Registration No. 333-115816
                                                     ---------------------------

                     U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                          AMENDMENT NO. 1 TO FORM SB-2
             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                                BIOENVISION, INC.
                 (Name of small business issuer in its charter)



                                                                        

                       Delaware                     2834                         13-4025857
                       --------                     ----                         ----------
(State or other jurisdiction of           (Primary Standard Industrial         (I.R.S. Employer
incorporation or organization)            Classification Code Number)         Identification No.)


                               509 Madison Avenue
                                    Suite 404
                            New York, New York 10022
                                 (212) 750-6660
                   (Address and telephone number of principal
               executive offices and principal place of business)

                               David P. Luci, Esq.
          Director of Finance, General Counsel and Corporate Secretary
                                Bioenvision, Inc.
                               509 Madison Avenue
                                    Suite 404
                            New York, New York 10022
                                 (212) 750-6660
                          (Name, address and telephone
                          number of agent for service)

                                    Copy to:
                            Luke P. Iovine, III, Esq.
                      Paul, Hastings, Janofsky & Walker LLP
                               75 East 55th Street
                               New York, NY 10022
                                 (212) 318-6000

Approximate date of commencement of proposed sale to the public: As soon as
practical after the effective date of this Registration Statement. If any of the
securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_| ___________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| ___________
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier registration statement for the same offering.
|_| ___________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|

                         CALCULATION OF REGISTRATION FEE

Title of each                        Proposed        Proposed        Amount of
class of              Number of       maximum         maximum       registration
securities to       shares to be   offering price    aggregate          fee
be registered        registered      per share     offering price       ---
-------------        ----------      ---------     --------------

Common Stock,        3,618,768       $ 9.945(1)    $35,988,657(1)   $4,559.76(1)
par value $.001
per share

Common Stock,       34,131,931(2)       (3)             (3)              (3)
par value $.001
per share





(1)  Calculated in accordance with Rule 457(c) under the Securities Act of 1933.

(2)  Represents  an aggregate of  34,131,931  shares of common stock  previously
registered  on  the  registration  statement  on  Form  SB-2  (Registration  No.
333-97443)  that are being  carried  forward in the  prospectus  filed with this
registration statement.

(3) This amount has previously  been paid by the registrant as the  registration
fee for the  34,131,931  shares of common stock  carried  forward from the prior
registration statement on Form SB-2 (Registration No. 333-97443).

Pursuant to Rule 429 under the Securities  Act, the prospectus  included as part
of this registration statement shall be deemed a combined prospectus which shall
also  relate  to our  registration  statement  on Form  SB-2  (Registration  No.
333-97443)  and  constitutes  a  post-effective  amendment  to our  registration
statement on Form SB-2 (Registration No. 333-97443).

The registrant hereby amends this  Registration  Statement on such date or dates
as may be necessary to delay its effective date until the registrant will file a
further amendment which  specifically  states that this  Registration  Statement
will  thereafter  become  effective  in  accordance  with  Section  8(a)  of the
Securities  Act of  1933  or  until  this  Registration  Statement  will  become
effective on such date as the Commission,  acting pursuant to said Section 8(a),
may determine.





The  information  in this  prospectus  is not complete  and may be changed.  The
selling  stockholders  may not sell  these  securities  until  the  registration
statement filed with the Securities and Exchange  Commission is effective.  This
prospectus is not an offer to sell these  securities and it is not soliciting an
offer to buy these  securities  in any  state  where  such  offer or sale is not
permitted.


                                            Subject to completion, June 21, 2004


                                   PROSPECTUS

                                BIOENVISION, INC.

                        37,750,699 Shares of Common Stock

           Of the shares of stock covered by this prospectus: (i) 10,880,000
shares are issuable upon the conversion of 5,440,000 preferred shares issued in
connection with a private placement consummated in May 2002; (ii) 5,440,000
shares are issuable upon the exercise of warrants issue to preferred
stockholders in connection with a private placement consummated in May 2002;
(iii) 6,650,867 shares were issued to former stockholders of Pathagon Inc. in
February 2002 in connection with the consummation of the acquisition of Pathagon
Inc.; (iv) 1,008,333 shares are issuable upon the exercise of warrants issued to
our financial advisor in connection with a private placement consummated in May
2002; (v) 3,751,995 shares were issued and 3,974,544 shares are issuable upon
the exercise of warrants and options issued to the co-founders, early round
investors and certain former consultants and advisors for services rendered to
or on behalf of us; (vi) 100,000 shares were issued and 200,000 shares are
issuable upon the exercise of warrants issued to a former co-development partner
for services rendered to us; (vii) 1,500,000 shares are issuable upon the
exercise of warrants issued in connection with a credit facility secured by
Bioenvision in November 2001; (viii) 160,000 shares are issuable upon the
exercise of warrants issued to two former financial advisors in March, 2004;
(ix) 175,000 shares issuable upon the exercise of warrants issued to a
regulatory consultant in April of 2003 for services rendered; (x) 2,602,898
shares were issued in connection with a private placement consummated in March
and May of 2004; and (xi) 780,870 shares are issuable upon the exercise of
warrants issued in connection with the private placement consummated in March
and May of 2004.

        All of the shares of stock covered by this prospectus are beneficially
owned by the selling stockholders listed in the section of this prospectus
called "Selling Stockholders." We are not selling any of the shares of stock
covered by this prospectus and we will not receive any proceeds from any sales
of our stock covered by this prospectus effected by the selling stockholders.

        Our common stock is traded on the American Stock Exchange under the
symbol "BIV". The last reported sales price of shares of our common stock on
June 11, 2004,was $8.60 per share.

        We urge you to read carefully the "Risk Factors" section beginning on
page 3 where we describe specific risks associated with an investment in
Bioenvision and these securities before you make your investment decision.

        Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.

                 The date of this prospectus is June ___, 2004.





                                TABLE OF CONTENTS


                                                                          Page
                                                                          ----

PROSPECTUS SUMMARY...........................................................1

THE OFFERING.................................................................2

RISK FACTORS.................................................................3

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS..............................15

USE OF PROCEEDS..............................................................15

DESCRIPTION OF SECURITIES....................................................15

SELLING STOCKHOLDERS.........................................................17

PLAN OF DISTRIBUTION.........................................................23

LEGAL PROCEEDINGS............................................................26

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS..............................................................27

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT........................................................29

LEGAL MATTERS................................................................31

EXPERTS......................................................................32

WHERE YOU CAN GET MORE INFORMATION...........................................32

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES...............................................32

DESCRIPTION OF BUSINESS......................................................33

DESCRIPTION OF PROPERTY .....................................................46

MANAGEMENT'S DISCUSSION AND ANALYSIS.........................................47

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............................60

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.....................60

EXECUTIVE COMPENSATION.......................................................61

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.......................................67

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS...................................68





--------------------------------------------------------------------------------

                               PROSPECTUS SUMMARY

You  should  read  the  following   summary  together  with  the  more  detailed
information  regarding us and the securities  being offered for sale by means of
this  prospectus  and our  financial  statements  and notes to those  statements
appearing  elsewhere  in this  prospectus.  The summary  highlights  information
contained elsewhere in this prospectus.  The terms "Bioenvision," "the company,"
"we,"  "our"  and  "us"  refer  to  Bioenvision,   Inc.  and  its   consolidated
subsidiaries unless the context suggests  otherwise.  The term "you" refers to a
prospective investor.

        We are an emerging  biopharmaceutical  company that develops and markets
drugs to treat  cancer.  Our two lead  drugs are  Clofarabine  and  Modrenal(R),
although we have several other products and technologies under  development.  As
of May 1, 2004,  our internal  staff  consisted of nine  employees  based in New
York, New York and Edinborough, Scotland.

        Clofarabine is a purine nucleoside analogue, or a small molecule, which,
based on our own clinical studies and studies conducted by others on our behalf,
we believe is effective in the treatment of leukemia. Clofarabine may also be an
effective agent to treat patients with solid tumor cancers, based on preclinical
studies and Phase I/II clinical trials performed to date. In the United Kingdom,
we are currently  conducting  clinical trials with Clofarabine for the treatment
of pediatric and adult acute leukemias. In the U.S., Clofarabine is currently in
Pivotal Phase II clinical  trials for  pediatric  acute  leukemias.  In January,
2002, the European orphan drug application for use of Clofarabine to treat acute
leukemia in adults was approved.  Orphan Drug  Designation  provides the Company
with ten years of market  exclusivity  in Europe for  Clofarabine.  The drug has
also been granted  orphan drug status and "fast  track"  treatment by the United
States Food and Drug  Administration  (the "FDA").  Further,  in August 2003, we
obtained  the  exclusive,  irrevocable  option to sell,  market  and  distribute
Clofarabine in Japan and Southeast Asia from the inventor of Clofarabine.  These
rights were not  previously  granted by  Southern  Research  Institute  and fall
outside  the scope of the  Company's  then  current  licensing  and  development
contracts  with  respect to  Clofarabine.  We  originally  obtained an exclusive
license  from  Southern  Research  Institute  to  sell,  market  and  distribute
Clofarabine  throughout the world,  except for Japan and Southeast Asia, for all
human  applications,  pursuant to a co-development  agreement,  dated August 31,
1998, between the Company and Southern Research Institute. On March 12, 2001, we
granted an exclusive  option to sell,  market and distribute  Clofarabine in the
U.S.  and  Canada  to ILEX  Oncology,  Inc.  We  converted  ILEX's  option to an
exclusive  sublicense on December 30, 2003.  Accordingly,  we do not possess the
rights to sell, market and distribute Clofarabine in the U.S.

        Modrenal(R) is a hormonal agent with a novel mode of action,  that makes
it an effective  agent in patients with advanced breast cancer who have acquired
resistance to other hormonal agents. We launched  Modrenal(R) in May 2003 in the
United Kingdom,  where we have received  regulatory  approval for its use in the
treatment of post-menopausal breast cancer. In the first half of 2004, we intend
to apply for mutual recognition in another four large European territories in an
effort to gain approval for  Modrenal(R) in each such  territory.  We anticipate
receiving  approval in each such  territory  in the first half of calendar  year
2005.  Further, we filed an IND for prostate cancer clinical trials in the US in
February  2004 and intend to commence our first US clinical  trial in the second
quarter of calendar year 2004.  Further,  we intend to seek regulatory  approval
for  Modrenal(R) in the United States as salvage  therapy for  hormone-sensitive
breast  cancer upon  completion of additional  clinical  studies.  We originally
obtained an exclusive license from Stegram  Pharmaceuticals Ltd. to sell, market
and distribute  Modrenal(R)  throughout the world,  except for South Africa, for
all human and animal health applications, pursuant to a co-development agreement
dated July 15, 1998.

        Our primary business strategy relates to our two lead drugs, Clofarabine
and Modrenal(R).  With Clofarabine, our strategy is to complete drug development
in Europe  and  obtain  marketing  authorization  from the  European  regulatory
authorities to market and distribute  Clofarabine for the treatment of pediatric
and adult acute  leukemias.  We  anticipate  receiving  approval  early in 2005,
subject  to our  obtaining  approval  of the  regulatory  authorities.  We  will
continue  clinical  trials in other  indications  with the  intention of seeking
label extensions after Clofarabine's first approval. With Modrenal, our strategy
is to expand  sales in the United  Kingdom and apply for mutual  recognition  to
obtain the right to sell Modrenal(R)  throughout Europe. We anticipate receiving
mutual recognition from major European Community member states by mid-2005.  Our
secondary business strategy is to continue to develop our portfolio of ancillary
products and technologies.  We anticipate that revenues derived from Clofarabine
and  Modrenal(R)  will permit us to further  develop our  portfolio of ancillary
products and technologies.

Corporate Background

        We were  incorporated  as Express  Finance,  Inc.  under the laws of the
State of Delaware on August 16, 1996, and changed our name to Ascot Group,  Inc.
in August 1998 and further to Bioenvision,  Inc. in December 1998. Our principal
executive  offices are located at 509 Madison Avenue,  Suite 404 , New York, New
York 10022.  Our telephone  number is (212) 750-6700 and our fax number is (212)
750-6777.  Our  website is  www.bioenvision.com.  Information  contained  on our
website does not constitute, and shall not be deemed to constitute, part of this
prospectus.


--------------------------------------------------------------------------------



--------------------------------------------------------------------------------




                                          

                                  The Offering

Shares of common stock offered by the
selling stockholders........................ 37,750,699

Shares of common stock outstanding as of
June 11, 2004............................... 28,316,163

Shares to be outstanding following
offering (assuming conversion of all
preferred  shares into common shares
and the exercise of options and warrants,
and assuming no sales of any securities
pursuant to this offering).................. 48,483,737

Use of proceeds............................. We will not receive any proceeds from the issuance
                                             or sale of the shares included in this offering.
                                             We may receive consideration upon the exercise
                                             of options and we will receive consideration
                                             upon the conversion of warrants which we intend
                                             to use for general corporate purposes.

Risk Factors................................ An investment in our common stock is subject
                                             to significant risks.  You should carefully
                                             consider the information set forth in the "Risk
                                             Factors" section of this prospectus as well as
                                             other information set forth in this prospectus,
                                             including our financial statements and related
                                             notes.

Plan of Distribution........................ The shares of common stock offered for
                                             resale may be sold by the selling stockholders
                                             pursuant to this prospectus in the manner
                                             described under "Plan of Distribution" on page 23.

Amex symbol................................. BIV



                                       2
--------------------------------------------------------------------------------



                                  RISK FACTORS

        You should  carefully  consider the following risks before you decide to
buy our common stock. Our business, financial condition or operating results may
suffer if any of the events  described in the  following  risk factors  actually
occur.  All known  risks  are  presented  in this  prospectus.  These  risks may
adversely affect our business,  financial condition or operating results. If any
of the events we have  identified  occur,  the trading 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 price of our  common  stock is likely to be  volatile  and  subject  to wide
fluctuations.

        The market price of the securities of biotechnology  companies has been,
and can be, especially  volatile.  Thus, the market price of our common stock is
likely to be subject to wide  fluctuations.  For the twelve  month  period ended
June 11, 2004, our closing stock price has ranged from a high of $11.75 to a low
of $1.75.  If our revenues do not grow or grow more slowly,  or, if operating or
capital expenditures exceed our expectations and cannot be adjusted accordingly,
or if some other  event  adversely  affects  us, the market  price of our common
stock  could  decline.  In  addition,  if  the  market  for  pharmaceutical  and
biotechnology  stocks  or the  stock  market in  general  experiences  a loss in
investor  confidence  or otherwise  fails,  the market price of our common stock
could fall for reasons  unrelated to our  business,  results of  operations  and
financial  condition.  The  market  price of our stock  also  might  decline  in
reaction to events that affect other  companies  in our  industry  even if these
events do not directly affect us or for other reasons.

Certain events could result in a dilution of holders of our common stock.

        As  of  June  11,  2004,  we  had  28,316,163  shares  of  common  stock
outstanding,  3,341,666 shares of Series A preferred stock outstanding which are
currently  convertible  into  6,683,332  shares of common  stock and  13,484,242
common stock equivalents  including  warrants and stock options,  other than the
options granted under the  co-development  agreement with ILEX. The exercise and
conversion prices of the common stock equivalents range from $0.735 to $7.50 per
share.  We have also  reserved for issuance an aggregate of 3,000,000  shares of
common stock for a stock option plan for our employees,  of which  approximately
1,900,000 have been issued. Historically, from time to time, we have awarded our
common stock to officers of the Company, in lieu of cash compensation,  although
we do  not  expect  to do so in  the  future.  As of  the  date  hereof,  we are
registering  37,750,699  shares under the  Securities  Act on this Form SB-2 and
have registered options to purchase 4,500,000 shares under the Securities Act on
Form S-8. The future resale of these shares and shares  underlying stock options
and warrants registered on this Form SB-2 and Form S-8 will result in a dilution
to your percentage  ownership of our common stock and could adversely affect the
market price of our common stock.

        The  terms  of  our  Series  A  Convertible   Preferred   Stock  include
antidilution  protection  upon the occurrence of sales of our common stock below
certain   prices,   stock  splits,   redemptions,   mergers  and  other  similar
transactions.  If one or more of these events occurs the number of shares of our
common stock that may be acquired upon conversion or exercise would increase. If
converted  or  exercised,  these  securities  will  result in a dilution to your
percentage  ownership of our common  stock.  The resale of many of the shares of
common stock which underlie these options and warrants are registered under this
prospectus and the sale of such shares may adversely  affect the market price of
our common stock.

The provisions of our charter and Delaware law may inhibit potential acquisition
bids that  stockholders  may believe are desirable,  and the market price of our
common stock may be lower as a result.

Section 203 of the Delaware corporate statute

        We are  subject to the  anti-takeover  provisions  of Section 203 of the
Delaware corporate statute, which regulates corporate acquisitions.  Section 203
may  affect  the  ability of an  "interested  stockholder"  to engage in certain
business  combinations,  including  mergers,  consolidation  or  acquisitions of
additional  shares,  for a period  of three  years  following  the time that the
stockholder becomes an "interested stockholder".  An "interested stockholder" is
defined to include  persons  owning  directly or  indirectly  15% or more of the
outstanding  voting stock of a corporation.  These  provisions  could discourage
potential  acquisition  proposals and could delay or prevent a change in control
transaction.  They could also have the effect of discouraging others from making
tender offers for our common stock.  As a result,  these  provisions may prevent
our stock price from increasing

                                       3





substantially  in  response  to  actual  or  rumored  takeover  attempts.  These
provisions may also prevent changes in our management.

Issuance of Preferred Stock Without Stockholder Approval.

          Our  preferred  stock  can be  created  and  issued  by the  board  of
directors without prior stockholder approval, with rights senior to those of the
common stock.  Preferred stock may be issued in one or more series, the terms of
which may be determined without further action by stockholders.  These terms may
include preferences,  conversion or other rights,  voting powers,  restrictions,
limitations  as  to  dividends,   qualifications   or  terms  or  conditions  of
redemption.  The  issuance of any  preferred  stock could  materially  adversely
affect the rights of holders of our common stock, and therefore could reduce its
value. In addition, specific rights granted to future holders of preferred stock
could be used to restrict our ability to merge with,  or sell assets to, a third
party.  The power of the board of directors to issue  preferred stock could make
it more difficult, delay, discourage,  prevent or make it more costly to acquire
or effect a change in control,  thereby  preserving  the  current  stockholders'
control.

We have a limited  operating  history,  which makes it difficult to evaluate our
business and to predict our future operating results.

        Since our inception,  August of 1996, we have been primarily  engaged in
organizational  activities,  including  developing a strategic  operating  plan,
entering into various  collaborative  agreements for the development of products
and technologies,  hiring personnel and developing and testing our products.  We
have not  generated  any  material  revenues  to date.  Accordingly,  we have no
relevant  operating  history upon which an  evaluation  of our  performance  and
prospects can be made.

We have incurred net losses since commencing business and expect future losses.

        To date, we have incurred  significant net losses,  including net losses
of $8,437,397 for the nine-month  period ended March 31, 2004 and $4,064,277 for
the three  month  period  ended March 31,  2004.  At March 31,  2004,  we had an
accumulated deficit of $37,676,811.  We anticipate that we may continue to incur
significant  operating losses for the foreseeable  future. We may never generate
material revenues or achieve profitability and, if we do achieve  profitability,
we may not be able to maintain profitability.

Clinical  trials for our products will be expensive  and may be time  consuming,
and their outcome is uncertain,  but we must incur substantial expenses that may
not result in any viable products.

        Before  obtaining  regulatory  approval  for  the  commercial  sale of a
product,  we must demonstrate through  pre-clinical  testing and clinical trials
that a product  candidate is safe and  effective  for use in humans.  Conducting
clinical  trials is a lengthy,  time-consuming  and expensive  process.  We will
incur  substantial  expense  for,  and  devote a  significant  amount of time to
pre-clinical testing and clinical trials. Even with Modrenal,  which is approved
and  marketed by us in the U.K. for the  treatment  of advanced  post-menopausal
breast  cancer,  we are  conducting  a clinical  trial in the U.S.  in  prostate
cancer, which is a new potential indication for this approved drug.

        Historically,  the results from pre-clinical  testing and early clinical
trials have often not been  predictive  of results  obtained  in later  clinical
trials.  A number of new drugs have shown promising  results in clinical trials,
but  subsequently  failed to establish  sufficient  safety and efficacy  data to
obtain  necessary  regulatory  approvals.  Data obtained from  pre-clinical  and
clinical activities are susceptible to varying interpretations, which may delay,
limit or prevent  regulatory  approval.  Regulatory  delays or rejections may be
encountered as a result of many factors,  including changes in regulatory policy
during the period of product  development.  Regulatory  authorities  may require
additional   clinical  trials,   which  could  result  in  increased  costs  and
significant  development delays.  Clofarabine currently is at a pivotal stage of
its development,  but many of our other products and technologies are at various
less mature  stages of  development  including  gossypol  for which we have just
commenced  a Phase I  clinical  trial in the  U.K.  and  gene  therapy  which is
currently in pre-clinical testing.

        Completion of clinical  trials for any product may take several years or
more. The length of time generally varies  substantially  according to the type,
complexity,  novelty and intended use of the product candidate. Our commencement
and rate of  completion  of  clinical  trials may be  delayed  by many  factors,
including:

        o       inability of vendors to  manufacture  sufficient  quantities  of
materials for use in clinical trials;


                                       4



        o       slower than expected rate of patient  recruitment or variability
in the number and types of patients in a study;

        o       inability to adequately follow patients after treatment;

        o       unforeseen safety issues or side effects;

        o       lack of efficacy during the clinical trials; or

        o       government or regulatory delays.


Our intangible assets constitute a significant  portion of our assets and relate
to ancillary products which may not be successfully commercialized

        Our ancillary products include OLIGON and Methylene Blue which are
anti-microbial agents that we acquired in February 2002. As of March 31, 2004,
our intangible assets associated with these products amounted to approximately
$14.8 million and constituted approximately 35% of our total assets and
approximately 55% of our stockholders' equity. We amortize approximately $1.3
million of this amount each year for the estimated useful life of these products
of approximately 13 years.

        We do not currently devote any significant time or resources to the
research and development of OLIGON and Methylene Blue and only intend to do so
if and to the extent we successfully commercialize our lead drugs, Clorfarabine
and Modrenal, over the next two years. If at any time in the future management
determines that the carrying amount of these assets is not recoverable, we would
need to write down the value of these assets. Based on the estimated useful life
of these assets of approximately 13 years and market considerations, no
assurance can be given that there will not be an impairment of these assets in
the future. Any impairment of these assets could result in a material impact on
our future results of operations.

If our development  agreement with ILEX does not proceed as planned we may incur
delay in the commercialization of Clofarabine,  which would delay our ability to
generate sales and cash flow from the sale of Clofarabine.

        ILEX, and any third party to which ILEX may grant a sublicense or in any
way transfer its obligations, has primary responsibility for conducting clinical
trials and  administering  regulatory  compliance  and  approval  matters in the
United States and Canada pursuant to the terms of our  co-development  agreement
with ILEX.  While there are target dates for completion,  that agreement  allows
ILEX time to continue  working  beyond those dates under certain  circumstances.
For example, under the co-development  agreement,  ILEX was required to complete
Pivotal Phase II Trials not later than December 31, 2002,  but ILEX failed to do
so. In this situation the  co-development  agreement provides that the milestone
shall be adjusted  such that ILEX  receives  more time to  complete  the pivotal
trials if the trials  are  ongoing  at  December  31,  2002 and  progressing  to
completion within a reasonable time thereafter. Further, ILEX was required under
the co-development  agreement to have filed a New Drug Application by August 31,
2003,  subject to extension if ILEX continues to use its  reasonable  efforts to
promptly  complete the filing after August 31, 2003.  ILEX  continued to use its
reasonable  efforts to complete  the filing  after  August 31, 2003 and in March
2004, ILEX completed the filing.

        If  ILEX  fails  to  meet  its  obligations  under  the   co-development
agreement,   we  could  lose  valuable  time  in  developing   Clofarabine   for
commercialization  both in the U.S. and in Europe. Because we intend to make use
of  clinical  data  from  the  clinical  trials  which  ILEX  conducted,  and is
conducting,  to prepare and support our  regulatory  applications  in Europe and
elsewhere,  ILEX's failure to  expeditiously  file the New Drug Application with
FDA could adversely affect the timing of European  approval.  We can not provide
assurance  that  ILEX  will  not  fail  to  meet  its   obligations   under  the
co-development  agreement.  Development  of  compounds  to the stage of approval
includes  inherent risk at each stage of development  that FDA in its discretion
will mandate a requirement not foreseeable by us or by ILEX. There would also be
testing  delays if, for  example,  our sources of drug supply  could not produce
enough  Clofarabine to support the then ongoing clinical trials being conducted.
If this were to occur, it could have a material adverse effect on our ability to
develop Clofarabine,  obtain necessary regulatory approvals,  and generate sales
and cash flow from the sale of Clofarabine.

        If delays in completion constitute a breach by ILEX or there are certain
other breaches of the co-development agreement by ILEX, then, at our discretion,
the primary  responsibility  for completion  would revert to


                                       5



us, but there is no assurance  that we would have the  financial,  managerial or
technical resources to complete such tasks in timely fashion or at all.

We have limited experience in developing products and may be unsuccessful in our
efforts to develop products.

        To  achieve  profitable  operations,  we,  alone  or with  others,  must
successfully  develop,  clinically  test,  market and sell our products.  We are
developing Clofarabine with ILEX Oncology, our U.S.  co-development partner, but
on February 26, 2004, Genzyme Corp. announced a merger pursuant to which Genzyme
intends  to  acquire  ILEX  in a  merger  transaction.  If this  transaction  is
consummated,  no  assurance  can be given that the  operational  and  managerial
relations  with  Genzyme  will  proceed  favorably  or  that  the  timeline  for
development  of  Clofarabine  will  not be  elongated.  If the  U.S.  regulatory
timeline is elongated,  this could  materially and adversely affect the European
regulatory timeline for the approval of Clofarabine.

        With  respect  to our  co-lead  drug,  Modrenal,  we  currently  have an
Investigational  New Drug  Application  filed  with FDA to conduct in the U.S. a
Phase II Clinical  Trial to  determine  efficacy of Modrenal in prostate  cancer
patients.  This Phase II Clinical  Trial will be  conducted on our behalf at the
Mass General Hospital in Boston, MA at the direction of Dr. Mathew Smith. To our
knowledge, Modrenal has not been tested in this indication in the past and there
can be no  assurance  that  Modrenal  will be an  effective  therapy in prostate
cancer.  Further, our long-term drug development objectives for Modrenal include
attempting  to test the drug and get  approval  in the  U.S.  for  treatment  of
advanced   post-menopausal  breast  cancer  patients.  These  trials  will  take
significant  time and resource and no assurance can be given that developing the
drug in this indication will result in a U.S.  approval for Modrenal in advanced
post-menopausal breast cancer patients.

        Generally,  most  products  resulting  from  our  or  our  collaborative
partners' product  development efforts are not expected to be available for sale
for at least  several  years,  if at all.  Potential  products that appear to be
promising at early stages of  development  may not reach the market for a number
of reasons, including:

o       discovery  during  pre-clinical  testing  or  clinical  trials  that the
    products are ineffective or cause harmful side effects;

o       failure to receive necessary regulatory approvals;

o       inability to manufacture on a large or economically feasible scale;

o       failure to achieve market acceptance; or

o       preclusion  from   commercialization  by  proprietary  rights  of  third
        parties.

        Most of the existing and future products and  technologies  developed by
us will require extensive additional development, including pre-clinical testing
and   clinical   trials,   as   well   as   regulatory   approvals,   prior   to
commercialization. Our product development efforts may not be successful. We may
fail to receive required  regulatory  approvals from U.S. or foreign authorities
for any  indication.  Any products,  if introduced,  may not be capable of being
produced in  commercial  quantities at  reasonable  costs or being  successfully
marketed.  The failure of our research and  development  activities to result in
any  commercially  viable products or technologies  would  materially  adversely
affect our future prospects.

Our  industry is subject to  extensive  government  regulation  and our products
require other regulatory  approvals which makes it more expensive to operate our
business.

        Regulation  in  General.  Virtually  all  aspects  of our  business  are
regulated by federal and state statutes and governmental  agencies in the United
States and other  countries.  Failure to comply  with  applicable  statutes  and
government  regulations  could have a material  adverse effect on our ability to
develop and sell products  which would have a negative  impact on our cash flow.
The development, testing, manufacturing,  processing, quality, safety, efficacy,
packaging, labeling,  record-keeping,  distribution,  storage and advertising of
pharmaceutical  products,  and  disposal of waste  products  arising  from these
activities,  are subject to  regulation by one or more federal  agencies.  These
activities are also regulated by similar state and local agencies and equivalent
foreign  authorities.  In our  material  contracts  with vendors  providing  any
portion of these types of services,  we seek  assurances that our vendors comply
and  will  continue  to  maintain  compliance  with  all  applicable  rules  and
regulations.  This is the case, for example,  with respect to our contracts with
Ferro


                                       6



Pfanstiehl  and Penn  Pharmaceuticals.  No assurance  can be given that our most
significant vendors will continue to comply with these rules and regulations.

        FDA Regulation.  All  pharmaceutical  manufacturers in the United States
are subject to  regulation  by the FDA under the  authority of the Federal Food,
Drug,  and Cosmetic  Act.  Under the Act, the federal  government  has extensive
administrative   and  judicial   enforcement   powers  over  the  activities  of
pharmaceutical  manufacturers to ensure  compliance with FDA regulations.  Those
powers include, but are not limited to the authority to:

o       initiate court action to seize unapproved or non-complying products;

o       enjoin non-complying activities;

o       halt  manufacturing  operations  that are not in compliance with current
        good manufacturing practices prescribed by the FDA;

o       recall products which present a health risk; and

o       seek civil monetary and criminal penalties.

        Other  enforcement   activities   include  refusal  to  approve  product
applications  or  the  withdrawal  of  previously  approved  applications.   Any
enforcement  activities,  including the  restriction  or prohibition on sales of
products marketed by us or the halting of manufacturing  operations of us or our
collaborators,  would have a material  adverse  effect on our ability to develop
and sell  products  which  would  have a negative  impact on our cash  flow.  In
addition, product recalls may be issued at our discretion or by the FDA or other
domestic  and  foreign  government  agencies  having  regulatory  authority  for
pharmaceutical product sales. Recalls may occur due to disputed labeling claims,
manufacturing   issues,   quality   defects   or  other   reasons.   Recalls  of
pharmaceutical  products  marketed  by us may occur in the  future.  Any product
recall could have a material adverse effect on our revenue and cash flow.

        FDA Approval Process.  We have a variety of products under  development,
including  line  extensions  of existing  products,  reformulations  of existing
products  and  new  products.  All  "new  drugs"  must  be  the  subject  of  an
FDA-approved  new drug  application  before  they may be  marketed in the United
States. All generic equivalents to previously approved drugs or new dosage forms
of existing drugs must be the subject of an  FDA-approved  abbreviated  new drug
application before they may by marketed in the United States. In both cases, the
FDA has the authority to determine what testing procedures are appropriate for a
particular  product  and, in some  instances,  has not  published  or  otherwise
identified  guidelines  as to  the  appropriate  procedures.  The  FDA  has  the
authority to withdraw existing new drug application and abbreviated  application
approvals and to review the  regulatory  status of products  marketed  under the
enforcement  policy.  The FDA may require an approved  new drug  application  or
abbreviated  application  for any drug product  marketed  under the  enforcement
policy  if  new  information  reveals  questions  about  the  drug's  safety  or
effectiveness.  All drugs must be  manufactured  in conformity with current good
manufacturing practices and drugs subject to an approved new drug application or
abbreviated  application must be  manufactured,  processed,  packaged,  held and
labeled in accordance with information  contained in the new drug application or
abbreviated application.

        The required  product testing and approval  process can take a number of
years and require  the  expenditure  of  substantial  resources.  Testing of any
product  under  development  may not  result in a  commercially-viable  product.
Further,  we may decide to modify a product in testing,  which could  materially
extend the test  period and  increase  the  development  costs of the product in
question.  Even after time and expenses,  regulatory approval by the FDA may not
be obtained for any products we develop.  In addition,  delays or rejections may
be  encountered  based upon  changes in FDA policy  during the period of product
development and FDA review.  Any regulatory  approval may impose  limitations in
the indicated use for the product.  Even if regulatory  approval is obtained,  a
marketed product, its manufacturer and its manufacturing  facilities are subject
to continual review and periodic inspections. Subsequent discovery of previously
unknown  problems  with a  product,  manufacturer  or  facility  may  result  in
restrictions on the product or manufacturer, including withdrawal of the product
from the market.

        Foreign  Regulatory  Approval.  Even if required  FDA  approval has been
obtained  with respect to a product,  foreign  regulatory  approval of a product
must also be obtained  prior to marketing the product  internationally.  Foreign
approval  procedures  vary from  country to country  and the time  required  for
approval  may  delay or  prevent  marketing.  In  certain  instances,  we or our
collaborative partners may seek approval to market and sell some of our products
outside of the United States before  submitting an  application  for approval


                                       7



to the FDA. The clinical  testing  requirements  and the time required to obtain
foreign  regulatory  approvals  may differ from that  required for FDA approval.
Although there is now a centralized  European  Union approval  mechanism for new
pharmaceutical  products in place,  each European Union country may  nonetheless
impose its own procedures and requirements, many of which are time consuming and
expensive,  and some European Union countries  require price approval as part of
the  regulatory  process.  Thus,  there can be  substantial  delays in obtaining
required approval from both the FDA and foreign regulatory authorities after the
relevant applications are filed.

        Changes in Requirements.  The regulatory  requirements applicable to any
product may be modified in the future.  We cannot  determine what effect changes
in regulations or statutes or legal  interpretations may have on our business in
the future. Changes could require changes to manufacturing methods,  expanded or
different  labeling,  the  recall,  replacement  or  discontinuation  of certain
products, additional record keeping and expanded documentation of the properties
of  certain  products  and  scientific   substantiation.   Any  changes  or  new
legislation  could have a material  adverse effect on our ability to develop and
sell products and, therefore, generate revenue and cash flow.

        The products under  development by us may not meet all of the applicable
regulatory  requirements needed to receive regulatory  marketing approval.  Even
after we expend substantial resources on research,  clinical development and the
preparation  and  processing of regulatory  applications,  we may not be able to
obtain  regulatory  approval  for  any of  our  products.  Moreover,  regulatory
approval for marketing a proposed pharmaceutical product in any jurisdiction may
not result in similar approval in other jurisdictions. Our failure to obtain and
maintain  regulatory  approvals  for  products  under  development  would have a
material  adverse  effect on our  ability  to  develop  and sell  products  and,
therefore, generate revenue and cash flow.

We may not be  successful  in  receiving  orphan  drug status for certain of our
products or, if that status is obtained,  fully  enjoying the benefits of orphan
drug status.

        Under the Orphan Drug Act, the FDA may grant orphan drug  designation to
drugs intended to treat a rare disease or condition. A disease or condition that
affects  populations of fewer than 200,000 people in the United States generally
constitutes a rare disease or  condition.  We may not be successful in receiving
orphan drug status for certain of our products.  Orphan drug designation must be
requested before submitting a new drug application.  After the FDA grants orphan
drug  designation,  the  generic  identity  of the  therapeutic  agent  and  its
potential  orphan use are publicized by the FDA. Under current law,  orphan drug
status is conferred upon the first company to receive FDA approval to market the
designated  drug for the designated  indication.  Orphan drug status also grants
marketing exclusivity in the United States for a period of seven years following
approval  of the new drug  application,  subject  to  limitations.  Orphan  drug
designation  does not provide any  advantage in, or shorten the duration of, the
FDA regulatory  approval  process.  Although  obtaining FDA approval to market a
product with orphan drug status can be advantageous,  the scope of protection or
the level of marketing  exclusivity  that is  currently  afforded by orphan drug
status and marketing approval may not remain in effect in the future.

        Our business  strategy  involves  obtaining  orphan drug designation for
certain of the oncology products we have under development. Although Clofarabine
has  received  orphan  drug  designation  with the FDA and EMEA,  we do not know
whether  any of our other  products  will  receive an orphan  drug  designation.
Orphan drug designation does not prevent other  manufacturers from attempting to
develop  the same  drug for the  designated  indication  or from  obtaining  the
approval of a new drug  application  for their drug prior to the approval of our
new drug  application.  If another  sponsor's new drug  application for the same
drug and the same  indication  is approved  first,  that  sponsor is entitled to
exclusive  marketing rights if that sponsor has received orphan drug designation
for its drug. In that case,  the FDA would refrain from approving an application
by us to market our competing  product for seven years,  subject to limitations.
Competing  products may not receive orphan drug  designations  and FDA marketing
approval before the products under development by us.

        New drug application  approval of a drug with an orphan drug designation
does  not  prevent  the  FDA  from  approving  the  same  drug  for a  different
indication,  or a molecular  variation of the same drug for the same indication.
Because doctors are not restricted by the FDA from  prescribing an approved drug
for uses not approved by the FDA, it is also  possible  that  another  company's
drug could be prescribed for indications for which products developed by us have
received orphan drug designation and new drug application approval.  Prescribing
of approved drugs for unapproved uses,  commonly referred to as "off label" use,
could adversely affect the marketing potential of products that have received an
orphan drug designation and new drug


                                       8



application approval. In addition,  new drug application approval of a drug with
an orphan drug designation does not provide any marketing exclusivity in foreign
markets.

        The  possible  amendment  of the Orphan  Drug Act by the  United  States
Congress has been the subject of frequent  discussion.  Although no  significant
changes to the Orphan Drug Act have been made for a number of years,  members of
Congress  have from  time to time  proposed  legislation  that  would  limit the
application of the Orphan Drug Act. The precise scope of protection  that may be
afforded by orphan drug  designation  and  marketing  approval may be subject to
change in the future.

The use of our products may be limited or eliminated by professional  guidelines
which would decrease our sales of these products and, therefore, our revenue and
cash flows.

        In addition to government agencies,  private health/science  foundations
and  organizations  involved in various diseases may also publish  guidelines or
recommendations  to  the  healthcare  and  patient  communities.  These  private
organizations may make recommendations that affect the usage of therapies, drugs
or procedures,  including  products developed by us. These  recommendations  may
relate to matters  such as usage,  dosage,  route of  administration  and use of
concomitant  therapies.  Recommendations  or  guidelines  that are  followed  by
patients  and  healthcare  providers  and that result in,  among  other  things,
decreased use or elimination  of products  developed by us could have a material
adverse  effect on our revenue and cash flows.  For example,  if  Clofarabine is
definitively  determined in clinical trials to be an active agent to treat solid
tumor cancer patients, but the required dose is high, private healthcare/science
foundations  could recommend  various other regimens of treatment which may from
time to time show activity at lower doses.

Generic  products  which  third  parties  may  develop  may render our  products
noncompetitive or obsolete.

        An increase in competition  from generic  pharmaceutical  products could
have a material adverse effect on our ability to generate revenue and cash flow.
For example,  many of the  indications in which  Clofarabine  and Modrenal,  our
co-lead drugs, have demonstrated activity are areas of unmet clinical need, such
as  Clofarabine's  application to pediatric acute leukemia in which,  initially,
the drug will be used as a salvage  therapy  after other  regimens of  treatment
have failed.  Our lead  investigators  who have assisted with the development of
Modrenal  envision,  initially,  that Modrenal  would be used as second or third
line therapy,  only after patients with advanced  post-menopausal  breast cancer
receive  regimens of timoxifin  and faslodex (or similar  drug)  treatments.  If
generic drug  companies  develop a compound  which is more effective than either
Clofarabine or Modrenal,  in these areas of unmet clinical need, , or equally as
effective but at lower doses, it could adversely affect our market and/or render
our drugs obsolete.

Because many of our competitors  have  substantially  greater  capabilities  and
resources,  they may be able to  develop  products  before  us or  develop  more
effective products or market them more effectively which would limit our ability
to generate revenue and cash flow.

        Competition  in our industry is intense.  Potential  competitors  in the
United States and Europe are numerous and include  pharmaceutical,  chemical and
biotechnology  companies,  most of  which  have  substantially  greater  capital
resources, marketing experience,  research and development staffs and facilities
than us.  Potential  competitors  for  certain  indications  of our  lead  drugs
include,  with respect to Clofarabine,  Schering AG, which markets  Fludarabine,
and certain generic drug companies in Europe which could market Fludarabine upon
expiry of the patent  protections held by Schering.  Potential  competitors with
respect to Modrenal include  Astra-zeneca  and Novartis,  which market timoxifen
and other aromitase  inhibitors,  which could be used by clinicians as first and
second   line   therapies   in  patients   with   hormone   sensitive   advanced
post-menopausal  breast  cancer  prior to a Modrenal  regimen of  treatment.  No
assurance can be given that the ongoing  business  activities of our competitors
will  not  have  a  material  adverse  effect  on  our  business  prospects  and
projections going forward.

        Although we seek to limit potential sources of competition by developing
products that are eligible for orphan drug  designation and new drug application
approval or other  forms of  protection,  our  competitors  may develop  similar
technologies and products more rapidly than us or market them more  effectively.
Competing technologies and products may be more effective than any of those that
are being or will be  developed  by us. The generic  drug  industry is intensely
competitive  and  includes  large  brand  name and  multi-source  pharmaceutical
companies.  Because  generic  drugs do not have patent  protection  or any other
market  exclusivity,  our competitors may introduce  competing generic products,
which may be sold at lower prices or with more aggressive marketing. Conversely,
as we introduce branded drugs into our product portfolio, we will


                                       9



face  competition  from  manufacturers of generic drugs which may claim to offer
equivalent  therapeutic  benefits  at a  lower  price.  The  aggressive  pricing
activities of our generic  competitors  could have a material  adverse effect on
our revenue and cash flow.

If we fail to keep up with rapid  technological  change and evolving  therapies,
our technologies and products could become less competitive or obsolete.

        The  pharmaceutical  industry is  characterized by rapid and significant
technological change. We expect that pharmaceutical  technology will continue to
develop  rapidly,  and our future  success will depend on our ability to develop
and maintain a competitive  position.  Technological  development  by others may
result in products developed by us, branded or generic, becoming obsolete before
they are marketed or before we recover a significant  portion of the development
and  commercialization   expenses  incurred  with  respect  to  these  products.
Alternative  therapies or new medical  treatments could alter existing treatment
regimes,  and thereby reduce the need for one or more of the products  developed
by us,  which  would  adversely  affect  our  revenue  and cash  flow.  See also
"--Generic  products  which third  parties  may develop may render our  products
noncompetitive or obsolete."

We depend on others for clinical  testing of our products  which could delay our
ability to develop products.

        We do not currently have any internal product testing capabilities.  Our
inability  to retain  third  parties  for the  clinical  testing of  products on
acceptable  terms would adversely  affect our ability to develop  products.  Any
failures by third parties to adequately perform their responsibilities may delay
the  submission  of  products  for  regulatory  approval,  impair our ability to
deliver products on a timely basis or otherwise impair our competitive position.
Our  dependence on third parties for the  development  of products may adversely
affect our  potential  profit  margins  and our  ability to develop  and deliver
products on a timely basis.

We depend on others to manufacture our products and have not  manufactured  them
in significant quantities.

        We have never  manufactured any products in commercial  quantities,  and
the  products  being  developed  by  us  may  not  be  suitable  for  commercial
manufacturing in a cost-effective manner. Manufacturers of products developed by
us will be subject to current good manufacturing practices prescribed by the FDA
or other rules and regulations prescribed by foreign regulatory authorities.  We
may not be able to enter into or maintain  relationships  either domestically or
abroad  with  manufacturers  whose  facilities  and  procedures  comply  or will
continue to comply with  current  good  manufacturing  practices  or  applicable
foreign  requirements.  Failure by a manufacturer of our products to comply with
current good manufacturing  practices or applicable  foreign  requirements could
result in significant  time delays or our inability to commercialize or continue
to market a product  and could  have a material  adverse  effect on our sales of
products and, therefore,  our cash flow. In the United States, failure to comply
with current good manufacturing practices or other applicable legal requirements
can lead to federal seizure of violative products, injunctive actions brought by
the federal  government,  and potential criminal and civil liability on the part
of a company and our officers and employees.

We have limited  sales and  marketing  capability,  and may not be successful in
selling or marketing our products.

        The creation of infrastructure  to commercialize  oncology products is a
difficult, expensive and time-consuming process. We may not be able to establish
direct or indirect  sales and  distribution  capabilities  or be  successful  in
gaining market  acceptance for proprietary  products or for other  products.  We
currently  have very  limited  sales and  marketing  capabilities.  We currently
employ one fulltime  sales  employee and two fulltime  marketing  employees.  To
market any products  directly,  we will need to develop a more fulsome marketing
and sales force with technical expertise and distribution capability or contract
with other pharmaceutical and/or health care companies with distribution systems
and direct sales forces.  To the extent that we enter into co-promotion or other
licensing  arrangements,  any revenues to be received by us will be dependent on
the  efforts  of  third  parties.  The  efforts  of  third  parties  may  not be
successful.  Our failure to establish marketing and distribution capabilities or
to enter into marketing and distribution  arrangements  with third parties could
have a material adverse effect on our revenue and cash flows.

If we lose key management our business will suffer.

        We are highly dependent on our Chief Executive Officer to develop our
lead drug. Dr. Wood has an employment agreement with the Company dated December
31, 2002 for an initial term of one year which


                                       10



automatically extends for additional one year periods until either party gives
the other written notice of termination at least 90 days prior to the end of the
current term. Dr. Wood is not near retirement age and he does not, to our
knowledge, plan on leaving the Company in the near future. Dr. Wood is one of
the founders of the company and he is intimately familiar with the science that
underlies our lead drugs and ancillary technologies. He also maintains a
position on the Clofarabine management team that is responsible for all drug
development activities relating to that lead drug, and has been instrumental in
the development and maintenance of our key relationships within the scientific
research and medical communities, and those with our vendors, inventors,
co-development partners and licensors. If Dr. Wood was no longer employed by the
company, the development of our drugs would be significantly delayed and
otherwise would be adversely impacted, and we may be unable to maintain and
develop these important relationships.

Need for additional personnel.

        The Company will be required to hire additional qualified scientific and
technical personnel, as well as personnel with expertise in clinical testing and
government regulation to expand our research and development programs and pursue
our product development plans. There is intense competition for qualified
personnel in the areas of the Company's activities, and there can be no
assurance that the Company will be able to attract and retain the qualified
personnel necessary for the development of its business. The Company faces
competition for qualified individuals from numerous pharmaceutical and
biotechnology companies, universities and research institutions. The failure to
attract and retain key scientific and technical personnel would have a material
adverse effect on the development of the Company's business and our ability to
develop, market and sell our products.

Our management and internal  systems might be inadequate to handle our potential
growth.

        Our success  will depend in  significant  part on the  expansion  of our
operations  and the  effective  management  of growth.  This growth has and will
continue to place a significant strain on our management and information systems
and resources and  operational  and financial  systems and resources.  To manage
future  growth,  our  management  must continue to improve our  operational  and
financial  systems and expand,  train,  retain and manage our employee base. Our
management  may not be able to manage our growth  effectively.  If our  systems,
procedures,  controls,  and resources are inadequate to support our  operations,
our expansion  would be halted or delayed and we could lose our  opportunity  to
gain  significant  market share or the timing with which we would otherwise gain
significant  market share.  Any inability to manage growth  effectively may harm
our  ability  to  institute  our  business  plan.  The  strain  on our  systems,
procedures,  controls and  resources is further  heightened by the fact that our
executive office and operational  development facilities are located in separate
time zones (New York and Edinburgh, Scotland, respectively).

We  depend  on  patent  and  proprietary  rights  to  develop  and  protect  our
technologies and products, which rights may not offer us sufficient protection.

        The pharmaceutical  industry places considerable importance on obtaining
patent and trade secret protection for new technologies, products and processes.
Our success  will depend on our  ability to obtain and  enforce  protection  for
products that we develop  under United States and foreign  patent laws and other
intellectual  property laws,  preserve the  confidentiality of our trade secrets
and operate without infringing the proprietary rights of third parties.  Through
our  current  license  agreements,  we have  acquired  the right to utilize  the
technology  covered  by  issued  patents  and  patent  applications,  as well as
additional  intellectual  property  and  know-how  that could be the  subject of
further patent  applications in the future.  Several of the original  patents to
trilostane have expired in the United States and foreign countries. Thus, we and
our licensors are pursuing  patent  applications  to specific uses,  combination
therapy and dosages or formulations of trilostane. We cannot guarantee that such
applications  will result in issued  patents or that such patents if issued will
provide adequate protection against competitors.  Patents may not be issued from
these  applications and issued patents may not give us adequate  protection or a
competitive advantage. Issued patents may be challenged,  invalidated, infringed
or  circumvented,  and any rights  granted  thereunder  may not  provide us with
competitive  advantages.  Parties not  affiliated  with us have  obtained or may
obtain  United States or foreign  patents or possess or may possess  proprietary
rights  relating to products  being  developed or to be developed by us. Patents
now in  existence  or  hereafter  issued  to others  may  adversely  affect  the
development or commercialization of products developed or to be developed by us.
Our planned  activities  may infringe  patents  owned by others.  Our patents to
Clofarabine are licensed from Southern Research Institute. The current projected
expiration date of the license is March 2021. These patents cover pharmaceutical
compositions  and methods of using  Clofarabine.  We cannot guarantee that these
patents  would  survive an attack on their  validity or that they will provide a
competitive  advantage over our competitors.  Moreover, we cannot guarantee that
Southern Research  Institute was the first to invent the subject matter of these
patents. In addition,  we are aware of a third party patent which


                                       11



is directed to the  treatment  of chronic  myelogenous  leukemia  ("CML")  using
specific  doses of  Clofarabine.  We do not believe that we will  infringe  this
patent.  If this patent is asserted against us, even though we may be successful
in defending  against such an assertion,  our defense would require  substantial
financial and human resources.  And, we may need a license to this patent to use
the claimed  dose in the  treatment  of CML.  However,  we do not know if such a
license is available at commercially reasonable terms, if at all.

        We could incur substantial costs in defending infringement suits brought
against us or any of our licensors or in asserting any infringement  claims that
we may have against others.  We could also incur substantial costs in connection
with any suits  relating to matters for which we have  agreed to  indemnify  our
licensors or  distributors.  An adverse  outcome in any litigation  could have a
material  adverse  effect on our ability to sell  products or use patents in the
future.  In addition,  we could be required to obtain  licenses under patents or
other  proprietary  rights  of third  parties.  These  licenses  may not be made
available  on terms  acceptable  to us, or at all. If we are required to, and do
not obtain any  required  licenses,  we could be  prevented  from,  or encounter
delays in, developing, manufacturing or marketing one or more products.

        We also rely upon  trade  secret  protection  for our  confidential  and
proprietary   information.   Others  may  independently   develop  substantially
equivalent  proprietary  information  and techniques or gain access to our trade
secrets or disclose our technology.  We may not be able to meaningfully  protect
our trade secrets which could limit our ability to exclusively produce products.

        We  require  our  employees,  consultants,  members  of  the  scientific
advisory   board  and   parties   to   collaborative   agreements   to   execute
confidentiality  agreements  upon the  commencement  of employment or consulting
relationships  or a  collaboration  with us.  These  agreements  may not provide
meaningful  protection of our trade secrets or adequate remedies in the event of
unauthorized use or disclosure of confidential and proprietary information.

Because  we have  international  operations,  we will be  subject  to  risks  of
conducting business in foreign countries.

        We have the right to manufacture,  market and distribute our lead drugs,
Clofarabine  and  Modrenal,   in  territories  outside  of  the  United  States.
Specifically,  we  currently  market  Modrenal  in the United  Kingdom  and upon
receiving  European  approval  for  Clofarabine,  we intend  to market  the drug
throughout  Europe.  Further,  half of our employees are employed by Bioenvision
Limited, our wholly-owned subsidiary with offices in Edinburgh, Scotland.

        Because we have international operations in the conduct of our business,
we are  subject  to the  risks of  conducting  business  in  foreign  countries,
including:

o       difficulty in establishing or managing distribution relationships;

o       different standards for the development, use, packaging, pricing and
        marketing of our products and technologies;

o       our inability to locate qualified local employees, partners,
        distributors and suppliers;

o       the potential burden of complying with a variety of foreign laws, trade
        standards and regulatory requirements, including the regulation of
        pharmaceutical products and treatment; and

o       general geopolitical risks, such as political and economic instability,
        changes in diplomatic and trade relations, and foreign currency risks.

We do not engage in forward currency transactions which means we are susceptible
to fluctuations in the U.S. dollar against foreign currencies such as the pound
sterling. Accordingly, as the value of the dollar becomes weaker against the
pound sterling, ongoing services provided by our UK employees, Cancer Research
Organizations and other service providers become more expensive to us. No
assurance can be given that the U.S. dollar will not continue to weaken which
could have a material adverse effect on the costs associated with our drug
development activities.


                                       12



We will have future  capital  needs and we may not be able to secure  additional
financing which could affect our ability to operate as a going concern.

        We  consummated  a private  placement  transaction  on March  22,  2004,
pursuant to which we raised  $12.8  million and issued  2,044,514  shares of our
common stock and warrants to purchase an additional 408,903 shares of our common
stock at a conversion  price of $7.50 per share. We consummated a second closing
for this  financing on May 13, 2004 in order to comply with certain  contractual
obligations of the Company to its holders of Series A Preferred Stock which hold
preemptive  rights for equity  offerings of the Company.  The Company  raised an
additional  $3.5 million in the second  trance  closing and issued an additional
558,384  shares of our common stock and warrants to purchase  111,677  shares of
our common stock at a conversion price of $7.50 per share.  However, we may need
additional  financing to continue to fund the research  and  development  of our
products and to generally  expand and grow our  business.  For example,  we will
need to  employ a  European  sales  force  within  the  next  twelve  months  to
capitalize on the commercial  potential for  Clofarabine  and Modrenal if and to
the extent our lead drugs are at market in Europe in the first half of 2005.  To
the extent that we will be  required to fund  operating  losses,  our  financial
position  would  deteriorate.  There can be no assurance that we will be able to
find  significant  additional  financing at all or on terms  favorable to us. If
equity  securities  are issued in connection  with a financing,  dilution to our
stockholders  may  result,  and if  additional  funds  are  raised  through  the
incurrence  of debt, we may be subject to  restrictions  on our  operations  and
finances.  Furthermore,  if we do incur  additional debt, we may be limiting our
ability  to  repurchase  capital  stock,  engage  in  mergers,   consolidations,
acquisitions  and asset  sales,  or alter our lines of  business  or  accounting
methods,  even though these actions would otherwise benefit our business.  As of
March 31,  2004,  we had  stockholders'  equity of  $26,743,344  and net working
capital of $17,197,041.

        If adequate  financing  is not  available,  we may be required to delay,
scale back or  eliminate  some of our  research  and  development  programs,  to
relinquish  rights to certain  technologies  or  products,  or to license  third
parties to  commercialize  technologies or products that we would otherwise seek
to develop.  Any inability to obtain additional  financing,  if required,  would
have a material  adverse  effect on our ability to continue our  operations  and
implement our business plan.

The prices we charge for our products and the level of third-party reimbursement
may decrease and our revenues could decrease.

        Our ability to commercialize  products  successfully  depends in part on
the price we may be able to charge for our  products  and on the extent to which
reimbursement  for the  cost  of our  products  and  related  treatment  will be
available from  government  health  administration  authorities,  private health
insurers and other third-party payors.  Government  officials and private health
insurers  are  increasingly  challenging  the  price  of  medical  products  and
services.   Significant   uncertainty  exists  as  to  the  pricing  flexibility
distributors will have with respect to, and the  reimbursement  status of, newly
approved health care products.

        Third-party  payors may attempt to control  costs  further by  selecting
exclusive providers of their pharmaceutical products. If third-party payors were
to make this type of arrangement with one or more of our competitors, they would
not reimburse patients for purchasing our competing products.  For example, if a
third-party  payor in the U.K.  were to pay  patients  for regimens of aromitase
inhibitor  treatment but not  treatments of Modrenal,  this would cause sales of
Modrenal to decline.  This lack of  reimbursement  would diminish the market for
products developed by us and could have a material adverse effect on us.

Our products may be subject to recall.

        Product  recalls may be issued at our  discretion or by the FDA, the FTC
or other  government  agencies  having  regulatory  authority for product sales.
Product recalls,  if any in the future,  may harm our reputation and cause us to
lose development  opportunities,  or customers or pay refunds. Products may need
to be recalled due to disputed labeling claims,  manufacturing  issues,  quality
defects,  or other  reasons.  We do not carry any insurance to cover the risk of
potential  product  recall.  Any product  recall  could have a material  adverse
effect on us, our prospects, our financial condition and results of operations.


                                       13



We may face  exposure  from  product  liability  claims  and  product  liability
insurance  may not be  sufficient  to cover  the costs of our  liability  claims
related to technologies or products.

        We  face  exposure  to  product  liability  claims  if  the  use  of our
technologies  or products or those we license  from third  parties is alleged to
have resulted in adverse effects to users thereof.  Product liability claims may
be brought by trial  participants,  although  to date,  no such claims have been
brought  against  us. If any such claims  were  brought  against us, the cost of
defending  such  claims  could  be  significant  and may  adversely  affect  our
business.  Regulatory  approval for  commercial  sale of our  products  does not
mitigate product  liability risks. Any precautions we take may not be sufficient
to avoid  significant  product  liability  exposure.  Although we have  obtained
product  liability  insurance  on our  technologies  and products at levels with
which management deems reasonable, no assurance can be given that this insurance
will cover any particular claim or that we have obtained an appropriate level of
liability  insurance coverage for our development and marketing  activities.  We
currently maintain three million dollars per year, claims made product liability
insurance  coverage which we believe is adequate.  Existing  coverage may not be
adequate as we further develop our products.  In the future,  adequate insurance
coverage or  indemnification  by collaborative  partners may not be available in
sufficient  amounts,  or at  acceptable  costs,  if at all.  To the extent  that
product liability insurance,  if available,  does not cover potential claims, we
will be required to  self-insure  the risks  associated  with those claims.  The
successful  assertion of any uninsured  product liability or other claim against
us could limit our ability to sell our products or could cause monetary damages.
In addition,  future  product  labeling  may include  disclosure  of  additional
adverse effects, precautions and contra indications,  which may adversely impact
product sales. The pharmaceutical industry has experienced increasing difficulty
in maintaining  product liability  insurance  coverage at reasonable levels, and
substantial  increases in insurance  premium  costs in many cases have  rendered
coverage economically impractical.


                                       14



                 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

        We have made statements  under the captions "Risk Factors," and in other
sections of this prospectus that are forward-looking  statements. In some cases,
you can  identify  these  statements  by  forward-looking  words  such as "may,"
"might,"  "will,"  "should,"  "expects,"  "plans,"  "anticipates,"   "believes,"
"estimates,"  "predicts," "potential" or "continue," the negative of these terms
and other comparable  terminology.  These  forward-looking  statements which are
subject  to  risks,   uncertainties   and  assumptions  about  us,  may  include
projections  of  our  future  financial   performance,   or  anticipated  growth
strategies and  anticipated  trends in our business.  These  statements are only
predictions  based on our current  expectations  and  projections  about  future
events.  There are important factors that could cause our actual results,  level
of activity,  performance or achievements to differ materially from the results,
level of  activity,  performance  or  achievements  expressed  or implied by the
forward-looking statements,  including those factors discussed under the section
entitled  "Risk  Factors." You should  specifically  consider the numerous risks
outlined under "Risk Factors." Although we believe the expectations reflected in
the  forward-looking  statements  are  reasonable,  we cannot  guarantee  future
results, levels of activity,  performance or achievements.  Moreover, neither we
nor any other person assumes responsibility for the accuracy and completeness or
any of these forward-looking statements.

                                 USE OF PROCEEDS

        The selling  stockholders  will receive the proceeds  from the resale of
the shares of common stock.  We will not receive any proceeds from the resale of
the  shares  of  common  stock  by the  selling  stockholders.  We  may  receive
consideration  upon the  exercise of options and we will  receive  consideration
upon  the  conversion  of  warrants  which  we will  use for  general  corporate
purposes.

        Expenses we are expected to incur in connection  with this  registration
are estimated at approximately  $150,000.  The selling stockholders will pay all
of their underwriting commissions and discounts and counsel fees and expenses in
connection with the resale of the shares covered by this prospectus.

                            DESCRIPTION OF SECURITIES

Description of Common Stock

        Number  of  Authorized  and  Outstanding   Shares.  Our  Certificate  of
Incorporation  authorizes  the issuance of  50,000,000  shares of common  stock,
$.001 par value per share, of which  28,316,163  shares were outstanding on June
11,  2004.  All of the  outstanding  shares of common  stock are fully  paid and
non-assessable.

        Voting  Rights.  Holders of shares of common  stock are  entitled to one
vote for each share on all matters to be voted on by the  stockholders.  Holders
of common stock have no cumulative voting rights. Accordingly,  the holders of a
simple  majority  of the  outstanding  common  stock  and  Series A  convertible
preferred stock, voting together as a class at a stockholders meeting at which a
quorum is present,  can elect all of the directors nominated for election at the
meeting.

        Other. Holders of common stock have no preemptive rights to purchase our
common  stock.  There are no  conversion  rights or  redemption  or sinking fund
provisions with respect to the common stock.

        Transfer  Agent.  Shares of common stock are  registered at the transfer
agent and are  transferable  at such  office by the  registered  holder (or duly
authorized  attorney) upon surrender of the common stock  certificate,  properly
endorsed.  No transfer  shall be registered  unless we are  satisfied  that such
transfer  will not  result in a  violation  of any  applicable  federal or state
securities  laws.  The transfer  agent for our common stock is Liberty  Transfer
Company, 274B New York Avenue,  Huntington,  New York 11743, Attention: Ms. Lisa
Conger.

Description of Preferred Stock

        Number of Authorized Shares. Our certificate of incorporation authorizes
the issuance of up to 10,000,000  shares of preferred stock, par value $.001 per
share, in one or more series with such  limitations  and  restrictions as may be
determined in the sole  discretion  of our board of  directors,  with no further
authorization by stockholders required for the creation and issuance thereof.


                                       15



        We have designated  5,920,000  shares of our preferred stock as Series A
convertible   preferred  stock,  of  which  3,341,666  shares  were  issued  and
outstanding  as of June 11,  2004.  The  holders  of the  Series  A  convertible
preferred stock vote as a single class with the common stock, on an as-converted
basis, on all matters upon which the holders of the common stock are entitled to
vote.  Each  outstanding  share of  Series A  convertible  preferred  stock  may
currently be converted into two shares of common stock, at the conversion  price
of $1.50 per share. The shares of Series A convertible  preferred stock shall be
automatically convertible into shares of common stock if the market price of the
common  stock  after one year from the date of issuance is $10.00 or more for 30
consecutive  trading days and the trading  volume is at least 150,000 shares per
trading day during such 30-day period. Holders of Series A convertible preferred
stock have a  liquidation  preference  over holders of common stock of $3.00 per
share.  Holders of the Series A convertible  preferred  stock are entitled to an
annual  5%  dividend  which may be paid in cash or  additional  shares of common
stock in our sole discretion.

Warrants

        As of June 11,  2004,  there were  outstanding  warrants  to purchase an
aggregate of 9,079,242 shares of our common stock, exercisable at prices ranging
from  $1.25 to $7.50 per  share.  The  weighted  average  exercise  price of the
warrants is $2.51.

Stock Options

        As of June 11,  2004,  there were  outstanding  options to  purchase  an
aggregate of 4,405,000 shares of our common stock, exercisable at prices ranging
from $0.735 to $6.50 per share, of which,  options to purchase  3,103,334 shares
were exercisable. The weighted average exercise price of the options is $1.64.


                                       16



                              SELLING STOCKHOLDERS

        As discussed elsewhere in this prospectus,  the selling stockholders are
individuals  or entities  who or which either hold shares of our common stock or
may  acquire  the same  upon the  conversion  of  preferred  shares  or upon the
exercise of certain  options or warrants  and,  as  discussed  under the caption
"Plan of  Distribution"  below,  may include certain of their pledgees,  donees,
transferees  or  other  successors-in-interest  who  receive  shares  as a gift,
pledge,  partnership  distribution  or  other  non-sale  related  transfer.  The
following table sets forth, as of the date of this prospectus:

        the name of each selling stockholder;

        the number of shares of common stock beneficially owned by each selling
        stockholder;

        the number of shares of common stock that may be sold in this offering;
        and

        the number and percentage of shares of common stock that will be
        beneficially owned by each selling stockholder following the offering to
        which this prospectus relates.

        The information with respect to ownership after the offering assumes the
sale of all of the shares offered and no purchases of additional shares. The
selling stockholders may offer all or part of the shares covered by this
prospectus at any time or from time to time.

        For  purposes  of the table  below,  the number of shares  "beneficially
owned" are those  beneficially  owned as determined  under the rules of the SEC.
Such information is not necessarily  indicative of beneficial  ownership for any
other purpose. Under such rules,  beneficial ownership includes any shares as to
which a person  has sole or  shared  voting  power or  investment  power and any
shares for which the person has the right to acquire  such power  within 60 days
through the exercise of any option,  warrant or right, through conversion of any
security  or  pursuant to the  automatic  termination  of a power of attorney or
revocation of a trust, discretionary account or similar arrangement. Percentages
in  the  table  below  are  based  on  28,316,163  shares  of our  common  stock
outstanding as of June 11, 2004.




                                                             Shares                                            Shares
                                                         Owned Prior to                                     Owned After
                                                          the Offering                                      the Offering
                                                          ------------           Number of Shares           ------------
                                                                                which may be Sold
Name                                                   Number      Percent       in This Offering       Number        Percent
                                                       ------      -------       ----------------       ------        -------
                                                                                                              

Perseus-Soros BioPharmaceutical
Fund, LP (1)                                           9,450,053     25.27%           9,450,053       --                      --
Caduceus Private Investments,
LP(2)                                                  2,110,410      6.96%           2,110,410       --                      --
OrbiMed Associates LLC (2)                                43,928          *              43,928       --                      --
PW Juniper Crossover Fund,
L.L.C.(2)                                                995,698      3.40%             995,698       --                      --
Special Situations Private
Equity Fund, L.P. (3)                                    250,000          *             250,000       --                      --
Xmark Fund, L.P. (4)                                     144,999          *             144,999       --                      --
Xmark Fund, Ltd. (5)                                     354,999      1.24%             354,999       --                      --
SDS Merchant Fund, LP (6)                                380,001      1.32%             380,001       --                      --
Orion Biomedical Offshore
Fund, LP (7)                                             133,875          *             133,875       --                      --
Orion Biomedical Fund, LP (8)                            616,125      2.13%             616,125       --                      --
Beaver Ltd. (9)                                           75,000          *              75,000       --                      --
CKH Invest Aps. (10)                                      50,001          *              50,001       --                      --
Merlin Biomed Private Equity
Fund LP (11)                                           1,025,617      3.50%           1,025,617       --                      --
Alexandra Global Master Fund, ltd.(12)                   310,666      1.09%             310,666       --                      --
DWS Investment GmbH (13)                               1,360,600      4.59%           1,360,600       --                      --
Michael Sistenich (14)                                   125,001          *             125,001       --                      --
Global Biotechnology Fund (15)                           209,369          *             209,369       --                      --
Oklahoma Medical Research
Foundation (16)                                          300,000      1.05%             300,000       --                      --
Christopher B. Wood (17)                               3,805,258     13.60%           3,638,592       166,666                  *
Julie Wood (17)                                          318,750      1.13%             318,750       --                      --
Stuart Smith (18)                                        700,000      2.43%             700,000       --                      --
Thomas Nelson (19)                                       287,523      1.01%             287,523       --                      --
Kevin Leech (20)                                       1,900,000      6.59%             500,000       1,400,000               4.94%
Bioaccelerate, Inc. (21)                               1,227,272      4.26%             500,000       727,272                 2.57%
Sterling Securities Ltd. (21)                             74,045          *              74,045       --                      --
Carpe DM, Inc. (21)                                       59,058          *              59,058       --                      --



                                       17





                                                                                                              

Michelle Tidball (21)                                    254,114          *             254,114       --                      --
Weil Consulting Corporation (21)                          75,000          *              75,000       --                      --
Kingsley Securities Ltd.  (21)                           124,544          *             124,544       --                      --
Fontenelle LLC  (21)                                      50,000          *              50,000       --                      --
Jano Holdings, Ltd. (22)                                 250,000          *             250,000       --                      --
George Margetts (23)                                     100,000          *             100,000       --                      --
Nagy Habib (24)                                           50,000          *              50,000       --                      --
NAB Holdings Ltd. (21) (25)                              478,247      1.68%             478,247       --                      --
SCO Capital Partners LLC (26), (28)                    7,009,946     24.67%           7,009,946       --                      --
SCO Financial Group LLC (26), (28)                       100,000          *             100,000       --                      --
SCO Securities LLC (26), (28)                            260,290          *             260,290
Daniel DiPietro (30)                                      50,000          *              50,000       --                      --
Jeremy Kaplan                                             10,000          *              10,000       --                      --
Joshua Golumb                                             10,000          *              10,000       --                      --
The Sophie C. Rouhandeh Trust(26)                        150,000          *             150,000       --                      --
The Chloe H. Rouhandeh Trust (26)                        150,000          *             150,000       --                      --
Jeffrey B. Davis (27), (28), (30)                        749,243      2.62%             749,243       --                      --
David Berstein (28)                                      269,200          *             269,200       --                      --
Eugene Zurlo (28)                                        282,900      1.00%             282,900       --                      --
Robert J. Donohoe (28)                                   282,400      1.00%             282,400       --                      --
Al-Midani Investment Company Limited (28)                 14,629          *              14,629       --                      --
Community Investment Partners (28)                         2,560          *               2,560       --
Oakwood Investors I, LLC (28)                             10,240          *              10,240       --                      --
Gutrafin, Ltd. (28)                                       14,629          *              14,629       --                      --
Edward W. Kelly (28), (29)                               356,013      1.26%             356,013       --                      --
RRD International, Inc. (31)                             175,000          *             175,000       --                      --
RLB Capital, Inc. (32)                                   100,000          *             100,000       --                      --
Stamford Capital (33)                                     60,000          *              60,000       --                      --
Palladin Opportunity Fund LLC                             13,632          *              13,632       --                      --
SDS Capital Group SPC, Ltd. (34)                         159,802          *             159,802       --                      --
Baystar Capital II, L.P. (35)                             60,000          *              60,000       --                      --
North Sound Legacy Fund, LLC (36)                          1,440          *               1,440       --                      --
North Sound Legacy Institutional Fund, LLC (37)           15,840          *              15,840       --                      --
North Sound Legacy International Fund, LLC (38)           30,720          *              30,720       --                      --
Vertical Ventures, LLC (39)                              115,200          *             115,200       --                      --
Iroquois Capital LP (40)                                  76,800          *              76,800       --                      --
Alpha Capital AG (41)                                     96,000          *              96,000       --                      --
Merlin Nexus I (42)                                       48,000          *              48,000       --                      --
Millenium Partners LP (43)                               120,000          *             120,000       --                      --
Jennison Health Sciences Fund (44)                       288,000      1.02%             288,000       --                      --
BioPharmaceutical Portfolio (45)                          30,240          *              30,240       --                      --
MP BioPharmaceutical Partners, L.P. (46)                  16,680          *              16,680       --                      --
MP BioPharmaceutical Fund Ltd. (47)                       68,880          *              68,880       --                      --
MP BioPharm Market-Neutral, L.P. (48)                      4,200          *               4,200       --                      --
Silveroak Invenstments, Inc. (49)                         48,000          *              48,000       --                      --
SF Capital Partners Ltd. (50)                            288,000      1.02%             288,000       --                      --
Perceptive Lifesciences Master Fund, Ltd. (51)           216,000          *             216,000       --                      --
Cranshire Capital, L.P. (52)                              48,000          *              48,000       --                      --
Quogue Capital LLC (53)                                   84,000          *              84,000       --                      --
Meditor Master Curra Fund Limited (54)                   192,000          *             192,000       --                      --
Atlas Equity I, Ltd. (55)                                120,000          *             120,000       --                      --
Steve Oliviera (56)                                       24,000          *              24,000       --                      --
SRG Capital LLC (57)                                      24,000          *              24,000       --                      --
StoneStreet LP (58)                                       60,000          *              60,000       --                      --
DKR Soundshore Oasis Holding
Company, Ltd. (59)                                        48,000          *              48,000       --                      --

Total                                                 40,044,637                     37,750,699    2,293,938




* Represents less than 1% of our outstanding shares of common stock.

    (1) Includes   3,000,000  shares  of  Series  A  Preferred  Stock  currently
        convertible  into 6,000,000 shares of common stock at a conversion price
        of $1.50 and a warrant  to  purchase  3,000,000  shares of common  stock
        exercisable  at $2.00 per share for five years  from May 8,  2002.  Also
        includes  375,044 common shares and a warrant to purchase  75,009 shares
        of common stock  exercisable  at $7.50 for five years from May 13, 2004.
        Based upon  information  contained  in its report on Schedule  13D filed
        with the  Commission  on May 20,  2002 and  amended  on January 8, 2003,
        Perseus-Soros  BioPharmaceutical  Fund, L.P. reported that Perseus-Soros
        BioPharmaceutical Fund, L.P. and Perseus-Soros Partners may be deemed to
        have sole power to direct the voting and  disposition  of the  9,000,000
        shares of common stock. By virtue of the relationships between and among
        Perseus-Soros BioPharmaceutical Fund, L.P., Perseus-Soros Partners, LLC,
        Perseus  BioTech Fund Partners,  LLC, SFM  Participation,  L.P., SFM AH,
        LLC, Frank H. Pearl,  George Soros,  Soros Fund Management LLC,  Perseus
        EC, LLC,  Perseuspur,  LLC,  each of such Perseus  entities,  other than
        Perseus-Soros  BioPharmaceutical  Fund, L.P. and Perseus-Soros Partners,
        may be deemed to share the power to direct the voting and disposition of
        the


                                       18



        9,000,000  shares  of  common  stock.   After  the  company's  May  2002
        financing, Perseus-Soros named two individuals to the company's board of
        directors.


    (2) Includes   669,964  shares  of  Series  A  Preferred   Stock   currently
        convertible  into 1,339,928 shares of common stock at a conversion price
        of  $1.50,  a  warrant  to  purchase  669,964  shares  of  common  stock
        exercisable at $2.00 per share for five years from May 16, 2002,  83,765
        common  shares and a warrant to purchase  16,753  shares of common stock
        exercisable  at $7.50 for five years from May 13,  2004 all of which are
        held by Caduceus  Private  Investments,  LP;  13,945  shares of Series A
        Preferred Stock currently convertible into 27,980 shares of common stock
        at a conversion  price of $1.50, a warrant to purchase  13,945 shares of
        common stock  exercisable at $2.00 per share for five years from May 16,
        2002, 1,744 common shares and a warrant to purchase 349 shares of common
        stock  exercisable  at $7.50 for five  years from May 13,  2004,  all of
        which are held by OrbiMed Associates LLC; and 316,091 shares of Series A
        Preferred  Stock  currently  convertible  into 632,182  shares of common
        stock at a  conversion  price of $1.50,  a warrant to  purchase  316,091
        shares of common  stock  exercisable  at $2.00 per share for five  years
        from May 16, 2002,  39,521 common shares and a warrant to purchase 7,904
        shares of common stock  exercisable at $7.50 for five years from May 13,
        2004, all of which are held by PW Juniper Crossover Fund,  L.L.C.  Based
        upon information  contained in its report on Schedule 13G filed with the
        Commission on June 21, 2002,  OrbiMed  Advisors Inc.,  OrbiMed  Advisors
        LLC,  OrbiMed  Capital LLC and Samuel D. Isaly  reported that they share
        the power to direct the voting and  disposition  of the shares of common
        stock.

    (3) Warrant to purchase 250,000 shares of common stock  exercisable at $2.00
        per share for five years from May 8, 2002.

    (4) Includes 48,333 shares of Series A Preferred Stock currently convertible
        into 96,666 shares of common stock at a conversion  price of $1.50 and a
        warrant to purchase  48,333 shares of common stock  exercisable at $2.00
        per share for five years from May 8, 2002.

    (5) Includes   118,333  shares  of  Series  A  Preferred   Stock   currently
        convertible into 236,666 shares of common stock at a conversion price of
        $1.50  and  a  warrant  to  purchase  118,333  shares  of  common  stock
        exercisable at $3.00 per share for five years from May 8, 2002.

    (6) Includes   106,667  shares  of  Series  A  Preferred   Stock   currently
        convertible into 213,334 shares of common stock at a conversion price of
        $1.50  and  a  warrant  to  purchase  166,667  shares  of  common  stock
        exercisable at $2.00 per share for five years from May 8, 2002.

    (7) Includes 44,625 shares of Series A Preferred Stock currently convertible
        into 89,250 shares of common stock at a conversion  price of $1.50 and a
        warrant to purchase  44,625 shares of common stock  exercisable at $2.00
        per share for five years from May 8, 2002.

    (8) Includes   205,375  shares  of  Series  A  Preferred   Stock   currently
        convertible into 410,750 shares of common stock at a conversion price of
        $1.50  and  a  warrant  to  purchase  205,375  shares  of  common  stock
        exercisable at $2.00 per share for five years from May 8, 2002.

    (9) Includes 25,000 shares of Series A Preferred Stock currently convertible
        into 50,000 shares of common stock at a conversion  price of $1.50 and a
        warrant to purchase  25,000 shares of common stock  exercisable at $2.00
        per share for five years from May 16, 2002.

    (10)Includes   16,667   shares  of  Series  A  Preferred   Stock   currently
        convertible  into 33,334 shares of common stock at a conversion price of
        $1.50  and  a  warrant  to  purchase   16,667  shares  of  common  stock
        exercisable  at $2.00 per share for five years from May 14,  2002.

    (11)Includes   333,334  shares  of  Series  A  Preferred   Stock   currently
        convertible into 666,668 shares of common stock at a conversion price of
        $1.50; warrant to purchase 333,334 shares of common stock exercisable at
        $2.00 per share for five  years from March 22,  2002;  21,346  shares of
        common  stock and a warrant to purchase  4,269 shares of common stock at
        $7.50  per  share  for five  years  from  March  22,  2004.  Based  upon
        information  contained  in its  report on  Schedule  13G filed  with the
        Commission on June 28, 2002,  Merlin BioMed  Private  Equity Fund,  L.P.
        reported  that it shares the power to direct the voting and  disposition
        of its shares of common stock with Merlin BioMed  Private  Equity,  LLC,
        its general partner and Dominique Semon, who is the sole managing member
        of the general partner.


                                       19



    (12)Includes  120,000 common shares; a warrant to purchase 166,666 shares of
        common stock  exercisable  at $2.00 per share for five years from May 8,
        2002;  and  a  warrant  to  purchase   24,000  shares  of  common  stock
        exercisable at $7.50 per share for five years from March 22, 2004.

    (13)Includes   433,333  shares  of  Series  A  Preferred   Stock   currently
        convertible into 866,666 shares of common stock at a conversion price of
        $1.50, a warrant to purchase 433,333 shares of common stock  exercisable
        at $2.00 per share  for five  years  from May 14,  2002,  50,501  common
        shares  and  a  warrant  to  purchase  10,100  shares  of  common  stock
        exercisable at $7.50 for five years from May 13, 2004.  Deutsche Bank AG
        has sole voting and investment power with respect to these shares.

    (14)Includes   41,667   shares  of  Series  A  Preferred   Stock   currently
        convertible  into 83,334 shares of common stock at a conversion price of
        $1.50  and  a  warrant  to  purchase   41,667  shares  of  common  stock
        exercisable at $2.00 per share for five years from May 16, 2002.

    (15)Includes   66,666   shares  of  Series  A  Preferred   Stock   currently
        convertible into 133,332 shares of common stock at a conversion price of
        $1.50  and  a  warrant  to  purchase   66,666  shares  of  common  stock
        exercisable  at $2.00 per share for five years from May 14,  2002.  Also
        includes  7,809 common shares and a warrant to purchase  1,562 shares of
        common stock exercisable at $7.50 for five years from May 13, 2004.

    (16)Under the terms of an amendment  to a license  agreement  with  Oklahoma
        Medical Research  Foundation,  we issued 200,000 shares of common stock,
        100,000 of which were sold in October 2003,  and a five-year  warrant to
        purchase an additional  200,000 shares of common stock.  Such warrant to
        purchase  200,000  shares of common  stock is  exercisable  at $2.33 per
        share for five years from May 14, 2002.

    (17)Dr.  Wood is  Chairman  and  Chief  Executive  Officer  of the  Company.
        Excludes  318,750 shares of common stock owned by Julie Wood, Dr. Wood's
        spouse,  as to which Dr. Wood  disclaims any  beneficial  interest,  and
        166,666  options which are  exercisable at $1.45 per share from December
        31, 2003.

    (18)Includes  options to acquire  500,000  shares of the common  stock which
        are exercisable at $1.25 per share for five years from April 30, 2001.

    (19)Includes  options to acquire  200,000  shares of the common  stock which
        are exercisable at $1.25 per share for five years from April 30, 2001.

    (20)These shares are owned of record by Phoenix Ventures Limited,  a Channel
        Islands (Jersey) corporation,  which, to our knowledge,  is wholly-owned
        by  Kevin  Leech.   These  shares  include  500,000  options  which  are
        exercisable at $1.25 per share for the benefit of Phoenix.

    (21)Bioaccelerate,  Inc.  is a BVI  corporation,  owned of record by several
        private  investors and includes options to acquire 500,000 shares of the
        common  stock  which are  exercisable  at $1.25 per share for five years
        from April 30,  2001.  On October 8, 2003,  certain  options  originally
        issued to Bioaccelerate, Inc. were transferred as follows:

        (i)     NAB Holdings Ltd. received options to purchase 500,000 shares of
                common  stock,  350,000 of which were  transferred  to  Michelle
                Tidball on December 9, 2003;

        (ii)    Sterling  Securities Ltd.  received  options to purchase 100,000
                shares of common stock;

        (iii)   Carpe DM, Inc.  received  options to purchase  80,000  shares of
                common stock;

        (iv)    Michelle  Tidball received options to purchase 100,000 shares of
                common stock;

        (v)     Kingsley  Securities Ltd.  received  options to purchase 124,544
                shares of common stock; and

        (vi)    Fontenelle  LLC received  options to purchase  50,000  shares of
                common  stock,  which it exercised  in November  2003 for 50,000
                shares of common stock.


                                       20



        Further, on November 25, 2003, the following  recipients of such options
        executed a cashless  exercise of such options and received the following
        shares of the Company's common stock:

        (i)     Sterling Securities Ltd. received 74,045 shares of common stock;

        (ii)    Carpe DM, Inc. received 59,058 shares of common stock; and

        (iii)   Michelle  Tidball  received  73,811 shares of common  stock.  On
                December 16, 2003, Ms. Tidball  executed a cashless  exercise of
                350,000  options  transferred  to her by NAB  Holdings  Inc. and
                received  255,303  shares of the Company's  common stock,  which
                includes 75,000 shares issued to Weil Consulting Corporation.

        Barbara Platts,  in her capacity as Managing  Director of Bioaccelerate,
        Inc.,  has  investment  power and  voting  power  with  respect to these
        shares, but disclaims any beneficial ownership thereof.

    (22)Includes  an  option  to  purchase   250,000   shares  of  common  stock
        exercisable at $1.25 per share for five years from August 8, 2001.

    (23)Includes  an  option  to  purchase   100,000   shares  of  common  stock
        exercisable at $1.25 per share for five years from April 30, 2001.

    (24)Includes  an  option  to  purchase   50,000   shares  of  common   stock
        exercisable at $1.25 per share for five years from April 30, 2001.

    (25)Includes  an  option  to  purchase   450,000   shares  of  common  stock
        exercisable  at $1.25 per share for five years from April 30,  2001.  On
        December  16,  2003,  NAB  Holdings  Ltd.  exercised  these  options and
        received 328,247 shares of common stock pursuant to a cashless exercise.

    (26)Includes  a  warrant  to  purchase   100,000   shares  of  common  stock
        exercisable  at $1.25 per share  issued to SCO  Financial  Group LLC for
        five years from November 16, 2001. Excludes a warrant to purchase 70,000
        shares of common  stock  exercisable  at $1.50 per share for five  years
        from  May 8,  2002  originally  held  by SCO  Financial  Group  LLC  but
        transferred  to  (i)  Daniel  DiPietro  (50,000);   (ii)  Jeremy  Kaplan
        (10,000);  and (iii) Joshua Golumb  (10,000).  SCO  Financial  Group LLC
        serves as  financial  advisor to the company.  SCO Capital  Partners LLC
        extended a $1 million  secured  credit  line to the  company in November
        2001. SCO Securities LLC, a related entity, served as placement agent in
        the  company's May 2002 private  placement of Series A Preferred  Stock.
        SCO Securities LLC also acted as placement agent for the company's March
        2004  private  placement  of common  stock  and  received  a warrant  to
        purchase  204,452  shares of common stock  exercisable at $6.25 for five
        years from March 22,  2004 and a warrant to  purchase  55,838  shares of
        common  stock  exercisable  at $6.25 for five years  from May 13,  2004.
        After the Pathagon acquisition, SCO Financial Group named one individual
        to the company's board of directors.

    (27)Includes  a  warrant  to  purchase   250,000   shares  of  common  stock
        exercisable  at $1.50 per share for five  years  from May 8,  2002.  Mr.
        Davis is the President of SCO  Financial  Group LLC, an affiliate of SCO
        Capital  Partners LLC. Mr. Davis disclaims  beneficial  ownership of all
        shares of common stock deemed beneficially owned by SCO Capital Partners
        LLC.

    (28) Indicates the selling stockholder was a former stockholder of Pathagon.

    (29)Mr. Kelly has executed a consulting  agreement with us pursuant to which
        we issued to him 200,000  shares of common  stock  which  vested over an
        eighteen month period.

    (30)Indicates  the  selling   stockholder  is  a  current  employee  of  SCO
        Financial Group LLC.

    (31)Warrant to purchase 175,000 shares of common stock  exercisable at $2.00
        per share for three years from April 2, 2003.

    (32)Warrant to purchase 100,000 shares of common stock  exercisable at $1.25
        per share for three years from February 23, 2004.


                                       21



    (33)Warrant to purchase  60,000 shares of common stock  exercisable at $2.00
        per share for three years from February 23, 2004.

    (34)Includes  133,168 shares of common stock and warrant to purchase  26,634
        shares of common  stock  exercisable  at $7.50 per share for five  years
        from March 22, 2004.

    (35)Includes  50,000  shares of common stock and warrant to purchase  10,000
        shares of common  stock  exercisable  at $7.50 per share for five  years
        from March 22, 2004.

    (36)Includes  1,200  shares of common  stock and  warrant  to  purchase  240
        shares of common  stock  exercisable  at $7.50 per share for five  years
        from March 22, 2004.

    (37)Includes  13,200  shares of common  stock and warrant to purchase  2,640
        shares of common  stock  exercisable  at $7.50 per share for five  years
        from March 22, 2004.

    (38)Includes  25,600  shares of common  stock and warrant to purchase  5,120
        shares of common  stock  exercisable  at $7.50 per share for five  years
        from March 22, 2004.

    (39)Includes  96,000  shares of common stock and warrant to purchase  19,200
        shares of common  stock  exercisable  at $7.50 per share for five  years
        from March 22, 2004.

    (40)Includes  64,000  shares of common stock and warrant to purchase  12,800
        shares of common  stock  exercisable  at $7.50 per share for five  years
        from March 22, 2004.

    (41)Includes  80,000  shares of common stock and warrant to purchase  16,000
        shares of common  stock  exercisable  at $7.50 per share for five  years
        from March 22, 2004.

    (42)Includes  40,000  shares of common  stock and warrant to purchase  8,000
        shares of common  stock  exercisable  at $7.50 per share for five  years
        from March 22, 2004.

    (43)Includes  100,000 shares of common stock and warrant to purchase  20,000
        shares of common  stock  exercisable  at $7.50 per share for five  years
        from March 22, 2004.

    (44)Includes  240,000 shares of common stock and warrant to purchase  48,000
        shares of common  stock  exercisable  at $7.50 per share for five  years
        from March 22, 2004.

    (45)Includes  25,200  shares of common  stock and warrant to purchase  5,040
        shares of common  stock  exercisable  at $7.50 per share for five  years
        from March 22, 2004.

    (46)Includes  13,900  shares of common  stock and warrant to purchase  2,780
        shares of common  stock  exercisable  at $7.50 per share for five  years
        from March 22, 2004.

    (47)Includes  57,400  shares of common stock and warrant to purchase  11,480
        shares of common  stock  exercisable  at $7.50 per share for five  years
        from March 22, 2004.

    (48)Includes  3,500  shares of common  stock and  warrant  to  purchase  700
        shares of common  stock  exercisable  at $7.50 per share for five  years
        from March 22, 2004.

    (49)Includes  40,000  shares of common  stock and warrant to purchase  8,000
        shares of common  stock  exercisable  at $7.50 per share for five  years
        from March 22, 2004.

    (50)Includes  240,000 shares of common stock and warrant to purchase  48,000
        shares of common  stock  exercisable  at $7.50 per share for five  years
        from March 22, 2004.

    (51)Includes  180,000 shares of common stock and warrant to purchase  36,000
        shares of common  stock  exercisable  at $7.50 per share for five  years
        from March 22, 2004.

    (52) Includes 40,000 shares of common stock and warrant to purchase 8,000
        shares of common stock exercisable at $7.50 per share for five years
        from March 22, 2004.


                                       22



    (53) Includes 70,000 shares of common stock and warrant to purchase 14,000
        shares of common stock exercisable at $7.50 per share for five years
        from March 22, 2004.

    (54) Includes 160,000 shares of common stock and warrant to purchase 32,000
        shares of common stock exercisable at $7.50 per share for five years
        from March 22, 2004.

    (55) Includes 100,000 shares of common stock and warrant to purchase 20,000
        shares of common stock exercisable at $7.50 per share for five years
        from March 22, 2004.

    (56) Includes 20,000 shares of common stock and warrant to purchase 4,000
        shares of common stock exercisable at $7.50 per share for five years
        from March 22, 2004.

    (57) Includes 20,000 shares of common stock and warrant to purchase 4,000
        shares of common stock exercisable at $7.50 per share for five years
        from March 22, 2004.

    (58) Includes 50,000 shares of common stock and warrant to purchase 10,000
        shares of common stock exercisable at $7.50 per share for five years
        from March 22, 2004.

    (59) Includes 40,000 shares of common stock and warrant to purchase 8,000
        shares of common stock exercisable at $7.50 per share for five years
        from March 22, 2004.

                              PLAN OF DISTRIBUTION

        The shares covered by this  prospectus may be offered and sold from time
to time by the selling stockholders.  The term "selling  stockholders"  includes
pledgees,  donees,  transferees or other  successors in interest  selling shares
received after the date of this  prospectus  from the selling  stockholders as a
pledge, gift,  partnership  distribution or other non-sale related transfer. The
number of shares beneficially owned by each selling stockholder will decrease as
and when it effects any such transfers. The plan of distribution for the selling
stockholders' shares sold hereunder will otherwise remain unchanged, except that
the  transferees,   pledgees,   donees  or  other  successors  will  be  selling
stockholders  hereunder.  To the extent required, we may amend and/or supplement
this prospectus from time to time to describe a specific plan of distribution.

        The  selling  stockholders  will  act  independently  of  us  in  making
decisions with respect to the timing,  manner and size of each sale. The selling
stockholders may offer their shares from time to time pursuant to one or more of
the following methods:

o       on the Amex or on any other market on which our common stock may from
        time to time be trading;

o       one or more block trades in which the broker or dealer so engaged will
attempt to sell the shares of common stock as agent but may position and resell
a portion of the block as principal to facilitate the transaction;

o       purchases by a broker or dealer as principal and resale by the broker or
dealer for its account pursuant to this prospectus;

o       ordinary brokerage transactions and transactions in which the broker
solicits purchasers;

o       in public or privately-negotiated transactions;

o       through the writing of options on the shares; through underwriters,
brokers or dealers (who may act as agents or principals) or directly to one or
more purchasers;

o       an exchange distribution in accordance with the rules of an exchange;
through agents;

o       through market sales, both long or short, to the extent permitted under
the federal securities laws; or in any combination of these methods.

        The sale price to the public may be:

o       the market price prevailing at the time of sale;


                                       23



o       a price related to the prevailing market price;

o       at negotiated prices; or

o       any other prices as the selling stockholder may determine from time to
        time.

        In connection with distributions of the shares or otherwise, the selling
stockholders may enter into hedging  transactions  with  broker-dealers or other
financial institutions, which may in turn engage in short sales of the shares in
the course of hedging the positions they assume;

o       sell the shares short and redeliver the shares to close out such short
        positions;

o       enter into option or other transactions with broker-dealers or other
        financial institutions which require the delivery to them of shares
        offered by this prospectus, which they may in turn resell; and

o       pledge shares to a broker-dealer or other financial institution, which,
        upon a default, they may in turn resell.

        In addition to the foregoing methods, the selling stockholders may offer
their shares from time to time in transactions  involving  principals or brokers
not otherwise  contemplated above, in a combination of such methods as described
above or any other lawful methods.

        Sales through brokers may be made by any method of trading authorized by
any  stock  exchange  or market on which  the  shares  may be listed or  quoted,
including  block  trading  in  negotiated  transactions.  Without  limiting  the
foregoing,  such  brokers  may act as  dealers by  purchasing  any or all of the
shares covered by this prospectus,  either as agents for others or as principals
for their own accounts, and reselling such shares pursuant to this prospectus. A
selling stockholder may effect such transactions directly, or indirectly through
underwriters,  broker-  dealers or agents acting on their  behalf.  In effecting
sales,  brokers and dealers engaged by the selling  stockholders may arrange for
other brokers or dealers to participate.

        Upon our being  notified by the selling  stockholders  that any material
arrangement  has been entered into with a  broker-dealer  for the sale of shares
offered hereby through a block trade, special offering, exchange distribution or
secondary  distribution  or a  purchase  by a broker or  dealer,  we will file a
supplement to this  prospectus,  if required,  pursuant to Rule 424(b) under the
Securities Act, disclosing:

o       the names of the selling stockholder(s) and of the participating
        broker-dealer(s), identifying them as underwriters, as required;

o       the number of shares involved;

o       the price at which such shares were sold;

o       the commissions paid or discounts or concessions allowed to such
        broker-dealer(s), where applicable; and

o       other facts material to the transaction.

        The shares may also be sold  pursuant  to Rule 144 under the  securities
act,  which permits  limited resale of shares  purchased in a private  placement
subject  to the  satisfaction  of certain  conditions,  including,  among  other
things,  the availability of certain current public  information  concerning the
issuer, the resale occurring following the required holding period under 144 and
the  number of shares  during  any  three-month  period  not  exceeding  certain
limitations.  The selling stockholders have the sole and absolute discretion not
to accept any  purchase  offer or make any sale of their shares if they deem the
purchase price to be unsatisfactory at any particular time.

        The  selling   stockholders  or  their  respective   pledgees,   donees,
transferees or other  successors in interest,  may also sell the shares directly
to market makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers.  These broker-dealers may receive compensation in
the form of discounts,  concessions or commissions from the selling stockholders
and/or the purchasers of shares for whom these


                                       24



broker-dealers  may act as agents or to whom  they  sell as  principal  or both,
which  compensation  as to a  particular  broker-dealer  might be in  excess  of
customary commissions.  Market makers and block purchasers purchasing the shares
will do so for their own account and at their own risk.  It is possible that the
selling  stockholders  will  attempt  to sell  shares of  common  stock in block
transactions to market makers or other purchasers at a price per share which may
be below the then market price. The selling  stockholders cannot assure that all
or any of the shares offered by this  prospectus  will be issued to, or sold by,
the selling  stockholders  if they do not  exercise or convert the common  stock
equivalents that they own. The selling stockholders and any brokers,  dealers or
agents, upon effecting the sale of any of the shares offered by this prospectus,
may be deemed "underwriters" as that term is defined under the securities act or
the exchange act, or the rules and regulations  under those acts. In that event,
any commissions  received by the  broker-dealers or agents and any profit on the
resale  of the  shares  of common  stock  purchased  by them may be deemed to be
underwriting commissions or discounts under the securities act.

        The selling stockholders, alternatively, may sell all or any part of the
shares offered by this prospectus through an underwriter. To our knowledge, none
of the selling  stockholders  have entered into any agreement with a prospective
underwriter  and  there  can be no  assurance  that any such  agreement  will be
entered  into.  If the  selling  stockholders  enter into such an  agreement  or
agreements,  then  we will  set  forth  in a  post-effective  amendment  to this
prospectus the following information:

o       the number of shares being offered;

o       the terms of the offering, including the name of any selling
        stockholder, underwriter, broker, dealer or agent;

o       the purchase price paid by any underwriter;

o       any discount, commission and other underwriter compensation;

o       any discount, commission or concession allowed or reallowed or paid to
        any dealer;

o       the proposed selling price to the public; and

o       other facts material to the transaction.

        We will also file such agreement or agreements.  In addition,  if we are
notified by the selling stockholders that a donee, pledgee,  transferee or other
successor-in-interest intends to sell more than 500 shares, a supplement to this
prospectus will be filed.

        The selling stockholders and any other persons participating in the sale
or  distribution  of the shares will be subject to applicable  provisions of the
exchange act and the rules and  regulations  under the exchange act,  including,
without  limitation,   Regulation  M.  These  provisions  may  restrict  certain
activities  of, and limit the timing of purchases and sales of any of the shares
by, the  selling  stockholders  or any other  such  person.  Furthermore,  under
Regulation M, persons  engaged in a  distribution  of securities  are prohibited
from simultaneously  engaging in market making and certain other activities with
respect  to the same  securities  for a  specified  period of time  prior to the
commencement of the distribution, subject to specified exceptions or exemptions.
All of these limitations may affect the marketability of the shares.

        We have agreed to pay all costs and expenses incurred in connection with
the  registration  of the shares  offered by this  prospectus,  except  that the
selling  stockholder will be responsible for all selling  commissions,  transfer
taxes and related  charges in  connection  with the offer and sale of the shares
and the fees of the selling stockholder's counsel.

        We have agreed with the selling  stockholders  to keep the  registration
statement of which this prospectus forms a part continuously effective until the
earlier  of the date that the  shares  covered  by this  prospectus  may be sold
pursuant  to Rule  144(k)  of the  securities  act and the date  that all of the
shares registered for sale under this prospectus have been sold.

        We  have  agreed  to  indemnify  the  selling  stockholders,   or  their
respective  transferees or assignees,  against  certain  liabilities,  including
liabilities  under the  securities  act, or to  contribute  to payments that the


                                       25



selling stockholders or their respective pledgees,  donees, transferees or other
successors in interest, may be required to make in respect of those liabilities.

                                LEGAL PROCEEDINGS

        On April 1, 2003,  RLB  Capital,  Inc.  filed a  complaint  against  the
Company in the Supreme Court of the State of New York (Index No. 601058/03). The
Complaint  alleged a breach of contract by the  Company  and  demanded  judgment
against the Company for $112,500 and  warrants to acquire  75,000  shares of the
Company's  common stock.  The Company  submitted its Verified Answer on June 25,
2003 and, in pertinent part, denied RLB's allegations and asserted counterclaims
based on negligence.  In September  2003, the Company filed a motion for summary
judgment and RLB filed its  response on October 27, 2003.  On November 12, 2003,
the Supreme Court granted the motion for summary  judgment and the complaint was
dismissed.  In March 2004, the complaint and two  counterclaims  asserted by the
Company were dismissed with prejudice.

        On December 19, 2003,  the Company filed a complaint  against Dr. Deidre
Tessman and Tessman  Technology  Ltd. (the "Tessman  Defendants") in the Supreme
Court of the State of New York,  County of New York  (Index No.  03-603984).  An
amended complaint alleges, among other things, breach of contract and negligence
by Tessman  and Tessman  Technology  and demands  judgment  against  Tessman and
Tessman  Technology  in an amount to be  determined  by the Court.  The  Tessman
Defendants  removed the case to federal  court,  then remanded it to state court
and served an answer with several  purported  counterclaims.  The Company denies
the  allegations in the  counterclaims  and intends to pursue its claims against
the Tessman Defendants vigorously .


                                       26



          DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The names, ages as of June 11, 2004 and existing positions with the Company,  if
any, are as follows:




Name of Individual                     Age      Position with Bioenvision
------------------                     ---      -------------------------
                                          

Christopher B. Wood, M.D.               58      Chairman of the Board and Chief Executive Officer
Jeffrey B. Davis                        41      Director
Thomas Scott Nelson, C.A.               65      Director
Steven A. Elms                          40      Director
Andrew Schiff, M.D.                     39      Director
Michael Kauffman M.D., Ph.D.            40      Director
David P. Luci, C.P.A., Esq.             37      Director of Finance, General Counsel and Corporate Secretary
Hugh S. Griffith                        36      Commercial Director (Europe) of Bioenvision, Ltd.


        The  name,  principal  occupation  for the  last  five  years,  selected
biographical  information  and the  period of  service  to the  Company  of each
director and executive officer is set forth below.

Christopher  B. Wood,  M.D.  has served as our  Chairman  of the Board and Chief
Executive  Officer since January 1999.  From January 1997 to December  1998, Dr.
Wood was Chairman of Eurobiotech,  Inc., a Delaware company.  From March 1994 to
January 1997, Dr. Wood was a specialist  surgeon in the National Health Service,
United Kingdom. From April 1979 to March 1991, Dr. Wood was a specialist surgeon
at The Royal Postgraduate  Medical School,  London,  England.  Dr. Wood holds an
M.D. from the  University of Wales School of Medicine and the  Fellowship of the
Royal College of Surgeons of Edinburgh.

Thomas Scott Nelson, C.A. was named a director in May 1998. Mr. Nelson served as
our Chief Financial  Officer from May 1998 to September 2002. From 1996 to 1999,
Mr.  Nelson  served as the  Director of Finance of the  Management  Board of the
Royal & Sun Alliance  Insurance  Group.  From 1991 to 1996, Mr. Nelson served as
Group Finance Director of the Main Board of Sun Alliance Insurance Group. He has
served as  Chairman  of the  United  Kingdom  insurance  industry  committee  on
European  regulatory,  fiscal and  accounting  issues.  He has also  worked with
Deloitte in Paris and as a consultant with PA Consultants Management. Mr. Nelson
is a Member of Institute of  Chartered  Accountants  of Scotland and a Fellow of
the Institute of Cost and Management Accountants. Mr. Nelson holds a B.A. degree
from Cambridge University.

Jeffrey B. Davis was named a director in February  2002. Mr. Davis has extensive
experience in investment  banking,  and corporate  development and financing for
development  stage  companies.  Mr. Davis  serves as President of SCO  Financial
Group LLC and SCO  Securities  LLC. He served as Senior Vice President and Chief
Financial  Officer of  HemaSure,  Inc.,  a  publicly  traded  development  stage
healthcare  technology  company from November 1995 to April 1997. Prior to that,
from  June 1990 to  November  1995,  Mr.  Davis  was Vice  President,  Corporate
Finance,  at Deutsche Morgan  Grenfell,  both in the U.S. and Europe.  Mr. Davis
also served in senior  marketing and product  management  positions at AT&T Bell
Laboratories  and Philips  Medical  Systems North  America,  where he was also a
member of the technical staff.

Steven A. Elms was named a director  in May 2002.  Mr. Elms serves as a Managing
Director of the  Perseus-Soros  BioPharmaceutical  Fund. For five years prior to
joining  Perseus-Soros,  Mr. Elms was a Principal in the Life Science Investment
Banking group of Hambrecht & Quist (now J.P. Morgan H&Q).  During his five years
at H&Q, Mr. Elms was involved in over 60 financing and M&A transactions, helping
clients  raise in excess of $3.3 billion of capital.  Mr. Elms' primary areas of
focus were the genomics and drug discovery technology sectors.

Andrew  Schiff,  M.D.  was named a director in May 2002.  Dr.  Schiff  currently
serves as a Managing Director of Perseus-Soros  Biopharmaceutical Fund. Over the
last  10  years,  Schiff  has  practiced  internal  medicine  at  The  New  York
Presbyterian  Hospital  where he maintains his position as a Clinical  Assistant
Professor of Medicine. In addition, he has also been a partner of a small family
run investment fund, Kuhn, Loeb & Co since September 1993.

Michael  Kauffman M.D., Ph.D. was named a director in January 2004. Dr. Kauffman
is currently the President and CEO of Predix  Pharmaceuticals.  Prior to that he
was the Vice President, Medicine, and Proteasome Inhibitor (VELCADE(TM)) Program
Leader at Millennium Pharmaceuticals Inc. Prior to that, Dr.


                                       27



Kauffman  held senior  positions at  Millennium  Predictive  Medicine,  Inc., as
cofounder  and Vice  President  of  Medicine,  and at  Biogen  Corporation.  Dr.
Kauffman  received his M.D. and Ph.D.  (molecular  biology and  biochemistry) at
Johns Hopkins and his postdoctoral  training at Harvard University.  He is board
certified in internal  medicine,  and comes with over 10 years of  experience in
drug discovery and development.

David P. Luci, C.P.A.,  Esq. has served as Director of Finance,  General Counsel
and Corporate  Secretary  since July 2002. From September 1994 to July 2002, Mr.
Luci served as a corporate  associate at Paul,  Hastings,  Janofsky & Walker LLP
(New York office). Prior to that, Mr. Luci served as a senior auditor at Ernst &
Young LLP (New York office). Mr. Luci is a certified public accountant. He holds
a  Bachelor  of Science  in  Business  Administration  with a  concentration  in
accounting  from Bucknell  University and a J.D. from Albany Law School of Union
University.

Hugh S.  Griffith has served as  Commercial  Director  (Europe) of  Bioenvision,
Ltd., a wholly-owned sales and marketing subsidiary of the Company since October
2002.  From  January  2002 to October  2002,  Mr.  Griffith  served as Executive
Commercial  Director of QuantaNova  Ltd. From January 2000 to December 2001, Mr.
Griffith  served as Senior  Business Unit Manager at Abbott  Laboratories,  Ltd.
where  he  was  responsible  for  strategic   development,   implementation  and
commercialization  of a new neonatology business unit. This role encompassed the
management  of the sales force,  marketing,  PR, policy and  healthcare  liaison
teams  whilst  also  directing  the  clinical  development   programme  for  the
neonatology portfolio. From April 1998 to January 2000, Mr. Griffith was the HIV
Business Unit Manager at Abbott  Laboratories  Ltd where he was  responsible for
the  profitability of the HIV franchise.  Mr Griffith managed the Norvir capsule
crisis  including the fully  comprehensive  named patient  programme.  At Abbott
Laboratories  Ltd.,  Mr.  Griffith also served as Business  Development  Manager
(July 1997 to April 1998) and as Area Sales Manager (October 1995 to July 1997).
Mr. Griffith holds a Masters of Business  Administration  from Cardiff  Business
School, a Diploma of Marketing and a Bachelor of Science in Honours Biology from
University of Stirling.


                                       28



         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The  following  table  sets  forth  certain  information  regarding  the
beneficial  ownership of common  stock,  as of June 11, 2004, by (i) each person
whom we know to  beneficially  own 5% or more of the common stock,  (ii) each of
our directors,  (iii) each person listed on the Summary  Compensation  Table set
forth under "Executive Compensation" and (iv) all of our directors and executive
officers.  The  number  of shares of  common  stock  beneficially  owned by each
stockholder  is determined in accordance  with the rules of the  Commission  and
does not necessarily indicate beneficial ownership for any other purpose.  Under
these rules,  beneficial  ownership  includes  those shares of common stock over
which the stockholder  exercises sole or shared voting or investment  power. The
percentage  ownership of the common stock,  however, is based on the assumption,
expressly  required  by the rules of the  Commission,  that  only the  person or
entity whose ownership is being reported has converted or exercised common stock
equivalents into shares of common stock; that is, shares underlying common stock
equivalents  are not included in  calculations  in the table below for any other
purpose,  including  for  the  purpose  of  calculating  the  number  of  shares
outstanding generally.






                                                BENEFICIAL OWNERSHIP    CURRENT PERCENTAGE OF
NAME                                                  OF STOCK                CLASS (1)
                                                                          

Perseus-Soros Biopharmaceutical
Fund, LP (2)
888 Seventh Avenue, 29th Floor
New York, New York 10106....................        9,450,053                   26.94%

OrbiMed Advisors Inc. (3)
767 Third Avenue, 30th Floor
New York, New York 10017....................        3,150,036                   10.81%

SCO Capital Partners LLC (4)
1285 Avenue of the Americas, 35th Floor
New York, New York 10019....................        7,370,236                   27.85%

Kevin Leech (5)
The Old Chapel
Sacre Couer
Rouge Boullion
St Helier
Jersey, Channel Islands.....................        1,900,000                    7.17%

Bioaccelerate, Inc. (6)
PO Box 3175
Road Town
Tortolla
British Virgin Islands......................        1,227,272                    4.63%


Christopher B. Wood, M.D. (7)
c/o Bioenvision, Inc.
509 Madison Avenue, Suite 404
New York, New York 10022....................        3,805,258                   14.00%



                                       29






                                                                          

David P. Luci (8)
c/o Bioenvision, Inc.
509 Madison Avenue, Suite 404
New York, New York 10022....................          280,000                    1.07%

Hugh Griffith (9)
c/o Bioenvision, Inc.
509 Madison Avenue, Suite 404
New York, New York 10022....................          100,000                    *

Thomas Scott Nelson (10)
c/o Bioenvision, Inc.
509 Madison Avenue, Suite 404
New York, New York 10022....................          287,523                    1.09%

Jeffrey B. Davis (11)
1285 Avenue of the Americas, 35th Floor
New York, New York  10019...................          749,243                    2.85%

Steven A. Elms
888 Seventh Avenue, 29th Floor
New York, New York 10106....................                0                   *

Andrew N. Schiff, M.D.
888 Seventh Avenue, 29th Floor
New York, New York 10106....................                0                   *

Michael Kauffman M.D., Ph.D.
c/o Bioenvision, Inc.
509 Madison Avenue, Suite 404
New York, New York 10022....................                0                   *

All Executive Officers and Directors as a
group (eight persons) (12)..................        5,222,024                   18.16%


----------------
* Represents holdings of less than one percent (1%).

(1) Based on a total of 26,002,829  shares of common stock outstanding as of May
    18, 2004.

(2) Includes 3,000,000 shares of Series A Preferred Stock currently  convertible
    into 6,000,000  shares of common stock at a conversion  price of $1.50 and a
    warrant to purchase  3,000,000  shares of common stock  exercisable at $2.00
    per share for five years  from May 8, 2002.  Also  includes  375,044  common
    shares and a warrant to purchase  75,009 shares of common stock  exercisable
    at $7.50 for five years from May 13, 2004. Based upon information  contained
    in its report on Schedule  13D filed with the  Commission  on May 20,  2002,
    Perseus-Soros  BioPharmaceutical  Fund,  L.P.  reported  that  Perseus-Soros
    BioPharmaceutical  Fund,  L.P. and  Perseus-Soros  Partners may be deemed to
    have sole power to direct the voting and disposition of the 9,000,000 shares
    of  common  stock.  By  virtue  of  the  relationships   between  and  among
    Perseus-Soros  BioPharmaceutical  Fund, L.P.,  Perseus-Soros  Partners, LLC,
    Perseus BioTech Fund Partners,  LLC, SFM Participation,  L.P., SFM AH, Inc.,
    Frank H. Pearl,  George Soros,  Soros Fund Management LLC,  Perseus EC, LLC,
    Perseuspur,  LLC, each of such Perseus  entities,  other than  Perseus-Soros
    BioPharmaceutical  Fund, L.P. and Perseus-Soros  Partners,  may be deemed to
    share the power to direct the voting and disposition of the 9,000,000 shares
    of common stock.

(3) Includes  669,964 shares of Series A Preferred Stock  currently  convertible
    into  1,339,928  shares of common  stock at a conversion  price of $1.50,  a
    warrant to purchase 669,964 shares of common stock  exercisable at $2.00 per
    share for five years from May 16, 2002,  83,765  common shares and a warrant
    to purchase  16,753  shares of common  stock  exercisable  at $7.50 for five
    years  from  May  13,  2004  all of  which  are  held  by  Caduceus  Private
    Investments,  LP;  13,945  shares  of  Series A  Preferred  Stock  currently
    convertible  into 27,980  shares of common  stock at a  conversion  price of
    $1.50,  a warrant to purchase  13,945 shares of common stock  exercisable at
    $2.00 per share for five years from May 16, 2002,  1,744 common shares and a
    warrant to purchase 349 shares of common stock exercisable at $7.50 for five
    years from May 13, 2004,  all of which are held by OrbiMed  Associates  LLC;
    and 316,091 shares of Series A


                                       30



    Preferred Stock currently convertible into 632,182 shares of common stock at
    a conversion  price of $1.50, a warrant to purchase 316,091 shares of common
    stock  exercisable  at $2.00  per share for five  years  from May 16,  2002,
    39,521 common shares and a warrant to purchase  7,904 shares of common stock
    exercisable at $7.50 for five years from May 13, 2004, all of which are held
    by PW Juniper Crossover Fund, L.L.C. Based upon information contained in its
    report on Schedule 13G filed with the  Commission on June 21, 2002,  OrbiMed
    Advisors Inc., OrbiMed Advisors LLC, OrbiMed Capital LLC and Samuel D. Isaly
    reported that they share the power to direct the voting and  disposition  of
    the shares of common stock.

(4) Includes a warrant to purchase 100,000 shares of common stock exercisable at
    $1.25  per share  issued to SCO  Financial  Group  LLC for five  years  from
    November 16, 2001.  Excludes a warrant to purchase  70,000  shares of common
    stock  exercisable  at $1.50  per  share  for five  years  from May 8,  2002
    originally  held by SCO Financial  Group LLC but  transferred  to (i) Daniel
    DiPietro  (50,000);  (ii) Jeremy  Kaplan  (10,000);  and (iii) Joshua Golumb
    (10,000).  SCO  Financial  Group LLC  serves  as  financial  advisor  to the
    company.  SCO Capital Partners LLC extended a $1 million secured credit line
    to the company in  November  2001.  SCO  Securities  LLC, a related  entity,
    served as placement  agent in the  company's  May 2002 private  placement of
    Series A Preferred  Stock.  SCO Securities LLC also acted as placement agent
    for the company's March 2004 private  placement of common stock and received
    a warrant to purchase  204,452  shares of common stock  exercisable at $6.25
    for five years from March 22, 2004 and a warrant to purchase  55,838  shares
    of common stock exercisable at $6.25 for five years from May 13, 2004. After
    the Pathagon  acquisition,  SCO Financial  Group named one individual to the
    company's board of directors.

(5) These  shares are owned of record by  Phoenix  Ventures  Limited,  a Channel
    Islands (Jersey)  corporation,  which, to our knowledge,  is wholly-owned by
    Kevin Leech.  These shares include  500,000 options which are exercisable at
    $1.25 per share for the benefit of Phoenix Ventures Limited.

(6) Bioaccelerate, Inc. is a BVI corporation, owned of record by several private
    investors and includes options to acquire 500,000 shares of the common stock
    which are exercisable at $1.25 per share for five years from April 30, 2001.
    Barbara Platts, in her capacity as Managing Director of Bioaccelerate, Inc.,
    has  investment  power and voting  power with respect to these  shares,  but
    disclaims any beneficial ownership thereof.

(7) Dr. Wood is Chairman and Chief  Executive  Officer of the Company.  Excludes
    318,750 shares of common stock owned by Julie Wood, Dr. Wood's spouse, as to
    which Dr. Wood disclaims any beneficial interest. Includes 1,500,000 options
    which  are  exercisable  at $1.25 for five  years  from  April 30,  2001 and
    166,666  options which are  exercisable at $1.45 per share from December 31,
    2003.

(8) Includes  options  to  acquire  170,000  shares  of common  stock  which are
    exercisable  at $0.735  per share from March 31,  2003 and  110,000  options
    which are exercisable at $0.74 per share from March 31, 2004.

(9) Includes  options to acquire  100,000  shares of the common  stock which are
    exercisable at $1.45 per share for five years from October 23, 2003.

(10)Includes  options to acquire  200,000  shares of the common  stock which are
    exercisable at $1.25 per share for five years from April 30, 2001.

(11)Includes a warrant to purchase  250,000  shares of common stock  exercisable
    at $1.50  per  share  for five  years  from May 8,  2002.  Mr.  Davis is the
    President of SCO Financial  Group LLC, an affiliate of SCO Capital  Partners
    LLC. Mr. Davis disclaims  beneficial ownership of all shares of common stock
    deemed beneficially owned by SCO Capital Partners LLC.

(12)Includes  options  to  purchase  2,496,666  shares  of common  stock,  and a
    warrant to purchase 250,000 shares of common stock.


                                  LEGAL MATTERS

        The  validity of the shares of common stock  offered by this  prospectus
and other legal  matters  relating to this  offering  will be passed on by Paul,
Hastings, Janofsky & Walker LLP, New York, New York.


                                       31



                                     EXPERTS

        Our  auditors  are  Grant  Thornton  LLP.  Our  consolidated   financial
statements  as at and for the  years  ended  June 30,  2003  and  June 30,  2002
appearing in this registration statement have been audited by Grant Thornton LLP
as set forth in their report dated  September 22, 2003,  appearing  elsewhere in
this  Prospectus,  and are included in reliance  upon such report given upon the
authority of this firm as experts in accounting and auditing.


                       WHERE YOU CAN GET MORE INFORMATION

        We file annual,  quarterly and special  reports,  proxy  statements  and
other  information  with the SEC.  You may read and copy any  materials  we have
filed with the SEC at the SEC's public reference rooms. The SEC also maintains a
web site  (http://www.sec.gov) that contains reports, proxy statements and other
information concerning us. Please call the SEC at 1-800-SEC-0330 for information
concerning the operations of the public  reference rooms or visit the SEC at the
following locations:

                 Public Reference Room           Midwest Regional Office
                 450 Fifth Street                Citicorp Center
                 Room 1024                       500 West Madison Street
                 Washington, D.C. 20549          Suite 1400
                                                 Chicago, Illinois 60661-2511


     DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT
                                  LIABILITIES

        Our bylaws  provide that  directors and officers shall be indemnified by
us to the fullest extent  authorized by the Delaware  General  Corporation  Law,
against all expenses and  liabilities  reasonably  incurred in  connection  with
services for us or on our behalf.

        Insofar as indemnification  for liabilities arising under the Securities
Act might be permitted to directors, officers or persons controlling our company
under the provisions  described above, we have been informed that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.


                                       32



                             DESCRIPTION OF BUSINESS

        Bioenvision  is  an  emerging  biopharmaceutical  company.  Our  primary
business focus is the  acquisition,  development  and  distribution  of drugs to
treat  cancer.  We  have a  broad  range  of  products  and  technologies  under
development, but our two lead drugs are Clofarabine and Modrenal(R).

We believe that our two lead products have the following competitive  advantages
over existing products at market:




                                                           

 Modrenal(R)(emerging endocrine resistance technology)        Clofarabine (purine nucleoside anti-metabolite technology)

 o  Novel mode of action on estrogen receptors                o   Next generation, halogenated-purine nucleoside analogue, designed
                                                                  to overcome the limitations and incorporate the best qualities of
 o  Increases estrogen binding to ER(beta) resulting              both fludarabine (Fludara(R)) and cladribine (Leustatin(R)).
    in decreased cancer cell proliferation                    o   Multiple Mechanisms of Action:
                                                                  o   Potent Inhibition of DNA Synthesis and Repair(active in
 o  35% overall clinical benefit rate in multi-                       dividing cancer cells).
    center clinical trial: meta-analysis of 714                   o   Induces Apoptotic (cell death) Pathway (active in non-dividing
    patients with advanced progressive post-                          cancer cells).
    menopausal breast cancer                                  o   Potent ability to kill cancer cells in a wide range of cell lines,
                                                                  including leukemia, non-small cell lung, colon, melanoma, ovarian,
 o  55% clinical benefit rate in patients who have                renal, prostate, and breast cancer lines.
    become resistant to tamoxifen therapy                     o   Significant clinical benefit demonstrated in both pediatric and
                                                                  adult leukemias:
 o  Possible synergistic combination therapy with tamoxifen       o   Overall response rates in relapsed/refractory pediatric acute
                                                                      leukemias of between 25% and 36% achieved.
 o  Phase II clinical trial commencing in prostate cancer Q2      o   Overall response rates in relapsed/refractory adult acute
    of calendar 2004                                                  myeloid leukaemia (AML) and chronic myeloid leukaemia in
                                                                      blast crisis (CML-BP) of between 55% and 64% achieved.
                                                              o   Solid tumor studies initiated with both the oral and
                                                                  intravenous formulations of Clofarabine.



                                       33



Anti-Cancer Product Portfolio
-----------------------------
        Our anti-cancer product portfolio includes three products,  Modrenal(R),
Clofarabine,  Gossypol, used or which may be useful in eight indications and one
technology, Gene Therapy, which may be useful in two indications.

        Modrenal(R)

        We have  the  exclusive  right  to  market  and  distribute  Modrenal(R)
(trilostane)  throughout  the world for all human  applications.  Our  exclusive
license  expires  upon the last to  expire  of the  patents  used or  useful  in
connection  with the  marketing  of  Modrenal(R).  Given that we have new patent
applications  filed which are subject to issuance,  we expect the last to expire
of our underlying patents will be 2020.

        Modrenal(R)  is  currently  at  market  in the  United  Kingdom  for the
treatment of women with advanced post menopausal  breast cancer.  We have a very
small  marketing  team that markets  Modrenal(R) in the United  Kingdom,  and we
record revenues accordingly.

        Modrenal is in Phase II clinical studies in prostate cancer trials,  and
in Q2-Q3 2004, we intend to commence a Phase IV study in  postmenopausal  breast
cancer and a Phase II study in pre-menopausal breast cancer.

        Clofarabine

        We have  the  exclusive  right to  manufacture,  market  and  distribute
Clofarabine  for all human  applications  in all areas of the world  other  than
Japan and Southeast Asia. We sublicensed  the right to  manufacture,  market and
distribute Clofarabine in the U.S. and Canada to ILEX Oncology, Inc. solely with
respect to human cancer applications. We maintain our exclusive rights until the
last to  expire of the  patents  used or  useful  in our  development  and sales
efforts which we expect to occur in 2020.

        Currently,  Clofarabine  is in pivotal Phase II Clinical  Trials for the
treatment of pediatric acute leukemias.  The final part of a rolling NDA will be
filed with the FDA by early Q2, 2004. The drug has a Fast Track  Designation and
therefore  we expect an FDA ruling by  Q3,2004.  As  indicated  in the  previous
paragraph,  ILEX has the rights to market  Clofarabine  in the U.S. and we would
receive a royalty on U.S. annual net sales.

        Clofarabine  is  also  in  Phase  II  Clinical  Trials  in  a  range  of
hematological cancers and Phase I clinical trials in solid tumors.

        Gossypol

        We have the  exclusive  world-wide  right to  manufacture  and market an
optical  isomer of gossypol  for human and  veterinary  applications.  Currently
gossypol,  to which we have ascribed the provisional trade name of Velostan,  is
completing  the  manufacturing  process.  We have  developed  a novel  method of
separating the enantiomers of gossypol and we are seeking patent  protection for
the process.  We expect to initiate Phase I clinical trials with the drug in Q2,
2004. The primary indication we are targeting for the drug is in bladder cancer,
although the drug may show efficacy in other tumor indications

        Gene Therapy

        We have the exclusive  world-wide  right to develop products from a gene
therapy platform  technology.  To date, we have  incorporated  three human genes
into the  proprietary  technology and we have tested two of these in preliminary
clinical  trials,  with the emphasis on the treatment of patients with end-stage
liver disease.  Management  believes the technology may also have application in
patients  undergoing  chemotherapy for cancer.  We maintain our exclusive rights
until the last to expire of the patents which we expect to occur in 2017.


                                       34



Non-Cancer Product Portfolio
----------------------------

Our non-cancer product portfolio is as follows:

Oligon(R) and Methylene Blue

        We have the  exclusive  world-wide  right to  manufacture  and market an
anti-infective  technology  for the use of thiazine  dyes,  including  Methylene
Blue, and for other  anti-infective  uses.  With the  acquisition of Pathagon in
February 2002, we acquired the exclusive  worldwide  license to this  technology
and license this  technology  from  Oklahoma  Medical  Research  Foundation.  We
maintain  our  exclusive  license  until the last to  expire  of the  underlying
patents.  Currently,  there are six patents  issued in the U.S.  and  additional
patents have been filed in the U.S., Europe, Canada and Japan.


        We have  sub-licensed  the right to market the technology in the U.S. to
Edwards  Lifesciences which is currently marketing the technology in its line of
short-term  vascular access  catheters.  Bioenvision  earns a nominal royalty on
annual net sales from Edwards Lifesciences.

Products and Technologies

        The  following  is a  description  of our current  portfolio of platform
technologies.

Purine Nucleoside Technology
        We have a license from Southern Research Institute, Birmingham, Alabama,
to develop and market purine  nucleoside  analogs  which,  based on  third-party
studies  conducted to date,  may be  effective in the  treatment of leukemia and
lymphoma. These studies were conducted by MD Anderson Cancer Center on behalf of
the  Company,  ILEX and  several  United  States  hospitals  involved  with ILEX
clinical studies.  The lead compound of these purine-based  nucleosides is known
as Clofarabine.  To facilitate its development, we entered into a co-development
agreement with Ilex Oncology,  Inc. ("Ilex") in March 2001, pursuant to which we
granted Ilex an option on a sub-license to make, sell and distribute Clofarabine
in the United  States and Canada,  subject to  successful  completion of certain
milestones. Clofarabine has successfully completed Phase I/II clinical trials at
M.D. Anderson Cancer Center, Houston, Texas. Three Phase II clinical trials have
begun at MD Anderson and will be extended to other leading centers in the United
States and Europe. In addition, a clinical trial exemption  certificate has been
granted for  Clofarabine  in the United  Kingdom and  approval  for a Phase I/II
trial of  Clofarabine in lymphoma has been obtained in  Switzerland.  In January
2002, the European orphan drug application for use of Clofarabine to treat acute
leukemia  in adults was  approved.  The drug also has been  granted  orphan drug
status in the United  States.  The  combination  of the Phase II trials in acute
leukemia at M.D.  Anderson Cancer Center and other leading cancer centers in the
U.S.  and Europe and the  encouraging  results  from the Phase I, early Phase II
studies  and  current  Phase  II  studies  lead  us to be  enthusiastic  for the
prospects  of  Clofarabine  reaching  the market,  possibly as soon as the third
quarter of calendar year 2004.  The United  States Food and Drug  Administration
recently  indicated  that it  would  review  Clofarabine  for the  treatment  of
refractory  or relapsed  ALL in children  more  quickly than normal after having
granted "fast track" status to  Clofarabine.  "Fast track" status means that the
FDA will start  reviewing  clinical  trial data even  before the entire New Drug
Application  ("NDA") is complete.  The FDA could  complete its review within six
months  rather  than the normal 12 month  review  period.  We believe the set of
clinical data from the current Phase II clinical trials could serve as the basis
for a marking  application,  which we  believe  could be filed as early as April
2004.

        ILEX is obligated  to pay us  royalties  on US and  Canadian  annual net
sales of  Clofarabine  on a sliding  scale  from 5.25% to  11.25%.  The  minimum
royalty of 5.25%  applies to annual net sales of up to $30  million per year and
the maximum  11.25%  royalty  rate  applies to annual net sales at or above $500
million per year.  SRI  receives  royalties on the same scale of US and Canadian
annual net sales  from 3.5% to 7.5% from each of  Bioenvision  and ILEX.  We pay
royalties  to each of SRI and  ILEX in the  amount  of 3.5% to 7.5% on the  same
scale as applies to the ILEX royalty payment  obligations noted above. ILEX also
is responsible  for 50% of our research and  development  costs  associated with
Clofarabine  development  in the  Territory  (worldwide  outside  of  Japan  and
Southeast Asia) other than the US and Canada.

        Under the terms of the agreement with Southern  Research  Institute,  we
were granted the  exclusive  worldwide  license,  excluding  Japan and Southeast
Asia, to make,  use and sell  products  derived from the  technology  for a term
expiring on the date of  expiration  of the last  patent  covered by the license
(subject to earlier  termination  under certain  circumstances),  and to utilize
technical information related to the technology to


                                       35



obtain patent and other  proprietary  rights to products  developed by us and by
Southern  Research   Institute  from  the  technology.   The  current  projected
expiration  date of the  license is March  2021.  We  currently  are  developing
Clofarabine  for the treatment of leukemia and lymphoma and we plan to study its
potential  role in treatment of solid tumors.  In August 2003, SRI granted us an
irrevocable,  exclusive  option to make, use and sell products  derived from the
technology  in Japan and  Southeast  Asia.  We intend to convert the option to a
license  upon  sourcing an  appropriate  co-marketing  partner to develop  these
rights in such territory.

        Pre-clinical and clinical testing of Clofarabine  demonstrated  that the
drug has  anti-tumor  activity  against  a range of human  and  animal  cancers,
including hematological malignancies and several solid tumors. Approximately 360
people participated in this clinical testing. In addition,  Clofarabine has been
shown to have good oral  bioavailability,  and in conjunction with ILEX, we have
developed and expect to complete an oral  formulation for  Clofarabine  prior to
December 2003.  Results from ongoing  clinical studies indicate that Clofarabine
may be an  effective  treatment  for  relapsed  acute  leukemias  in  adult  and
pediatric  patients,  as well as acute leukemias in adult and pediatric patients
that have become resistant,  or refractory,  to prior  treatments.  According to
researchers  at M.D.  Anderson  Cancer  Center,  interim  Phase II study results
showed  that 45% of adults  with acute  myelogenous  leukemia  (AML)  achieved a
complete  remission  (CR) rate,  and acute  lymphocytic  leukemia (ALL) patients
achieved a 20% CR rate when treated with  Clofarabine  as a single  agent.  Data
from a separate Phase I dose-escalation study demonstrated a 25% CR rate, and an
overall  response  rate of 40%,  in  children  with  acute  leukemias  who  were
refractory  to  previous  therapy.  Trials  in  pediatric  acute  leukemias  are
currently  ongoing in the U.S.  and are planned to commence in Europe later this
calendar year. Complete remission,  in this context, means complete clearance of
all  leukemic  cells  from the  blood  and  normalization  of the  blood  count,
sustained for a period of more than four weeks. In this context, a response,  or
partial response, has largely the same meaning,  except that the bone marrow may
still  contain  more than five  percent but less than 25% blast cells  (leukemic
cells).

Clofarabine appears to attack cancer cells in at least four ways:

(1)     damaging DNA in cancer cells;
(2)     preventing  DNA repair by damaged cancer cells;
(3)     damaging   the   cancer   cell's   important   control   structures--the
        mitochondria; and
(4)     initiating  the process of programmed  cell death  (apoptosis) in cancer
        cells.

        Clofarabine  combines many of the  favorable  properties of the two most
commonly used nucleoside analog drugs, fludarabine(R) and cladribine(R), but has
several-fold greater potency,  when compared to fludarabine(R),  at damaging the
DNA of leukemia cells.  Clofarabine appears to achieve this greater potency by a
process  of  breaking   DNA  chains  and   inhibiting   an   important   enzyme,
ribonucleotide  reductase.  Clofarabine distinguishes itself from other drugs by
its broader  activity;  in particular,  the manner in which it damages the cells
mitochondria  and initiates the process of  programmed  cell death  (apoptosis).
(See Blood 2000; volume 96, page 3537).

        Because  Clofarabine is a potent inhibitor of DNA repair, we, along with
our co-development  partners in North America, ILEX, are exploring the potential
use of Clofarabine in combination  with DNA damaging  agents.  This strategy has
already  been  validated   through  the  combination  of   Fludarabine(R)   with
cyclophosphamide in the treatment of chronic lymphocytic  leukemia (CLL) because
Fludarabine,  like  Clofarabine,  is in the same  class of  compounds,  known as
purine nucleoside  analogs,  with similar  mechanisms of action in that the both
work by damaging DNA in a cancer cell. Public reports indicate that Fludarabine,
used in combination with a cyclophosphamide  agent, blocks enzymes which promote
cancer cell growth. Because Clofarabine and Fludarabine are in the same class of
cancer agents with similar  modes of action,  we believe use of  Clofarabine  in
combination  with  DNA  damaging  agents  may  have  the  same  effect  as  with
Fludarabine.

        Purine  Nucleoside--Solid  Tumor. In pre-clinical tests, Clofarabine has
shown anti-tumor  activity against several human cancers,  including  cancers of
the colon,  kidney and prostate,  as well as its action against  leukemic cells.
This activity against solid tumors distinguishes Clofarabine from other drugs in
its class which have shown relatively  little activity against solid tumors.  We
intend to develop  Clofarabine  as a potential drug for the treatment of certain
solid tumors,  such as colon and prostate cancer.  The development  strategy for
Clofarabine as a solid tumor agent will run in conjunction  with the program for
hematological  cancers,  but is expected  to take  longer to  complete  clinical
trials and will require a different marketing approach.

        Cancer of the colon is one of the most  common  cancers  in the  Western
world  with  approximately  200,000  new cases in the United  States  each year.
Surgery is the most successful  treatment for the primary tumor. Once the cancer
has spread the results of chemotherapy are disappointing and long-term  survival
figures



                                       36




have  changed  very  little in the past 50 years.  There is a great  need for an
effective  chemotherapeutic  agent  to treat  this  disease,  and a huge  market
potential  exists for any drug that can induce tumor regression in patients with
metastatic  colon cancer.  Prostate  cancer affects  181,000 new patients in the
United States each year.  Initial  treatment is directed at hormonal  control of
the disease,  but in the event control is not achieved,  chemotherapy usually is
required. We intend to develop Clofarabine, or a derivative of Clofarabine, as a
potential drug for the treatment of advanced colon and prostate cancer.

Selective Steroid Receptor Modulation Technology

        Selective steroid receptor modulation  technology,  the lead compound of
which is currently approved by regulatory  authorities in the United Kingdom for
the treatment of advanced breast cancer in post-menopausal  women, has also been
approved by  regulatory  authorities  in Germany,  for the  treatment of certain
adrenal  disorders,  such as Cushing's  Disease.  The product had also  received
marketing  approval  for the  treatment of  Cushing's  disease in certain  other
European  countries  and the United  States.  The lead product,  trilostane,  is
currently  approved for marketing under the names Modrenal(R) and Modrastane(R).
We receive royalty payments from Dechra on sales of trilostane in the veterinary
market in Europe.

        Breast cancer is, in general, a hormone-dependent disease, with estrogen
being the principal hormone driving cell growth.  Consequently,  a major part of
modern  treatment is directed at blocking the action of estrogen,  either at the
site of  production  in the body or at the cell's  estrogen  receptor.  The most
widely  used  drug in this  area,  Tamoxifen(R),  has been  very  successful  in
improving  response  rates and  survival  in women  with  breast  cancer.  Until
recently,  it was  believed  that  estrogen  acted via a single  receptor on the
cancer  cell.  However,  it is now known  that more than one  estrogen  receptor
exists. Recent scientific data from Professor Gavin Vinson's laboratory at Queen
Mary & Westfield  College,  London,  England (part of the  University of London)
have shown that  trilostane  has a unique and  previously  unrecognized  mode of
action.  The drug inhibits  estrogen binding to the classical  estrogen receptor
(ER(alpha))  in an indirect  (allosteric)  fashion and also  modulates  estrogen
binding to the  newly-described  second  receptor,  ER(beta).  This action makes
trilostane  the first drug in a new class of agents that  specifically  modulate
ligand  binding to  ER(beta).  This novel  action may explain the high  clinical
response  rates  seen  when the drug was given to breast  cancer  patients  with
Tamoxifen(R) resistance. Furthermore, trilostane's action is different from that
of other known "hormonal  agents"  although its actions may be  complementary to
those of other drugs. Extensive clinical trials with the drug have shown that it
is effective in a significant proportion of breast cancer patients, particularly
those with  hormone-sensitive  tumors.  Trilostane  has no  aromatase  inhibitor
activity,  which  distinguishes it from some of the competitor hormonal products
currently  marketed for the treatment of breast cancer.  We believe that the new
data presents the drug with considerable market potential, although there can be
no assurance that the medical profession or the FDA will accept this new data or
that the drug will be successful in the marketplace.

        Trilostane  has been  extensively  studied in  controlled  trials in the
United States, Europe and Australia,  and almost 800 patients with breast cancer
have been treated with trilostane.  Of these 800 patients, 87 of them were given
the drug in the United States as part of an FDA-approved  trial.  Its anti-tumor
activity has been well  documented  and the drug has been shown to produce tumor
response rates (i.e.  arrest the growth of the tumor) of up to 55% in women with
hormone-sensitive  breast  cancer.  In a sub-set  analysis of the clinical trial
data, patients with hormone-sensitive  breast cancer who had responded to one or
more hormonal  therapies were given  trilostane upon relapse of the cancer.  The
response  rate was above  40% in this  group of  patients.  This  compares  to a
response rate of about 30-35% with currently marketed  aromatase  inhibitors and
approximately  25% with  herceptin  given as second  line  therapy.  Most of the
patients in the sub-set had received  Tamoxifen(R) as first-line therapy.  Thus,
trilostane given as follow-on, or salvage, therapy has a response rate in excess
of those reported for the drugs  currently in use for  second-line  treatment in
this disease. Furthermore,  trilostane has an acceptable side-effect profile. On
the basis of these data,  trilostane was granted a product license in the United
Kingdom for the treatment of post-menopausal breast cancer.

        We hold an exclusive  license,  until the expiration of existing and new
patents  related to  trilostane,  to market  trilostane  in major  international
territories,  and an  agreement  with a United  Kingdom  company  to  co-develop
trilostane   for  other   therapeutic   indications.   Trilostane  is  currently
manufactured by third-party  contractors in accordance  with good  manufacturing
practices.  We have no plans to  establish  our own  manufacturing  facility for
trilostane, but will continue to use third-party contractors.

        We launched Modrenal(R) in May 2003 in the United Kingdom for use in the
treatment of  post-menopausal  breast cancer.  We also intend to seek regulatory
approval  for   Modrenal(R)  in  the  United  States  as  salvage   therapy  for
hormone-sensitive  breast cancers and hormone independent prostate cancers. This
would  target  patients  that have  hormone-sensitive  cancers  and have  become
refractory  to prior  hormone  treatments,



                                       37




such as  Tamoxifen(R)  or aromatase  inhibitors.  We believe that the  potential
market for  Modrenal(R),  based upon the sales of currently  available drugs for
hormonal  therapy for breast cancers,  is in excess of $1.8 billion of sales per
annum worldwide.  The results of 11 clinical trails to date, with a total of 783
patients  tested,  in the United States,  Europe and Australia with  Modrenal(R)
show that it is at least as effective in second line or third line  treatment of
advanced breast cancer as the currently available hormonal  treatments,  such as
the selective estrogen receptor modulators,  or SERMs, and aromatase inhibitors.
In the view of several  clinicians and  investigators  familiar with  Modrenal's
mode of action, Modrenal(R) is most effective in certain specific patient types,
such  as  those  who  have  become  Tamoxifen(R)-refractory.   Furthermore,  our
management  currently  intends to price  Modrenal(R) in such a manner as to make
treatment with Modrenal(R)  compare very favorably,  on a price basis,  with the
cost of  treatment  with the  existing  drugs used for second line or third line
therapy.  We believe that this pricing  strategy  should result in cost benefits
for physicians, patients and health-care systems.

        Anti-Estrogen  Prostate.  We have  received  Institutional  Review Board
approval  from  the  Massachusetts  General  Hospital  for a Phase  II  study of
trilostane for the treatment of androgen  independent prostate cancer. The study
will be conducted by The Dana Faber Cancer  Institute  and currently is intended
to commence in October 2003.

        The human  prostate  gland is under the  control  of  several  hormones,
including androgens and estrogen. Receptors for estrogen have been identified in
the prostate gland, and the newly discovered  "second receptor,"  ER(beta),  has
been isolated from the human prostate gland.  ER(beta) is also highly  expressed
in uterine and ovarian  tissue.  Prostate  cancer,  in most cases,  is initially
hormone-dependent  and  treatment  of the  disease  is usually  directed  toward
blocking  the action of the  relevant  hormones.  Unfortunately,  it is a common
occurrence  for the cancer cells to become  resistant  to the standard  hormonal
agents.  We believe  that this is probably  due to the  inability  of  currently
available  treatments to block all the  receptors on the prostate  cancer cells.
The ability of  trilostane to control  prostate cell growth by altering  hormone
binding on important  receptors could expand the treatment  options for patients
with prostate cancer.

        Since adrenal disorders are relatively  uncommon in humans, our strategy
is not to aggressively market trilostane for these indications,  but, rather, to
focus our  marketing  efforts  on  trilostane  for the  treatment  of breast and
prostate cancer, which have considerably greater market potential.  We intend to
file for  applicable  regulatory  approval of trilostane for treatment of breast
cancer in the United  States  within  months after  discussing  the  appropriate
course of regulatory consideration with applicable regulators. We will, however,
pursue   opportunities  for  adrenal  disorder  products  on  a  smaller  scale,
principally  in the  veterinary  market,  which we believe will generate  modest
revenues  over the near term.  Marketing  approval for  trilostane's  use in the
veterinary  market has been granted in the United  Kingdom and the drug is being
distributed by a third party. Under the terms of a co-development  agreement, we
were granted the exclusive worldwide license,  excluding Japan and South Africa,
to make, use and sell products  derived from this technology for a term expiring
on the date of expiration of the last patent covered by the license,  subject to
earlier  termination under certain  circumstances,  in exchange for, among other
things,  certain royalty  payments based on gross sales of products derived from
the technology.

        We also plan to devote our research efforts to discover new applications
for trilostane and related products.  The latest work has allowed new patents to
be filed which,  if granted,  will extend broadly the  commercial  potential for
trilostane and related products. In addition, a new analog of trilostane,  which
shows increased activity compared with trilostane, is being developed and is the
subject of new patent filings.

OLIGON(R) Technology

        With the acquisition of Pathagon in February 2002, we acquired  patents,
technology  and  technology   patents   relating  to  OLIGON(R)   anti-infective
technology,  and have licensed rights from Oklahoma Medical Research  Foundation
to the use of thiazine dyes,  including methylene blue, for other anti-infective
uses.

        The  OLIGON(R)  technology is based on the  antimicrobial  properties of
silver  ions.  The broad  spectrum  activity  of silver ions  against  bacteria,
including  antibiotic-resistant  strains, has been known for decades.  OLIGON(R)
materials have  application  in a wide range of devices and products,  including
vascular access  devices,  urology  catheters,  pulmonary  artery  catheters and
thoracic devices, renal dialysis catheters, orthopedic devices and several other
medical and consumer  product  applications.  One  application  of the OLIGON(R)
technology has been licensed to a third party, which is currently  marketing the
technology in its line of short-term vascular access catheters.



                                       38




        Six U.S.  patents for the  OLIGON(R)  technology  have been  granted and
additional  patents  have been filed.  In  addition,  patents have been filed in
Europe,  Canada  and  Japan.  The  OLIGON(R)  technology   specifically  targets
hospital-acquired  infections,  the rate of which tripled  between 1980 and 1990
and which  accounts for  approximately  $11 billion of extra expense to the U.S.
healthcare system each year.  According to the U.S. Centers for Disease Control,
$6.5 billion of this expense is related to  infections  associated  with medical
devices,  including vascular access and urology catheters, and is unreimbursable
to hospitals.  OLIGON(R)  devices will be marketed as next  generation  products
into large existing markets. Manufacturers of existing products are aware of the
seriousness  of device  related  infections,  but none has been able to  develop
technology that imparts antimicrobial  efficacy to surfaces of implanted devices
over long periods of time. OLIGON(R) effectively addresses these requirements.

Methylene Blue Technology

        We have licensed from Oklahoma Medical Research Foundation the rights to
use a range of thiazine  dyes,  the most well known of which is methylene  blue,
for the in vitro and in vivo  inactivation  of pathogens in  biological  fluids.
Methylene  blue,  especially  when  irradiated  by  light,  acts  by  preventing
replication  of nucleic acid (DNA and RNA) in  pathogens.  Currently,  we do not
derive any revenues from its commercial use.

        Blood transfusions are required to treat a variety of medical conditions
and, to meet that need,  over 90 million  blood  donations  occur each year.  Of
these, approximately 39 million donations occur in North America, Western Europe
and Japan.  Methylene  blue is currently used in several  European  countries to
inactivate  pathogens in fresh frozen  plasma  (FFP).  We intend to work closely
with  international  blood  collection  agencies  to  maximize  the value of our
intellectual property position.

Gene Therapy Technology

        Our product  portfolio also includes a variety of gene therapy  products
which, we believe,  may offer  advancements in the field of cancer treatment and
may  have  additional  applications  in  certain  non-cancer  diseases  such  as
diabetes,  cystic  fibrosis  and  other  auto-immune  disorders.  Pursuant  to a
co-development  agreement  with the Royal Free and  University  College  Medical
School  and a  Canadian  biotechnology  company,  we are  developing  DNA vector
technologies  which,  based on pre-clinical  research and early Phase I clinical
trials,  we  believe  are  capable  of  elevating  albumin  levels in cancer and
cirrhosis patients with hypo-albuminemia,  a serious physiological  disorder. We
believe this has  considerable  market  potential  since low albumin  levels are
considered  to be  very  dangerous  consequences  of  many  diseases,  including
cirrhosis and liver cancer.

Cytostatic Technology

        We have acquired a license to develop a distinct group of compounds that
we believe  could play an important  role in  controlling  the rate of growth of
cancer  cells.  In some cancers,  such as cancer of the bladder and skin,  drugs
that stop cell growth  (cytostatics)  can be as effective as drugs that kill the
cell by direct toxicity (cytotoxics). The cytostatic drugs we are developing are
believed to work by blocking cell  division and reversing the malignant  process
in the cancer cell. The first  compound is a synthetic  analog of a drug derived
from a naturally  grown  plant,  which has been  widely  tested for a variety of
clinical  indications.  The results of this testing  have been  published in the
medical literature.  In particular,  the drug has shown efficacy against certain
cancers  by,  it is  believed,  preventing  cell  division  and  promoting  cell
differentiation.

        We plan to develop  more  potent  analogs and to study their role in the
process  of cell  differentiation  and the  prevention  of the  spread of cancer
cells. The first compound derived from this technology is currently approved for
a Phase I clinical trial at a leading United Kingdom cancer center.

Animal Health Products

        We also have one animal  health  product,  Veteryl(R),  at market in the
United Kingdom for the treatment of Cushing's disease in dogs. In November 2001,
we granted to Arnolds Ltd., a major distributor of animal products in the United
Kingdom,  the right to market the drug for a six-month trial period, after which
time,  if the  results  were  satisfactory  to  Arnolds,  we would  enter into a
licensing  arrangement  whereby  Arnolds would pay royalties to us on sales from
April 2002 onward. During the trial period, Arnolds posted more than $400,000 of
sales of the drug.  Arnolds has licensed the drug from us for sale in the United
Kingdom  market  in  consideration  of  a  payment  of a 5%  royalty  on  sales.
Separately, in May 2003, we granted to Dechra Pharmaceuticals, PLC, an affiliate
of Arnolds Ltd., the exclusive right to market the drug in the United States for
$5.5 million of total consideration (including milestone payments) and a royalty
of 2%-4% of annual net sales.



                                       39




Patents and Proprietary Rights

        Our success will depend, in part, upon our ability to obtain and enforce
protection  for our  products  under United  States and foreign  patent laws and
other  intellectual  property laws,  preserve the  confidentiality  of our trade
secrets and operate without  infringing the proprietary rights of third parties.
Our policy is to file patent  applications  in the United States and/or  foreign
jurisdictions  to  protect  technology,   inventions  and  improvements  to  our
inventions  that are  considered  important to the  development of our business.
Also,  we will rely  upon  trade  secrets,  know-how,  continuing  technological
innovations and licensing opportunities to develop a competitive position.

        Through our current  license  agreements,  we have acquired the right to
utilize  the   technology   covered  by  five  issued  patents  and  six  patent
applications,  as well as  additional  intellectual  property and know-how  that
could be the subject of further patent  applications in the future.  We evaluate
the desirability of seeking patent or other forms of protection for our products
in  foreign  markets  based on the  expected  costs  and  relative  benefits  of
attaining  this  protection.  There can be no assurance that any patents will be
issued from any  applications  or that any issued  patents will afford  adequate
protection to us.  Further,  there can be no assurance  that any issued  patents
will not be  challenged,  invalidated,  infringed  or  circumvented  or that any
rights granted thereunder will provide competitive advantages to us. Parties not
affiliated  with us have obtained or may obtain United States or foreign patents
or possess or may possess proprietary rights relating to our products. There can
be no assurance that patents now in existence or hereafter issued to others will
not adversely  affect the  development or  commercialization  of our products or
that our planned activities will not infringe patents owned by others.

        As a  result  of the  licenses  described  above,  we are the  exclusive
licensee or sublicensee of three United States  patents  expiring in 2005,  2008
and 2014 relating to compounds,  pharmaceutical  compositions and methods of use
encompassing   clofarbine.   We  have  also  filed  two  United   States  patent
applications relating to the use of clofarbine in autoimmune diseases.  Although
the basic patents to trilostane have expired,  we are the exclusive  licensee of
several  United States and foreign  patent  applications  relating to the use of
trilostane alone or in combination with anticancer agents.

        We could incur substantial costs in defending  ourselves in infringement
suits  brought  against  us  or  any  of  our  licensors  or  in  asserting  any
infringement  claims  that we may  have  against  others.  We could  also  incur
substantial  costs in connection with any suits relating to matters for which we
have agreed to indemnify our licensors or  distributors.  An adverse  outcome in
any  litigation  could  have a  material  adverse  effect  on our  business  and
prospects. In addition, we could be required to obtain licenses under patents or
other proprietary rights of third parties. No assurance can be given that any of
these licenses would be made available on terms  acceptable to us, or at all. If
we are  required  to,  and do not  obtain  any  required  licenses,  we could be
prevented from, or encounter delays in,  developing,  manufacturing or marketing
one or more of our products.

        We also rely upon  trade  secret  protection  for our  confidential  and
proprietary  information.  There  can  be no  assurance  that  others  will  not
independently  develop  substantially  equivalent  proprietary  information  and
techniques  or  otherwise  gain  access to our trade  secrets or  disclose  this
technology or that we can meaningfully protect our trade secrets.

        It is our policy to require our employees,  consultants,  members of the
Scientific  Advisory  Board and parties to  collaborative  agreements to execute
confidentiality  agreements  upon the  commencement  of employment or consulting
relationships  or a  collaboration  with us. These  agreements  provide that all
confidential  information  developed  or made  known  during  the  course of the
relationship  with us is to be kept  confidential  and not  disclosed  to  third
parties  except  in  specific  circumstances.  In the  case  of  employees,  the
agreements  provide that all  inventions  resulting  from work performed for us,
utilizing our property or relating to our business and conceived or completed by
the individual during  employment shall be our exclusive  property to the extent
permitted by applicable law.

Sales and Marketing

        We intend to establish strategic  partnerships for the marketing,  sales
and  distribution  of our  products in North  America and certain  countries  in
Europe.  As of the date of this annual  report on From 10-KSB,  we have one such
arrangement  in place with Ilex for the  co-development  and marketing of one of
our initial lead products,  Clofarabine,  and another  arrangement  with Edwards
Lifesciences for the marketing of short-term vascular access catheters using the
OLIGON(R)  technology.  We have  also  engaged  in our own  marketing  and sales
efforts in connection  with the marketing and sale of  Modrenal(R) in the United
Kingdom and upon regulatory  authorities' granting mutual recognition with which
we intend to apply during calendar 2004, throughout Europe. However, in order to
market any of our products  effectively,  we would need to establish a



                                       40




much more  integrated  marketing  and sales force with  technical  expertise and
distribution capability or contract with other pharmaceutical and/or health care
companies with distribution systems and direct sales forces.

        Our marketing  policy will be to generate  awareness of our products and
target the two key audiences  for our products - doctors and  patients.  Medical
education will be a priority,  with the use of  peer-opinion  leaders,  clinical
trials at major centers, satellite symposia and conferences, product advertising
in specific scientific  journals and trained sales personnel.  Patient education
is carefully  controlled  and is important to our  marketing  approach.  Patient
education is particularly  important because Modrenal(R),  our first product for
which we have obtained regulatory approval (in the United Kingdom) for marketing
for  use  in a  type  of  cancer  treatment,  is  effective  for  patients  with
post-menopausal  breast  cancer,  one of the most  common  cancers in women.  In
particular,  the drug is approved as follow-on  treatment  for patients who have
previously responded to hormonal therapy.
 If the trials of trilostane in prostate cancer prove successful, we will have a
drug for treating a cancer found in  approximately  180,000 men each year in the
United  States.  We will work with  patient help  organizations,  inform the lay
public through consumer journals and television.

Manufacturing

        We do not have and do not  intend  to  establish  any  internal  product
testing,  manufacturing or distribution  capabilities.  Our strategy is to enter
into  collaborative  arrangements with other companies for the clinical testing,
manufacture and distribution of its products.  These collaborators are generally
expected to be responsible  for funding or  reimbursing  all or a portion of the
development  costs,  including the costs of clinical testing necessary to obtain
regulatory  clearances and for commercial-scale  manufacturing,  in exchange for
exclusive or  semi-exclusive  rights to market  specific  products in particular
geographic  territories.  Manufacturers  of our products will be subject to Good
Manufacturing  Practices  prescribed  by the FDA or other rules and  regulations
prescribed by foreign regulatory authorities.

Raw Materials

        Our raw materials (such as laboratory  chemicals) and other supply items
to be used in our research and  development  processes are  available  from many
different  suppliers  and are generally  available in  sufficient  quantities in
timely  fashion.   We  do  not  anticipate  any  significant   problems  in  the
availability of, or significant  price increases for,  required raw materials or
other production items in the foreseeable future.

Research and Development

        In developing new products,  we consider a variety of factors including:
(i) existing or potential marketing  opportunities for these products;  (ii) our
capability  to arrange for these  products to be  manufactured  on a  commercial
scale;  (iii) whether or not these products  complement  our existing  products;
(iv) the  opportunities  to leverage  these  products  with the  development  of
additional products;  and (v) the ability to develop co-marketing  relationships
with  pharmaceutical  and/or other  companies  with respect to the products.  We
intend to fund future research and development activities at a number of medical
and scientific  centers in Europe and the United States.  Costs related to these
activities are expected to include:  clinical trial  expenses;  drug  production
costs; salaries and benefits of scientific, clinical and other personnel; patent
protection  costs;  analytical and other testing costs;  professional  fees; and
insurance and other administrative  expenses. We currently have three scientists
currently  working  on a  full-time  basis  who are  involved  in  research  and
development activities. We have spent approximately $1,900,000 and $1,700,000 on
research and development activities in 2002 and 2003, respectively.

Industry Overview

        We believe the  biopharmaceutical  industry  has  evolved  significantly
since its  commercial  inception  in the 1970s and is  currently  approaching  a
period of  sustained  growth.  To be  successful,  we believe  biopharmaceutical
companies must have the ability to harness rapidly advancing technology, provide
solutions for previously unmet therapeutic  needs,  ensure faster development of
new drugs and allow flexibility to exploit changing market  conditions.  We seek
to engage in this new  generation of  biopharmaceutical  companies,  linking the
technological  skills of doctors and scientists in Europe and North America with
the U.S. and European capital markets.

        The National  Cancer  Institute  estimated in 2000 the overall costs for
cancer to be $107 billion in the United  States;  $37 billion for direct  costs,
$11 billion for morbidity costs and $59 billion for mortality  costs.  Treatment
of breast,  lung and prostate  cancer  account for over half the direct  medical
costs.



                                       41




The table below shows the forecast global cancer treatment market for the period
2001-2007.  The overall market is forecast to grow from $29.4 billion in 2001 to
$42.8bn in 2007, representing an average annual growth rate of 6.5%.




Forecast Global Cancer Treatment Market 2001 - 2007 (amounts in $ billions)
---------------------------------------------------------------------------

Drug Class              2001      2002       2003       2004       2005       2006       2007
-----------------       -------   -------    -------    -------    -------    -------    -------
                                                                    
Adjunct therapies       $11,321   $11,834    $12,347    $12,860    $13,373    $13,752    $14,132
Cytotoxics                8,651     9,136      9,501      9,881     10,277     10,585     10,902
Hormonals                 5,720     5,841      5,950      5,952      5,856      5,688      5,464
Innovative agents         3,679     4,665      5,650      7,126      8,602     10,432     12,261
                        -------   -------    -------    -------    -------    -------    -------
        TOTALS          $29,372   $31,476    $33,448    $35,820    $38,108    $40,457    $42,760
                        =======   =======    =======    =======    =======    =======    =======

Source:  Reuters, 2002



        We believe that new cancer therapies increasingly will be required to be
more  cost-effective  and allow for alternate  site or in-home  treatment and to
improve patient quality of life during treatment.

        With respect to our products and technologies  within the overall cancer
market,  Clofarabine  and  Gossypol  constitute  cytotoxic  agents and  Modrenal
constitutes  a  hormonal  agent,  in  each  case,  which  we  believe  may  have
significant  market  potential  both in the U.S.  and other  parts of the world.
Although we have  received  orphan drug status for  Clofarabine  in the U.S. and
Europe in pediatric and adult acute leukemias,  we continue to develop the drug,
in conjunction with our U.S.  co-development  partner,  ILEX Oncology,  Inc., in
other  indications  with broader markets  including solid tumors and combination
studies. If Clofarabine  demonstrates  efficacy in all of these indications,  we
believe  it has  potential  to be a  leading  drug in the  U.S.  and  Europe  in
hematological  cancers with widespread use in solid tumors.  We believe efficacy
data on the use of Gossypol in bladder  cancers will be available as early as Q1
2005 upon  completion  of our initial  clinical  trial.  Modrenal is an approved
agent which we market for the treatment of  post-menopausal  women with advanced
breast  cancer  in  the  United  Kingdom  and  we  anticipate  receiving  mutual
recognition  from other European Union member states in Q1 2005. Taken together,
we believe this portion of our cancer drug portfolio  could create a significant
commercial advantage for our company and our stockholders.

Government Regulation

        The  FDA  and  comparable   regulatory   agencies  in  state  and  local
jurisdictions and in foreign countries impose substantial  requirements upon the
clinical  development,  manufacture  and marketing of  pharmaceutical  products.
These agencies and other federal, state and local entities regulate research and
development activities and the testing,  manufacture,  quality control,  safety,
effectiveness,  labeling,  storage,  record keeping,  approval,  advertising and
promotion of our drug delivery products.
The  process  required by the FDA under the new drug  provisions  of the Federal
Food,  Drug and  Cosmetics Act before our products may be marketed in the United
States generally involves the following:

        o    pre-clinical laboratory and animal tests;

        o    submission to the FDA of an  investigational  new drug application,
             or IND,  which must become  effective  before  clinical  trials may
             begin;

        o    adequate and well-controlled human clinical trials to establish the
             safety and efficacy of the proposed  pharmaceutical in our intended
             use;

        o    submission to the FDA of a new drug application; and

        o    FDA review and approval of the new drug application.

        The testing and approval process requires  substantial time, effort, and
financial  resources  and we cannot be certain that any approval will be granted
on a timely basis, if at all.

        Pre-clinical  tests include  laboratory  evaluation of the product,  its
chemistry,  formulation  and stability,  as well as animal studies to assess the
potential  safety and efficacy of the product.  The results of the  pre-clinical
tests,  together  with  manufacturing   information  and  analytical  data,  are
submitted to the FDA as part of an IND,  which must become  effective  before we
may begin human clinical trials. The IND automatically becomes



                                       42




effective 30 days after  receipt by the FDA,  unless the FDA,  within the 30-day
time period,  raises  concerns or  questions  about the conduct of the trials as
outlined in the IND and imposes a clinical hold. In such a case, the IND sponsor
and the FDA must resolve any  outstanding  concerns  before  clinical trials can
begin.  There is no  certainty  that  pre-clinical  trials  will  result  in the
submission  of an  IND  or  that  submission  of  an  IND  will  result  in  FDA
authorization to commence clinical trials.

        Clinical  trials  involve  the  administration  of  the  investigational
product  to human  subjects  under  the  supervision  of a  qualified  principal
investigator.  Clinical  trials are conducted in accordance  with protocols that
detail the objectives of the study,  the parameters to be used to monitor safety
and the efficacy  criteria to be  evaluated.  Each protocol must be submitted to
the FDA as part of the IND. Further, each clinical study must be conducted under
the auspices of an  independent  institutional  review board at the  institution
where the study will be conducted. The institutional review board will consider,
among  other  things,  ethical  factors,  the safety of human  subjects  and the
possible liability of the institution.

        Human clinical trials are typically conducted in three sequential phases
which may overlap:

        o    PHASE  I: The  drug is  initially  introduced  into  healthy  human
             subjects  or  patients  and tested for  safety,  dosage  tolerance,
             absorption, metabolism, distribution and excretion;

        o    PHASE II: Studies are conducted in a limited patient  population to
             identify  possible short term adverse  effects and safety risks, to
             determine  the  efficacy  of  the  product  for  specific  targeted
             diseases and to determine dosage tolerance and optimal dosage;

        o    PHASE  III:  Phase III trials are  undertaken  to further  evaluate
             clinical  efficacy  and to further  test for safety in an  expanded
             patient  population,  often at  geographically  dispersed  clinical
             study sites.  Phase III or IIb/III  trials are often referred to as
             pivotal  trials,  as they  are  used for the  final  approval  of a
             product.

        In the case of products for  life-threatening  diseases  such as cancer,
the initial  human testing is often  conducted in patients  with disease  rather
than in healthy  volunteers.  Since these  patients  already  have the  targeted
disease or  condition,  these studies may provide  initial  evidence of efficacy
traditionally  obtained  in Phase II trials and so these  trials are  frequently
referred to as Phase I/II trials. We cannot be certain that we will successfully
complete Phase I, Phase II or Phase III testing of our product candidates within
any specific time period, if at all. Furthermore, we, the FDA, the institutional
review board or the sponsor may suspend  clinical  trials at any time on various
grounds,  including a finding that the subjects or patients are being exposed to
an unacceptable health risk.

        The results of product  development,  pre-clinical  studies and clinical
studies are submitted to the FDA as part of a new drug  application for approval
of the marketing and commercial shipment of the product.  The FDA may deny a new
drug application if the applicable  regulatory criteria are not satisfied or may
require additional clinical data. Even if the additional data is submitted,  the
FDA may  ultimately  decide that the new drug  application  does not satisfy the
criteria for approval.  Once issued,  the FDA may withdraw  product  approval if
compliance  with  regulatory  standards for production and  distribution  is not
maintained or if safety problems occur after the product reaches the market.  In
addition,  the FDA requires  surveillance  programs to monitor approved products
which have been commercialized,  and the agency has the power to require changes
in labeling or to prevent further marketing of a product based on the results of
these post-marketing programs.

        The FDA has a Fast Track program  intended to facilitate the development
and expedite the review of drugs that demonstrate the potential to address unmet
medical needs for  treatment of serious or  life-threatening  conditions.  Under
this program,  if the FDA determines  from a preliminary  evaluation of clinical
data that a fast track product may be effective,  the FDA can review portions of
a new drug application for a Fast Track product before the entire application is
complete, and undertakes to complete its review process within six months of the
filing of the new drug application. The FDA approval of a Fast Track product can
include restrictions on the product's use or distribution such as permitting use
only for specified medical procedures or limiting  distribution to physicians or
facilities  with special  training or expertise.  The FDA may grant  conditional
approval of a product  with Fast Track  status and require  additional  clinical
studies following approval.

        Satisfaction of FDA requirements or similar requirements of state, local
and foreign  regulatory  agencies  typically  takes several years and the actual
time  required  may vary  substantially,  based  upon the type,  complexity  and
novelty  of the  pharmaceutical  product.  Government  regulation  may  delay or
prevent  marketing



                                       43




of  potential  products  for a  considerable  period of time and  impose  costly
procedures upon our activities.  Success in pre-clinical or early stage clinical
trials  does not  assure  success  in later  stage  clinical  trials.  Data from
pre-clinical  and  clinical  activities  is not  always  conclusive  and  may be
susceptible  to varying  interpretations  which  could  delay,  limit or prevent
regulatory  approval.  Even  if a  product  receives  regulatory  approval,  the
approval may be significantly  limited to specific  indications.  Further,  even
after the FDA approves a product, later discovery of previously unknown problems
with a product  may  result in  restrictions  on the  product  or even  complete
withdrawal of the product from the market.

        Any  products  manufactured  or  distributed  under  FDA  clearances  or
approvals  are  subject  to  pervasive  and  continuing  regulation  by the FDA,
including record-keeping  requirements and reporting of adverse experiences with
the  products.  Drug  manufacturers  and their  subcontractors  are  required to
register  with  the  FDA  and  state  agencies,  and  are  subject  to  periodic
unannounced  inspections by the FDA and state agencies for compliance  with good
manufacturing practices,  which impose procedural and documentation requirements
upon manufacturers and their third party manufacturers.

        We are subject to numerous other federal,  state and local laws relating
to  such  matters  as  safe   working   conditions,   manufacturing   practices,
environmental  protection,  fire hazard  control,  and  disposal of hazardous or
potentially hazardous substances.  We may incur significant costs to comply with
such laws and regulations now or in the future.  In addition,  we cannot predict
what adverse  governmental  regulations  may arise from future  United States or
foreign governmental action.

        We also are subject to foreign regulatory  requirements  governing human
clinical trials and marketing approval for pharmaceutical products which we sell
outside the United States.  The  requirements  governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary widely from country to
country.  Whether or not we obtain FDA  approval,  we must obtain  approval of a
product by the comparable  regulatory  authorities of foreign  countries  before
manufacturing or marketing the product in those countries.  The approval process
varies from  country to country and the time  required for these  approvals  may
differ  substantially from that required for FDA approval.  We cannot assure you
that  clinical  trials  conducted  in one  country  will be  accepted  by  other
countries  or that  approval in one country will result in approval in any other
country.  For clinical trials conducted outside the United States,  the clinical
stages   generally  are  comparable  to  the  phases  of  clinical   development
established by the FDA.

Competition

        Competition  in  the  pharmaceutical  industry  is  intense.   Potential
competitors   in  the  United   States  and  Europe  are  numerous  and  include
pharmaceutical,  chemical  and  biotechnology  companies,  most  of  which  have
substantially  greater capital  resources,  marketing  experience,  research and
development  staffs and facilities  than us. Although we seek to limit potential
sources of competition by developing  products that are eligible for orphan drug
designation  or other forms of  protection,  there can be no assurance  that our
competitors  will not succeed in developing  similar  technologies  and products
more rapidly than are being or will be developed by us.

        One of Bioenvision's  lead drugs,  Clofarabine,  has been granted Orphan
Drug Status in the U.S.  and Europe,  and is currently  undergoing  multi-center
Phase II trials. Listed below are other Cytotoxic Agents currently at market.



                                                                                           Growth
                                                                   1999     2000    2001   2000-01
Company       Brand            Generic        Class                ($m)     ($m)    ($m)     (%)
------------- ---------------- -------------- ------------------- ------- -------- ------ ----------
                                                                           
BMS           Taxol            Paclitaxel     Other Cytotoxics     1,481    1,592  1,197       -24.8
Aventis       Taxotere         Docctaxel      Other Cytotoxics       461      686    925        34.8
Lilly         Gemzar           Gemcitabine    Antimetabolite         453      559    723        29.3
BMS           Paraplatin       Carboplatin    Other Cytotoxics       600      690    702         1.7
Pharmacia     Camptosar        irinorccan     Other Cytotoxics       293      441    613        39.0
Taiho         UFT              tegafur        Antimetabolite         460      440    420e       -4.5
                               uracil
Pharmacia     Pharmorubicin/   cpirubein      Cytotoxic              206      199    261        31.2
              Ellence                         Antibiotics
Ivax          Paxene           paclitaxel     Other Cytotoxics       n/a       35    215       514.3
Roche         Furtulon         doxifluridine  Antimetabolite         166      201    201         0.0
Aventis       Campro           irinotecan     Other Cytotoxics        83      139    186        33.8
Sanofi        Eloxatine        oxilaplatin    Other Cytotoxics        72      130    181        39.2
SP            Temodar          temozolomide   Alkylating agents       36      121    180        48.8
Roche         Xeloda           capecitabine   Antimetabolite          53       89    155        74.0
GSK           Hycarntin        topotecan      Other Cytotoxics       141      144    131        -9.0





                                       44





                                                                                           Growth
                                                                   1999     2000    2001   2000-01
Company       Brand            Generic        Class                ($m)     ($m)    ($m)     (%)
------------- ---------------- -------------- ------------------- ------- -------- ------ ----------
                                                                           
Schering AG   Fludara          fludarabine    Antimetabolite          79      102    120        17.6
BMS           Ifex             ifosfamide     Alkylating agents       88      108    120e       11.1
Alza US       Doxil/Caelyx     liposomal/     Cytotoxic               66       82    100        22.0
                               doxorubicin    Antibiotics
Pierre Fabre  Navelbine        vinorelbine    Vae                     76       82     90e        9.8
Wyeth         Novantrone       mitoxantrone   Cytotoxic               45       60     71        18.7
                                              Antibiotics
BMS           VcPesid          ctoposide      Vae                     77       70     65e       -7.1
GSK           Navelbine        vinorelbine    Vae                     67       65     63e       -3.1
Pharmacia     Adriamycin       doxorubicin    Cytotoxic               65       62     55e      -11.3
                                              Antibiotics
BMS           Hydrea           hydroxyurea    Alkylating agents       56       52     48e       -7.7

Others                                                             1,824    1,776   1,829        3.0
                                                                  ------- -------- ------ ----------
          TOTAL                                                    6,948    7,925   8,651        9.2
                                                                  ======= ======== ====== ==========

Source:  Reuters, 2002



        Another of Bioenvision's  lead drugs,  Modrenal(R) is approved in the UK
for the treatment of  post-menopausal  patients with advanced breast cancer.  In
particular,  the drug is  approved  as  follow-on  treatment  for  patients  who
previously have responded to hormonal therapy.

Listed below are other hormonal therapies currently at market.



                                                                                           Growth
                                                                   1999     2000    2001   2000-01
Company       Brand            Generic        Class                ($m)     ($m)    ($m)     (%)
------------- ---------------- -------------- ------------------- ------- -------- ------ ----------
                                                                          
TAP           Lupron           Leuprorelin    LHRH agonsists         775      798    833         4.4
AstraZeneca   Zoladex          Goserelin      LHRH agonsists         686      734    728        -0.8
AstraZeneca   Nolvadex         Tamoxifen      Anti-estrogens         573      576    630         9.4
AstraZeneca   Casodex          Bicalulamide   Anti-estrogens         340      433    569        31.4
Takeda        Leuplin          leuprorelin    LHRH agonsists         485      515    530e        2.9
Barr          Tamoxifen        Tamoxifen      Anti-estrogens         297      322    501        55.6
Pharmacia     Depo-Provera     Medroxy        Progestagens           252      272    283         4.0
AstraZeneca   Arimidex         Anastrozole    Aromatase              140      156    191        22.4
                                              Inhibitors
Abbott        Lupron           leuprorelin    LHRH agonsists         140      153    163         6.5
BMS           Megace           megestrol      Progestagens           114      180    150e      -16.7
Novartis      Femara           letrozole      Aromatase               57       74    125        68.9
                                              Inhibitors
Ipsen         Deccapepryl      triptorelin    LHRH agonsists         100      105    110e        4.8
Aventis       Nilandron        nilutamide     Anti-androgens          72       87     93e        6.9
Schering AG   Androcur         cyproterone    Anti-androgens          91       95     92        -3.0
Aventis       Suprecur/        buserelin      LHRH agonsists          83       84     85e        1.7
              Suprefact
SP            Eulexin          flutamide      Anti-androgens         155      128     83       -35.2
Pharmacia     Aromasin         exemestane     Aromatase              n/a       36     65e       80.6
                                              Inhibitors
Nihun Kayaku  Odyne            flutamide      Anti-androgens          71       65     62e       -4.5
Teikoku       Prostal          chlormadinone  Progestagens            63       63     62e       -1.6
Hormone
Novartis      Lentaron         formestane     Aromatase               47       45     43e       -4.4
                                              Inhibitors
Nihun Kayaku  Fareston         toremifene     Anti-estrogens          44       43     40e       -6.1
Novartis      Afema            tadrozole      Aromatase               22       25     23e       -8.0
                                              Inhibitors
Mitsui        Tasuomin         Tamoxifen      Anti-estrogens          10        9      9e       -3.2

Others                                                               237      240     250        4.3
                                                                  ------- -------- ------ ----------
          TOTAL                                                    4,855    5,237   5,720        9.2
                                                                  ======= ======== ====== ==========
Source:  Reuters, 2002



        The generic drug industry is intensely  competitive  and includes  large
brand name and multi-source  pharmaceutical companies.  Because generic drugs do
not have patent protection or any other market exclusivity,  our competitors may
introduce competing generic products,  which may be sold at lower prices or with
more aggressive  marketing.  Conversely,  as we introduce branded drugs into our
product portfolio,  we will face competition from manufacturers of generic drugs
which may claim to offer equivalent therapeutic benefits at a lower price.



                                       45




        We expect that our proposed products will compete on the basis of, among
other things,  safety,  efficacy,  reliability,  price,  quality of life factors
(including  the  frequency  and  method  of  drug  administration),   marketing,
distribution,  reimbursement and effectiveness of intellectual  property rights.
We believe that our  competitive  success will be based partly on our ability to
attract and retain  scientific  personnel,  establish  specialized  research and
development   capabilities,   gain  access  to   manufacturing,   marketing  and
distribution  resources,  secure licenses to external technologies and products,
and obtain  sufficient  development  capital.  We intend to obtain many of these
capabilities   from   pharmaceutical   or   biotechnology    companies   through
collaborative or license  arrangements.  However,  there is intense  competition
among early stage  biotechnology  firms to  establish  these  arrangements.  Our
development  products may not be of suitable  potential market size or provide a
compelling  return on investment to attract other firms to commit resources to a
collaboration.  Even  if  collaborations  can be  established,  there  can be no
assurance  that  we  will  secure  financial  terms  that  meet  our  commercial
objectives.

Employees

        As of  June  11,  2004,  we had  seven  full-time  and  three  part-time
employees.  Of these,  three are in  management,  three are in  sales/marketing,
three are in  administration  and  three are in  research  and  development.  We
believe our relationships with our employees are satisfactory.

Corporate History

        We were  incorporated  as Express  Finance,  Inc.  under the laws of the
State of Delaware on August 16, 1996, and changed our name to Ascott Group, Inc.
in August 1998 and further to Bioenvision,  Inc. in December 1998, at which time
the Company  merged with  Bioenvision,  Inc, (`Old  Bioenvision')  a development
stage Company  primarily engaged in the research and development of products and
technologies for the treatment of cancer.

        On February 1, 2002, we completed the  acquisition of Pathagon Inc., the
successor in interest to Bridge Blood  Technologies  L.L.C.,  d/b/a Pathagon,  a
non-public company focused on the development of novel  anti-infective  products
and technologies.  Pathagon's principal products,  OLIGON(R) and methylene blue,
are ready for market.  Affiliates  of SCO Capital  Partners  LLC, our  financial
advisor and  consultant,  owned 82% of  Pathagon  prior to the  acquisition.  We
acquired  100% of the  outstanding  shares of Pathagon in exchange for 7,000,000
shares of our common stock. The acquisition has been accounted for as a purchase
business combination in accordance with SFAS 141. With the acquisition, we added
rights to OLIGON(R) and methylene blue to our product portfolio.

                             DESCRIPTION OF PROPERTY

Facilities

        As of the  date  of this  report  we do not  own  any  interest  in real
property.  We currently lease 3,229 square feet of office space at our principal
executive offices at 509 Madison Avenue, Suite 404, New York, New York 10022 for
approximately  $13,000 per month. These facilities are the center for all of our
administrative  functions in the United States.  We also rent 250 square feet of
office  space at 32  Haymarket,  London  SW1Y 4TP for  approximately  $1,000 per
month.  This  office  space  is  used to  perform  certain  marketing  functions
throughout  Europe.  Also, we rent on a month-to-month  basis  approximately 500
square feet of office space in Edinburgh,  Scotland for approximately $3,000 per
month.  To date,  most of our drug  development  programs have been conducted at
scientific  institutions  around  the  world.  It  is  our  policy  to  continue
development at leading scientific  institutions in the United States and Europe.
We do not plan to conduct  laboratory  research in any of our  facilities in the
near future, rather, we will conduct research through collaborative arrangements
with Southern Research Institute, M.D. Anderson and others.

Investment Policies

We do not  currently  have any  investments  in real estate or interests in real
estate;  investments or interests in real estate  mortgages or in the securities
of or  interests  in persons  primarily  engaged in real  estate.  We  generally
acquire our assets for the purpose of ultimately  producing  sales revenues from
the  exploitation  of such assets in the  development  of our  biopharmaceutical
business.  We  currently  invest our surplus  cash in  interest-bearing  deposit
accounts and short-term certificates of deposit.




                                       46




                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                        FOR THE YEAR ENDED JUNE 30, 2003

        The  following   discussion  and  analysis  provides  information  which
management  believes is  relevant  to an  assessment  and  understanding  of our
results of operations and financial  condition.  The  discussion  should be read
together with our audited  consolidated  financial statements and notes included
in this Registration Statement, for further details.

        Summary of Significant Accounting Policies

        Financial  Reporting  Release No. 60, which was recently released by the
SEC,  requires  all  companies to include a  discussion  of critical  accounting
policies  or  methods  used in the  preparation  of the  consolidated  financial
statements.  In  addition,  Financial  Reporting  Release  No.  61 was  recently
released by the SEC,  which  requires all  companies to include a discussion  to
address,  among  other  things,   liquidity,   off-balance  sheet  arrangements,
contractual obligations and commercial commitments.  The following discussion is
intended  to  supplement  the  summary of  significant  accounting  policies  as
described in Note 1 of the Notes To  Consolidated  Financial  Statements for the
year ended June 30, 2002 included herein.

        These policies were selected because they represent the more significant
accounting  policies and methods that are broadly  applied in the preparation of
the consolidated financial statements.

        Revenue  Recognition - Revenue under  research  contracts is recorded as
earned under the  contracts,  as services are provided.  In accordance  with SEC
Staff Accounting  Bulletin No. 101, upfront  nonrefundable  fees associated with
license and development  agreements where the Company has continuing involvement
in the  agreement,  are  recorded as deferred  revenue and  recognized  over the
period of involvement. If the estimated service period is subsequently modified,
the  period  over  which  the  up-front  fee is  recognized  would  be  modified
accordingly on a prospective  basis.  Revenues from the  achievement of research
and  development  milestones,  which  represent the achievement of a significant
step in the research and  development  process,  are recognized  when and if the
milestones are achieved.

        Stock  Based  Compensation  -  In  accordance  with  the  provisions  of
Statement of Financial  Accounting  Standards  ("SFAS") No. 123,  Accounting for
Stock-Based  Compensation,  we apply Accounting  Principles Board Opinion 25 and
related   interpretations   in  accounting   for  our  stock  option  plan  and,
accordingly, we do not recognize compensation expense for employee stock options
granted  with  exercise  prices  equal to or  greater  than fair  market  value.
Non-employee  stock-based   compensation   arrangements  are  accounted  for  in
accordance  with the  provisions of SFAS No. 123 and Emerging  Issues Task Force
No.  96-18,  Accounting  for  Equity  Instruments  That Are Issued to Other Than
Employees for  Acquiring,  or in  Conjunction  with Selling,  Goods or Services.
Under EITF No. 96-18, as amended,  where the fair value of the equity instrument
is more  reliably  measurable  than the fair value of  services  received,  such
services will be valued based on the fair value of the equity instrument.

        Use of Estimates - The preparation of financial statements in conformity
with  generally  accepted  accounting  principles of the United States  requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities  and the disclosure of contingent  assets and liabilities
at the date of the  financial  statements  as well as the  reported  amounts  of
revenues and expenses during the reporting  period.  Actual results could differ
from those  estimates,  and such  differences  may be material to the  financial
statements.

Overview

        We are an emerging  biopharmaceutical  company that develops and markets
drugs to treat  cancer.  Our two lead  drugs are  Clofarabine  and  Modrenal(R),
although we have several other products and technologies under  development.  As
of May 1, 2004,  our internal  staff  consisted of nine  employees  based in New
York, New York and Edinborough, Scotland.

        Clofarabine is a purine nucleoside analogue, or a small molecule, which,
based on our own clinical studies and studies conducted by others on our behalf,
we believe is effective in the treatment of leukemia. Clofarabine may also be an
effective agent to treat patients with solid tumor cancers, based on preclinical
studies and Phase I/II clinical trials performed to date. In the United Kingdom,
we are currently  conducting  clinical trials with Clofarabine for the treatment
of pediatric and adult acute leukemias. In the U.S., Clofarabine



                                       47




is currently in Pivotal Phase II clinical trials for pediatric acute  leukemias.
In January, 2002, the European orphan drug application for use of Clofarabine to
treat acute leukemia in adults was approved.  Orphan Drug  Designation  provides
the Company with ten years of market exclusivity in Europe for Clofarabine.  The
drug has also been granted orphan drug status and "fast track"  treatment by the
United States Food and Drug Administration (the "FDA"). Further, in August 2003,
we obtained the  exclusive,  irrevocable  option to sell,  market and distribute
Clofarabine in Japan and Southeast Asia from the inventor of Clofarabine.  These
rights were not  previously  granted by  Southern  Research  Institute  and fall
outside  the scope of the  Company's  then  current  licensing  and  development
contracts  with  respect to  Clofarabine.  We  originally  obtained an exclusive
license  from  Southern  Research  Institute  to  sell,  market  and  distribute
Clofarabine  throughout the world,  except for Japan and Southeast Asia, for all
human  applications,  pursuant to a co-development  agreement,  dated August 31,
1998, between the Company and Southern Research Institute. On March 12, 2001, we
granted an exclusive  option to sell,  market and distribute  Clofarabine in the
U.S.  and  Canada  to ILEX  Oncology,  Inc.  We  converted  ILEX's  option to an
exclusive  sublicense on December 30, 2003.  Accordingly,  we do not possess the
rights to sell, market and distribute Clofarabine in the U.S.

        Modrenal(R) is a hormonal agent with a novel mode of action,  that makes
it an effective  agent in patients with advanced breast cancer who have acquired
resistance to other hormonal agents. We launched  Modrenal(R) in May 2003 in the
United Kingdom,  where we have received  regulatory  approval for its use in the
treatment of post-menopausal breast cancer. In the first half of 2004, we intend
to apply for mutual recognition in another four large European territories in an
effort to gain approval for  Modrenal(R) in each such  territory.  We anticipate
receiving  approval in each such  territory  in the first half of calendar  year
2005.  Further, we filed an IND for prostate cancer clinical trials in the US in
February  2004 and intend to commence our first US clinical  trial in the second
quarter of calendar year 2004.  Further,  we intend to seek regulatory  approval
for  Modrenal(R) in the United States as salvage  therapy for  hormone-sensitive
breast  cancer upon  completion of additional  clinical  studies.  We originally
obtained an exclusive license from Stegram  Pharmaceuticals Ltd. to sell, market
and distribute  Modrenal(R)  throughout the world,  except for South Africa, for
all human and animal health applications, pursuant to a co-development agreement
dated July 15, 1998.

        Our primary business strategy relates to our two lead drugs, Clofarabine
and Modrenal(R).  With Clofarabine, our strategy is to complete drug development
in Europe  and  obtain  marketing  authorization  from the  European  regulatory
authorities to market and distribute  Clofarabine for the treatment of pediatric
and adult acute  leukemias.  We  anticipate  receiving  approval  early in 2005,
subject  to our  obtaining  approval  of the  regulatory  authorities.  We  will
continue  clinical  trials in other  indications  with the  intention of seeking
label extensions after Clofarabine's first approval. With Modrenal, our strategy
is to expand  sales in the United  Kingdom and apply for mutual  recognition  to
obtain the right to sell Modrenal(R)  throughout Europe. We anticipate receiving
mutual recognition from major European Community member states by mid-2005.  Our
secondary business strategy is to continue to develop our portfolio of ancillary
products and technologies.  We anticipate that revenues derived from Clofarabine
and  Modrenal(R)  will permit us to further  develop our  portfolio of ancillary
products and technologies.

         Company Status

        We have made  significant  progress in developing our product  portfolio
over the past twelve months,  and have multiple  products in clinical trials. We
have incurred losses during this emerging stage. Our management believes that we
have the opportunity to become a leading oncology-focused pharmaceutical company
in the next five years if we successfully bring our two lead drugs to market. We
anticipate  that  revenues  derived  from the two lead drugs  will  permit us to
further  develop the twelve other products and potential  products  currently in
our development portfolio.  We currently plan to have as many as twelve products
at  market  by the end of  2006.  We have  commenced  marketing  one of our lead
products,  Modrenal(R),  and we  intend  to  continue  developing  our  existing
platform  technologies  with a primary  business focus on drugs to treat cancer,
and  commercializing  products derived from such technologies.  A key element of
our  business  strategy  is to continue to acquire,  obtain  licenses  for,  and
develop new  technologies  and  products  that we believe  offer  unique  market
opportunities  and/or  complement our existing product lines. As a result of the
acquisition  of Pathagon Inc. in February  2002, we have several  anti-infective
technologies.  These include the OLIGON(R)  technology,  an advanced biomaterial
that has been approved for certain  indications  by the FDA in the U.S.,  and is
being sold by a product  co-development  partner,  and the use of thiazine dyes,
such as methylene blue, which are used for in vitro and in vivos inactivation of
pathogens  (viruses,  bacteria and fungus) in biological  fluids.  It is not the
Company's strategy to sell devices or to expand into the  anit-infective  market
per se, but the  technology  obtained in the Pathagon  acquisition  has specific
application  for support of the cancer patient and oncology  treatment.  We have
had  discussions  with potential  product  co-development  partners from time to



                                       48




time, and plan to continue to explore the possibilities for  co-development  and
sub-licensing  in order to implement  our  development  plans.  In addition,  we
believe that some of our products may have  applications in treating  non-cancer
conditions  in humans and in  animals.  Those  conditions  are  outside our core
business focus and we do not presently intend to devote a substantial portion of
our resources to  addressing  those  conditions.  In May 2003, we entered into a
Sub-License Agreement with Dechra Pharmaceuticals,  plc ("Dechra"),  pursuant to
which  Bioenvision   sub-licensed  the  marketing  and  development   rights  to
modrestane,  solely with respect to animal  health  applications,  in the United
States and Canada, to Dechra.  We received $1.25 million in cash,  together with
future  milestone and royalty  payments which are contingent upon the occurrence
of  certain  events We intend to  continue  to try and  exploit  these  types of
opportunities as they arise.

        You should  consider the  likelihood of our future  success to be highly
speculative in light of our limited  operating  history,  as well as the limited
resources, problems, expenses, risks and complications frequently encountered by
similarly  situated  companies.  To address  these risks,  we must,  among other
things:

o    satisfy  our future  capital  requirements  for the  implementation  of our
     business plan;

o    commercialize our existing products;

o    complete  development  of products  presently  in our  pipeline  and obtain
     necessary regulatory approvals for use;


o    implement and successfully  execute our business and marketing  strategy to
     commercialize products;

o    establish and maintain our client base;

o    continue to develop new products and upgrade our existing products;

o    respond to industry and competitive developments; and

o    attract, retain, and motivate qualified personnel.

        We may not be successful in addressing these risks. If we were unable to
do so, our business  prospects,  financial  condition  and results of operations
would be materially  adversely  affected.  The likelihood of our success must be
considered in light of the development cycles of new pharmaceutical products and
technologies and the competitive and regulatory environment in which we operate.

Results of Operations

Year Ended June 30, 2003 Compared to Year Ended June 30, 2002

        We reported  revenues of $505,000  and $803,000 for the years ended June
30, 2003 and 2002,  respectively.  Revenues reflect recognition of consideration
received  pursuant  to our  agreements  with  co-development  and  sub-licensing
partners  in  connection  with our  platform of drugs and  technologies.  Of the
revenues recorded for the year ended June 30, 2003,  $12,000 was recognized from
Dechra, pursuant to the Sub-License Agreement, dated May 13, 2003.

        Research  and  development  costs for the years  ended June 30, 2003 and
2002 were  $1,689,000 and $1,912,000,  respectively,  representing a decrease of
$223,000.

        Our research and  development  costs include costs  associated  with six
projects of which the Company devotes significant time and resource. Clofarabine
research  and  development  costs for the year ended June 30, 2003 and 2002 were
$871,000 and $596,000,  respectively,  representing an increase of $275,000. The
increase  primarily  reflects  the costs  associated  with our having  commenced
clinical  trials  in  Europe  to  develop  Clofarabine.  Modrenal  research  and
development  costs for the year ended June 30, 2003 and 2002 were  $913,000  and
$923,000,  respectively,  representing a decrease of $10,000.  Gossypol research
and  development  costs were $30,000 and $90,000,  respectively,  representing a
decrease of $60,000. The decrease primarily reflects a decrease in the amount of
resource  devoted by the Company to this compound  while the Company  focused on
developing its lead drugs.  Gene Therapy research and development  costs for the
year  ended  June  30,



                                       49




2003 were  $(130,000)  and $303,000,  respectively,  representing  a decrease of
$433,000.  The decrease  primarily reflects an accrued expense in the year ended
2002 of $200,000  which was determined to be less than  originally  estimated by
the Company in the year ended June 30, 2003. The clinical trials and development
strategy for the Clofarabine and Modrenal projects, in each case, is anticipated
to cost several million dollars and will continue for several years based on the
number of clinical  indications  within  which we plan to develop  these  drugs.
Currently,  management cannot estimate the timing or costs associated with these
projects  because many of the  variables,  such as interaction  with  regulatory
authorities and response rates in various clinical trials,  are not predictable.
Estimated total costs to date for each of these four projects is as follows: (i)
Clorfarabine  research  and  development  costs  have  been  approximately  $3.0
million;  (ii) Modrenal research and development  costs have been  approximately
$2.35  million;   (iii)  Gossypol  research  and  development  costs  have  been
approximately  $150,000;  and (iv) Gene Therapy  research and development  costs
have  been  approximately  $450,000.  Our  other two  research  and  development
projects involve our two ancillary  technologies;  OLIGON and Methylene Blue. We
do not currently  devote any significant time or resources to these research and
development  projects,  but  we  intend  to  do so  if  and  to  the  extent  we
successfully  commercialize our lead drugs, Clorfarabine and Modrenal , over the
next two years.

        Administrative  expenses  for the year ended June 30, 2003 and 2002 were
$4,567,000 and $2,128,000, respectively, representing an increase of $2,439,000.
Of this amount,  $1,600,000  of this  increase  was due to the  expansion of the
internal  management  team  from one full  time  employee  to  eight  full  time
employees; approximately $150,000 of this increase was due to lease expenses and
office supplies /equipment for the newly opened New York and Edinburgh, Scotland
offices, both of which we opened during the year;  approximately $300,000 of the
increase  was due to an  increase  in  investor  and public  relations  expenses
related  to  pre-marketing  activities  with  Clofarabine  and  marketing  costs
associated with Modrenal;  approximately $200,000 of the increase was related to
increases in related travel expense to successfully  manage our drug development
activities;  and approximately  $150,000 of the increase was due to increases in
our consulting and legal expenses as the result of our recent growth.

        We reported  interest and finance charges of $325,000 for the year ended
June 30, 2003,  representing  a decrease of $1,848,000  from the year ended June
30, 2002.  This decrease  reflects the retirement of our credit  facility in May
2002 and the fact that we carried  no long term debt  during the year ended June
30, 2003.

        Depreciation  and amortization  expense totaled  $1,345,000 for the year
ended June 30, 2003,  representing  an increase of $766,000  from the year ended
June 30,  2002.  The increase is primarily  due to the  amortization  of certain
intangible  assets we acquired in the Pathagon  transaction which we consummated
in February 2002.

Year Ended June 30, 2002 Compared to Year Ended June 30, 2001

        We reported  revenues of $803,000  and $245,000 for the years ended June
30,  2002 and 2001,  respectively.  Revenues  reflect  our  agreements  with our
co-development  partners  and/or  licensees in  connection  with our platform of
drugs and technologies.

        Research  and  development  costs for the years  ended June 30, 2002 and
2001 were $1,912,000 and $1,566,000,  respectively,  representing an increase of
approximately  $346,000.  This increase primarily is attributable to a full year
amortization of deferred  royalties,  which represent  advance royalties paid to
SRI that are being  amortized over the same period that related revenue is being
recognized.

        Administrative  expenses  for the year ended June 30, 2002 and 2001 were
$2,128,000 and $550,000,  respectively,  representing an increase of $1,578,000.
Of this amount,  (i) approximately  $650,000 related to an increase in legal and
other  professional  fees paid  during  the year,  (ii)  approximately  $750,000
related to an increase in  printing,  investor  and public  relations  costs and
(iii) approximately $85,000 was due to an increase in travel expenses related to
the Company's expansion of the internal management team.

        We reported  interest and finance charges of $2,173,000 and $229,000 for
the years ended June 30, 2002 and 2001,  respectively,  representing an increase
of  $1,944,000.  This  increase  reflects  charges  related to the  issuance  of
warrants in connection with the Company's various financings.

        Depreciation and  amortization  expense totaled $579,000 and $23,000 for
the years ended June 30, 2002 and 2001, respectively. This increase primarily is
due to the amortization of certain intangible assets we acquired in the Pathagon
transaction, which we consummated in February 2002.



                                       50




Liquidity and Capital Resources

        We anticipate that we may continue to incur significant operating losses
for the foreseeable  future.  There can be no assurance as to whether or when we
will generate material revenues or achieve profitable operations.

        We are  actively  seeking  strategic  alliances  in order to develop and
market our range of products. In August 2001, we obtained a $1 million unsecured
line of credit facility from Jano Holdings  Limited,  bearing interest at 8% per
annum. In November 2001, we entered into a senior,  Secured Credit Facility with
SCO  Capital  Partners  LLC.  The  credit  facility  was  established  for up to
$1,000,000  in short term  financing,  in four trances of  $250,000,  subject to
satisfaction  of  certain  conditions,  secured  by the pledge of certain of our
assets,  and was  established  to bear  interest on drawings at a rate of 6% per
annum.  In  addition,  our  officers  agreed to defer  salaries,  and our former
outside  counsel  agreed to defer  certain  fees,  until we obtained  sufficient
long-term funding.  Deferred salaries and fees amounted to approximately $52,000
through June 30, 2002. In May 2001, our officers agreed to accept 705,954 shares
of our  common  stock in  settlement  of  $910,681  of the  outstanding  accrued
salaries  through June 30, 2001. The shares were issued during the quarter ended
March 31, 2002.  On October 17,  2001,  our  officers  agreed to accept  134,035
shares in settlement of $154,140 of additional  outstanding  accrued salaries to
September 30, 2001. On October 17, 2001, the board of directors  approved a plan
to repay  certain  trade debt with  shares of our common  stock,  and a total of
146,499 shares of common stock were issued for the repayment of $168,473.

        We received an initial  payment  from ILEX of  $1,350,000  which  became
non-refundable  in March  2001  upon  execution  of the  agreement  with ILEX to
co-develop  Clofarabine.  That sum will be recognized  as income for  accounting
purposes  on a straight  line basis over the period  from March  2001,  when the
payment  was  received,  through  December  31,  2002,  at which  time  ILEX was
originally scheduled to complete Phase II trials of Clofarabine and make another
payment to us.

        We received an initial payment from Dechra of $1,250,000 on May 13, 2003
upon execution of our sub-license  agreement with Dechra. This agreement expires
upon  expiration of the last patent related to modrenal or the completion of the
last royalty obligation as set forth therein.

        On May 7, 2002 we  authorized  the  issuance and sale of up to 5,920,000
shares  of  Series A  Preferred  Stock.  The  Series A  preferred  stock  may be
converted  into shares of common stock at an initial  conversion  price of $1.50
per share of common  stock,  subject  to  adjustment  for  stock  splits,  stock
dividends,  mergers,  issuances of cheap stock and other  similar  transactions.
Holders of Series A preferred  stock also received,  in respect of each share of
Series A preferred  stock  purchased in a private  placement which took place in
May 2002,  one warrant to purchase  one share of our common  stock at an initial
exercise price of $2.00 subject to adjustment.

        Through May 16, 2002 we have sold an aggregate  of  5,916,666  shares of
Series A  convertible  participating  preferred  stock  in the May 2002  private
placement for $3.00 per share and warrants to purchase an aggregate of 5,916,666
shares of common stock,  resulting in aggregate gross proceeds of  approximately
$17,750,000.  A  portion  of the  proceeds  were  used to repay in full the Jano
Holdings and SCO Capital  obligations upon which such facilities were terminated
as well as to repay fees amounting to $1,610,000 related to the transaction.

        On June 30, 2003, we have cash and cash  equivalents  of $8,200,000  and
working capital of $6,108,000  which  management  believes will be sufficient to
continue  currently planned  operations over the next 12 months.  Although we do
not currently  intend to raise any additional  funds for the next 12 months,  we
can not ensure additional funds will not be raised during such period because of
the  significant  scale up of our operating  activities,  including  clofarabine
development and the launch of modrenal.  Further,  a key element of our business
strategy  is to  continue  to  acquire,  obtain  licenses  for,  and develop new
technologies  and products  that we believe  offer unique  market  opportunities
and/or  complement our existing product lines. We are not presently  considering
any such transactions, and we do not presently expect to acquire any significant
assets over the coming 12 month period,  but if any such opportunity  arises and
we deem it to be in our interests to pursue such an opportunity,  it is possible
that additional financing would be required for such a purpose.

        We anticipate that we may continue to incur significant operating losses
for the foreseeable future.  There can be no assurance as to whether or where we
will generate material revenues or achieve profitable operations.



                                       51




        The Company has the following commitments as of June 30, 2003:

                                Payments Due in
---------------------- -------------- -------------- ------------ --------------
                           Total          2004          2005          2006
---------------------- -------------- -------------- ------------ --------------
Employee Contracts           266,400        266,400            -              -
---------------------- -------------- -------------- ------------ --------------
Occupancy Lease              369,500        161,600      166,100         41,000
---------------------- -------------- -------------- ------------ --------------
Total                        635,900        418,500      156,000         39,000
---------------------- -------------- -------------- ------------ --------------

---------------------- -------------- -------------- ------------ --------------

        In  management's  opinion,  cash flows  from  operations  and  borrowing
capacity  combined  with  cash on hand will  provide  adequate  flexibility  for
funding the Company's  working  capital  obligations for the next twelve months.
However,  there can be no assurance that suitable debt or equity  financing will
be available for the Company.  The Company has a commitment  under its operating
lease with the New York  office.  The Company  leases  3,299 square feet under a
lease  that  expires  on  September  30,  2005.  The  Company  is a party  to an
additional month-to-month lease agreement for its subsidiary, Bioenvision, Ltd.

Plan of Operation

        We are an emerging  biopharmaceutical  company  with a primary  business
focus on the acquisition, development and distribution of drugs to treat cancer.
We have acquired development and marketing rights to a portfolio of six platform
technologies  developed  over the past 15 years from  which a range of  products
have been  derived  and  additional  products  may be  developed  in the future.
Although we have commenced marketing one of our lead products,  Modrenal(R), and
intend  to  continue  to  develop   Clofarabine,   and  our  existing   platform
technologies and commercializing products derived from such technologies,  a key
element of our business strategy is to continue to acquire, obtain licenses for,
and develop new  technologies  and products  that we believe offer unique market
opportunities  and/or  complement our existing product lines.  Once a product or
technology  has  been  launched  into  the  market  for  a  particular   disease
indication, we plan to work with numerous collaborators, both pharmaceutical and
clinical,  in the oncology community to extend the permitted uses of the product
to other indications.  In order to market our products effectively, we intend to
develop  marketing  alliances with strategic  partners and may co-promote and/or
co-market in certain territories.

        We plan to  continue to use a major  portion of the  proceeds of the May
2002 private placement to initiate clinical trials of Clofarabine in Europe. The
emphasis will be on the use of Clofarabine in the treatment of refractory  acute
leukemia in children and adults.  The drug has received orphan drug  designation
in Europe.

        We plan to identify  licensing  partners for  OLIGON(R)  and to continue
developing new aspects of the technology.  We also plan to continue  development
of methlylene blue and other products in our pipeline.

        With  respect  to  our  gene  therapy  technology,   we  have  completed
laboratory  research  which  confirms  proof of  principal  of our gene  therapy
technology  and has added to the  pre-clinical  data which will be important for
any subsequent regulatory  submission.  This laboratory research was required to
allow the Company and the  research  departments  of the  relevant  universities
assisting  with this  technology  to file  patents  for which  the  Company  has
licensing rights. We now plan to perform additional clinical trials with the two
lead products related to this technology.

        Key Personnel, Consultants and Infrastructure

        On July 22, 2002,  David P. Luci commenced  employment  with the Company
and serves as Director of Finance,  General  Counsel and Corporate  Secretary of
the  Company,  pursuant  to  terms  which  are  memorialized  in  an  Employment
Agreement,  dated March 31, 2003.  See Part III,  Item 9  "Directors,  Executive
Officers,  Promoters and Control  Persons;  Compliance with Section 16(a) of the
Exchange Act - Employment Agreements" below.

        On September 3, 2002,  the Company and ILEX  constituted  the management
team (the  "Management  Team") for the  development  of Clofarabine in the U.S.,
Canada and Europe.  The Management  Team meets  regularly to plan and coordinate
clofarabine  drug development on an ongoing basis. The Management Team currently
consists  of Dr.  Wood and Mr.  Luci from the  Company  and  Jeffrey  Buchalter,
President and Chief Executive Officer of Ilex.



                                       52




        On September  17,  2002,  the Company  announced  its  establishment  of
principal executive offices at 509 Madison Avenue, Suite 404, New York, New York
10022.

        On September 24, 2002, Mr. Thomas Scott Nelson  resigned his position as
Chief Financial Officer of the Company. Mr. Luci has taken responsibility as the
Company's  principal  accounting  officer.  Mr.  Nelson  continues  his  role as
director of the Company.

        On September 30, 2002, Stuart Smith resigned from his position as Senior
Vice President of the Company;  his  employment  agreement was  terminated.  The
Company  issued shares of its common stock to Mr. Smith at the then current fair
market value in satisfaction  of all  outstanding  obligations of the Company to
Mr. Smith pursuant to the employment agreement.

        On  October  6,  2002,  Mr.  Hugh  Griffith  commenced  employment  with
Bioenvision Ltd., a wholly owned subsidiary of the Company.  Mr. Griffith serves
as Commercial  Director (Europe) and is responsible for Bioenvision's  marketing
campaign for modrenal, which is approved in the United Kingdom for the treatment
of advanced  post-menopausal  breast  cancer,  and for  Bioenvision's  sales and
marketing  initiatives for all other approved products  throughout Europe which,
initially, includes methylene blue and OLIGON.

        On November 1, 2002,  the Company  entered into an agreement  with Queen
Mary Westfield College,  University of London ("Queen Mary"), pursuant to which,
in  pertinent  part,  Queen  Mary has  agreed to perform  certain  research  and
development  activities in connection with the development of modrenal(TM).  The
term of the agreement is five years, subject to certain rights of the parties to
terminate prior thereto.

        On December 1, 2002, the Company  appointed Mr. Ian Abercrombie to serve
as Sales Manager  (Europe).  Messrs.  Abercrombie  and Griffith,  together,  are
creating a worldwide marketing strategy for the Company's products and marketing
Modrenal (TM) in the United Kingdom.  Further, Messrs.  Abercrombie and Griffith
are designing plans to expand the Company's  marketing  strategy  throughout the
European Community and to commence  pre-registration  marketing  activities with
Clofarabine worldwide, except for North America.

        On December 31,  2002,  the Company  entered into a one-year  employment
agreement  with Dr.  Christopher  B.  Wood who  serves  as  Chairman  and  Chief
Executive  Officer of the Company.  See Part III, Item 9  "Directors,  Executive
Officers,  Promoters and Control  Persons;  Compliance with Section 16(a) of the
Exchange Act - Employment Agreements" below.

        On December 31, 2002,  the Company  entered into a consulting  agreement
with Dr.  Deidre  Tessman to serve as a regulatory  consultant to the Company in
connection with the European development of Clofarabine.

        In January 2003, we entered into an agreement with RRD International LLC
("RRD"),  pursuant  to  which  RRD  serves  as the  global  product  development
consultant to the Company in connection  with the  development  of  Clofarabine,
Modrenal  (TM) and OLIGON and assists with  designing  and managing our clinical
development  program  for our  products.  On April 2, 2003,  the Company and RRD
further  memorialized  their  agreement  pursuant  to a formal  Master  Services
Agreement and Registration  Rights Agreement and, in connection  therewith,  the
Company  issued a Warrant to RRD  pursuant to which RRD has the right to acquire
175,000  shares of our  common  stock at an  exercise  price of $2.00 per share,
which warrant includes registration rights under certain circumstances.

        In April 2003, we entered into an exclusive  license  agreement with CLL
Pharma ("CLL"), pursuant to which CLL has agreed to develop a new formulation of
modrenal using proprietary patented technology of CLL. The term of the agreement
is for a period of 24 months  following the first delivery of reformulated  drug
product.

        In May  2003,  we  entered  into a  Sub-License  Agreement  with  Dechra
Pharmaceuticals,  plc ("Dechra"), pursuant to which Bioenvision sub-licensed the
marketing and  development  rights to modrestane,  solely with respect to animal
health  applications,  in the United States and Canada,  to Dechra.  We received
$1.25 million in cash, together with future milestone and royalty payments which
are contingent upon the occurrence of certain events.

        In May 2003,  we  entered  into a Master  Services  Agreement  with Penn
Pharmaceutical Services Limited ("Penn"), pursuant to which Penn will assist the
Company with labeling,  packaging and  distribution  of Clofarabine  and certain
other  services  including  regulatory  and quality  control,  in each case,  as
requested by the



                                       53




Company on an ongoing  basis.  The term of the agreement is 12 months subject to
automatic 12 month extensions unless earlier terminated by either party.

        In June  2003,  we entered  into a supply  agreement  and a  development
agreement, in each case, with Ferro Phanstiehl Laboratories, ("Ferro"), pursuant
to which Ferro will  manufacture and exclusively  supply to us our global supply
of Clofarabine  and perform a scale-up of this compound for commercial  use. The
term of the supply  agreement is five-years  from the first  product  regulatory
approval for Clofarabine, subject to certain early termination rights.

        Scientific Advisory Board / Modrenal Launch

        In December  2002, the Company's  scientific  advisory board convened at
the Meeting of the American Society of  Hematologists  in  Philadelphia,  PA and
reviewed the clinical trial results to date and planned future  clinical  trials
for clofarabine.

        In May 2003, the Company's  scientific  advisory board met to review and
discuss  the  design  and  strategy  for the  forthcoming  clinical  trials  for
modrenal, globally, for patients with breast cancer.

        In May 2003,  the  Company  launched  the  marketing  of modrenal in the
United  Kingdom  for breast  cancer at the Royal  College of Surgeons in London,
England.

Recent Accounting Pronouncements

        In July 2002,  the FASB  Issued  Statement  146,  "Accounting  for Costs
Associated  with Exit or  Disposal  Activities"  ("SFAS  146").  This  Statement
addresses  financial  accounting and reporting for costs associated with exit or
disposal  activities and nullifies  Emerging  Issues Task Force (EITF) Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Cost to Exit an Activity (including Certain Costs Incurred in a Restructuring)."
The principal  difference  between this  Statement and Issue 94-3 relates to its
requirements  for  recognition of a liability for a cost associated with an exit
or disposal  activity.  This  Statement  requires  that a  liability  for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred.  Under  Issue 94-3,  a liability  for an exit cost as defined in Issue
94-3 was  recognized at the date of an entity's  commitment to an exit plan. The
provisions of this Statement are effective for exit or disposal  activities that
are initiated  after December 31, 2002.  Effective  January 1, 2003, the Company
adopted the  provisions  of SFAS 146 which did not have an impact on the results
of operations or financial position.

        In November 2002,  the FASB issued  Interpretation  No. 45,  "Guarantors
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees of  Indebtedness  of Others" ("FIN 45"). FIN 45 requires that certain
guarantees  be initially  recorded at fair value,  which is  different  from the
general  current  practice of recording a liability only when a loss is probable
and reasonably  estimable.  FIN 45 also requires a guarantor to make significant
new  disclosures for virtually all  guarantees.  Effective  January 1, 2003, the
Company  adopted the disclosure  requirements  under FIN 45 which did not have a
material  impact on the  results of  operations  or  financial  position  of the
Company.

        On December  31,  2002,  the FASB issued SFAS No. 148,  "Accounting  for
Stock Based  Compensation  Transition  and  Disclosure"  ("SFAS 148").  SFAS 148
amends FASB Statement No. 123,  "Accounting  for Stock Based  Compensation,"  to
provide  alternative  methods of  transition  to SFAS 123's fair value method of
accounting  for  stock-based  employee  compensation.  SFAS 148 also  amends the
disclosure  provisions  of SFAS 123 and APB Opinion No. 28,  "Interim  Financial
Reporting,"  to require  disclosure  on the  summary of  significant  accounting
policies  of the  effects  of an  entity's  accounting  policy  with  respect to
stock-based employee  compensation on reported net income and earnings per share
in annual and interim financial  statements.  While SFAS 148 does not amend SFAS
123 to require  companies to account for employee  stock  options using the fair
value  method,  the  disclosure  provisions  of SFAS 148 are  applicable  to all
companies with  stock-based  employee  compensation,  regardless of whether they
account  for the  compensation  using the fair  value  method of SFAS 123 or the
intrinsic  value  method of APB  Opinion 25. The  Company  adopted the  required
disclosure provisions of SFAS 148 as described under accounting policy footnote,
"Stock Based Compensation."

        In January 2003, the FASB issued  interpretation No. 46,  "Consolidation
of  Variable  Interest  Entities--An  Interpretation  of ARB No. 51" ("FIN 46"),
which addresses  consolidation of variable interest entities. FIN 46 expands the
criteria for  consideration  in determining  whether a variable  interest entity
should  be   consolidated



                                       54




by a business entity,  and requires  existing  unconsolidated  variable interest
entities (which include,  but are not limited to, Special Purpose  Entities,  or
SPE's) to be consolidated by their primary  beneficiaries if the entities do not
effectively disburse risks among parties involved.  This interpretation  applies
immediately  to variable  interest  entities  created after January 31, 2003 and
variable  interest  entities in which an enterprise  obtains and interest  after
that date. It applies in the first fiscal year or interim period beginning after
June 15,  2003 to variable  interest  entities  in which an  enterprise  holds a
variable  interest that it acquired before February 1, 2003. The adoption of FIN
46 is not  expected  to have a material  impact on the results of  operation  or
financial position of the Company.

        In May 2003,  the FASB  issued  SFAS No.  150,  "Accounting  for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity" (SFAS
150"). The objective of SFAS No. 150 is to establish standards for how an issuer
classifies and measures certain financial  instruments with  characteristics  of
both  liabilities  and equity.  SFAS 150 is effective for  financial  statements
entered  into  or  modified  after  May 31,  2003  and  for  existing  financial
instruments after July 1, 2003. The adoption of SFAS 150 is not expected to have
a material  impact on the results of  operations  or  financial  position of the
Company.

        In May 2003, the Emerging Issues Task Force ("EITF") reached a consensus
on EITF Issue No.  00-21,  "Revenue  Arrangements  with  Multiple  Deliverables"
("EITF  00-21").  EITF  00-21  provides  guidance  on how to  determine  when an
arrangement that involves multiple revenue-generating activities or deliverables
should be divided into  separate  units of  accounting  for revenue  recognition
purposes,  and if this division is required,  how the arrangement  consideration
should be allocated among the separate units of accounting.  The guidance in the
consensus  is  effective  for  revenue  arrangements  entered  into in  quarters
beginning  after June 15,  2003.  The  adoption of EITF 00-21 did not impact the
Company's  consolidated  financial position or results of operations,  but could
affect the timing or pattern  of revenue  recognition  for future  collaborative
research and/or license agreements.

Subsequent Events

        In August  2003,  we entered  into an  amendment  to the  co-development
agreement with Stegram  Pharmaceuticals  plc ("Stegram"),  pursuant to which, in
pertinent part, we succeeded to the U.K. marketing rights to modrenal.

        In August  2003,  we received  notice that our  application  to list our
shares of common stock had been approved by the American  Stock  Exchange  under
the symbol "BIV".  Our shares of common stock commenced  trading on the American
Stock Exchange on September 8, 2003.
In August 2003, SRI granted us an irrevocable, exclusive option to make, use and
sell products derived from the technology in Japan and Southeast Asia. We intend
to convert the option to a license  upon  sourcing an  appropriate  co-marketing
partner to develop these rights in such territory.
In September 2003, we entered into a letter  agreement with ILEX Oncology,  Inc.
pursuant to which we are working with ILEX to co-develop an oral formulation for
clofarabine;  the rights and related  costs to which we agreed to split  equally
with ILEX.


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                      FOR THE QUARTER ENDED MARCH 31, 2004

The  following  discussion  and analysis of  significant  factors  affecting the
Company's operating results,  liquidity and capital resources and should be read
in conjunction with the accompanying financial statements and related notes.

Overview

        We have several products and technologies under development, but our two
lead drugs are Clofarabine and Modrenal(R).

        Clofarabine is a purine nucleoside analogue, or a small molecule, which,
based on our own clinical studies and studies conducted by others on our behalf,
we believe is effective in the treatment of leukemia. Clofarabine may also be an
effective agent to treat patients with solid tumor cancers, based on preclinical
studies and Phase I/II clinical trials performed to date. In the United Kingdom,
we are currently  conducting  clinical trials with Clofarabine for the treatment
of pediatric and adult acute leukemias. In the U.S., Clofarabine



                                       55




is currently in Pivotal Phase II clinical trials for pediatric acute  leukemias.
In January, 2002, the European orphan drug application for use of Clofarabine to
treat acute leukemia in adults was approved.  Orphan Drug  Designation  provides
the Company with ten years of market exclusivity in Europe for Clofarabine.  The
drug has also been granted orphan drug status and "fast track"  treatment by the
United States Food and Drug Administration (the "FDA"). Further, in August 2003,
we obtained the  exclusive,  irrevocable  option to sell,  market and distribute
Clofarabine in Japan and Southeast Asia from the inventor of Clofarabine.  These
rights were not  previously  granted by  Southern  Research  Institute  and fall
outside  the scope of the  Company's  then  current  licensing  and  development
contracts  with  respect to  Clofarabine.  We  originally  obtained an exclusive
license  from  Southern  Research  Institute  to  sell,  market  and  distribute
Clofarabine  throughout the world,  except for Japan and Southeast Asia, for all
human  applications,  pursuant to a co-development  agreement,  dated August 31,
1998, between the Company and Southern Research Institute. On March 12, 2001, we
granted an exclusive  option to sell,  market and distribute  Clofarabine in the
U.S.  and  Canada  to ILEX  Oncology,  Inc.  We  converted  ILEX's  option to an
exclusive  sublicense on December 30, 2003.  Accordingly,  we do not possess the
rights to sell, market and distribute Clofarabine in the U.S.

        Modrenal(R) is a hormonal agent with a novel mode of action,  that makes
it an effective  agent in patients with advanced breast cancer who have acquired
resistance to other hormonal agents. We launched  Modrenal(R) in May 2003 in the
United Kingdom,  where we have received  regulatory  approval for its use in the
treatment of post-menopausal breast cancer. In the first half of 2004, we intend
to apply for mutual recognition in another four large European territories in an
effort to gain approval for  Modrenal(R) in each such  territory.  We anticipate
receiving  approval in each such  territory  in the first half of calendar  year
2005.  Further, we filed an IND for prostate cancer clinical trials in the US in
February  2004 and intend to commence our first US clinical  trial in the second
quarter of calendar year 2004.  Further,  we intend to seek regulatory  approval
for  Modrenal(R) in the United States as salvage  therapy for  hormone-sensitive
breast  cancer upon  completion of additional  clinical  studies.  We originally
obtained an exclusive license from Stegram  Pharmaceuticals Ltd. to sell, market
and distribute  Modrenal(R)  throughout the world,  except for South Africa, for
all human and animal health applications, pursuant to a co-development agreement
dated July 15, 1998.

        Our primary business strategy relates to our two lead drugs, Clofarabine
and Modrenal(R).  With Clofarabine, our strategy is to complete drug development
in Europe  and  obtain  marketing  authorization  from the  European  regulatory
authorities to market and distribute  Clofarabine for the treatment of pediatric
and adult acute  leukemias.  We  anticipate  receiving  approval  early in 2005,
subject  to our  obtaining  approval  of the  regulatory  authorities.  We  will
continue  clinical  trials in other  indications  with the  intention of seeking
label extensions after Clofarabine's first approval. With Modrenal, our strategy
is to expand  sales in the United  Kingdom and apply for mutual  recognition  to
obtain the right to sell Modrenal(R)  throughout Europe. We anticipate receiving
mutual recognition from major European Community member states by mid-2005.  Our
secondary business strategy is to continue to develop our portfolio of ancillary
products and technologies.  We anticipate that revenues derived from Clofarabine
and  Modrenal(R)  will permit us to further  develop our  portfolio of ancillary
products and technologies.

        Although our primary business  strategy is to develop and  commercialize
our two lead drugs,  Clofarabine  and  Modrenal(R)  for sale in the  territories
within which we have  licensed the right to sell,  market and  distribute  these
drugs, our board of directors continues to evaluate other strategic alternatives
for the Company and its products,  including the potential disposition of all or
a  portion  of  our  business,   potential   licensing   and/or   co-development
arrangements   with  other   pharmaceutical   companies  and  certain  financing
strategies.

Company Status

        We have made  significant  progress in developing our product  portfolio
over the past twelve months,  and have multiple  products in clinical trials. We
have incurred  losses during this emerging  stage.  We anticipate  that revenues
derived  from the two lead drugs will  permit us to  further  develop  our other
products and potential products currently in our development portfolio. On March
29, 2004,  ILEX  Oncology,  Inc. filed a New Drug  Application  with the FDA for
approval of  Clofarabine  in the U.S. for the treatment of pediatric ALL and AML
(the "NDA Filing"). The Company has taken the NDA filing and currently is in the
process of converting the filing to a Common Technical  Document (the "CTD") for
filing  with  the  EMEA  as the  basis  potentially  for  European  approval  of
Clofarabine  for the treatment of pediatric ALL and AML. The Company  expects to
file the CTD with the EMEA in the third  quarter of calendar  year 2004. We have
commenced  marketing  one of our lead  products,  Modrenal(R),  and we intend to
continue  developing our existing platform  technologies with a primary business
focus on drugs to treat cancer, and  commercializing  products derived from such
technologies.



                                       56




        A key  element of our  business  strategy  is to continue to develop new
technologies  and products  that we believe  offer unique  market  opportunities
and/or  complement our existing product lines. As a result of the acquisition of
Pathagon  Inc., in February 2002, we have several  anti-infective  technologies.
These include the OLIGON(R)  technology,  an advanced  biomaterial that has been
approved for certain  indications by the FDA in the United States,  and is being
sold by a product co-development  partner, and the use of thiazine dyes, such as
methylene  blue,  which  are  used for in vitro  and in  vivos  inactivation  of
pathogens  (viruses,  bacteria and fungus) in biological  fluids.  It is not the
Company's strategy to sell devices or to expand into the  anit-infective  market
per se, but the  technology  obtained in the Pathagon  acquisition  has specific
application  for support of the cancer patient and oncology  treatment.  We have
had  discussions  with potential  product  co-development  partners from time to
time, and plan to continue to explore the possibilities for  co-development  and
sub-licensing  in order to implement  our  development  plans.  In addition,  we
believe that some of our products may have  applications in treating  non-cancer
conditions  in humans and in  animals.  Those  conditions  are  outside our core
business focus and we do not presently intend to devote a substantial portion of
our resources to  addressing  those  conditions.  In May 2003, we entered into a
Sub-License Agreement with Dechra Pharmaceuticals,  plc ("Dechra"),  pursuant to
which Bioenvision sub-licensed to Dechra the marketing and development rights to
modrestane,  solely with respect to animal  health  applications,  in the United
States and  Canada.  We received  $1.25  million in cash,  together  with future
milestone  and royalty  payments  which are  contingent  upon the  occurrence of
certain  events.  We  intend  to  continue  to try to  exploit  these  types  of
opportunities  as they arise.

        You should  consider the  likelihood of our future  success to be highly
speculative in light of our limited  operating  history,  as well as the limited
resources, problems, expenses, risks and complications frequently encountered by
similarly  situated  companies.  To address  these risks,  we must,  among other
things:

o    satisfy  our future  capital  requirements  for the  implementation  of our
     business plan;

o    commercialize our existing products;

o    complete  development  of products  presently  in our  pipeline  and obtain
     necessary regulatory approvals for use;

o    implement and successfully  execute our business and marketing  strategy to
     commercialize products;

o    establish and maintain our client base;

o    continue to develop new products and upgrade our existing products;

o    respond to industry and competitive developments; and

o    attract, retain, and motivate qualified personnel.

        We may not be successful in addressing  these risks. If we are unable to
do so, our business  prospects,  financial  condition  and results of operations
would be materially  adversely  affected.  The likelihood of our success must be
considered in light of the development cycles of new pharmaceutical products and
technologies and the competitive and regulatory environment in which we operate.

Results of Operations

        We have acquired  development and marketing rights to a portfolio of six
platform technologies  developed over the past fifteen years, from which a range
of products  have been derived and  additional  products may be developed in the
future.  Although we intend to commence  marketing  our lead  product,  Modrenal
(TM),  and  to  continue  developing  our  existing  platform  technologies  and
commercializing  products derived from such  technologies,  a key element of our
business  strategy is to continue to develop new  technologies and products that
we believe  offer unique market  opportunities  and/or  complement  our existing
product  lines.  Once a product or technology  has been launched into the market
for  a  particular   disease   indication,   we  plan  to  work  with   numerous
collaborators,  both  pharmaceutical and clinical,  in the oncology community to
extend  the  permitted  uses of the  product to other  indications.  In order to
market our products  effectively,  we intend to develop marketing alliances with
strategic partners and may co-promote and/or co-market in certain territories.



                                       57




        The Company recorded  revenues for the three months ended March 31, 2004
and 2003 of approximately  $846,000 and $46,000,  respectively,  representing an
increase of $800,000.  The Company  recorded  revenues for the nine months ended
March 31, 2004 and 2003 of approximately $1,758,000 and $464,000,  respectively,
representing an increase of $1,294,000. Approximately $620,000 and $1,390,000 of
the  increase  for the three  and nine  month  periods  ended  March  31,  2004,
respectively,  relates to reimbursement for Clofarabine research and development
costs incurred by the Company for European drug development  (partially  offset,
for the for the nine months  ended March 31,  2004,  by an extension of the time
period within which the Company recognizes Clofarabine milestone revenues, which
has  the  effect  of  reducing   revenue   recognized  for  such  milestones  by
approximately  $300,000 during the period).  Revenues reflect our agreement with
our  co-development  partners and/or licenses in connection with our platform of
drugs and  technologies  and includes sales of Clofarabine in Europe pursuant to
the Company's Named Patient Program.

        Research and development costs for the three months ended March 31, 2004
and 2003 were $994,000 and $320,000,  respectively,  representing an increase of
$674,000.

        Research and development  costs for the nine months ended March 31, 2004
and 2003 were $2,545,000 and $1,162,000,  respectively,  representing a increase
of $1,383,000.

        Our research and  development  costs include costs  associated  with six
projects  for  which  the  Company  devotes   significant   time  and  resource.
Clofarabine  research and development  costs for the nine months ended March 31,
2004 and 2003  were  $1,612,000  and  $730,000,  respectively,  representing  an
increase of $881,000.  The increase primarily reflects the costs associated with
our having commenced clinical trials in Europe to develop Clofarabine.  Modrenal
research and development costs for the nine months ended March 31, 2004 and 2003
were $744,000 and $561,000,  respectively,  representing a decrease of $183,000.
Gossypol research and development costs were $152,000 and $27,000, respectively,
representing a increase of $124,000. Gene Therapy research and development costs
for the nine  months  ended  March  31,  2004 and  2003  were 0 and  $(158,000),
respectively,  representing  a decrease  of  $158,000.  The  decrease  primarily
reflects  an  accrued  expense  in the year  ended  2002 of  $200,000  which was
determined to be less than originally estimated by the Company in the year ended
June 30, 2003. The clinical trials and development  strategy for the Clofarabine
and Modrenal  projects,  in each case, is  anticipated  to cost several  million
dollars  and will  continue  for  several  years based on the number of clinical
indications within which we plan to develop these drugs.  Currently,  management
cannot estimate the timing or costs  associated with these projects because many
of the variables,  such as interaction with regulatory  authorities and response
rates in various  clinical trials,  are not predictable.  Our other two research
and  development  projects  involve our two ancillary  technologies;  OLIGON and
Methylene Blue. We do not currently  devote any significant time or resources to
these research and  development  projects,  but we intend to do so if and to the
extent we successfully  commercialize our lead drugs, Clofarabine and Modrenal ,
over the next two years.

        Selling,  general and administrative expenses for the three months ended
March  31,  2004  and  2003  were  $3,722,000  and   $1,050,000,   respectively,
representing  an increase of  $2,672,000.  Selling,  general and  administrative
expenses for the nine months ended March 31, 2004 and 2003 were  $7,080,000  and
$2,743,000, respectively,  representing an increase of $4,337,000. Approximately
$1,943,000  and  $2,597,000 of the increase for the three and nine month periods
ended March 31, 2004, respectively, relates to stock based compensation recorded
during the period  resulting  from the  repricing  of the  options  issued to an
officer of the Company.  Approximately  $57,000 and $155,000 of the increase for
the three and nine month periods ended March 31, 2004, respectively,  was due to
the  expansion of the internal  management  team from one full time  employee to
eight full time  employees  during the three and nine month  periods then ended.
Approximately  $98,000 and $532,000 of the increase for the three and nine month
periods ended March 31, 2004,  respectively,  was due to an increase in investor
and  public  relations   expenses  related  to  pre-marketing   activities  with
Clofarabine and marketing costs associated with Modrenal.  Approximately  $2,000
and $107,000 of the increase  for the three and nine month  periods  ended March
31, 2004,  respectively,  was related to increases  in travel  related  expenses
incurred  in order to  successfully  manage  our more  active  drug  development
activities  during the three and nine month  periods  then ended.  Approximately
$562,000  and $817,000 of the  increase in Selling,  general and  administrative
expense for the three and nine month periods ended March 31, 2004, respectively,
was due to increases in our  consulting  and legal expenses as the result of our
recent  growth  internally  and  operationally  during  the three and nine month
periods ended March 31, 2004, respectively.

        Depreciation and  amortization  expense for the three months ended March
31, 2004 and 2003 were  $343,000 and  $339,000,  respectively,  representing  an
increase of $5,000.  Depreciation and  amortization



                                       58




expense for the nine months  ended March 31, 2004 and 2003 were  $1,023,000  and
$1,006,000,  respectively,  representing an increase of $17,000. The increase is
primarily due to the amortization of certain intangible assets we acquired.

Liquidity and Capital Resources

        We anticipate that we may continue to incur significant operating losses
for the foreseeable  future.  There can be no assurance as to whether or when we
will  generate  material  revenues  or  achieve  profitable  operations.  We are
actively seeking strategic alliances in order to develop and market our range of
products.

        We  consummated  a private  placement  transaction  on March  22,  2004,
pursuant to which we raised  $12.8  million and issued  2,044,514  shares of our
common stock and warrants to purchase an additional 408,903 shares of our common
stock at a conversion  price of $7.50 per share. We consummated a second closing
for this  financing on May 13, 2004 in order to comply with certain  contractual
obligations of the Company to its holders of Series A Preferred Stock which hold
preemptive  rights for equity  offerings of the Company.  The Company  raised an
additional  $3.5 million in the second closing and issued an additional  558,384
shares of our common stock and warrants to purchase 111,677 shares of our common
stock at a conversion price of $7.50 per share.

        We received an initial payment from Dechra of $1,250,000 on May 13, 2003
upon execution of our sub-license  agreement with Dechra. This agreement expires
upon  expiration of the last patent related to modrenal or the completion of the
last royalty obligation as set forth therein.

        We received a milestone  payment  from ILEX of $3.5  million on December
30, 2003,  upon  executing an amendment to the  co-development  agreement.  This
payment related to the achievement of a milestone; namely, completion of pivotal
phase II trials.  Pursuant to the Company's  co-development  agreement with SRI,
the Company immediately paid $1.75 million of such milestone payment to SRI.

        On March 31, 2004, we had cash and cash  equivalents of $17,558,813  and
working capital of $17,197,041,  which management believes will be sufficient to
continue currently planned  operations over the next twelve months.  Although we
do not  currently  intend to raise  any  additional  funds  for the next  twelve
months,  we cannot ensure additional funds will not be raised during such period
because of the  significant  scale-up  of our  operating  activities,  including
Clofarabine development and the launch of Modrenal.

        Further,  a key  element of our  business  strategy  is to  continue  to
develop new  technologies  and  products  that we believe  offer  unique  market
opportunities and/or complement our existing product lines. We are not presently
considering any such transactions, and we do not presently expect to acquire any
significant  assets  over  the  coming  twelve  month  period,  but if any  such
opportunity  arises  and we deem it to be in our  interests  to  pursue  such an
opportunity, it is possible that additional financing would be required for such
a purpose.

Future commitments of the Company for the twelve-month  period April 1st through
March 31 are as follows:

                                    Payments Due:

                       Total              2005                     2006

Employee Contracts     2,436,186          1,218,093                1,218,093
Occupancy Lease          248,605            164,972                   83,633
Total                  2,684,791          1,383,065                1,301,726

        In  management's  opinion,  cash flows  from  operations  and  borrowing
capacity  combined  with  cash on hand will  provide  adequate  flexibility  for
funding the Company's  working  capital  obligations for the next twelve months.
However,  there can be no assurance that suitable debt or equity  financing will
be available for the Company.  The Company has a commitment  under its operating
lease with the New York  office.  The Company  leases  3,229 square feet under a
lease  that  expires  on  September  30,  2005.  The  Company  is a party  to an
additional  month-to-month  lease  agreement  for  its  subsidiary,  Bioenvision
Limited.

        The Company is required to accrue for and pay a dividend of 5%,  subject
to certain  adjustments,  on its cumulative  Series A Convertible  Participating
Preferred  Stock.  In the event of a voluntary  or  involuntary  liquidation  or
dissolution of the Company,  before any  distribution of assets shall be made to
the holders of the Company's  securities which are junior to the preferred stock
(such as the common stock),  holders of the preferred stock shall be paid out of
the assets of the Company  legally  available for  distribution to the



                                       59




Company's  stockholders an amount per share equal to the initial  original issue
price  ($3.00)  subject  to  certain  adjustments  plus all  accrued  but unpaid
dividends on such preferred stock.

Subsequent Events

        In April 2004, ILEX paid the Company the $2,000,000,  which it agreed to
pay upon the filing of the NDA. ILEX filed the NDA with FDA in March 2004.

        In April 2004, the Company entered into a Clinical Development Agreement
with Covance Inc.  pursuant to which Covance has agreed to perform  certain drug
development  activities in connection  with the Company's  BIV-121  sponsor lead
clinical trial in Europe.


                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        In August 2001  Bioenvision  issued  208,333 shares at the rate of $1.25
per share in lieu of salary and consulting fees as follows: Christopher B. Wood,
98,684 shares; Thomas Nelson, 27,412 shares; and Stuart Smith, 82,237 shares.

        In August 2001, we obtained a $1 million line of credit facility,  which
expires in September 2002, from Jano Holdings Limited,  one of our stockholders.
This credit facility was terminated in May 2002.

        In October 2001, we issued 134,035 shares of common stock to officers as
payment for salaries accrued to September 30, 2001.

        On November 16,  2001,  we entered  into an  engagement  letter with SCO
Financial Group,  pursuant to which SCO would act as our financial  advisor.  In
connection with the engagement  letter,  we issued a warrant to purchase 100,000
shares of common  stock at an  exercise  price of $1.25 per  share,  subject  to
certain anti-dilution adjustments.  The warrants expire five years from the date
of  issuance.  Pursuant  to this  engagement  letter,  among other  things,  SCO
Financial Group performs investor relations services for the Company and earns a
monthly fee of $9,000 per month in connection therewith.

        On November 16, 2001, in connection with securing a credit facility with
SCO Capital, we issued warrants to purchase 1,500,000 shares of our common stock
at a  strike  price  of  $1.25  per  share,  subject  to  certain  anti-dilution
adjustments.  The  warrants  expire  five years from the date of  issuance.  The
credit facility with SCO Capital was terminated in May 2002.

        On February 5, 2002,  we completed the  acquisition  of Pathagon Inc. In
connection  therewith,  on February 1, 2002 we issued 7,000,000 shares of common
stock to the former stockholders of Pathagon Inc.

        In May 2002,  we  completed  a private  placement  pursuant  to which we
issued an aggregate of 5,916,666  shares of Series A  convertible  participating
preferred  stock for $3.00 per share and  warrants to purchase an  aggregate  of
5,916,666  shares of common  stock and in March and May of 2004 we  completed  a
private  placement  pursuant to which we issued an aggregate of 2,602,898 shares
of our common stock and  warrants to purchase an aggregate of 780,870  shares of
common stock. An affiliate of SCO Capital Partners LLC, one of our stockholders,
served as financial  advisor to the Company in connection with these  financings
and earned a placement fee of  approximately  $1,200,000 in connection  with the
May 2002 private  placement  and warrants to purchase  260,291  shares of common
stock for $6.25 per share for the March and May 2004 financings.  This affiliate
of SCO Capital  Partners LLC  continues  to serve as a financial  advisor to the
Company.

            MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        In August  2003,  we received  notice that our  application  to list our
shares of common stock had been  approved by the American  Stock  Exchange.  Our
shares of common  stock  commenced  trading on the  American  Stock  Exchange on
September 8, 2003.  The following  represents the range of reported high and low
bid quotations  for our common stock on a quarterly  basis since July 1, 2001 as
reported on the OTC  Bulletin  Board  through  the first  quarter of 2003 and as
reported  on AMEX for the  second  quarter of 2003 and all  subsequent  periods.
Throughout  this period and through  September 5, 2003,  our trading  symbol was
"BIOV"  Our  trading  symbol  was  changed  to "BIV" on  September  8, 2003 upon
commencement  of  listing  our  shares of  common  stock on the  American  Stock
Exchange.  The  quotations  also reflect  inter-dealer  prices,  without  retail
mark-up, mark-down or commission, and may not represent actual transactions.



                                       60




                                       High                                Low
                                       ----                                ---

Fiscal Year Ended June 30, 2002
First Quarter                          $2.50                               $1.60
Second Quarter                         $2.50                               $1.15
Third Quarter                          $3.00                               $2.25
Fourth Quarter                         $3.60                               $1.75

Fiscal Year Ended June 30, 2003
First Quarter                          $2.55                               $1.35
Second Quarter                         $2.25                               $1.10
Third Quarter                          $1.55                               $0.39
Fourth Quarter                         $2.89                               $0.77

Nine Months Ended March 31, 2004
First Quarter                          $4.90                               $1.70
Second Quarter                         $5.40                               $3.13
Third Quarter                          $10.25                              $3.74

        On June 11, 2004, we had 189 stockholders of record.

        We have never declared or paid cash dividends on our capital stock,  and
our board of  directors  does not intend to declare or pay any  dividends on the
common  stock in the  foreseeable  future.  However,  the Company is required to
accrue for and pay a dividend  of 5%,  subject  to certain  adjustments,  on its
cumulative Series A Convertible  Participating Preferred Stock. We have not paid
dividends on our cumulative Series A Convertible  Participating  Preferred Stock
since May 8, 2002 but have accrued the dividends  since that time. Our earnings,
if any,  are  expected to be retained for use in  expanding  our  business.  The
declaration  and  payment  in the future of any cash or stock  dividends  on the
common stock will be at the discretion of the board of directors and will depend
upon a variety of factors,  including  our  ability to service  our  outstanding
indebtedness and to pay our dividend obligations on securities ranking senior to
the common stock, our future earnings, if any, capital  requirements,  financial
condition  and such other  factors as our board of directors  may consider to be
relevant from time to time.

                             EXECUTIVE COMPENSATION

        The following table sets forth  information for each of the fiscal years
ended June 30, 2003, 2002 and 2001 concerning the compensation  paid and awarded
to all individuals  serving as (a) our chief executive officer,  (b) each of our
four other most  highly  compensated  executive  officers  (other than our chief
executive officer) at the end of our fiscal year ended June 30, 2003 whose total
annual salary and bonus exceeded  $100,000 for these periods,  and (c) up to two
additional  individuals,  if any, for whom  disclosure  would have been provided
pursuant to (b) except that the individual(s)  were not serving as our executive
officers at the end of our fiscal year ended June 30, 2003:



                                       61




                                                     Summary Compensation Table

                              Annual compensation                      Long term compensation
                         ----------------------------- -------------------------------------------------------
                                                                  Awards                     Payouts
                                                                        Securities
                                                         Restricted     underlying     LTIP       All other
Name &                     Salary     Bonus     Other   Stock Awards   options/SARs   payouts    compensation
Principal                  ------     -----     -----   ------------   ------------   -------    ------------
Position           Year      $          $         $           $                          $            $
--------           ----
                                                        
Christopher B.
Wood (1)           2003   225,000       -
                   2002   225,000       -                                500,000
                   2001   180,000       -                              1,500,000

David P. Luci (2)  2003   205,200   57,000(3)                            500,000
                   2002      -          -
                   2001      -          -

Hugh Griffith (4)  2003   180,000   20,000                               300,000
                   2002      -          -
                   2001      -          -

Stuart Smith (5)   2003      -          -
                   2002   150,000       -                                      -
                   2001   150,000       -                                500,000


--------------------------

(1)   On April 30,  2001,  Dr.  Wood was granted  options to purchase  1,500,000
      shares of our common stock.  The options are  immediately  exercisable and
      originally  expired on April 30, 2004 but have been  extended to April 30,
      2006.  On December  31,  2002,  Dr.  Wood was granted  options to purchase
      500,000  shares of our common stock which vest and become  exercisable  in
      equal amounts on the first, second and third anniversaries of the December
      31, 2002 grant date.
(2)   On July 22, 2002, Mr. Luci was granted options to purchase  380,000 shares
      of our common stock.  On March 31, 2003, in connection  with the execution
      of an employment agreement between the Company and Mr. Luci, these options
      were cancelled and the Company  issued options to purchase  500,000 shares
      of common stock at a  then-current  fair market value.  Of these  options,
      options to purchase  170,000  shares of our common  stock are  immediately
      exercisable  and,  subject to certain  circumstances,  options to purchase
      110,000 shares of common stock vest and become  exercisable on each of the
      first, second and third anniversaries of March 31, 2003, the grant date.
(3)   This annual  bonus was  prorated  for the  portion of  calendar  year 2002
      within which Mr. Luci was  employed by the Company.  The net amount of the
      bonus paid to Mr. Luci after such pro-ration was equal to $25,000.
(4)   On October 23, 2002, Mr. Griffith was granted options to purchase  300,000
      shares of our common stock at a then-current  fair market value.  Of these
      options,  options to purchase  100,000 shares of our common stock vest and
      become  exercisable,  subject  to  certain  circumstances,  on each of the
      first, second and third anniversaries of October 23, 2002, the grant date.
(5)   On April 30,  2001,  Mr.  Smith was granted  options to  purchase  500,000
      shares of our common stock.  The options are  immediately  exercisable and
      originally  expired on April 30, 2004 but have been  extended to April 30,
      2006.  On September 30, 2002,  Stuart Smith  resigned from his position as
      Senior Vice  President  of the Company and his  employment  agreement  was
      terminated.

Employment Agreements

        We have entered into  employment  agreements  with each of our principal
executive officers.  Pursuant to these agreements,  our executive officers agree
to devote all or a substantial  portion of their business and professional  time
efforts to our business as executive officers. The employment agreements provide
for certain  compensation  packages,  which include  bonuses and other incentive
compensation.  The agreements also contain  covenants  restricting the employees
from competing  with us and our business and  prohibiting  them from  disclosing
confidential information about us and our business.



                                       62




        On  September  1, 1999,  we entered into an  employment  agreement  with
Christopher  B.  Wood,  M.D.  under  which he serves as our  Chairman  and Chief
Executive  Officer.  The initial term of Dr. Wood's employment  agreement is two
years with automatic  one-year  extensions  thereafter unless either party gives
written  notice to the  contrary.  On December 31,  2002,  we entered into a new
employment  agreement  with Dr.  Wood,  under which he continues to serve as our
Chairman and Chief Executive Officer. Under this contract, the term is one year,
with  automatic  one-year  extensions  thereafter  unless either party  provides
written notice to the contrary. Dr. Wood's new employment agreement provides for
an  initial  base  salary of  $225,000,  a bonus as  determined  by the Board of
Directors,  health  insurance  and other  benefits  currently  or in the  future
provided to key employees of the Company. If Dr. Wood's employment is terminated
other than for cause or if he resigns  for good reason or if a change of control
occurs,  he will  receive  a lump sum  payment  in an  amount  equal to his then
current  annual  base  salary  and any and all  unvested  options  will vest and
immediately become exercisable.

        On January 1, 2000, we entered into an employment  agreement with Stuart
Smith under which he serves as our Senior Vice  President.  The initial  term of
Mr.  Smith's  employment   agreement  is  two  years,  with  automatic  one-year
extensions  thereafter unless either party gives written notice to the contrary.
Mr. Smith's agreement  provides for an initial base salary of $150,000,  a bonus
as determined by the board of directors,  life  insurance  benefits equal to his
annual salary,  health  insurance and other benefits  currently or in the future
provided to our key  employees.  On September 30, 2002,  Mr. Smith resigned from
his position as Senior Vice President of the Company;  his employment  agreement
was terminated and the Company agreed to issue shares of its common stock to Mr.
Smith at the then current fair market value in  satisfaction  of all outstanding
obligations of the Company to Mr. Smith pursuant to the employment agreement.

        On March 31, 2003, we entered into an employment agreement with David P.
Luci,  pursuant to which he serves as our Director of Finance,  General  Counsel
and Corporate Secretary.  The initial term of Mr. Luci's employment agreement is
one-year,  with automatic  one-year  extensions  thereafter  unless either party
provides written notice to the contrary.  If Mr. Luci's employment is terminated
other than for cause or if he resigns  for good reason or if a change of control
occurs,  he will receive a lump sum payment in an amount equal to 1.5 multiplied
by the sum of (i) his then current annual base salary plus (ii) his then average
annual bonus for the preceding  two years and any and all unvested  options will
vest and immediately become exercisable.

Director Compensation

        Our policy is that  non-management  directors  are entitled to receive a
director's  fee of $1,000 per meeting for attendance at meetings of the board of
directors,  and are reimbursed for actual  expenses  incurred in respect of such
attendance.  We do not separately compensate employees for serving as directors.
We do not provide additional compensation for committee participation or special
assignments of the board of directors.

Stock Options

        Our Board of Directors has adopted,  and our stockholders  have approved
our  2003  Stock   Incentive  Plan.  The  plan  was  adopted  to  recognize  the
contributions made by our employees,  officers,  consultants,  and directors, to
provide those individuals with additional  incentive to devote themselves to our
future  success  and to improve  our  ability to  attract,  retain and  motivate
individuals upon whom our growth and financial success depends.

   The key provisions of the plan are as follows:

Eligibility and Administration.

        The plan authorizes the Board of Directors or the compensation committee
(the  "Administrator"),  to  (i)select  the  participants  who are to be granted
options,  restricted  shares or performance  units,  (ii)determine the number of
shares  of  Common  Stock  to be  granted  to each  participant,  (iii)designate
options, to the extent the award consists of options, as incentive stock options
or  nonstatutory   stock  options,   (iv)determine   the  vesting  schedule  and
performance  criteria,  if any, for restricted  shares and performance units and
(v)determine  to what  extent  the awards  may be  transferable.  As of the date
hereof,  there are  approximately  7  employees  who are  currently  eligible to
participate  in the  plan  under  the  Company's  policies.  All  directors  and
consultants   are  currently   eligible  to   participate   in  the  plan.   The
Administrator's  interpretations  and  construction  of the plan are  final  and
binding on the Company.



                                       63




Shares Available for Issuance Under the Plan

        The stock  subject to options  granted  under the plan are shares of the
Company's authorized but unissued or reacquired shares of Common Stock. On March
23, 2004,  the closing price of the common stock on the American  Stock Exchange
of the Common Stock was $8.45 per share. There are 3,000,000 shares reserved for
grants of options under the plan. On the same date, there were 22,934,616 shares
of Common Stock outstanding.

Grant, Exercise and other Terms of Awards.

        Options issued under the plan are designated as either  incentive  stock
options or  nonstatutory  stock  options.  Incentive  stock  options are options
meeting the  requirements of Section 422 of the Code, and  nonstatutory  options
are options not intended to so qualify.

        The  exercise  price of options  granted  under the plan may not be less
than  100% of the fair  market  value of the  Common  Stock of the  Company  (as
defined by the plan) on the date of the grant.  With respect to any  participant
who  owns  stock  representing  more  than  10%  of  the  voting  rights  of the
outstanding  Common Stock of the Company,  the exercise  price of any  incentive
stock  option  granted  must equal at least 110% of the fair market value of the
Common Stock on the grant date, and the maximum term of any such incentive stock
option must not exceed five years.

        Options,  restricted  shares  and  performance  units are  evidenced  by
written award  agreements in a form approved by the  Administrator  from time to
time and no award is effective  until the  applicable  award  agreement has been
executed by both  parties  thereto.  Options  granted  under the plan may become
exercisable  in  cumulative  increments  over a period of  months  or years,  or
otherwise,  as determined by the  Administrator.  The purchase  price of options
shall be paid in cash; provided, however, that if the applicable award agreement
so provides,  or the  Administrator,  in its sole discretion  otherwise approves
thereof,  the purchase price may be paid in shares of Common Stock having a fair
market  value  on the  exercise  date  equal  to the  exercise  price  or in any
combination  of cash and shares of Common Stock,  as long as the sum of the cash
so paid and the fair  market  value of the  shares  so  surrendered  equals  the
aggregate  purchase price. In addition,  the  Administrator  may permit deferred
compensation  elections by certain directors and executive  officers.  The award
agreement  evidencing the restricted  shares and/or  performance units shall set
forth the terms  upon  which  the  Common  Stock  subject  to any  awards or the
achievement of any cash bonus may be earned.

        No options granted under the plan are  exercisable  after the expiration
of ten years (or less in the discretion of the  Administrator)  from the date of
the grant,  and no incentive  stock options granted under the Amended Award Plan
to a  participant  who owns more than ten percent of the total  combined  voting
power of all classes of  outstanding  stock of the Company shall be  exercisable
after  the  expiration  of  five  years  (or  less,  in  the  discretion  of the
Administrator)  from the date of the grant.  The aggregate fair market value (as
of the  respective  date or  dates of  grant)  of the  shares  of  Common  Stock
underlying the incentive  stock options that are  exercisable for the first time
by a  participant  during any calendar year under the plan and all other similar
plans maintained by the Company may not exceed $100,000. If a participant ceases
to be an employee  of the  Company  for any reason  other than his or her death,
Disability  or  Retirement  (as  such  terms  are  defined  in the  plan),  such
participant shall have the right, subject to certain  restrictions,  to exercise
that option at any time within  ninety days (or less,  in the  discretion of the
Administrator) after cessation of employment,  but, except as otherwise provided
in the  applicable  award  agreement,  only to the extent  that,  at the date of
cessation  of  employee,  the  participant's  right to exercise  such option had
vested and had not been previously  exercised.  The  Administrator,  in its sole
discretion,  may provide  that the option shall cease to be  exercisable  on the
date of such  cessation if such cessation  arises by reason of  termination  for
Cause (as such term is defined in the Amended Award Plan) or if the  participant
becomes an employee,  director or consultant of an entity that the Administrator
determines is in direct competition with the Company.

        In the  event a  participant  dies  before  such  participant  has fully
exercised his or her option, then the option may be exercised at any time within
twelve months after the participant's  death by the executor or administrator of
his or her estate or by any person who has acquired the option directly from the
participant by bequest or inheritance,  but except as otherwise  provided on the
applicable award  agreement,  only to the extent that, at the date of death, the
participant's  right to exercise such option had vested pursuant to the terms of
the  applicable  award  agreement  and  had not  been  forfeited  or  previously
exercised.

        In the event a  participant  ceases to be an  employee of the Company by
reason of Disability,  such



                                       64




participant shall have the right, subject to certain  restrictions,  to exercise
the  option at any time  within  twelve  months (or such  shorter  period as the
Administrator may determine) after such cessation of employment, but only to the
extent that, at the date of cessation of employment,  the participant's right to
exercise  such  option  had  previously  vested  pursuant  to the  terms  of the
applicable award agreement and had not previously been exercised.

        In the event a  participant  ceases to be an  employee of the Company by
reason of Retirement,  such participant shall have the right, subject to certain
restrictions,  to exercise  the option at any time  within  ninety days (or such
longer or shorter period as the  Administrator may determine) after cessation of
employment, but only to the extent that, at the date of cessation of employment,
the participant's right to exercise such option had vested pursuant to the terms
of the applicable award agreement and had not previously been exercised.

Adjustment of Awards Upon Certain Events.

        If the Company  merges with another  corporation  and the Company is the
surviving  corporation  in such  merger  and under the terms of such  merger the
shares  of Common  Stock  outstanding  immediately  prior to the  merger  remain
outstanding and unchanged, each outstanding award shall continue to apply to the
shares  subject  thereto  and will  also  pertain  and  apply to any  additional
securities and other property, if any, to which a holder of the number of shares
subject to the option would have been entitled as a result of the merger.

        In the event all or  substantially  all of the assets of the Company are
sold, the Company  engages in a merger where the Company does not survive or the
Company is consolidated with another corporation, each participant shall receive
immediately  before the  effective  date of such sale,  merger or  consolidation
restricted  shares  and  the  value  of  any  performance  units  to  which  the
participant  is then entitled  (regardless  of any vesting  condition)  and each
outstanding  option  will  become  exercisable  (without  regard to the  vesting
provisions  thereof)  for a period of at least 30 days ending five days prior to
the  effective  date of the  transaction.  Notwithstanding  the  foregoing,  the
surviving corporation may, in its sole discretion, (i) (a) grant to participants
with  options,  options to purchase  shares of the  surviving  corporation  upon
substantially  the same terms as the options  granted under the plan, (b) tender
to all participants with restricted shares, an award of restricted shares of the
surviving  or acquiring  corporation,  and (c) tender to all  participants  with
performance  units, an award of performance  units of the surviving or acquiring
corporation,  or (ii) (a) permit  participants with restricted shares to receive
unrestricted  shares immediately prior to the effective date of any transaction,
(b) permit  participants  with performance units to receive cash with respect to
the value of any performance units immediately  before the effective date of the
transaction and (c) provide  participants  with options the choice of exercising
the  option  prior  to  the  consummation  of the  transaction  or  receiving  a
replacement option.

        Notwithstanding  anything  to  the  contrary  and  except  as  otherwise
expressly  provided in the applicable  award  agreement,  the vesting or similar
installment  provisions  relating to the exercisability of any award,  option or
replacement  option  tendered as  described in the  previous  sentence  shall be
accelerated,  and the participant  with restricted  shares or performance  units
shall become  fully  vested,  and the  participant  with options  shall have the
right, for a period of at least 30 days, to exercise such options; provided that
such accelerations of vesting and  exercisability  shall occur only in the event
that the  participant's  employment  with or  services  for the  Company  should
terminate  within two years  following  a Change of Control  (as  defined in the
plan),  unless such  employment  or services are  terminated  by the Company for
Cause (as defined in the plan) or by the  participant  voluntarily  without Good
Reason (as defined in the plan),  or such  employment or services are terminated
due  to  the  death  or  Disability  of  the  participant.  Notwithstanding  the
foregoing,  no incentive stock option shall become  exercisable  pursuant to the
foregoing  without the  participant's  consent,  if the result would be to cause
such option not to be treated as an incentive stock option.

        The number of shares of Common Stock covered by the plan,  the number of
shares of Common Stock covered by each outstanding option,  restricted share and
performance unit and the exercise price of any options shall be  proportionately
adjusted for any  increase or decrease in the number of issued  shares of Common
Stock  resulting from a subdivision or  consolidation  of such shares or a stock
split or the payment of a stock dividend (but only of Common Stock) or any other
increase or decrease in the number of issued shares effected  without receipt of
consideration by the Company.

Transfer of Awards.

        Unless an award is designated  transferable  by the  Administrator  upon
grant, during the lifetime of the participant who has been granted an award, the
award shall be shall not be  assignable  or  transferable.  No



                                       65




incentive  stock option may be designated as  transferable.  In the event of the
participant's  death,  any  nontransferable  award shall be  transferable by the
participant's will or the laws of descent and distribution.

Amendment and Termination.

        The plan  will  continue  in  effect  until  terminated  by the Board of
Directors or until  expiration  of the plan on November 17, 2013.  The Board may
suspend or discontinue the plan or revise or amend it.

        The following table sets forth information  concerning option/SAR grants
in our fiscal  year ended June 30,  2003 to all  individuals  serving as (a) our
chief  executive  officer,  (b) each of our four other most  highly  compensated
executive  officers (other than our chief  executive  officer) at the end of our
fiscal  year ended June 30, 2003 whose total  annual  salary and bonus  exceeded
$100,000 for these periods,  and (c) up to two additional  individuals,  if any,
for whom  disclosure  would have been  provided  pursuant to (b) except that the
individual(s)  were not  serving  as our  executive  officers  at the end of our
fiscal year ended June 30, 2003:



                                Option/SAR Grants in Last Fiscal Year
                                         [Individual Grants]

                           Number of        Percent of total
                           securities         options/SARs
                           underlying          granted to
                          options/SARs        employees in      Exercise or base
        Name               granted (#)         fiscal year       price ($/Share)     Expiration Date
---------------------- ------------------- ------------------- -------------------- -----------------
                                                                           
Christopher B. Wood    500,000             35.84%              $1.45                12/31/12

David P. Luci          500,000             35.84%              $0.74                3/31/13

Hugh Griffith          300,000             21.51%              $1.45                10/22/12

All Executive          1,300,000           93.13%              n/a                  n/a
Officers



        There were no  options/SARs  exercised in our fiscal year ended June 30,
2003 by the named executive officers.




                                       66




        The following table shows the June 30, 2003 fiscal year-end value of the
stock options held by the Named Executive Officers.



                                   Year End 2003 Option/SAR Values

                                Number of Securities
                               Underlying Unexercised               Value of Unexercised In-the-Money
                              Options/SARs at Year End                 Options/SARs at Year End (1)
                        ------------------------------------- --------------------------------------------
         Name              Exercisable      Unexercisable         Exercisable            Unexercisable
         ----              -----------      -------------         -----------            -------------
                                                                                
Christopher B. Wood        1,500,000          500,000              $1,455,000               $385,000

David P. Luci                170,000          330,000                $251,600               $448,400

Hugh Griffith                100,000          200,000                 $77,000               $154,000



------------------------------
(1) Amounts shown reflect the excess of the market value of the  underlying  our
common  stock at year end based upon the $2.22 per share  closing  price on June
30, 2003 over the exercise  prices for the stock options.  The actual value,  if
any, an executive  may realize is dependent  upon the amount by which the market
price of our common stock exceeds the exercise  price when the stock options are
exercised.


                      Equity Compensation Plan Information

        The following table provides information about the securities authorized
for issuance under the Company's equity compensation plans as of June 30, 2003:




                                                                              Number of securities
                                                                             remaining available for
                              Number of securities                            future issuance under
                                to be issued upon     Weighted-average         equity compensation
                             exercise of outstanding  exercise price of         plans (excluding
                                options, warrants    outstanding options,          securities
                                   and rights        warrants and rights     reflected in column (a))
        Plan category                  (a)                  (b)                        (c)
------------------------------ --------------------  ---------------------  --------------------------
                                                      
Equity compensation plans
   approved by security
   holders (1)                         --                     --                       --
Equity compensation plans
   not approved by security
   holders                          6,378,333               $1.30                      --

Total                               6,378,333               $1.30                      --





(1) At June 30, 2003, the Company had no equity  compensation  plans approved by
    security holders.


                              FINANCIAL STATEMENTS

        The  consolidated  financial  statements  of  Bioenvision,  Inc. and its
subsidiaries  including the notes thereto and the report  thereon,  is presented
beginning at page F-1.


    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                                  DISCLOSURE.

        None.




                                       67






                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                                        

Report of Independent Registered Public Accounting Firm                                  F-1

Consolidated Balance Sheets as of June 30, 2003 and 2002                                 F-2

Consolidated Statements of Operations for years ended June 30, 2003 and 2002             F-3

Consolidated Statements of Stockholders' Equity (Deficit) for years ended June 30,       F-4
2003 and 2002

Consolidated Statements of Cash Flows for years ended June 30, 2003 and 2002             F-5

Notes to Consolidated Financial Statements                                               F-6

Consolidated Balance Sheets as of March 31, 2004                                         F-24

Consolidated Statements of Operations for the nine month period ended March 31,          F-25
2004 and 2003 (Unaudited)

Consolidated Statements of Cash Flows for the nine month period ended March 31,          F-26
2004 and 2003 (Unaudited)

Notes to Consolidated Financial Statements (Unaudited)                                   F-27







REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Stockholders of Bioenvision, Inc. and Subsidiaries

We have audited the  accompanying  consolidated  balance sheets of  Bioenvision,
Inc. and Subsidiaries as of June 30, 2003 and 2002 and the related  consolidated
statements of operations, stockholders' equity (deficit), and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the consolidated financial position of Bioenvision,  Inc.
and Subsidiaries as of June 30, 2003 and 2002, and the  consolidated  results of
their  operations  and cash flows for the years then  ended in  conformity  with
accounting principles generally accepted in the United States of America.


/s/ Grant Thornton LLP

GRANT THORNTON LLP
New York, New York
September 22, 2003


                                      F-1






                       Bioenvision, Inc. and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS

                                                                                           June 30,              June 30,
                                                                                             2003                  2002
                                                                                        -------------           ------------
                                                                                                          

Current assets
   Cash and cash equivalents                                                            $   7,929,686           $ 12,882,521
   Restricted cash                                                                            290,000
   Deferred costs - current                                                                    22,727                184,091
   Accounts receivable                                                                         25,000                 50,000
   Other assets                                                                               105,976
                                                                                        -------------           ------------
       Total current assets                                                                 8,373,389             13,116,612

  Property and equipment, net                                                                  49,265                    587
  Deferred costs - long term                                                                  224,937
  Intangible assets, net                                                                   15,779,399             16,921,792
  Goodwill                                                                                  3,902,705              4,704,100
  Security deposits                                                                            79,111
  Other Long term assets                                                                      126,869
                                                                                        -------------           ------------

       Total assets                                                                      $ 28,535,675           $ 34,743,091
                                                                                         ============           ============

              LIABILITIES AND STOCKHOLDERS' EQUITY

  Current liabilities
   Accounts payable                                                                    $      411,392         $      434,316
   Accrued expenses                                                                           730,722              1,513,859
   Accrued dividends payable                                                                1,009,146                131,328
   Deferred revenue - current                                                                 113,636                368,182
                                                                                        -------------           ------------

       Total current liabilities                                                            2,264,896              2,447,685

  Deferred revenue - long term                                                              1,124,685
  Deferred tax liability - non-current                                                      6,317,702              7,656,000
                                                                                        -------------           ------------

       Total liabilities                                                                    9,707,283             10,103,685
                                                                                        -------------           ------------

  COMMITMENTS AND CONTINGENCIES
  Stockholders' equity
   Preferred stock - $0.001 par value; 5,920,000 shares authorized
     and 5,916,966 shares issued and outstanding at June 30,
     2003 and June 30, 2002, respectively (liquidation preference $17,750,898)                  5,917                  5,917
   Common stock - $0.001 par value; 50,000,000 shares authorized
     and 17,122,739 and 16,887,786 shares issued and outstanding at June 30,
     2003 and June 30, 2002, respectively                                                      17,123                 16,887
   Additional paid-in capital                                                              47,304,449             45,491,555
   Accumulated deficit                                                                    (28,651,443)           (21,027,299)
   Accumulated other comprehensive income                                                     152,346                152,346
                                                                                        -------------           ------------

        Stockholders' equity                                                               18,828,392             24,639,406
                                                                                        -------------           ------------

        Total liabilities and stockholders' equity                                      $  28,535,675           $ 34,743,091
                                                                                        =============           ============



The accompanying notes are an integral part of these statements.


                                      F-2







                       Bioenvision, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                             Year ended
                                                                              June 30,
                                                                      ---------------------------
                                                                         2003            2002
                                                                      -----------    ------------

                                                                               

Revenue                                                                 $ 504,857    $    802,965
                                                                      -----------    ------------

Costs and expenses
   Research and development                                             1,689,278       1,912,258
   General and administrative                                           4,567,413       2,127,664
   Depreciation and amortization                                        1,344,969         579,342
                                                                      -----------    ------------

       Total costs and expenses                                         7,601,660       4,619,264
                                                                      -----------    ------------

Loss from operations                                                   (7,096,803)     (3,816,299)

Interest income (expense)
   Interest and finance charges                                          (325,000)     (2,172,682)
   Interest income                                                        138,574
                                                                      -----------    ------------

                                                                         (186,426)     (2,172,682)

       Net loss before income tax benefit                              (7,283,229)     (5,988,981)

Income tax benefit                                                        536,903         253,000
                                                                      -----------    ------------

       NET LOSS                                                        (6,746,326)     (5,735,981)

Cumulative preferred stock dividend                                      (877,818)       (131,328)
Beneficial conversion preferred stock dividend                                         (9,351,339)
                                                                      -----------    ------------

       Net loss available to common stockholders                      $(7,624,144)   $(15,218,648)
                                                                      ===========    ============

Basic and diluted net loss per share of common stock                 $      (0.45)   $      (1.25)
                                                                     ============    ============

Weighted-average shares used in
   computing basic and diluted
   net loss per share                                                  16,920,939      12,184,152
                                                                       ==========      ==========



The accompanying notes are an integral part of these statements.


                                      F-3







                       Bioenvision, Inc. and Subsidiaries

            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)


                                                                                                      Accumulated          Total
                                      Preferred                           Additional                      Other        Stockholders'
                              Stock              Common Stock
                         --------------------------------------------      Paid In      Acccumlated   Comprehensive        Equity

                            Shares      $        Shares        $           Capital        Deficit         Income          (Deficit)
                            ------      -       ------         -
                                                                                                 

Balance at June 30, 2001                       8,248,919       8,249        3,165,540     (5,808,651)     152,346        (2,482,516)


Net loss for the year                                                                     (5,735,981)                    (5,735,981)

Shares issued to
employees for
accrued salaries                               1,048,352       1,048        1,269,864                                     1,270,912

Shares issued to
consultants
for services                                     390,515         391          168,083                                       168,473

Shares issued in
connection with
acquisition of Pathagon                        7,000,000       7,000       12,484,926                                    12,491,926

Shares issued in
connection with
licensing agreement -
OMRF                                             200,000         200          619,800                                       620,000

Warrants issued in
connection with
licensing agreement -
OMRF                                                                          425,600                                       425,600

Gross proceeds from
issuance of preferred
stock                     5,916,966    5,917                               17,744,081                                    17,749,998
Direct costs incurred
to issue preferred
stock                                                                      (3,911,906)                                   (3,911,906)
Cumulative preferred
stock dividend                                                                              (131,328)                      (131,328)
Beneficial conversion
preferred stock
dividend                                                                    9,351,339     (9,351,339)

Warrants issued in
connection with credit
facility                                                                    1,872,000                                     1,872,000

Warrants issued for
services rendered                                                           2,302,228                                     2,302,228


                          ----------------------------------------------------------------------------------------------------------

Balance at June 30, 2002  5,916,966    5,917  16,887,786      16,888       45,491,554    (21,027,299)     152,346        24,639,405



Net loss for the year                                                                     (6,746,326)                    (6,746,326)
Cumulative preferred
stock dividend                                                                              (877,818)                      (877,818)
Shares issued to
consultants for
services                                         234,953         235        1,258,080                                     1,258,080
Warrants issued in
connection with
services                                                                      182,350                                       182,350

Rrepricing of options                                                         372,465                                       372,465
                          ----------------------------------------------------------------------------------------------------------

Balance at June 30, 2003  5,916,966   $5,917  17,122,739    $ 17,123      $47,304,449   $(28,651,443)     $152,346       $18,828,392
                          =========   ======  ==========    ========      ===========   ============      ========       ===========



The accompanying notes are an integral part of this statement.


                                      F-4







                       Bioenvision, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                                     Year ended
                                                                                                      June 30,
                                                                                        ------------------------------------
                                                                                             2003                  2002
                                                                                        --------------       ---------------
                                                                                                        

 Cash flows from operating activities

    Net loss                                                                             $ (6,746,326)        $ (5,735,981)
                                                                                          -----------          -----------
    Adjustments to reconcile net loss to net
       cash used in operating activities

         Depreciation and amortization                                                      1,344,969              579,342
         Financing charges - noncash                                                                             2,129,482
         Deferred tax benefit                                                                (536,903)
         Compensation costs - shares and warrants issued
         to nonemployees                                                                    1,440,429
         Compensation costs - re-pricing of options                                           372,465
         Changes in assets and liabilities
           Deferred costs                                                                     (63,573)             337,500
           Deferred revenue                                                                   870,139             (736,364)
           Accounts payable                                                                   (22,924)            (350,817)
           Other current assets                                                              (105,976)
           Other long term assets                                                            (126,869)
           Accounts receivable                                                                 25,000              (50,000)
           Security deposits                                                                  (79,111)
           Officer's salary for equity conversion                                                                   52,090
           Other accrued expenses and liabilities                                            (782,901)           1,099,636
                                                                                        --------------       ---------------
                  Net cash used in operating activities                                    (4,411,581)          (2,675,113)
                                                                                        --------------       ---------------

 Cash flows from investing activities
    Purchase of intangible assets                                                            (191,848)            (455,500)
    Capital expenditures                                                                      (59,406)
    Restricted cash                                                                          (290,000)
                                                                                        --------------       ---------------
                  Net cash used in investing activities                                      (541,254)            (455,500)
                                                                                        --------------       ---------------

 Cash flows from financing activities
    Bank overdraft                                                                                                (127,241)
    Proceeds from loan financing                                                                                   982,943
    Repayment of loan financing                                                                                   (982,943)
    Proceeds from issuance of preferred stock                                                                   17,749,998
    Costs incurred in connection with offering                                                                  (1,609,623)
                                                                                        --------------       ---------------
                  Net cash provided by financing activities                                                     16,013,134
                                                                                        --------------       ---------------
                  Net (decrease) increase in cash and cash
                  equivalents                                                              (4,952,835)          12,882,521

 Cash and cash equivalents, beginning of year                                              12,882,521                -
                                                                                        --------------       ---------------

 Cash and cash equivalents, end of year                                                  $  7,929,686          $12,882,521
                                                                                         ============          ===========

 Supplemental disclosure of cash flow information:
    Cash paid during the year for
        Interest                                                                         $          -          $    43,200

 Supplemental disclosure of noncash investing and financing activities:
    Noncash conversion of officer's salary into common
    stock                                                                                $          -          $ 1,270,912
    Noncash conversion of trade payables into common stock                               $          -          $   168,473
    Noncash issuance of warrants related to SCO financing
    agreement                                                                            $          -          $ 1,872,000
    Noncash issuance of warrants in connection with
    preferred stock                                                                      $          -          $ 2,302,283
    Noncash issuance of stock related to Pathagon
    acquisition                                                                          $          -          $12,491,926
    Noncash issuance of warrants and shares related to
    OMRFA                                                                                $          -          $ 1,145,600



The accompanying notes are an integral part of these statements.


                                      F-5



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002

Note 1 - Organization and significant accounting policies

Description of business

Bioenvision,   Inc.   ("Bioenvision"   or   the   "Company")   is  an   emerging
biopharmaceutical  company  whose  primary  business  focus is the  acquisition,
development and  distribution of drugs to treat cancer.  The Company has a broad
range of products and technologies under development, but its two lead drugs are
Clofarabine and  Modrenal(R).  Modrenal(R)is  approved for marketing in the U.K.
for advanced breast cancer. The Company's plan is to bring  Modrenal(R)into  the
U.S. to perform further clinical trials and to access the U.S.  market.  Most of
the  Company's  other  drugs are now in  clinical  trials in  various  stages of
development.

The Company was  incorporated  as Express  Finance,  Inc.  under the laws of the
State of Delaware on August 16,1996,  and changed its name to Ascot Group,  Inc.
in August 1998 and further to Bioenvision, Inc. in December 1998.

On February 1, 2002,  the Company  completed  the  acquisition  of Pathagon Inc.
("Pathagon"),  a privately  held  company  focused on the  development  of novel
anti-infective  products and  technologies.  Pathagon's  principal  products are
OLIGON(R) and methylene blue.  Affiliates of SCO Financial  Group, the Company's
financial   advisor  and  consultant,   owned  82%  of  Pathagon  prior  to  the
acquisition.  The Company acquired 100% of the outstanding shares of Pathagon in
exchange for 7,000,000 shares of the Company's common stock. The acquisition has
been accounted for as a purchase  business  combination in accordance  with SFAS
141.

Basis of presentation

 Prior to the  acquisition  of Pathagon  and the May 2002  private  placement in
which the  Company  raised  gross  proceeds of $17.7  million  (see note 6), the
Company  devoted most of its efforts to  establishing  a new  business  (raising
capital,  research  and  development,  etc.)  and had been a  development  stage
enterprise.  Management believes they now have the financial resources to market
some of the Company's late-stage products which can lead to significant revenues
from royalty payments and drug sales. Accordingly,  effective June 30, 2002, the
financial  statements do not reflect the required  disclosure  for a Development
Stage Enterprise.

Principles of consolidation

The accompanying  consolidated  financial statements include the accounts of the
Company  and  its  wholly  owned   subsidiaries.   Inter-company   accounts  and
transactions have been eliminated.

Use of estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles  of the United States of America  requires  management to
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities and the disclosure of contingent  assets and liabilities at the date
of the  financial  statements  as well as the  reported  amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates, and such differences may be material to the financial statements.


                                      F-6



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002

Note 1 - Organization and significant accounting policies - continued

Revenue Recognition

In accordance with SEC Staff Accounting Bulletin No. 101, upfront  nonrefundable
fees associated with research and development collaboration agreements where the
Company has continuing  involvement  in the agreement,  are recorded as deferred
revenue and recognized over the estimated  research and development period using
the straight-line method. If the estimated period is subsequently  modified, the
period over which the up-front fee is  recognized is modified  accordingly  on a
prospective basis using the straight-line method.  Revenues from the achievement
of research and  development  milestones,  which  represent the achievement of a
significant  step in the research and development  process,  are recognized when
and if the milestones are achieved. Continuation of certain contracts and grants
are dependent upon the Company  and/or its  co-development  partners'  achieving
specific contractual milestones;  however, none of the payments received to date
are refundable regardless of the outcome of the project.

Upfront  nonrefundable fees associated with licensing  arrangements are recorded
as deferred  revenue and  recognized  over the licensing  arrangement  using the
straight line method, which approximates the life of the patent.

Research and development

Research and development costs are charged to expense as incurred.

Stock based compensation

At June 30,  2003,  the  Company has stock  based  compensation  plans which are
described  more fully in Note 9. As permitted by SFAS No. 123,  "Accounting  for
Stock Based  Compensation",  the Company  accounts for stock based  compensation
arrangements   with  employees  in  accordance  with  provisions  of  Accounting
Principles  Board  ("APB")  Opinion  No.  25  "Accounting  for  Stock  Issued to
Employees".  Compensation expense for stock options issued to employees is based
on the difference on the date of grant,  between the fair value of the Company's
stock  and the  exercise  price of the  option.  Under  APB 25,  no stock  based
employee  compensation  cost is  reflected  in reported  net loss,  when options
granted to  employees  have an exercise  price equal to the market  value of the
underlying  common stock at the date of grant. For year ended June 30, 2003, the
Company  recognized  stock  based  employee  compensation  cost of $372,465 as a
result of the  March 31,  2003  re-pricing  of  380,000  options  granted  to an
employee pursuant to the terms of his Employment Agreement (see Note 7).

The  Company  accounts  for  equity   instruments  issued  to  non-employees  in
accordance  with the  provisions of SFAS 123 and Emerging  Issues Task Force no.
96-18,  "Accounting  for  Equity  Instruments  That Are  Issued  to  Other  Than
Employees for Acquiring,  or in Conjunction  with Selling Goods or Services," as
amended by EITF 00-27.  Under EITF No. 96-18, where the fair value of the equity
instrument is more reliably measurable than the fair value of services received,
such services  will be valued based on the fair value of the equity  instrument.
The Company  expects to continue  applying the  provisions  of APB 25 for equity
issuances to employees.


                                      F-7



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002

Note 1 - Organization and significant accounting policies - continued


The following table  illustrates the effect on net loss and loss per share as if
the fair value based  method had been  applied to all  outstanding  and unvested
awards in each period.




                                                                              Year Ended June 30,
                                                                          ---------------------------
                                                                             2003                2002
                                                                          -----------         -----------
                                                                                       
Net loss available to common stockholders, as reported                   $(7,624,144)        $(15,218,648)
Add:  Stock based employee compensation expense
     included in reported net loss                                           372,465               --
Deduct:  Total stock based employee compensation
     expense determined under fair value based method
     for all awards                                                       (1,214,723)              --
Pro forma net loss available to common stockholders                      $(8,466,402)        $(15,218,648)

Loss per share
     Basic and diluted - as reported                                     $(0.45)             $(1.25)
     Basic and diluted - pro forma                                       $(0.50)             $(1.25)


 The fair  value of  options  at the date of grant  was  established  using  the
Black-Scholes model with the following assumptions:

                                              2003
                                              ----

        Expected life (years)                 4.00

        Risk free interest rate              3.00%

        Expected volatility                   80%

        Expected dividend yield              0.00

Income taxes

The Company  accounts for income taxes under  Statement of Financial  Accounting
Standards  No. 109,  "Accounting  for Income  Taxes"  (FAS 109).  Under FAS 109,
deferred tax assets and  liabilities  are  determined  based on the  differences
between the financial  reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates that will be in effect when the differences
are expected to reverse.  The Company records a valuation  allowance for certain
temporary  differences  for  which it is more  likely  than not that it will not
receive future tax benefits.

Net loss per share

Basic net loss per share is computed using the weighted average number of common
shares  outstanding  during the periods.  Diluted net loss per share is computed
using the weighted  average  number of common  shares and  potentially  dilutive
common shares outstanding  during the periods.  Options and warrants to purchase
15,749,543 and  13,604,543  shares of common stock have not been included in the
calculation of net loss per share for the years ended June 30, 2003 and 2002,


                                      F-8



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002

Note 1 - Organization and significant accounting policies - continued

respectively, as their effect would have been anti-dilutive.

Foreign currency translation

Through  June 30,  2001,  the  functional  currency of the Company was the Pound
Sterling and its reporting  currency was the United States  dollar.  Translation
adjustments  arising from differences in exchange rates from these  transactions
were reported as accumulated other comprehensive  income in stockholders' equity
(deficit).  Effective July 1, 2001, the functional and reporting currency is the
United States dollar.

Cash and cash equivalents

The Company considers all highly liquid financial instruments with a maturity of
three months or less when purchased to be cash equivalents.  The Company invests
all its  funds  with a single  financial  institution  which  provides  for FDIC
insurance of $100,000.

Advertising costs

Costs related to advertising and other promotional  expenditures are expensed as
incurred.  Advertising costs totaled $144,300 and $4,850, respectively,  for the
years ended June 30, 2003 and 2002, respectively.

Deferred costs

Deferred costs  represents  royalty  payments that became due and payable to SRI
upon the Company's execution of the co-development  agreement with Ilex Oncology
advance  royalties.  These costs have been presented  together with research and
development  costs on the statement of  operations  for the years ended June 30,
2003 and 2002.

Property and equipment

Property and equipment are stated at cost, net of accumulated  depreciation  and
amortization.  Property and equipment are depreciated on a  straight-line  basis
over an estimated three-year useful life.

Goodwill and Other Intangible Assets

Goodwill  represents the excess of costs over the fair value of identifiable net
assets of Pathagon.  Intangible  assets  include  patents and  licensing  rights
acquired in connection  with the acquisition of Pathagon.  The Company  accounts
for these assets in accordance with Statement of Financial  Accounting Standards
("SFAS") No. 142, Goodwill and Other Intangible Assets.  Goodwill and intangible
assets  acquired in a purchase  business  combination  and determined to have an
indefinite  useful life are not amortized,  but instead tested for impairment at
least  annually in accordance  with the provisions of SFAS No. 142. SFAS No. 142
also requires that  intangible  assets with estimable  useful lives be amortized
over their respective estimated useful lives to their estimated residual values,
and reviewed for  impairment in  accordance  with SFAS No. 144,  Accounting  for
Impairment or Disposal of Long-Lived  Assets ("SFAS No. 144").  The Company does
not have any intangible assets with an indefinite useful life.

Long-Lived Assets

The  Company  adopted  the  provisions  of SFAS  No.  144 on July  1,  2003.  In
accordance with SFAS No. 144,  long-lived assets, such as property and equipment
and  intangible  assets  subject to  amortization  are reviewed  for  impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.


                                      F-9



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002

Note 1 - Organization and significant accounting policies - continued

 Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to estimated undiscounted future cash flows expected
to be generated by the asset.  If the  carrying  amount of an asset  exceeds its
estimated future cash flows, an impairment charge is recognized by the amount by
which the carrying amount of the asset exceeds the fair value of the asset.

Prior to the  adoption of SFAS No. 144,  the Company  accounted  for  long-lived
assets in accordance with SFAS No. 121,  Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of.

Impact of recently issued accounting pronouncements

In July 2002, the FASB Issued  Statement 146,  "Accounting for Costs  Associated
with  Exit or  Disposal  Activities"  ("SFAS  146").  This  Statement  addresses
financial  accounting and reporting for costs  associated  with exit or disposal
activities  and  nullifies  Emerging  Issues Task Force  (EITF)  Issue No. 94-3,
"Liability  Recognition for Certain Employee Termination Benefits and Other Cost
to Exit an Activity (including Certain Costs Incurred in a Restructuring)."  The
principal  difference  between  this  Statement  and Issue  94-3  relates to its
requirements  for  recognition of a liability for a cost associated with an exit
or disposal  activity.  This  Statement  requires  that a  liability  for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred.  Under  Issue 94-3,  a liability  for an exit cost as defined in Issue
94-3 was  recognized at the date of an entity's  commitment to an exit plan. The
provisions of this Statement are effective for exit or disposal  activities that
are initiated  after December 31, 2002.  Effective  January 1, 2003, the Company
adopted the  provisions  of SFAS 146 which did not have an impact on the results
of operations or financial position.

In November 2002, the FASB issued Interpretation No. 45, "Guarantors  Accounting
and Disclosure  Requirements for Guarantees,  Including  Indirect  Guarantees of
Indebtedness  of Others" ("FIN 45"). FIN 45 requires that certain  guarantees be
initially  recorded at fair value,  which is different from the general  current
practice of recording a liability  only when a loss is probable  and  reasonably
estimable.  FIN 45 also requires a guarantor to make significant new disclosures
for virtually all guarantees. Effective January 1, 2003, the Company adopted the
disclosure requirements under FIN 45 which did not have a material impact on the
results of operations or financial position of the Company.

On December 31, 2002, the FASB issued SFAS No. 148,  "Accounting for Stock Based
Compensation  Transition  and  Disclosure"  ("SFAS  148").  SFAS 148 amends FASB
Statement  No.  123,  "Accounting  for Stock  Based  Compensation,"  to  provide
alternative  methods of transition to SFAS 123's fair value method of accounting
for  stock-based  employee  compensation.  SFAS 148 also  amends the  disclosure
provisions of SFAS 123 and APB Opinion No. 28, "Interim Financial Reporting," to
require  disclosure  on the summary of  significant  accounting  policies of the
effects of an entity's  accounting  policy with respect to stock-based  employee
compensation on reported net income and earnings per share in annual and interim
financial  statements.  While  SFAS  148  does not  amend  SFAS  123 to  require
companies to account for employee stock options using the fair value method, the
disclosure  provisions  of  SFAS  148  are  applicable  to  all  companies  with
stock-based  employee  compensation,  regardless of whether they account for the
compensation  using the fair  value  method of SFAS 123 or the  intrinsic  value
method of APB Opinion 25. The Company adopted the required disclosure provisions
of  SFAS  148  as  described  under  accounting  policy  footnote  "Stock  based
compensation".


                                      F-10



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002

Note 1 - Organization and significant accounting policies - continued

In January  2003,  the FASB  issued  interpretation  No. 46,  "Consolidation  of
Variable Interest  Entities--An  Interpretation of ARB No. 51" ("FIN 46"), which
addresses  consolidation  of  variable  interest  entities.  FIN 46 expands  the
criteria for  consideration  in determining  whether a variable  interest entity
should  be   consolidated   by  a  business   entity,   and  requires   existing
unconsolidated  variable interest  entities (which include,  but are not limited
to, Special  Purpose  Entities,  or SPE's) to be  consolidated  by their primary
beneficiaries  if the entities do not  effectively  disburse risks among parties
involved.  This interpretation applies immediately to variable interest entities
created  after  January  31,  2003 and  variable  interest  entities in which an
enterprise  obtains and interest after that date. It applies in the first fiscal
year or interim  period  beginning  after  June 15,  2003 to  variable  interest
entities  in which an  enterprise  holds a variable  interest  that it  acquired
before  February  1, 2003.  The  adoption  of FIN 46 is not  expected  to have a
material  impact on the  results  of  operation  or  financial  position  of the
Company.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments  with  Characteristics  of Both Liabilities and Equity" (SFAS 150").
The  objective  of SFAS No.  150 is to  establish  standards  for how an  issuer
classifies and measures certain financial  instruments with  characteristics  of
both  liabilities  and equity.  SFAS 150 is effective for financial  instruments
entered  into  or  modified  after  May 31,  2003  and  for  existing  financial
instruments after July 1, 2003. The adoption of SFAS 150 is not expected to have
a material  impact on the results of  operations  or  financial  position of the
Company.

In May 2003, the Emerging Issues Task Force ("EITF") reached a consensus on EITF
Issue No.  00-21,  "Revenue  Arrangements  with  Multiple  Deliverables"  ("EITF
00-21").  EITF 00-21  provides  guidance on how to determine when an arrangement
that involves multiple  revenue-generating  activities or deliverables should be
divided into separate units of accounting for revenue recognition purposes,  and
if this  division  is  required,  how the  arrangement  consideration  should be
allocated among the separate units of accounting.  The guidance in the consensus
is effective for revenue  arrangements  entered into in quarters beginning after
June  15,  2003.  The  adoption  of EITF  00-21  did not  impact  the  Company's
consolidated  financial position or results of operations,  but could affect the
timing or pattern  of revenue  recognition  for  future  collaborative  research
and/or license agreements.

NOTE 2 - Acquisition of Pathagon

On February 1, 2002,  the Company  completed the  acquisition  of Pathagon.  The
acquisition was accounted for as a purchase  business  combination in accordance
with SFAS 141. The Company issued  7,000,000  shares of common stock to complete
the  acquisition,  which was valued at  $12,600,000  based on the 5-day  average
trading price of the stock ($1.80) surrounding November 22, 2001, the day of the
Company's announcement of the agreed upon acquisition.  The acquired patents and
licensing  rights of OLIGON(R) and methylene blue  (collectively  referred to as
"Purchased  Technologies"),  were  recorded at their fair market value which was
approximately  $17,576,000.  The patent and licensing  rights acquired are being
amortized over 13 years,  which is the estimated  remaining  contractual life of
these assets.  Since the estimated fair value of the Purchased  Technologies was
at  least  equal  to the  amount  paid,  the  purchase  price,  net  of  assumed
liabilities, was allocated to Purchased Technologies.  The transaction qualified
as a tax-free merger which resulted in a difference  between the tax basis value
of the assets  acquired and the fair market  value of the patents and  licensing
rights.  As a result,  a deferred tax liability  was recorded for  approximately
$7,909,000.  The purchase price exceeded the fair market value of the net assets
acquired  resulting  in the  recording  of Goodwill of  $4,704,100.  The Company
recorded a charge to goodwill of $801,395 for fiscal year ended June 30, 2003 as
a result of a change in tax rates used to compute  the  deferred  tax  liability
arising as a result of this  acquisition.  Pathagon had no operations other than
holding the patents and licenses  acquired.  As Pathagon had no operations,  its
pro-forma financials would not be meaningful and thus are not presented.

The Company now has the worldwide rights to the use of thiazine dyes,  including
methylene  blue,  for in  vitro  and  in  vivos  inactivation  of  pathogens  in
biological fluids. Methylene blue is one of only two compounds used commercially
to  inactivate  pathogens  in  blood  products,  and is  currently  used in many
European  countries to inactivate  pathogens in fresh frozen plasma. The Company
believes that, as a result of the mechanism of action of its


                                      F-11



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002

Note 2 - Acquisition of Pathagon - continued

proprietary  technology,  its systems also have the potential to inactivate many
new pathogens before they are identified and before tests have been developed to
detect their  presence in the blood supply.  Because the  Company's  systems are
being  designed  to  inactivate  rather  than  merely  test for  pathogens,  the
Company's  systems also have the potential to reduce the risk of transmission of
pathogens that would remain undetected by testing.

The OLIGON(R)  technology is a patented  anti-microbial  technology  that can be
incorporated into the  manufacturing  process of many implantable  devices.  The
patented process,  involving two dissimilar metals (silver and platinum) creates
an  electrochemical  reaction that releases  silver ions that destroy  bacteria,
fungi and other pathogens.  The Company intends to commercialize  the technology
in partnership with leading medical devices manufacturers.

On May 6,  1997,  Baxter  Healthcare  Corporation  acting  through  its  Edwards
Clinical-Care  Division  ("Edwards") entered into an Exclusive License Agreement
with Implemed, Inc. ("Implemed"), a predecessor in interest to the Pathagon and,
by virtue of the  acquisition  of  Pathagon,  a  predecessor  in interest to the
Company.  Pursuant to the terms of the License  Agreement,  among other  things,
Edwards  licensed  certain  intellectual  property  technology  relating  to the
manufacture of anti-microbial polymers from Implemed.

On May 7, 2002,  the  Company  executed an  amendment  to the  original  license
agreement  between  Oklahoma  Medical  Research  Foundation  ("OMRF") and Bridge
Therapeutic Products,  Inc. ("BTP"), a predecessor of Pathagon,  relating to the
licensing of methylene  blue.  Under the terms of the amendment,  OMRF agreed to
the assignment of the original license agreement by BTP to Pathagon. Pursuant to
the  amendment,  the Company paid OMRF $100,000 and issued 200,000 shares of the
Company's common stock and a five-year warrant to purchase an additional 200,000
shares of common  stock.  The exercise  price of the warrant is $2.33 per share,
subject  to  adjustment.  The  Company  capitalized  the costs of  approximately
$1,145,600  related to this  amendment as an intangible  asset and will amortize
this asset over the remaining life of the methylene blue license agreement.


NOTE 3  - Intangible Assets

Intangible assets consist of the following:      June 30, 2003     June 30, 2002

Patents and licensing rights                       $17,644,521       $17,487,548
Less: accumulated amortization                       1,865,122           565,756
                                                   -----------       -----------
                                                   $15,779,399       $16,921,792
                                                   ===========       ===========

Amortization of patents and licensing rights amounted to $1,334,241 and $561,832
for the years ended June 30, 2003 and June 30, 2002, respectively.  Amortization
for each of the next five fiscal years will amount to  approximately  $1,342,000
annually.

NOTE 4 - License and Co-Development Agreements

Clofarabine

We have a license from Southern Research Institute ("SRI"), Birmingham, Alabama,
to develop and market purine  nucleoside  analogs  which,  based on  third-party
studies  conducted to date,  may be  effective in the  treatment of leukemia and
lymphoma.  The lead  compound  of  these  purine-based  nucleosides  is known as
Clofarabine.  Under the terms of the  agreement  with SRI,  we were  granted the
exclusive  worldwide  license,  excluding Japan and Southeast Asia, to make, use
and sell products derived from the technology for a term expiring on the date of
expiration  of the last  patent  covered  by the  license  (subject  to  earlier
termination under certain circumstances), and to utilize technical


                                      F-12



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002

Note 4 - License and Co-Development Agreements - continued

information  related to the  technology to obtain  patent and other  proprietary
rights to products  developed by us and by SRI from the  technology.  We plan to
develop Clofarabine  initially for the treatment of leukemia and lymphoma and to
study its potential role in treatment of solid tumors.

In August 2003, SRI granted us an irrevocable, exclusive option to make, use and
sell products derived from the technology in Japan and Southeast Asia. We intend
to convert the option to a license  upon  sourcing an  appropriate  co-marketing
partner to develop these rights in such territory.

To facilitate the development of Clofarabine,  we entered into a  co-development
agreement with ILEX Oncology,  Inc.  ("ILEX") in March 2001.  Under the terms of
the co-development  agreement,  ILEX is required to pay all development costs in
the United States and Canada,  and 50% of approved  development  costs worldwide
outside  the U.S.  and Canada  (excluding  Japan and  Southeast  Asia).  ILEX is
responsible for conducting all clinical trials and the filing and prosecution of
applications  with  applicable  regulatory  authorities in the United States and
Canada. The Company retains the right to handle those matters in all territories
outside the United States and Canada  (excluding  Japan and Southeast Asia). The
Company retained the exclusive  manufacturing and distribution  rights in Europe
and  elsewhere  worldwide,  except  for the  United  States,  Canada,  Japan and
Southeast  Asia.  Under the  co-development  agreement,  ILEX will have  certain
rights if it  performs  its  development  obligations  in  accordance  with that
agreement.  The Company would be required to pay ILEX a royalty on sales outside
the U.S., Canada, Japan and Southeast Asia. In turn, ILEX, which would have U.S.
and Canadian  distribution  rights,  would pay the Company a royalty on sales in
the U.S. and Canada.  In addition,  the Company is entitled to certain milestone
payments.  The  Company  also  granted  Ilex an option to purchase $1 million of
Common Stock after  completion of the pivotal Phase II clinical trial,  and ILEX
has an additional option to purchase $2 million of Common Stock after the filing
of a new drug application in the United States for the use of Clofarabine in the
treatment of lymphocytic leukemia.  The exercise price per share for each option
is  determined  by a  formula  based  around  the date of  exercise.  Under  the
co-development   agreement,  ILEX  also  pays  royalties  to  Southern  Research
Institute  based on certain  milestones.  The Company is obligated to milestones
and royalties to Southern Research Institute in respect to Clofarabine.

The Company received a nonrefundable, upfront payment of $1.35 million when they
entered  into the  agreement  with ILEX and is  entitled  to  receive  milestone
payments of $2.5 million upon completion of management designed pivotal Phase II
clinical trials of Clofarabine  and $5.0 million after  submission of a new drug
application  with the FDA. The upfront  payment was deferred and  recognized  as
revenues  ratably,  on a  straight-line  basis over the related  service period,
through December 2002. The Company recognized revenues of approximately $490,000
and $800,000 in connection  with the up-front  payment of ILEX agreement for the
years ended June 30, 2003 and 2002, respectively.

Deferred costs  represents  royalty  payments that became due and payable to SRI
upon the Company's execution of the co-development agreement with Ilex Oncology.
The Company also defers all royalty  payments made to SRI and  recognizes  these
costs  ratably,  on a  straight-line  basis  concurrent  with  revenue  that  is
recognized in connection with Ilex agreement.  Research and Development includes
approximately  $207,000 and $368,000 for the years ended June 30, 2003 and 2002,
respectively, related to such charges.


                                      F-13



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002


Note 4 - License and Co-Development Agreements - continued

                                   Modrenal(R)

The Company holds an exclusive license, until the expiration of existing and new
patents  related  to  Modrenal(R),  to market  Modrenal  in major  international
territories,  and an  agreement  with a United  Kingdom  company  to  co-develop
Modrenal(R)  for  other  therapeutic   indications.   Management  believes  that
Modrenal(R)  currently is manufactured by third-party  contractors in accordance
with good manufacturing practices. The Company has no plans to establish its own
manufacturing  facility for  Modrenal(R),  but will continue to use  third-party
contractors.

Anti-Estrogen  Prostate.  We have received  Institutional  Review Board approval
from the  Massachusetts  General Hospital for a Phase II study of trilostane for
the  treatment  of  androgen  independent  prostate  cancer.  The study  will be
conducted  by The Dana Faber  Cancer  Institute  and  currently  is  intended to
commence in May 2004.

                            Operational Developments

In  June  2003,  we  entered  into  a  supply  agreement  with  Ferro-Pfanstiehl
Laboratories  ("Ferro"),  pursuant to which Ferro has agreed to manufacture  and
supply 100% of Bioenvisions global requirements for Clofarabine-API.  Subject to
certain circumstances,  this agreement will expire on the fifth anniversary date
of the first regulatory approval of Clofarabine drug product.

In June 2003,  the Company  entered  into a  development  agreement  with Ferro,
pursuant to which Ferro  agreed to perform  certain  development  activities  to
scale up, develop,  finalize, and supply CTM and GMP supplier  qualifications of
the API-Clofarabine.  Subject to certain  circumstances,  this agreement expires
upon the completion of the development  program.  The  development  agreement is
milestone  based and payments are to be paid upon  completion of each milestone.
If Ferro has not  completed  the  development  agreement by December  2007,  the
development  agreement will  automatically  terminate  without further action by
either party.  Through June 30, 2003, the Company paid and  capitalized  $50,000
related to development costs.

In May 2003, we entered into a sub-license  agreement  with Dechra,  pursuant to
which Dechra has been granted a sub-license for all of Bioenvision's  rights and
entitlements  to market and distribute  Modrenal in the United States and Canada
solely in  connection  with  animal  health  applications.  Subject  to  certain
circumstances, this agreement expires upon expiration of the last patent related
to Modrenal or the  completion  of the last royalty set forth in the  agreement.
Through June 30, 2003, we have  recognized  deferred  revenue and deferred costs
related  to this  agreement  as  described  below in this  Note 4.  The  Company
received an upfront  non-refundable  payment of $1.25 million upon  execution of
this  agreement  and may  receive up to an  additional  $3.75  million  upon the
achievement by Dechra of certain milestones set forth in the agreement.

In   May   2003,   we   entered   into  a   master   services   agreement   with
Penn-Pharmaceutical Services Limited ("Penn"), pursuant to which Penn has agreed
to label,  package and  distribute  Clofarabine on behalf of and at our request.
The services to be performed  by Penn also  include  regulatory  support and the
manufacture  ,  quality  control,  packaging  and  distribution  of  proprietary
medicinal products  including  clinical trials supplies and samples.  Subject to
certain  circumstances,  the term of this  agreement is twelve months and renews
for  subsequent  twelve month  periods  unless  either party  tenders  notice of
termination upon no less than three month prior written notice.


                                      F-14



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002

NOTE 4 - License and Co-Development Agreements - continued

In April 2003, we entered into an exclusive  license  agreement with  CLL-Pharma
("CLL"),  pursuant to which CLL has agreed to perform certain  development works
and  studies to create a new  formulation  of Modrenal in the form of a soft gel
capsule.  CLL  intends  to use its  proprietary  MIDDS.-patented  technology  to
perform  this service on behalf of the Company.  This new  formulation,  once in
hand, will allow the Company to apply for necessary  authorization,  as required
by applicable European health  authorities,  to sell Modrenal throughout Europe.
Through  June 30,  2003,  the  Company  paid an advance of  $175,000  related to
development  services to be provided by CLL over an eighteen month period, which
advance was recorded as a prepaid development cost by the Company.


Note 5 - Income taxes

The components of the income tax benefit are as follows:


                                                          June 30,
                                                  ---------------------------
                                                   2003               2002
                                                -----------        -----------
Current:
  Federal                                       $       --           $       --
                                                 ---------            ---------
  State                                                 --                   --
                                                 ---------            ---------

Deferred:
  Federal                                         (404,000)            (160,000)
  State                                           (133,000)             (93,000)
                                                 ---------            ---------
                                                  (537,000)            (253,000)
                                                 ---------            ---------
Total benefit                                    $(537,000)           $(253,000)
                                                 =========            =========


                                      F-15



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002


Note 5 - Income taxes - continued

Significant  components  of the  company's  deferred tax assets and liability at
June 30 are as follows:


                                                              June 30,
                                                     ---------------------------
                                                      2003               2002
                                                   -----------       -----------
Deferred tax liability
   Acquired intangibles                             $(6,318,000)    $(7,656,000)

Deferred tax assets
   Net operating loss                                 5,512,000       3,256,000
   Depreciation                                          11,000          13,000
   Net deferred revenue                                 401,000              --
   Other                                                 66,000           1,000
                                                     -----------    -----------
Total deferred tax assets                             5,990,000       3,270,000
Valuation allowance for deferred tax assets          (5,990,000)     (3,270,000)
                                                     -----------    -----------
Net deferred tax asset                                       --              --
                                                    -----------     -----------
Net deferred tax liability                           (6,318,000)     (7,656,000)
                                                    ===========     ===========

At June 30, 2003,  the Company had  approximately  $13,609,000  of net operating
loss  carryforwards  for U.S.  Federal and state income tax purposes that expire
fiscal  year  ending  2019,  with a tax value of  $5,512,000.  A full  valuation
allowance  has  been  established  for  the  deferred  tax  assets  due  to  the
uncertainty of the utilization of such deferred tax asset.

The Tax Reform Act of 1986 enacted a complex set of rules (Internal Revenue Code
Section 382) limiting the  utilization  of NOLs to offset future  taxable income
following a corporate "ownership change." Generally, this occurs when there is a
greater than 50 percentage point change in ownership.  Accordingly,  such change
could limit the amount of NOLs available in a given year, which could ultimately
cause NOLs to expire prior to utilization.

The income tax benefit as  recognized  differs  from the  benefit  that would be
recognized at the Federal  statutory rate on the pre-dividend net loss primarily
due to the  valuation  allowance  established  against  the net  operating  loss
deferred tax assets.



                                      F-16



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002


NOTE 6 - Stockholders' transactions

            Common Stock and Securities Convertible into Common Stock

In April 2001, in accordance  with the terms of the Company's stock option plan,
the  Company  issued the  following  options at an  exercise  price of $1.25 per
share, which immediately vested:

o   a total of  2,200,000  options to  employees  (Christopher  Wood - 1,500,000
    options;  Stuart Smith - 500,000 options;  and Thomas Scott Nelson - 200,000
    options);

o   a total of 2,654,544 options to certain consultants to the Company; and

o   a total of  500,000  options  to  Phoenix  Ventures,  which  were  issued in
    connection  with a credit  facility  made  available  to the Company by Glen
    Investments  Limited, a Jersey (Cnannel Islands) corporation wholly owned by
    Kevin R. Leech, a U.K. citizen and one of the Company's stockholders,  which
    facility was terminated in August 2001.


Originally,  the terms of the options  were that each option  could be exercised
after April 30, 2001 for a period of three years,  whereby the options  would no
longer be able to be exercised after April 30, 2004 unless  otherwise  agreed to
with the Company.  In July 2002, the Company  changed the  three-year  term to a
five-year  term.  The  extension of the  foregoing  options to a five-year  term
required  the Company to record  additional  compensation,  interest and finance
charges and  consulting  fees and  expenses  of  $422,500  in the quarter  ended
September 30, 2002.

In August 2001,  the Board of Directors  approved the issuance of 208,333 shares
of  common  stock  to  its  officers  and  directors  in  exchange  for  accrued
compensation  at a rate of $1.25  per  share.  In  October  2001,  the  Board of
Directors  approved  the  issuance  of 134,055  shares of  commons  stock to its
officers and  directors in exchange for accrued  compensation  of  approximately
$206,000.

In connection  with securing the Facility with SCO Capital in November 2001, the
Company issued  warrants to purchase  1,500,000  shares of the Company's  common
stock at a strike  price of $1.25 per share,  subject  to certain  anti-dilution
adjustments.  The  warrants  expire  five years from the date of  issuance.  The
Company  measured the fair market  value of the warrants and recorded  financing
costs of $1,872,000,  which were  amortized  over the term of the Facility.  The
warrants  expire five years from the date of issuance.  The credit facility with
SCO Capital  was  terminated  in May 2002 at which time the  Company  received a
payoff letter evidencing such termination.

In  December  2001,  the Company  granted  200,000  shares of common  stock to a
consultant to the Company,  these shares  vesting over an eighteen month period.
Compensation  expense of $212,108 and $80,456 were recorded as  consulting  fees
for the years ended June 30, 2003 and 2002, respectively.

On February 1, 2002, in connection  with the Company's  acquisition of Pathagon,
the Company issued  7,000,000 shares of its common stock. In connection with the
closing  of  the  acquisition  of  Pathagon,   the  Company  also  entered  into
Registration   Rights  Agreements,   with  the  persons  or  entities  who  were
shareholders of Pathagon,  pursuant to which the Company is required to register
the offer and resale of the shares of common  stock  issued in the  acquisition.
Affiliates of SCO Capital owned 82% of Pathagon prior to the acquisition.

On May 12, 2002, a majority of the  Company's  shareholders  delivered a written
consent to authorize  amendment of the Company's  certificate of  incorporation,
approved  by the  Company's  Board of  Directors,  to  increase  the  number  of
authorized shares of common stock from 25,000,000 to 50,000,000 and to authorize
the  issuance  of  10,000,000  shares  of the  Company's  Series  A  Convertible
Preferred Stock. The shareholder action became effective,  and the amendment was
filed and became effective, on April 30, 2002.


                                      F-17



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002


Note 6 - Stockholders' transactions - continued

In March 2002, the Company issued 705,984 shares of common stock to its officers
and directors as payment for salaries accrued through June 30, 2001 of $910,000

In June 2002,  the  Company  granted  options  to an  officer of the  Company to
purchase 380,000 shares of common stock at an exercise price of $1.95 per share,
which equaled the stock price on the date of the grant.  Of this amount,  50,000
options vested on June 28, 2002 and the remaining  330,000  options vest ratably
over a three-year period on each anniversary date. On March 31, 2003 the Company
entered into an Employment Agreement with such officer of the Company,  pursuant
to which,  among other things,  the exercise price for all 380,000  options were
changed to $0.735 per share,  which  equaled  the stock  price on that date.  In
addition,  the Company issued an additional 120,000 options at an exercise price
of $0.735 per share which vested  immediately.  As a result of the re-pricing of
380,000  options,  the Company  will  re-measure  the  intrinsic  value of these
options at the end of each reporting period and will adjust compensation expense
based on changes in the stock price. Compensation expense recognized as a result
of this re-pricing amounted to $372,465 for the year ended June 30, 2003.

On October 23, 2002, the Company granted  options to purchase  300,000 shares of
common stock at an exercise price of $1.45 per share to the Commercial  Director
(Europe) of the Company. Of these options, options to purchase 100,000 shares of
common stock vest and become exercisable on each of the first,  second and third
anniversary of October 23, 2002, the grant date.

On October 23, 2002, the Company  granted  options to purchase  50,000 shares of
common stock at an exercise price of $1.45 per share to another  employee of the
Company.  Of these  options,  options to purchase  50,000 shares of common stock
vest and  become  exercisable  on each of the first and  second  anniversary  of
October 23, 2002, the grant date.

On December 31, 2002 the Company  issued  options to purchase  500,000 shares of
common stock at an exercise  price equal to $1.45 per share (average of the high
and low bid price on the  grant  date),  to its  Chairman  and  Chief  Executive
Officer,  Dr.  Christopher  B.  Wood.  Of  these  options,  subject  to  certain
circumstances,  options to purchase  166,666 shares of common stock vest on each
of the first, second and third anniversary of the grant date.

On December 31, 2002 the Company  issues  options to purchase  200,000 shares of
common  stock at an  exercise  price of $2.00 per share to a  consultant  to the
Company who performs  European  regulatory  services  for the Company.  Of these
options,  options to purchase  66,666 shares of common stock vest on each of the
first, second and third anniversary of the grant date.  Compensation  expense of
$24,333 was recorded as consulting fees for the year ended June 30, 2003.

On January 9, 2003 the Company issued to an employee of the Company,  options to
purchase  20,000 shares of common stock at an exercise price of $1.42 per share,
which equaled the stock price on the date of grant. Of these options, subject to
certain  circumstances,  options to purchase  10,000 shares of common stock vest
and  become  exercisable  on the first  anniversary  of the  grant  date and the
remaining  options to  purchase  10,000  shares of common  stock vest and become
exercisable on the second anniversary of the grant date.

In January  2003,  we  entered  into an  agreement  with RRD  International  LLC
("RRD"),  pursuant  to  which  RRD  serves  as the  global  product  development
consultant to the Company in connection  with the  development  of  Clofarabine,
Modrenal  (TM) and OLIGON and assists with  designing  and managing our clinical
development  program  for our  products.  On April 2, 2003,  the Company and RRD
further memorialized their agreement pursuant to a


                                      F-18



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002

NOTE 6 - Stockholders' transactions - continued

formal Master  Services  Agreement and  Registration  Rights  Agreement  and, in
connection therewith,  the Company issued a Warrant to RRD pursuant to which RRD
has the right to acquire 175,000 shares of our common stock at an exercise price
of $2.00 per share,  which warrant  includes  registration  rights under certain
circumstances.  Compensation expense of $182,350 was recorded as consulting fees
for the year ended June 30, 2003.

                                 Preferred Stock
On May 7, 2002 the Company  authorized  the issuance and sale of up to 5,920,000
shares of Series A Convertible  Participating  Preferred Stock, par value $0.001
per  share  ("Series  A  Preferred  Stock").  Series A  Preferred  Stock  may be
converted  into two  shares of common  stock at an initial  conversion  price of
$1.50 per share of common stock,  subject to adjustment for stock splits,  stock
dividends,  mergers, issuances of cheap stock and other similar transactions. In
May 2002,  the Company  consummated  a Private  Placement  of Series A Preferred
Stock and received  gross  proceeds of $17.7  million  (see Note 8).  Holders of
Series A  Preferred  Stock also  received,  in respect of each share of Series A
Preferred Stock purchased in the May 2002 Private Placement by the Company,  one
warrant  to  purchase  one share of the  Company's  common  stock at an  initial
exercise  price of $2.00,  subject to  adjustment.  The  purchasers  of Series A
Preferred Stock also received certain  registration  rights. The preferred stock
generally  carries  rights to vote with the holders of common stock as one class
on a two-for-one  basis.  The preferred stock is convertible  into the Company's
common  stock on a  two-for-one  basis  subject  to certain  adjustments  at the
earlier  to occur of (i) at the  election  of each  holder  from and  after  the
issuance  date, or (ii) the date at any time after the one year  anniversary  of
the  issuance  date upon  which both (x) the  average of the market  price for a
share of common stock for thirty  consecutive  trading  days exceeds  $10.00 per
share, subject to certain adjustments, and (y) the average of the trading volume
for the Company's  common stock during such period exceeds  150,000,  subject to
certain adjustments.

The  Company is  required  to accrue for and pay a  dividend  of 5%,  subject to
certain  adjustments,  on its  cumulative  Series  A  Convertible  Participating
Preferred  Stock.  In the event of a voluntary  or  involuntary  liquidation  or
dissolution of the Company,  before any  distribution of assets shall be made to
the holders of the Company's  securities which are junior to the preferred stock
(such as the common stock),  holders of the preferred stock shall be paid out of
the assets of the Company  legally  available for  distribution to the Company's
stockholders  an amount per share  equal to the  initial  original  issue  price
($3.00) subject to certain  adjustments plus all accrued but unpaid dividends on
such preferred stock.

NOTE 7 - Related party transactions

On November 16, 2001,  we entered into an  engagement  letter with SCO Financial
Group,  pursuant to which SCO would act as our financial advisor.  In connection
with the engagement  letter,  we issued a warrant to purchase  100,000 shares of
common  stock at an  exercise  price of $1.25  per  share,  subject  to  certain
anti-dilution  adjustments.  The  warrants  expire  five  years from the date of
issuance.  The issuance of these shares was  capitalized  as deferred  financing
costs and was amortized over a twelve-month period.

In  connection  with  securing a credit  facility  with SCO  Capital,  we issued
warrants to purchase  1,500,000  shares of our common stock at a strike price of
$1.25 per share,  subject to certain  anti-dilution  adjustments.  The  warrants
expire  five  years from the date of  issuance.  The  credit  facility  with SCO
Capital was  terminated in May 2002 at which time the Company  received a payoff
letter evidencing such termination.

On February 5, 2002, we completed the acquisition of Pathagon Inc. Affiliates of
SCO  Capital  owned 82% of  Pathagon  prior to the  acquisition.  In  connection
therewith, on February 1, 2002 we issued 7,000,000 shares of common stock to the
former stockholders of Pathagon Inc.


                                      F-19



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002


NOTE 8 - Stock options

The Company  adopted its 2001 Stock  Option Plan (the "Plan") on April 30, 2001.
The  purchase  price of  stock  options  under  the  Plan is  determined  by the
Compensation   Committee   of  the  Board  of  Directors  of  the  Company  (the
"Committee").  The term is fixed by the Committee, but no incentive stock option
is exercisable after 5 years from the date of grant.

In June 2002,  the  Company  granted  options  to an  officer of the  Company to
purchase 380,000 shares of common stock at an exercise price of $1.95 per share,
which equaled the stock price on the date of the grant.  Of this amount,  50,000
options vested on June 28, 2002 and the remaining  330,000  options vest ratably
over a three-year period on each anniversary date. On March 31, 2003 the Company
entered into an Employment Agreement with such officer of the Company,  pursuant
to which,  among other things,  the exercise price for all 380,000  options were
changed to $0.735 per share,  which  equaled  the stock  price on that date.  In
addition,  the Company issued an additional 120,000 options at an exercise price
of $0.735 per share which vested  immediately.  As a result of the re-pricing of
380,000  options,  the Company  will  re-measure  the  intrinsic  value of these
options  at the end of each  reporting  period  and will  record  a  charge  for
compensation  expense  to the  extent  the  vested  portions  are in the  money.
Compensation  expense  recognized  as a result of this  re-pricing  amounted  to
$372,467 for the year ended June 30, 2003.

On October 23, 2002, the Company granted  options to purchase  300,000 shares of
common stock at an exercise price of $1.45 per share to the Commercial  Director
(Europe) of the Company. Of these options, options to purchase 100,000 shares of
common stock vest and become exercisable on each of the first,  second and third
anniversary of October 23, 2002, the grant date.

On October 23, 2002, the Company  granted  options to purchase  50,000 shares of
common stock at an exercise price of $1.45 per share to another  employee of the
Company.  Of these  options,  options to purchase  50,000 shares of common stock
vest and  become  exercisable  on each of the first and  second  anniversary  of
October 23, 2002, the grant date.

On December 31, 2002 the Company  issued  options to purchase  500,000 shares of
common stock at an exercise  price equal to $1.45 per share (average of the high
and low bid price on the  grant  date),  to its  Chairman  and  Chief  Executive
Officer,  Dr.  Christopher  B.  Wood.  Of  these  options,  subject  to  certain
circumstances,  options to purchase  166,666 shares of common stock vest on each
of the first, second and third anniversary of the grant date.

On December 31, 2002 the Company  issues  options to purchase  200,000 shares of
common  stock at an  exercise  price of $2.00 per share to a  consultant  to the
Company who performs  European  regulatory  services  for the Company.  Of these
options,  options to purchase  66,666 shares of common stock vest on each of the
first, second and third anniversary of the grant date.  Compensation  expense of
$24,333 was recorded as consulting fees for the year ended June 30, 2003.

On January 9, 2003 the Company issued to an employee of the Company,  options to
purchase  20,000 shares of common stock at an exercise price of $1.42 per share,
which equaled the stock price on the date of grant. Of these options, subject to
certain  circumstances,  options to purchase  10,000 shares of common stock vest
and  become  exercisable  on the first  anniversary  of the  grant  date and the
remaining  options to  purchase  10,000  shares of common  stock vest and become
exercisable on the second anniversary of the grant date.


                                      F-20



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002


NOTE 8 - Stock options - continued

A summary of the Company's stock option activity for options issued to employees
and related information follows:

                                                                Weighted Avg.
                                            No. of Shares       Exercise Price
                                            -------------       --------------

Balance - July 1, 2001                          2,200,000      $     1.25

          Granted during 2002                         -                -

          Exercised during 2002                       -                -

          Forfeiture during 2002                      -                -
                                           -----------------

Balance - June 30, 2002                         2,200,000            1.25


          Granted during 2003                    1,370,000            1.19

          Exercised during 2003                      -                 -

          Forfeiture during 2003                     -                 -
                                           -----------------------------------
Balance - June 30, 2003                          3,570,000      $      1.23
                                           ===================================




                                                        Stock Options Outstanding
                --------------------------------------------------------------------------------------------------------------------
                                                                                               Weighted Average  Number of Stock
                                                       Weighted Average    Number of           Remaining         Options
                Exercise Price Range                   Exercise price      Options             Contractual Life  Exercisable
                --------------------------------------------------------------------------------------------------------------------
                                                                                                        

                $0.74                                   $           0.74           500,000     9.13                      170,000

                $1.25 - $1.45                           $           1.29         3,070,000     8.89                    2,210,000
                                                                           -------------------                   -------------------
                                                                                 3,570,000                            2,380,000
                                                                           ===================                   ===================



                                      F-21



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002


NOTE 9 - Commitments and Contingencies

Leases
------

The  Company  leases  3,229  square  feet of  office  space  for  its  New  York
headquarters  under a non-cancellable  operating lease expiring on September 30,
2005.  Rent expense in 2003,  excluding real estate taxes,  insurance and repair
costs, was approximately $110,000. At June 30, 2003, total minimum rentals under
operating leases with initial or remaining  non-cancellable  lease terms of more
than one year were:

                      Year ended June 30,

                             2004   $193,317

                             2005    197,873

                             2006     63,439

                             2007     10,185

                             2008     ______

                                    $464,814
                                    ========

The Company is a party to an additional  month-to-month  lease agreement for its
subsidiary, Bioenvision Ltd. in Edinburgh, Scotland.

Employment Agreements
---------------------

On September 1, 1999, we entered into an employment  agreement with  Christopher
B. Wood, M.D. under which he serves as our Chairman and Chief Executive Officer.
The initial term of Dr. Wood's employment  agreement is two years with automatic
one-year  extensions  thereafter unless either party gives written notice to the
contrary.  On December 31, 2002, we entered into a new employment agreement with
Dr. Wood,  under which he continues to serve as our Chairman and Chief Executive
Officer.  Under this contract,  the term is one year,  with  automatic  one-year
extensions  thereafter  unless  either  party  provides  written  notice  to the
contrary.  Dr.  Wood's new  employment  agreement  provides  for an initial base
salary of $225,000,  a bonus as  determined  by the Board of  Directors,  health
insurance  and  other  benefits  currently  or in  the  future  provided  to key
employees of the Company.  If Dr. Wood's employment is terminated other than for
cause or if he resigns for good reason or if a change of control occurs, he will
receive a lump sum payment in an amount  equal to his then  current  annual base
salary  and any and all  unvested  options  will  vest  and  immediately  become
exercisable.

On January 1, 2000,  we entered into an employment  agreement  with Stuart Smith
under which he serves as our Senior  Vice  President.  The  initial  term of Mr.
Smith's employment  agreement is two years, with automatic  one-year  extensions
thereafter unless either party gives written notice to the contrary. Mr. Smith's
agreement provides for an initial base salary of $150,000, a bonus as determined
by the board of directors,  life insurance  benefits equal to his annual salary,
health  insurance and other benefits  currently or in the future provided to our
key  employees.  On September 30, 2002,  Mr. Smith resigned from his position as
Senior Vice President of the Company;  his  employment  agreement was terminated
and the Company  agreed to issue  shares of its common stock to Mr. Smith at the
then current fair market value in satisfaction of all outstanding obligations of
the Company to Mr. Smith pursuant to the employment agreement.


                                      F-22



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002


Note 9 - Commitments and Contingencies - continued

On March 31, 2003, we entered into an employment  agreement  with David P. Luci,
pursuant  to which he serves as our  Director of  Finance,  General  Counsel and
Corporate  Secretary.  The initial term of Mr.  Luci's  employment  agreement is
one-year,  with automatic  one-year  extensions  thereafter  unless either party
provides written notice to the contrary.  If Mr. Luci's employment is terminated
other than for cause or if he resigns  for good reason or if a change of control
occurs,  he will receive a lump sum payment in an amount equal to 1.5 multiplied
by the sum of (i) his then current annual base salary plus (ii) his then average
annual bonus for the preceding  two years and any and all unvested  options will
vest and immediately become exercisable.

Litigation
----------

On April 1, 2003, RLB Capital, Inc. filed a complaint against the Company in the
Supreme  Court of the State of New York  (Index No.  601058/03).  The  Complaint
alleges a breach of contract by the  Company  and demands  judgment  against the
Company for  $112,500  and warrants to acquire  75,000  shares of the  Company's
common stock. The Company submitted its Verified Answer on June 25, 2003 and, in
pertinent part,  denied RLB's  allegations and asserted  counterclaims  based on
negligence.  The  Company  believes  that  the  grounds  for the  complaint  are
meritless  and intends to defend this matter  vigorously.  If the Company is not
able to successfully defend this complaint, management does not believe that any
resulting  judgment or settlement  would have a material  adverse  effect on the
Company, its financial position or results of operations.


NOTE 10 - Subsequent Events

In August 2003,  we entered into an  amendment to the  co-development  agreement
with Stegram  Pharmaceuticals  plc ("Stegram"),  pursuant to which, in pertinent
part, we succeeded to the U.K. marketing rights to Modrenal. In August 2003, SRI
granted  us an  irrevocable,  exclusive  option to make,  use and sell  products
derived from the  technology in Japan and  Southeast  Asia. We intend to convert
the option to a license upon  sourcing an  appropriate  co-marketing  partner to
develop these rights in such territory.

In September 2003, we entered into a letter  agreement with ILEX Oncology,  Inc.
pursuant to which we are working with ILEX to co-develop an oral formulation for
Clofarabine;  the rights and related  costs to which we agreed to split  equally
with ILEX.


                                      F-23







                       BIOENVISION, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                                           March 31,             June 30,
                                                                                             2004                 2003
                                                                                          -----------           ---------
                           ASSETS                                                         (unaudited)           (audited)
                                                                                                          

Current assets
   Cash and cash equivalents                                                             $17,558,813            $7,929,686
   Restricted cash                                                                           290,000               290,000
   Deferred costs                                                                            178,027                22,727
   Accounts receivable                                                                     2,640,263                25,000
   Other assets                                                                              187,604               105,976
                                                                                             -------               -------

       Total current assets                                                               20,854,708             8,373,389

   Property and equipment, net                                                                37,757                49,265
   Intangible assets, net                                                                 14,801,470            15,779,399
   Goodwill                                                                                3,902,705             3,902,705
   Security deposits                                                                          79,111                79,111
   Other long term assets                                                                     30,001               126,869
   Deferred costs-long term                                                                2,776,186               224,937
                                                                                           ---------               -------
       Total assets                                                                      $42,481,937           $28,535,675
                                                                                         ===========           ===========

            LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities
   Accounts payable                                                                       $1,133,000              $411,392
   Accrued expenses                                                                          493,369               730,722
   Accrued dividends payable                                                               1,597,118             1,009,146
   Deferred revenue                                                                          434,181               113,636
                                                                                             -------               -------

       Total current liabilities                                                           3,657,667             2,264,896

Deferred revenue-long term                                                                 6,166,152             1,124,685
Deferred tax liability                                                                     5,914,774             6,317,702
                                                                                           ---------             ---------

       Total liabilities                                                                  15,738,593             9,707,283
                                                                                          ----------             ---------

 Stockholders' equity
   Preferred stock - $0.001 par value; 20,000,000 shares authorized;                           4,698                 5,917
     4,698,333 and 5,916,966 shares issued and outstanding at March 31, 2004
     and June 30, 2003, respectively (liquidation  preference $14,094,999 and
     17,750,898 at March 31, 2004 and June 30, 2003, respectively)
   Common stock - par value $0.001; 70,000,000 shares authorized;                             23,018                17,123
     23,017,950 and 17,122,739 shares issued and outstanding at March 31,
      2004 and June 30, 2003, respectively
   Additional paid-in capital                                                             64,240,092            47,304,449
   Accumulated deficit                                                                   (37,676,811)          (28,651,443)
   Accumulated other comprehensive income                                                    152,346               152,346
                                                                                             -------               -------

        Stockholders' equity                                                              26,743,344            18,828,392
                                                                                          ----------            ----------

        Total liabilities and stockholders' equity                                       $42,481,937           $28,535,675
                                                                                         ===========           ===========


The accompanying notes are an integral part of these financial statements.


                                      F-24






                       Bioenvision, Inc. and Subsidiaries
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                              Nine months ended
                                                                  March  31,
                                                           -----------------------
                                                             2004             2003
                                                         -----------      -----------
                                                         (unaudited)      (unaudited)
                                                                   

           Licensing and royalty revenue                   $361,308         $463,935
           Research and development contract revenue      1,396,722              -
                                                         ----------        ---------
                     Total revenue                        1,758,030          463,935

        Costs and expenses
           Research and development                       2,545,128        1,162,108
           Selling, general and administrative            7,079,367        2,743,160
           (includes stock based compensation
           expense of $2,526,943 and $256,056 for
           the three months ended March 31, 2004 and
           2003, respectively, and $3,625,535 and
           $678,556 for the nine months ended March
           31, 2004 and 2003, respectively)
           Depreciation and amortization                  1,023,325        1,005,709
                                                         ----------        ---------
                Total costs and expenses                 10,647,818        4,910,977
                                                         ----------        ---------
        Loss from operations                             (8,889,789)      (4,447,042)

        Interest income (expense)
           Interest and finance charges                           -         (325,000)
           Interest income                                   49,465          117,054
                                                         ----------        ---------

        Net loss before income tax benefit               (8,840,325)      (4,654,988)

        Income tax benefit                                  402,928          456,300
                                                         ----------        ---------
        Net loss                                         (8,437,397)      (4,198,688)

        Cumulative preferred stock dividend                (587,971)        (658,972)
                                                         ----------        ---------
        Net loss available to common stockholders       $(9,025,369)     $(4,857,660)
                                                        ===========      ===========


        Basic and diluted net loss per share of
        common stock                                         $(0.50)          $(0.29)
                                                        ===========      ===========

        Weighted average shares used in computing        18,122,445       16,887,786
           basic and diluted net loss per share         ===========      ===========


The accompanying notes are an integral part of these financial statements.


                                      F-25






                       Bioenvision, Inc. and Subsidiaries
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                         Nine months ended
                                                                             March  31,
                                                                  --------------------------------
                                                                      2004                 2003
                                                                  -----------          -----------
                                                                  (unaudited)          (unaudited)
                                                                                

 Cash flows from operating activities

 Net loss                                                        $(8,437,397)         $(4,198,688)
    Adjustments to reconcile net loss to net
       cash used in operating activities

         Depreciation and amortization                             1,023,325            1,005,710
         Deferred tax benefit                                       (402,928)            (456,300)
         Compensation costs - shares and warrants issued           1,009,290              678,556
           to nonemployees

         Compensation costs - re-pricing of options                2,597,796                    -

         Compensation costs-options issued to employees               18,449

         Changes in assets and liabilities
           Deferred costs                                         (2,706,549)             184,091
           Deferred revenue                                        5,362,012             (368,182)

           Accounts payable                                          721,608             (109,623)
           Other current assets                                      (81,628)             (45,529)
           Other long term assets                                     96,868                4,247
           Accounts receivable                                    (2,615,263)             (79,111)
           Other accrued expenses and liabilities                   (237,353)            (772,834)
                                                                    --------             --------

                  Net cash used in operating activities           (3,651,771)          (4,157,663)
                                                                  ----------           ----------

 Cash flows from investing activities

 Purchase of intangible assets                                       (30,772)            (161,183)

 Capital expenditures                                                 (3,116)             (59,405)
    Restricted cash                                                     -                (290,000)
                                                                   ---------           ----------

                  Net cash used in investing activities              (33,888)            (510,588)
                                                                     -------             --------

 Cash flows from financing activities
    Proceeds from issuance of common stock                        12,157,240                -
    Proceeds from exercise of options, warrants and other
    convertible securities                                         1,157,546                -
                                                                   ---------           ----------
         Net cash provided by financing activities                13,314,786                -
                                                                   ---------           ----------

 Net increase (decrease) in cash and cash equivalents              9,629,127           (4,668,251)

 Cash and cash equivalents, beginning of period                    7,929,686           12,882,521
                                                                   ---------           ----------

 Cash and cash equivalents, end of period                        $17,558,813           $8,214,270
                                                                 ===========           ==========



The accompanying notes are an integral part of these financial statements


                                      F-26




                       BIOENVISION, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                 March 31, 2004

                                   (Unaudited)

NOTE A - Description of Business


Bioenvision,   Inc.   ("Bioenvision"   or   the   "Company")   is  an   emerging
biopharmaceutical  company whose primary  business focus is the  development and
distribution of drugs to treat cancer. The Company has a broad range of products
and technologies under  development,  but its two lead drugs are Clofarabine and
Modrenal(R).  Modrenal(R)is  approved  for  marketing  in the U.K.  for advanced
post-menopausal  breast  cancer.  The  Company'  has filed an IND in the  United
States to test  Modrenal(R)  in a Phase II clinical  trial for the  treatment of
androgen  independent  prostate  cancer  which  clinical  trial is  expected  to
commence in Q2 of calendar  2004.  The  Company's  future  plans within the U.S.
include  development  of  Modrenal(R)  in the U.S. for the treatment of advanced
post-menopausal  breast  cancer.  Most of the  Company's  other drugs are now in
clinical trials in various stages of development including  Clofarabine,  a drug
which we believe to be effective  for the treatment of pediatric and adult acute
leukemia, and potentially solid tumors and chronic leukemia.


NOTE B - Interim Financial Statements


In the opinion of management,  the accompanying unaudited condensed consolidated
financial  statements  contain all the  adjustments  (consisting  only of normal
recurring  accruals)  necessary  to present  fairly the  consolidated  financial
position as of March 31, 2004 and the consolidated results of operations for the
three months and nine months  ended March 31, 2004 and 2003,  and cash flows for
the nine months ended March 31, 2004 and 2003.


The condensed  consolidated balance sheet at June 30, 2003 has been derived from
the  audited  financial  statements  at that date,  but does not include all the
information and footnotes required by accounting  principles  generally accepted
in the United States for complete financial statements. For further information,
refer to the audited  consolidated  financial  statements and footnotes  thereto
included  in the Form  10-KSB  filed by the  Company for the year ended June 30,
2003.


The condensed  consolidated  results of operations for the three months and nine
months  ended  March 31,  2004 and 2003 are not  necessarily  indicative  of the
results to be expected for any other interim period or for the full year.

NOTE C - Stock Based Compensation

At March 31,  2004,  the Company has stock  based  compensation  plans which are
described more fully in the Company's  annual report on Form 10-KSB for the year
ended June 30, 2003. As permitted by SFAS No. 123,  "Accounting  for Stock Based
Compensation," the Company accounts for stock based compensation arrangements in
accordance with provisions of Accounting Principles Board ("APB") Opinion No. 25
"Accounting  for Stock  Issued to  Employees."  Compensation  expense  for stock
options  issued to  employees is based on the  difference  on the date of grant,
between  the fair value of the  Company's  stock and the  exercise  price of the
option. Under APB 25, no stock based employee  compensation cost is reflected in
reported net loss,  when options  granted to  employees  have an exercise  price
equal to the market value of the  underlying  common stock at the date of grant.
For the  three  months  and nine  months  ended  March  31,  2004,  the  Company
recognized  stock  based  employee   compensation   expense  of  $1,943,888  and
$2,597,796,  respectively,  as a result  of the  March 31,  2003  re-pricing  of
380,000 options  granted to an employee  pursuant to the terms of his employment
contract. For each of the three months and nine months ended March 31, 2004, the
Company  recorded  compensation  expense of $18,499,  as a result of the 288,600
options granted to certain employees on January 20, 2004.


The  Company  accounts  for  equity   instruments  issued  to  non-employees  in
accordance  with the  provisions of SFAS No. 123 and Emerging  Issues Task Force
("EITF") No. 96-18,  "Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling Goods or Services,"
as amended by EITF No. 00-27.  Under EITF No. 96-18, where the fair value of the
equity  instrument is more reliably  measurable  than the fair value of services
received,  such  services  will be valued  based on the fair value of the equity
instrument.  The Company  expects to continue  applying  the  provisions  of APB
Opinion No. 25 for equity issuances to employees.



                                      F-27




The following table  illustrates the effect on net loss and loss per share as if
the fair value based  method had been  applied to all  outstanding  and unvested
awards in each period.




                                                     Three months ended              Nine months ended
                                                          March 31,                      March 31,
                                                          ---------                      ---------
                                                    2004            2003            2004           2003
                                                    ----            ----            ----           ----
                                                                                   
Net loss available to common stockholders,
as reported                                     $(4,239,982)   $(1,699,307)    $(9,025,369)    $(4,857,660)
                                                 -----------    -----------     -----------     -----------
Add:  Stock based employee compensation
expense included in reported net income,
net of tax effects                              $    18,499          -         $    18,499            -
Deduct:  Total stock based employee             $  (159,528)   $(152,042)      $  (284,959)    $  (274,267)
compensation expense determined under fair         ---------    ---------         ---------     ----------
value based method for all awards; net of
related tax effects

Pro forma net loss                              $(4,381,011)   $(1,851,349)    $(9,291,829)    $(5,131,927)
                                                 ===========    ===========     ===========     ===========
Loss per share

     Basic and diluted - as reported            $   (0.21)     $   (0.10)      $   (0.50)      $   (0.29)

     Basic and diluted - pro forma              $   (0.22)     $   (0.11)      $   (0.51)      $   (0.30)



     The fair value of options  at the date of grant was  established  using the
     Black-Scholes model with the following assumptions:


                                                 Three months ended         Nine months ended
                                                      March 31,                 March 31,
                                                      ---------                 ---------
                                                2004            2003       2004           2003
                                                ----            ----       ----           ----


Expected life (years)                            4               4          4               4

Risk free interest rate                         3.00%           3.00%      3.00%          3.00%

Expected volatility                            80.00%          80.00%     80.00%         80.00%

Expected dividend yield                         0.00            0.00       0.00           0.00




NOTE D - Net Loss Per Share

Basic net loss per share is computed using the weighted average number of common
shares  outstanding  during the periods.  Diluted net loss per share is computed
using the weighted  average  number of common  shares and  potentially  dilutive
common shares outstanding  during the periods.  Options and warrants to purchase
13,145,020  and  6,054,544  shares of common stock have not been included in the
calculation  of net loss per share for the nine months  ended March 31, 2004 and
2003, respectively, as their effect would have been anti-dilutive.

NOTE E - License And Co-Development Agreements


                                   Clofarabine

The Company has a license from Southern Research Institute ("SRI"),  Birmingham,
Alabama,  to develop  and  market  purine  nucleoside  analogs  which,  based on
third-party  studies  conducted to date,  may be  effective in the  treatment of
leukemia and lymphoma.  The lead compound of these  purine-based  nucleosides is
known as Clofarabine.  The Company is developing  Clofarabine  initially for the
treatment of pediatric and adult leukemias, lymphomas and solid tumors.

In August  2003,  SRI granted the Company an  irrevocable,  exclusive  option to
make,  use and sell products  derived from the technology in Japan and Southeast
Asia.  The Company  intends to convert the option to a license upon  sourcing an
appropriate co-marketing partner to develop these rights in such territory.




                                      F-28




To  facilitate  the  development  of  Clofarabine,  the Company  entered  into a
co-development  agreement with ILEX Oncology, Inc. ("ILEX") in March 2001. Under
the terms of the co-development agreement, the Company granted ILEX an option to
market Clofarabine in the United States and Canada.  ILEX is required to pay all
development  costs  in the  United  States  and  Canada,  and  50%  of  approved
development  costs  worldwide  outside the United  States and Canada  (excluding
Japan and Southeast  Asia).  The Company also granted Ilex an option to purchase
$1 million of Common  Stock after  completion  of the pivotal  Phase II clinical
trial, and ILEX has an additional  option to purchase $2 million of Common Stock
after the filing of a new drug  application  in the United States for the use of
Clofarabine  in the treatment of  lymphocytic  leukemia.  The exercise price per
share  for each  option is  determined  by a formula  based  around  the date of
exercise.  Under the  co-development  agreement,  ILEX also  pays  royalties  to
Southern Research  Institute based on certain  milestones.  Also, the Company is
obligated to pay  milestones  and  royalties to Southern  Research  Institute in
respect to Clofarabine  sales outside the United State and Canada.  On September
12, 2003,  ILEX paid the Company  approximately  $775,000 in respect of Research
and  Development  costs  incurred by the Company for European  drug  development
through August 31, 2003. The Company  recognized  additional revenue of $622,000
from ILEX for Research and Development  costs incurred by the Company during the
three months ended March 31, 2004.


The Company received a nonrefundable, upfront payment of $1.35 million when they
entered  into the  agreement  with ILEX and is  entitled  to  receive  milestone
payments of $2.5 million upon completion of management designed pivotal Phase II
clinical trials of Clofarabine  and $5.0 million after  submission of a new drug
application  with the FDA. The upfront  payment was deferred and  recognized  as
revenues  ratably,  on a  straight-line  basis over the related  service period,
through December 2002. The Company  recognized  revenues of $0 for the three and
nine months ended March 31, 2004 and $0 and approximately $368,000 for the three
and nine months ended March 31, 2003,  in connection  with the up-front  payment
under the ILEX agreement.

Deferred costs  represents  royalty  payments that became due and payable to SRI
upon the Company's execution of the co-development agreement with Ilex Oncology.
The Company also defers all royalty  payments made to SRI and  recognizes  these
costs  ratably,  on a  straight-line  basis  concurrent  with  revenue  that  is
recognized in connection with Ilex agreement.

                                   Modrenal(R)

The Company holds an exclusive license, until the expiration of existing and new
patents  related  to  Modrenal(R),  to market  Modrenal  in major  international
territories,  and an  agreement  with a United  Kingdom  company  to  co-develop
Modrenal(R)  for  other  therapeutic   indications.   Management  believes  that
Modrenal(R)  currently is manufactured by third-party  contractors in accordance
with good manufacturing practices. The Company has no plans to establish its own
manufacturing  facility for  Modrenal(R),  but will continue to use  third-party
contractors.

Anti-Estrogen  Prostate.  The Company has  received  Institutional  Review Board
approval  from  the  Massachusetts  General  Hospital  for a Phase  II  study of
Modrenal(R) for the treatment of androgen independent prostate cancer. The study
will be conducted by The Dana Faber Cancer  Institute  and currently is intended
to commence in May 2004.


Operational Developments


On April 27, 2004,  the Company  entered into a Clinical  Development  Agreement
with  Covance  Inc.,  pursuant to which  Covance  has agreed to perform  certain
clinical  investigatory  services for the  development  of Clofarabine in Europe
including, without limitation,  performing CRO activities in connection with the
Company's  ongoing Phase II clinical trial of  Clofarabine  for the treatment of
adults with Acute  Myeloid  Leukemia for which  chemotherapy  is not  considered
suitable ("BIV 121"). The Company's  management  acknowledges that BIV 121 could
possibly be the basis for a regulatory  submission in the adult AML  indication;
although several factors beyond management's  control may affect the development
of Clofarabine in this indication.

On March 31, 2004, ILEX Oncology,  Inc., our U.S. co-development partner for the
development of Clofarabine,  filed a New Drug  Application  ("NDA") with FDA for
approval of  Clofarabine  in the U.S. for the treatment of pediatric ALL and AML
(the "NDA Filing"). The Company has taken the NDA filing and currently is in the
process of converting the filing to a Common Technical  Document (the "CTD") for
filing  with  the  EMEA  as the  basis  potentially  for  European  approval  of
Clofarabine  for the treatment of pediatric ALL and AML. The Company  expects to
file the CTD with the EMEA in the third quarter of calendar year 2004.

On December 30, 2003,  the Company  converted  ILEX's option to a sublicense and
ILEX paid the Company $3.5



                                      F-29




million  constituting an acceleration of milestone payments required pursuant to
the  co-development  agreement.  Further,  ILEX agreed to pay an  additional  $2
million  upon  filing an NDA and a further  $2 million  six  months  thereafter.
Pursuant to the original co-development agreement, ILEX was obligated to pay the
Company $2.5 million upon completion of the pivotal phase II clinical trials; an
additional $500,000 on filing an NDA for acute leukemias; and an additional $4.5
million within twelve months  thereafter.  These  non-refundable  fees that were
received  pursuant  to  license  and other  collaborative  agreements  where the
Company  has  continuing  involvement  are  recorded  as  deferred  revenue  and
recognized  over the estimated  service  period  through March 2021. The related
costs  paid to SRI were  also  deferred  and are being  amortized  over the same
service  period.  ILEX filed the NDA with FDA in March  2004 and in April  2004,
ILEX paid the Company $2 million,  representing  the payment due to be paid upon
filing of the NDA. The Company  expects to receive the final $2 million  payment
from ILEX Oncology in Q3 of calendar year 2004.

In  September  2003,  the  Company and ILEX  entered  into an  amendment  to the
co-development  agreement,  pursuant to which the Company collaborated with ILEX
to co-develop an oral formulation for Clofarabine;  the rights and related costs
of which will be shared equally.


In August 2003,  the Company  entered  into an  amendment to the  co-development
agreement with Stegram  Pharmaceuticals  plc ("Stegram"),  pursuant to which, in
pertinent  part, the Company  succeeded to Stegram the United Kingdom  marketing
rights to Modrenal.

In August  2003,  SRI granted the Company an  irrevocable,  exclusive  option to
make,  use and sell  products  derived from  Clofarabine  in Japan and Southeast
Asia.  The Company  intends to convert the option to a license upon  sourcing an
appropriate co-marketing partner to develop these rights in such territory.

In June 2003, the Company entered into a supply agreement with  Ferro-Pfanstiehl
Laboratories  ("Ferro"),  pursuant to which Ferro has agreed to manufacture  and
supply 100% of Bioenvision's global requirements for Clofarabine-API. Subject to
certain circumstances,  this agreement will expire on the fifth anniversary date
of the first regulatory approval of Clofarabine drug product.

In June 2003,  the Company  entered  into a  development  agreement  with Ferro,
pursuant to which Ferro  agreed to perform  certain  development  activities  to
scale up, develop,  finalize, and supply CTM and GMP supplier  qualifications of
the API-Clofarabine.  Subject to certain  circumstances,  this agreement expires
upon the completion of the development  program.  The  development  agreement is
milestone  based and payments are to be paid upon  completion of each milestone.
If Ferro has not  completed  the  development  agreement by December  2007,  the
development  agreement will  automatically  terminate  without further action by
either party.  The Company paid and  capitalized  $50,000 related to development
costs.

In May 2003,  the  Company  entered  into a  sub-license  agreement  with Dechra
Pharmaceuticals,  plc  ("Dechra"),  pursuant to which  Dechra has been granted a
sub-license  for all of  Bioenvision's  rights  and  entitlements  to market and
distribute  Modrenal in the United States and Canada  solely in connection  with
animal health  applications.  Subject to certain  circumstances,  this agreement
expires upon expiration of the last patent related to Modrenal or the completion
of the last royalty set forth in the agreement.  The Company received an upfront
non-refundable payment of $1.25 million upon execution of this agreement and may
receive up to an  additional  $3.75  million upon the  achievement  by Dechra of
certain milestones set forth in the agreement. The upfront payment received from
Dechra has been deferred and will be  recognized as revenues on a  straight-line
basis over the term of the  license  agreement  through  May 2014.  The  Company
recognized  revenues of $29,000 and $87,000 for the three and nine months  ended
March 31, 2004 in connection with this sublicense  agreement with Dechra.  As of
March 31, 2004,  deferred revenues include  approximately  $1,153,000 related to
this agreement.

In  May  2003,  the  Company  entered  into a  master  services  agreement  with
Penn-Pharmaceutical Services Limited ("Penn"), pursuant to which Penn has agreed
to label,  package and distribute  Clofarabine on behalf of and at the Company's
request.  The services to be performed by Penn also include  regulatory  support
and the manufacture,  quality control, packaging and distribution of proprietary
medicinal products  including  clinical trials supplies and samples.  Subject to
certain  circumstances,  the term of this  agreement is twelve months and renews
for  subsequent  twelve month  periods  unless  either party  tenders  notice of
termination upon no less than three months prior written notice.


In April 2003, we entered into an exclusive  license  agreement with  CLL-Pharma
("CLL"),  pursuant to which CLL has agreed to perform certain  development works
and  studies to create a new  formulation  of Modrenal in the form of a soft gel
capsule.  CLL  intends  to use its  proprietary  MIDDS.-patented  technology  to
perform  this service on



                                      F-30




behalf  of the  Company.  This new  formulation,  once in hand,  will  allow the
Company to apply for necessary authorization, as required by applicable European
health authorities,  to sell Modrenal throughout Europe.  Through June 30, 2003,
the Company paid an advance of $175,000  related to  development  services to be
provided by CLL over an eighteen  month period,  which advance was recorded as a
prepaid development cost by the Company.

NOTE F - Equity Transactions
 In June 2002,  the  Company  granted  options  to an officer of the  Company to
purchase 380,000 shares of common stock at an exercise price of $1.95 per share,
which  equaled  the stock  price on the date of  grant.  Of this  amount  50,000
options vested on June 28, 2002 and the remaining  330,000  options vest ratably
over a  three-year  period on each  anniversary  date.  On March 31,  2003,  the
Company  entered into an Employment  Agreement with such officer of the Company,
pursuant to which, among other things, the exercise price for all of the 380,000
options were changed to $0.735 per share,  which equaled the stock price on that
date.  In  addition,  the Company  issued an  additional  120,000  options at an
exercise  price of $.735 per share  which vest  immediately.  As a result of the
repricing  of all  of the  380,000  options,  the  Company  will  remeasure  the
intrinsic  value of these options at the end of each  reporting  period and will
record a charge for compensation expense to the extent the vested portion of the
options are in the money.  For the three  months and nine months ended March 31,
2004, the Company recognized stock based compensation  expense of $1,943,888 and
$2,597,796, respectively.


During the three  months ended March 31,  2003,  the Company also issued  20,000
options to another  employee to  purchase  20,000  shares of common  stock at an
exercise  price of $1.42 per  share.  Of this  amount,  10,000  options  vest on
January 9, 2004 and the remaining 10,000 options will vest on January 9, 2005.

On April 2, 2003, the Company granted RRD International, a regulatory consultant
to the Company,  a warrant to acquire  175,000  shares of the  Company's  common
stock at an exercise price of $2.00 per share,  which warrant vests ratably upon
satisfaction   of  five   milestones   included  in  the  warrant  and  includes
registration rights under certain  circumstances.  In connection therewith,  for
the three  monthsand  nine month  periods  ended  Match 31,  2004,  the  Company
recognized   consulting   expense  of   approximately   $485,000  and  $611,000,
respectively.

During the three months ended  December 31, 2003,  the Company issued options to
another  employee to purchase 25,000 shares of common stock at an exercise price
of $3.53 per share. Of this amount, 12,500 options vest on November 11, 2004 and
the remaining 12,500 will vest on November 11, 2005.

During  the three and nine  months  ended  March 31,  2004,  certain  holders of
760,000  shares of the  Company's  preferred  stock  converted  such shares into
1,520,000  shares of the Company's  common stock. In addition,  during the three
and nine months ended March 31,  2004,  certain  warrant  holders of the Company
exercised  their warrants to acquire 433,000 and 608,000 shares of the Company's
common  stock,  respectively.  The Company  received  proceeds of  approximately
$867,000 and  $1,129,000  during the three and nine months ended March 31, 2004,
respectively from the exercise of these warrants.

 During the three and nine month periods ended March 31, 2004,  certain  holders
of  options  to  purchase  an  aggregate  of  1,025,000  and  2,113,000  shares,
respectively  of the  Company's  common  stock were  exercised  pursuant  to the
cashless  exercise  feature  available  to such  option  holders and the Company
issued  approximately  847,000  and  1,738,000  shares  of its  common  stock in
connection therewith.

On January 3, 2004,  the Company issued 14,510  restricted  shares of its common
stock to a consultant to the Company for certain  executive  placement  services
rendered  to  the  Company.   The  Company  recorded   compensation  expense  of
approximately  $60,637 for the three months  ended March 31, 2004 in  connection
with such issuance.

On January 20, 2004, the Company granted 20,000 options to Dr. Michael Kauffman,
for serving as a member of the Board of Directors, at an exercise price of $4.55
per share which vest ratably on the first and second  anniversaries of the grant
date.

On January 20, 2004 the Company recorded a compensation  expense of $18,499 as a
result of the 288,600 options granted to certain employees.

On February 4, 2004,  the Company issued 20,000 shares of its common stock to an
employee of the Company in connection  with the exercise of options issued prior
to that date.

On March 22, 2004,  the Company  consummated  a private  placement  transaction,
pursuant to which we raised  $12.8  million and issued  2,044,514  shares of our
common stock and warrants to purchase an additional 408,903 shares of



                                      F-31




our common stock at a conversion  price of $7.50 per share. The Company recorded
proceeds  of  $12,151,240  net of all legal,  professional  and  financing  fees
incurred in  connection  with the  offering.  The Company  consummated  a second
closing  for this  financing  on May 13,  2004 in order to comply  with  certain
contractual  obligations  of the  Company to its  holders of Series A  Preferred
Stock which hold  preemptive  rights for equity  offerings of the  Company.  The
Company raised an additional  $3.5 million from the second closing and issued an
additional  558,384 shares of our common stock and warrants to purchase  111,677
shares of our common stock at a conversion price of $7.50 per share.

NOTE G - Related Party Transactions

In May 2002,  we  completed a private  placement  pursuant to which we issued an
aggregate of 5,916,666  shares of Series A convertible  participating  preferred
stock for $3.00 per share and  warrants to purchase an  aggregate  of  5,916,666
shares of common stock and in March of 2004 we  consummated a private  placement
pursuant to which we raised $12.8  million with a second  closing in May 2004 in
which we raised an  additional  $3.5 million (See "Note  F-Equity  Transactions"
above).  An affiliate  of SCO Capital  Partners  LLC,  one of our  stockholders,
served as financial  advisor to the Company in connection with these  financings
and earned a placement fee of approximately  $1.2 million in connection with May
2002  private  placement  and a placement  fee of $1.1  million and  warrants to
purchase  260,291  shares of common  stock for $6.25 per share for the March and
May 2004  financings.  This  affiliate of SCO Capital  Partners LLC continues to
serve as a financial advisor to the Company.

NOTE H - New Accounting Pronouncements

In January 2003, the FASB issued Financial Interpretation No. 46, "Consolidation
of Variable  Interest  Entities" ("FIN 46"),  which addresses  consolidation  by
business  enterprises  of variable  interest  entities  (VIEs).  The  accounting
provisions and disclosure  requirements of FIN 46 are effective  immediately for
VIEs created after January 31, 2003, and are effective for the Company's  fiscal
period  ending March 31, 2004,  for VIEs created  prior to February 1, 2003.  In
December  2003,  the FASB  published a revision to FIN 46 ("FIN 46R") to clarify
some of the provisions of the  interpretation and to defer the effective date of
implementation  for certain  entities.  Under the  guidance  of FIN 46R,  public
companies that have interests in VIE's that are commonly  referred to as special
purpose  entities  are required to apply the  provisions  of FIN 46R for periods
ending  after  December  15,  2003.  A  public  company  that  does not have any
interests in special purpose entities but does have a variable interest in a VIE
created before February 1, 2003, must apply the provisions of FIN 46R by the end
of the first  interim or annual  reporting  period  ending after March 14, 2004.
During the quarter  ended March 31, 2004 the Company  adopted the  provisions of
FIN 46R.  Adoption  of FIN46R  did not have a material  effect on the  Company's
financial statements.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of Both Liabilities and Equity" ("SFAS 150").
The objective of SFAS 150 is to establish standards for how an issuer classifies
and  measures  certain  financial   instruments  with  characteristics  of  both
liabilities and equity. SFAS 150 is effective for financial  instruments entered
into or modified after May 31, 2003 and for existing financial instruments after
July 1, 2003. Adoption of SFAS 150 did not have a material impact on the results
of operations or financial position of the Company.

In May 2003, the Emerging Issues Task Force ("EITF") reached a consensus on EITF
Issue No.  00-21,  "Revenue  Arrangements  with  Multiple  Deliverables"  ("EITF
00-21").  EITF 00-21  provides  guidance on how to determine when an arrangement
that involves multiple  revenue-generating  activities or deliverables should be
divided into separate units of accounting for revenue recognition purposes,  and
if this  division  is  required,  how the  arrangement  consideration  should be
allocated among the separate units of accounting.  The guidance in the consensus
is effective for revenue  arrangements  entered into in quarters beginning after
June  15,  2003.  The  adoption  of EITF  00-21  did not  impact  the  Company's
consolidated  financial position or results of operations,  but could affect the
timing or pattern  of revenue  recognition  for  future  collaborative  research
and/or license agreements.

NOTE I -  Litigation

On April 1, 2003, RLB Capital,  Inc.  filed a complaint  against the Company in
the Supreme Court of the State of New York (Index No. 601058/03).  The Complaint
alleged a breach of contract by the Company and  demanded  judgment  against the
Company for  $112,500  and warrants to acquire  75,000  shares of the  Company's
common stock. The Company submitted its Verified Answer on June 25, 2003 and, in
pertinent part,  denied RLB's  allegations and asserted  counterclaims  based on
negligence.  In September 2003, the Company filed a motion for summary  judgment
and RLB filed its response on October 27, 2003.  In December  2003,  the Supreme
Court granted the motion for summary  judgment and the complaint was  dismissed.
In March 2004, the complaint and two counterclaims  asserted by the Company were
dismissed with prejudice.


                                      F-32




On December 19, 2003, the Company filed a complaint  against Dr. Deidre Tessman
and Tessman  Technology Ltd. (the "Tessman  Defendants") in the Supreme Court of
the State of New York,  County of New York  (Index  No.  03-603984).  An amended
complaint  alleges,  among other  things,  breach of contract and  negligence by
Tessman and Tessman  Technology and demands judgment against Tessman and Tessman
Technology in an amount to be determined  by the Court.  The Tessman  Defendants
removed the case to federal court, then remanded it to state court and served an
answer with several purported counterclaims.  The Company denies the allegations
in the  counterclaims  and  intends  to pursue its claims  against  the  Tessman
Defendants vigorously.


                                      F-33



                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

                    INDEMNIFICATION OF DIRECTORS AND OFFICERS

        The  indemnification  of officers  and  directors of the  Registrant  is
governed by Section 145 of the General  Corporation Law of the State of Delaware
(the "DGCL") and the Certificate of  Incorporation,  as amended,  and By-Laws of
the  Registrant.  Subsection  (a) of DGCL Section 145 empowers a corporation  to
indemnify  any person who was or is a party or is  threatened to be made a party
to any  threatened,  pending or completed  action,  suit or proceeding,  whether
civil, criminal,  administrative or investigative (other than an action by or in
the right of the  corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the  request of the  corporation  as a director,  officer,  employee or agent of
another  corporation,  partnership,  joint venture,  trust or other  enterprise,
against expenses (including attorneys' fees), judgments,  fines and amounts paid
in settlement  actually and reasonably incurred by the person in connection with
such  action,  suit or  proceeding  if the person acted in good faith and in the
manner  the  person  reasonably  believed  to be in or not  opposed  to the best
interests  of the  corporation,  and,  with  respect to any  criminal  action or
proceeding,  had no  reasonable  cause  to  believe  the  person's  conduct  was
unlawful.

        Subsection  (b) of DGCL Section 145 empowers a corporation  to indemnify
any  person  who was or is a party  or is  threatened  to be made a party to any
threatened,  pending  or  completed  action  or suit by or in the  right  of the
corporation  to procure a  judgment  in its favor by reason of the fact that the
person is or was a director,  officer, employee or agent of the corporation,  or
is or was serving at the  request of the  corporation  as a  director,  officer,
employee or agent of another corporation,  partnership,  joint venture, trust or
other  enterprise  against  expenses  (including  attorneys'  fees) actually and
reasonably incurred by the person in a connection with the defense or settlement
of such  action or suit if the person  acted in good faith and in the manner the
person reasonably  believed to be in or not opposed to the best interests of the
corporation and except that no  indemnification  shall be made in respect of any
claim,  issue or matter as to which such person  shall have been  adjudged to be
liable to the corporation  unless and only to the extent that the Delaware Court
of  Chancery  or the  court in which  such  action  or suit  was  brought  shall
determine upon  application  that,  despite the adjudication of liability but in
view of all the  circumstances of the case, such person is fairly and reasonably
entitled  to  indemnity  for such  expenses  which the Court of Chancery or such
other court shall deem proper.

        DGCL Section 145 further  provides  that to the extent that to a present
or former director or officer is successful,  on the merits or otherwise, in the
defense of any action, suit or proceeding referred to in subsections (a) and (b)
of Section 145, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses  (including  attorneys' fees) actually and
reasonably  incurred by such  person in  connection  therewith.  In all cases in
which  indemnification  is permitted under subsection (a) and (b) of Section 145
(unless  ordered  by a  court),  it  shall  be made by the  corporation  only as
authorized in the specific case upon a determination that indemnification of the
present  or  former  director,  officer,  employee  or  agent is  proper  in the
circumstances  because  the  applicable  standard of conduct has been met by the
party to be  indemnified.  Such  determination  must be made,  with respect to a
person who is a director or officer at the time of such determination,  (1) by a
majority  vote of the  directors  who are no  parties  to such  action,  suit or
proceeding,  even  though  less than a  quorum,  or (2) by a  committee  of such
directors designated by majority vote of such directors, even though less than a
quorum,  or (3) if there are no such directors,  or if such directors so direct,
by independent  legal counsel in a written opinion,  or (4) by the stockholders.
The statute authorizes the corporation to pay expenses incurred by an officer or
director in advance of the final  disposition of a proceeding upon receipt of an
undertaking  by or on behalf of the person to whom the advance will be made,  to
repay the advances if it shall ultimately be determined that he was not entitled
to  indemnification.  DGCL Section 145 also  provides that  indemnification  and
advancement  of expenses  permitted  thereunder  are not to be  exclusive of any
other rights to which those seeking  indemnification  or advancement of expenses
may  be  entitled  under  any  By-law,   agreement,   vote  of  stockholders  or
disinterested  directors,  or otherwise.  DGCL Section 145 also  authorizes  the
corporation  to  purchase  and  maintain  liability  insurance  on behalf of its
directors,  officers, employees and agents regardless of whether the corporation
would have the statutory power to indemnify such persons against the liabilities
insures.





        Article Seventh of the Certificate of  Incorporation  of the Registrant,
as amended  (the  "Certificate"),  provides  that no director of the  Registrant
shall be personally  liable to the Registrant or its  stockholders  for monetary
damages for breach of fiduciary duty as a director  except for liability (i) for
any  breach  of  the  director's  duty  of  loyalty  to  the  Registrant  or its
stockholders,  (ii) for acts or  omissions  not in good  faith or which  involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the  DGCL  (involving   certain   unlawful   dividends  or  stock  purchases  or
redemptions),  or (iv) for any  transaction  from which the director  derived an
improper personal benefit.

        Pursuant to Section 145(g) of the DGCL,  the  Registrant's  By-Laws,  as
amended,  authorize the Registrant to obtain  insurance to protect  officers and
directors  from certain  liabilities,  including  liabilities  against which the
Registration cannot indemnify its officers and directors.

        In derivative  actions,  Bioenvision may only protect from liability its
officers,  directors,   employees  and  agents  against  expenses  actually  and
reasonably  incurred in connection with the defense or settlement of a suit, and
only if they acted in good faith and in a manner they reasonably  believed to be
in, or not opposed to, the best interests of the corporation. Indemnification is
not  permitted  in the event that the  director,  officer,  employee or agent is
actually adjudged liable to Bioenvision unless, and only to the extent that, the
court in which the action was brought so determines.

        Bioenvision's  Certificate of  Incorporation  permits it to protect from
liability its directors except in the event of: (1) any breach of the director's
duty of loyalty to  Bioenvision or its  stockholders;  (2) any act or failure to
act that is not in good faith or involves  intentional  misconduct  or a knowing
violation of the law; (3)  liability  arising  under Section 174 of the Delaware
General Corporation Law, relating to unlawful stock purchases,  redemptions,  or
payment of dividends;  or (4) any transaction in which the director  received an
improper personal benefit.


                   OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

        The following  sets forth the estimated  expenses  payable in connection
with the preparation and filing of this Registration:

*Printing and Engraving Expenses...............................          15,000
*Accounting Fees and Expenses..................................          18,000
*Legal Fees and Expenses.......................................         100,000
*Blue Sky Fees and Expenses....................................           2,000
*Transfer Agent's and Registrar's Fees and Expenses............           1,000
*Miscellaneous.................................................          14,000

         *Total................................................        $150,000

*  Estimated.

                     RECENT SALES OF UNREGISTERED SECURITIES

        In March and May 2004, we issued an aggregate of 2,602,898 shares of our
common  stock and  warrants to  purchase  780,871  shares of common  stock to 35
seventeen accredited investors,  as defined under Regulation D of the Securities
Act. The  issuance of these  shares and  warrants  was exempt from  registration
under  Regulation D under the  Securities  Act or Section 4(2) of the Securities
Act.

        In June 2003,  in  connection  with that certain  employment  agreement,
dated  January 1, 2000,  by and between the  Company and Mr.  Stuart  Smith (the
"Smith  Employment  Agreement"),  we issued 19,728 shares of our common stock at
fair market value to Mr. Smith in settlement of any and all obligations owing to
Mr. Smith under the Smith Employment Agreement. The issuance of these shares was
exempt from registration  under Regulation D under the Securities Act or Section
4(2) of the Securities Act.





        In May 2003, in connection with that certain consulting agreement, dated
November 19, 2001 (the "Sterling Consulting Agreement"), we issued 15,225 shares
of our common stock at fair market value to Mr.  Sterling in  settlement  of all
outstanding obligations under the Sterling Consulting Agreement. The issuance of
these  shares  was  exempt  from  registration  under  Regulation  D  under  the
Securities Act or Section 4(2) of the Securities Act.

        In February 2003, in connection with that certain consulting  agreement,
dated March 1, 2002,  by and  between  the Company and Mr.  Edward W. Kelly (the
"Kelly Consulting  Agreement"),  we issued 200,000 shares of our common stock at
fair  market  value  to Mr.  Kelly  in  settlement  of  all  of our  outstanding
obligations under the Kelly Consulting  Agreement.  The issuance of these shares
was exempt from  registration  under  Regulation D under the  Securities  Act or
Section 4(2) of the Securities Act.

        In January 2003, in connection with our employment of our office manager
at the principal  executive  office, we issued options to purchase 20,000 shares
of our common stock at an exercise  price of $1.42 per share which  approximated
the fair  market  value of the common  stock on the date of the  grant.  Of such
options,  subject to certain terms and  conditions,  options to purchase  10,000
shares of our common stock  vested  immediately  and options to purchase  10,000
shares of our common stock vest on the one-year  anniversary of January 9, 2003,
the grant date.

        On  December  31, 2002 the Company  issued  options to purchase  500,000
shares of common  stock at an  exercise  price  equal to $1.45 per share,  which
approximated the fair market value of the common stock on the date of the grant,
to its Chairman and Chief Executive  Officer,  Dr. Christopher B. Wood. Of these
options, subject to certain circumstances, options to purchase 166,666 shares of
common  stock vest on each of the first,  second  and third  anniversary  of the
grant date.

        On  December  31, 2002 the Company  issued  options to purchase  200,000
shares  of  common  stock  at an  exercise  price  of  $2.00  per  share,  which
approximated the fair market value of the common stock on the date of the grant,
to a consultant to the Company who performs European regulatory services for the
Company.  Of these  options,  options to purchase  66,666 shares of common stock
vest on each of the  first,  second  and third  anniversary  of the grant  date.
Compensation  expense of $24,333 was  recorded as  consulting  fees for the year
ended June 30, 2003.

        In October 2002, in connection with our employment of Ian Abercrombie as
our Sales Manager  (Europe),  we issued options to purchase 50,000 shares of our
common stock at an exercise  price of $1.45 per share,  which  approximated  the
fair  market  value  of the  common  stock on the  date of the  grant.  Of these
options,  subject to certain terms and  conditions,  options to purchase  25,000
shares of common  stock  vest on each of the first and second  anniversaries  of
October 23, 2002, the grant date.

        In October 2002, in connection  with our  employment of Hugh Griffith as
our Commercial  Director (Europe),  we issued options to purchase 300,000 shares
of our common stock at an exercise price of $1.45 per share,  which approximated
the fair  market  value of the common  stock on the date of the grant.  Of these
options,  subject to certain terms and conditions,  options to purchase  100,000
shares of common stock vest on each of the first, second and third anniversaries
of October 23, 2002, the grant date.

        In July 2002, in connection  with our employment of David P. Luci as our
Director of Finance and General  Counsel,  we issued options to purchase 380,000
shares  of our  common  stock at an  exercise  price of $1.95 per  share,  which
approximated the fair market value of the common stock on the date of the grant.
In  connection  with our entering into an  employment  agreement  with Mr. Luci,
dated March 31, 2003, we cancelled  these options and issued options to purchase
500,000 shares of common stock, which are exercisable at $0.735 per share, which
approximated the fair market value of the common stock on the date of the grant.
Of these options,  subject to certain terms and conditions,  options to purchase
170,000  shares of common stock  vested on March 31, 2003 (the grant date),  and
options to purchase  110,000  shares of common  stock vest on each of the first,
second and third anniversaries of March 31, 2003.

        In May 2002,  Bioenvision  issued an aggregate  of  5,916,666  shares of
Series A  convertible  participating  preferred  stock  for  $3.00 per share and
warrants  to  purchase  an  aggregate  of  5,916,666  shares of common  stock to







seventeen accredited investors,  as defined under Regulation D of the Securities
Act. The  issuance of these  shares and  warrants  was exempt from  registration
under  Regulation D under the  Securities  Act or Section 4(2) of the Securities
Act.

        On February 1, 2002, Bioenvision issued 7,000,000 shares of common stock
to the former  stockholders of Pathagon in connection  with the  consummation of
the  Pathagon  transaction.  The  issuance  of  these  shares  was  exempt  from
registration  under Regulation D under the Securities Act or Section 4(2) of the
Securities Act.

        On November 16,  2001,  we entered  into an  engagement  letter with SCO
Financial  Group,  pursuant  to  which  SCO  Financial  Group  would  act as our
financial advisor. In connection with the engagement letter, we issued a warrant
to purchase  100,000  shares of common  stock at an exercise  price of $1.25 per
share, subject to certain anti-dilution adjustments. In connection with securing
a credit  facility with SCO Capital,  we issued  warrants to purchase  1,500,000
shares of our  common  stock at a strike  price of $1.25 per  share,  subject to
certain anti-dilution adjustments.  The warrants expire five years from the date
of  issuance.  The  issuance  of these  shares and  warrants  were  exempt  from
registration  under Regulation D under the Securities Act or Section 4(2) of the
Securities Act.

        In  October  2001,  we issued  134,035  shares of common  stock to three
officers as payment for salaries  accrued to September  30, 2001,  each of which
were  accredited  investors,  as defined under the  Securities  Act of 1933. The
issuance of these shares was exempt from  registration  under Regulation D under
the Securities Act or Section 4(2) of the Securities Act.

        In August 2001 in connection  with  outstanding  deferred  salaries,  we
issued 208,333 shares of common stock at the rate of $1.25 per share as follows:
Christopher Wood 98,684 shares;  Thomas Nelson, 27,412 shares; and Stuart Smith,
82,237 shares.  The issuance of these shares was exempt from registration  under
Regulation D under the Securities Act or Section 4(2) of the Securities Act.

        In addition,  in August  2001,  we granted  150,000  options to purchase
shares of our common stock at an exercise price of $1.25 per share.  The options
were issued to two consultants in exchange for certain  services  rendered.  The
options expire in August 2004 and are  immediately  vested.  Those  issuances of
options were exempt from  registration  under Regulation S promulgated under the
Securities  Act or  Section  4(2) of the  Securities  Act.  In August  2001,  we
cancelled these options and replaced them with 150,000 shares.





EXHIBITS




Exhibit
Number                               Description
-------                              -----------

                          
   2.1                       Acquisition Agreement between Registrant and Bioenvision,  Inc. dated
                             December  21,  1998  for  the  acquisition  of  7,013,897  shares  of
                             Registrant's  Common Stock by the  stockholders of Bioenvision,  Inc.
                             (1)

   2.2                       Amended  and  Restated  Agreement  and  Plan of  Merger,  dated as of
                             February  1,  2002,  by  and  among  Bioenvision,  Inc.,  Bioenvision
                             Acquisition Corp. and Pathagon, Inc. (5)

   3.1                       Certificate of Incorporation of Registrant. (2)

3.1(a)                       Amendment to Certificate of Incorporation filed January 29, 1999. (3)

3.1(b)                       Certificate of Correction to the Certificate of Incorporation,  filed
                             March 15, 2002 (6)

3.1(c)                       Certificate of Amendment to the Certificate of  Incorporation,  filed
                             April 30, 2002 (6)

   3.2                       Amended and Restated By-Laws of the Registrant. (13)

3.2(a)                       Amendment to Bylaws, effective April 30, 2002 (6)

   4.1                       Certificate of Designation (6)

   4.2                       Form of Warrant (6)

   4.3                       Registration  Rights  Agreement,  dated April 2, 2003, by and between
                             Bioenvision, Inc. and RRD International, LLC (14)

   4.4                       Warrant,  dated April 2, 2003, made by Bioenvision,  Inc. in favor of
                             RRD International, LLC (14)

   5.1                       Opinion of Paul, Hastings, Janofsky & Walker, LLP

  10.1                       Pharmaceutical  Development Agreement,  dated as of June 10, 2003, by
                             and between  Bioenvision,  Inc.  and Ferro  Pfanstiehl  Laboratories,
                             Inc. (15)

  10.2                       Co-Development  Agreement between Bioheal,  Ltd. and Christopher Wood
                             dated May 19, 1998. (3)

  10.3                       Master  Services  Agreement,  dated  May  14,  2003,  by and  between
                             PennDevelopment  Pharmaceutical  Services  Limited  and  Bioenvision,
                             Inc. (15)

  10.4                       Co-Development  Agreement between Stegram  Pharmaceuticals,  Ltd. And
                             Bioenvision, Inc. dated July 15, 1998. (3)

  10.5                       Co-Development  Agreement  between  Southern  Research  Institute and
                             Eurobiotech Group, Inc. dated August 31, 1998. (3)

10.5(a)                      Agreement to Grant License from  Southern  Research
                             Institute  to   Eurobiotech   Group,   Inc.   dated
                             September 1, 1998. (3)

  10.6                       License and Sub-License  Agreement,  dated as of May 13, 2003, by and
                             between Bioenvision, Inc. and Dechra Pharmaceuticals, plc (15)






                          
  10.7                       Employment  Agreement  between  Bioenvision,  Inc. and Christopher B.
                             Wood, M.D., dated December 31, 2002 (3)

  10.8                       Employment  Agreement  between  Bioenvision,  Inc. and David P. Luci,
                             dated March 31, 2003. (14)

  10.9                       Securities  Purchase Agreement with Bioaccelerate Inc dated March 24,
                             2000. (4)

 10.10                       Engagement  Letter  Agreement,  dated as of November 16, 2001, by and
                             between Bioenvision, Inc. and SCO Securities LLC. (7)

 10.11                       Security  Agreement,  dated as of November 16, 2001, by  Bioenvision,
                             Inc. in favor of SCO Capital Partners LLC. (7)

 10.12                       Commitment  Letter,  dated  November  16,  2001,  by and  between SCO
                             Capital Partners LLC and Bioenvision, Inc. (7)

 10.13                       Senior Secured Grid Note,  dated  November 16, 2001, by  Bioenvision,
                             Inc. in favor of SCO Capital Partners LLC. (7)

 10.14                       Registration  Rights Agreement,  dated as of February 1, 2002, by and
                             among Bioenvision,  Inc., the former  stockholders of Pathagon,  Inc.
                             party thereto, Christopher Wood, Bioaccelerate Limited, Jano Holdings
                             Limited and Lifescience Ventures Limited. (8)

 10.15                       Stockholders Lock-Up Agreement,  dated as of February 1, 2002, by and
                             among Bioenvision,  Inc., the former  stockholders of Pathagon,  Inc.
                             party thereto, Christopher Wood, Bioaccelerate Limited, Jano Holdings
                             Limited and Lifescience Ventures Limited. (8)

 10.16                       Form of Securities Purchase Agreement by and among Bioenvision,  Inc.
                             and certain purchasers, dated as of May 7, 2002. (6)

 10.17                       Form of Registration Rights Agreement by and among Bioenvision,  Inc.
                             and certain purchasers, dated as of May 7, 2002. (6)

 10.18                       Exclusive   License   Agreement  by  and  between  Baxter  Healthcare
                             Corporation,  acting through its Edwards Critical-Care  division, and
                             Implemed, dated as of May 6, 1997. (12)

 10.19                       License   Agreement  by  and  between   Oklahoma   Medical   Research
                             Foundation  and  bridge  Therapeutic  Products,  Inc.,  dated  as  of
                             January 1, 1998. (12)

 10.20                       Amendment No. 1 to License  Agreement by and among  Oklahoma  Medical
                             Research Foundation,  Bioenvision, Inc. and Pathagon, Inc., dated May
                             7, 2002. (12)

 10.21                       Inter-Institutional  Agreement between Sloan-Kettering  Institute for
                             Cancer Research and Southern Research  Institute,  dated as of August
                             31, 1998. (12)

 10.22                       License Agreement between  University College London and Bioenvision,
                             Inc., dated March 1, 1999. (12)

 10.23                       Research Agreement between Stegram  Pharmaceuticals  Ltd., Queen Mary
                             and Westfield College and Bioenvision, Inc., dated June 8, 1999 (12)

 10.24                       Research and License Agreement between  Bioenvision,  Inc.,  Velindre
                             NHS Trust and University  College  Cardiff  Consultants,  dated as of
                             January 9, 2001. (12)






                          
 10.25                       Co-Development   Agreement,   between  Bioenvision,   Inc.  and  ILEX
                             Oncology, Inc., dated March 9, 2001. (12)

 10.26                       Amended  and  Restated  Agreement  and  Plan of  Merger,  dated as of
                             February 1, 2002, among Bioenvision,  Inc.,  Bioenvision  Acquisition
                             Corp. and Pathagon Inc. (5)

 10.27                       Master Services Agreement,  dated as of April 2, 2003, by and between
                             Bioenvision, Inc. and RRD International, LLC(14)

  16.1                       Letter from Graf  Repetti & Co., LLP to the  Securities  and Exchange
                             Commission, dated September 30, 1999. (9)

  16.2                       Letter  from  Ernst  &  Young  LLP to  the  Securities  and  Exchange
                             Commission, dated July 6, 2001. (10)

  16.3                       Letter  from  Ernst  &  Young  LLP to  the  Securities  and  Exchange
                             Commission, dated August 16, 2001. (11)

  21.1                       Subsidiaries of the registrant (4)

  23.1                       Consent of Grant Thornton LLP

  23.2                       Consent  of Paul,  Hastings,  Janofsky  &  Walker  LLP  (included  in
                             Exhibit 5.1)

  24.1                       Power of Attorney (appears on signature page)




-----------------------
 (1)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K filed with the SEC on January 12, 1999.

 (2)  Incorporated  by  reference  and  filed  as  an  Exhibit  to  Registrant's
      Registration  Statement  on Form 10-12g filed with the SEC on September 3,
      1998.

 (3)  Incorporated  by reference  and filed as an Exhibit to  Registrant's  Form
      10-KSB/A filed with the SEC on October 18, 1999.

 (4)  Incorporated  by reference  and filed as an Exhibit to  Registrant's  Form
      10-KSB filed with the SEC on November 13, 2000.

 (5)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K filed with the SEC on April 16, 2002.

 (6)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K, filed with the SEC on May 28, 2002.

 (7)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K, filed with the SEC on January 8, 2002.

 (8)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K, filed with the SEC on February 21, 2002.

 (9)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K, filed with the SEC on October 1, 1999.

(10)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K/A, filed with the SEC on July 26, 2001.






(11)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K, filed with the SEC on December 6, 2001.

(12)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K, filed with the SEC on June 24, 2002.

(13)  Incorporated  by  reference  and  filed  as  an  Exhibit  to  Registrant's
      Quarterly Report on Form 10-QSB for the three-month  period ended December
      31, 2002.

(14)  Incorporated  by  reference  and  filed  as  an  Exhibit  to  Registrant's
      Quarterly Report on Form 10-QSB for the three-month period ended March 31,
      2003.

(15)  Incorporated  by reference  and filed as an Exhibit to  Registrant's  Form
      10-KSB filed with the SEC on September 29, 2003.

                                  UNDERTAKINGS

        (a)    The undersigned registrant hereby undertakes:

               (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

                      (i) To include any prospectus required by section 10(a)(3)
                      of the Securities Act of 1933, as amended.

                      (ii) To  reflect  in the  prospectus  any  facts or events
                      arising  after  the  effective  date  of the  registration
                      statement  (or the most  recent  post-effective  amendment
                      thereof)   which,   individually   or  in  the  aggregate,
                      represent  a  fundamental  change in the  information  set
                      forth in the registration  statement.  Notwithstanding the
                      foregoing,   any   increase   or  decrease  in  volume  of
                      securities   offered  (if  the  total   dollar   value  of
                      securities   offered  would  not  exceed  that  which  was
                      registered)  and any deviation from the low or high end of
                      the estimated  maximum  offering range may be reflected in
                      the  form of  prospectus  filed  with the  Securities  and
                      Exchange  Commission  pursuant to Rule 424(b),  if, in the
                      aggregate,  the changes in volume and price  represent not
                      more than a 20% change in the maximum  aggregate  offering
                      price set forth in the  "Calculation of Registration  Fee"
                      table in the effective registration statement.

                      (iii) To include any material  information with respect to
                      the plan of distribution  not previously  disclosed in the
                      registration  statement  or any  material  change  to such
                      information in the registration statement.

               (2)  That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such  securities at that time shall be deemed to be the initial bona
fide offering thereof.


               (3)  To remove  from  registration  by means of a  post-effective
amendment  any of the  securities  being  registered  which remain unsold at the
termination of this offering.

               (4)  The  undersigned  registrant  hereby  undertakes  that,  for
purposes of determining  any liability  under the  Securities Act of 1933,  each
filing of the  registrant's  annual report  pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee  benefit  plan's annual  report  pursuant to Section 15(d) of the
Securities  Exchange  Act of 1934)  that is  incorporated  by  reference  in the
registration  statement  shall  be  deemed  to be a new  registration  statement
relating to the securities





offered  therein,  and the  offering  of such  securities  at that time shall be
deemed to be the initial bona fide offering thereof.

               (5)  Insofar as indemnification for liabilities arising under the
Securities  Act of 1933 may be  permitted  to  directors,  officers  or  persons
controlling the registrant pursuant to the foregoing provisions,  the registrant
has been advised that in the opinion of the Securities  and Exchange  Commission
such  indemnification  is against such public policy as expressed in the Act and
is, therefore, unenforceable.
  In the event that a claim for indemnification  against such liabilities (other
than the payment by the  registrant of expanses  incurred or paid by a director,
officer or controlling person of the registrant in the successful defense if any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered,  the registrant will,
unless in the opinion of its counsel the matter has been settled by  controlling
precedent,  submit to a court of appropriate  jurisdiction  the question whether
such  indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.





                                   SIGNATURES

In  accordance  with  the  requirements  of  the  Securities  Act of  1933,  the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the  requirements  for filing on Form SB-2 and authorized  this  Registration
Statement  to be  signed  on its  behalf  by  the  undersigned,  thereunto  duly
authorized, in the City of New York, State of New York, on the 21st day of June,
2004.

                                        BIOENVISION, INC.

                                        By /s/ Christopher B. Wood
                                        --------------------------
                                        Christopher B. Wood, Chairman of the
                                        Board and Chief Executive Officer


In  accordance  with  the  requirements  of the  Securities  Act of  1933,  this
registration  statement  has  been  signed  by  the  following  persons  in  the
capacities and on the dates indicated.




Signature                                          Title                        Date
---------                                          -----                        ----
                                                                      
/s/ Christopher B. Wood, M.D.           Chairman and Chief Executive        June 21, 2004
-----------------------------           Officer and Director
Christopher B. Wood, M.D.               (Principal Executive Officer)

___________*___________                 Director of Finance, General
David P. Luci                           Counsel and Corporate Secretary     June 21, 2004
                                        (Principal Financial and
                                        Accounting Officer)

___________*___________                 Director                            June 21, 2004
Thomas S. Nelson, C.A.

___________*___________                 Director                            June 21, 2004
Michael Kauffman

___________*___________                 Director                            June 21, 2004
Jeffrey B. Davis

___________*___________                 Director                            June 21, 2004
Andrew N. Schiff

___________*___________                 Director                            June 21, 2004
Steven A. Elms





* By:  /s/ Christopher B. Wood, M.D.
       -----------------------------
       Christopher B. Wood, M.D.










EXHIBIT INDEX
Exhibit
Number                               Description
-------                              -----------

                          
   2.1                       Acquisition Agreement between Registrant and Bioenvision,  Inc. dated
                             December  21,  1998  for  the  acquisition  of  7,013,897  shares  of
                             Registrant's  Common Stock by the  stockholders of Bioenvision,  Inc.
                             (1)

   2.2                       Amended  and  Restated  Agreement  and  Plan of  Merger,  dated as of
                             February  1,  2002,  by  and  among  Bioenvision,  Inc.,  Bioenvision
                             Acquisition Corp. and Pathagon, Inc. (5)

   3.1                       Certificate of Incorporation of Registrant. (2)

3.1(a)                       Amendment to Certificate of Incorporation filed January 29, 1999. (3)

3.1(b)                       Certificate of Correction to the Certificate of Incorporation,  filed
                             March 15, 2002 (6)

3.1(c)                       Certificate of Amendment to the Certificate of  Incorporation,  filed
                             April 30, 2002 (6)

   3.2                       Amended and Restated By-Laws of the Registrant. (13)

3.2(a)                       Amendment to Bylaws, effective April 30, 2002 (6)

   4.1                       Certificate of Designation (6)

   4.2                       Form of Warrant (6)

   4.3                       Registration  Rights  Agreement,  dated April 2, 2003, by and between
                             Bioenvision, Inc. and RRD International, LLC (14)

   4.4                       Warrant,  dated April 2, 2003, made by Bioenvision,  Inc. in favor of
                             RRD International, LLC (14)

   5.1                       Opinion of Paul, Hastings, Janofsky & Walker, LLP

  10.1                       Pharmaceutical  Development Agreement,  dated as of June 10, 2003, by
                             and between  Bioenvision,  Inc.  and Ferro  Pfanstiehl  Laboratories,
                             Inc. (15)

  10.2                       Co-Development  Agreement between Bioheal,  Ltd. and Christopher Wood
                             dated May 19, 1998. (3)

  10.3                       Master  Services  Agreement,  dated  May  14,  2003,  by and  between
                             PennDevelopment  Pharmaceutical  Services  Limited  and  Bioenvision,
                             Inc. (15)

  10.4                       Co-Development  Agreement between Stegram  Pharmaceuticals,  Ltd. And
                             Bioenvision, Inc. dated July 15, 1998. (3)

  10.5                       Co-Development  Agreement  between  Southern  Research  Institute and
                             Eurobiotech Group, Inc. dated August 31, 1998. (3)

10.5(a)                      Agreement to Grant License from  Southern  Research
                             Institute  to   Eurobiotech   Group,   Inc.   dated
                             September 1, 1998. (3)

  10.6                       License and Sub-License  Agreement,  dated as of May 13, 2003, by and
                             between Bioenvision, Inc. and Dechra Pharmaceuticals, plc (15)






                          
  10.7                       Employment  Agreement  between  Bioenvision,  Inc. and Christopher B.
                             Wood, M.D., dated December 31, 2002 (3)

  10.8                       Employment  Agreement  between  Bioenvision,  Inc. and David P. Luci,
                             dated March 31, 2003. (14)

  10.9                       Securities  Purchase Agreement with Bioaccelerate Inc dated March 24,
                             2000. (4)

 10.10                       Engagement  Letter  Agreement,  dated as of November 16, 2001, by and
                             between Bioenvision, Inc. and SCO Securities LLC. (7)

 10.11                       Security  Agreement,  dated as of November 16, 2001, by  Bioenvision,
                             Inc. in favor of SCO Capital Partners LLC. (7)

 10.12                       Commitment  Letter,  dated  November  16,  2001,  by and  between SCO
                             Capital Partners LLC and Bioenvision, Inc. (7)

 10.13                       Senior Secured Grid Note,  dated  November 16, 2001, by  Bioenvision,
                             Inc. in favor of SCO Capital Partners LLC. (7)

 10.14                       Registration  Rights Agreement,  dated as of February 1, 2002, by and
                             among Bioenvision,  Inc., the former  stockholders of Pathagon,  Inc.
                             party thereto, Christopher Wood, Bioaccelerate Limited, Jano Holdings
                             Limited and Lifescience Ventures Limited. (8)

 10.15                       Stockholders Lock-Up Agreement,  dated as of February 1, 2002, by and
                             among Bioenvision,  Inc., the former  stockholders of Pathagon,  Inc.
                             party thereto, Christopher Wood, Bioaccelerate Limited, Jano Holdings
                             Limited and Lifescience Ventures Limited. (8)

 10.16                       Form of Securities Purchase Agreement by and among Bioenvision,  Inc.
                             and certain purchasers, dated as of May 7, 2002. (6)

 10.17                       Form of Registration Rights Agreement by and among Bioenvision,  Inc.
                             and certain purchasers, dated as of May 7, 2002. (6)

 10.18                       Exclusive   License   Agreement  by  and  between  Baxter  Healthcare
                             Corporation,  acting through its Edwards Critical-Care  division, and
                             Implemed, dated as of May 6, 1997. (12)

 10.19                       License   Agreement  by  and  between   Oklahoma   Medical   Research
                             Foundation  and  bridge  Therapeutic  Products,  Inc.,  dated  as  of
                             January 1, 1998. (12)

 10.20                       Amendment No. 1 to License  Agreement by and among  Oklahoma  Medical
                             Research Foundation,  Bioenvision, Inc. and Pathagon, Inc., dated May
                             7, 2002. (12)

 10.21                       Inter-Institutional  Agreement between Sloan-Kettering  Institute for
                             Cancer Research and Southern Research  Institute,  dated as of August
                             31, 1998. (12)

 10.22                       License Agreement between  University College London and Bioenvision,
                             Inc., dated March 1, 1999. (12)

 10.23                       Research Agreement between Stegram  Pharmaceuticals  Ltd., Queen Mary
                             and Westfield College and Bioenvision, Inc., dated June 8, 1999 (12)

 10.24                       Research and License Agreement between  Bioenvision,  Inc.,  Velindre
                             NHS Trust and University  College  Cardiff  Consultants,  dated as of
                             January 9, 2001. (12)






                          
 10.25                       Co-Development   Agreement,   between  Bioenvision,   Inc.  and  ILEX
                             Oncology, Inc., dated March 9, 2001. (12)

 10.26                       Amended  and  Restated  Agreement  and  Plan of  Merger,  dated as of
                             February 1, 2002, among Bioenvision,  Inc.,  Bioenvision  Acquisition
                             Corp. and Pathagon Inc. (5)

 10.27                       Master Services Agreement,  dated as of April 2, 2003, by and between
                             Bioenvision, Inc. and RRD International, LLC(14)

  16.1                       Letter from Graf  Repetti & Co., LLP to the  Securities  and Exchange
                             Commission, dated September 30, 1999. (9)

  16.2                       Letter  from  Ernst  &  Young  LLP to  the  Securities  and  Exchange
                             Commission, dated July 6, 2001. (10)

  16.3                       Letter  from  Ernst  &  Young  LLP to  the  Securities  and  Exchange
                             Commission, dated August 16, 2001. (11)

  21.1                       Subsidiaries of the registrant (4)

  23.1                       Consent of Grant Thornton LLP

  23.2                       Consent  of Paul,  Hastings,  Janofsky  &  Walker  LLP  (included  in
                             Exhibit 5.1)

  24.1                       Power of Attorney (appears on signature page)



-----------------------
 (1)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K filed with the SEC on January 12, 1999.

 (2)  Incorporated  by  reference  and  filed  as  an  Exhibit  to  Registrant's
      Registration  Statement  on Form 10-12g filed with the SEC on September 3,
      1998.

 (3)  Incorporated  by reference  and filed as an Exhibit to  Registrant's  Form
      10-KSB/A filed with the SEC on October 18, 1999.

 (4)  Incorporated  by reference  and filed as an Exhibit to  Registrant's  Form
      10-KSB filed with the SEC on November 13, 2000.

 (5)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K filed with the SEC on April 16, 2002.

 (6)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K, filed with the SEC on May 28, 2002.

 (7)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K, filed with the SEC on January 8, 2002.

 (8)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K, filed with the SEC on February 21, 2002.

 (9)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K, filed with the SEC on October 1, 1999.

(10)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K/A, filed with the SEC on July 26, 2001.






(11)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K, filed with the SEC on December 6, 2001.

(12)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K, filed with the SEC on June 24, 2002.

(13)  Incorporated  by  reference  and  filed  as  an  Exhibit  to  Registrant's
      Quarterly Report on Form 10-QSB for the three-month  period ended December
      31, 2002.

(14)  Incorporated  by  reference  and  filed  as  an  Exhibit  to  Registrant's
      Quarterly Report on Form 10-QSB for the three-month period ended March 31,
      2003.

(15)  Incorporated  by reference  and filed as an Exhibit to  Registrant's  Form
      10-KSB filed with the SEC on September 29, 2003.