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<SEC-DOCUMENT>0000950123-10-048762.txt : 20100513
<SEC-HEADER>0000950123-10-048762.hdr.sgml : 20100513
<ACCEPTANCE-DATETIME>20100513083055
ACCESSION NUMBER:		0000950123-10-048762
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20100331
FILED AS OF DATE:		20100513
DATE AS OF CHANGE:		20100513

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			TRANSDEL PHARMACEUTICALS INC
		CENTRAL INDEX KEY:			0001360214
		STANDARD INDUSTRIAL CLASSIFICATION:	PHARMACEUTICAL PREPARATIONS [2834]
		IRS NUMBER:				450567010
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-52998
		FILM NUMBER:		10826568

	BUSINESS ADDRESS:	
		STREET 1:		4225 EXECUTIVE SQUARE
		STREET 2:		SUITE 485
		CITY:			LA JOLLA
		STATE:			CA
		ZIP:			92037
		BUSINESS PHONE:		(858) 457-5300

	MAIL ADDRESS:	
		STREET 1:		4225 EXECUTIVE SQUARE
		STREET 2:		SUITE 485
		CITY:			LA JOLLA
		STATE:			CA
		ZIP:			92037

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	Bywater Resources, Inc
		DATE OF NAME CHANGE:	20060421
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>c00915e10vq.htm
<DESCRIPTION>FORM 10-Q
<TEXT>
<HTML>
<HEAD>
<TITLE>Form 10-Q</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 10pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 10pt"><B>FORM 10-Q</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">(Mark One)
</DIV>


<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 10pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT style="font-family: Wingdings">&#254;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD><B>QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE OF 1934</B></TD>
</TR>
</TABLE>
</DIV>


<!-- xbrl,dc -->
<DIV align="center" style="font-size: 10pt; margin-top: 10pt; margin-left: 0%"><B>For the quarterly period ended March&nbsp;31, 2010</B></DIV>
<!-- /xbrl,dc -->

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 10pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT style="font-family: Wingdings">&#111;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT</b></TD>
</TR>
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt; margin-left: 0%"><B>For the transition period from <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>
Commission file number: 000-52998</B>
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 10pt"><B><FONT style="border-bottom: 1px solid #000000">Transdel Pharmaceuticals, Inc.</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10pt">
(Exact Name of Registrant in Its Charter)</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Delaware</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">45-0567010</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">(State or Other Jurisdiction of Incorporation <BR>
or Organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(I.R.S. Employer Identification No.)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">4225 Executive Square, Suite&nbsp;485<BR>
La Jolla, CA
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">92037</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(Address of Principal Executive Offices)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Zip Code)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt">(858)&nbsp;457-5300<BR>
<DIV style="margin-top: 1px"><FONT style="border-top: 1px solid #000000">(Registrant&#146;s Telephone Number, Including Area Code)</FONT></DIV></DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><DIV style="margin-top: 1px"><FONT style="border-top: 1px solid #000000">(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)</FONT></DIV>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Indicate by check mark whether the registrant: (1)&nbsp;has filed all reports required to be filed
by Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or
for such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days. YES <FONT style="font-family: Wingdings">&#254;</FONT> NO
<FONT style="font-family: Wingdings">&#111;</FONT>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule&nbsp;405 of Regulation&nbsp;S-T
(&#167;232.405 of this chapter) during the
preceding 12&nbsp;months (or for such shorter period that the registrant was required to submit and post
such files). YES <FONT style="font-family: Wingdings">&#111;</FONT> NO <FONT style="font-family: Wingdings">&#111;</FONT>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of &#147;large
accelerated filer&#148;, &#147;accelerated filer&#148; and &#147;smaller reporting company&#148; in Rule&nbsp;12b-2 of the
Exchange Act (Check One):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Large accelerated filer <FONT style="font-family: Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Accelerated filer <FONT style="font-family: Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Non-accelerated filer <FONT style="font-family: Wingdings">&#111;</FONT>
<FONT style="white-space: nowrap">(Do not check if a smaller reporting company)</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="white-space: nowrap"> Smaller reporting company <FONT style="font-family: Wingdings">&#254;</FONT></FONT></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Indicate by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of
the Exchange Act). <font style="white-space: nowrap">YES <FONT style="font-family: Wingdings">&#111;</FONT> NO <FONT style="font-family: Wingdings">&#254;</FONT></font>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">As of May&nbsp;10, 2009, 15,652,061 shares of issuer&#146;s common stock, with $0.001 par value per
share were outstanding.
</DIV>

<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>




<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left">
<!-- TOC -->
</DIV>

<DIV align="left">
<A name="tocpage"></A>
</DIV>







<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>TRANSDEL PHARMACEUTICALS, INC.<BR>
(A Development Stage Company)</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><U>Table of Contents</U>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101">Part I FINANCIAL INFORMATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#102">Item&nbsp;1. Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#103">Condensed Consolidated Balance Sheets &#151; March&nbsp;31, 2010 (Unaudited) and December&nbsp;31,
2009</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#104">Unaudited Condensed Consolidated Statements of Operations for the three-month
periods ended March&nbsp;31, 2010 and 2009</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#105">Unaudited Condensed Consolidated Statements of Cash Flows for the three-month
periods ended March&nbsp;31, 2010 and 2009</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#106">Notes to the Unaudited Condensed Consolidated Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#107">Item&nbsp;2. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#108">Item&nbsp;4T. Controls and Procedures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#109">Part II OTHER INFORMATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#110">Item&nbsp;1. Legal Proceedings</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#111">Item&nbsp;1A. Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#112">Item&nbsp;2. Unregistered Sales of Equity Securities and Use of Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#113">Item&nbsp;6. Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c00915exv31w1.htm">Exhibit 31.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c00915exv32w1.htm">Exhibit 32.1</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>PART I<BR>
FINANCIAL INFORMATION</B>
</DIV>

<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;1.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Financial Statements.</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>TRANSDEL PHARMACEUTICALS, INC.<BR>
(A Development Stage Company)</B>
</DIV>

<DIV align="left">
<A name="103"></A>
</DIV>
<!-- xbrl,bs -->
<DIV align="center" style="font-size: 10pt"><B>CONDENSED CONSOLIDATED BALANCE SHEETS</B></DIV>
<!-- xbrl,body -->

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2010</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(Unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">951,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,589,773</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,917</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,016,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,670,690</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,394</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,018,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,672,084</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>LIABILITIES AND STOCKHOLDERS&#146; (DEFICIT)&nbsp;EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">559,797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">681,014</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued Phase 3 expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">255,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">343,633</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued separation expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">211,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued expenses and payroll liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,226</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,053,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,094,873</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; (deficit)&nbsp;equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Preferred stock, $0.001 par value; 5,000,000 shares authorized, none outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock, $0.001 par value; 50,000,000 shares authorized, 15,652,061 shares
issued and outstanding as of March&nbsp;31, 2010 (unaudited)&nbsp;and December&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,652</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,754,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,497,128</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deficit accumulated during the development stage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,806,181</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,935,569</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total stockholders&#146; (deficit)&nbsp;equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(35,801</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">577,211</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities and stockholders&#146; (deficit)&nbsp;equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,018,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,672,084</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><I>See accompanying notes to these unaudited condensed consolidated financial statements.</I>
</DIV>
<!-- /xbrl,bs -->

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">




<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>TRANSDEL PHARMACEUTICALS, INC.<BR>
(A Development Stage Company)</B>
</DIV>

<DIV align="left">
<A name="104"></A>
</DIV>
<!-- xbrl,op -->
<DIV align="center" style="font-size: 10pt"><B>UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS</B></DIV>
<!-- xbrl,body -->

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>For the</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Period From</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>July 24, 1998</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(Inception)</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Through</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2010</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2010</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Selling, general and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">755,587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">481,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,193,268</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,146,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,629,274</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">870,745</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,628,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,822,542</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income (expense):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,575,755</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,789</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127,202</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain on forgiveness of liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,914</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain on settlement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">375,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total other income (expense), net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,789</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(983,639</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(870,612</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,621,236</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(15,806,181</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic and diluted loss per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.06</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.10</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average common shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,652,061</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,564,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><I>See accompanying notes to these unaudited condensed consolidated financial statements.</I>
</DIV>
<!-- /xbrl,op -->

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">




<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>TRANSDEL PHARMACEUTICALS, INC.<BR>
(A Development Stage Company)</B>
</DIV>

<DIV align="left">
<A name="105"></A>
</DIV>
<!-- xbrl,cf -->
<DIV align="center" style="font-size: 10pt"><B>UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS</B></DIV>
<!-- xbrl,body -->

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>For The Period</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>From July 24,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>1998</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(Inception)</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Through</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Three Months Ended March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2010</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2010</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from operating activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(870,612</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,621,236</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(15,806,181</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments to reconcile net loss to net cash used in operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Estimated fair value of contributed services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,475,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain on forgiveness of liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(89,914</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization of prepaid consulting fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">572,008</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,024</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non-cash interest on notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,575,755</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">257,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">159,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,514,068</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Changes in operating assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Prepaid consulting costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(140,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Prepaid expenses and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,818</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(65,099</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(121,217</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">224,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">649,711</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accrued Phase 3 expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(88,374</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">275,456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">255,259</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accrued separation expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">211,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">211,046</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accrued expenses and payroll liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(42,416</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,756</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,810</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash used in operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(637,891</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(917,681</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,818,513</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from investing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,154</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,154</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from financing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from notes payable to stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226,300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,500,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital contributions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168,707</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net proceeds from purchase of common stock and exercise of warrants and stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,450</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net proceeds from Private Placements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,779,092</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,773,549</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net change in cash and cash equivalents</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(637,891</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(917,681</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">951,882</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and cash equivalents, beginning of period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,589,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,111,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and cash equivalents, end of period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">951,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,193,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">951,882</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Supplemental disclosure of cash flow information:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of and adjustment to common stock and warrants to consulting firms for prepaid consulting fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">432,007</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of notes payable and accrued interest into common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,530,177</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forgiveness of notes payable and accrued interest to shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">241,701</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of advances to notes payable to shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">196,300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><I>See accompanying notes to these unaudited condensed consolidated financial statements.</I>
</DIV>
<!-- /xbrl,cf -->

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">




<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>TRANSDEL PHARMACEUTICALS, INC.<BR>
(A Development Stage Company)</B>
</DIV>

<DIV align="left">
<A name="106"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</B></DIV>

<!-- xbrl,ns -->



<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Note 1. Business Description</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Transdel Pharmaceuticals, Inc. (&#147;Transdel&#148; or &#147;Company&#148;) is a specialty pharmaceutical company
developing non-invasive, topically delivered products. The Company&#146;s innovative patented Transdel&#153;
cream formulation technology is designed to facilitate the effective penetration of a variety of
products through the tough skin barrier. Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>, the Company&#146;s lead pain product, utilizes
the Transdel&#153; platform technology to deliver the active drug, ketoprofen, a non-steroidal
anti-inflammatory drug (&#147;NSAID&#148;), through the skin directly into the underlying tissues where the
drug exerts its well-known anti-inflammatory and analgesic effects. The Company intends to
leverage its Transdel&#153; platform technology to expand and create a portfolio of topical products for
a variety of indications.
</DIV>


<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Note 2. Basis of Presentation</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company has prepared the accompanying condensed consolidated financial statements in accordance
with United States generally accepted accounting principles (&#147;GAAP&#148;) for interim financial
information and with the rules and regulations of the Securities and Exchange Commission (the
&#147;SEC&#148;) related to a Quarterly Report on Form 10-Q and Article&nbsp;8 of Regulation&nbsp;S-X. Accordingly,
they do not include all of the information and disclosures required by GAAP for annual financial
statements. The condensed consolidated financial statements include the accounts of Transdel and its wholly
owned subsidiary, Transdel Pharmaceuticals Holdings, Inc. (formerly known as Trans-Pharma
Corporation). All significant intercompany balances and transactions have been eliminated in
consolidation. In the opinion of the Company&#146;s management, the accompanying condensed consolidated
financial statements contain all the adjustments necessary (consisting only of normal recurring
accruals) to make the financial position of the Company as of March&nbsp;31, 2010, the results of
operations for three months ended March&nbsp;31, 2010 and 2009, and cash flows for the three months
ended March&nbsp;31, 2010 and 2009, fairly stated. We have evaluated subsequent events through the
filing date of this Form 10-Q and determined that no subsequent events have occurred that would
require recognition in the condensed consolidated financial statements or disclosure in the notes
thereto other than as disclosed in the accompanying notes. The condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial statements for the
year ended December&nbsp;31, 2009 contained in Form 10-K filed on March&nbsp;31, 2010 with the SEC. Interim
operating results are not necessarily indicative of operating results for the full year.
</DIV>


<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Note 3. Merger with Public Company and Reorganization</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">On September&nbsp;17, 2007, Transdel entered into an Agreement of Merger and Plan of Reorganization (the
&#147;Merger Agreement&#148;) by and among Transdel, Transdel Pharmaceuticals Holdings, Inc., a privately
held Nevada corporation (&#147;Transdel Holdings&#148;), and Trans-Pharma Acquisition Corp., a newly formed,
wholly-owned Delaware subsidiary of Transdel (&#147;Acquisition Sub&#148;). Upon closing of the merger
transaction contemplated under the Merger Agreement (the &#147;Merger&#148;), Acquisition Sub merged with and
into Transdel Holdings, and Transdel Holdings, as the surviving corporation, became a wholly-owned
subsidiary of Transdel.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In connection with the merger, 1,849,993 of Transdel common shares remain outstanding and all other
outstanding shares of Transdel were cancelled. Also, at the closing of the Merger, each share of
Transdel Holdings common stock issued and outstanding immediately prior to the closing of the
Merger was exchanged for the right to receive 0.15625 of one share of Transdel&#146;s common stock. An
aggregate of 8,000,000 shares of Transdel&#146;s common stock were issued to the holders of Transdel
Holdings&#146; common stock. As a result of the transaction, the former owners of Transdel Holdings
became the controlling stockholders of Transdel. Accordingly, the merger of Transdel Holdings and
Transdel is a reverse merger that has been accounted for as a recapitalization of Transdel
Holdings.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Effective on September&nbsp;17, 2007, and for all reporting periods thereafter, Transdel&#146;s operating
activities, including any prior comparative period, will include only those of Transdel Holdings.
All references to shares and per share amounts in the accompanying condensed consolidated financial
statements and footnotes have been restated to reflect the aforementioned share exchange.
</DIV>


<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Note 4. Summary of Significant Accounting Policies</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Going Concern</I>. The accompanying condensed consolidated financial statements have been prepared on a
going-concern basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has incurred recurring operating losses,
had negative operating cash flows and has not recognized any revenues since July&nbsp;24, 1998
(Inception). In addition, the Company had a deficit accumulated during the development stage of
$15.8&nbsp;million at March&nbsp;31, 2010. These factors raise substantial doubt about the Company&#146;s ability
to continue as a going concern.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">




<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>TRANSDEL PHARMACEUTICALS, INC.<BR>
(A Development Stage Company)<BR>
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Note 4. Summary of Significant Accounting Policies (continued)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company&#146;s continuation as a going concern is dependent on its ability to obtain additional
financing to fund operations, implement its business model, and ultimately, to attain profitable
operations. The Company intends to raise additional financing to fund its operations through
various means, including equity or debt financing, funding from a corporate partnership or
licensing arrangement or any similar financing. However, there is no assurance that sufficient
financing will be available or, if available, on terms that would be acceptable to the Company.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The condensed consolidated financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as a going concern.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Development Stage Enterprise. </I>The Company is devoting substantially all of its present efforts to
establishing a new business, and its planned principal operations have not yet commenced. All
losses accumulated since inception have been considered as part of the Company&#146;s development stage
activities.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The accompanying condensed consolidated financial statements contemplate the realization of assets
and the satisfaction of liabilities in the normal course of business. The Company is a development
stage enterprise and has sustained significant losses since Inception and expects to continue to
incur losses through 2010.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In order to execute the second Phase 3 clinical trial and other supportive safety studies for
Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>, which are required by the U.S. Food and Drug Administration (&#147;FDA&#148;) to obtain final
regulatory approval for Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>, the Company will need to secure additional funds through
various means, including equity and debt financing, funding from a corporate partnership or
licensing arrangement or any similar financing. On April&nbsp;5, 2010, the Company received gross
proceeds of $1&nbsp;million from the issuance of a 2-year senior convertible note (see Note 9), however,
there can be no assurance that the Company will be able to obtain additional debt or equity
financing, if and when needed, on terms acceptable to the Company. Any additional equity or debt
financing may involve substantial dilution to the Company&#146;s stockholders, restrictive covenants or
high interest costs. The failure to raise needed funds on sufficiently favorable terms could have a
material adverse effect on the execution of the Company&#146;s business plan, operating results and
financial condition. The Company&#146;s long term liquidity also depends upon its ability to generate
revenues from the sale of its products and achieve profitability. The failure to achieve these
goals could have a material adverse effect on the execution of the Company&#146;s business plan,
operating results and financial condition.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Research and Development. </I>Research and development costs are charged to expense and accordingly
accrued when incurred.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Cash and Cash Equivalents</I>. Cash equivalents consist of highly liquid investments with maturities of
three months or less from the original purchase date.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Concentrations of Credit Risk. </I>Financial instruments that potentially subject the Company to
significant concentration of credit risk consist primarily of cash and cash equivalents. The
Company invests its excess cash balances (approximately $500,000 as of March&nbsp;31, 2010) in a
combination of government issued and government backed securities. The remaining amount of cash is
held in an operating account and in the form of multiple short term certificates of deposit, all of
which (except for $100,000 of the operating account) are insured by the Federal Deposit Insurance
Corporation (&#147;FDIC&#148;) as they are individually under the insured maximum of $250,000.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Computer Equipment. </I>Computer equipment is stated at cost less accumulated depreciation.
Depreciation is calculated using the straight-line method over the estimated useful life of three
years.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Fair Value of Financial Instruments. </I>The fair values of the Company&#146;s cash and cash equivalents,
accounts payable and accrued expenses approximate carrying values due to their short maturities.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Revenue Recognition. </I>The Company will recognize revenues when four basic criteria are met: (1)
persuasive evidence of an arrangement exists; (2)&nbsp;delivery has occurred; (3)&nbsp;the selling price is
fixed and determinable; and (4)&nbsp;collectibility is reasonably assured. Determination of criteria (3)
and (4)&nbsp;will be based on management&#146;s judgments regarding the fixed nature of the selling prices of
the products delivered and the collectibility of those amounts. Provisions for discounts and
rebates to customers, estimated returns and allowances, and other adjustments will be provided for
in the same period the related sales are recorded. The Company will defer any revenue for which the
product has not been delivered or for which services have not been rendered or are subject to
refund until such time that the Company and the customer jointly determine that the product has
been delivered or services have been rendered or no refund will be required.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->7<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">




<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>TRANSDEL PHARMACEUTICALS, INC.<BR>
(A Development Stage Company)<BR>
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Note 4. Summary of Significant Accounting Policies (continued)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">As of March&nbsp;31, 2010, the Company had not generated any revenues and the Company does not
anticipate that it will generate any revenues until one or more of its drug candidates are approved
by the FDA or until the Company is able to commercialize one or more of its cosmetic products.
Also, effective sales and marketing support must be in place in order for either the drug
candidates or the cosmetic products to generate any revenues. The FDA approval process is highly
uncertain and at this time the Company cannot estimate when it will generate revenues from sales of
its products.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Stock-Based Compensation. </I>All share-based payments to employees, including grants of stock options
to employees, directors and consultants and restricted stock grants, are recognized in the
financial statements based upon their fair values. The Company recorded total stock-based
compensation for employees, directors and consultants of $257,600, $159,118 and $1,514,068 for the
three months ended March&nbsp;31, 2010 and 2009 and the period from Inception through March&nbsp;31, 2010,
respectively, for options and restricted stock granted and vested which is included in selling,
general and administrative expenses and research and development expenses in the amount of $224,063
and $33,537, $156,199 and $2,919, and $1,004,217 and $509,851, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The value of equity instruments issued to consultants and vendors in exchange for goods and
services is periodically remeasured and income or expense is recognized during their vesting terms.
The measurement date for the fair value of the equity instruments issued is determined at the
earlier of (i)&nbsp;the date at which a commitment for performance by the consultant or vendor is
reached or (ii)&nbsp;the date at which the consultant or vendor&#146;s performance is complete. In the case
of equity instruments issued to consultants, the fair value of the equity instrument is primarily
recognized over the term of the consulting agreement. An asset acquired in exchange for the
issuance of fully vested, nonforfeitable equity instruments should not be presented or classified
as an offset to equity on the grantor&#146;s balance sheet once the equity instrument is granted for
accounting purposes.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Basic and Diluted Loss per Common Share</I>. Basic net loss per common share is computed by dividing
net loss for the period by the weighted average number of common shares outstanding during the
period. Diluted net loss per share is computed by dividing the net loss for the period by the
weighted average number of common and common equivalent shares, such as stock options and warrants
outstanding during the period.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Basic and diluted net loss applicable to common stock per share is computed using the weighted
average number of common shares outstanding during the period. Common stock equivalents (prior to
application of the treasury stock, if converted method) from stock options and warrants were
2,707,730 and 1,837,730 for the three months ended March&nbsp;31, 2010 and 2009, respectively, are
excluded from the calculation of diluted net loss per share for all periods presented because the
effect is anti-dilutive. If the Company reported net income for these periods, no common stock
equivalents would have been included in the number of shares used to calculate diluted earnings per
share in each of the three months ended March&nbsp;31, 2010 and 2009, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Use of Estimates. </I>The preparation of financial statements in conformity with GAAP requires
management to make estimates and judgments that affect the reported amounts of assets, liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting periods. Significant estimates made
by management are, among others, the valuation of contributed services, stock options, deferred
taxes and stock-based compensation issued to employees and non-employees. Actual results could
differ from those estimates.
</DIV>


<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Note 5. Stockholders&#146; Equity</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">On October&nbsp;27, 2008, the Company entered into an agreement with an investor relations firm (&#147;IR
Firm&#148;), pursuant to which the IR Firm would provide certain investor relations and public relations
services to the Company for a period of one year, beginning on November&nbsp;1, 2008. In exchange for
such services, the Company issued the 82,568 registered shares of its common stock, of which 68,667
shares were nonforfeitable (valued at $85,834 and recorded as prepaid consulting fees upon
issuance) and 13,901 shares were forfeitable, to the IR Firm as a prepayment of services to be
received. The Company terminated the agreement with the IR Firm effective March&nbsp;31, 2009. Therefore, during
the first quarter of 2009, the Company amortized the remaining portion of the nonforfeitable shares
of $28,612 (previously issued and recorded as prepaid consulting fees) and recognized the issuance
of the 13,901 forfeitable shares in addition to the issuance of 31,877 (for an aggregate of 45,778)
shares of the Company&#146;s common stock for services provided by the IR Firm. The fair market value
of the shares issued during the first quarter of 2009 was $50,356, which was included in selling,
general and administrative expenses in the accompanying statement of operations and is included in
the expenses disclosed in Note 4.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">




<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>TRANSDEL PHARMACEUTICALS, INC.<BR>
(A Development Stage Company)<BR>
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Note 5. Stockholders&#146; Equity (continued)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">On April&nbsp;24, 2008, the Company entered into a one-year consulting agreement with a firm to provide
the Company with financial advisory services. As compensation for the services, the Company issued
a three-year warrant to purchase 5,000 shares of the Company&#146;s common stock at a cash and cashless
price of $2.00 per share. The fair value of the warrant, determined based on the Black-Scholes
pricing model, was valued at $1,310, which was amortized over the one-year term ending in April
2009. For the three months ended March&nbsp;31, 2009, $327 was amortized and included in selling,
general and administrative expenses in the accompanying condensed consolidated statement of
operations
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">For the three months ended March&nbsp;31, 2009 and for the period from Inception through March&nbsp;31, 2010,
the Company amortized $28,939 and $572,008, respectively, of prepaid consulting fees which is
included as part of selling, general and administrative expenses.
</DIV>


<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Note 6. Stock Option Plan</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">On September&nbsp;17, 2007, the Company&#146;s Board of Directors and stockholders adopted the 2007 Incentive
Stock and Awards Plan (the &#147;Plan&#148;), which provides for the issuance of a maximum of an aggregate of
3,000,000 (as amended on November&nbsp;5, 2008) shares of Common Stock. The purpose of the Plan is to
provide an incentive to attract and retain directors, officers, consultants, advisors and employees
whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an
active interest of such persons into the Company&#146;s development and financial success. Under the
Plan, the Company is authorized to issue incentive stock options intended to qualify under Section
422 of the Code, non-qualified stock options and restricted stock. The Plan will be administered by
the Company&#146;s Board of Directors until such time as such authority has been delegated to a
committee of the board of directors.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">A summary of the Plan for the three months ended March&nbsp;31, 2010 is as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Ave.</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Ave.</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Remaining</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Aggregate</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Contractual</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Intrinsic</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Price</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Life</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Value</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding &#151; January&nbsp;1, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,605,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cancelled</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding &#151; March&nbsp;31, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,905,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">109,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercisable &#151; March&nbsp;31, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,045,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vested and expected to vest &#151; March&nbsp;31, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,826,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">101,100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The aggregate intrinsic value in the table above represents the total pre-tax amount of the
proceeds, net of exercise price, which would have been received by option holders if all option
holders had exercised and immediately sold all options with an exercise price lower than the market
price on March&nbsp;31, 2010, based on the closing price of the Company&#146;s common stock of $1.00 on that
date.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The options were granted to the employees, directors and consultants at exercise prices that ranged
from $0.70 to $2.62, the estimated fair market value of the common stock on the dates of issuance.
All options granted to date expire on the ten year anniversary of the issuance date and vest on a
quarterly basis over three months to five years. The Company uses the Black-Scholes option pricing
model to estimate the grant-date fair value of share-based awards. The Black-Scholes model requires
subjective assumptions regarding future stock price volatility and expected time to exercise, along
with assumptions about the risk-free interest rate and expected dividends, which affect the
estimated fair values of the Company&#146;s stock-based awards. The expected term of options granted was
determined in accordance with the &#147;simplified approach&#148; as the Company has very limited historical
data on employee exercises and post-vesting employment termination behavior.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->9<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">



<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>TRANSDEL PHARMACEUTICALS, INC.<BR>
(A Development Stage Company)<BR>
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Note 6. Stock Option Plan (continued)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The expected volatility is based on the historical volatilities of the common stock of comparable
publicly traded companies based on the Company&#146;s belief that it currently has limited historical
data regarding the volatility of its stock price on which to base a meaningful estimate of expected
volatility. The risk-free rate selected to value any particular grant is based on the U.S. Treasury
rate that corresponds to the expected term of the grant effective as of the date of the grant. The
Company used 0% as an expected dividend yield assumption. These factors could change in the future,
affecting the determination of stock-based compensation expense in future periods. Utilizing these
assumptions, the fair value is determined at the date of grant. For the three months ended March
31, 2010, the Company recorded stock-based compensation related to stock options for employees and
directors of $257,600.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">On December&nbsp;19, 2008, the Board of Directors approved and the Company entered into a consulting
agreement with a firm to provide the Company with business development services. As part of the
compensation for the services, the Company issued the firm a non-qualified stock option, under the
Plan, to purchase up to 50,000 shares of common stock. The stock option vested in full on March
19, 2009 and was exercised during the third quarter of 2009. The option was granted with an
exercise price of $0.99. The option was revalued on an interim basis until the termination of the
agreement and the final estimated fair value of the stock option, based on the Black-Scholes
pricing model. This option was amortized over the term of the agreement which was approximately
four months as the consulting agreement was terminated effective April&nbsp;16, 2009. For the three
months ended March&nbsp;31, 2009, the Company recorded stock-based compensation related to this stock
option of $28,267.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In April&nbsp;2009, the Company entered into a consulting agreement with a consultant to provide the
Company with clinical management services. On June&nbsp;18, 2009, as part of the compensation for the
services, the Board of Directors approved and the Company issued the consultant a non-qualified
stock option, under the Plan, to purchase up to 85,000 shares of common stock. Per the option
agreement, a portion of the stock option (25,000 shares) became fully vested once the Company
announced the results from the Phase 3 trial of Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>, which occurred on October&nbsp;6, 2009.
Therefore, the final valuation (of $36,658) of this portion of the option was determined and
recorded in the fourth quarter of 2009. The remainder of the stock option (60,000 shares) was
scheduled to vest, on a quarterly basis, over a one-year term, if the consulting agreement was
still effective and had not been terminated by either the Company or the consultant prior to the
one-year vesting term. The option was granted with an exercise price of $1.60 and has a ten year
life. However, effective October&nbsp;12, 2009, the consultant became an employee of the Company.
Therefore, the original stock option agreement was amended and effectively removed the requirement
for the consulting agreement to be in place for the remainder of term, but rather that the
individual retains the employee status through the remaining vesting term that will end on June&nbsp;1,
2010. Since this option effectively was transformed into an employee stock option agreement with
the change in status, the final valuation of the option was determined. For the portion of the
60,000 options that vested prior to the change in status, the amount associated with those vested
shares was recorded as a consulting stock-based compensation expense in the fourth quarter of 2009.
The expense related to the options that vest subsequent to the hire date, are recorded as employee
stock-based compensation.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">As of March&nbsp;31, 2010, there was approximately $600,000 of total unrecognized compensation expense
related to unvested stock options under the Plan. That expense is expected to be recognized over
the weighted-average period of 2.3&nbsp;years.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Also, on November&nbsp;21, 2008, the Company issued a restricted stock grant to a director of the
Company for 25,000 shares of the Company&#146;s common stock. The restricted stock grant vested over a
one-year period. The fair value of the grant was determined to be $17,500 and was amortized to
selling, general and administrative expenses on a straight line basis over the one-year vesting
period. For the three months ended March&nbsp;31, 2009 and the period from Inception through March&nbsp;31,
2010, the Company recorded stock-based compensation related to this restricted stock of $4,374, and
$17,500, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Effective February&nbsp;17, 2010, the Board of Directors of the Company accepted the resignation of Dr.
Juliet Singh as Chief Executive Officer of the Company and as a director on the Board. In
connection with Dr.&nbsp;Singh&#146;s resignation, the Company and Dr.&nbsp;Singh entered into a separation
agreement that provided Dr.&nbsp;Singh with one year of continued salary in accordance with the terms of
her existing employment agreement as well as the accelerated vesting of 300,000 stock options
previously granted. In addition, the term in which Dr.&nbsp;Singh may exercise the vested options
(which included 610,000 options in total, comprised of 310,000 stock options that were vested as of
the separation date as well as the 300,000 stock options subject to the accelerated vesting) was
modified and extended to three years from the date of her resignation. In accordance with
accounting guidance, since these stock options were modified, the value of the modification for
each stock option was determined. For the stock options vested as of the separation date, the
modified value was equal to the number of options multiplied by the difference in value (per the
Black-Scholes option pricing model) between the original and modified terms of the stock options
utilizing current values for market stock price, interest rate and volatility. For the stock
options in which the vesting was accelerated, the new value for these stock options was calculated
as of the separation date using the Black-Scholes option pricing model. In total, the additional
stock based compensation expense recognized for the modified stock options was approximately
$174,000 and was recorded in additional paid-in capital and general and
administrative expenses in the accompanying condensed consolidated balance sheets and condensed
consolidated statement of operations as of and for the three-month period ended March&nbsp;31, 2010,
respectively.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->10<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">



<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>TRANSDEL PHARMACEUTICALS, INC.<BR>
(A Development Stage Company)<BR>
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>




<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Note 7. Stock Warrants</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company issued warrants to purchase shares of its common stock in conjunction with private
placement offerings in 2007 and 2008 and a consulting agreement in 2008. The expiration of the
outstanding warrants occurs through May&nbsp;2013 at various periods.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">A summary of the status of the warrants for the three months ended March&nbsp;31, 2010 is as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted-</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Subject to</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Average</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Warrants</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Price</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warrants outstanding &#151; January&nbsp;1, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">802,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4.10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warrants outstanding and exercisable &#151; March&nbsp;31, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">802,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4.10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average remaining contractual life of the outstanding warrants &#151; March&nbsp;31, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">2.56 years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Note 8. Commitments and Contingencies</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><U>Indemnities and Guarantees</U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In addition to the indemnification provisions contained in the Company&#146;s charter documents, the
Company will generally enter into separate indemnification agreements with the Company&#146;s directors
and officers. These agreements require the Company, among other things, to indemnify the director
or officer against specified expenses and liabilities, such as attorneys&#146; fees, judgments, fines
and settlements, paid by the individual in connection with any action, suit or proceeding arising
out of the individual&#146;s status or service as the Company&#146;s director or officer, other than
liabilities arising from willful misconduct or conduct that is knowingly fraudulent or deliberately
dishonest, and to advance expenses incurred by the individual in connection with any proceeding
against the individual with respect to which the individual may be entitled to indemnification by
the Company. These guarantees and indemnities do not provide for any limitation of the maximum
potential future payments the Company could be obligated to make. Historically, the Company has not
been obligated nor incurred any payments for these obligations and, therefore, no liabilities have
been recorded for these indemnities and guarantees in the accompanying consolidated balance sheets.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><U>Cato Research Ltd. Agreement</U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In accordance with the Master Services Agreement, dated April&nbsp;10, 2007, between the Company and
Cato Research Ltd. (&#147;Cato&#148;), a contract research and development organization, the Company entered
into a clinical trial services agreement (&#147;Agreement&#148;) with Cato on June&nbsp;10, 2008. Under the
Agreement, Cato served as the Company&#146;s strategic partner and contract research organization in
conducting the Company&#146;s Phase 3 clinical trial for Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>. As of March&nbsp;31, 2010, the
Company incurred approximately $3.2&nbsp;million (original estimate of costs was $3.3&nbsp;million) related
to Cato&#146;s fees as well as pass-through costs incurred by Cato or payable to the clinical sites for
patients enrolled in the study. The Company does not anticipate incurring any additional costs
related to this Agreement.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">



<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>TRANSDEL PHARMACEUTICALS, INC.<BR>
(A Development Stage Company)<BR>
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Note 8. Commitments and Contingencies (Continued)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><U>Cosmetic Products Consulting Agreement</U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">On August&nbsp;25, 2008, the Company entered into a consulting agreement with a firm to provide product
and business development services for specific cosmetic/cosmeceutical products that would be
developed by the Company. To the extent a specific cosmetic/cosmeceutical product, applicable to
the consulting agreement, is successfully developed and a separate agreement is entered into
between the Company and a third party for (including but not limited to) the out-license or
distribution of a product, the firm will receive a percentage of the operating profits from the
third party agreement as agreed upon in the consulting agreement.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><U>Cosmeceutical License Agreement</U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">On May&nbsp;20, 2009, the Company and JH Direct, LLC (&#147;JH Direct&#148;) entered into a licensing agreement
providing JH Direct with the exclusive worldwide rights to the Company&#146;s anti-cellulite
cosmeceutical product which utilizes the Company&#146;s patented transdermal delivery system technology,
Transdel&#153;. Under the terms of the agreement, JH Direct will pay the Company initial royalty
advances and a continuing licensing royalty on the worldwide sales of the anti-cellulite product.
The Company retained the exclusive rights to seek pharmaceutical/dermatological partners for the
anti-cellulite product for an initial period of one year following the launch of the product,
thereafter JH Direct will be allowed to expand in this channel. In accordance with the cosmetic
products consulting agreement, the consulting firm will receive a percentage of the operating
profits paid to the Company.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><U>Separation Agreement</U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Effective February&nbsp;17, 2010, the Board of Directors of the Company accepted the resignation of Dr.
Juliet Singh as Chief Executive Officer of the Company and as a director on the Board. In
connection with Dr.&nbsp;Singh&#146;s resignation, the Company and Dr.&nbsp;Singh entered into a separation
agreement that provides Dr.&nbsp;Singh with one year of continued salary in accordance with the terms of
her existing employment agreement as well as the accelerated vesting of 300,000 stock options
previously granted. The separation agreement also includes a mutual release of claims. In
accordance with this agreement, the Company recorded a one-time accrual of $242,000 for the one
year of continued salary (including the related employer payroll taxes) and medical benefits.
Also, as noted in Note 6, the Company recorded a total expense of approximately $174,000 during the
first quarter 2010 for the value of the modifications to the stock options.
</DIV>


<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Note 9. Subsequent Event</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><U>Issuance of Senior Convertible Promissory Note</U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">On April&nbsp;5, 2010, the Company issued a two (2)-year Senior Convertible Promissory Note (the &#147;Note&#148;)
to an existing investor through a private placement. The Note includes an annual interest rate of
7.5&nbsp;percent and (unless converted or prepaid, as noted below) all principal and interest are due
and payable on April&nbsp;5, 2012 (&#147;Maturity Date&#148;). At any time prior to the Maturity Date, the
investor may convert all or a portion of the outstanding principal and accrued interest at a
conversion ratio of one share of Transdel&#146;s common stock for each $1 owed. Also, at any time prior
to Maturity Date, the Company has the option to prepay the outstanding principal and accrued
interest. The Company received gross proceeds from the issuance of the Note in the aggregate
amount of $1,000,000. There were no discounts or commissions paid in connection with this private
placement.
</DIV>

<!-- /xbrl,ns -->

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->12<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;2.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Overview</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We are a specialty pharmaceutical company developing non-invasive, topically delivered
products. Our innovative patented Transdel&#153; cream formulation technology is designed to facilitate
the effective penetration of a variety of products through the tough skin barrier. Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>,
our lead pain product, utilizes the Transdel&#153; platform technology to deliver the active drug,
ketoprofen, a non-steroidal anti-inflammatory drug (&#147;NSAID&#148;), through the skin directly into the
underlying tissues where the drug exerts its well-known anti-inflammatory and analgesic effects.
We intend to leverage the Transdel&#153; platform technology to expand and create a portfolio of topical
products for a variety of indications.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On September&nbsp;17, 2007, we entered into an Agreement of Merger and Plan of Reorganization (the
&#147;Merger Agreement&#148;) with Transdel Pharmaceuticals Holdings, Inc., a privately held Nevada
corporation (&#147;Transdel Holdings&#148;), and Trans-Pharma Acquisition Corp., our newly formed,
wholly-owned Delaware subsidiary (&#147;Acquisition Sub&#148;). Upon closing of the merger transaction
contemplated under the Merger Agreement (the &#147;Merger&#148;), Acquisition Sub merged with and into
Transdel Holdings, and Transdel Holdings, as the surviving corporation, became our wholly-owned
subsidiary.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As is discussed further in the Liquidity and Capital Resources section below, we have limited
funds to support our operations. Our continuation as a going concern subsequent to the fourth
quarter of 2010 is dependent on our ability to obtain additional financing to fund the continued
operation of our business model for a long enough period to achieve profitable operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Plan of Operations</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">For the next twelve months, our current operating plan is focused on the development of our
lead drug, Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP> for the indication of acute pain, inflammation and swelling associated
with soft tissue injuries, development of cosmetic/cosmeceutical products and co-development
opportunities in other therapeutic areas utilizing our Transdel&#153; platform technology.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Clinical Program for Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In June&nbsp;2008, we initiated a Phase 3 clinical study designed as a randomized, double-blind,
placebo-controlled, multi-center Phase 3 study that enrolled a total of 364 patients with acute
soft tissue injuries of the upper or lower extremities in 26 centers in the United States. The
primary efficacy endpoint was the difference between Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP> and placebo in the change from
baseline in pain intensity as measured by the 100 mm Visual Analogue Scale (VAS)&nbsp;during daily
activities over the past 24 hours on the Day 3 visit.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As we reported in October&nbsp;2009, the top-line results showed that the study demonstrated
statistical significance in its primary endpoint in the per protocol analysis and was favorable for
Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>
in the Intent-To Treat (ITT)&nbsp;analysis. Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP> also demonstrated an
excellent safety and tolerability profile. There were no Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP> treatment
related gastrointestinal, cardiovascular, hepatic or other clinically relevant adverse events (AEs)
reported. In particular, there was a low incidence of skin associated AEs, 1.1% with Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>
and 2.2% with placebo. Furthermore, Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP> was well absorbed through the skin and in support
of the safety and tolerability only minimal blood concentrations of ketoprofen were detected in a
subset of patients who underwent blood sampling for pharmacokinetic (PK)&nbsp;analyses following
repeated topical applications. These PK results are consistent with our previous clinical study
findings and support the excellent safety profile.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In January&nbsp;2010, we reported on further in-depth analyses of the ITT data from the
Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top"><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP>Phase 3 study. For the modified ITT analysis we identified 35 patients
who did not meet study entry criteria at the time of randomization. Excluding the data from these
patients who should not have been randomized into the study based on information that was not known
at the time of enrollment, the study demonstrated statistical significance (p&#060;0.038) on the
primary efficacy endpoint. This analysis was confirmed by a third-party statistical expert.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The weight of evidence of a treatment effect in this study is further strengthened by a key
secondary endpoint (pain intensity recorded 3 times daily on patient diary cards) that supports the
primary endpoint. The pain curves over time show consistent separation between treatment groups
reaching statistical significance in favor of Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>; using both the original and modified
ITT population.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Based on discussions with the FDA at least two adequate and well-controlled Phase 3 studies
are required in order to obtain regulatory approval to market Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>. We believe that the
first Phase 3 trial will qualify as one adequate and well-controlled trial because there is
statistical significance on the primary endpoint in an objectively defined modified ITT population,
and statistical significance on secondary endpoints. We are in the process of determining the
design of the second Phase 3 trial. There is no assurance that the FDA will accept our conclusion
of the modified ITT data from the first Phase 3 study as sufficient as part of the requirements for
regulatory approval
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As part of a routine requirement to provide safety information in the NDA submission we have
to perform studies such as to assess the allergenicity potential and absorption of ketoprofen
during concurrent exercise and heat exposure with Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>.
These additional supportive trials will be conducted in healthy subjects. The timing of the
second Phase 3 trial and the other supportive studies will be dependent on obtaining adequate
financing to support the execution of these activities and for other working capital expenditures.
</DIV>


<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->13<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We expect that Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>, if and when approved by the FDA, could become the first topical
NSAID cream product available by prescription in the United States for acute pain management. We
are seeking a commercial partner for Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>, and are actively pursuing
discussions with U.S. and foreign based potential partners with sales and marketing
infrastructures.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Cosmeceutical/Cosmetic Product Development Program</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We have expanded our product development programs to include cosmetic/cosmeceutical products,
which utilize our patented transdermal delivery system technology, Transdel<SUP style="FONT-size: 85%; vertical-align: text-top">TM</SUP>. Our lead
product is an anti-cellulite formulation, for which we have initial clinical information supporting
the beneficial effects of this key cosmetic/cosmeceutical product on skin appearance. Our
potential pipeline of cosmetic/cosmeceutical products includes hyperpigmentation and anti-aging
formulations. We are pursuing discussions with potential sales and marketing partners for these
cosmetic/cosmeceutical products.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On May&nbsp;20, 2009, we entered into a license agreement with JH Direct, LLC (&#147;JH Direct&#148;)
providing JH Direct with the exclusive worldwide rights to our anti-cellulite cosmeceutical
product. Under the terms of the agreement, JH Direct will pay us initial royalty advances if the
product is marketed and a continuing licensing royalty on the worldwide sales of the anti-cellulite
product. We retained the exclusive rights to seek pharmaceutical/dermatological partners for the
anti-cellulite product for an initial period of one year following the launch of the product,
thereafter JH Direct will be allowed to expand in this channel. We anticipate that JH Direct will
launch the anti-cellulite product through a direct response television campaign during the second
half of 2010.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Other Product Development Programs</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We believe that the clinical success of Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP> will facilitate the use of the Transdel&#153;
delivery technology in other products. We have identified co-development opportunities for
potential products in pain management and other therapeutic areas utilizing the Transdel&#153; platform
technology and we are exploring potential partnerships for these identified products. In addition
to others, some of these identified co-development areas include hormone based products, antiemetic
and dermatological products using our Transdel delivery system. We are also looking to out-license
our Transdel&#153; drug delivery technology for the development and commercialization of additional
innovative drug products. There can be no assurance that any of the activities associated with our
product development programs will lead to definitive agreements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We believe that our current staff is sufficient to carry out our business plan in the coming
twelve months, however, if our operations in the future require it, we will consider the employment
of additional staff or the use of consultants. Upon the resignation of our Chief Executive
Officer, effective February&nbsp;17, 2010, our Board of Directors initiated a search for a new Chief
Executive Officer. Until then, our Chief Financial Officer, John Lomoro, will serve as the acting
Chief Executive Officer.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Results of Operations</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Selling, General and Administrative Expenses</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our selling, general and administrative expenses include personnel costs including wages and
stock-based compensation, corporate facility expenses, investor relations, consulting, insurance,
legal and accounting expenses.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The table below provides information regarding selling, general and administrative expenses:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Three months ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2010</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Variance</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Selling, general and administrative</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">755,587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">481,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">274,113</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->14<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">For the three months ended March&nbsp;31, 2010, the increase of $274,113 in selling, general
and administrative expense, as compared to the same period in the prior year, was primarily related
to an increase in personnel expenses related to the separation agreement for our former chief
executive officer, partially offset by a decrease in expenses for investor relations
and consulting expenses. Further explanations for these variances are as follows:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">As a result of the separation agreement entered into by us and our former chief
executive officer, we recognized aggregate one-time expenses of approximately $416,000.
This amount was comprised of approximately $242,000 related to the accrual of continued
salary and medical benefits to be provided for a period of one year after the separation
date of February&nbsp;17, 2010 and approximately $174,000 of stock based compensation expense
related to the modification of terms for the former chief executive officer&#146;s stock
options.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The primary reason for the decrease, approximately $73,000, of investor relations
expense was due to significant amount of stock based compensation incurred during the same
period last year, but not in the current period, for investor relations services provided
to us.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">In the first quarter of 2009, we incurred monthly fees and stock-based compensation
charges related to consulting services primarily for business development services.
However, during the first quarter of 2010, we only incurred a minor amount of consulting
fees, therefore, this accounted for a net decrease in consulting expenses of approximately
$57,000.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Research and Development Expenses</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our research and development expenses primarily include costs for the Ketotransdel clinical
program. These costs are comprised of expenses for our first Phase 3 study, including costs for
our contract research organization and investigator payments to the clinical sites participating in
the study. Other expenses are personnel costs including wages and stock-based compensation,
contract manufacturing, non-clinical studies, consulting and other costs related to the clinical
program.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The table below provides information regarding research and development expenses:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Three months ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2010</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Variance</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Research and development</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">115,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,146,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,031,393</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">For the three months ended March&nbsp;31, 2010, the decrease of $1.0&nbsp;million in research and
development expense, as compared to the same period in the prior year, was primarily related to a
significant decrease of activities for the Phase 3 study, partially offset by increased expenses
related to personnel and consulting services. Further explanations for these variances are as
follows:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">During the same period in the prior year, the Phase 3 study for Ketotransdel was
on-going and therefore, we recognized approximately $1.1&nbsp;million of expenses related to the
study during that period. The expenses were primarily for the investigator payments owed
to the clinical sites for the patients they enrolled in the study and the fees incurred by
our contract research organization for their services provided in conducting the study. In
the current period, we only recognized a minimal amount of expense, which was incurred by
our contract research organization for final administrative activities related to the
study.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The increase in personnel expenses of approximately $76,000 was primarily related to
stock-based compensation and wages of our chief medical officer who was hired in October
2009. This position was not filled in the same period of the prior year.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The increase in consulting expenses of approximately $13,000 during the current period,
in comparison to the same period in the prior year, is due to fees incurred by consultants
in order to provide additional analysis on the Phase 3 study data.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Interest Income</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Interest income was $133 and $6,789 for the three months ended March&nbsp;31, 2010 and 2009,
respectively. The decrease is due to a lower average cash balance and lower interest rates during
the three month period ended March&nbsp;31, 2010, as compared to the same period in the prior year.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Liquidity and Capital Resources</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Since inception through March&nbsp;31, 2010, we have incurred losses of approximately $15.8
million. These losses are primarily due to selling, general and administrative and research and
development expenses incurred in connection with developing and seeking regulatory approval for our
lead drug, Ketotransdel. Historically, our operations have been financed through capital
contributions and debt and equity financings.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of March&nbsp;31, 2010, we had approximately $952,000 in cash and cash equivalents. However, on
April&nbsp;5, 2010, we issued a two (2)-year Senior Convertible Promissory Note (the &#147;Note&#148;) to an
existing investor through a private placement. The Note includes an annual interest rate of 7.5
percent and (unless converted or prepaid, as noted below) all principal and interest are due and
payable on April&nbsp;5, 2012 (&#147;Maturity Date&#148;). At any time prior to the Maturity Date, the investor
may convert all or a portion of the outstanding principal and accrued interest at a conversion
ratio of one share of Transdel&#146;s common stock for each $1 owed. Also, at any time prior to
Maturity Date, we have the option to prepay the outstanding principal and accrued interest. We
received gross proceeds from the issuance of the Note in the aggregate amount of $1,000,000.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We have limited funds to support our operations. We have prepared our condensed consolidated
financial statements in this Form 10-Q on a going-concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business. Our continuation
as a going concern subsequent to the fourth quarter of 2010 is dependent on our ability to obtain
additional financing to fund the continued operation of our business model for a long enough
period to achieve profitable operations. As of March&nbsp;31, 2010, with our current cash and cash
equivalents position and the $1&nbsp;million received from the issuance of the Note, we have forecasted
and anticipate having adequate resources in order to execute a portion of our operating plan into
the fourth quarter of 2010, which would include the final payments for the Phase 3 clinical
trial completed in 2009 and general and administrative expenses. However, in order to execute the second Phase 3 clinical trial of
Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP> which is currently required by the FDA to obtain final regulatory approval for
Ketotransdel we would need to raise additional funds. We intend to seek additional financing to
fund the second Phase 3 clinical trial as well as to continue our cosmetic/cosmeceutical program
and to explore co-development opportunities. If adequate financing is not available, we will not be
able to conduct the second Phase 3 trial.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We may be required to pursue sources of additional capital to fund our operations through
various means, including equity or debt financing, funding from a corporate partnership or
licensing arrangement or any similar financing. Future financings through equity investments are
likely to be dilutive to existing stockholders. Also, the terms of securities we may issue in
future capital transactions may be more favorable for our new investors. Newly issued securities
may include preferences, superior voting rights and the issuance of warrants or other derivative
securities, which may have additional dilutive effects. In addition, if we raise additional funds
through collaboration and licensing arrangements, we may be required to relinquish potentially
valuable rights to our product candidates or proprietary technologies, or grant licenses on terms
that are not favorable to us. Further, we may incur substantial costs in pursuing future capital
and/or financing, including investment banking fees, legal fees, accounting fees, printing and
distribution expenses and other costs. We may also be required to recognize non-cash expenses in
connection with certain securities we may issue, such as convertible notes and warrants, which will
adversely impact our financial results.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The significant downturn in the overall economy and the ongoing disruption in the capital
markets has reduced investor confidence and negatively affected investments, generally and
specifically, in the pharmaceutical industry. In addition, the fact that we are not profitable and
need significant additional funds to complete our clinical trials, could further impact the
availability or cost of future financings. As a result, there can be no assurance that additional
funds will be available when needed from any source or, if available, will be available on terms
that are acceptable to us. If we are unable to raise funds to satisfy our capital needs on a
timely basis, we may be required to cease operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Critical Accounting Policies</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We rely on the use of estimates and make assumptions that impact our financial condition and
results. These estimates and assumptions are based on historical results and trends as well as our
forecasts as to how results and trends might change in the future. Although we believe that the
estimates we use are reasonable, actual results could differ from those estimates.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We believe that the accounting policies described below are critical to understanding our
business, results of operations and financial condition because they involve more significant
judgments and estimates used in the preparation of our condensed consolidated financial statements. An
accounting policy is deemed to be critical if it requires an accounting estimate to be made based
on assumptions about matters that are highly uncertain at the time the estimate is made, and any
changes in the different estimates that could have been used in the accounting estimates that are
reasonably likely to occur periodically could materially impact our condensed consolidated financial
statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our most critical accounting policies and estimates that may materially impact our results of
operations include:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><I>Stock-Based Compensation. </I>All share-based payments to employees, including grants of employee
stock options and restricted stock grants, to be recognized in the financial statements based upon
their fair values. We use the Black-Scholes option pricing model to estimate the grant-date fair
value of share-based awards. Fair value is determined at the date of grant. The financial statement
effect of forfeitures is estimated at the time of grant and revised, if necessary, if the actual
effect differs from those estimates.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our accounting policy for equity instruments issued to consultants and vendors in exchange for
goods and services follows Financial Accounting Standards Board (&#147;FASB&#148;) guidance. As such, the
value of the applicable stock-based compensation is periodically remeasured and income or expense
is recognized during the vesting terms. The measurement date for the fair value of the equity
instruments issued is determined at the earlier of (i)&nbsp;the date at which a commitment for
performance by the consultant or vendor is reached or (ii)&nbsp;the date at which the consultant or
vendor&#146;s performance is complete. In the case of equity instruments issued to consultants, the fair
value of the equity instrument is recognized over the term of the consulting agreement. An asset
acquired in exchange for the issuance of fully vested, nonforfeitable equity instruments should not
be presented or classified as an offset to equity on the grantor&#146;s balance sheet once the equity
instrument is granted for accounting purposes.
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Off-Balance Sheet Arrangements</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Since our inception, except for standard operating leases, we have not engaged in any
off-balance sheet arrangements, including the use of structured finance, special purpose entities
or variable interest entities.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Recent Accounting Pronouncements</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Recent accounting pronouncements issued by the FASB did not or are not believed by management
to have a material impact on our present or future condensed consolidated financial statements.
</DIV>
<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;4T.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Controls and Procedures.</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the Commission&#146;s rules and forms and that such
information is accumulated and communicated to our management, including our acting Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding
required disclosure. In designing and evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives, and management is required
to apply its judgment in evaluating the cost-benefit relationship of possible controls and
procedures.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As required by Commission Rule&nbsp;13a-15(b), we carried out an evaluation, under the supervision
and with the participation of our management, including our acting Chief Executive Officer and the
Chief Financial Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the quarter covered by this quarterly report on Form 10-Q.
Based on the foregoing, our acting Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were effective at the reasonable assurance level.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Changes in Internal Control Over Financial Reporting</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">There has been no change in our internal control over financial reporting during our most
recent fiscal quarter that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>PART II<BR>
OTHER INFORMATION</B>
</DIV>

<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;1.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Legal Proceedings</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">None.
</DIV>
<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;1A.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Risk Factors</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><I>You should consider carefully the following information about the risks described below,
together with the other information contained in this quarterly report on </I><I>Form 10-Q</I><I> and in our
other filings with the Securities and Exchange Commission, before you decide to buy or maintain an
investment in our common stock. We believe the risks described below are the risks that are
material to us as of the date of this quarterly report. If any of the following risks actually
occur, our business financial condition, results of operations and future growth prospects would
likely be materially and adversely affected. In these circumstances, the market price of our common
stock could decline, and you may lose all or part of the money you paid to buy our common stock.
The risk factors set forth below with an asterisk (*) next to the title are new risk factors or
risk factors containing changes, including any material changes from the risk factors set forth in
our annual report on </I><I>Form 10-K</I><I> for the fiscal year ended December&nbsp;31, 2009, as filed with the
Securities and Exchange Commission on March&nbsp;31, 2010.</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Risks Relating to Our Business</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>*We have incurred losses in the research and development of Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP> and our Transdel&#153;
technology since inception. No assurance can be given that we will ever generate revenue or become
profitable.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Since inception we have recorded operating losses. From Inception through March&nbsp;31, 2010, we
have a deficit accumulated during the development stage of approximately $15.8&nbsp;million, and for the
three months ended March&nbsp;31, 2010, we experienced a net loss of approximately $871,000. In
addition, we expect to incur increasing operating losses for the foreseeable future as we continue
to incur costs for research and development and clinical trials, and in other development
activities. Our ability to generate revenue and achieve profitability depends upon our ability,
alone or with others, to complete the development of our proposed products, obtain the required
regulatory approvals and manufacture, market and sell our proposed products. Development is costly
and requires significant investment. In addition, we may choose to in-license rights to particular
drugs or active ingredients for use in cosmetic/cosmeceutical products. The license fees for such
drugs or active ingredients may increase our costs.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As we continue to engage in the development of Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP> and develop other products,
including cosmetic/cosmeceutical products, there can be no assurance that we will ever be able to
achieve or sustain market acceptance, profitability or positive cash flow. Our ultimate success
will depend on many factors, including whether Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP> receives FDA approval. We cannot be
certain that we will receive FDA approval for Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>, or that we will reach the level of
sales and revenues necessary to achieve and sustain profitability. Unless we raise additional
capital, we will not be able to execute our business plan or fund business operations. Furthermore,
we will be forced to reduce our expenses and cash expenditures to a material extent, which would
impair or delay our ability to execute our business plan.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>*The report of our independent registered public accounting firm on our 2009 consolidated
financial statements contains a going concern modification, and we will need additional financing
to execute our business plan, fund our operations and to continue as a going concern, which
additional financing may not be available on a timely basis, or at all.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We have limited remaining funds to support our operations. We have prepared our condensed
consolidated financial statements in this Form 10-Q on a going-concern basis, which contemplates
the realization of assets and the satisfaction of liabilities in the normal course of business. We
will not be able to execute our current business plan, fund our business operations or continue as
a going concern long enough to achieve profitability unless we are able to secure additional funds.
As of March&nbsp;31, 2010, with our current cash and cash equivalents position and the $1&nbsp;million of
proceeds from the issuance of the senior convertible promissory note in April&nbsp;2010, we have
forecasted and anticipate having adequate resources in order to execute a portion of our operating
plan into the fourth quarter of 2010, which would include the final payments for the Phase 3
clinical trial completed in 2009 and general and administrative expenses. The Report of
Independent Registered Public Accounting Firm on our December&nbsp;31, 2009 consolidated financial
statements includes an explanatory paragraph stating that the recurring losses incurred from
operations and a working capital deficiency raise substantial doubt about our ability to continue
as a going concern. However, in order to meet the FDA&#146;s requirement for two adequate and well
controlled Phase 3 clinical trials in order to obtain regulatory approval to market
Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>, we will need to secure additional funds. If adequate financing is not
available, we will not be able to meet the FDA&#146;s requirements to obtain regulatory approval to
market Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>. In addition, if one or more of the risks discussed in these risk
factors occur or our expenses exceed our expectations, we may be required to raise further
additional funds sooner than anticipated.
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We will be required to pursue sources of additional capital to fund our operations through
various means, including equity or
debt financing, funding from a corporate partnership or licensing arrangement or any similar
financing. Future financings through equity investments are likely to be dilutive to existing
stockholders. Also, the terms of securities we may issue in future capital transactions may be
more favorable for our new investors. Newly issued securities may include preferences, superior
voting rights and the issuance of warrants or other derivative securities, which may have
additional dilutive effects. In addition, if we raise additional funds through collaboration and
licensing arrangements, we may be required to relinquish potentially valuable rights to our product
candidates or proprietary technologies, or grant licenses on terms that are not favorable to us.
Further, we may incur substantial costs in pursuing future capital and/or financing, including
investment banking fees, legal fees, accounting fees, printing and distribution expenses and other
costs. We may also be required to recognize non-cash expenses in connection with certain securities
we may issue, such as convertible notes and warrants, which will adversely impact our financial
results.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The significant downturn in the overall economy and the ongoing disruption in the capital
markets has reduced investor confidence and negatively affected investments generally and
specifically in the pharmaceutical industry. In addition, the fact that we are not profitable and
will need significant additional funds to meet the FDA&#146;s requirement for two adequate and well
controlled Phase 3 clinical trials in order to obtain regulatory approval to market
Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP> and any other clinical trials we would want to
commence for other products, could further impact the availability or cost of future financings.
As a result, there can be no assurance that additional funds will be available when needed from any
source or, if available, will be available on terms that are acceptable to us. If we are unable to
raise funds to satisfy our capital needs on a timely basis, we may be required to cease operations.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>We may not be able to correctly estimate our future operating expenses, which could lead to
cash shortfalls.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our operating expenses may fluctuate significantly in the future as a result of a variety of
factors, many of which are outside of our control. These factors include:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the time and resources required to develop, conduct clinical trials and obtain
regulatory approvals for our drug candidates;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the costs to attract and retain personnel with the skills required for effective
operations; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the costs of preparing, filing, prosecuting, defending and enforcing patent
claims and other patent related costs, including litigation costs and the results of
such litigation.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>Timing and results of clinical trials to demonstrate the safety and efficacy of products as
well as FDA approval of products are uncertain.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We are subject to extensive government regulations. The process of obtaining FDA approval is
costly, time consuming, uncertain and subject to unanticipated delays. Before obtaining regulatory
approvals for the sale of any of our products, we must demonstrate through preclinical studies and
clinical trials that the product is safe and effective for each intended use. Preclinical and
clinical studies may fail to demonstrate the safety and effectiveness of a product. Even promising
results from preclinical and early clinical studies do not always accurately predict results in
later, large scale trials. A failure to demonstrate safety and efficacy would result in our failure
to obtain regulatory approvals. Moreover, if the FDA grants regulatory approval of a product, the
approval may be limited to specific indications or limited with respect to its distribution, which
could limit revenues.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We cannot assure you that the FDA or other regulatory agencies will approve any products
developed by us, on a timely basis, if at all, or, if granted, that such approval will not subject
the marketing of our products to certain limits on indicated use. In particular, the outcome of
the final analyses of the data from the Phase 3 clinical trial for Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP> may vary from our
initial conclusions or the FDA may not agree with our interpretation of such results or may
challenge the adequacy of our clinical trial design or the execution of the clinical trial,
including our modified ITT analysis for our Phase 3 clinical trial of Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>. The FDA is
requiring two adequate and well controlled Phase 3 clinical trials for Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP> before we can
submit a 505(b) (2)&nbsp;New Drug Application. In addition, the results of any future clinical trials
may not be favorable and we may never receive regulatory approval for Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>. Any limitation
on use imposed by the FDA or delay in or failure to obtain FDA approvals of products developed by
us would adversely affect the marketing of these products and our ability to generate product
revenue, as well as adversely affect the price of our common stock.
</DIV>

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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>If we fail to comply with continuing federal, state and foreign regulations, we could lose our
approvals to market drugs and our business would be seriously harmed.</I></B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Following initial regulatory approval of any drugs we may develop, we will be subject to
continuing regulatory review, including review of adverse drug experiences and clinical results
that are reported after our drug products become commercially available. This would include results
from any post-marketing tests or continued actions required as a condition of approval. The
manufacturer and manufacturing facilities we use to make any of our drug candidates will be subject
to periodic review and inspection by the FDA. If a previously unknown problem or problems with a
product or a manufacturing and laboratory facility used by us is
discovered, the FDA or foreign regulatory agency may impose restrictions on that product or on
the manufacturing facility, including requiring us to withdraw the product from the market. Any
changes to an approved product, including the way it is manufactured or promoted, often requires
FDA approval before the product, as modified, can be marketed. In addition, we and our contract
manufacturers will be subject to ongoing FDA requirements for submission of safety and other
post-market information. If we or our contract manufacturers fail to comply with applicable
regulatory requirements, a regulatory agency may:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">issue warning letters;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">impose civil or criminal penalties;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">suspend or withdraw our regulatory approval;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">suspend or terminate any of our ongoing clinical trials;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">refuse to approve pending applications or supplements to approved applications filed by us;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">impose restrictions on our operations;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">close the facilities of our contract manufacturers; or</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">seize or detain products or require a product recall.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Additionally, regulatory review covers a company&#146;s activities in the promotion of its drugs,
with significant potential penalties and restrictions for promotion of drugs for an unapproved use.
Sales and marketing programs are under scrutiny for compliance with various mandated requirements,
such as illegal promotions to health care professionals. We are also required to submit information
on our open and completed clinical trials to public registries and databases. Failure to comply
with these requirements could expose us to negative publicity, fines and penalties that could harm
our business.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If we violate regulatory requirements at any stage, whether before or after marketing approval
is obtained, we may be fined, be forced to remove a product from the market or experience other
adverse consequences, including delay, which would materially harm our financial results.
Additionally, we may not be able to obtain the labeling claims necessary or desirable for product
promotion.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>Delays in the conduct or completion of our clinical and non-clinical trials or the analysis of
the data from our clinical or non-clinical trials may result in delays in our planned filings for
regulatory approvals, and may adversely affect our business.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We cannot predict whether we will encounter problems with any of our completed or planned
clinical or non-clinical studies that will cause us or regulatory authorities to delay or suspend
planned clinical and non-clinical studies. Any of the following could delay the completion of our
planned clinical studies:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">failure of the FDA to approve the scope or design of our clinical
or non-clinical trials or manufacturing plans;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">delays in enrolling volunteers in clinical trials;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">insufficient supply or deficient quality of materials necessary
for the performance of clinical or non-clinical trials;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">negative results of clinical or non-clinical studies; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">adverse side effects experienced by study participants in clinical
trials relating to a specific product.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">There may be other circumstances other than the ones described above, over which we may have
no control that could materially delay the successful completion of our clinical and non-clinical
studies.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>None of our pharmaceutical product candidates, other than Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>, have commenced
clinical trials.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">None of our pharmaceutical product candidates, other than Ketotransdel<SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP>, have commenced any
clinical trials and there are a
number of FDA requirements that we must satisfy in order to commence clinical trials. These
requirements will require substantial time, effort and financial resources. We cannot assure you
that we will ever satisfy these requirements. In addition, prior to commencing any trials of a drug
candidate, we must evaluate whether a market exists for the drug candidate. This is costly and time
consuming and no assurance can be given that our market studies will be accurate. We may expend
significant capital and other resources on a drug candidate and find that no commercial market
exists for the drug. Even if we do commence clinical trials of our other drug candidates, such drug
candidates may never be approved by the FDA.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>Once approved, there is no guarantee that the market will accept our products, and regulatory
requirements could limit the commercial usage of our products.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Even if we obtain regulatory approvals, uncertainty exists as to whether the market will
accept our products or if the market for our products is as large as we anticipate. A number of
factors may limit the market acceptance of our products, including the timing of regulatory
approvals and market entry relative to competitive products, the availability of alternative
products, the price of our products relative to alternative products, the availability of third
party reimbursement and the extent of marketing efforts by third party distributors or agents that
we retain. We cannot assure you that our products will receive market acceptance in a commercially
viable period of time, if at all. We cannot be certain that any investment made in developing
products will be recovered, even if we are
successful in commercialization. To the extent that we expend significant resources on research and
development efforts and are not able, ultimately, to introduce successful new products as a result
of those efforts, our business, financial position and results of operations may be materially
adversely affected, and the market value of our common stock could decline.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>We may be subject to product liability claims.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The development, manufacture, and sale of pharmaceutical and cosmetic/cosmeceutical products
expose us to the risk of significant losses resulting from product liability claims. Although we
have obtained and intend to maintain product liability insurance to offset some of this risk, we
may be unable to maintain such insurance or it may not cover certain potential claims against us.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In the future, we may not be able to afford to obtain insurance due to rising costs in
insurance premiums in recent years. Currently we have been able to secure insurance coverage,
however, we may be faced with a successful claim against us in excess of our product liability
coverage that could result in a material adverse impact on our business. If insurance coverage is
too expensive or is unavailable to us in the future, we may be forced to self-insure against
product-related claims. Without insurance coverage, a successful claim against us and any defense
costs incurred in defending ourselves may have a material adverse impact on our operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>If our patents are determined to be unenforceable, or if we are unable to obtain new patents
based on current patent applications or for future inventions, we may not be able to prevent others
from using our intellectual property.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our success will depend in part on our ability to:
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">obtain and maintain patent protection with respect to our products;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">prevent third parties from infringing upon our proprietary rights;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">maintain trade secrets;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">operate without infringing upon the patents and proprietary rights of others; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">obtain appropriate licenses to patents or proprietary rights held by
third parties if infringement would otherwise occur, both in the U.S.
and in foreign countries.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We obtained a patent from the United States Patent and Trademark Office on our Transdel&#153;
technology in 1998, which affords protection of Transdel&#153; through 2016 in the United States. We
may not be successful in our efforts to extend the date of our patent protection beyond 2016.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The patent and intellectual property positions of specialty pharmaceutical companies,
including ours, are uncertain and involve complex legal and factual questions. There is no
guarantee that we have or will develop or obtain the rights to products or processes that are
patentable, that patents will issue from any pending applications or that claims allowed will be
sufficient to protect the technology we develop or have developed or that is used by us, our
contract manufacturing organizations or our other service providers. In addition, we cannot be
certain that patents issued to us will not be challenged, invalidated, infringed or circumvented,
including by our competitors, or that the rights granted thereunder will provide competitive
advantages to us.
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Furthermore, patent applications in the U.S. are confidential for a period of time until they
are published, and publication of
discoveries in scientific or patent literature typically lags actual discoveries by several
months. As a result, we cannot be certain that the inventors listed in any patent or patent
application owned by us were the first to conceive of the inventions covered by such patents and
patent applications or that such inventors were the first to file patent applications for such
inventions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We also may rely on unpatented trade secrets and know-how and continuing technological
innovation to develop and maintain our competitive position, which we seek to protect, in part, by
confidentiality agreements with employees, consultants, collaborators and others. We also have
invention or patent assignment agreements with our employees and certain consultants. There can be
no assurance, however, that binding agreements will not be breached, that we will have adequate
remedies for any breach, or that trade secrets will not otherwise become known or be independently
discovered by competitors. In addition, there can be no assurance that inventions relevant to us
will not be developed by a person not bound by an invention assignment agreement with us.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>The use of our technologies could potentially conflict with the rights of others.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The manufacture, use or sale of our proprietary products may infringe on the patent rights of
others. If we are unable to avoid infringement of the patent rights of others, we may be required
to seek a license, defend an infringement action or challenge the validity of the patents in court.
Patent litigation is costly and time consuming and may divert management&#146;s attention and our
resources. We may not have sufficient resources to bring these actions to a successful conclusion.
In such case, we may be required to alter our products, pay licensing fees or cease activities. If
our products conflict with patent rights of others, third parties could bring legal actions against
us claiming damages and seeking to enjoin manufacturing and marketing of affected products. If
these legal
actions are successful, in addition to any potential liability for damages, we could be required to
obtain a license in order to continue to manufacture or market the affected products. We may not
prevail in any legal action and a required license under the patent may not available on acceptable
terms, if at all.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>We will be dependent on outside manufacturers in the event that we successfully develop our
product candidates into commercial products; therefore, we will have limited control of the
manufacturing process, access to raw materials, timing for delivery of finished products and costs.
One manufacturer may constitute the sole source of one or more of our products.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Third party manufacturers will manufacture all of our products, in the event that we
successfully develop our product candidates into commercial products. Currently, certain of our
contract manufacturers constitute the sole source of one or more of our products. If any of our
existing or future manufacturers cease to manufacture or are otherwise unable to deliver any of our
products or any of the components of our products, we may need to engage additional manufacturing
partners. Because of contractual restraints and the lead-time necessary to obtain FDA approval of a
new manufacturer, replacement of any of these manufacturers may be expensive and time consuming and
may disrupt or delay our ability to supply our products and reduce our revenues.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Because all of our products, in the event that we successfully develop our product candidates
into commercial products, will be manufactured by third parties, we have a limited ability to
control the manufacturing process, access to raw materials, the timing for delivery of finished
products or costs related to this process. There can be no assurance that our contract
manufacturers will be able to produce finished products in quantities that are sufficient to meet
demand or at all, in a timely manner, which could result in decreased revenues and loss of market
share. There may be delays in the manufacturing process over which we will have no control,
including shortages of raw materials, labor disputes, backlog and failure to meet FDA standards.
Increases in the prices we pay our manufacturers, interruptions in our supply of products or lapses
in quality could adversely impact our margins, profitability and cash flows. We are reliant on our
third-party manufacturers to maintain their manufacturing facilities in compliance with FDA and
other federal, state and/or local regulations including health, safety and environmental standards.
If they fail to maintain compliance with FDA or other critical regulations, they could be ordered
to curtail operations, which would have a material adverse impact on our business, results of
operations and financial condition.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We also rely on our outside manufacturers to assist us in the acquisition of key documents
such as drug master files and other relevant documents that are required by the FDA as part of the
drug approval process and post-approval oversight. Failure by our outside manufacturers to properly
prepare and retain these documents could cause delays in obtaining FDA approval of our drug
candidates.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>We are dependent on third parties to conduct clinical trials and non-clinical studies of our
drug candidates and to provide services for certain core aspects of our business. Any interruption
or failure by these third parties to meet their obligations pursuant to various agreements with us
could have a material adverse effect on our business, results of operations and financial
condition.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We do not employ personnel or possess the facilities necessary to conduct many of the
activities associated with our programs. We engage consultants, advisors, contract research
organizations (CROs) and others to design, conduct, analyze and interpret the results of studies in
connection with the research and development of our product candidates. As a result, many important
aspects of our product candidates&#146; development are outside our direct control. There can be no
assurance that such third parties will perform all of their obligations under arrangements with us
or will perform those obligations satisfactorily.
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The CROs with which we contract for execution of our clinical studies play a significant role
in the conduct of the studies and subsequent collection and analysis of data, and we will likely
depend on these and other CROs and clinical investigators to conduct any future clinical studies or
assist with our analysis of completed studies and to develop corresponding regulatory strategies.
Individuals working at the CROs with which we contract, as well as investigators at the sites at
which our studies are conducted, are not our employees, and we cannot control the amount or timing
of resources that they devote to our programs. If these CROs fail to devote sufficient time and
resources to our studies, or if their performance is substandard, it will delay the approval of our
applications to regulatory agencies and the introduction of our products. Failure of these CROs to
meet their obligations could adversely affect development of our product candidates and as a result
could have a material adverse effect on our business, financial condition and results of
operations. Moreover, these CROs may have relationships with other commercial entities, some of
which may compete with us. If they assist our competitors at our expense, it could harm our
competitive position.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>Our cosmetic/cosmeceutical product development program may not be successful.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We recently expanded our product development program to include cosmetic/cosmeceutical
products, which utilize our patented transdermal delivery system technology, Transdel<SUP style="FONT-size: 85%; vertical-align: text-top">TM</SUP>.
Since our primary focus will remain on seeking FDA approval for Ketotransdel, we plan to use
limited resources on our cosmetic/cosmeceutical development program and, as a result, we will need
to partner with third parties to perform formulation, clinical research, manufacturing, sales and
marketing activities. We have initial clinical information supporting the beneficial effects of our
anti-cellulite product on skin appearance, and to supplement the license agreement entered into for
this product, we are pursuing discussions with potential sales and marketing partners for this
product. We cannot assure you that the results of any further studies that may be required before
these products can be commercialized will be successful, that we will enter into commercial
agreements (in addition to the license agreement entered into in the second quarter 2009 with JH
Direct, LLC) with third parties for these products on acceptable terms, or at all, or that these
products will be successfully commercialized. Even if we are not required to obtain FDA pre-market
approval for these products, we will still be subject to a number of federal and state regulations,
including regulation by the FDA and the Federal Trade Commission on any marketing claims we make
about our products. There is no assurance that we will be successful in developing any other
cosmetic/cosmeceutical products, including products for hyperpigmentation and anti-aging. Any
products we develop may cause undesirable side effects that could limit their use, require their
removal from the market and subject us to adverse regulatory action and product liability claims.
Further, the market for cosmetic/cosmeceutical products is highly competitive, and there is no
assurance that our products will be able to compete against the many products and treatments
currently being offered or under development by other established, well-known and well-financed
cosmetic, health care and pharmaceutical companies.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>We currently have no internal sales and marketing resources and may have to rely on third
parties in the event that we successfully commercialize our product.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In order to market any of our products in the United States or elsewhere, we must develop
internally or obtain access to sales and marketing forces with technical expertise and with
supporting distribution capability in the relevant geographic territory. We may not be able to
enter into marketing and distribution arrangements or find a corporate partner to market our drug
candidates, and we currently do not have the resources or expertise to market and distribute our
products ourselves. If we are not able to enter into marketing or distribution arrangements or find
a corporate partner who can provide support for commercialization of our products, we may not be
able to successfully commercialize our products. Moreover, any new marketer or distributor or
corporate partner for our specific combinations, with whom we choose to contract may not establish
adequate sales and distribution capabilities or gain market acceptance for our products.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>If we are unable to retain our key personnel or attract additional professional staff, we may
be unable to maintain or expand our business.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Due to the specialized scientific nature of our business, our ability to develop products and
to compete will remain highly dependent, in large part, upon our ability to attract and retain
qualified scientific, technical and commercial personnel. The loss of key scientific, technical and
commercial personnel or the failure to recruit additional key scientific, technical and commercial
personnel could have a material adverse effect on our business. While we have consulting agreements
with certain key institutions, we cannot assure you that we will succeed in retaining personnel or
their services under existing agreements. There is intense competition for qualified personnel in
the pharmaceutical industry, and we cannot assure you that we will be able to continue to attract
and retain the qualified personnel necessary for the development of our business.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->23<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Risks Relating to Our Industry</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>If we are unable to compete with other companies that develop rival products to our products,
then we may never gain market share or achieve profitability.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The pharmaceutical industry is intensely competitive, and we face competition across the full
range of our activities. If we
fail to compete successfully, our business, results of operations and financial condition
could be adversely affected. Our competitors include brand name and generic manufacturers of
pharmaceuticals specializing in transdermal drug delivery, especially those doing business in the
United States. In the market for pain management products, our competitors include manufacturers of
over-the-counter and prescription pain relievers. Because we are smaller than many of our national
competitors, we may lack the financial and other resources needed to compete for market share in
the pain management sector. Our other potential drug candidates will also face intense competition
from larger and better established pharmaceutical and biotechnology companies. Many of these
competitors have significantly greater financial, technical and scientific resources than we do. In
addition to product safety, development and efficacy, other competitive factors in the
pharmaceutical market include product quality and price, reputation, service and access to
scientific and technical information. If our products are unable to compete with the products of
our competitors, we may never gain market share or achieve profitability.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>We may not be able to keep up with the rapid technological change in the biotechnology and
pharmaceutical industries, which could make our products obsolete and reduce our potential
revenues.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Biotechnology and related pharmaceutical technologies have undergone and continue to be
subject to rapid and significant change. Our future will depend in large part on our ability to
maintain a competitive position with respect to these technologies. It is possible that
developments by our competitors will render our products and technologies obsolete or unable to
compete. Any products that we develop may become obsolete before we recover expenses incurred in
developing those products, which may require that we raise additional funds to continue our
operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>Our ability to generate revenues will be diminished if we fail to obtain acceptable prices or
an adequate level of reimbursement from third-party payors.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If we succeed in bringing a specific product to market, we cannot be certain that the products
will be considered cost effective and that reimbursement from insurance companies and other
third-party payors will be available or, if available, will be sufficient to allow us to sell the
products on a competitive basis.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Significant uncertainty exists as to the reimbursement status of newly approved health care
products. Third-party payors, including Medicare, are challenging the prices charged for medical
products and services. Government and other third-party payors increasingly are attempting to
contain health care costs by limiting both coverage and the level of reimbursement for new drugs
and by refusing, in some cases, to provide coverage for uses of approved products for disease
indications for which the FDA has not granted labeling approval. Third-party insurance coverage may
not be available to patients for any products we discover and develop, alone or with collaborators.
If government and other third-party payors do not provide adequate coverage and reimbursement
levels for our products, the market acceptance of these products may be reduced.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>Changes in the healthcare industry that are beyond our control may be detrimental to our
business.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The healthcare industry is changing rapidly as the public, governments, medical professionals
and the pharmaceutical industry examine ways to broaden medical coverage while controlling the
increase in healthcare costs. Potential changes could put pressure on the prices of prescription
pharmaceutical products and reduce our business or prospects. In the
United States, the Federal government recently passed comprehensive
healthcare reform legislation. Many of the details regarding the
implementation of this legislation are yet to be determined and we
currently cannot predict whether or to what extent such
implementation or adoption of reforms may affect our business.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Risks Relating to the Common Stock</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>We are subject to financial reporting and other requirements for which our accounting and
other management systems and resources may not be adequately prepared.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We are subject to reporting and other obligations under the Securities Exchange Act of 1934,
as amended, (the &#147;Exchange Act&#148;) including the requirements of Section&nbsp;404 of the Sarbanes-Oxley
Act. Section&nbsp;404 requires us to conduct an annual management assessment of the effectiveness of our
internal controls over financial reporting for the annual report on Form 10-K. Also, we will be
required to obtain a report by our independent registered public accounting firm addressing these
assessments commencing with our annual report on Form 10-K for the fiscal year ending December&nbsp;31,
2010. These reporting and other obligations will place significant demands on our management,
administrative, operational, and accounting resources. We anticipate that we may need to upgrade
our systems; implement additional financial and management controls, reporting systems and
procedures; implement or outsource an internal audit function; and hire additional accounting and
finance staff. If we are unable to accomplish these objectives in a timely and effective fashion,
our ability to comply with our financial reporting requirements and other rules that apply to
reporting companies could be impaired and we may not be able to obtain the independent registered
public accounting firm opinion required by Section&nbsp;404. Any failure to maintain effective internal
controls could have a negative impact on our ability to manage our business and on our stock price.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->24<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>If we fail to maintain an effective system of internal control, we may not be able to report
our financial results accurately
or to prevent fraud. Any inability to report and file our financial results accurately and
timely could harm our business and adversely impact the trading price of our common stock.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Effective internal control is necessary for us to provide reliable financial reports and
prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we will not be
able to manage our business as effectively, and our business and reputation with investors would be
harmed. Any such inabilities to establish effective controls or loss of confidence would have an
adverse affect on our financial condition, results of operation and access to capital. We have not
performed an in-depth analysis to determine if past failures of internal controls exist, and may in
the future discover areas of our internal control that need improvement.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>Public company compliance may make it more difficult to attract and retain officers and
directors.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Sarbanes-Oxley Act and new rules subsequently implemented by the Securities and Exchange
Commission (&#147;SEC&#148;) have required changes in corporate governance practices of public companies. As
a public company, we expect these new rules and regulations to increase our compliance costs and to
make certain activities more time consuming and costly. We also expect that these new rules and
regulations may make it more difficult and expensive for us to obtain director and officer
liability insurance in the future and we may be required to accept reduced policy limits and
coverage or incur substantially higher costs to obtain the same or similar coverage. As a result,
it may be more difficult for us to attract and retain qualified persons to serve on our board of
directors or as executive officers.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>Our stock price may be volatile.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The market price of our common stock is likely to be highly volatile and could fluctuate
widely in price in response to various factors, many of which are beyond our control, including the
following:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">changes in the pharmaceutical industry and markets;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">competitive pricing pressures;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">our ability to obtain working capital financing;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">new competitors in our market;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">additions or departures of key personnel;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">limited &#147;public float&#148; in the hands of a small number of persons
whose sales or lack of sales could result in positive or negative
pricing pressure on the market price for our common stock;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">sales of our common stock;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">our ability to execute our business plan;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">operating results that fall below expectations;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">loss of any strategic relationship with our contract manufacturers
and clinical and non-clinical research organizations;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">industry or regulatory developments;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">economic and other external factors; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">period-to-period fluctuations in our financial results.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In addition, the securities markets have from time to time experienced significant price and
volume fluctuations that are unrelated to the operating performance of particular companies. These
market fluctuations may also materially and adversely affect the market price of our common stock.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>We have not paid dividends in the past and do not expect to pay dividends in the future. Any
return on investment may be limited to the value of our common stock.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We have never paid cash dividends on our common stock and do not anticipate doing so in the
foreseeable future. The payment of dividends on our common stock will depend on earnings, financial
condition and other business and economic factors affecting us at such time as our board of
directors may consider relevant. If we do not pay dividends, our common stock may be less valuable
because a return on your investment will only occur if our stock price appreciates.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>Our common stock is classified as a &#147;penny stock&#148;, which makes it more difficult for our
investors to sell their shares.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our common stock is currently subject to the &#147;penny stock&#148; rules adopted under Section 15(g)
of the Exchange Act. The penny stock rules apply to companies whose common stock is not listed on
The Nasdaq Stock Market or other national securities exchange and trades at less than $4.00 per
share or that have tangible net worth of less than $5,000,000 ($2,000,000 if the company has been
operating for three or more years). These rules require, among other things, that brokers who trade
penny stock to persons other than &#147;established customers&#148; complete certain documentation, make
suitability inquiries of investors and provide investors with certain information concerning
trading in the security, including a risk disclosure document and quote information under certain
circumstances. Many brokers have decided not to trade penny stocks because of the requirements
of the penny stock rules and, as a result, the number of broker-dealers willing to act as market
makers in such securities is limited. If we remain subject to the penny stock rules for any
significant period, it could have an adverse effect on the market, if any, for our securities. If
our securities are subject to the penny stock rules, investors will find it more difficult to
dispose of our securities.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Furthermore, for companies whose securities are traded in the OTC Bulletin Board, it is more
difficult (1)&nbsp;to obtain accurate quotations, (2)&nbsp;to obtain coverage for significant news events
because major wire services generally do not publish press releases about such companies and (3)&nbsp;to
obtain needed capital.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B><I>Offers or availability for sale of a substantial number of shares of our common stock may
cause the price of our common stock to decline.</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The sale by our stockholders of substantial amounts of our common stock in the public market
or upon the expiration of any statutory holding period, under Rule&nbsp;144, or upon expiration of
lock-up periods applicable to outstanding shares, or issued upon the exercise of outstanding
options or warrants, could create a circumstance commonly referred to as an &#147;overhang&#148; and in
anticipation of which the market price of our common stock could fall. The existence of an
overhang, whether or not sales have occurred or are occurring, also could make more difficult our
ability to raise additional financing through the sale of equity or equity-related securities in
the future at a time and price that we deem reasonable or appropriate.
</DIV>
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;2.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Unregistered Sales of Equity Securities and Use of Proceeds</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">None
</DIV>
<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;6.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Exhibits</B></DIV></TD>
</TR>
</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="6%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="2"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD  colspan="2" nowrap align="center" style="border-bottom: 1px solid #000000"><B>Number</B></TD>

    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top">31.1
</TD>
<TD>*</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;302 Certification of Principal Executive Officer and Principal Financial Officer</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top">32.1
</TD>
<TD>*</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;906 Certification of Principal Executive Officer and Principal Financial Officer</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>







<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Filed herewith.</DIV></TD>
</TR>

</TABLE>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->26<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">





<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>SIGNATURES</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Transdel Pharmaceuticals, Inc.<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Dated: May 13, 2010&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ John Lomoro
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">John Lomoro&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" nowrap>Acting Chief Executive Officer
and Chief Financial Officer<br>
(Principal Executive Officer and
Principal Financial Officer)
</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->27<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><U><B>EXHIBIT INDEX</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="6%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD colspan="2" nowrap align="center"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD colspan="2" nowrap align="center" style="border-bottom: 1px solid #000000"><B>Number</B></TD>

    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
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    <TD align="left" valign="top">&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>

<TR valign="bottom">
    <TD align="right" valign="top">31.1
</TD>
<TD>*</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;302 Certification of Principal Executive Officer and Principal Financial Officer</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top">32.1
</TD>
<TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;906 Certification of Principal Executive Officer and Principal Financial Officer</DIV></TD>
</TR>
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</TABLE>
</DIV>




<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>


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    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Filed herewith.</DIV></TD>
</TR>

</TABLE>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->28<!-- /Folio -->
</DIV>

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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>c00915exv31w1.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 31.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">






<DIV align="right" style="font-size: 10pt; margin-top: 10pt">EXHIBIT 31.1
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt">CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER UNDER<BR>
SECTION 302 OF THE SARBANES-OXLEY ACT
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">I, John Lomoro, Acting Chief Executive Officer and Chief Financial Officer of Transdel
Pharmaceuticals, Inc., certify that:
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">I have reviewed this quarterly report on Form 10-Q of Transdel Pharmaceuticals, Inc.;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules&nbsp;13a-15(f) and 15d-15(f)) for the registrant and
have:</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Evaluated the effectiveness of the registrant&#146;s disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Disclosed in the report any change in the registrant&#146;s internal
control over financial reporting that occurred during the registrant&#146;s
most recent fiscal quarter (the registrant&#146;s fourth fiscal quarter in
the case of the annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant&#146;s internal
control over financial reporting;</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(5)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant&#146;s auditors and
registrant&#146;s board of directors (or persons performing the equivalent
functions):</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">All significant deficiencies or material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant&#146;s ability to
record, process, summarize and report financial information; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant&#146;s internal
control over financial reporting.</DIV></TD>
</TR>

</TABLE>
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<TR>
    <TD align="left">Date: May 13, 2010&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ John Lomoro
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">John Lomoro&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left" nowrap>Acting Chief Executive Officer and Chief Financial Officer<br>
(Principal Executive Officer and Principal
Financial Officer)&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>3
<FILENAME>c00915exv32w1.htm
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 32.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="right" style="font-size: 10pt; margin-top: 10pt">EXHIBIT 32.1
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt">CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In connection with the Quarterly Report of Transdel Pharmaceuticals, Inc. (the &#147;Company&#148;) on Form
10-Q for the period ended March&nbsp;31, 2010 as filed with the Securities and Exchange Commission on
the date hereof (the &#147;Report&#148;) pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, I, John Lomoro, Acting Chief Executive Officer and Chief
Financial Officer of Transdel Pharmaceuticals, Inc., certify that:
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Dated: May&nbsp;13, 2010
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">                         /s/ John T. Lomoro
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">John T. Lomoro&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left" nowrap>Acting Chief Executive Officer and Chief Financial Officer<br>
(Principal Executive Officer and Principal
Financial Officer)&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>



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