of the Company.

On August 7, 2008, Omnimmune Corp., a privately-held Texas corporation, merged with and into Omnimmune Acquisition Corp., a Delaware corporation, and a wholly-owned subsidiary of the Company formed for the purpose of the merger.  As a result, (i) Omnimmune Corp. became a wholly-owned subsidiary of the Company, (ii) the shareholders of Omnimmune Corp. became the majority stockholders of the Company and the shareholders prior to the merger were reduced to a minority ownership, (iii) the historical management of the Company resigned, and the management of Omnimmune Corp. became the management of the Company, (iv) the business of Omnimmune Corp. became the business of Omnimmune and the former business of Roughneck was eliminated, and (v) the historical financial statements of Omnimmune Corp. became the historical financial statem ents of the Company.  Therefore, as a consequence of two mergers, one on August 6, 2008, and one on August 7, 2008, Omnimmune (formerly Roughneck) went from being a public corporation domiciled in Nevada formerly in the business of marketing and retailing oil and gas drilling supply products with little or no continuing operations and a fiscal year end of May 31, to being a public company domiciled in Delaware in the biotechnology business with a fiscal year end of December 31.  These transactions are described in detail in the Company’s Form 8-K filed with the SEC on August 12, 2008, as amended on August 21, 2008, August 27, 2008 and September 5, 2008, respectively.

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Results of Operations

Because we have not generated any revenues, we rely entirely on debt and equity financing to fund ongoing operations, and expect to continue to do so for the foreseeable future.   Generating revenues and ultimately achieving profitability will require the successful completion of our research and development programs, and the subsequent commercialization of the results or of products derived from such research and development efforts or from our patents and patents pending and those licensed from our strategic collaborators.  No assurances can be given as to our ability to identify sufficient sources of funding to sustain our operations, commercialize our products or achieve profitability.   These matters raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that may result from the outcome of this uncertainty. In order to alleviate our working capital deficiency and address our continued financing concerns, management intends to continue to take affirmative steps towards identifying sources of capital that will be sufficient to fund our operations until such time as we are cash flow positive.  However, there remains a substantial risk that the Company will not prove successful in raising the necessary capital needed to continue in business as a going concern.

Three Months Ended September 30, 2010 and September 30, 2009

Revenue

As a development stage pharmaceutical company, we have not generated any revenues and do not expect to generate any revenues for the foreseeable future.  

Costs and Expenses

Our general and administrative expenses decreased approximately 44% to $224,765  in the three months ended September 30, 2010, from $401,300 for the same period in 2009.  For the three months ended September 30, 2010, selling, general, and administrative expenses consisted  primarily of payroll and employee benefits of $126,339; consulting fees of $68,182; legal and accounting fees of $11,547;  non cash compensation of $6,952; insurance expense of $6,582; and office rent expense of $2,313. The increase of approximately $49,500 in 2010 resulted from license fees becoming due during the period.

Interest Expense

Interest expense increased approximately 29% to $78,730 in the three months ended  September 30, 2010, from $60,865 for the same period in 2009. The primary reason for this increase was the acceleration of a portion of the amortization of the discount which resulted from the amending of a note payable during the nine months ended September 30, 2010.

Net Loss

For the reasons stated above, our net loss for the three months ending September 30, 2010 was $303,495, compared to a net loss for the three months ending September 30, 2009 of $462,165.  For the period since inception January 15, 1997 through September 30, 2010, our accumulated net loss is $22,431,670.

Nine Months Ended September 30, 2010 and September 30, 2009

Revenue

As a development stage pharmaceutical company, we have not generated any revenues and do not expect to generate any revenues for the foreseeable future.  

Costs and Expenses

Our general and administrative expenses decreased approximately 16% to $937,983  in the nine months ended September 30, 2010, from $1,123,207 for the same period in 2009.  For the nine months ended September 30, 2010, selling, general, and administrative expenses consisted  primarily of payroll and employee benefits of $396,070; consulting fees of $209,552; license fees of $125,000; legal and accounting fees of $69,990; non cash compensation of $27,750; insurance expense of $26,528; financing fees of $23,000and office rent expense of $6,939.    

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Interest Expense

Interest expense increased approximately 119% to $385,737in the nine months ended September 30, 2010, from $176,371 for the same period in 2009. The primary reason for this increase was the acceleration of a portion of the amortization of the discount which resulted from the amending of a note payable during the three months ended March 31, 2010.

Gain on Termination of License Agreement

As a result of  the termination of the license agreement with Ohio State University, during the nine months ended September 30, 2010, the Company had a gain on the termination of the agreement aggregating $497,072.  There was no similar activity in the comparable prior period.

Loss on Restructuring of Debt 

During the nine months ended September 30, 2010, the Company had a loss on the extinguishment of debt in the amount of $505,755; there is no such activity in the comparable period.  This loss is the result of the acceleration of the amortization of the discount on a convertible note payable pursuant to the modification to the terms of the note payable.

Net Loss

For the reasons stated above, our net loss for the nine months ending September 30, 2010 was $1,332,403, compared to a net loss for the nine months ending September 30, 2009 of $1,299,578.  For the period since inception January 15, 1997 through September 30, 2010, our accumulated net loss is $22,431,670.

Liquidity and Capital Resources

Net cash used in operating activities was $495,542  for the nine months ended September 30, 2010, compared to net cash used in operating activities of $178,503 for the same period in 2009. This increase was primarily the result of the restructuring of debt during the nine months ended September 30, 2010, and there was no comparable activity during the nine months ended September 30, 2009.  The increased cash flow was also directly attributable to the monies repaid to the Company by OSU as a result of the consensual termination of the OSU License Agreement.   From inception through September 30, 2010, cash used in operating activities was $4,484,766.

Net cash provided by investing activities was $310,000 for the nine months ended September 30, 2010, compared to $0 for the same period in 2009.  The primary reason for this increase was the termination of a license agreement, and there was no comparable activity during the nine months ended September 30, 2009.  From inception through September 30, 2010, we have generated $304,000 in cash from investing activities.

Net cash provided by financing activities was $184,720 for the nine months ended September 30, 2010, compared to $125,888  for  the same period in 2009.  The primary reason for the increase is during the nine months ended September 30, 2010, the Company issued convertible notes payable in the aggregate amount of $183,500, and there was no comparable activity during the nine months ended September 30, 2009. From inception through September 30, 2010, we have generated $4,185,571 in cash from financing activities.  We have financed our operations primarily through loans from shareholders and investors in our bridge financings and private placement equity offerings.

Management is seeking to raise additional funds through private debt and equity offerings to enable us to satisfy our cash requirements in the coming months and beyond and to fund ongoing research and development activities.  We are not self-supporting through internally generated capital, and rely exclusively on our continued ability to raise additional funds through private or public debt or equity financings to meet our ongoing cash needs.  

We will require substantial additional funding in order to meet our obligations to our licensors, continue our research and product development programs, including preclinical testing and clinical trials of our product candidates, and meet ongoing operating expenses.   We are currently delinquent with all of our principal licensors, and are subject to the ongoing risk that our licensing partners will begin to take aggressive measure in an attempt to terminate their license agreements with the Company and reclaim their technologies.  We expect to continue to incur substantial losses through at least the next several years and may incur losses in subsequent periods.  The amount and timing of our future losses are highly uncertain.  Our ability to achieve and thereafter sustain profitability wi ll be dependent upon, among other things, successfully developing, commercializing and obtaining regulatory approval or clearances for our technologies and products resulting from these technologies, which will require substantial additional funding, the availability of which is uncertain.

There is a substantial risk that we will prove unable to obtain financing sufficient to pay ongoing obligations or to fund our working capital and other cash requirements.  No assurance can be given that any such additional funding will be available or that, if available, can be obtained on terms favorable to us.  If we are unable to raise needed funds on acceptable terms, we will not be able to develop our products, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements.  A continued material shortage of capital may require us to take drastic steps such as restructuring our capital structure, reducing our levels of operations, disposing of selected assets, curtailing our development efforts or seeking an acquisition partner.  If cash is insuffici ent, we may not be able to retain our licensed technologies and may be forced to initiate bankruptcy proceedings and/or discontinue operations.

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Off-Balance Sheet Arrangements

We have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.

Critical Accounting Policies

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities.

We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our consolidated financial statements; we believe the following critical accounting policy involves the most complex, difficult and subjective estimates and judgments:

Stock Based Compensation   Effective January 1, 2006, the Company adopted ASC 718-10 utilizing the modified prospective approach. Prior to the adoption of ASC 718-10 we accounted for stock option grant in accordance with ASC718-10, and accordingly, recognized compensation expense for stock option grants.

Under the modified prospective approach, ASC 718-10 applies to new awards and to awards that were outstanding on January 1, 2006 that are subsequently modified, repurchased or cancelled. Under the modified prospective approach, compensation cost recognized in the nine months of fiscal 2006 includes compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of ASC 718-10, and compensation cost for all share-based payments granted subsequent to January 1, 2006 based on the grant-date fair value estimated in accordance with the provisions of ASC 718-10. Prior periods were not restated to reflect the impact of adopting the new standard.

 A summary of option activity under the Plan as of September 30, 2010, and changes during the period ended are presented below:

	Options		Weighted Average Exercise Price
Outstanding at December 31, 2009		2,350,000	$	2.50
Issued		-		-
Exercised		-		-
Forfeited or expired		-		-
Outstanding at September 30, 2010		2,350,000	$	2.50
Vested at September 30, 2010		2,350,000	$	2.50
Non-vested at September 30, 2010		-	$	-

There was no aggregate intrinsic value of options outstanding and exercisable at September 30, 2010. Aggregate intrinsic value represents the difference between the Company's closing stock price on the last trading day of the fiscal period, which was $0.02 as of September 30, 2010, and the exercise price multiplied by the number of options outstanding. As of September 30, 2010, total unrecognized stock-based compensation expense related to stock options was $0. The total fair value of options vested during the three and nine months September 30, 2010 and 2009 was $6,952 and $27,750, respectively.

Revenue Recognition.   Our policy is to recognize revenue over the period that we perform required activities under the terms of various agreements.  Revenue from transactions that do not require future performance obligations from us is recognized as contemplated in the agreements, typically upon acceptance and when collectability is reasonably assured.  Revenue resulting from the achievement of milestone events stipulated in the agreements will be recognized when the milestone is achieved.

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Research and Development. Research and development expenditures, including direct and allocated overhead expenses, are charged to expense as incurred.

Royalties.  We are required to remit royalty payments based on product sales to certain parties under our license agreements.  From time to time we have been in default under certain of our material license agreements with respect to our payment obligations and achievement of performance milestones; however, such license agreements are currently in good standing.

Long-Lived Assets.  Equipment is stated at acquired cost less accumulated depreciation.  Laboratory and office equipment are depreciated on the straight-line basis over the estimated useful lives (three to seven years).

Impairment of long-lived assets is recognized when events or changes in circumstances indicate that the carrying amount of the asset or related group of assets may not be recoverable.  If the expected future undiscounted cash flows are less than the carrying amount of the asset, an impairment loss is recognized at that time.  Measurement of impairment may be based upon appraisal, market value of similar assets or discounted cash flows.

Patent Costs and Rights.  Patent costs and rights are expensed as incurred.

Income Taxes.  As of September 30, 2010, we had aggregate unused net operating loss carryforwards of approximately $8,050,000.  These carryforwards may be used to reduce future tax liabilities and expire at various dates through 2027.  Our use of current net operating loss carryforwards may be substantially limited as a result of the change in ownership related to the Merger and the Offering.

Recent Accounting Pronouncements

For a summary of recently issued accounting standards, please see Note 1 to the consolidated unaudited financial statements included in Part I, Item 1 in this report.

Cautionary Notice Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) and the Private Securities Litigation Reform Act of 1995.  Forward-looking statements reflect the current view about future events and financial performance based on certain assumptions.  They include opinions, forecasts, projections, guidance, expectations, beliefs or other statements that are not statements of historical fact.  In some cases, forward-looking statements can be identified by words such as “may,” “can,” “will,” “should,” “could,” “expects,” “hopes,R 21; “believes,” “plans,” “anticipates,” “estimates,” “predicts,” “projects,” “potential,” “intends,” “approximates” or the negative or other variation of such terms and other comparable expressions.  Forward-looking statements in this report may include statements about:

•        future financial and operating results, including projections of revenues, income, expenditures, cash balances and other financial items;

•        capital requirements and the need for additional financing;

•         our ability to develop commercially viable products;

•         our intellectual property rights and similar rights of others, including actual or potential competitors;

•         the outcome of regulatory submissions and approvals and clinical trials;

•         the performance of our future products and their potential to generate revenues;

•         our beliefs and opinions about the safety and efficacy of any of our future products and the results of our studies;

•         development of new products;

•         growth, expansion and acquisition strategies;

•         current and future economic and political conditions;

•         overall industry and market performance;

•         competition;

•         management’s goals and plans for future operations; and

•         other assumptions described in this report underlying or relating to any forward-looking statements.

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The forward-looking statements in this report are only predictions.  Actual results could and likely will differ materially from these forward-looking statements for many reasons, including the risks described under “Risk Factors” and elsewhere in this report.  No guarantee about future results, performance or achievements can be made.  These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.  The safe harbors for forward-looking statements provided by the Private Securities Litigation Reform Act are unavailable to issuers of “penny stock.”  Our shares may be considered a penny stock and, as a result, the safe harbors may not be available to us.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act).  Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(e), our management has carried out an evaluation, with the participation and under the supervision of our Chief Executive Officer and Chief Financial Officer, Dr. Harris Lichtenstein, of the effectiveness of the design and operation of our disclosure controls and procedures, as of September 30,  2010.  Based upon, and as of the date of that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 31, 2010, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act was complete.

(b) 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) of the Exchange Act. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.  As required by Exchange Act Rule 13a-15(f), for the period covered by the Annual Report on Form 10-K for the year ended December 31, 2009, our management, under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial (and principal accounting) Officer conducted an evaluation of the effectiveness of our internal control over financial reporting with reference to the framework in Internal Control--Integr ated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on, and as of the date of that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2009, our internal controls over financial reporting were effective.  

(c)  Changes in Internal Control over Financial Reporting

There were no changes in internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially effect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are currently no formal legal proceedings involving the Company which are pending. The Company may be subject to other lawsuits, claims and other legal matters that arise in the ordinary course of conducting business, none of which, in management’s opinion, would be expected to have a material adverse impact on the Company’s financial condition, results of operations or cash flows.

ITEM 1A. RISK FACTORS

An investment in our common stock involves a high degree of risk.  You should carefully consider the risks and uncertainties described below and all other information contained in this report before deciding to invest in shares of  our common stock.  While all risks and uncertainties that we believe to be material to our business and, therefore, the value of our common stock are described below, it is possible that other risks and uncertainties that affect our business will arise or become material in the future.  If we are unable to effectively address these risks and uncertainties, our business, financial condition or results of operations could be materially and adversely affected.  In this event, the value of the common stock could decline and you could lose all or a portion of your investment.

Our auditors have substantial doubts as to our ability to continue as a going concern.

The auditor’s report on our financial statements for the year ended December 31, 2009 expresses an opinion that substantial doubt exists as to whether Omnimmune can continue to meet its ongoing obligations and remain in business.  Because Omnimmune has been issued an opinion by its auditors that substantial doubt exists as to whether we can continue as a going concern, it may be more difficult for us to attract investors, and we may not survive.  Our future is dependent upon our ability to obtain financing and upon future profitable operations from the development and commercialization of our products.  We may seek additional funds through private placements of equity or the incurrence of additional debt.  Our financial statements do not include any adjustments relating to the recoverabilit y and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event we cannot continue in existence.

We require additional financing, and an inability to raise the necessary capital or to do so on acceptable terms would jeopardize our ability to stay in business.

As of November 17, 2010 we had cash on hand totaling $924 compared to $5,627 as of December 31, 2009.  The Company has been unable to meet certain of its ongoing obligations, including payments due to senior management, employees, consultants, attorneys, noteholders, licensors and other key creditors.   Absent immediate additional infusions of capital, the Company does not have sufficient liquidity to meet its ongoing obligations on a timely basis, and must resort to consensual extensions and hope that creditors will refrain from pursuing default remedies with respect to delinquent obligations of the Company.  The limited amount of cash on hand jeopardizes the Company’s ability to fund operations and satisfy its ongoing obligations in a timely manner, including to the licensors of its core technologies. In addition, if we are unable in the near future to raise sufficient capital to fund storage costs related to the Company’s cell-lines, sequences and other samples and materials being held in frozen storage for future testing and to actually pursue the testing of those materials so as to advance the development of the technologies being licensed from third parties, there is a substantial risk that we will not be given access to the stored materials or that, through the passage of time, the stored samples will degrade or otherwise lose their value to the Company. 

We may seek to raise additional funds through public or private equity or debt financing, licensing and other agreements, a line of credit, asset sales or other arrangements.  However, there is a substantial risk that we will be successful in locating any additional funding, or that such funding, when needed, will be available on terms favorable to us or at all.  Furthermore, any additional equity or equity-related financing may be dilutive to our stockholders, and debt financing, if available, may subject us to restrictive covenants and significant interest costs.  We may also choose to obtain funding through licensing and other contractual arrangements.  Such agreements may require us to relinquish our rights to certain of our technologies, products or marketing territories.  

If we are unable to obtain additional capital, we may then attempt to preserve our available resources by various methods including deferring the satisfaction of commitments, reducing expenditures on our research and development programs or otherwise scaling back our operations. If we are unable to raise additional capital or defer costs, that inability would have a material adverse effect on our financial position, results of operations and prospects and our business could fail.  Our financial difficulties may also lead us to consider initiating bankruptcy proceedings, or could result in such proceedings being involuntarily commenced against us.

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We are or soon may be past due under certain of our material license agreements and other agreement and notes with respect to our payment obligations.  There is no assurance that we will receive extensions of these obligations or that we will not default under these agreements in the future; any such defaults could materially and adversely affect our business.

Each of our existing license agreements with third party collaborators requires us to make periodic payments to the licensors for the licensed rights, including, by way of example, upfront and annual license maintenance fees, royalties based on product sales utilizing the licensed technology, sublicensing royalties, milestone payments based on certain achievements as we conduct trials on the licensed products and progress them through the FDA approval process, and the reimbursement or payment of costs associated with prosecuting the patents subject to these license agreements.

Given our significant cash flow limitations and our inability in recent months to raise additional capital, we have had difficulties making required milestone and other payments under certain of our license agreements.  Based on voluntary concessions and extensions by the affected licensors, no notice of default has been issued under any of our license agreements as of the date of this Report.  However, there is no assurance that existing or future delinquencies will not lead to the issuance of a notice of default, that we will be able to remain current in the payment of our license fees on a go-forward basis, or that the respective licensors will cooperate in any requests for waivers or extensions. All of the license agreements require the licensors to give written notice of any payment default, which would then co mmence a period of between 30 days and 90 days, depending on the particular license agreement, during which time the Company could cure the default. If we default in the payment of any of our obligations to our licensors, there is no assurance that we will be in a position to cure any such defaults during the particular cure period. In that event, the continued existence and/or exclusivity of the affected license could be at risk.

Additionally, our license agreements provide for various performance and achievement milestones to ensure that we devote adequate personnel and financial resources to the commercialization of the licensed patents and processes.   For example, if we do not achieve the milestones in our agreements with The Allegheny-Singer Research Institute and Columbia University, the respective licensor can, with prior notice and an opportunity to cure, elect to terminate the subject license agreement or convert the exclusive worldwide license to a non-exclusive license.  With respect to our license agreement with IGR, we have to achieve net sales or sublicense revenue from products developed with the licensed patents to retain exclusivity under the license agreement, subject to our right to request two one-year extensions of the exclusive license with the payment of an additional license fee to the licensor. 

 In addition to our license agreements, a number of material obligations to certain lenders, including $550,000 in principal indebtedness owed to certain bridge lenders, significant monies owed to employees, consultants and attorneys, and other debt holders, are or will soon be past due , and the Company has no present wherewithal to satisfy these obligations.  Although no creditor has issued a notice of default under the applicable debt instrument or otherwise sought to enforce its remedies, there is no assurance that the holders of the Company’s debt, including certain related parties, will continue to acquiesce to any extensions or will not otherwise seek to pursue remedies they may have or will have once their obligations are past due.  Should the Company fail to either pay the amounts past due or wor k out consensual extensions and/or modifications of terms, it may default on such obligations, which could significantly and irreparably harm the Company’s business.

Substantial future issuances and sales of our common stock, the exercise and sale of our common stock underlying our warrants or options, or the conversion and sale of our common stock underlying our convertible promissory notes could result in substantial dilution for existing shareholders and could also depress our stock price.

The market price for our common stock could decline, perhaps significantly, as a result of issuances of a large number of shares of our common stock in the public market or even the perception that such issuances could occur.  Such issuances may be direct, as in the case of stock issued to investors as part of a financing or similar transaction, or indirect, in the form of the issuance of convertible debt or equity  securities that could be converted into common stock at prices substantially lower than the then-current trading price of the Company’s common stock.  In addition, the Company may reduce the conversion price associated with already issued securities to induce the holders of such securities to advance additional sums to the Company.  Because of the Company’s dire financial condition and difficulty raising funds needed to continue to fund ongoing operations, there is a significant likelihood that the Company will have to issue such dilutive securities in order to raise necessary funding.   Should the Company issue substantial additional stock, or notes or preferred stock convertible into the Company’s common stock, such issuances would have an adverse dilutive effect on all existing shares of the Company’s common stock and would likely cause the market price for our common stock to decline, perhaps significantly.

Furthermore, and as described above in Note 7, “Equity,” and as more fully described n the Company’s Form 8-K filed on January 26, 2010, the Company entered into a Term Sheet (the “Term Sheet”) for Debt Financing and Agreed Upon Restructuring with Margie Chassman (“Chassman”), pursuant to which (i) a total of $203,500 in convertible debt financing was raised by the Company at a conversion price of $0.01 per share (the “Convertible Debt Financing"), (ii) the conversion price related to approximately $800,000 in existing unsecured indebtedness to Chassman was fixed at $0.01 per share, (iii) Chassman agreed to a 2-year lock-up with respect to her convertible debt and underlying stock, subject to agreed upon quarterly leakage amounts, and (iv) management and certain angel investors received l imited anti-dilution protection that will result in the issuance to management of such additional shares as are required to maintain management’s specified collective ownership interest through the next $3.5 million in net financing and the angel investors to maintain their specified collective ownership interest through the initial round of up to $500,000 in convertible debt financing.

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The number of currently issued and outstanding shares of the Company’s stock stands at 9,355,921  as of September 30, 2010.  However, based on, among other things: (i) additional shares that will be issued to management and certain angel investors through the anti-dilution protection prescribed in the Term Sheet, (ii) the adjustment in the conversion price of certain previously issued notes, and (iii) the conversion price offered to investors in the Convertible Debt Financing, the number of additional shares of common stock of the Company that could be issued or has become issuable is greatly in excess of that number and, subject to an increase in authorized share capital to permit conversion, would substantially exceed the total number of authorized shares of Common Stock of the Company.  Although c ontractual prohibitions contained in the convertible notes themselves and in the Term Sheet would prevent the conversion of any debt or equity securities to the extent such conversion would result in an issuance of shares in an amount greater than the number of authorized shares of the Company, once the Company’s authorized share capital is increased, existing holders of common stock could experience substantial dilution if the Company’s convertible debt holders choose to convert their debt to equity.   Management plans, in due course, to seek appropriate shareholder authorization to increase the number of authorized shares of the Company to a number sufficient to accommodate conversion of all then-outstanding debt and equity securities.  This would not only result in a substantial increase in the number of shares of common stock issued, thereby diluting existing shareholders significantly, it could also result in a significant adverse impact on the company’s share price.

Funding for early stage biotechnology companies has been severely curtailed and may continue to prove challenging for the foreseeable future.

Over the past two years, funding for early stage biotechnology companies such as ours has been drastically reduced from previous levels, and traditional sources of financing have all but disappeared.  There is a substantial risk that the ongoing economic situation will worsen or continue for an extended period, which could exacerbate funding difficulties for Omnimmune and other similarly situated companies.  The current economic climate substantially increases the risk that Omnimmune will not be able to raise sufficient funding levels to execute on its business plan or remain current on its obligations to its licensors and other creditors.

Additional Risk Factors are set forth in the Company’s most recent filing under Form 10-K dated May 17, 2010, covering the calendar year ended December 31, 2009.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

For more information about unregistered sales of our securities, see Item 1, Note 8 of this report for a discussion of our sales of convertible promissory notes and Units.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

EXHIBIT NO.	NAME OF EXHIBIT
2.1	Agreement of Merger, dated as of August 6, 2008, by and between Roughneck Supplies, Inc. and Omnimmune Holdings, Inc. (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed on August 12, 2008).
2.2	Agreement of Merger and Plan of Reorganization, dated as of August 7, 2008, by and among the Omnimmune Holdings, Inc., Omnimmune Acquisition Corp., a wholly owned subsidiary of the Company, and Omnimmune Corp. (incorporated by reference to Exhibit 2.2 to our Current Report on Form 8-K filed on August 12, 2008).
2.3	Certificate of Merger, effective August 6, 2008, merging Roughneck Supplies, Inc. with and into Omnimmune Holdings, Inc. (incorporated by reference to Exhibit 2.3 to our Current Report on Form 8-K filed on August 12, 2008).
2.4	Articles of Merger, effective August 7, 2008, merging Omnimmune Corp. with and into Omnimmune Acquisition Corp. (incorporated by reference to Exhibit 2.4 to our Current Report on Form 8-K filed on August 12, 2008).
4.1	Second Amended and Restated Convertible Demand Promissory Note
10.1	Registration Rights Agreement, dated as of August 7, 2008, by and among Omnimmune Holdings, Inc. and the stockholders of Omnimmune Holdings, Inc. parties thereto (incorporated by reference to Exhibit 10.15 to our Current Report on Form 8-K filed on August 12, 2008).
10.2	Form of Lock-Up Agreement between the Company and executive officers and certain stockholders (incorporated by reference to Exhibit 10.18 to our Current Report on Form 8-K filed on August 12, 2008).
10.3	Amendment and Pledge dated July 31, 2008, to Gift Agreement entered into as of April 18, 2008, by and among The Ohio State University Medical Center, The Ohio State University Foundation and Omnimmune Corp. (incorporated by reference to Exhibit 10.23 to our Current Report on Form 8-K filed on August 12, 2008).
10.4	License Termination Agreement dated June 18, 2010 with The Ohio State University.
31.1	Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Chief Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

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

	OMNIMMUNE HOLDINGS, INC.
Dated: November 22, 2010	/s/ HARRIS A. LICHTENSTEIN
	Harris A. Lichtenstein
	Chief Executive Officer

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