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foley.com

WRITER’S DIRECT LINE

813.225.4122

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CLIENT/MATTER NUMBER

097557-0105

BOSTON

BRUSSELS

CHICAGO

DETROIT

JACKSONVILLE

LOS ANGELES

MADISON

MIAMI

MILWAUKEE

NEW YORK

ORLANDO

SACRAMENTO

SAN DIEGO

SAN DIEGO/DEL MAR

SAN FRANCISCO

SHANGHAI

SILICON VALLEY

TALLAHASSEE

TAMPA

TOKYO

WASHINGTON, D.C.

DIP Lender Plan Note, further described on page F-41 of the Form 10-K: The Company replaced the note it had previously issued to Corps Real, LLC with a new note in an original principal amount of $2,291,560. Under the terms of the new note, the Company is allowed to draw up to an additional $0.9 million. The Company drew an additional $0.25 million under the line of credit between September 30, 2010 and November 17, 2010 (the effective date of the Company’s Plan), resulting in an increase to cash. The Company also recorded the new, discounted note, a beneficial conversion feature, and removed the carrying value of the old note (from notes payable, related parties as the original note was not subject to compromise through the Company’s reorganization proceedings). The difference between carrying values was recorded as a decrease to accumulated deficit.

Convertible Note Transaction, further described on page F-41 of the Form 10-K: The Company issued an aggregate $7.0 million in new notes to a total of twelve accredited investors. As a result, the Company recorded an increase in cash and debt issuance costs as well as the new notes at a discount. The discount resulted from the Series A and B exchange warrants issued with the notes as well as conversion features associated with the notes. Both the warrants and the conversion features were recorded as derivative liabilities. The Company also recorded an increase to common stock and additional paid in capital to account for conversions of the notes to equity that occurred on November 17, 2010 (the effective date of the Company’s Plan). Finally, the Company recorded a charge to accumulated deficit to account for the day one loss on the value of the associated conversion features (the fair value of the conversion feature that exceeded the financing proceeds allocated to it), as well as interest and amortization charges from October 19, 2010 through November 17, 2010.

Laurus/Valens Secured Claims, further described on page F-43 of the Form 10-K: The Company issued to Laurus Master Fund, Ltd. (“Laurus”) and certain of its affiliated entities both Term A Notes, maturing on November 17, 2012, in the principal amount of $24.9 million and Term B Notes, maturing on November 17, 2013, in the principal amount of $4.16 million. These Term A Notes and Term B Notes were issued in satisfaction of prepetition claims against the Company resulting from the following obligations:

The $7.799 million note payable to Laurus (originated in March 2006);

The $0.250 million note payable to Valens Offshore SPV II, Corp. (originated in October 2007);

The $0.245 million note payable to Valens U.S. SPV I, LLC (originated in October 2007);

The $3.6 million note payable to Valens Offshore SPV II, Corp. (originated in December 2007);

The $4.9 million note payable to Valens U.S. SPV I, LLC (originated in December 2007);

The $7.5 million minimum royalty due on sales of AutovaxID instrumentation (originated in April 2007); and

The $4.4 million loan modification fee (originated in July 2008) in consideration for modifying the terms of all the then outstanding debt due to Laurus, PSource Structured Debt Limited (“PSource”), Valens Offshore SPV I, Ltd. (“Valens I”), Valens Offshore SPV II, Corp. (“Valens II”), Valens U.S. SPV I, LLC (“Valens US” and together with Valens I and Valens II, “Valens”), and LV Administrative Services, Inc., as administrative and collateral agent for Laurus, PSource, and Valens (“LV” and together with Laurus, PSource, Valens, and each of their respective affiliates, “Laurus/Valens”).

Conversion of Secured Notes held by Accentia Biopharmaceuticals, Inc. (“Accentia”), further described on page F-44 of the Form 10-K: On November 17, 2010 (the effective date of the Company’s Plan), Accentia converted its claim into 17.9 million shares of the Company’s common stock. As a result, the Company recorded an increase in common stock and additional paid in capital for the fair value of the shares issued and a decrease in liabilities subject to compromise for the carrying amount of the Accentia claim. The difference between these two amounts was recorded to accumulated deficit.

2008 Secured Debentures, further described on page F-44 of the Form 10-K: In settlement of the claims of the holders of the Company’s 2008 Secured Debentures, the Company issued 400,206 shares of its common stock, as well as an agreement to issue an additional 481,250 shares of its common stock in seven quarterly installments following November 17, 2010 (the effective date of the Company’s Plan). The Company recorded an increase in common stock and additional paid in capital for the fair value of the shares issued, as well as a liability for the fair value of the 481,250 shares to be issued at future dates. The Company also removed the carrying value of the 2008 Secured Debenture holders’ aggregate claims from liabilities subject to compromise. The Company recorded the difference between these two amounts to accumulated deficit. One of the Company’s 2008 Secured Debenture holders was Valens U.S. SPV I, LLC. The Valens claim was settled by issuance of the Term A Notes and Term B Notes discussed above.

Claims of Ronald E. Osman, further described on page F-44 of the Form 10-K: In settlement of the claims related to the Company’s May 9, 2008 promissory note issued to Ronald E. Osman, the Company issued 608,224 shares of its common stock. The Company recorded an increase in common stock and additional paid in capital for the fair value of the shares issued and removed the carrying value of the claims associated with the May 9, 2008 promissory note from liabilities subject to compromise. The Company recorded the difference between these two amounts to accumulated deficit.

Plan Distributions to Unsecured Creditors, further described on page F-44 of the Form 10-K: In satisfaction of all other allowed unsecured claims against the Company, it issued a combination of notes and shares of its common stock, at an effective conversion rate equal to $1.66 per share. The new notes were recorded as long term debt, at fair value; the common shares were recorded as increases to common stock and additional paid in capital, at fair value; and the carrying values of the liabilities associated with these unsecured claims were removed from liabilities subject to compromise. The Company recorded the difference between these two amounts to accumulated deficit. Unresolved claims in the amount of $0.43 million were reclassified from liabilities subject to compromise to reserve for unresolved pre-petition claims.

April and December New Markets Tax Credits Transactions, further described on page F-45 of the Form 10-K: In consideration of the retention of an unsecured claim of approximately $0.6 million by the parties to the New Markets Tax Credit (“NMTC”) transactions that occurred in April 2006 and December 2006, all of the Company’s obligations relating to both the April 2006 and the December 2006 NMTC transactions were terminated on November 17, 2010 (the effective date of the Company’s Plan). As a result, the Company ceased to have a financial interest in the entities that were party to these transactions and had been included in the Company’s consolidated financial statements as variable interest entities. This resulted in the deconsolidation of these entities following the guidance of ASC 810-10-40. In order to de-recognize the entities, the Company recorded a decrease to cash, prepaid expenses, other assets, accounts payable, liabilities subject to compromise and non-controlling interest in variable interest entities, with an offset to accumulated deficit.

Termination of Warrants and Issuance of Shares, further described on page F-45 of the Form 10-K: On November 17, 2010 (the effective date of the Company’s Plan), the Company issued 14,834,782 shares of its common stock in consideration for the cancellation of outstanding warrants held by Laurus and its affiliates. Some of these warrants were not afforded equity classification upon issuance due to various adjustment features associated with their strike price, and thus were classified as liabilities subject to compromise. As a result of the settlement of these warrants, the Company recorded a reduction to liabilities subject to compromise and an increase to common stock and additional paid in capital for the fair value of the shares issued, with an offset to accumulated deficit.

Stock Compensation Expense: On November 17, 2010 (the effective date of the Company’s Plan), approximately 3.1 million option shares previously issued under the Company’s incentive stock option plan vested resulting in an increase to additional paid in capital and a charge to accumulated deficit for stock compensation expense.

the Company is responsible for the adequacy and accuracy of the disclosure in its filings;

staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the Company’s filings; and

the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.