Radiotherapy is the most common modality for treating human cancers. Approximately 50%-60% of cancer patients need radiotherapy at some stage of treatment, either for curative or palliative purposes. To obtain optimal results, a judicious balance between the total dose of radiotherapy delivered and the threshold of the surrounding normal critical tissues is required. In order to obtain better control with a higher dose, normal tissue must be protected against radiation injury. Thus, the role of radioprotective compounds is very important in clinical radiotherapy.

The U.S. market for anticancer therapeutics is large and growing. The American Cancer Society estimates overall annual cancer costs in the United States at $189.8 billion: $69.4 billion for direct medical costs, $16.9 billion for morbidity costs, and $103.5 billion for mortality costs. Treatment of breast, lung and prostate cancer accounts for over half of the direct medical costs. The market for anticancer drugs, valued at more than $15 billion in 1998, was projected to nearly double by 2003, and, ultimately, exceeded this projection.

Renal cell carcinoma, or RCC, is a niche cancer that accounts for 3% of all cancer cases in the United States, but is the most common type of kidney cancer in adults. In the United States, approximately 25,000 — 30,000 patients are diagnosed with RCC annually. For early-stage cancer, the five-year survival rate is 60% to 70%. If the cancer has spread to the lymph nodes, the five-year survival rate is 5% to 15%. If it has spread to other organs, the five-year survival rate is less than 5%.

Extraordinary radioprotective properties, an excellent toxicity profile, outstanding stability and inexpensive production of Protectan CBLB502 make this drug product a primary candidate for entering formal preclinical studies. Initially, Protectan CBLB502 will be developed for non-medical purposes — as a radioprotectant antidote for the protection of people from severe doses of ionizing radiation. This drug development strategy complies with recently adopted FDA rules for investigational drugs that address situations such as radiation injury, where it would be unethical to conduct efficacy studies in humans.

The Company is developing drugs to treat one of the most treatment resistant types of cancer — renal cell carcinoma, or RCC. Unlike many cancer types that frequently mutate or delete p53, one of the major tumor suppressor genes, RCC belongs to a rare category of cancers that typically maintain a wild type form of this protein. Nevertheless, RCC cells are resistant to apoptosis, suggesting that in spite of its normal structure, p53 is functionally disabled. The Company has established a drug discovery program to identify small molecules that selectively kill tumor cells by restoring the normal function to functionally impaired p53 in RCC. This program yielded a series of chemicals with the desirable properties named curaxins (CBLC100 series). Curaxins represent a novel class of anticancer drugs with a unique combination of therapeutic properties. Unlike conventional chemotherapy, they kill tumor cells by simultaneously hitting two important molecular targets — activating p53 and deactivating NF-kB — rather than through DNA damage.

One of the curaxins from the 9-aminoacridine group is a long-known anti-infective compound known as quinacrine which the Company refers to as Curaxin CBLC102. It has been used for over 40 years to treat malaria, osteoarthritis and autoimmune disorders. But the Company has discovered new mechanisms of action for quinacrine in the area of apoptosis. The Company has observed that Curaxin CBLC102 behaves as a potent NF-kB suppressor and activator of p53 in RCC and several other types of cancer cells. It has favorable pharmacological and toxicological profiles and demonstrates the anticancer effect in transplants of human cancer cells into primates. These features make Curaxin CBLC102 the Company’s prime IND candidate among other curaxins. The drug candidate will be used for Phase II clinical trials to treat RCC, soft-tissue sarcoma and hormone refractory prostate cancer patients.

Operating expenses increased from $3,155,784 for the year ended December 31, 2004 to $3,626,664 for the year ended December 31, 2005.

Net income (loss) was $(2.5 million) for the year ended Dcember 31, 2005, compared to $(2.5 million) for the year ended Dcember 31, 2004.

Net interest expense (income) was $(101,378) for the year ended Dcember 31, 2005, compared to $3,699 for the year ended Dcember 31, 2004.