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Filed by the Registrantx

Check the appropriate box:

x	Preliminary Proxy Statement

o	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

o	Definitive Proxy Statement

o	Definitive Additional Materials

o	Soliciting Material Pursuant to §240.14a-12

eXegenics, Inc.

 

 

Payment of Filing Fee (Check the appropriate box):

x	No fee required

o	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

1)

Title of each class of securities to which transaction applies: _________

3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule O-11 (set forth the amount on which the filing fee is calculated and state how it was determined): _____________________________________________

4)

Proposed maximum aggregate value of transaction: ________________

5)

Total fee paid: ______________________________________________

o	Fee paid previously with preliminary materials

o	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by Registration Statement number, or the Form or Schedule and the date of its filing.

1)

Amount Previously Paid: ______________________________________

2)

Form, Schedule or Registration Statement No.: ____________________

3)

Filing Party: ________________________________________________

4)

Date Filed: __________________________________________________

 

None of the Investors is currently an affiliate of eXegenics. The 19,440,491 shares of eXegenics common stock issued to the Investors will equal 51% of the outstanding capital stock of eXegenics on the closing date of the stock sale, on a fully-diluted basis.

 

 

 

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Anticipated greater access to future business opportunities;

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Management and investment experience of Phillip Frost, M.D., the sole trustee of Frost Gamma Investment Trusts, an Investor who will purchase 15,490,546, or approximately 80%, of the shares of eXegenics common stock being sold;

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the likelihood that eXegenics will, as a result of its receipt of the proceeds from the sale, have better opportunities for future growth; and

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the ability of eXegenics stockholders to continue to participate in potential business opportunities identified by eXegenics.

 

The eXegenics board of directors believes that the terms of the stock sale are fair to the eXegenics stockholders and in their best interests and recommends that eXegenics stockholders vote FOR the sale of shares of eXegenics common stock pursuant to the stock purchase agreement, FOR the amendment to the certificate of incorporation of eXegenics to increase the number of authorized shares of common stock and FOR the issuance of 50,000 shares of eXegenics common stock to each of Messrs. Paganelli and Baron pursuant to the stock grants.

 

The Stock Purchase Agreement (see page______)

 

The stock purchase agreement is attached as Annex A to this Proxy Statement. You are encouraged to read the stock purchase agreement as it is the legal document that governs the stock sale.

 

Purchase price per share of eXegenics common stock (see page ________)

 

 

 

 

 

Neither the shares of eXegenics common stock to be issued in the stock sale, or the shares to be issued to Messrs. Paganelli and Baron will be registered under the Securities Act of 1933, as amended (the “Securities Act”). As a result these shares will be “restricted securities” within the meaning of the Securities Act and may not be resold in the public

 

 

 

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Approval of the stock sale and the grant of shares of eXegenics common stock to Messrs. Paganelli and Baron requires the affirmative vote of a majority of the shares present in person or by proxy at the eXegenics special meeting and entitled to vote.

 

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Approval of the amendment to the certificate of incorporation of eXegenics to increase the number of shares of common stock eXegenics is authorized to issue from 30,000,000 to 75,000,000 requires the affirmative vote of the holders of a majority of the outstanding shares of eXegenics common stock and Series A preferred stock entitled to vote, voting as a single class, and the affirmative vote of a majority of the outstanding shares of eXegenics common stock entitled to vote, voting as a separate class.

 

 

 

 

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in favor of the sale of shares of eXegenics common stock pursuant to the stock purchase agreement, and

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in favor of the amendment to the certificate of incorporation of eXegenics to increase the number of authorized shares of eXegenics common stock to 75,000,000.

 

This post-stock sale voting agreement will continue for a period of three years from consummation of the stock sale.

 

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approval of the stock sale by the eXegenics stockholders;

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approval of the amendment to the certificate of incorporation of eXegenics to increase the number of shares of common stock eXegenics is authorized to issue from 30,000,000 to 75,000,000;

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absence of all legal prohibition on completion of the stock sale; and

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obtaining all necessary consents and approvals.

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performance by the Investors of their obligations required to be performed by them at or prior to closing to the extent specified in the stock purchase agreement; and

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accuracy as of closing of the representations and warranties made by the Investors to the extent specified in the stock purchase agreement.

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performance by eXegenics of the obligations required to be performed by it at or prior to closing to the extent specified in the stock purchase agreement; and

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accuracy as of closing of the representations and warranties made by eXegenics to the extent specified in the stock purchase agreement.

 

 

 

 

(1)

subject to certain exceptions set forth in the stock purchase agreement, the stock sale has not been completed by January 31, 2007;

 

 

(2)

there is a permanent legal prohibition to closing the stock sale; or

 

(3)

eXegenics stockholders fail to approve the stock sale and the amendment to the certificate of incorporation of eXegenics at a duly held meeting.

 

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the Investors shall have breached their representations and warranties in the stock purchase agreement, or there has been a breach by the Investors of their covenants or agreements contained in the stock purchase agreement, which breach or failure to perform would cause failure of a condition to the closing of the stock sale and which is not cured or curable within ten days of notice to the Investors of such breach or failure to perform.

 

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eXegenics shall have breached its representations and warranties in the stock purchase agreement, or there has been a breach by eXegenics of its covenants or agreements contained in the stock purchase agreement, which breach or failure to perform would cause failure of a condition to the closing of the stock sale and which is not cured or curable within ten days of notice to eXegenics of such breach or failure to perform.

 

 

 

In deciding to approve the stock sale, the eXegenics board of directors considered the opinion of its financial advisor, Empire Valuation Consultants, LLC, that, as of July 26, 2006, the consideration to be paid by the Investors to eXegenics in connection with the stock sale is fair to eXegenics and the holders of its common stock and Series A preferred stock from a financial point of view. This opinion is attached to this Proxy Statement as Annex B.

 

 

Q:	On what matters are eXegenics stockholders being asked to vote?

 

 

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the sale of 19,440,491 shares of eXegenic’s common stock to the Investors pursuant to the stock purchase agreement, described under “The Stock Purchase Agreement” beginning on page [____] and “Special Meeting Proposals-Item 1-Stock Sale” beginning on page [____];

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the amendment to the certificate of incorporation of eXegenics to increase the number of authorized shares of common stock from 30,000,000 shares to 75,000,0000 shares, as described under "Special Meeting Proposals—Item 2—Amendment to the Certificate of Incorporation of eXegenics" beginning on page [___];

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the grant of 50,000 shares of eXegenics common stock to each of John A. Paganelli, our interim chief executive officer, secretary and chairman of the eXegenics board of directors, and Robert Baron, an eXegenics director, as described under “Special Meeting Proposals - Item 3 - Grant of Shares of Common Stock to Insiders” beginning on page [____]; and

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such other matters as may properly come before the special meeting, including the approval of any adjournment of the special meeting.

 

Q:	What will happen in the stock sale?

 

A:

In the stock sale, eXegenics will sell and issue an aggregate of 19,440,491 shares of eXegenics common stock to the Investors. As required by the stock purchase agreement, immediately following the completion of the stock sale, the Investors will own 51% of eXegenics outstanding capital stock on a fully-diluted basis. This number is based upon the outstanding shares of eXegenics common stock on June 30, 2006 and assumes the conversion of all outstanding eXegenics Series A preferred stock, which are convertible on a share-for-share basis into shares of eXegenics common stock, the exercise of all outstanding options or warrants to purchase shares of eXegenics common stock and the issuance of 50,000 shares of eXegenics common stock to each of Messrs. Paganelli and Baron immediately prior to the closing of the stock sale.

 

Q:	As a current stockholder of eXegenics will I receive any consideration in connection with the stock sale?

 

A:

No. The stock sale transaction involves the sale of shares of eXegenics common stock to the Investors. The current stockholders of eXegenics are not entitled to any compensation or other consideration in connection with the stock sale. In fact, if the stock sale is consummated, the issuance of 19,440,491 additional shares of eXegenics common stock to the Investors will have a dilutive effect on the current eXegenics stockholders, because as the number of shares of eXegenics common stock issued and outstanding increases, the percentage ownership interests of the current stockholders of eXegenics decreases.

 

Q:	Why are shares of eXegenics common stock being issued to John Paganelli and Robert Baron?

A:

In early 2004, the board of directors of eXegenics appointed Messrs. Paganelli and Baron to serve as the members of the Business Opportunities Search Committee to identify and negotiate strategic opportunities for eXegenics. In March of 2005, and in connection with the services rendered to the Business Opportunities Search Committee, the board awarded each a stock bonus of 50,000 shares, the issuance to be contingent upon a change of control transaction and stockholder approval of the grants. You should read the section titled "Interests of eXegenics Executive Officers and Directors in the Stock Sale " at page [____] for a discussion of these interests and the interests of others in the stock sale.

 

 

Q:	When and where is the stockholder special meeting?

 

A:	The special meeting will take place on [___________], 2006 at 9:00 a.m., local time, at the corporate offices of eXegenics, 1250 Pittsford-Victor Road, Building 200, Suite 280, Pittsford, New York 14534.

 

Q:	Does the board of directors of eXegenics recommend voting in favor of the proposals to be considered at the special meeting?

A:

Yes, after careful consideration, eXegenics’s board of directors, by unanimous vote, has determined the stock sale to be fair to the eXegenics stockholders and in their best interests and declared the stock sale advisable. The eXegenics’s board of directors approved the stock purchase agreement and recommends that the eXegenics stockholders approve the sale of shares of eXegenics common stock to the Investors pursuant to the stock purchase agreement. In considering the recommendation of the eXegenics board of directors with respect to the stock sale, eXegenics stockholders should be aware that certain directors and officers of eXegenics have certain interests in the stock sale that are different from, or are in addition to, the interests of eXegenics stockholders generally. We encourage you to read the section titled "Interests of eXegenics Executive Officers and Directors in the Stock Sale " at page [____] for a discussion of these interests.

The eXegenics board of directors also determined, by unanimous vote, that the amendment to the certificate of incorporation of eXegenics is advisable and in the best interests of eXegenics and its stockholders. As described below under “Is the approval of the amendment to the certificate of incorporation of eXegenics required for the stock sale”, the increase in authorized shares of eXegenics common stock is necessary to consummate the stock sale. Additionally, the board of directors has determined that it is in the best interests of eXegenics and its stockholders to have additional shares of common stock available for future issuance in connection with possible acquisitions, equity financing requirements and opportunities and other general corporate purposes. Except for the issuance of shares of eXegenics common stock in connection with the stock sale, issuances in connection with the conversion of shares of eXegenics Series A preferred stock, issuances in connection with the exercise or conversion of outstanding warrants or options, and the issuance of eXegenics common stock to Messrs. Paganelli and Baron pursuant to the stock grants, eXegenics has no present commitments or agreements that will require or involve the future issuance of any additional shares of common stock.

Q:	How do I vote?

A:	You may vote by mail by completing, signing and dating your proxy card and returning it in the enclosed, postage-paid and addressed envelope. If you mark your voting instructions on the proxy card, your shares will be voted:

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as you instruct, and

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according to the best judgment of the proxy holders if a proposal comes up for a vote at the special meeting that is not on the proxy card or for the adjournment of the special meeting.

 

 

 

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FOR the sale of shares of eXegenics common stock pursuant to the stock purchase agreement, FOR the amendment to the certificate of incorporation of eXegenics to increase the number of authorized shares of common stock to 75,000,000, and FOR the issuance of 50,000 shares of eXegenics common stock to each of Mr. Paganelli and Mr. Baron; and

 

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according to the best judgment of the proxy holders if a proposal comes up for a vote at the special meeting that is not on the proxy card or for the adjournment of the special meeting.

 

 

Q:	What do I do if I want to change my vote?

 

A:

Just send in a later-dated, signed proxy to eXegenics’s secretary, John A. Paganelli, before the special meeting. Or, you can attend the special meeting in person and vote. You may also revoke your proxy by giving written notice of revocation to eXegenics’s secretary at eXegenics’s corporate offices prior to the special meeting.

 

Q:	If my shares are held in "street name" by my broker, bank or other nominee, will my broker, bank or other nominee vote my shares for me?

 

A:	If you do not provide your broker, bank or nominee with instructions on how to vote your "street name" shares, your broker, bank or nominee:

 

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will be permitted to vote on the adoption of the stock sale and the amendment to the certificate of incorporation of eXegenics, and

 

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will not be permitted to vote on the issuance of shares of eXegenics common stock to Messrs. Paganelli and Baron.

 

 

 

Q:	What is required for a quorum at the special meeting?

 

A:

The holders of a majority of the outstanding shares of eXegenics voting capital stock, that is eXegenics common stock and eXegenics Series A preferred stock, entitled to vote must be present, in person or by proxy, to constitute a quorum at the special meeting. Abstentions and broker non-votes (shares held by a broker, bank or nominee that does not have the authority to vote on a matter and has not received instructions from the beneficial owner) are counted as present in determining whether the quorum requirement is met.

 

Q:	What appraisal rights do stockholders have in connection with the matters before the special meeting?

 

A:	The holders of eXegenics common stock and Series A preferred stock do not have any right to an appraisal of the value of their shares in connection with any of the matters before the special meeting.

 

Q:	Is the approval of the amendment to the certificate of incorporation of eXegenics required for the stock sale?

A:

Yes. The amendment to the certificate of incorporation of eXegenics to increase the number of authorized shares of common stock from 30,000,000 to 75,000,000 is required to consummate the stock sale. Under the stock purchase agreement, eXegenics is required to sell and issue to the Investors that number of shares of eXegenics common stock equal to 51% of the outstanding capital stock of eXegenics on the closing date of the stock sale on a fully diluted basis. eXegenics

 

 

 

The approval of the stock sale does not constitute an approval of the stock grants to Messrs. Paganelli and Baron. Stockholders may vote FOR the stock sale and AGAINST the stock grants.

 

Q:	What happens if I do not return a proxy card or otherwise provide proxy instructions?

 

A:

The failure to return your proxy card could be a factor in establishing a quorum for the special meeting. If your shares of eXegenics common stock and/or Series A preferred stock are held in “street name”, the failure to provide your broker with instructions on how to vote your shares on the stock grant proposal will be the equivalent of a vote against the grants.

 

Q:	When do you expect the stock sale to be completed?

 

A:

Assuming approval of the amendment to the certificate of incorporation of eXegenics to increase the number of authorized shares of eXegenics common stock, we expect to complete the stock sale as soon as possible following the special meeting and the filing of the amendment to the certificate of incorporation of eXegenics with the Delaware Secretary of State. However, the exact timing of completion of the stock sale cannot be determined yet because completion of the stock sale is subject to a number of conditions.

 

Q:	How many authorized but unissued shares of eXegenics common stock will exist after the closing of the stock sale?

 

A:	Following the closing of the stock sale and, assuming the charter amendment is approved to increase in the authorized shares of eXegenics common stock from 30,000,000 to 75,000,000, there will be approximately 38,000,000 shares of eXegenics common stock authorized but unissued.

 

Q:	Who do I call if I have questions about the special meeting?

A:	If you have any questions about the matters to be considered at the special meeting or about procedures for voting, or if you need additional copies of this Proxy Statement or the enclosed proxy card, you should contact:

 

 

 

 

The board of directors of eXegenics has unanimously determined that the stock purchase agreement and the stock sale are fair and in the best interests of eXegenics and its stockholders. Accordingly, the board of directors has unanimously adopted and approved the stock purchase agreement and unanimously recommends that the holders of eXegenics common stock and Series A preferred stock vote “FOR” the sale of shares of eXegenics common stock pursuant to the stock purchase agreement. In evaluating and approving the stock sale, the board of directors considered the analysis provided by its financial advisor - Empire Valuation Consultants, LLC - , consulted with eXegenics’s legal counsel, reviewed a significant amount of information and considered a number of factors, including the following:

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the purchase price to be received by eXegenics for its shares of common stock in the context of a change-in-control transaction, which was determined by the board of directors to be fair;

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the fact that the purchase price constituted a premium over the last sale price per share of eXegenics common stock ($.39) reported by the Nasdaq Over-the-Counter Bulletin Board on July 25, 2006, the last transaction prior to the July 26, 2006 board of directors meeting;

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the oral opinion of Empire Valuation Consultants, LLC, followed by its written opinion, with respect to its determination as to the fairness of the purchase price consideration, from a financial point of view, to eXegenics and its stockholders, and the analyses, methodologies and conclusions of Empire Valuation underlying its opinion;

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the likelihood that the stock sale could be consummated, noting the timing of and conditions to the stock sale;

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the terms and conditions set forth in the stock purchase agreement;

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the fact that eXegenics had been in contact with several other potential strategic partners or acquirers and that such persons had been afforded ample opportunity to submit proposals for consideration by the board of directors; and

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the business reputation and investment experience of Phillip Frost, M.D., the sole trustee of Frost Gamma Investments Trust, one of the Investors, and the board of director’s belief that Dr. Frost will assist in identifying business opportunities for eXegenics. Brief biographical information as to Dr. Frost follows.

 

The eXegenics board of directors retained Empire Valuation Consultants, LLC to deliver an opinion to the board of directors as to the fairness of the purchase price to eXegenics and the eXegenics stockholders from a financial point of view. Empire Valuation was selected by eXegenics because of its knowledge, expertise and reputation. No limitations were imposed by the eXegenics board of directors on Empire Valuation with respect to the investigation made or the procedures followed by it in arriving at its opinion.

The full text of Empire Valuation’s opinion is attached as Annex B and is incorporated into this Proxy Statement by reference. That opinion describes the procedures followed by Empire Valuation in arriving at its opinion, as well as certain assumptions made by Empire Valuation.

 

Investment Value.  The investment value, which is sometimes referred to as the income value or earnings value, establishes a range of values of a business based on various methods. One investment value method frequently used estimates the present value of an enterprise’s future earnings or cash flow. Another recognized investment value method is to determine the level of current annual benefits (i.e., earnings, cash flow, dividends, etc.), and then capitalize one or more of the benefit types using an appropriate capitalization rate. Yet another method of calculating investment value is a cash flow analysis of the ability of an enterprise to service acquisition debt obligations (at a certain price level) while providing sufficient earnings for reasonable dividends and capital adequacy requirements. In connection with the cash flow analysis, the return on investment that would accrue to a prospective buyer at the transaction value is calculated.

Market Value.  Market value is generally defined as the price, established on an "arms-length" basis, at which knowledgeable, unrelated buyers and sellers would agree. The "hypothetical" market value for the stock of a corporation is normally determined by comparison of certain financial data of similarly situated publicly traded corporations, adjusting for significant differences in financial performance criteria and for any lack of marketability or liquidity. The market value in connection with the evaluation of control is determined by the sales of comparable companies.

Net Asset Value. NAV is the value of the net equity of an entity, after adjusting the company’s assets and liabilities from its stated cost basis to its estimated market value. Empire Valuation gave consideration to the Company’s stock portfolio, prepaid expense, stock subscription receivable, NOL carryforward, accounts payable, accrued expenses and its continued lawsuit with a former employee. Empire Valuation also gave consideration to the prospective market value of eXegenics shell corporation exclusive of its other assets and liabilities.

Conclusion.  It is Empire Valuation’s opinion that the aggregate cash purchase price of $8,613,000 or $0.44 per share for a 51% interest in eXegenics is fair from a financial perspective to the public shareholders. In arriving at its opinion, Empire Valuation, based on its experience and judgment as an independent appraiser, subjectively weighed the values arrived at using the market value, investment value and net asset value appraisal methods previously summarized,

 

The following table sets forth the high and low sales prices of eXegenics common stock for each fiscal quarter of the previous two years and the first two quarters of this year, as reported by the Nasdaq Over-the-Counter Bulletin Board:

 

		High			Low
2006:
First Quarter		$	0.46		$	0.39
Second Quarter			0.45			0.38
2005:
First Quarter		$	0.45		$	0.32
Second Quarter			0.47			0.35
Third Quarter			0.44			0.36
Fourth Quarter			0.46			0.39
2004:
First Quarter		$	1.09		$	0.68
Second Quarter			1.32			0.68
Third Quarter			0.85			0.35
Fourth Quarter			0.70			0.21

In considering the recommendation of the eXegenics board of directors that the eXegenics stockholders vote FOR the sale of shares of eXegenics common stock pursuant to the stock purchase agreement, stockholders of eXegenics should be aware that certain members of the eXegenics board of directors and members of its management team have interests in the stock sale that differ from, or are in addition to, those of the eXegenics stockholders generally. The eXegenics board of directors was aware of these potential conflicts during its deliberations on the merits of the stock sale and in making its decision to approve the stock sale, the stock purchase agreement and the related transactions and, in determining to recommend to the stockholders of eXegenics that they vote FOR the sale of shares of eXegenics common stock pursuant to the stock purchase agreement.

eXegenics Board Membership

Pursuant to a voting agreement to be executed by the Investors, each of the Investors will agree, for a period of three years after the closing of the stock sale, to vote their shares of eXegenics common stock and any successor in favor of the election as directors of John A. Paganelli, interim chief executive officer, secretary and chairman of the board of directors, and Robert Baron, a director of eXegenics, to the board of directors of eXegenics.

Stock Bonus

Each of Mr. Paganelli and Mr. Baron were awarded in 2005 contingent stock bonuses of 50,000 shares of eXegenics common stock in connection with their services to the Business Opportunities Search Committee of the board of directors. These awards are contingent upon the consummation of a change-in-control transaction - the stock sale constitutes a change in control transaction - and approval by the eXegenics stockholders of the stock grants. One of the proposals for consideration by the eXegenics stockholders at the special meeting is approval of the stock grants.

The approval of the stock sale does not constitute an approval of the stock grants, and stockholders may vote FOR the stock sale and AGAINST the stock grants.

 

 

 

 

 

 

 

 

 

 

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the size of the eXegenics board of directors is increased from four to five members;

 

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two of eXegenics current directors - Robert Benou and David Lee Spencer, M.D. - will resign from the board of directors; and

 

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three designees of Phillip Frost, M.D., to be identified prior to the closing, will become directors of eXegenics, to serve until their terms expire at eXegenics's next annual stockholder meeting.

 

 

 

eXegenics Board of Directors' Covenant to Recommend.    The eXegenics board of directors has agreed to recommend the approval and adoption by the stockholders of eXegenics of the stock sale and the amendment to the certificate of incorporation. However, the eXegenics board of directors is permitted to (i) not recommend approval and adoption of the stock sale and the charter amendment or (ii) withdraw or modify its recommendation in a manner materially adverse to the Investors, if the eXegenics board of directors determines in good faith, after consultation with outside legal counsel, that it is necessary to withdraw or modify its recommendation to comply with its fiduciary duties.

 

Interim Operations of eXegenics.    eXegenics has undertaken a covenant that places restrictions on it until either the closing of the stock sale or until the stock purchase agreement is terminated. In general, eXegenics is required to conduct its business in the ordinary course consistent with past practice. 

 

Restrictions. eXegenics shall not, without the prior consent of a majority of the Investors:

Amend its organizational documents;

Issue, sell or authorize the issuance or sale of shares of any class of its securities, or enter into agreements or commitments obligating it to issue such securities, other than in connection with the conversion of shares of its preferred stock or the exercise of outstanding warrants or stock options or bonuses granted to directors, officers or employees prior to the date of the stock purchase agreement;

Redeem, purchase or otherwise acquire its capital stock;

Enter into material contracts or transactions, or make any material capital expenditure other than those relating to the transactions contemplated by the stock purchase agreement;

Declare, set aside or pay dividends or make other distributions (whether in cash, stock or property) with respect to its common stock;

 

 

Create, incur, assume, maintain or permit to exist any indebtedness except as otherwise incurred in the ordinary course of business, consistent with past practice;

Pay, discharge or satisfy claims or liabilities other than in the ordinary course of business, consistent with past practice;

Cancel any material debts or waive any material claims or rights;

Make any loans, advances or capital contributions to, or investments in financial instruments of any person;

Assume, guarantee, endorse or otherwise become responsible for the liabilities or commitments of any person;

Increase compensation payable to its employees, officers or directors or increase any bonus, insurance, pension or other employee benefit plan, payment or arrangement made to, for or with any of its employees, officers or directors;

Enter into any employment contract or grant any severance or termination pay or make any such payment with or to any of its employees, officers or directors;

Materially change its accounting practices, the manner of keeping its books, accounts or records, other than alterations required by GAAP or applicable law;

Enter into any indemnification, contribution or similar contract pursuant to which it is required to indemnify any person or make contributions to any other person;

Amend or terminate any of its existing contracts in a manner that would result in any material liability to it or as a result of such amendment or termination; or

Change its tax accounting principles, methods or election.

 

Reasonable Efforts Covenant. eXegenics and the Investors have agreed to cooperate with each other and use commercially reasonable efforts to take, or cause to be taken, all actions and do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to complete the stock sale and the other transactions contemplated by the stock purchase agreement.

 

 

 

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organization, good standing and qualifications to do business in foreign jurisdictions;

 

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no subsidiaries;

 

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capitalization;

 

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corporate power, authority and capacity to enter into and perform the transactions contemplated by the stock purchase agreement;

 

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authorization to issue shares of its common stock to the Investors under and pursuant to applicable law free and clear of liens and with the rights and preferences set forth in its certificate of incorporation;

 

 

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no conflicts or defaults;

 

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SEC filings and certain compliance matters;

 

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absence of certain material changes since December 31, 2005, the date of its latest audited financial statements;

 

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absence of undisclosed litigation matters;

 

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absence or non-applicability of statutory, charter or bylaw takeover provisions;

 

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no brokers’, finders' or agents' fees; and

 

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truthfulness and correctness, in all material respects, of disclosure materials provided.

 

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investment intent;

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power, authority and capacity to enter into and perform the transactions contemplated by stock purchase agreement;

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qualification as an “accredited investor” under the Securities Act of 1933;

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sophistication and suitability;

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nationality and residence;

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knowledge of restrictions as to transferability of the shares of common stock to be issued and awareness of the provisions of Rule 144 of the Securities Act of 1933; and

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no brokers’, finders’ or agents’ fees.

 

 

 

Mutual Closing Conditions. The obligations of eXegenics and the Investors to complete the stock sale are subject to the satisfaction or, to the extent legally permissible, waiver of the following conditions:

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approval of the stock sale by the eXegenics stockholders;

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approval of the amendment to the certificate of incorporation of eXegenics to increase the number of shares of common stock eXegenics is authorized to issue from 30,000,000 to 75,000,000;

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absence of all legal prohibition on completion of the stock sale; and

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obtaining all necessary consents and approvals.

Additional Closing Conditions for eXegenics’s Benefit. eXegenics’s obligations to complete the stock sale are subject to the satisfaction of the following additional conditions:

 

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performance by the Investors of their obligations required to be performed by them at or prior to closing to the extent specified in the stock purchase agreement; and

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accuracy as of closing of the representations and warranties made by the Investors to the extent specified in the stock purchase agreement.

Additional Closing Conditions for the Investors’ Benefit. The Investors' obligations to complete the stock sale are subject to the satisfaction of the following additional conditions:

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performance by eXegenics of the obligations required to be performed by it at or prior to closing to the extent specified in the stock purchase agreement; and

accuracy as of closing of the representations and warranties made by eXegenics to the extent specified in the stock purchase agreement.

 

Right to Terminate. The stock purchase agreement may be terminated at any time prior to the closing of the stock sale, whether before or after stockholder approval, in any of the following ways:

 

(a)    By mutual written agreement of eXegenics and the Investors;

(b)    By either eXegenics or the Investors if:

(i)    the stock sale has not been completed by January 31, 2007, provided that the right to terminate the stock purchase agreement is not be available to any party whose breach of any provision of or whose failure to perform any obligation under the stock purchase agreement was the cause of, or resulted in the failure of the stock sale to occur on or before January 31, 2007;

(ii)    a final and nonappealable judgment, injunction, order or decree enjoining eXegenics or the Investors from consummating the stock sale is entered; provided that the right to terminate the stock purchase agreement is not be available to any party whose breach of any provision of or whose failure to perform any obligation under the stock purchase agreement was the cause of the permanent legal prohibition; or

(iii)    the eXegenics stockholders fail to approve the stock sale and the amendment to the certificate of incorporation of eXegenics at a duly held meeting.

(c)    By eXegenics if: the Investors shall have breached their representations and warranties in the stock purchase agreement, or there has been a breach by the Investors of their covenants or agreements contained in the stock purchase agreement, which breach or failure to perform would cause failure of a condition to the closing of the stock sale not be satisfied, and either such condition is incapable of being satisfied by January 31, 2007 or such breach or failure to perform is not cured within 10 days after notice of such breach or failure to perform has been given by eXegenics to the Investors.

(d)    By the Investors if: eXegenics shall have breached its representations and warranties in the stock purchase agreement, or there has been a breach by eXegenics of its covenants or agreements contained in the stock purchase agreement, which breach or failure to perform would cause failure of a condition to the closing of the stock sale not be satisfied, and either such condition is incapable of being satisfied by January 31, 2007 or such breach or failure to perform is not cured within 10 days after notice of such breach or failure to perform has been given by the Investors to eXegenics.

If the stock purchase agreement is validly terminated, except as described in this paragraph and below under “Termination Fees and Expenses”, eXegenics and the Investors will have no continuing liabilities or obligations to one another, except that neither eXegenics nor the Investors will be relieved of or released from any liabilities or damages arising out of its or their material breach of or material failure to perform under the stock purchase agreement.

Termination Fee and Expenses 

 

 

 

 

 

 

•

in favor of the stock sale; and

 

•

in favor of the amendment to the certificate of incorporation of eXegenics to increase the number of authorized shares of common stock to 75,000,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At present, eXegenics has no commitment to issue shares of its common stock for any purpose other than in connection with the stock sale. However, Dr. Frost has indicated to eXegenics that if the stock sale is approved, he will investigate and possibly pursue one or more business combination opportunities he has identified. In addition, and whether or not any such business combinations are, in fact, consummated, the eXegenics board of directors believes it is also desirable to have additional shares available for other corporate purposes that might arise in the future, other than in the stock sale. For example, shares of eXegenics common stock could be issued from time to time for acquisitions or to raise capital. Under some circumstances, it is also possible for a company to use unissued shares for anti-takeover purposes, but eXegenics has no present intention to take any such action. Future issuances of shares of our capital stock would likely dilute the percentage ownership of the stockholders in eXegenics.

 

 

 

 

A.

Seventy Five Million (75,000,000) shares of Common Stock, having a par value of $.01 per share.

 

B.

Ten Million (10,000,000) shares of Preferred Stock, having a par value of $.01 per share. Of the Ten Million (10,000,000) authorized shares of Preferred Stock, par value $.01 per share, Four Million (4,000,000) shares are designated “Series A Convertible Preferred Stock” (“Series A Preferred”) with the rights, preferences, privileges and restrictions specified herein. The remaining Six Million (6,000,000) authorized shares of Preferred Stock, having a par value of $.01 per share, shall have such voting powers, full or limited, or no voting powers, and such designations, preferences, optional or other special rights and qualifications, limitations or restrictions as shall be stated or expressed in the resolution or resolutions providing for the issuance of such stock adopted by the Board of Directors of the Corporation.

 

 

 

 

 

 

 

(1)	Based on the closing price of eXegenics common stock on the OTC Bulletin Board on September 22, 2006.

 

 

Overview 

eXegenics was formerly known as Cytoclonal Pharmaceuticals Inc. and was involved in the research, creation, and development of drugs for the treatment and/or prevention of cancer and infectious diseases. Historically, eXegenics had operated as a drug discovery company, exploiting new enabling technologies to advance and shorten the new drug development cycle. Commencing in 2003, eXegenics began terminating its research and related activities. Since then, all of our scientific staff and administrative positions have been eliminated and all of our research and development activities have been terminated. As such, we are a holding company with a portfolio of marketable securities.

 

 

Liquidity and Capital Resources 

Results of Operations -- Fiscal Year Ended December 31, 2005 Compared to Fiscal Year Ended December 31, 2004

 

 

Supplementary Financial Information

		Quarter Ended
		March 31			June 30			September 30			December 31			Total Year
2005
Revenues		$	—		$	—		$	—		$	—		$	—
Net (loss) income			(290,000	)		(434,000	)		870,000			(332,000	)		(186,000	)
Loss per share — basic and diluted(a)			(0.03	)		(0.03	)		0.05			(0.01	)		0.03
2004
Revenues		$	—		$	—		$	—		$	—		$	—
Net loss			(739,000	)		(531,000	)		(368,000	)		(288,000	)		(1,926,000	)
Loss per share — basic and diluted(a)			(0.06	)		(0.03	)		(0.02	)		(0.02	)		(0.13	)

(a)

Per common share amounts for the quarters and full year have been calculated separately. Accordingly, quarterly amounts may not add to the annual amount because of differences in the weighted average common shares outstanding during each period due to the effect of the Company’s issuing shares of its common stock during the year.

 

 

 

		Common Stock						Series A Preferred Stock
Name and Address of Beneficial Owner(1)		Number			Percent of Class(2)			Number			Percent of Class(3)			Percent of all Voting Securities(4)
Bruce Meyers (5)			1,224,277			7.35	%		39,051			3.85	%		7.20	%
J Morton Davis and Rosalind Davidowitz (6).			1,553,900			9.49	%		—			—			8.99	%
John A. Paganelli (7).			105,000			*			—			—			*
Robert A. Baron (8)			126,800			*			—			—			*
Robert Benou (9)			80,000			*			—			—			*
David Lee Spencer, M.D (10).			854,100			5.14	%		—			—			4.88	%
David E. Riggs (11)			82,200			*			—			—			*
David Hostelley			—			—			—			—			—
Directors and executive officers as a group (5 persons)			1,238,100			6.84	%		—			—			6.54	%

*	Less than One Percent.
(1)	Except as otherwise indicated, the address of each beneficial owner is c/o eXegenics Inc., 1250 Pittsford-Victor Road, Building 200, Suite 280, Pittsford, New York 14534.
(2)	Calculated on the basis of ____________ shares of common stock issued and outstanding as of September 1, 2006 except that shares of common stock underlying options and warrants exercisable within 60 days of the date hereof are deemed to be outstanding for purposes of calculating the beneficial ownership percentage of securities of the holder of such options or warrants. This calculation excludes shares of common stock issuable upon the conversion of series A preferred stock.
(3)	Calculated on the basis of___________ shares of Series A preferred stock outstanding as of September 1, 2006
(4)	Calculated on the basis of an aggregate of _____________ shares of common stock and ___________ shares of Series A preferred stock issued and outstanding as of September 1, 2006, except that shares of common stock underlying options and warrants exercisable within 60 days of the date hereof are deemed to be outstanding for purposes of calculating beneficial ownership of securities of the holder of such options or warrants. This calculation excludes shares of common stock issuable upon the conversion of Series A preferred stock.
(5)	Mr. Meyers’ address is c/o Meyers Associates, L.P., 45 Broadway, New York, New York 10006. The amount shown for Mr. Meyers includes: 859,645 shares owned by Mr. Meyers; 4,740 shares owned by the Bruce Meyers Keogh; 33,800 shares of the Company’s common stock owned by the Joseph Rita and Bruce Meyers Foundation for Life Inc. (Mr. Meyers is the Chairman of the Board of the Joseph Rita and Bruce Meyers Foundation for Life), 39,051 shares of the Company’s common stock issuable upon the conversion of 39,051 shares of preferred stock owned by Bruce Meyers; and the following securities owned by Meyers Associates, L.P. of which Mr. Meyers, is an executive officer, the sole shareholder and director of the general partner of Meyers Associates, L.P.; 76,092 shares of common stock, and 250,000 shares of common stock issuable upon the exercise of currently exercisable five-year warrants issued in 2002 to Meyers Associates, L.P. A portion of the shares beneficially owned by Mr. Meyers were obtained for services provided by Meyers Associates, L.P. a registered broker dealer. The services provided by Meyers Associates, L.P. included acting as financial advisor, placement agent and/or underwriter to the Company. Beneficial ownership information is taken from a Schedule 14A filed on September 15, 2003.
(6)	Beneficial ownership information and the information in this footnote were taken from Schedule 13G filed February 7, 2006. As of December 31, 2005, Mr. Davis may be deemed to beneficially own: (i) 248,000 shares of common stock owned by D.H. Blair Investment Banking Corp. (“Blair Investment”), and (ii) 1,305,900 shares owned by Rosalind Davidowitz (Mr. Davis’ wife). Mr. Davis’ business address is 44 Wall Street, New York, New York 10005. Ms. Davidowitz’ address is 7 Sutton Place South, Lawrence, New York 11559. As of December 31, 2005, Rosalind Davidowitz may be deemed to beneficially own 1,305,900 shares of common stock owned directly by Rosalind Davidowitz, and 248,000 shares of common stock owned by Blair Investment. Ms. Davidowitz has sole power to vote or to direct the disposition of those shares owned by her. Each of Ms. Davidowitz and Mr. Davis do not deem the filing of the aforementioned Schedule 13G as an admission by each of beneficial ownership of the securities owned by the other.

 

 

(7)	Ownership consists of 50,000 shares of common stock and options to purchase 55,000 shares of common stock currently exercisable or exercisable within 60 days of September 1, 2006.
(8)	Ownership consists of 71,800 shares of common stock and options to purchase 55,000 shares of common stock currently exercisable or exercisable within 60 days of September 1, 2006.
(9)	Ownership consists of 25,000 shares of common stock and options to purchase 55,000 shares of common stock currently exercisable or exercisable within 60 days of September 1, 2006.
(10)	Ownership consists of 799,100 shares of common stock and options to purchase 55,000 shares of common stock currently exercisable or exercisable within 60 days of September 1, 2006.
(11)	Ownership consists of 7,200 shares of common stock and options to purchase 75,000 shares of common stock currently exercisable or exercisable within 60 days of September 1, 2006. Does not include options to purchase 25,000 shares of common stock not exercisable within 60 days of September 1, 2006.

 

The following tables set forth the annual compensation paid to or earned by each person who served as the chief executive officer of eXegenics during the fiscal year ended December 31, 2005 and each of the other executive officers, other than its chief executive officer, who were serving as executive officers of eXegenics at the end of the fiscal year ended December 31, 2005 (our “Named Executive Officers”).

 

		SUMMARY COMPENSATION TABLE
					Annual compensation									Long-term compensation
														Awards						Payouts
Name and principal position		Year			Salary			Bonus (1)			Other annual compensation			Restricted stock award(s)			Securities underlying options/ SARs			LTIP payouts			All other compensation
John A. Paganelli, Interim CEO (2)			2005		$	12,500			—		$	75,000			—			20,000			—			—
			2004		$	---			—		$	75,000			—			20,000			—			—
			2003			—			—			—			—			—			—			—
Dr. David Hostelley, CFO (3)			2005		$	15,000			—			—			—			—			—			—
			2004			—			—			—			—			—			—			—
			2003			—			—			—			—			—			—			—
David E. Riggs Former President,			2005		$	244,000			—			—			—			—			—			—
CEO, CFO and Secretary (4)			2004		$	235,000			—			—			—			75,000			—			—
			2003		$	190,561			—			—			—			225,000			—			—
Ronald L. Goode, Ph.D.			2005			—			—			—			—			—			—			—
Former President, CEO (5)			2004		$	95,751			—			—			—			—			—			—
			2003		$	405,000		$	105,000		$	12,000 (6	)		—			—			—			—

(1)	Bonuses paid in the year reported were earned and accrued in the previous year.
(2)	Mr. Paganelli is chairman of the board of directors of eXegenics. Mr. Paganelli became interim chief executive officer of eXegenics on June 29, 2005. The compensation reported under “Other annual compensation” reflects compensation earned by Mr. Paganelli as the chairman of the board of directors.
(3)	Mr. Hostelley became chief financial officer of eXegenics on July 1, 2005.
(4)	Mr. Riggs served as our president and chief executive officer until June 29, 2005.
(5)	Dr. Goode served as our president and chief executive officer until February 23, 2004.
(6)	“Other annual compensation” paid to Dr. Goode during fiscal 2003 consisted of a $12,000 car allowance.

 

 

 

		Individual Grants(1)												Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term (2)
Name		Number of Securities Underlying Options Granted (#)			% of Total Options Granted to Employees in Fiscal Year			Exercise or Base Price($/Share)			Expiration Date			5%			10%
John A. Paganelli			20,000			20	%	$	.40			Jan. 2015 thru Oct. 2015		$	13,031		$	20,750

(1)

The options are non-qualified stock options, granted pursuant to the eXegenics amended and restated 2000 stock option plan. Options to purchase 20,000 shares of common stock, at an average exercise price of $0.40 per share, vest immediately on the grant date that ranges from January 1, 2005 through October 1, 2005. These options were granted to Mr. Paganelli as a member of the board of directors.

(2)

In accordance with the rules of the Securities and Exchange Commission, we show in these columns the potential realizable value over the term of the option (the period from the grant date to the expiration date). We calculate this assuming that the fair market value of our common stock on the date of grant appreciates at the indicated annual rate, 5% and 10% compounded annually, for the entire term of the option and that the option is exercised and sold on the last day of its term for the appreciated stock price. These amounts are based on assumed rates of appreciation and do not represent an estimate of our future stock price. Actual gains, if any, on stock option exercises will depend on the future performance of our common stock, the option holder’s continued employment with us through the option exercise period, and the date on which the option is exercised.

								Number of Securities Underlying Unexercised Options at Fiscal Year-End						Value of the Unexercised In-The-Money Options at Fiscal Year-End
Name		Shares Acquired on Exercise			Value Realized			Exercisable			Unexercisable			Exercisable			Unexercisable
John A. Paganelli			—			—			40,000			—		$	500			N/A
David E. Riggs			—			—			50,000			25,000			N/A			N/A

 

 

 

On March 22, 2005 the board of directors of eXegenics approved the grant of 50,000 shares of eXegenics common stock to each of John A. Paganelli and Robert Baron contingent upon the closing of a change-in-control transaction, subject to approval by the stockholders of the stock grants and require that each recipient of the stock grant is a member of the eXegenics board of directors at the time of the change-in-control.

 

 

Plan Category		Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)			Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b)			Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column(a)) (c)
Equity compensation plans approved by security holders			905,000		$	3.37			3,345,000
Equity compensation plans not approved by security holders (1)			290,000		$	0.75			N/A

(1)	Consists of the following warrants: Roan-Meyers dated August 13, 2002 to purchase 125,000 shares of our common stock; Roan-Meyers warrants, dated August 13, 2002 to purchase 125,000 shares of our common; and Petkevich & Partners, LLC warrants, to purchase 40,000 shares of our common stock.

 

 

 

Notice Requirement. A stockholder must provide a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the annual meeting and any material interest in such business of the stockholder and the beneficial owner, if any, on whose behalf the proposal is made. The notice must contain the information specified in the bylaws as to the identity of the stockholder or beneficial owner on whose behalf the proposal is made.

Notice Deadlines. Written notice of a proposal of other business must be delivered to the Secretary not less than 55 nor more than 75 days prior to the first anniversary of the date on which we first mailed our proxy materials for the prior year’s annual meeting. However, if the annual meeting is more than 30 days before or more than 60 days after the anniversary date, notice must be delivered by the close of business on the 10^th day after the public announcement of the date of such meeting.

Where to Send. Stockholder proposals must be addressed to the Secretary and mailed to him at eXegenics, Inc., 1250 Pittsford-Victor Road, Building 200, Suite 280, Pittsford, New York 14534.

 

 

 

 

 

 

 

 

		Page
Report of Rotenberg & Company, LLP, Independent Registered Public Accounting		F- 1
Report of BDO Seidman, LLP, Independent Registered Public Accounting Firm		F-2
Balance Sheets at December 31, 2005 and 2004		F-3
Statements of Operations for the Fiscal Years ended December 31, 2005, 2004 and 2003		F- 4
Statements of Changes in Stockholders’ Equity for the Fiscal Years ended December 31, 2005, 2004 and 2003		F-5
Statements of Cash Flows for the Fiscal Years ended December 31, 2005, 2004 and 2003		F-6
Notes to Audited Financial Statements for the Fiscal Years ended December 31, 2005 and 2004		F-7
Balance Sheets at June 30, 2006 and December 31, 2005		F-18
Statements of Operations for the Three and Six Months Ended June 30, 2006 and 2005		F-19
Statement of Cash Flows for the Six Months Ended June 30, 2006 and 2005		F-20
Notes to Financial Statements (Unaudited) for the period Ended June 30, 2006 and 2005		F-21

 

 

We have audited the accompanying balance sheet of eXegenics Inc. as of December 31, 2005, and the related statements of operations, changes in stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of eXegenics Inc. as of December 31, 2005 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Rotenberg & Co., llp

 

Rotenberg & Co., llp

 

eXegenics Inc.

We have audited the accompanying balance sheets of eXegenics Inc. (the Company) as of December 31, 2004 and 2003, and the related statements of operations, changes in stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of eXegenics Inc. as of December 31, 2004 and 2003, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

 

		December 31,
		2005			2004
ASSETS
Current assets:
Cash and cash equivalents		$	8,901,000		$	8,734,000
Restricted cash			—			175,000
Marketable securities available for sale			—			1,124,000
Prepaid expenses and other current assets			99,000			35,000
Total current assets			9,000,000			10,068,000
Equipment, net			—			3,000
		$	9,000,000		$	10,071,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses		$	277,000		$	239,000
Stockholders’ equity:
Preferred stock — $.01 par value, 10,000,000 shares authorized; 952,839 and 935,332 shares of Series A convertible preferred issued and outstanding (liquidation value $2,382,000 and $2,338,000)			10,000			9,000
Common stock — $.01 par value, 30,000,000 shares authorized; 16,945,026 and 16,869,031 shares issued			169,000			169,000
Additional paid in capital			68,384,000			68,385,000
Accumulated other comprehensive income			—			1,124,000
Subscriptions receivable, net of reserve			(101,000	)		(302,000	)
Accumulated deficit			(56,402,000	)		(56,216,000	)
Treasury stock, 611,200 and 611,200 shares of common stock, at cost			(3,337,000	)		(3,337,000	)
			8,723,000			9,832,000
		$	9,000,000		$	10,071,000

 

 

 

		Year Ended December 31,
		2005			2004			2003
Revenue:
License and research fees		$	—		$	—		$	13,000
Operating expenses:
Research and development			—			—			154,000
General and administrative			1,438,000			2,051,000			2,938,000
Expenses related to strategic redirection			—			—			653,000
Merger, tender offers and consent solicitation expenses			—			—			2,233,000
			1,438,000			2,051,000			5,978,000
Other (income) expenses:
Gain on sale of investments, net			(1,064,000	)		—			—
Interest income			(190,000	)		(127,000	)		(174,000	)
Interest expense			2,000			2,000			2,000
			(1,252,000	)		(125,000	)		(172,000	)
Loss before provision (benefit) for taxes			(186,000	)		(1,926,000	)		(5,793,000	)
Provision (benefit) for taxes			—			—			—
Net Loss			(186,000	)		(1,926,000	)		(5,793,000	)
Preferred stock dividend			(234,000	)		(223,000	)		(207,000	)
Net loss attributable to common stockholders		$	(420,000	)	$	(2,149,000	)	$	(6,000,000	)
Basic and diluted loss per common share:		$	(0.03	)	$	(0.13	)	$	(0.38	)
Weighted average number of shares outstanding — basic and diluted			16,271,000			16,050,000			15,690,000

 

 

 

 

 

		Convertible												Additional						Reserve on						Accumulated Other			Treasury Stock
		Preferred Stock						Common Stock						Paid in			Subscriptions			Subscp.			Accumulated			Comprehensive
		Shares			Amount			Shares			Amount			Capital			Receivable			Rec			Deficit			Income (Loss)			Shares			Amount			Total
Balance — January 1, 2003			828,023		$	8,000			16,184,486		$	162,000			67,272,000			(301,000	)		—			(48,497,000	)		—			511,200			($2,570,000	)		16,074,000
Preferred stock converted to common stock			(20,293	)		—			20,293			—			—			—			—			—			—			—			—			—
Preferred dividend (stock)			82,834			1,000			—			—			(1,000	)		—			—			—			—			—			—			—
Net interest on Subscription Receivable			—			—			—			—			—			(1,000	)		—			—			—			—			—			(1,000	)
Exercise of stock options			—			—			10,000			—			4,000			—			—			—			—			—			—			4,000
Issuance of shares previously recorded as issuance from Treasury Stock			—			—			100,000			1,000			766,000			—			—			—			—			100,000			(767,000	)		—
Value assigned to warrants and options issued for professional services			—			—			—			—			20,000			—			—			—			—			—			—			20,000
Net loss for the year			—			—			—			—			—			—			—			(5,793,000	)		—			—			—			(5,793,000	)
Balance — December 31, 2003			890,564			9,000			16,314,779			163,000			68,061,000			(302,000	)		—			(54,290,000	)		—			611,200			(3,337,000	)		10,304,000
Preferred stock converted to common stock			(44,252	)		(500	)		44,252			500			—			—			—			—			—			—			—			—
Preferred dividend (stock)			89,020			500			—			—			(500	)		—			—			—			—			—			—			—
Exercise of stock options			—			—			360,000			4,000			188,000			—			—			—			—			—			—			192,000
Compensation related to grant of stock and options to board members			—			—			150,000			1,500			132,000			—			—			—			—			—			—			133,500
Value assigned to warrants and options issued for professional services			—			—			—			—			4,500			—			—			—			—			—			—			4,500
Comprehensive Income:
Net Loss for the year			—			—			—			—			—			—			—			(1,926,000	)		—			—			—			(1,926,000	)
Unrealized gain on available for sale securities			—			—			—			—			—			—			—			—			1,124,000			—			—			1,124,000
Total comprehensive income			—			—			—			—			—			—			—			—			—			—			—			(802,000	)
Balance — December 31, 2004			935,332		$	9,000			16,869,031		$	169,000		$	68,385,000			($302,000	)		—			($56,216,000	)	$	1,124,000			611,200			($3,337,000	)	$	9,832,000
Preferred stock converted to common stock			(75,995	)		—			75,995			—			—			—			—			—			—			—			—			—
Preferred dividend (stock)			93,502			1,000			—			—			(1,000	)		—			—			—			—			—			—			—
Accrued Interest on subscription receivable			—			—			—			—			—			(14,000	)		—			—			—			—			—			(14,000	)
Reserve on stock subscriptions receivable			—			—			—			—			—			—			215,000			—			—			—			—			215,000
Comprehensive Income:
Net Loss for the year			—			—			—			—			—			—			—			(186,000	)		—			—			—			(186,000	)
Realized gain on available for sale securities			—			—			—			—			—			—			—			—			(1,124,000	)		—			—			(1,124,000	)
Total comprehensive income			—			—			—			—			—			—			—			—			—			—			—			—
Balance — December 31, 2005			952,839		$	10,000			16,945,026		$	169,000		$	68,384,000			($316,000	)	$	215,000			($56,402,000	)		—			611,200			($3,337,000	)	$	8,723,000