ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

The following discussion of our plan of operations should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this document.

OVERVIEW

We are a development-stage biopharmaceutical company focusing on the development of proprietary, cell-targeted therapeutic products for the treatment of neuromuscular and neurodegenerative diseases. Our goal is to increase the quality and quantity of life of people suffering with these diseases. Primary efforts are currently being focused on moving our lead product into phase I/II clinical trials for Duchenne muscular dystrophy. Our broad platform technology also includes the development of products for multiple sclerosis, amyotrophic lateral sclerosis and chronic inflammatory demyelinating polyneuropathy.

CAPITAL RESOURCES AND CASH REQUIREMENTS

During the three months ended March 31, 2006, the Company exhausted its cash resources and has not been able to remain current with respect to the payment terms of its operating obligations. In addition, the Company has substantial convertible debt obligations with terms that require payment during the next nine months. Currently, our outstanding debt includes $2,000,000 plus accrued interest of December 2005 Convertible Debentures due as to $1,000,000 on each of December 9, 2006 and December 28, 2006, and an aggregate of $698,736 plus accrued interest of convertible notes, of which $448,736 plus accrued interest is due on July 3, 2006 and $250,000 plus accrued interest is due on December 9, 2006.

During the three months ended March 31, 2006, the Company received proceeds from exercises of stock options of $200,000. Subsequent to March 31, 2006, the Company entered into negotiations for additional funding and has received advance funding of $756,000 as of May 16, 2006, in the form of unsecured loans. On May 3, 2006, the Company entered into a term sheet in connection with a private offering of one year 6% convertible notes in an aggregate principal amount of up to $6,000,000. In addition, on April 28, 2006, the Company entered into a letter agreement with Oppenheimer & Co. Inc. and has retained the firm as its strategic advisor to assist in the Company's effort to explore various strategic alternatives to enhance shareholder value.

The Company is continuing to seek additional capital, collaborative partners, joint ventures and strategic alliance agreements both within the United States and abroad in an effort to continue the development of its proposed products; however, there are currently no firm commitments in place for new capital nor has the Company identified any prospective joint venture partners or participants with which it would enter into a strategic alliance arrangement. Absent additional funding from private or public equity or debt financings, collaborative or other partnering arrangements, or other sources, the Company will be unable to conduct its product development efforts as planned, and may need to curtail its development plans, cease operations or sell assets. These matters raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.

Primarily as the result of recording a change in the fair value of its derivative financial instruments of $2,637,732, offset by stock-based compensation expense of $617,277 and non-cash interest expense from the amortization of the beneficial conversion feature in certain convertible debt instruments of $419,876, the Company recorded net income for the three months ended March 31, 2006 of $329,007. The Company used net cash flows in its operating activities of $573,337 during the three months ended March 31, 2006. The Company's working capital deficiency amounted to $6,427,617 and its development stage accumulated deficit amounted to $37,587,088 at March 31, 2006. The Company expects to continue incurring losses for the foreseeable future due to the inherent uncertainty that is related to establishing the commercial feasibility of pharmaceutical products. The Company will require substantial additional funding to support the development of its proposed products and fund its operations while it continues its efforts to execute its business plan.

Our planned activities for the foreseeable future will continue to require us to engage consultants and contract research organizations to support our clinical development programs, and additional personnel, including management, with expertise in areas such as preclinical testing, clinical trial design and management, regulatory affairs, manufacturing and marketing. We will need to raise substantial additional capital for these purposes and to continue funding the development of Myodur and our other products.

There can be no assurance that our plans to obtain additional financing to fund operations will be successful or that the successful implementation of the business plan will actually improve our operating results. If these financing programs are not successful in raising the capital we require to execute our development plans, it may be necessary to curtail, or cease entirely our operations.

RESEARCH, DEVELOPMENT AND MANUFACTURING

Currently, our primary efforts are raising capital and moving our lead product into phase I/II clinical trials for Duchenne muscular dystrophy. If we are successful in raising capital, we plan to use our available cash to continue the development of our technologies, which currently is primarily focused on preparing for and executing our phase I/II human clinical trial for Myodur, if approved by the FDA. As resources permit, we may also fund other development of Myodur or any of our other technologies. We presently expect to initiate human clinical trials by the end of 2006.

We currently rely on third party contract research organizations, service providers, and suppliers for support in research and development and pre-clinical, toxicology and clinical testing. In addition, we do not have, and do not intend to establish, our own manufacturing facilities to produce our product candidates in the near or mid-term. We outsource the manufacturing of our proposed product, Myodur, to contract manufacturers. In April 2005, we entered into an exclusive manufacture and supply agreement with Bachem AG ("Bachem") whereby Bachem is entitled to receive royalty payments in the amount of the lesser of 5% of "net sales" (as defined in the agreement) or $10 million, $15 million or $25 million in the first, second and third (and thereafter) years of the agreement, respectively. As of March 31, 2006, we have sufficient materials required for our initial human clinical trials. We do not have sufficient capital to purchase all the materials necessary to complete our long-term toxicology studies or to complete all of our human clinical trials in order to file for approval to market our proposed product, Myodur.

OFF BALANCE SHEET ARRANGEMENTS

Currently, we do not have any off balance sheet arrangements which would require disclosure in our financial statements.

EMPLOYEES

As of May 16, 2006, we had seven employees, all of whom are full-time employees, one of whom focuses on and coordinates our research program, four that focus on and coordinate clinical and regulatory strategy and operations, and two in management, finance, and administration. Three of our employees have doctorate and/or M.D. degrees. As our current business strategy is primarily to coordinate research, clinical development, and manufacturing activities by third parties, we do not anticipate hiring a significant number of additional employees over the next twelve months.

PROPERTIES

We currently lease our executive offices in Hunt Valley, Maryland consisting of approximately 5,200 square feet for approximately $7,200 per month. This lease expires on December 31, 2006 and we believe it should provide sufficient space for our clinical, regulatory and other administrative functions during the remaining term of the lease. We are currently evaluating our needs for office space beyond December 31, 2006 and laboratory space. If financing is available, we may secure laboratory facilities for our own internal research activities. We are currently conducting research in various third party commercial and academic settings, and we plan to continue this practice and expand our use of third-party research organizations and facilities to meet specific needs.