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

General

Samaritan Pharmaceuticals, Inc. (including the subsidiaries, referred to as "Samaritan", the "Company", "it", "we", and "our"), formed in September 1994, is an entrepreneurial biopharmaceutical pipeline company, focused on commercializing innovative therapeutic products to relieve the suffering of patients with Alzheimer's disease; cancer; cardiovascular disease, HIV, and Hepatitis C; as well as, commercializing its acquired marketing and sales rights to sell eleven (11) marketed products in Greece and/or various Eastern European countries.

Samaritan is focused on commercializing three blockbuster market drug candidates with late-stage preclinical (non-clinical) development programs. Samaritan is evaluating the use of Caprospinol, SP-233 in Alzheimer's disease patients; the use of SP-1000 with acute coronary disease patients; and the use of SP-10 as an "oral treatment" for Hepatitis C patients. In addition, Samaritan has partnered its oral entry inhibitor HIV drug SP-01A with Pharmaplaz, Ireland.

Commercialization Business Model

Our commercialization business model is focused dually on, the partnering of our promising innovative products to pharmaceutical companies; and the acquisition of the marketing and sales rights to revenue-generating marketed products for sales in Greece and Eastern Europe. This model allows Samaritan to focus on our core competencies in drug discovery and drug development. Samaritan partners promising innovative therapeutics anywhere in the early "human" clinical trial stage, i.e. late-stage preclinical studies, Phase I Clinical trials, or proof of concept, Phase II clinical trials, with the objective of partnering before costly Phase III clinical trials. Potential revenue streams with this model could include up-front fees, milestone payments, and participation in the marketing success of partnered products through royalties. In addition, Samaritan is enhancing and strengthening our sales and marketing force in Greece and Eastern Europe to allow for the significant economics gained by advancing the commercialization of our contracted marketed products. Our business model is entirely focused on achieving growth and maximizing value for the benefit of our shareholders.

Licensing and Collaborative Agreements

To build, advance and promote our product portfolio, Samaritan often seeks to augment our own internal programs and capabilities with collaborative projects with a number of outside partners. For our marketed products, we have established certain license agreements, co-promotion arrangements, manufacturing, supply and co-development alliances with pharmaceutical and other biotechnology companies, academic institutions and government laboratories to which we currently pay royalties. Similarly, for product candidates now in development, we have secured licenses to certain intellectual property and entered into strategic alliances with third parties for various aspects of research, development, manufacturing and commercialization, pursuant to which we will owe or receive future royalties if the product candidates are licensed and commercialized.

The Company has a research collaboration (the "Research Collaboration") with The Research Institute of McGill University Health Centre and Samaritan Therapeutics over a ten-year period through 2017. The budget is for $1,000,000 paid over four
(4) quarterly payments of $250,000, is unallocated, and covers the general research and development effort. Under the Research Collaboration, the Company receives worldwide exclusive rights, excluding Canada, to any novel therapeutic agents or diagnostic technologies that may result from the Research Collaboration. Samaritan Therapeutics receives exclusive rights to the Canadian market to any novel therapeutic agents or diagnostic technologies that may result from the Research Collaboration. The Company also terminated the Georgetown University research collaboration in the second quarter of 2007; however, Samaritan Pharmaceuticals' existing worldwide exclusive rights to licensed technologies with Georgetown will remain in force under the terms of their respective license agreements.

Samaritan and Pharmaplaz, a private Irish Healthcare company and a shareholder of Samaritan, announced on March 28, 2007 that they entered into an agreement (the "Pharmaplaz Agreement") to commercialize SP-01A, an "oral" HIV entry inhibitor. Currently, Pharmaplaz owns 943,292 common shares of the Company, representing 3.4% of the total shares issued and outstanding. Under the terms of the agreement, Pharmaplaz, a shareholder, is required to pay Samaritan $10 million in upfront fees. The first payment of $1.4 million was received during the first quarter of 2007, and $750,000 was received during the fourth quarter of 2007. As a result of Pharmaplaz's failure to timely pay the remaining balance of 7.85 million, Pharmaplaz is currently not in compliance with the terms of the Pharmaplaz Agreement. The remaining $7.85 million is expected to be received before year end 2007. Pharmaplaz, a shareholder, will pay for and be responsible for future research and development to bring the technology to market. Samaritan has no remaining obligations or performance for future research and development. The $10,000,000 payment is non-refundable. Upon request, Samaritan might occasionally advise Pharmaplaz regarding SP-01A, in relationship to Principal Investigators with applications for NIH grants, or other grant applications to advance SP-01A, at Pharmaplaz's cost. Samaritan and Pharmaplaz will split 50/50 of all revenues stemming from SP-01A.

Marketed Products

Samaritan has also entered into strategic collaborative relationships with other pharmaceutical companies to commercialize branded approved prescription products in Samaritan's selected niche territories, such as, in Greece, Albania, Bosnia, Bulgaria, Croatia, Cyprus, Czech Republic, Egypt, FYROM, Hungary, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia, Syria and Turkey. We use our expertise to register approved drugs with regulatory agencies in the country we have acquired the rights for; and then, upon regulatory approval, we distribute, market and sell these products. Currently, we have in-licensed the rights to sell eleven (11) drugs, Amphocil from Three Rivers Pharmaceuticals, Elaprase and Replagal from Shire Pharmaceuticals, Infasurf from Ony, Inc, and Mepivamol, Methadone, Morphine Sulphate, Naloxone, Naltrexone, and Oramorph from Molteni Farmaceutici, and Rapydan from EUSA Pharma. Our efforts are focused on specialist physicians in private practice or at hospitals and major medical centers in our territories. Below is a description of our in-licensed products.

AMPHOCIL(R)

AMPHOCIL(R) is a lipid form of amphotericin B indicated for the treatment of invasive aspergillosis, a life threatening systemic fungal infection. AMPHOCIL(R) is indicated for the treatment of severe systemic and/or deep mycoses in cases where toxicity or renal failure precludes the use of conventional amphotericin B in effective doses, and in cases where prior systemic antifungal therapy has failed. Fungal infections successfully treated with AMPHOCIL(R) include disseminated candidiasis and aspergillosis. AMPHOCIL(R) has been used successfully in severely neutropenic patients.

AMPHOCIL(R) is an approved FDA prescription product owned by Three Rivers Pharmaceuticals, Inc. and marketed by Three Rivers Pharmaceuticals, Inc. in the US. Samaritan signed an exclusive distribution deal for Greece, Cyprus and Ireland with Three Rivers.

Currently, Samaritan is marketing Amphocil(R) in Greece. Samaritan has received marketing approval from Cyprus authorities and is awaiting the next tender announcement by Cyprus authorities for applications. Marketing authorization for Amphocil(R) is pending in Ireland.

Currently, Amphocil(R) is currently being marketed and sold in Greece and Cyprus. Marketing authorization for Amphocil(R) is pending in Ireland.

ELAPRASE(R)

ELAPRASE(R) is a human enzyme replacement therapy for the treatment of Hunter syndrome, also known as Mucopolysaccharidosis II (MPS II). Hunter syndrome is a rare, life-threatening genetic condition that results from the absence or insufficient levels of the lysosomal enzyme iduronate-2-sulfatase. Without this enzyme, cellular waste products accumulate in tissues and organs, which then begin to malfunction.

ELAPRASE(R) was granted marketing authorization for the long-term treatment of patients with Hunter's disease by the European Commission in January 2007. ELAPRASE(R) is the first, and only, enzyme replacement therapy for Hunter's disease patients and was launched in the U.S. in July 2006.

Currently, ELAPRASE(R) is sold and distributed by Samaritan on a named patient basis until the pricing and the reimbursement of ELAPRASE(R) is established in Greece and Cyprus with the relevant regulatory authorities. Samaritan signed an exclusive licensing agreement with Shire Pharmaceuticals for the marketing and sale of ELAPRASE(R) in Greece and Cyprus which became effective March 1, 2007.

INFASURF(R)

INFASURF(R) treats and prevents Respiratory Distress Syndrome (RDS). This syndrome occurs when infants lack surfactant, a natural substance normally produced in the body, which is necessary for lungs to function normally. INFASURF(R) is used exclusively in hospitals with a neonatal intensive care unit (NICU) and is administered by neonatologists, neonatal nurses, neonatal nurse practitioners and respiratory therapists.

On January 16, 2007, Samaritan signed an exclusive agreement with Siraeo, Ltd for the marketing and distribution of the product INFASURF(R) in Turkey, Serbia, Bosnia, Macedonia, Albania, Egypt and Syria. INFASURF(R) is an approved FDA prescription product owned by ONY, Inc. and marketed by Forest Laboratories in the US.

Currently, Samaritan is utilizing the US FDA approved regulatory file in preparing marketing applications for INFASURF(R) with regulatory authorities in Turkey, Serbia, Bosnia, F.Y.R.O.M., Albania, Egypt and Syria to gain country marketing authorization drug approval.

MEPIVAMOL(R)

MEPIVAMOL(R) (Mepivacaine) is an effective and reliable local anesthetic of intermediate duration and low systemic toxicity. It is widely used for regional anesthetic procedures such as IVRA, infiltration, epidural blockade, plexus and peripheral nerve blockade. MEPIVAMOL(R) is approved by the Italian Ministry of Health (The equivalent to the US FDA) and is owned by Molteni Farmaceutici, Inc. and marketed by Molteni Farmaceutici, Inc. in Italy.

On January 1, 2007, Samaritan entered into an exclusive licensing agreement with Molteni Farmaceutici for the marketing and distribution of MEPIVAMOL(R) in the countries of Greece and Cyprus. Currently, Samaritan is utilizing the Italian Ministry of Health approved regulatory file in preparing marketing applications for MEPIVAMOL(R) with regulatory authorities in Greece and Cyprus to gain country marketing authorization drug approval.

METHADONE HCL(R)

METHADONE HCL(R) is an opiate agonist. METHADONE HCL(R) prevents heroin or morphine from interacting with receptors for natural painkillers called endorphins, blocking the effects of the addictive drugs and reducing the physical cravings. METHADONE HCL(R) is approved by the Italian Ministry of Health (The equivalent to the US FDA) and is owned by Molteni Pharmaceuticals, Inc. and marketed by Molteni Farmaceutici, Inc. in Italy.

On January 1, 2007, Samaritan entered into an exclusive licensing agreement with Molteni Farmaceutici for the marketing and distribution of METHADONE HCL(R) in the countries of Greece and Cyprus.

Currently, METHADONE HCL(R) can only be sold in Greece and Cyprus via a centralized government tender. Samaritan is awaiting the next tender announcement by Greece and Cyprus authorities.

MORPHINE SULPHATE(R)

MORPHINE SULPHATE(R) (Injectable Formulation) relieves moderate to severe pain by binding to brain receptors. Morphine Sulphate may be used to control the pain following surgery, child birth, and other procedures. It may also be used to treat the pain associated with cancer, heart attacks, sickle cell disease and other medical conditions.

On January 1, 2007, Samaritan entered into an exclusive licensing agreement with Molteni Farmaceutici for the marketing and distribution of MORPHINE SULPHATE(R) in the countries of Greece and Cyprus.

Currently, MORPHINE SULPHATE(R) can only be sold in Greece and Cyprus via a centralized government tender. Samaritan is awaiting the next tender announcement by Greece and Cyprus authorities.

NALOXONE MOLTENI(R)

NALOXONE MOLTENI(R) is an opioid antagonist which reverses the effects of opioid overdose, for example heroin and morphine overdose. Specifically, Naloxone is used in opioid overdoses for countering life-threatening depression of the central nervous system and respiratory system.

On January 1, 2007, Samaritan entered into an exclusive licensing agreement with Molteni Farmaceutici for the marketing and distribution of NALOXONE MOLTENI(R) in the countries of Greece and Cyprus.

Currently, NALOXONE(R) will be sold and distributed by Samaritan on a named patient basis until the pricing and the reimbursement of NALOXONE(R) is established in Greece and Cyprus, with the relevant regulatory authorities.

NALTREXONE MOLTENI(R)

NALTREXONE MOLTENI(R) is an opioid antagonist which is used to help people who have a narcotic or alcohol addiction stay drug free. NALTREXONE MOLTENI(R) is used after the patient has stopped taking drugs or alcohol. It works by blocking the effects of narcotics or by decreasing the craving for alcohol.

NALTREXONE MOLTENI(R) is approved by the Italian Ministry of Health (The equivalent to the US FDA) and is owned by Molteni Farmaceutici, Inc. and marketed by Molteni Farmaceutici, Inc. in Italy.

On January 1, 2007, Samaritan entered into an exclusive licensing agreement with Molteni Farmaceutici for the marketing and distribution of NALTREXONE MOLTENI(R) in the countries of Greece and Cyprus.

Currently, Samaritan is utilizing the Italian Ministry of Health approved regulatory file in preparing marketing applications for NALTREXONE MOLTENI(R) with regulatory authorities in Greece and Cyprus to gain country marketing authorization drug approval.

ORAMORPH(R)

ORAMORPH(R) is morphine sulphate in an oral solution and is used for managing moderate to severe chronic pain for more than a few days. It works by dulling the pain perception center in the brain. ORAMORPH(R) is approved by the Italian Ministry of Health (The equivalent to the US FDA) and is marketed by Molteni in Italy.

ORAMORPH(R) is approved by the Italian Ministry of Health (The equivalent to the US FDA) and is owned by Molteni Farmaceutici, Inc. and marketed by Molteni Farmaceutici, Inc. in Italy.

On January 1, 2007, Samaritan entered into an exclusive licensing agreement with Molteni Farmaceutici for the marketing and distribution of ORAMORPH(R) in the countries of Greece and Cyprus.

Currently, Oramorph has a Greek marketing authorization. Oramorph can only be sold in Greece via a centralized government tender. Samaritan is awaiting the next tender announcement by Greece authorities.

RAPYDAN(R)

RAPYDAN(R) is indicated for local dermal analgesia on intact skin, and consists of a thin, uniform, local anesthetic formulation with an integrated, oxygen-activated heating component that is intended to enhance the delivery of the local anesthetic. The drug formulation is an eutectic mixture of lidocaine 70 mg and tetracaine 70 mg. Rapydan(R) is indicated to provide local dermal analgesia for superficial venous access and superficial dermatological procedures such as excision, electrodessication and shave biopsy of skin lesions.

On August 3, 2007, Samaritan signed an exclusive agreement with EUSA for the marketing and distribution of the product RAPYDAN(R) in Greece and Cyprus. Rapydan(R) is an approved FDA prescription product under the name SYNERA(R) and is owned by ZARS Pharmaceuticals, Inc. and marketed by Endo Pharmaceuticals, Inc. in the US.

Currently, Samaritan is utilizing the US FDA approved regulatory file in preparing marketing applications for Rapydan(R) with regulatory authorities in Greece and Cyprus to gain country marketing authorization drug approval.

REPLAGAL(R)

REPLAGAL(R) is a long-term enzyme replacement therapy used to treat patients with a confirmed diagnosis of Fabry Disease. Fabry Disease is caused by a deficiency of an enzyme, alpha-galactosidase A (also called ceramidetrihexosidase), involved in the breakdown of fats.

Samaritan signed an exclusive licensing agreement with Shire Pharmaceuticals for the marketing and sale of Replagal(R) in Greece and Cyprus, which became effective May 1, 2007. Currently, REPLAGAL(R) has a Greek and Cyprus pricing, reimbursement and marketing authorization.

Plan and Results of Operations

We have used the proceeds from private placements of our capital stock, primarily to expand our preclinical and clinical efforts, as well as for general working capital. At this time, we are beginning to commit additional resources to the development of SP-233, as well as for the development of our other drugs.

Additional details regarding the human trials and INDs the Company plans to file may be found in the section entitled "Description of Business" in the Company's Annual Report on Form 10-K/A filed with the SEC on April 27, 2007 for the fiscal year ended December 31, 2006.

On July 5, 2007, the Company's Board of Directors affected a one-for-six reverse stock split of its common stock. The financial statements presented herein have been restated to reflect the reverse stock split as if it had occurred at the beginning of each period presented. All share and per share information included in these consolidated financial statements has been adjusted to reflect this reverse stock split.

Results of Operations For The Three (3) Months Ended September 30, 2007 As Compared To The Three (3) Months Ended September 30, 2006

Revenue for the three-month period ended September 30, 2007, as compared September 30, 2006, Pharmaceuticals sales increased to $818,773 from $10,586, respectively. This increase of $808,187 was comprised of $750,000 licensing fees from the Pharmaplaz collaboration and $68,773 product sales of Amphocil and Elaprase in European markets.

We incurred research and development expenses of $154,235 for the three months ended September 30, 2007, as compared to $1,053,552 for the three months ended September 30, 2006. This decrease of $899,317 or eighty-five percent (85%) was primarily attributable to the culmination of the costs associated with our HIV clinical trial. We expect research and development expenditures relating to drug discovery and development will increase during the remainder of 2007 and into subsequent years due to the expanding requirements of FDA clinical trials for:
(a) our Alzheimer's drug program; (b) the initiation of trials for other potential indications; and (c) additional study expenditures for potential pharmaceutical candidates. Research and development expenses may fluctuate from period to period, depending upon the stage of certain projects and the level of preclinical testing and clinical trial-related activities.

General and administrative expenses decreased to $666,922 for the three months ended September 30, 2007, as compared to $701,144 for the three months ended September 30, 2006. This decrease of $34,222 or five percent (5%), was primarily attributable to an decrease in branding costs and other discretionary expenditures.

Depreciation and amortization amounted to $47,974 for the three months ended September 30, 2007, as compared to $38,100 for the three months ended September 30, 2006. This increase of $9,783, or twenty-eight percent (28%), was primarily attributable to increases in amortization on both purchased technology and approved patents.

Net interest income amounted to $(487) and $(7,622) for the three (3) months ended September 30, 2007 and 2006, respectively. The credit balance in the interest expense account is attributable to offsetting interest earned from holding our cash in marketable securities and certificates of deposits. Interest income was $7,586 and $7,622, for the three (3) months ended September 30, 2007 and 2006, respectively. Interest expense was $7,099 and $-0-, for the three (3) months ended September 30, 2007 and 2006, respectively. The increase in interest cost is a result of an accrual pertaining to a short-term loan made by an officer during the quarter ended September 30, 2007.

We had a loss of $132,648 for the three months ended September 30, 2007, as compared to a loss of $1,774,588 for the three months ended September 30, 2006. The decreased loss was primarily due to licensing revenue from the Pharmaplaz collaboration and the decrease attributable to the culmination of the research costs associated with our HIV clinical trials. As disclosed in the financial statements, earnings (loss) per share was $0 and ($.07) per share (undiluted), for the three months ended September 30, 2007 and 2006, respectively.

Results of Operations For The nine (9) Months Ended September 30, 2007 As Compared To The nine (9) Months Ended September 30, 2006

Revenue for the nine-month period ended September 30, 2007, as compared to September 30, 2006, Pharmaceuticals sales increased to $3,929,327 from $32,379. This increase of $3,896,948 was related to $3,451,742 licensing revenue from the collaboration with Pharmaplaz and $477,585 from the launch of the products Amphocil and Elaprase in June 2007 in Greece.

Samaritan and Pharmaplaz, a private Irish Healthcare company and a shareholder of Samaritan, announced on March 28, 2007 that they entered into an agreement (the "Pharmaplaz Agreement") to commercialize SP-01A, an "oral" HIV entry inhibitor. Currently, Pharmaplaz owns 943,292 common shares of the Company, representing 3.4% of the total shares issued and outstanding. Under the terms of the agreement, Pharmaplaz, a shareholder, is required to pay Samaritan $10 million in upfront fees. The first payment of $1.4 million was received during the first quarter of 2007, and $750,000 was received during the fourth quarter of 2007. As a result of Pharmaplaz's failure to timely pay the remaining balance of 7.85 million, Pharmaplaz is currently not in compliance with the terms of the Pharmaplaz Agreement. The remaining $7.85 million is expected to be received before year end 2007. Pharmaplaz, a shareholder, will pay for and be responsible for future research and development to bring the technology to market. Samaritan has no remaining obligations or performance for future research and development. The $10,000,000 payment is non-refundable. Upon request, Samaritan might occasionally advise Pharmaplaz regarding SP-01A, in relationship to Principal Investigators with applications for NIH grants, or other grant applications to advance SP-01A, at Pharmaplaz's cost. Samaritan and Pharmaplaz will split 50/50 of all revenues stemming from SP-01A. Licensing revenue recorded through September 30, 2007 is $3,451,742.

We incurred research and development expenses of $1,125,871 for the nine months ended September 30, 2007, as compared to $3,153,260 for the nine months ended September 30, 2006. This decrease of $2,027,389, or sixty-four percent (64%), was primarily attributable to the culmination of the costs associated with our HIV clinical trial. We expect research and development expenditures relating to drug discovery and development will increase during the remainder of 2007 and into subsequent years due to the expanding requirements of FDA clinical trials for: (a) our Alzheimer's drug program; (b) the initiation of trials for other potential indications; and (c) additional study expenditures for potential pharmaceutical candidates. Research and development expenses may fluctuate from period to period, depending upon the stage of certain projects and the level of preclinical testing and clinical trial-related activities.

General and administrative expenses remained consistent at $2,044,699 for the nine months ended September 30, 2007, compared to $2,017,875 for the nine months ended September 30, 2006.

Depreciation and amortization amounted to $138,063 for the nine months ended September 30, 2007, as compared to $107,922 for the six months ended September 30, 2006. This increase of $30,141, or twenty-nine percent (29%), was primarily attributable to increases in amortization on both purchased technology and approved patents.

Net interest income amounted to $(15,536) and ($24,136) for the nine (9) months ended September 30, 2007 and 2006, respectively. The credit balance in the interest expense account is attributable to offsetting interest earned from holding our cash in marketable securities and certificates of deposits. Interest income was $22,635 and $24,143, for the nine (9) months ended September 30, 2007 and 2006, respectively. Interest expense was $7,099 and $7, for the nine (9) months ended September 30, 2007 and 2006, respectively. The increase in interest cost is a result of an accrual pertaining to a short-term loan made by an officer made during the quarter ended September 30, 2007.

We had earnings of $216,015 for the nine (9) months ended September 30, 2007, as compared to a loss of $5,225,702 for the nine (9) months ended September 30, 2006. Earnings were the result of the sale of rights to Pharmaplaz, as described in the notes. As disclosed in the financial statements, earnings (loss) per share was $.01 and $(0.22) per share (undiluted), for the nine months ended September 30, 2007 and 2006, respectively.

The net loss since our inception on September 5, 1994 through September 30, 2007 was $ (41,093,127). We expect losses to continue for the near future, and such losses will likely increase as human clinical trials are undertaken in the United States. Future profitability will be dependent upon our ability to complete the development of our pharmaceutical products, obtain necessary regulatory approvals and effectively market such products. In addition, future profitability will require the Company to establish agreements with other parties for clinical testing, manufacturing, commercialization and sale of its products.

Liquidity and Capital Resources

As of September 30, 2007, the Company's cash position was $231,775. We are continuing efforts to raise additional capital and to execute our research and development plans. Even if we are successful in raising sufficient money to carry out these plans, additional clinical development is necessary to bring our products to market, which will require a significant amount of additional capital.

Cash used in operating activities during the nine (9) month period ended September 30, 2007 was $(1,264,591), as compared to $(4,736,059) for the nine
(9) month period ended September 30, 2006, a decrease of $(3,471,468). This decrease is primarily attributable to fluctuations and timing of the cost with our HIV clinical trial, and the receipt of the $1.4 million from Pharmaplaz, the payments on the sale of licensing rights.

Cash provided (used) by investing activities was ($594,457) for the nine (9) month period ended September 30, 2007, as compared to cash provided of $327,140 for the nine (9) month period ended September 30, 2006, a decrease of $921,597. Last year, the period reflected proceeds from the liquidation of a certificate of deposit for use in funding 2006 activities. The current year's period includes increases in patent costs and expenditures pertaining to a collaboration agreement with a fifty percent (50%) owned Canadian subsidiary.

Cash provided by financing activities was $1,348,748 for the nine (9) month period ended September 30, 2007, as compared to $6,078,014 for the nine (9) month period ended September 30, 2006, a decrease of $4,729,266 or seventy-eight percent (78%). Last year's results include proceeds of $2,045,000 from private placements, and $3,968,514 from the Purchase Agreement II with Fusion. Because of the decrease in immediate research costs and the sale of licenses rights to Pharmaplaz, the Company did not have a need to raise as much capital through the sale of stock.

Current assets as of September 30, 2007 were $3,335,969 as compared to $1,073,921 as of December 31, 2006. This increase of $2,262,048 was primarily attributable to the and recording of an account receivable from the sale of licensing rights to Pharmaplaz and receivables from overseas product sales. Current liabilities as of September 30, 2007 were $2,098,127 as compared to $1,519,565 as of December 31, 2006, an increase of $578,562, primarily due to the inclusion of cost of sales of the European products and the obtaining of a $300,000 short term loan.

On May 12, 2005, we entered into the Purchase Agreement II with Fusion Capital, pursuant to which Fusion Capital has agreed to purchase our common stock from time to time, at our option, up to an aggregate amount of $40,000,000 over fifty
(50) months commencing December 29, 2005, which is the date the SEC declared effective our Registration Statement on Form SB-2 (Commission Registration No. 051267250). Samaritan filed a post effective amendment on Form S-1 to the above Registration Statement (Commission Registration No. 07556090) on January 9, 2007, which was declared effective on February 6, 2007.

Under the Purchase Agreement II agreement, we have set a minimum purchase price ("floor price") of $1.50. Fusion Capital shall not have the right or the obligation to purchase shares of our common stock on any business day that the market price of our common stock is below $1.50. On November 15, 2007, the last reported market sale price of our common stock was $0.65. Accordingly, the Company cannot currently access funds under the Purchase Agreement II and will not be able to access such funds in the future unless the market price our common stock exceeds $1.50 per share.

Assuming a minimum purchase price of $1.50 per share and the purchase by Fusion Capital of the full 368,229 remaining shares under the Purchase Agreement II, the remaining proceeds to us would be $552,344 unless we choose to register more than 368,229 shares, which we have the right, but not the obligation, to do. In the event we elect to sell more than the 368,229 shares, we will be required to file a new Registration Statement and have it declared effective by the U.S. Securities & Exchange Commission.

If we continue to be unable to access funds under the Purchase Agreement II, we may need to sell additional equity securities in private placements. As of September 30, 2007, with 234,895 remaining available under the Registration Statement, the selling price of our common stock to Fusion Capital will have to average at least $151.13 per share for us to receive the remaining proceeds of $35,499,999 without registering additional shares of common stock. Shares issued through September 30, 2007 under the Purchase Agreement II are 2,265,105, with proceeds of $4,500,001. There were no Fusion transactions in the third quarter of 2007.

We cannot predict the amount or timing of our need for additional funds under various circumstances, which could include a significant acquisition of a business or assets, new product development projects, expansion opportunities, or other factors that may require us to raise additional funds in the future. We cannot provide assurance that funds will be available to Samaritan when needed on favorable terms, or at all.

Samaritan and Pharmaplaz, a private Irish Healthcare company and a shareholder of Samaritan, announced on March 28, 2007 that they entered into an agreement (the "Pharmaplaz Agreement") to commercialize SP-01A, an "oral" HIV entry inhibitor. Currently, Pharmaplaz owns 943,292 common shares of the Company, representing 3.4% of the total shares issued and outstanding. Under the terms of the agreement, Pharmaplaz, a shareholder, is required to pay Samaritan $10 million in upfront fees. The first payment of $1.4 million was received during the first quarter of 2007, and $750,000 was received during the fourth quarter of 2007. As a result of Pharmaplaz's failure to timely pay the remaining balance of 7.85 million, Pharmaplaz is currently not in compliance with the terms of the Pharmaplaz Agreement. The remaining $7.85 million is expected to be received before year end 2007. Pharmaplaz, a shareholder, will pay for and be responsible for future research and development to bring the technology to market. Samaritan has no remaining obligations or performance for future research and development. The $10,000,000 payment is non-refundable. Upon request, Samaritan might occasionally advise Pharmaplaz regarding SP-01A, in relationship to Principal Investigators with applications for NIH grants, or other grant applications to advance SP-01A, at Pharmaplaz's cost. Samaritan and Pharmaplaz will split 50/50 of all revenues stemming from SP-01A.

We will continue to have significant general and administrative expenses, including expenses related to clinical studies, our research collaboration with universities and patent registration costs. Except for the Purchase Agreement II with Fusion Capital, no commitment exists for continued investments, or for and underwriting.

In addition to our financing arrangements with Fusion Capital (as discussed above), we may require substantial additional funds to sustain our operations and to grow our business. The amount will depend, among other things, on (a) the rate of progress and cost of our research and product development programs and clinical trial activities; (b) the cost of preparing, filing, prosecuting, maintaining and enforcing patent claims and other intellectual property rights; and (c) the cost of developing manufacturing and marketing capabilities, if we decide to undertake those activities. The clinical development of a therapeutic product is a very expensive and lengthy process which may be expected to utilize $5 to $20 million over a three (3) to six (6) year development cycle. We may also need to obtain additional funds to develop our therapeutic products and our future access to capital is uncertain. The allocation of limited resources is an ongoing issue for us as we move from research activities into the more costly clinical investigations required to bring therapeutic products to market. We also expect to generate revenues from our marketed products in the near future, and our business model has changed from a development model to a licensing and development model. For more information on the change in business model, please see "Business Model" section.

The extent to which we rely on Fusion Capital as a source of funding will depend on a number of factors, including the prevailing market price of our common stock (which must exceed $1.50 per share) and the extent to which we are able to secure working capital from other sources. Even if we are able to access the full amounts under Purchase Agreement II with Fusion Capital, we may still need additional capital to fully implement our business, operating and development plans. If we are unable to obtain additional financing, we might be required to delay, scale back or eliminate selected research and product development programs or clinical trials, or be required to license third parties to commercialize products or technologies that we would otherwise undertake ourselves, or cease certain operations all together. However, any of these options might have a material adverse effect upon the Company. If we raise additional funds by issuing equity securities, dilution to stockholders may result, and new investors could have rights superior to existing holders of shares. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, the consequences would have a material adverse effect on our business, operating results, financial condition and prospects.

We have been able to meet our cash needs during the past twelve (12) months through a combination of funds received through private placements and funds received under the purchase agreements with Fusion Capital. Currently, we have out-licensed our SP-01A and in-licensed the rights to sell eleven (11) drugs, Amphocil from Three Rivers Pharmaceuticals, Elaprase and Replagal from Shire Pharmaceuticals, Infasurf from Ony, Inc, and Mepivamol, Methadone, Morphine Sulphate, Naloxone, Naltrexone, Oramorph from Molteni Pharmaceuticals , and Rapydan from EUSA Pharma to meet our cash needs. We intend to continue to explore avenues to obtain additional capital through private placements and by the sale of our shares of common stock to Fusion Capital.

During the third quarter of 2007, the Chief Executive Officer and Chairman of the Board agreed to loan the Company an aggregate of $300,000 on a short-term basis pursuant to the terms of promissory notes ("Notes") from the Company. Proceeds from each of the loans dated on July 16, 2007 and September 18, 2007 for $250,000 and $50,000 respectively, funded the Company's continuing operating expenses, ongoing expenses, legal and accounting fees, as well as for working capital and other contingencies. Under the terms of the Notes issued by the Company to Lender, the Company will: (i) pay interest to Lender at a rate of Prime Rate (as quoted in the Wall Street Journal) plus 4% per annum. The principal and interest due on the Notes are due on demand. The Notes will be repaid from proceeds of any subsequent financing arrangement to which the Company becomes a party or from the cash flow from the Company's operations.

Forward-Looking Information and Factors that May Affect Future Results

The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions. This report and other written or oral statements that we make from time to time contain such forward-looking statements that set forth anticipated results based on management's plans and assumptions. Such forward-looking statements involve substantial risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as "will," "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target," "forecast" and other words and terms of similar meaning in connection with any discussion of future operating or financial performance or business plans and prospects. In particular, these include statements relating to future actions, business plans and prospects, prospective products or product approvals, future performance or results of current and anticipated products, sales efforts, expenses, interest rates, foreign exchange rates, the outcome of contingencies, such as legal proceedings, and financial results. Among the factors that could cause actual results to differ materially are the following:

o the success of research and development activities;
o decisions by regulatory authorities regarding whether and when to approve our drug applications, as well as their decisions regarding labeling and other matters that could affect the availability or commercial potential of our products;
o the speed with which regulatory authorizations, pricing approvals and product launches may be achieved;
o the success of external business development activities;
o competitive developments, including with respect to competitor drugs and drug candidates that treat diseases and conditions similar to those treated by our in-line drugs and drug candidates;
o the ability to successfully market both new and existing products domestically and internationally;
o difficulties or delays in manufacturing;
o trade buying patterns;
o the ability to meet generic and branded competition after the loss of patent protection for our products and competitor products;
o the impact of existing and future regulatory provisions on product exclusivity;
o trends toward managed care and healthcare cost containment;

o Legislation or regulatory action in our marketed territories affecting, among other things, pharmaceutical product pricing, reimbursement or access, the importation of prescription drugs and the involuntary approval of prescription medicines for over-the-counter use;
o claims and concerns that may arise regarding the safety or efficacy of or marketed products and product candidates;
o legal defense costs, insurance expenses, settlement costs and the risk of an adverse decision or settlement related to product liability, patent protection, governmental investigations, ongoing efforts to explore various means for resolving asbestos litigation and other legal proceedings;
o the Company's ability to protect its patents and other intellectual property both domestically and internationally;
o interest rate and foreign currency exchange rate fluctuations;
o governmental laws and regulations affecting domestic and foreign operations, including tax obligations;
o changes in U.S. generally accepted accounting principles;
o any changes in business, political and economic conditions due to the threat of terrorist activity in the U.S. and other parts of the world, and related U.S. military action overseas;
o growth in costs and expenses;
o changes in our product, segment and geographic mix; and

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of anticipated results is subject to substantial risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements.

We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Forms 10-Q, 8-K and 10-K reports to the Securities and Exchange Commission. Our Form 10-K/A filing for the 2006 fiscal year filed on April 27, 2007 listed various important factors that could cause actual results to differ materially from expected and historic results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. Readers can find them in Part II, Item 1A, of this filing under the heading "Risk Factors". You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

This report includes discussion of certain clinical studies relating to various in-line products and/or product candidates. These studies typically are part of a larger body of clinical data relating to such products or product candidates, and the discussion herein should be considered in the context of the larger body of data.