INOVIO PHARMACEUTICALS, INC. - Quarter Report: 2007 September (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2007

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-14888

INOVIO BIOMEDICAL CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware	33-0969592
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

11494 SORRENTO VALLEY ROAD

SAN DIEGO, CALIFORNIA 92121-1318

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)

(858) 597-6006

(COMPANY’S TELEPHONE NUMBER, INCLUDING AREA CODE)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” as defined in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer x Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares outstanding of the registrant’s Common Stock, par value $0.001 per share, was 43,814,739 as of November 2, 2007.

INOVIO BIOMEDICAL CORPORATION

FORM 10-Q

For the Quarterly Period Ended September 30, 2007

INDEX


Part I	Financial Information

	Item 1.	Financial Statements

		a)	Condensed Consolidated Balance Sheets as of September 30, 2007 (Unaudited) and December 31, 2006

		b)	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2007 and 2006 (Unaudited)

		c)	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2006 (Unaudited)

		d)	Notes to Condensed Consolidated Financial Statements (Unaudited)

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk

	Item 4.	Controls and Procedures

Part II	Other Information

	Item 1.	Legal Proceedings

	Item 1A.	Risk Factors

	Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds

	Item 3.	Default Upon Senior Securities

	Item 4.	Submission of Matters to a Vote of Security Holders

	Item 5.	Other Information

	Item 6.	Exhibits

Signatures

Part I. Financial Information

Item 1. Financial Statements

INOVIO BIOMEDICAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2007			December 31, 2006
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	7,086,719		$	8,321,606
Short-term investments	21,362,700			14,700,000
Accounts receivable	292,643			326,071
Prepaid expenses and other current assets	878,917			1,124,262

Total current assets	29,620,979			24,471,939

Fixed assets, net	370,972			390,789
Intangible assets, net	6,300,705			6,514,293
Goodwill	4,290,594			4,290,594
Other assets	282,000			282,000

Total assets	$	40,865,250		$	35,949,615

LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable and accrued expenses	$	1,894,086		$	2,009,972
Accrued clinical trial expenses	653,321			675,330
Deferred revenue	496,566			583,147
Deferred rent	61,947			50,582

Total current liabilities	3,105,920			3,319,031

Deferred revenue, net of current portion	4,146,829			4,396,875
Deferred rent, net of current portion	115,198			177,908
Deferred tax liabilities	966,000			1,013,250

Total liabilities	8,333,947			8,907,064

Minority interest	—			5,349,995

Stockholders’ equity:
Preferred stock	113			1,028
Common stock	43,803			35,639
Additional paid-in capital	174,309,742			150,459,604
Other comprehensive income	167,065			37,045
Accumulated deficit	(141,939,420		)	(128,754,730		)
Receivables from stockholders	(50,000		)	(86,030		)

Total stockholders’ equity	32,531,303			21,692,556

Total liabilities, minority interest and stockholders’ equity	$	40,865,250		$	35,949,615

See accompanying notes.

INOVIO BIOMEDICAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
Revenue:
License fee and milestone payments	$	136,870		$	204,699		$	580,624		$	526,815
Revenue under collaborative research and development arrangements	265,970			254,137			800,272			762,718
Grant and miscellaneous revenue	83,671			116,993			105,094			646,979

Total revenue	486,511			575,829			1,485,990			1,936,512

Operating expenses:
Research and development	2,335,378			2,185,931			7,759,625			5,808,251
General and administrative	3,177,723			1,926,628			7,813,435			5,680,699

Total operating expenses	5,513,101			4,112,559			15,573,060			11,488,950

Loss from operations	(5,026,590		)	(3,536,730		)	(14,087,070		)	(9,552,438		)

Interest and other income	405,599			127,849			925,715			460,927

Net loss	(4,620,991		)	(3,408,881		)	(13,161,355		)	(9,091,511		)

Imputed and declared dividends on preferred stock	—			(31,706		)	(23,335		)	(138,494		)

Net loss attributable to common stockholders	$	(4,620,991	)	$	(3,440,587	)	$	(13,184,690	)	$	(9,230,005	)

Amounts per common share — basic and diluted:
Net loss	$	(0.11	)	$	(0.11	)	$	(0.32	)	$	(0.30	)
Imputed and declared dividends on preferred stock	—			—			—			—
Net loss per share attributable to common stockholders	$	(0.11	)	$	(0.11	)	$	(0.32	)	$	(0.30	)

Weighted average number of common shares outstanding — basic and diluted	43,699,683			30,902,644			40,711,751			30,368,822

See accompanying notes.

INOVIO BIOMEDICAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30, 2007			Nine Months Ended September 30, 2006
Cash flows from operating activities:
Net loss from continuing operations	$	(13,161,355	)	$	(9,091,511	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	124,831			185,507
Amortization of intangible assets	622,929			566,838
Compensation for services paid in stock options	1,238,563			1,320,535
Compensation for services paid in common stock	978,507			50,000
Amortization of deferred tax liabilities	(47,250		)	(47,250		)
Revenue from conversion of note payable	—			(10,814		)
Accretion of discount on available-for-sale securities	(49,410		)	—
Changes in operating assets and liabilities:
Accounts receivable	24,813			(16,293		)
Prepaid expenses and other current assets	308,877			(450,998		)
Accounts payable and accrued expenses	(153,934		)	(872,398		)
Deferred revenue	(336,627		)	(541,884		)
Deferred rent	(51,345		)	(40,024		)

Net cash used in operating activities	(10,501,401		)	(8,948,292		)

Cash flows from investing activities:
Purchases of available-for-sale securities	(16,602,985		)	(13,500,000		)
Proceeds from sales of available-for-sale securities	10,000,000			7,800,000
Purchases of capital assets	(105,014		)	(94,623		)
Capitalization of patents and other assets	(409,341		)	(496,625		)

Net cash used in investing activities	(7,117,340		)	(6,291,248		)

Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs	16,290,322			121,167
Repayment of stockholder note receivable	36,030			—
Payment of preferred stock cash dividend	(23,335		)	(130,801		)

Net cash provided by (used in) financing activities	16,303,017			(9,634		)

Effect of exchange rate changes on cash	80,837			22,500

Decrease in cash and cash equivalents	(1,234,887		)	(15,226,674		)

Cash and cash equivalents, beginning of period	8,321,606			17,166,567

Cash and cash equivalents, end of period	$	7,086,719		$	1,939,893

See accompanying notes.

INOVIO BIOMEDICAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Inovio Biomedical Corporation (the “Company”, “we” or “us”) have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. The condensed consolidated balance sheet as of September 30, 2007, condensed consolidated statements of operations for the three and nine months ended September 30, 2007 and 2006, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2007 and 2006, are unaudited, but include all adjustments (consisting of normal recurring adjustments) that we consider necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2007, shown herein are not necessarily indicative of the results that may be expected for the year ending December 31, 2007, or for any other period. These financial statements, and notes thereto, should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2006, included in our Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 16, 2007.

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

We incurred a net loss attributable to common stockholders of $4,620,991 and $13,184,690 for the three and nine months ended September 30, 2007, respectively. We had working capital of $26,515,059 and an accumulated deficit of $141,939,420 as of September 30, 2007. Our ability to continue as a going concern is dependent upon our ability to obtain additional capital and eventually achieve profitable operations. We will continue to rely on outside sources of financing to meet our current and anticipated capital needs, however such financing may not always be readily available to us. Further, there can be no assurance, assuming we successfully raise additional funds, that we will achieve positive cash flow. If we are not able to secure additional funding, we will be required to scale back our research and development programs, preclinical studies, clinical trials, and general and administrative activities and may not be able to continue as a viable business. These unaudited condensed consolidated financial statements do not include any adjustments to the specific amounts and classifications of assets and liabilities, which might be necessary should we be unable to continue in business. Our unaudited condensed consolidated financial statements as of and for the period ended September 30, 2007 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business for the foreseeable future.

Certain reclassifications have been made to the consolidated financial statements as of September 30, 2006 and December 31, 2006 to conform to our September 30, 2007 presentation.

2. Principles of Consolidation

These unaudited condensed consolidated financial statements include the accounts of Inovio Biomedical Corporation and its wholly-owned subsidiaries, Genetronics, Inc., a company incorporated in the state of California; Inovio AS, a company incorporated in Norway; and Inovio Asia Pte. Ltd. (IAPL), a company incorporated in the Republic of Singapore. All intercompany accounts and transactions have been eliminated upon consolidation.

3. Intangible Assets Subject to Amortization

	Cost		Accumulated amortization			Net book value
As of September 30, 2007
Patents	$	5,256,232	$	(2,782,496	)	$	2,473,736
Licenses	1,198,781		(821,812		)	376,969
Acquired contracts and intellectual property	4,050,000		(600,000		)	3,450,000
	$	10,505,013	$	(4,204,308	)	$	6,300,705
As of December 31, 2006
Patents	$	4,829,596	$	(2,409,079	)	$	2,420,517
Licenses	1,198,781		(723,755		)	475,026
Acquired contracts and intellectual property	4,050,000		(431,250		)	3,618,750
	$	10,078,377	$	(3,564,084	)	$	6,514,293

The aggregate amortization expense for the three and nine months ended September 30, 2007 was $207,926 and $622,929, respectively.

The aggregate amortization expense for the three and nine months ended September 30, 2006 was $192,687 and $566,838, respectively.

The estimated aggregate amortization expense for each of the five succeeding fiscal years is $206,558 for the remainder of fiscal year 2007, $755,922 for 2008, $633,967 for 2009, $583,248 for 2010, and $533,572 for 2011.

4. Stockholders’ Equity

The following is a summary of our authorized and issued common and preferred stock as of September 30, 2007 and December 31, 2006:

	Authorized:	10,000,000 shares of preferred stock with a par value of $0.001 per share, of which 1,091 shares are authorized for issuance of Series C Cumulative Convertible Preferred Stock (Series C Preferred Stock) and 1,966,292 are authorized for issuance of Series D Convertible Preferred Stock (Series D Preferred Stock); and
		300,000,000 shares of common stock with a par value of $0.001 per share

	Issued and Outstanding:	71 and 102 shares of Series C Preferred Stock, par value of $0.001 per share, as of September 30, 2007 and December 31, 2006, respectively.

		113,311 and 1,027,967 shares of Series D Preferred Stock, par value of $0.001 per share, as of September 30, 2007 and December 31, 2006, respectively.

		43,859,739 and 43,803,489 shares of common stock issued and outstanding, respectively, par value of $0.001 per share, as of September 30, 2007; and 35,639,521 shares of common stock issued and outstanding, as of December 31, 2006, respectively.

Preferred Stock

The following is a summary of changes in the number of outstanding shares of our preferred stock for the three months ended September 30, 2006 and 2007:

	Series A		Series C		Series D
Shares Outstanding as of July 1, 2006	2		228		1,027,967
Preferred Shares converted	(2	)	—		—

Shares Outstanding as of September 30, 2006	—		228		1,027,967

Shares Outstanding as of July 1, 2007	—		86		113,311
Preferred Shares converted	—		(15	)	—

Shares Outstanding as of September 30, 2007	—		71		113,311

The following is a summary of changes in the number of outstanding shares of our preferred stock for the nine months ended September 30, 2006 and 2007:

	Series A		Series B		Series C		Series D
Shares Outstanding as of January 1, 2006	52		100		337		1,561,935
Preferred Shares converted	(52	)	(100	)	(109	)	(533,968	)

Shares Outstanding as of September 30, 2006	—		—		228		1,027,967

Shares Outstanding as of January 1, 2007	—		—		102		1,027,967
Preferred Shares converted	—		—		(31	)	(914,656	)

Shares Outstanding as of September 30, 2007	—		—		71		113,311

The shares of the Company’s outstanding Series C and Series D Preferred Stock have the following pertinent rights and privileges, as set forth in the Company’s Amended and Restated Certificate of Incorporation and its Certificates of Designations, Rights and Preferences related to the various series of preferred stock.

Dividend Preferences

The holders of all series of the Company’s preferred stock are entitled to receive dividends on a pari passu basis with the holders of common stock, when, if and as declared by the Company’s Board of Directors.

In addition, the holders of the Series C Preferred Stock received a mandatory dividend rate of 6% per annum per outstanding share of Series C Preferred Stock, payable quarterly, based on the $10,000 Liquidation Preference of such share through the period ending on May 24, 2007. These dividends were paid in cash or common stock equal to the equivalent cash amount divided by the 20 day preceding average closing price. The Company could only elect to pay the dividends in shares of common stock if the average closing price of the shares of common stock for the 20 days immediately preceding the dividend payment date was equal to or greater than the conversion price of either of the relevant series of Preferred Stock. All dividends were paid to outstanding Series C Preferred Stockholders on each quarter-end payment date. We paid cash dividends to holders of our Series C Preferred Stock of $0 and $23,335 during the three and nine months ended September 30, 2007, respectively.

Rights on Liquidation

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company (a “liquidation event”), before any distribution of assets of the Company shall be made to or set apart for the holders of common stock, the holders of Series C Preferred Stock, pari passu, are entitled to receive payment of such assets of the Company in an amount equal to $10,000 per share of such series of preferred stock, plus any accumulated and unpaid dividends thereon (whether or not earned or declared). In the event of any liquidation event, the holders of the Series D Preferred Stock are entitled to be paid out of the assets of the Company available for distribution to its stockholders (i) before any distribution of assets of the Company shall be made to or set apart for the holders of common stock or any class or series of stock ranking on liquidation junior to the Series D Preferred Stock, (ii) ratably with any class or series of stock ranking on liquidation on a parity with the Series D Preferred Stock, and (iii) after and subject to the payment in full of all amounts required to be distributed to the holders of the Company’s Series C Preferred Stock and any other class or series of stock of the Company ranking on liquidation prior and in preference to the Series D Preferred Stock, an amount equal to $3.204 per share of Series D Preferred Stock.

If the assets of the Company available for distribution to stockholders exceed the aggregate amount of the liquidation preferences payable with respect to all shares of each series of preferred stock then outstanding, then, after the payment of such preferences is made or irrevocably set aside, the holders of the Company’s common stock are entitled to receive a pro rata portion of such assets based on the aggregate number of shares of common stock held by each such holder. The holders of the Company’s outstanding preferred stock shall participate in such a distribution on a pro-rata basis, computed based on the number of shares of common stock which would be held by such preferred holders if immediately prior to the liquidation event all of the outstanding shares of the preferred stock had been converted into shares of common stock at the then current conversion value applicable to each series.

A Change of Control of the Company (as defined in the Certificates of Designations, Rights and Preferences) is not a liquidation event triggering the preferences described above, and is instead addressed by separate terms in the Series C and Series D Certificates of Designations, Rights, and Preferences.

Although the liquidation preferences are in excess of the par value of $0.001 per share of the Company’s preferred stock, these preferences are equal to or less than the stated value of such shares based on their original purchase price.

Voting Rights

The holders of all series of the Company’s preferred stock outstanding have full voting rights and powers equal to the voting rights and powers of holders of the Company’s common stock and are entitled to notice of any stockholders’ meeting in accordance with the Company’s Bylaws. Holders of the Company’s preferred stock are entitled to vote on any matter upon which holders of the Company’s common stock have the right to vote, including, without limitation, the right to vote for the election of directors together with the holders of common stock as one class.

Actions Requiring the Consent of Holders of Convertible Preferred Stock

As long as at a certain number of shares of each series of the Company’s preferred stock issued on the respective “Date of Original Issue” for such series are outstanding, the consent of at least a majority of the shares of that series of preferred stock outstanding are necessary to approve:

(a) Any amendment, alteration or repeal of (i) any of the provisions of the relevant series’ Certificate of Designation, including any increase in the number of authorized shares of such series or (ii) the Company’s Certificate of Incorporation or Bylaws in a manner that would adversely affect the rights of the holders of the relevant series of preferred stock;

(b) the authorization, creation, offer, sale or increase in authorized shares by the Company of any stock of any class, or any security convertible into stock of any class, or the authorization or creation of any new series of preferred stock ranking in terms of liquidation preference, redemption rights or dividend rights, pari passu with or senior to, the relevant series of preferred stock in any manner;

(c) the declaration or payment of any dividend or other distribution (whether in cash, stock or other property) with respect to the Company’s capital stock or that of any subsidiary, other than a dividend or other distribution pursuant to the terms of the relevant series of preferred stock or other series of preferred stock noted in the relevant Certificate of Designation; and

(d) except for the holders of the Series D Preferred Stock, the redemption, purchase or other acquisition, directly or indirectly, of any shares of the Company’s capital stock or any of its subsidiaries or any option, warrant or other right to purchase or acquire any such shares, or any other security, other than certain accepted redemptions of preferred stock, certain outstanding warrants, the repurchase of shares at cost from employees of the Company upon termination of employment in accordance with written agreements pursuant to which the shares were issued, or other specified repurchase or redemption rights pursuant to written agreements outstanding at the time of original issuance of the preferred stock in question.

These specific voting rights are applicable for the Series C Preferred Stock as long as at least 35% of the number of shares of Series C Preferred Stock issued on the Date of Original Issue remain outstanding, and the same threshold applies to the Series D Preferred Stock. As of September 30, 2007, only the outstanding shares of our Series D Preferred Stock had such series voting rights remaining.

Participation Rights

Holders of the Series C Preferred Stock have the right to participate with respect to the Company’s issuance of any equity or equity-linked securities or debt convertible into equity or in which there is an equity component (“Additional Securities”) on the same terms and conditions as offered by the Company to the other purchasers of such Additional Securities. However securities issued or issuable upon any of the following are not deemed “Additional Securities”: (A) the conversion of outstanding preferred stock or exercise of related warrants, or the issuance of shares of common stock as payment of dividends to holders of preferred stock, (B) the exercise of any warrants or options outstanding prior to the authorization or issuance of the series of preferred stock in question (C) the issuance (at issuance or exercise prices at or above fair market value) of common stock, stock awards or options under, or the exercise of any options granted pursuant to, any Board-approved employee stock option or similar plan for the issuance of options or capital stock of the Company, (D) the issuance of shares of common stock pursuant to a stock split, combination or subdivision of the outstanding shares of common stock, and (E) for evaluation of the rights of the Series C Preferred Stock only, in connection with a bona fide joint venture or development agreement or strategic partnership, the primary purpose of which is not to raise equity capital.

Each time the Company proposes to offer any Additional Securities, it is obligated to provide each holder of shares of the Series C Preferred Stock notice of such intention including the terms of such intended offering (including size and pricing) and the anticipated closing date of the sale. These preferred stockholders then have a specified period in which to respond to the Company to elect to purchase or obtain, at the price and on the terms specified in the Company’s notice, up to that number of such Additional Securities which equals such holder’s Pro Rata Amount. The “Pro Rata Amount” for any given holder of shares of the Series C Preferred Stock equals that portion of the Additional Securities offered by the Company which equals the proportion that the number of shares of common stock that such preferred stockholder owns or has the right to acquire to the total number of shares of common stock then outstanding (assuming in each case the full conversion and exercise of all convertible and exercisable securities then outstanding).

The holders of the Series C Preferred Stock have the right to pay the consideration for the Additional Securities purchasable upon such participation with shares of such series of Preferred Stock, which will be valued for such purpose at the applicable series’ Liquidation Preference plus any accrued and unpaid dividends for such purpose. However, when shares of such preferred stock are used as participation consideration, then such holder’s Pro Rata Amount is increased (but not decreased) to the extent necessary to equal that number of Additional Securities as are convertible into or exchangeable for such number of shares of Common Stock as is obtained by dividing (a) the Liquidation Preference attributable to such holder’s shares of the applicable series of Preferred Stock plus any accrued and unpaid dividends on such Preferred Stock by (b) the Conversion Value then in effect for such shares, and in such event the Company shall be obligated to sell such number of Additional Securities to each such holder, even if the aggregate Pro Rata Amount for all such holders exceeds the aggregate amount of Additional Securities that the Company had initially proposed to offer. To the extent that not all holders of a particular series of

preferred stock elect to participate up to their full Pro Rata Amounts, the participating holders of that series of preferred stock have the right to increase their participation accordingly.

The participation rights of the holders of the Series C Preferred Stock may not be assigned or transferred, other than assignment to any wholly-owned subsidiary or parent of, or to any corporation or entity that is, within the meaning of the Securities Act, controlling, controlled by or under common control with, any such holder. As a result of transfers, the holders of the Series C Preferred Stock outstanding as of September 30, 2007 no longer had such participation rights.

The Series D Preferred Stock has no participation rights.

Conversion Rights

The Series C Preferred Stock each provide the holder of such shares an optional conversion right and provide a mandatory conversion upon certain triggering events.

Right to Convert - The holder of any share or shares of Series C Preferred Stock has the right at any time, at such holder’s option, to convert all or any lesser portion of such holder’s shares of the Preferred Stock into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing (i) the aggregate Liquidation Preference applicable to the particular series of preferred shares, plus accrued and unpaid dividends thereon by (ii) the applicable Conversion Value (as defined in the relevant series’ Certificate of Designations, Rights and Preferences) then in effect for such series of preferred shares. The Company is not obligated to issue any fractional shares or scrip representing fractional shares upon such conversion and instead shall pay the holder an amount in cash equal to such fraction multiplied by the current market price per share of the Company’s common stock.

Mandatory Conversion — The Company has the option upon thirty (30) days prior written notice, to convert all of the outstanding shares of the Series C Preferred Stock into such number of fully paid and non-assessable shares of common stock as is determined by dividing (i) the aggregate Liquidation Preference of the shares of the relevant series of preferred stock to be converted plus accrued and unpaid dividends thereon by (ii) the applicable Conversion Value (as defined in the relevant series’ Certificate of Designations, Rights and Preferences) then in effect, if at any time after twelve months following the Original Issue Date of each such series of preferred stock all of the following triggering events occur:

(i) The registration statement covering all of the shares of common stock into which the particular series of preferred stock is convertible is effective (or all of the shares of common stock into which the preferred stock is convertible may be sold without restriction pursuant to Rule 144(k) under the Securities Act of 1933, as amended);

(ii) the Daily Market Price (as defined in the applicable Certificates of Designations, Rights and Preferences) of the common stock crosses a specified pricing threshold for twenty of the thirty consecutive trading days prior to the date the Company provides notice of conversion to the holders; and

(iii) the average daily trading volume (subject to adjustment for stock dividends, subdivisions and combinations) of the common stock for at least twenty of the thirty consecutive trading days prior to the date the Company provides notice of conversion to the holders exceeds 25,000 shares.

As of September 30, 2007, our outstanding shares of the Series C Preferred Stock were convertible into 104,410 shares of our common stock at a conversion price of $6.80 per share, and the applicable Daily Market Price of the common stock for triggering mandatory conversion equaled $18.00 per share.

The Series D Preferred Stock only provides the holder of such shares an optional conversion right. As of September 30, 2007, 113,311 shares of the Series D Preferred Stock were convertible into our common stock on a one-for-one basis.

Common Stock

In August 2007, we entered into an agreement with an outside consulting advisor pursuant to which we issued 230,000 registered shares of common stock and registered warrants to purchase 150,000 shares of common stock, as payment of a non-refundable retainer in connection with the engagement of its services.

In May 2007, we completed a registered equity financing, whereby we sold 4,595,094 shares of our common stock resulting in gross aggregate cash proceeds of $16,174,737.

In March 2007, we entered into an agreement in which we agreed to issue a total of 90,000 restricted shares of our common stock in equal quarterly installments in exchange for consulting services. As of September 30, 2007, we had issued 22,500 restricted common shares and recorded a consulting expense and related liability of $15,188 as of September 30, 2007 for the 11,250 common shares which were due and subsequently issued in October 2007. During the remaining term of the agreement, we will continue to issue 11,250 restricted shares of our common stock at each quarter-end in exchange for the consulting services we will receive each quarter.

In January 2007, we exchanged for 2,201,644 restricted shares of our common stock and warrants to purchase up to 770,573 restricted shares of our common stock for 2,201,644 ordinary shares of our Singapore subsidiary Inovio Asia Pte. Ltd. (IAPL), pursuant to the terms of the Securities Purchase and Exchange Agreement under which the ordinary shares were originally issued by IAPL in October 2006 for $5,349,995.

In March 2007, we terminated our exclusive royalty-free license to IAPL allowing our subsidiary to use certain of our intellectual property, which had been issued in October 2006 prior to the ordinary share financing described above, in exchange for 6,584,365 ordinary shares of IAPL. Upon termination we retained the IAPL ordinary shares received in the license transaction.

In October 2006, we completed a registered offering with foreign investors, whereby we sold 4,074,067 shares of our common stock and issued warrants to purchase 1,425,919 shares of our common stock which resulted in gross aggregate cash proceeds of $9,900,003. As part of this offering, we informed holders of our then outstanding Series C Preferred Stock who held participation rights, of their ability to participate in the respective offering based upon the pricing of the transaction and the applicable liquidation preference for their series of preferred shares with such rights. Some of these participating stockholders had previously converted a portion of their shares of preferred stock pursuant to their optional conversion rights, and most of these participating stockholders wholly converted their remaining shares of the Company’s preferred stock through exercise of their participation rights in this offering. By electing to participate in this offering, these participating preferred stockholders converted 115.12 shares of previously issued Series C Preferred Stock and $14,571 of accrued dividends into 479,722 restricted shares of our common stock and warrants to purchase 167,902 restricted shares of our common stock. These participating stockholders received 304,450 additional restricted shares of our common stock as compared to the number of shares of our common stock into which their existing Series C Preferred Stock could have been converted under the original terms of the Series C Preferred Stock. As a result, we recorded an imputed dividend charge of $1,851,056 related to the participating stockholders who converted $1,151,200 of their previous Series C Preferred Stock investment. We calculated this imputed dividend charge pursuant to the guidance contained in Emerging Issues Task Force (“EITF”) Issue No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments, where the incremental number of shares of our common stock which was received by our participating Series C Preferred Stockholders was multiplied by the price of our common stock on the commitment date of the original Series C Preferred Stock issuance, or $6.08 per share, to calculate the imputed dividend charge associated with this beneficial conversion.

In July and October 2006, we issued 25,000 and 24,261 common shares, respectively, to an outside consulting company in payment of a non-refundable retainer in connection with the engagement of its services.

In June 2006, we issued 86,956 common shares to a licensing company in exchange for various patents and other assets and a $50,000 shareholder note receivable.

Warrants

All warrants issued as partial consideration for our previously mentioned August 2007 consulting advisor agreement are exercisable at an exercise price of $3.00 per share through August 2012. As of September 30, 2007, no warrants issued in connection with the consulting agreement had been exercised and all were outstanding.

All warrants issued in our October 2006 registered offering are exercisable at an exercise price of $2.87 per share through October 2011. The shares underlying these registered warrants were also initially registered for offer and sale in October 2006; however these warrants can be settled with unregistered shares if the Company is unable to maintain its existing registration statement on which these securities were registered. We have evaluated the provisions of the registered warrants using the guidance contained in EITF No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, and determined that the criteria for equity classification were met, and therefore the warrants associated with our registered offering have been classified within stockholders’ equity. As of September 30, 2007, no warrants issued in connection with our registered offering and preferred stock conversion had been exercised and all were outstanding.

All warrants issued in the October 2006 participating preferred stock conversion and the January 2007 IAPL ordinary share exchange are exercisable at an exercise price of $2.87 per share through October 2011. As of September 30, 2007, no warrants issued in connection with the IAPL private placement had been exercised and all were outstanding.

In our December 2005 private placement to accredited investors, we issued warrants to purchase an aggregate of 3,462,451 shares of common stock at an exercise price of approximately $2.93 per share, which are exercisable through December 2010. As of September 30, 2007, no warrants issued in connection with this private placement had been exercised, and all were outstanding.

In our January 2005 private placement to accredited investors, we issued warrants to purchase 508,240 shares of our common stock at an exercise price of $5.50 per share, which are exercisable through January 2010. As of September 30, 2007, no warrants issued as part of this private placement had been exercised and all were outstanding.

In connection with the leasing of our new corporate headquarters, we issued a warrant to purchase 50,000 shares of our common stock at $5.00 per share to the landlord of the leased facility in December 2004, which is exercisable through December 2009. This warrant was valued on the date of issuance using the Black-Scholes pricing model. The fair value of this warrant, $120,913, is being recognized ratably over the five-year term of the lease as rent expense. As of September 30, 2007, this warrant remains unexercised and outstanding.

In our May 2004 offering of our Series C Preferred Stock, we issued warrants to the investors to purchase 561,084 shares of our common stock at an exercise price of $8.80 per share and warrants to the placement agents to purchase 152,519 shares of our common stock at an exercise price of $6.80 per share, in each case exercisable through May 10, 2009. As of September 30, 2007, none of these warrants had been exercised and all were outstanding.

At the closing of our July 2003 sale of our previously issued and subsequently converted Series A and Series B Preferred Stock, we issued warrants to the investors to purchase 2,433,073 shares of our common stock at an exercise price of $3.00 per share and warrants to the placement agents to purchase 447,060 shares of our common stock at an exercise price of between $2.40 and $2.80 per share, both of which are exercisable through July 13, 2008. Of these July 2003 warrants, warrants to purchase 878,582 shares had been exercised as of September 30, 2007, resulting in gross cash proceeds of $1,983,107.

On September 15, 2000, we entered into an exclusive license agreement with the University of South Florida Research Foundation, Inc. (“USF”), whereby USF granted us an exclusive, worldwide license to USF’s rights in patents and patent applications generally related to needle electrodes (the “License Agreement”). Pursuant to the License Agreement, we granted USF and its designees a warrant to acquire 150,000 common shares for $9.00 per share. This warrant expires on September 14, 2010. At the date of grant, 75,000 shares underlying the warrant vested, and the remaining shares will vest upon the achievement of certain milestones. The 75,000 non-forfeitable vested shares underlying the warrant were valued at $553,950 using the Black-Scholes pricing model and were recorded as capitalized license fees. The remaining 75,000 shares underlying the non-vested warrant are forfeitable and will be valued at the fair value on the date of vesting using the Black-Scholes pricing model. As of September 30, 2007, none of these warrants had been exercised and all were outstanding.

Stock Options

We have one active stock and cash-based incentive plan, our 2007 Omnibus Incentive Plan (the “Incentive Plan”), pursuant to which we have granted stock options and restricted stock awards to executive officers, directors and employees. The plan was adopted on March 31, 2007 and approved by the stockholders on May 4, 2007. The Incentive Plan reserves 750,000 shares of our common stock for issuance as or upon exercise of incentive awards granted and to be granted at future dates. At September 30, 2007, we had 556,250 shares of common stock available for future grant and had outstanding 101,250 shares of unvested restricted common stock, 63,750 shares of vested restricted stock, and options to purchase 28,750 shares of common stock. The awards granted and available for future grant under the Incentive Plan generally have a term of ten years and generally vest over a period of three years. The Incentive Plan terminates by its terms on March 31, 2017.

The Incentive Plan supersedes all of our previous stock option plans, which include our 1997 Stock Option Plan, under which we had options to purchase 60,498 shares of common stock outstanding and our Amended 2000 Stock Option Plan, under which we had options to purchase 3,394,589 shares of common stock outstanding at September 30, 2007. The terms and conditions of the options outstanding under these plans remain unchanged.

5. Net Loss Per Share

Net loss per share is calculated in accordance with SFAS No. 128, Earnings Per Share. Basic loss per share is computed by dividing the net loss for the year by the weighted average number of common shares outstanding during the year. Diluted loss per share is calculated in accordance with the treasury stock method and reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted to common stock. Since the effect of the assumed exercise of common stock options and other convertible securities was anti-dilutive for all periods presented, there is no difference between basic and diluted loss per share.

6. Share-Based Compensation

We estimate the fair value of stock options granted using the Black-Scholes pricing model. The Black-Scholes pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility and expected option life. We amortize the fair value of the awards granted on a straight-line basis. All options grants are amortized over the requisite service period of the awards. Expected volatility is based on historical volatility. The expected life of options granted is calculated using the simplified method based on the terms and conditions of the options as provided in Staff Accounting Bulletin (“SAB”) No. 107, Share-Based Payment. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant. The estimated forfeiture rate is based on historical data and we record share-based compensation expense only for those awards that we expect to vest.

Assumptions used to value employee stock options using the Black-Scholes model are presented below:

	Nine Months Ended September 30,
	2007	2006
Risk-free interest rate	4.07%-4.95%	4.74%-4.96%
Expected volatility	94%-98%	109%
Expected life in years	6	6
Dividend yield	—	—

The weighted average grant date fair value per share was $1.72 and $2.17 for employee stock options granted during the three and nine months ended September 30, 2007, respectively, and $1.99 and $2.17 for employee stock options granted during the three and nine months ended September 30, 2006, respectively.

The weighted average grant date fair value per share was $3.69 for non-vested restricted stock granted during the nine months ended September 30, 2007. There was no non-vested restricted stock granted during the three months ended September 30, 2007 or for the three and nine months ended September 30, 2006.

Total compensation cost for our employee stock plans for the three and nine months ended September 30, 2007 was $310,322 and $1,285,870, respectively, of which $74,942 and $279,746 was included in research and development expenses and $235,380 and $1,006,124 was included in general and administrative expenses, respectively.

At September 30, 2007, there was $1,721,001 of total unrecognized compensation cost, related to non-vested employee stock options, which is expected to be recognized over a weighted-average period of 1.1 years. At September 30, 2006, there was $1,573,607 of total unrecognized compensation cost, related to non-vested employee stock options which was expected to be recognized over a weighted-average period of 1.0 year.

At September 30, 2007, there was $313,908 of total unrecognized compensation cost, related to non-vested restricted stock, which is expected to be recognized over a weighted-average period of 1.9 years. There was no unrecognized compensation cost related to non-vested restricted stock at September 30, 2006.

We account for options granted to non-employees in accordance with 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, and Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payment. The fair value of these options at the measurement dates was estimated using the Black-Scholes pricing model. Total stock-based compensation for options granted to non-employees for the three and nine months ended September 30, 2007, was $10,919 and $103,473, respectively. Total stock-based compensation for options granted to non-employees for the three and nine months ended September 30, 2006 was $65,604 and $161,889, respectively.

7. Comprehensive Loss

Comprehensive loss for the three and nine months ended September 30, 2007 includes net loss, foreign currency translation gains and de minimis amounts of unrealized gains on investments. Comprehensive loss for the three and nine months ended September 30, 2006 includes net loss and foreign currency translation gains and losses. Comprehensive loss for the three and nine months ended September 30, 2007 was $4,570,516 and $13,031,335, respectively. Comprehensive loss for the three and nine months ended September 30, 2006 was $3,418,175 and $9,067,762 respectively.

8. Supplemental Disclosures of Cash Flow Information

	Nine Months Ended September 30,
	2007		2006
Supplemental schedule of financing activities:

Conversion of minority interest into common stock	$	5,349,995	$	—
Common stock issued in connection with declared dividends on preferred stock	$	—	$	7,693
Conversions of preferred stock to common stock	$	961	$	1,268
Issuance of common stock for patents and other assets	$	—	$	128,922
Issuance of common stock in exchange for shareholder note receivable	$	—	$	59,290
Leasehold improvements financed by landlord	$	—	$	172,054
Non-cash warrant exercise for common stock	$	38	$	—

9. Income Taxes

In July 2006, the Financial Accounting Standards Board issued Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes, or “FIN 48”, which clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. Additionally, FIN 48 provides guidance on the de-recognition, classification, interest and penalties, accounting in interim periods, and disclosure requirements for uncertain tax positions. We adopted the provisions of FIN 48 beginning January 1, 2007.

We file income tax returns in the U.S. and various foreign and state jurisdictions. Due to our losses incurred, we are essentially subject to income tax examination by tax authorities from our inception to date. Our policy is to recognize interest expense and penalties related to income tax matters as tax expense. At September 30,

2007, we do not have any significant accruals for interest related to unrecognized tax benefits or tax penalties. We believe we have appropriate support for all income tax positions taken, or to be taken, in our tax returns, and that our accruals for tax liabilities are adequate for all open years based on an assessment of factors including past experience and interpretations of tax law applied to the facts of each matter.

With regard to our U.S. operations, we had deferred tax assets of approximately $36.2 million as of January 1, 2007, which have been fully offset by a valuation allowance due to uncertainties surrounding our ability to generate future taxable income to realize these assets. The deferred tax assets are primarily composed of federal and state tax net operating loss (“NOL”) carryfowards and federal and state research and development (“R&D”) credit carryforwards. Utilization of our NOL and R&D credit carryforwards to offset future taxable income may be subject to a substantial annual limitation as a result of ownership changes that have occurred previously or that could occur in the future. Until we have determined whether such an ownership change has occurred, and until the amount of any limitation becomes known, no amounts are being presented as an uncertain tax position in accordance with FIN 48. Management believes that the amount subject to limitation could be significant. Any carryforwards that will expire prior to utilization as a result of such limitations will be removed from deferred tax assets accompanied by a corresponding reduction of the related valuation allowance. Due to the existence of the valuation allowance, future changes in our unrecognized tax benefits related to our operations in the U.S. will not impact our effective tax rate.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and Notes thereto appearing elsewhere in this report, and the Consolidated Financial Statements and Notes thereto included in our annual report on Form 10-K.

This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements with regards to our revenue, spending, cash flow, products, actions, plans, strategies and objectives. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or simply state future results, performance or achievements, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will be,” “will continue,” “will result,” “could,” “may,” “might,” or any variations of such words with similar meanings. Any such statements are subject to risks and uncertainties that could cause our actual results to differ materially from those which are management’s current expectations or forecasts. Such information is subject to the risk that such expectations or forecasts, or the assumptions underlying such expectations or forecasts, become inaccurate.

Such risks and uncertainties are disclosed from time to time in our reports filed with the SEC, including our reports on Forms 8-K, 10-Q, and 10-K and such risks and uncertainties are discussed in this Report under the headings “Certain Factors That Could Affect Our Future Results” later in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and in “Risk Factors” located in Part II, Item 1A. The risks included in this Report are not exhaustive. Other sections of this Report may include additional factors that could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and we cannot predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Investors should also be aware that while we do, from time to time, communicate with securities analysts, we do not disclose any material non-public information or other confidential commercial information to them. Accordingly, individuals should not assume that we agree with any statement or report issued by any analyst, regardless of the content of the analyst’s report. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.

General

We are a San Diego-based biomedical company focused on developing multiple DNA-based vaccines and immunotherapies and partnering our Selective Electrochemical Tumor Ablation ("SECTA") therapy for commercialization. We are developing multiple human applications of electroporation, using brief, controlled electrical pulses to increase cellular uptake of useful biopharmaceutical and, in the specific field of gene-based treatments, increased levels of gene expression. When used to administer DNA vaccines, our electroporation technology has demonstrated in both pre-clinical and clinical studies that it can increase levels of gene expression and immune response. Our significant immunotherapy and DNA vaccine partners include Merck, Wyeth, Vical, University of Southampton, Moffitt Cancer Center, U.S. Army, National Cancer Institute, and the International Aids Vaccine Initiative, with five programs in Phase I and Phase I/II classified clinical trials. Our technology is protected by an extensive patent portfolio covering in vivo electroporation.

Our primary development efforts involve licensing agreements with Merck & Co., Inc., Wyeth Pharmaceuticals and Vical, Inc., under which these companies are supporting the development and registration of their therapies using the delivery mechanism of our novel device. In November 2006, we executed a licensing agreement with VGX Pharmaceuticals (VGX) for a worldwide non-exclusive license to our DNA Electroporation Delivery Technology for intratumoral delivery of a proprietary gene intended to control the growth of melanoma and other cancers using an HIV sequence. We also have a collaborative commercialization agreement with Tripep AB to co-develop a novel DNA Hepatitis C therapeutic vaccine (HCV), for which we have received approvals from the Swedish Medical Products Agency and local ethics committees to initiate a Phase I/II clinical trial, which has now begun enrollment. Other activities include Phase I clinical trials at the H. Lee Moffitt Cancer Center and at the University of Southampton.

Our SECTA therapy is designed to treat solid tumors locally by selectively killing cancerous cells, thereby minimizing cosmetic or functional detriments often caused by surgical removal of predominantly healthy tissue around a treated tumor. Our SECTA therapy uses bleomycin sulfate delivered intratumorally through our MedPulser^® electroporation system. The purpose of this therapy is to provide treated patients with quality of life benefits not considered achievable using a surgical treatment method, combined with intended equivalent results in terms of local tumor control and survival. We aim to demonstrate these benefits with multiple clinical studies in several different cancer indications. Each cancer indication is the subject of a separate clinical development program, specifically designed to address the unique and differentiating clinical and biological attributes of each type of cancer we are evaluating. We have now completed enrollment of 13 patients in an FDA-approved Phase I/II clinical study of recurrent breast cancer. We have also completed enrollment of 92 patients in a European pre-marketing study of head and neck cancer and have also completed enrollment of 89 patients in a European pre-marketing study of patients with skin cancer. We have expedited our efforts in performing data analysis from our SECTA oncology program for the benefit of concurrently being able to evaluate data from multiple clinical studies.

We had also been enrolling patients in two Phase III clinical studies designed to evaluate the use of our SECTA therapy as a treatment for resectable recurrent and second primary squamous cell carcinomas of the head and neck (“SCCHN”). These specific studies accrued North American and European patients with tumors in the anterior and posterior areas of the oral cavity. The primary endpoint of these two Phase III trials was preservation of function status at four and eight month intervals as measured by the Performance Status Scale (which assesses the ability of a patient to eat “normal” foods, speak understandably, and eat in public). On June 5, 2007, we announced that we had stopped enrollment of these studies based on a recommendation from the trial’s independent data monitoring committee (“DMC”). The DMC expressed concern about the study’s efficacy and notable serious adverse events, including higher mortality rates associated with the SECTA therapy arm of the study when compared to the surgery treatment arm. In the DMC’s opinion, although no single parameter was sufficient to warrant recommending a review of the trial, the totality of data for this recurrent head and neck cancer study suggested an unfavorable benefit-to-risk profile for the SECTA therapy arm relative to the surgery treatment arm. The DMC also noted that the perceived slow enrollment in the study presented a possible challenge in meeting our patient enrollment goals of each of these two trials, but further elaborated that if timely enrollment could allow the combined trials to reach an aggregate target of 400 patients, this would provide enhanced insights regarding the benefit-to-risk profile for our SECTA therapy. Without conducting further analysis, we stopped enrollment to allow us to conduct our own interim analysis of the unaudited and unblinded data regarding the 212 patients enrolled to date.

We are now completing the process of monitoring the final patients treated in our five SECTA clinical studies and concurrently conducting an analysis of the resulting data. Management estimates that the cost to complete SECTA patient monitoring, as required by regulatory and good clinical practice (“GCP”) standards, and the costs resulting from the corresponding data analysis performed for the purpose of obtaining a strategic partner may total approximately $6 million. We expect to substantially complete this analysis by the end of 2008. The Company will not independently reinitiate the two Phase III clinical studies halted in June 2007 nor initiate other clinical studies pertaining to our SECTA therapy. Our business plan for our SECTA therapy has been focused on generating a set of clinical data across multiple indications to further characterize the therapy’s clinical benefits, safety analysis, cost savings, and profit potential necessary to make this product viable and attractive for a potential marketing and sales partner who can successfully market our product. As a result of our efforts in validating data from prior clinical studies and our continuing belief that our pending data will provide additional support for the advanced therapeutic benefits of our innovative device, we believe we will be able to continue our efforts to secure a commercialization path for our SECTA therapy, which could include: a) securing one or more industry partnerships for either select geographic regions or on a broader global scale; b) spinning out our SECTA asset base into a newly formed company, funded entirely by third party investors; or c) selling our SECTA asset base to interested parties. Management cannot reasonably assure our investors that any of these alternatives will be completed or will culminate in the realization of any material value to our Company or to our stockholders.

We have a patent portfolio encompassing electroporation, covering a range of apparatuses, methodologies, conditions, and applications including oncology, gene delivery, vascular, transdermal and ex vivo.

As of September 30, 2007, we had an accumulated deficit of $141,939,420. We expect to continue to incur substantial operating losses in the future due to our commitment to our research and development programs, the funding of preclinical studies, clinical trials and regulatory activities and the costs of general and administrative activities.

Critical Accounting Policies

The SEC defines critical accounting policies as those that are, in management’s view, important to the portrayal of our financial condition and results of operations and require management’s judgment. Our discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. We base our estimates on experience and on various assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates.

Our critical accounting policies include:

Revenue Recognition. We have adopted a strategy of co-developing or licensing our gene delivery technology for specific genes or specific medical indications. Accordingly, we have entered into collaborative research and development agreements and have received funding for pre-clinical research and clinical trials. Payments under these agreements, which are non-refundable, are recorded as revenue as the related research expenditures are incurred pursuant to the terms of the agreements and provided collectibility is reasonably assured.

License fees are comprised of initial fees and milestone payments derived from collaborative licensing arrangements. We continue to recognize non-refundable milestone payments upon the achievement of specified milestones upon which we have earned the milestone payment, provided the milestone payment is substantive in nature and the achievement of the milestone was not reasonably assured at the inception of the agreement. We defer payments for milestone events which are reasonably assured and recognize them ratably over the minimum remaining period of our performance obligations. Payments for milestones which are not reasonably assured are treated as the culmination of a separate earnings process and are recognized as revenue when the milestones are achieved.

We receive non-refundable grants under available government programs. We record government grants applicable towards current expenditures as revenue when there is reasonable assurance that we have complied with all conditions necessary to receive the grants, collectibility is reasonably assured, and the related expenditures have been incurred.

Research and Development Expenses. Since our inception, virtually all of our activities have consisted of research and development efforts related to developing our electroporation technologies. We expense all such expenditures in the period incurred. Our expenses related to clinical trials are based on services received and efforts expended pursuant to contracts with multiple research institutions and clinical research organizations that conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed fee or unit price. Payments under the contracts depend on factors such as the successful enrollment of patients or the completion of clinical trial milestones. Expenses related to clinical trials generally are accrued based on contracted amounts applied to the level of patient enrollment and activity according to the protocol. If timelines or contracts are modified based upon changes in the clinical trial protocol or scope of work to be performed, we modify our estimates accordingly on a prospective basis.

Valuation of Goodwill and Intangible Assets. Our business acquisitions typically result in goodwill and other intangible assets, and the recorded values of those assets may become impaired in the future. Acquired intangible assets are still being developed for the future economic viability contemplated at the time of acquisition. We are concurrently conducting Phase I and pre-clinical trials using the acquired intangibles, and we have entered into certain significant licensing agreements for use of these acquired intangibles.

We record patents at cost and amortize these costs using the straight-line method over the expected useful lives of the patents or 17 years, whichever is less. Patent cost consists of the consideration paid for patents and related legal costs. License costs are recorded based on the fair value of consideration paid and amortized using the

straight-line method over the shorter of the expected useful life of the underlying patents or the term of the related license agreement. As of September 30, 2007, our goodwill and intangible assets, including patents and license costs, net of accumulated amortization, totaled $10,591,299.

The determination of the value of such intangible assets requires management to make estimates and assumptions that affect our condensed consolidated financial statements. We assess potential impairments to intangible assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. Our judgments regarding the existence of impairment indicators and future cash flows related to intangible assets are based on operational performance of our acquired businesses, market conditions and other factors. If impairment is indicated, we reduce the carrying value of the intangible asset to fair value. While our current and historical operating and cash flow losses are potential indicators of impairment, we believe the future cash flows to be received from our intangible assets will exceed the intangible assets’ carrying value, and accordingly, we have not recognized any impairment losses through September 30, 2007.

Although there are inherent uncertainties in this assessment process, the estimates and assumptions we use are consistent with our internal planning. If these estimates or their related assumptions change in the future, we may be required to record an impairment charge on all or a portion of our goodwill and intangible assets. Furthermore, we cannot predict the occurrence of future impairment-triggering events nor the impact such events might have on our reported asset values. Future events could cause us to conclude that impairment indicators exist and that goodwill or other intangible assets associated with our acquired businesses are impaired. Any resulting impairment loss could have an adverse impact on our results of operations.

Share-Based Compensation. Share-based compensation cost is estimated at the grant date based on the fair-value of the award and is recognized as expense ratably over the requisite service period of the award. Determining the appropriate fair-value model and calculating the fair value of stock-based awards at the grant date requires considerable judgment, including estimating stock price volatility, expected option life and forfeiture rates. We develop our estimates based on historical data. If factors change and we employ different assumptions in future periods, the compensation expense that we record may differ significantly from what we have recorded in the current period. A small change in the estimates used may have a relatively large change in the estimated valuation. We use the Black—Scholes pricing model to value stock option awards. We recognize compensation expense using the straight-line amortization method.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements. SFAS 157 becomes effective for us on January 1, 2008. Upon adoption, the provisions of SFAS 157 are to be applied prospectively with limited exceptions. Management is currently evaluating the impact of this standard and does not expect the adoption of SFAS 157 to have a material impact on our condensed consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115” (SFAS 159). Under SFAS 159, we may elect to measure certain financial instruments and other items at fair value on an instrument by instrument basis subject to certain restrictions. SFAS 159 becomes effective for us on January 1, 2008. The impact of the adoption of SFAS 159 will be dependent on the extent to which we elect to measure eligible items at fair value.

Results of Operations

Revenue. We had total revenue of $486,511 and $1,485,990, respectively, for the three and nine months ended September 30, 2007, compared to $575,829 and $1,936,512, respectively, for the three and nine months ended September 30, 2006. Revenue primarily consists of license fees, milestone payments and amounts received from collaborative research and development agreements and grants.

Revenue from license fees and milestone payments was $136,870 and $580,624, respectively, for the three and nine months ended September 30, 2007, as compared to $204,699 and $526,815, respectively, for the three and

nine months ended September 30, 2006. The decrease in revenue under license fees and milestone payments for the three months period ended September 30, 2007, as compared to the comparable period in 2006, was mainly due to less revenue recognized from our Merck license agreement which was fully amortized in May 2007. The increase in revenue under license fees and milestone payments for the nine month period ended September 30, 2007, as compared to the comparable period in 2006, was mainly due to the recognition of previously deferred revenue from our licensing agreement with Wyeth which was executed in November 2006, offset by less revenue recognized from the fully amortized Merck license agreement.

During the three and nine months ended September 30, 2007, we recorded revenue under collaborative research and development arrangements of $265,970 and $800,272, respectively, as compared to $254,137 and $762,718, respectively, for the three and nine months ended September 30, 2006. This increase in revenue was primarily due to more collaborative research and development revenue recognized from the Merck Collaborative Research Agreement (“Merck Agreement”). We record billings from research and development work performed pursuant to the Merck Agreement as revenue as we incur the related research expenditures pursuant to the terms of the Merck Agreement.

Grant and miscellaneous revenue was $83,671 and $105,094, respectively, for the three and nine months ended September 30, 2007, as compared to $116,993 and $646,979, respectively, for the three and nine months ended September 30, 2006. The decrease in grant and miscellaneous revenue for the three and nine months ended September 30, 2007, as compared to the comparable periods in 2006, was mainly due to a reduction in revenue recognized from European Union and U.S. Army grants due to the timing of work performed.

Research and Development Expenses. Research and development expenses, which include clinical trial costs, for the three and nine months ended September 30, 2007, were $2,335,378 and $7,759,625, respectively, as compared to $2,185,931and $5,808,251 for the three and nine months ended September 30, 2006, respectively. The increase in research and development expenses for the three and nine months ended September 30, 2007, as compared to the comparable periods in 2006, was primarily due to an increase in clinical trial expenses associated with patient enrollment, clinical site costs, data collection and monitoring costs, and increased costs related to the use of outside Clinical Research Organizations (“CRO’s”) and Clinical Research Associates (“CRA’s”). Additional increases are associated with the expansion of our in-house engineering and research expertise, increased consulting services and an increase in lab supplies related to our existing and next generation programs, offset by less outside lab testing performed in connection with the U.S. Army grant.

General and Administrative Expenses. General and administrative expenses, which include business development expenses and the amortization of intangible assets, for the three and nine months ended September 30, 2007, were $3,177,723 and $7,813,435, respectively, as compared to $1,926,628 and $5,680,699 for the three and nine months ended September 30, 2006, respectively. The increase in general and administrative expenses for the three and nine months ended September 30, 2007, as compared to the comparable periods in 2006, was mainly due to an increase in outside consulting services related to partnering our SECTA therapy program, an increase in investor relations services associated with expanding our DNA and gene therapy program, an increase in personnel expenses associated with expanding our in-house expertise, and legal fees associated with intellectual property and business development efforts.

Share-Based Compensation. Share-based compensation cost is measured at the grant date, based on the fair value of the award reduced by estimated forfeitures, and is recognized as expense over the employee’s requisite service period. Total compensation cost for our stock plans for the three and nine months ended September 30, 2007 was $310,332 and $1,285,870, respectively, as compared to $320,702 and $1,158,647 for the three and nine months ended September 30, 2006, respectively.

Interest and Other Income. Interest and other income for the three and nine months ended September 30, 2007, was $405,599 and $925,715, respectively, as compared to $127,849 and $460,927 for the three and nine months ended September 30, 2006. The increase in interest and other income for the three and nine months ended September 30, 2007 was primarily due to larger cash and short-term investment balances as a result of our May 2007 and October 2006 equity financings, and a higher average interest rate.

Imputed and Declared Dividends on Preferred Stock. The former holders of our Series A and B Preferred Stock received an annual dividend at a rate of 6%, in shares of common stock or cash, payable quarterly through

September 30, 2006. As a result, no dividends were paid to Series A or B Preferred Stock holders during the three and nine months ended September 30, 2007. We paid cash of $46 and $345 during the three and nine months ended September 30, 2006 and issued a total of 2,871 shares valued at $7,693 during the nine months ended September 30, 2006, to the former holders of our Series A Preferred Stock. We paid $0 and $14,795 in cash to the former holders of our Series B Preferred Stock during the three and nine months ended September 30, 2006, respectively.

The holders of our Series C Preferred Stock were entitled to receive an annual dividend at a rate of 6%, in shares of common stock or cash, payable quarterly, through May 20, 2007. As a result, no dividends were paid to Series C Preferred Stock holders during the three months ended September 30, 2007. As part of this dividend, we paid cash of $23,335 during the nine months ended September 30, 2007 to holders of our Series C Preferred Stock. We paid cash of $17,089 and $101,090 during the three and nine months ended September 30, 2006 to holders of our Series C Preferred Stock and accrued $14,571 for certain holders of our Series C Preferred Stock who participated in our October 2006 equity financing, during the nine months ended September 30, 2006.

Liquidity and Capital Resources

During the last seven years, our primary uses of cash have been to finance research and development activities including clinical trial activities in the oncology, DNA vaccines and other immunotherapy areas of our business. Since inception, we have satisfied our cash requirements principally from proceeds from the sale of equity securities.

Recent Sales of Equity Securities

In May 2007, we completed a registered equity financing wherein we issued and sold 4,595,094 shares of our common stock for $3.52 per share, resulting in aggregate cash proceeds of $16,174,737 prior to offering expenses of $110,313.

In October 2006, we completed a registered equity financing with foreign investors, wherein we issued and sold 4,074,067 shares of our common stock for $2.43 per share and warrants to purchase 1,425,919 shares of our common stock, resulting in aggregate cash proceeds of $9,900,003 prior to offering expenses of $1,161,070. In connection with this offering, certain holders of our previously issued Series C Preferred Stock exchanged 115.12 shares of their outstanding Series C Preferred Stock and accrued dividends thereon for $14,571 and 479,722 restricted shares of our common stock and warrants to purchase 167,902 restricted shares of our common stock. All warrants issued in the registered offering and the preferred exchange transaction have a term of five years and are exercisable at $2.87 per share.

In October 2006, Inovio Asia Pte. Ltd. (“IAPL”), our subsidiary organized in Singapore, completed a private placement, issuing and selling 2,201,644 of its ordinary shares at $2.43 per share for cash in the amount of $5,349,995. These ordinary shares were exchanged in January 2007 for 2,201,644 restricted shares of our common stock and five-year warrants to purchase up to 770,573 restricted shares of common stock at an exercise price of $2.87 per share.

Working Capital and Liquidity

As of September 30, 2007, we had working capital of $26,515,059, as compared to $21,152,908 as of December 31, 2006. The increase in working capital during the nine months ended September 30, 2007 was primarily due to the equity financing which occurred in May 2007, offset by expenditures related to our research and development and clinical trial activities, as well as various general and administrative expenses related to legal, corporate development, and investor relations activities.

As of September 30, 2007, we had an accumulated deficit of $141,939,420. We have operated at a loss since 1994, and we expect this to continue for some time. The amount of the accumulated deficit will continue to increase, as it will be expensive to continue clinical, research and development efforts. If these activities are successful and if we receive approval from the FDA to market equipment, then even more funding will be required to market and sell the equipment. The outcome of the above matters cannot be predicted at this time. We are evaluating potential partnerships as an additional way to fund operations. We will continue to rely on outside sources of financing to meet our capital needs beyond next year. We expect that our current cash and short-term

investment resources will fund our operations through the fourth quarter of 2009 based on our current operating plan. However, there can be no assurance, even assuming we successfully raise additional funds, that we will maintain positive cash flow. If we are not able to secure additional funding, we will be required to further scale back our research and development programs, preclinical studies and clinical trials, general, and administrative activities and may not be able to continue in business.

Our long-term capital requirements will depend on numerous factors including:

• The progress and magnitude of the research and development programs, including preclinical and clinical trials;

• The time involved in obtaining regulatory approvals;

• The cost involved in filing and maintaining patent claims;

• Competitor and market conditions;

• The ability to establish and maintain collaborative and licensing arrangements;

• The ability to obtain grants to finance research and development projects;

• The cost of manufacturing scale-up; and

• the cost of commercialization activities and arrangements.

The ability to generate substantial funding to continue research and development activities, preclinical and clinical studies and clinical trials and manufacturing, scale-up, and selling, general, and administrative activities is subject to a number of risks and uncertainties and will depend on numerous factors including:

• The ability to raise funds in the future through public or private financings, collaborative arrangements, grant awards or from other sources;

• Our potential to obtain equity investments, collaborative arrangements, license agreements or development or other funding programs in exchange for manufacturing, marketing, distribution or other rights to products developed by us; and

• The ability to maintain existing collaborative arrangements.

We cannot guarantee that additional funding will be available when needed or on favorable terms. If it is not, we will be required to scale back our research and development programs, preclinical studies and clinical trials, and selling, general, and administrative activities, or otherwise reduce or cease operations and our business and financial results and condition would be materially adversely affected.

Certain Factors That Could Affect Our Future Results

All of the information in this Quarterly Report on Form 10-Q, including the factors listed below and the factors listed under Part II, Item 1A. should be carefully considered and evaluated. These factors are not the only concerns or uncertainties facing us. Additional matters not now known to us or that we may currently deem immaterial could also impair our ability to conduct business in the future.

If any of the circumstances among the following or others factors actually occur, our ability to commercialize our technology, and the therapies we believe are derivable therefrom, could be compromised and the trading price of our common stock could decline.

We Will Have A Need For Significant Funds In The Future And There Is No Guarantee That We Will Be Able To Obtain The Funds We Need. Developing a new medical device and conducting clinical trials is

expensive. Our product development efforts may not lead to commercial products, either because our product candidates fail to be found safe or effective in clinical trials or because we lack the necessary financial or other resources or relationships to pursue our programs through commercialization. Our capital and future revenue may not be sufficient to support the expenses of our operations, the development of a commercial infrastructure and the conduct of our clinical trials and pre-clinical research.

Our plans for continuing clinical trials, conducting research, furthering development and, eventually, marketing our human-use equipment will involve substantial costs. The extent of such costs will depend on many factors, including some of the following:

• The progress and breadth of pre-clinical testing and the size or complexity of our clinical trials and drug delivery programs, all of which directly influence cost;

• Higher than expected costs involved in complying with the regulatory process to get our human-use products approved, including the number, size, and timing of necessary clinical trials and costs associated with the current assembly and review of existing clinical and pre-clinical information;

• Higher than expected costs involved in patenting our technologies and defending them and pursuing our overall intellectual property strategy;

• Changes in our existing research and development relationships and our ability to efficiently negotiate and enter into new agreements;

• Changes in or terminations of our existing collaboration and licensing arrangements;

• Faster than expected rate of progress and changes in the scope and the cost of our research and development and clinical trial activities;

• An increase or decrease in the amount and timing of milestone payments we receive from collaborators;

• Higher than expected costs of preparing an application for FDA approval of our MedPulser^®Electroporation Therapy System;

• Higher than expected costs of developing the processes and systems to support FDA approval of our MedPulser^® Electroporation Therapy System;

• An increase in our timetable and costs for the development of marketing operations and other activities related to the commercialization of our MedPulser^® Electroporation Therapy System and our other product candidates;

• A change in the degree of success in our SECTA clinical trials;

• Higher than expected costs to further develop and scale up our manufacturing capability of our human-use equipment; and

• Competition for our products and our ability, and that of our partners, to commercialize our products.

We plan to fund operations by several means. We will attempt to enter into contracts with partners that will fund either general operating expenses or specific programs or projects. Some funding also may be received through government grants. However, we may not be able to enter into any such contracts or may not receive such grants or, if we do, our partners and the grants may not provide enough funding to meet our needs.

In the past, we have raised funds through the public and private sale of our stock, and we are likely to do this in the future. Sale of our stock to new investors usually results in existing stockholders becoming “diluted.” The

greater the number of shares sold, the greater the dilution. A high degree of dilution can make it difficult for the price of our stock to increase, among other things. Dilution also weakens existing stockholders’ voting power.

We cannot assure that we will be able to raise additional capital to fund operations, or that we will be able to raise additional capital under terms that are favorable to us.

The Market For Our Stock Is Volatile, Which Could Adversely Affect An Investment In Our Stock. Our share price and volume are highly volatile. This is not unusual for biomedical companies of our size, age, and with a discrete market niche. It also is common for the trading volume and price of biotechnology stocks to be unrelated to a company’s operations, i.e. increase or decrease on positive or no news. Our stock has exhibited this type of behavior in the past, and may well exhibit it in the future. The historically low trading volume of our stock, in relation to many other biomedical companies of our size, makes it more likely that a severe fluctuation in volume, either up or down, will affect the stock price.

Some factors that we would expect to depress the price of our stock include:

• Adverse clinical trial results;

• Our inability to obtain additional capital;

• Announcement that the FDA denied our request to approve our human-use product for commercialization in the United States, or similar denial by other regulatory bodies which make independent decisions outside the United States (to date, the EU is the only foreign jurisdiction in which we have sought approval for commercialization);

• Announcement of legal actions brought by or filed against us for patent or other matters, especially if we receive negative rulings or outcomes in such actions;

• Cancellation of corporate partnerships or other material agreements;

• Public concern as to the safety or efficacy of our human-use products including public perceptions regarding gene therapy in general;

• Potential negative market reaction to the terms or volume of any issuances of shares of our stock to new investors or service providers;

• Stockholders’ decisions, for whatever reasons, to sell large amounts of our stock;

• Adverse research and development results;

• Declining working capital to fund operations, or other signs of apparent financial uncertainty;

• Significant advances made by competitors that adversely affect our potential market position; and

• The loss of key personnel and the inability to attract and retain additional highly-skilled personnel.

Additionally, our clinical trials are open-ended and, therefore, there is the possibility that information regarding the success (or setbacks) of our clinical trials may be obtained by the public prior to a formal announcement by us. These factors, as well as the other factors described in this Quarterly Report, could significantly affect the price of our stock.

If We Do Not Have Enough Capital To Fund Operations, Then We Will Have To Cut Costs. If we are unable to raise additional funds under acceptable terms, then we will have to take measures to cut costs, such as:

• Delay, scale back or discontinue one or more of our oncology or gene delivery programs or other aspects of operations, including laying off personnel or stopping or delaying clinical trials;

• Sell or license some of our technologies that we would not otherwise sell or license if we were in a stronger financial position;

• Sell or license some of our technologies under terms that are less favorable than they otherwise might have been if we were in a stronger financial position; and

• Consider merging with another company or positioning ourselves to be acquired by another company.

If it became necessary to take one or more of the above-listed actions, then we may receive a lower valuation, which could impact our stock price. Further, the effects on our operations, financial performance and stock price may be significant if we do not or cannot take one or more of the above-listed actions in a timely manner when needed.

Our Business Is Highly Dependent On Receiving Approvals From Various Regulatory Authorities And Will Be Dramatically Affected If Approval To Manufacture And Sell Our Human-Use Equipment Is Not Granted Or Is Not Granted In A Timely Manner. The production and marketing of our human-use equipment and our ongoing research, development, pre-clinical testing, and clinical trial activities are subject to extensive regulation. Numerous governmental agencies in the U.S. and internationally, including the FDA, must review our applications and decide whether to grant regulatory approval. All of our human-use equipment must go through an approval process, in some instances for each indication for which we want to label it for use (such as use for dermatology, use for transfer of a certain gene to a certain tissue, or use for administering a certain drug to a certain tumor type in a patient having certain characteristics). These regulatory processes are extensive and involve substantial costs and time.

We have limited experience in, and limited resources available, for such regulatory activities. Failure to comply with applicable regulations can, among other things, result in non-approval, suspensions of regulatory approvals, fines, product seizures and recalls, operating restrictions, injunctions and criminal prosecution.

Any of the following events can occur and, if any did occur, any one could have a material adverse effect on our business, financial conditions and results of operations:

• As mentioned earlier, clinical trials may not yield sufficiently conclusive results for regulatory agencies to approve the use of our products;

• There can be delays, sometimes long, in obtaining approval for our human-use devices, and indeed, we have experienced such delays in obtaining FDA approval of our clinical protocols;

• The rules and regulations governing human-use equipment such as ours can change during the review process, which can result in the need to spend time and money for further testing or review;

• If approval for commercialization is granted, it is possible the authorized use will be more limited than we believe is necessary for commercial success, or that approval may be conditioned on completion of further clinical trials or other activities; and

• Once granted, approval can be withdrawn, or limited, if previously unknown problems arise with our human-use product or data arising from its use.

We Could Be Substantially Damaged If Physicians And Hospitals Performing Our Clinical Trials Do Not Adhere To Protocols Defined In Clinical Trial Agreements. We work and have worked with a number of hospitals to perform clinical trials, primarily in the field of oncology. We depend on these hospitals to recruit patients for our trials, to perform the trials according to our protocols, and to report the results in a thorough, accurate and consistent manner. Although we have agreements with these hospitals which govern what each party is to do with respect to each protocol, patient safety, and avoidance of conflict of interest, there are risks that the terms of the contracts will not be followed, such as the following:

Possible Deviations from Protocol. The hospitals or the physicians working at the hospitals may not perform the trials correctly. Deviations from our protocol may make the clinical data not useful and the trial could become essentially worthless.

Potential for Conflict of Interest. Physicians working on protocols may have an improper economic interest in our company, or other conflict of interest. When a physician has a personal stake in the success of the trial, such as when a physician owns stock, or rights to purchase stock of the trial sponsor, it can create suspicion that the trial results were improperly influenced by the physician’s interest in economic gain. Not only can this put the clinical trial results at risk, but it can also cause serious damage to a company’s reputation.

Patient Safety and Consent Issues. Physicians and hospitals may fail to secure formal written consent as instructed or report adverse effects that arise during the trial in the proper manner, which could put patients at unnecessary risk. Physicians and hospital staff may fail to observe proper safety measures such as the mishandling of used medical needles, which may result in the transmission of infectious and deadly diseases, such as HIV. This increases our liability, affects the data, and can damage our reputation.

If any of these events were to occur, then it could have a material adverse effect on our ability to receive regulatory authorization to sell our human-use equipment, and on our reputation. Negative events that arise in the performance of clinical trials sponsored by biotechnology companies of our size and with limited cash reserves have resulted in companies going out of business. While these risks are always present, to date, our contracted physicians and clinics have been successful in collecting significant data regarding the clinical protocols under which they have operated, and we are unaware of any conflicts of interest or improprieties regarding our protocols.

Even If Our Products Are Approved By Regulatory Authorities, If We Fail To Comply With On-Going Regulatory Requirements, Or If We Experience Unanticipated Problems With Our Products, These Products Could Be Subject To Restrictions Or Withdrawal From The Market. Any product for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data and promotional activities for such product, will be subject to continual review and periodic inspections by the FDA and other regulatory bodies. Even if regulatory approval of a product is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to certain requirements resulting in costly post-marketing testing and surveillance to monitor the safety or efficacy of the product. Later discovery of previously unknown problems with our products, including unanticipated adverse events of unanticipated severity or frequency regarding manufacturer or manufacturing processes or failing to comply with regulatory requirements, may result in restrictions on such products or manufacturing processes, withdrawal of the products from the market, voluntary or mandatory recall, fines, suspension of regulatory approvals, product seizures or detention, injunctions or the imposition of civil or criminal penalties.

Failure To Comply With Foreign Regulatory Requirements Governing Human Clinical Trials And Marketing Approval For Our Human-Use Equipment Could Prevent Us From Selling Our Products In Foreign Markets, Which May Adversely Affect Our Operating Results And Financial Conditions. For the purposes of marketing our MedPulser^® Electroporation Therapy System outside the United States, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country and may require additional testing. The time required to obtain approvals outside the United States may differ from that required to obtain FDA approval. We may not obtain foreign regulatory approval on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other countries or by the FDA. Failure to comply with these regulatory requirements or to obtain required approvals could impair our ability to develop these markets and could have a material adverse affect on our results of operations and financial condition.

Our Ability To Achieve Significant Revenues From Sales Or Leases Of Human-Use Products Will Depend On Establishing Effective Sales, Marketing And Distribution Capabilities Or Relationships And We Currently Lack Substantial Experience In These Areas. To market our products, we will need to develop sales, marketing and distribution capabilities. In order to develop or otherwise obtain these capabilities, we may have to enter into marketing, distribution or other similar arrangements with third parties in order to sell, market and distribute our products successfully. To the extent that we enter into any such arrangements with third parties, our product revenue is likely to be lower than if we marketed and sold our products directly, and our revenues will depend upon the efforts of these third parties.

We have limited experience in sales, marketing and distribution of clinical and human-use products and we currently have no sales, marketing or distribution capability. If we decide to market and sell our human-use products directly, we must develop a marketing and sales capability. This would involve substantial costs, training and time. We may be unable to develop sufficient sales, marketing and distribution capabilities to commercialize our products successfully. Regardless of whether we elect to use third parties or seek to develop our own marketing capability, we may not be able to successfully commercialize any product.

We Rely On Collaborative And Licensing Relationships To Fund A Portion Of Our Research And Development Expenses. If We Are Unable To Maintain Or Expand Existing Relationships, Or Initiate New Relationships, We Will Have To Defer Or Curtail Research And Development Activities In One Or More Areas. Our partners and collaborators fund a portion of our research and development expenses and assist us in the research and development of our human-use equipment. These collaborations and partnerships help pay the salaries and other overhead expenses related to research. In the past, we have encountered operational difficulties after the termination of an agreement by a former partner. Because this partnership was terminated, we did not receive significant milestone payments which we had expected and were forced to delay some clinical trials as well as some product development.

Our oncology clinical trials to date have used our equipment together with the anti-cancer drug bleomycin. We do not currently intend to package bleomycin together with the equipment for sale, but if it should be necessary or desirable to do this, we would need a reliable source of the drug. At this time we do not have a reliable long-term source of bleomycin for inclusion with equipment or alone. If it becomes necessary or desirable to include bleomycin in our package, we would have to form a relationship with another provider of this generic drug before any product could be launched.

We also rely on scientific collaborators at companies and universities to further expand our research and to test our equipment. In most cases, we lend our equipment to a collaborator, teach him or her how to use it, and together design experiments to test the equipment in one of the collaborator’s fields of expertise. We aim to secure agreements that restrict collaborators’ rights to use the equipment outside of the agreed upon research, and outline the rights each of us will have in any results or inventions arising from the work.

Nevertheless, there is always potential that:

• Our equipment will be used in ways we did not authorize, which can lead to liability and unwanted competition;

• We may determine that technology has been improperly assigned to us or a collaborator may claim rights to certain of our technology, which may require us to pay license fees or milestone payments and, if commercial sales of the underlying product are achieved, royalties;

• We may lose rights to inventions made by our collaborators in the field of our business, which can lead to expensive litigation and unwanted competition;

• Our collaborators may not keep our confidential information to themselves, which can lead to loss of our right to seek patent protection and loss of trade secrets, and expensive litigation; and

• Collaborative associations can damage a company’s reputation if they fail and thus, by association or otherwise, the scientific or medical community may develop a negative view of us.

We cannot guarantee that any of the results from these collaborations will be successful. We also cannot be sure that we will be able to continue to collaborate with individuals and institutions that will further develop our products, or that we will be able to do so under terms that are not overly restrictive. If we are not able to maintain or develop new collaborative relationships, it is likely that our research pace will slow down and that it will take longer to identify and commercialize new products, or new indications for our existing products.

We Rely Heavily On Our Patents And Proprietary Rights To Attract Partnerships And Maintain Market Position. The strength of our patent portfolio is an important factor that will influence our success. Patents give the patent holder the right to prevent others from using its patented technology. If someone infringes upon the patented

material of a patent holder, the patent holder has the right to initiate legal proceedings against that person to protect its patented material. These proceedings, however, can be lengthy and costly. We perform an ongoing review of our patent portfolio to confirm that our key technologies are adequately protected. If we determine that any of our patents require either additional disclosures or revisions to existing information, we may ask that such patents be reexamined or reissued, as applicable, by the United States Patent and Trademark Office.

The patenting process, enforcement of issued patents, and defense against claims of infringement are inherently risky. Because we rely heavily on patent protection, we face the following significant risks:

Possibility of Inadequate Patent Protection for Product. The United States Patent and Trademark Office or foreign patent offices may not grant patents of meaningful scope based on the applications we have already filed and those we intend to file. If we do not have patents that adequately protect our human-use equipment and indications for its use, then we will not be competitive.

Potential That Important Patents Will Be Judged Invalid. Some of the issued patents we now own or license may be determined to be invalid. If we have to defend the validity of any of our patents, the costs of such defense could be substantial, and there is no guarantee of a successful outcome. In the event an important patent related to our drug delivery technology is found to be invalid, we may lose competitive position and may not be able to receive royalties for products covered in part or whole by that patent under license agreements.

Danger of Being Charged With Infringement. Although we are not currently aware of any parties intending to pursue infringement claims against us, there is the possibility that we may use a patented technology owned by another person and/or be charged with infringement. Defending or indemnifying a third party against a charge of infringement can involve lengthy and costly legal actions, and there can be no guarantee of a successful outcome. Biotechnology companies comparable to us in size and financial position have discontinued business after losing infringement battles. If we or our partners were prevented from using or selling our human-use equipment, then our business would be materially adversely affected.

Freedom to Operate Issues. We are aware that patents related to electrically-assisted drug delivery have been granted to, and patent applications have been filed by our potential competitors. We or our partners have received licenses from some of these patents, and will consider receiving additional licenses in the future. Nevertheless, the competitive nature of our field of business and the fact that others have sought patent protection for technologies similar to ours make these potential issues significant.

In addition to patents, we also rely on trade secrets and proprietary know-how. We try to protect this information with appropriate confidentiality and inventions agreements with our employees, scientific advisors, consultants, and collaborators. We cannot be sure that these agreements will not be breached, that we will be able to protect ourselves if they are breached, or that our trade secrets will not otherwise become known or be independently discovered by competitors. If any of these events occur, then we face the potential of losing control over valuable company information, which could negatively affect our competitive position.

If We Are Not Successful In Developing Our Current Products, Our Business Model May Change As Our Priorities And Opportunities Change And Our Business May Never Develop To Be Profitable Or Sustainable. There are many products and programs that seem promising to us which we could pursue. However, with limited resources, we may decide to change priorities and shift programs away from those that we have been pursuing for the purpose of exploiting our core technology of electroporation. The choices we make will be dependent upon numerous contemporaneous factors, some of which we cannot predict. We cannot be sure that our business model, as it currently exists or as it may evolve, will enable us to become profitable or to sustain operations.

Serious And Unexpected Side Effects Attributable To Gene Therapy May Result In Governmental Authorities Imposing Additional Regulatory Requirements Or A Negative Public Perception Of Our Products. The MedPulser^® DNA Electroporation Delivery Technology and any of our other gene therapy or DNA vaccine product candidates under development could be broadly described as gene therapies. A number of clinical trials are being conducted by other pharmaceutical companies involving gene therapy, including compounds similar to, or competitive with, our product candidates. The announcement of adverse results from these clinical trials, such as serious unwanted and unexpected side effects attributable to treatment, or any response by the FDA to such clinical trials, may impede the progress of our clinical trials, delay or prevent us from obtaining regulatory approval, or

negatively influence public perception of our product candidates, which could harm our business and results of operations and reduce the value of our stock.

The U.S. Senate has held hearings concerning the adequacy of regulatory oversight of gene therapy clinical trials, as well as the adequacy of research subject education and protection in clinical research in general, and to determine whether additional legislation is required to protect volunteers and patients who participate in such clinical trials. The Recombinant DNA Advisory Committee, or RAC, which acts as an advisory body to the National Institutes of Health, has expanded its public role in evaluating important public and ethical issues in gene therapy clinical trials. Implementation of any additional review and reporting procedures or other additional regulatory measures could increase the costs of or prolong our product development efforts or clinical trials.

As of September 30, 2007, to our knowledge, there have not been any serious adverse events in any gene therapy clinical trials in which our technology was used. In the future, if one or a series of serious adverse events were to occur during a gene therapy clinical trial in which our technology was used, we would report all such events to the FDA and other regulatory agencies as required by law. Such serious adverse events, whether treatment-related or not, could result in negative public perception of our treatments and require additional regulatory review or other measures, which could increase the cost of or prolong our gene therapy clinical trials or require us to halt our clinical trials altogether.

The FDA has not approved any gene therapy product or gene-induced product for sale in the United States. The commercial success of our products will depend in part on public acceptance of the use of gene therapy products or gene-induced products, which are a new type of disease treatment for the prevention or treatment of human diseases. Public attitudes may be influenced by claims that gene therapy products or gene-induced products are unsafe, and these treatment methodologies may not gain the acceptance of the public or the medical community. Negative public reaction to gene therapy products or gene-induced products could also result in greater government regulation and stricter clinical trial oversight.

There Is A Possibility That Our Technology Will Become Obsolete Or Lose Its Competitive Advantage. The drug delivery business is very competitive, fast moving and intense, and expected to be increasingly so in the future. Other companies and research institutions are developing drug delivery systems that, if not similar in type to our systems, are designed to address the same patient or subject population. Therefore, we cannot promise that our products will be the best, the safest, the first to market, or the most economical to manufacture and use. If competitors’ products are better than ours, for whatever reason, then we could become less profitable from product sales and our products could become obsolete.

There are many reasons why a competitor might be more successful than us, including:

Financial Resources. Some competitors have greater financial resources and can afford more technical and developmental setbacks than we can.

Greater Experience. Some competitors have been in the biomedical business longer than we have. They have greater experience than us in critical areas like clinical testing, obtaining regulatory approval and sales and marketing. This experience or their name recognition may give them a competitive advantage over us.

Superior Patent Position. Some competitors may have better patent protection over their technology than we have or will have in order to protect our technology. If we cannot use our patents to prevent others from copying our technology or developing similar technology, or if we cannot obtain a critical license to another’s patent that we need to manufacture and use our equipment, then we would expect our competitive position to weaken.

Faster to Market. Some companies with competitive technologies may move through stages of development, approval, and marketing faster than us. If a competitor receives FDA approval before us, then it will be authorized to sell its products before we can sell ours. Because the first company “to market” often has a significant advantage over others, a second place position could result in less than anticipated sales.

Reimbursement Allowed. In the U.S., third party payers, such as Medicare, may reimburse physicians and hospitals for competitors’ products but not for our own human-use products. This would significantly affect our ability to sell our human-use products in the U.S. and would have a negative impact on revenue and our business as

a whole. Outside of the U.S., reimbursement and funding policies vary widely.

Any Acquisition We Might Make May Be Costly And Difficult To Integrate, May Divert Management Resources Or Dilute Stockholder Value. We have considered and made strategic acquisitions in the past, including the acquisition of Inovio AS, and in the future, may acquire or invest in complementary companies, products or technologies. As part of our business strategy, we may acquire assets or businesses principally relating to or complementary to our current operations, and we have in the past evaluated and discussed such opportunities with interested parties. Any acquisitions we undertake will be accompanied by issues commonly encountered in business acquisitions, which could adversely affect us, including:

• Potential exposure to unknown liabilities of acquired companies;

• The difficulty and expense of assimilating the operations and personnel of acquired businesses;

• Diversion of management time and attention and other resources;

• Loss of key employees and customers as a result of changes in management;

• Incurrence of amortization expenses related to intangible assets or large impairment charges such as the charges in excess of $3.3 million we incurred in our 2005 results of operations related to the write-off of in-process research and development that we acquired in our acquisition of Inovio AS;

• Increased legal, accounting and other administrative costs associated with negotiation, documentation and reporting any such acquisition; and

• Possible dilution to our stockholders.

In addition, geography and/or language barriers may make the integration of businesses more difficult. We may not be successful in overcoming these risks or any other problems encountered in connection with any of our acquisitions.

Economic, Political, Military Or Other Events In The United States Or In Other Countries Could Interfere With Our Success Or Operations And Harm Our Business. The September 11, 2001 terrorist attacks disrupted commerce throughout the United States and other parts of the world. The continued threat of similar attacks throughout the world and the military action taken by the United States and other nations in Iraq or other countries may cause significant disruption to commerce throughout the world. To the extent that such disruptions further slow down the global economy, our business and results of operations could be materially adversely affected. We are unable to predict whether the threat of new attacks or the responses thereto will result in any long-term commercial disruptions or if such activities or responses will have a long-term material adverse effect on our business, results of operations or financial condition.

Our Dependence Upon Non-Marketed Products, Our Lack Of Experience In Manufacturing And Marketing Human-Use Products, And Our Continuing Deficit May Result In Even Further Fluctuations In Our Trading Volume And Share Price. Successful approval, marketing, and sales of our human-use equipment are critical to the financial future of our company. Our human-use products are not yet approved for sale in the United States and other jurisdictions and we may never obtain these approvals. Even if we do obtain approvals to sell our human-use products in the United States, these sales may not be as large or as timely as we expect. These uncertainties may cause our operating results to fluctuate dramatically in the next several years. We believe that quarter-to-quarter or annual comparisons of our operating results are not a good indicator of our future performance. Nevertheless, these fluctuations may cause us to perform below the expectations of public market analysts and investors. If this happens, the price of our common shares would likely decline.

We Have The Potential for Product Liability Issues With Human-Use Equipment. The testing, marketing and sale of human-use products expose us to significant and unpredictable risks of equipment product liability claims. These claims may arise from patients, clinical trial volunteers, consumers, physicians, hospitals, companies, institutions, researchers or others using, selling, or buying our equipment. Product liability risks are inherent in our business and will exist even after the products are approved for sale. If and when our human-use equipment is

commercialized, we run the risk that use (or misuse) of the equipment will result in personal injury. The chance of such an occurrence will increase after a product type is on the market.

We have obtained liability insurance in connection with our ongoing business and products, and we may purchase additional policies if such policies are determined by management to be necessary. However, our existing insurance and the insurance we purchase may not provide adequate coverage in the event a claim is made and we may be required to pay claims directly. If we did have to make payment against a claim, it would impact our financial ability to perform the research, development, and sales activities that we have planned.

If and when our human-use equipment is commercialized, there is always the risk of product defects. Product defects can lead to loss of future sales, decrease in market acceptance, damage to our brand or reputation, product returns and warranty costs, and even product withdrawal from the market. These events can occur whether the defect resides in a component we purchased from a third party or whether it was due to our design and/or manufacturer. We expect that our sales agreements will contain provisions designed to limit our exposure to product liability claims. However, we do not know whether these limitations will be enforceable in the countries in which the sale is made. Any product liability or other claim brought against us, if successful and of sufficient magnitude, could negatively impact our financial performance.

We Cannot Be Certain That We Will Be Able To Manufacture Our Human-Use Equipment In Sufficient Volumes At Commercially Reasonable Costs. Our manufacturing facilities for human-use products will be subject to quality systems regulations, international quality standards and other regulatory requirements, including pre-approval inspection for our human-use equipment and periodic post-approval inspections for all human-use products. While we have undergone and passed a quality systems audit from an international body, we have never undergone a quality systems inspection by the FDA. We may not be able to pass an FDA inspection when and if it occurs. If our facilities are found not to be compliant with FDA standards in sufficient time, prior to a launch of our product in the United States, then it will result in a delay or termination of our ability to produce our human-use equipment in our facility. Any delay in production will have a negative affect on our business. While there are no target dates set forth for launch of our products in the United States, we plan on launching these products once we successfully perform a Phase III clinical study, obtain the requisite regulatory approval, and engage a partner who has the financial resources and marketing capacity to bring our products to market.

Our products must be manufactured in sufficient commercial quantities, in compliance with regulatory requirements, and at an acceptable cost to be attractive to purchasers. We rely on third parties to manufacture and assemble most aspects of our equipment, and thus cannot directly control the quality, timing or quantities of equipment manufactured or assembled at any given time.

Disruption of the manufacture of our products, for whatever reason, could delay or interrupt our ability to manufacture or deliver our products to customers in a timely basis. This would be expected to affect revenue and may affect our long-term reputation, as well. In the event we provide product of inferior quality, we run the risk of product liability claims and warranty obligations, which will negatively affect our financial performance.

If We Lose Key Personnel Or Are Unable To Attract And Retain Additional, Highly Skilled Personnel Required To Develop Our Products Or Obtain New Collaborations, Our Business May Suffer. We depend, to a significant extent, on the efforts of our key employees, including senior management and senior scientific, clinical, regulatory and other personnel. The development of new therapeutic products requires expertise from a number of different disciplines, some of which is not widely available. We depend upon our scientific staff to discover new product candidates and to develop and conduct pre-clinical studies of those new potential products. Our clinical and regulatory staff is responsible for the design and execution of clinical trials in accordance with FDA requirements and for the advancement of our product candidates toward FDA approval. Our manufacturing staff is responsible for designing and conducting our manufacturing processes in accordance with the FDA’s Quality System Regulations. The quality and reputation of our scientific, clinical, regulatory and manufacturing staff, especially the senior staff, and their success in performing their responsibilities, are significant factors in attracting potential funding sources and collaborators. In addition, our Chief Executive Officer and Chief Financial Officer and other executive officers are involved in a broad range of critical activities, including providing strategic and operational guidance. The loss of these individuals, or our inability to retain or recruit other key management and scientific, clinical, regulatory, manufacturing and other personnel, may delay or prevent us from achieving our business objectives. We face intense competition for personnel from other companies, universities, public and private research institutions, government entities and other organizations.

We May Not Meet Environmental Guidelines And As A Result Could Be Subject To Civil And Criminal Penalties. Like all companies in our industry, we are subject to a variety of governmental regulations relating to the use, storage, discharge and disposal of hazardous substances. Our safety procedures for handling, storage and disposal of such materials are designed to comply with applicable laws and regulations. While we believe we are currently in compliance with all material applicable environmental regulations, if we are found to not comply with environmental regulations, or if we are involved with contamination or injury from these materials, then we may be subject to civil and criminal penalties. This would have a negative impact on our reputation and finances, and could result in a slowdown or even complete cessation of our business.

Our Facilities Are Located Near Known Earthquake Fault Zones, And The Occurrence Of An Earthquake Or Other Catastrophic Disaster Could Cause Damage To Our Facilities And Equipment. Our facilities are located near known earthquake fault zones and are vulnerable to damage from earthquakes. We are also vulnerable to damage from other types of disasters, including fire, floods, power loss, communications failures and similar events. If any disaster were to occur, our ability to operate our business at our facilities would be seriously impaired. In addition, the unique nature of our research activities could cause significant delays in our programs and make it difficult for us to recover from a disaster. The insurance we maintain may not be adequate to cover our losses resulting from disasters or other business interruptions. Accordingly, an earthquake or other disaster could materially and adversely harm our ability to conduct business.

Legislation Requiring Companies To Evaluate Internal Controls Under Section 404 Of The Sarbanes-Oxley Act Of 2002 Has Increased Our Expenses And Could Result In Events That Adversely Affect Our Stock Price. As directed by Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404), the Securities and Exchange Commission adopted rules requiring public companies to include a report of management on our internal control over financial reporting in our annual reports on Form 10-K that contains an assessment by management of the effectiveness of our internal control over financial reporting. In addition, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. This requirement first applied to our 2004 Annual Report on Form 10-K.

How companies are implementing these new requirements including internal control reforms, if any, to comply with Section 404’s requirements, and how independent auditors are applying these new requirements and testing companies’ internal controls, is an evolving process and remains subject to uncertainty. The requirements of Section 404 are ongoing and apply to future years. We expect that our internal controls will continue to evolve as our business activities change. During the course of management’s and our independent registered public accounting firm’s review of our internal control over financial reporting as of December 31, 2006, we did not identify any significant control deficiencies that rose to the level of material weaknesses, as defined by the Public Company Accounting Oversight Board (PCAOB). Although we will continue to diligently and vigorously review our internal control over financial reporting, in order to ensure compliance with the Section 404 requirements, any control system, regardless of how well designed, operated and evaluated, can provide only reasonable, not absolute, assurance that its objectives will be met.

If, during any year, our independent registered public accounting firm is not satisfied with our internal control over financial reporting or the level at which this control is documented, designed, operated, tested or assessed, or if the independent registered public accounting firm interprets the requirements, rules or regulations differently than we do, then our independent registered public accounting firm may decline to attest to the effectiveness of our internal control over financial reporting or may issue a report that is qualified. This could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our financial statements, which ultimately could negatively impact the market price of our stock.

Anti-Takeover Provisions In Our Charter Documents, Our Stockholder Rights Agreement And Delaware Law May Prevent Or Delay Removal Of Incumbent Management Or A Change Of Control. Anti-takeover provisions of our Certificate of Incorporation, as amended, our Amended and Restated Stockholders Rights Agreement and Delaware law may have the effect of deterring or delaying attempts by our stockholders to remove or replace management, engage in proxy contests and effect changes in control. The provisions of our charter documents include the ability of our board of directors to issue shares of preferred stock without approval of all our stockholders upon the terms and conditions and with the rights, privileges and preferences as our board of directors may determine.

The Rights issued pursuant to our Amended and Restated Stockholder Rights Agreement could become

exercisable, subject to certain exceptions, if a person or group announces acquisition of 20% or more of our common stock or announces commencement of a tender or exchange offer the consummation of which would result in ownership by the person or group of 20% or more of our common stock.

In addition, as a Delaware corporation, we are subject to Delaware law, including Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder unless certain specific requirements are met as set forth in Section 203.

These provisions, alone or together, could have the effect of deterring or delaying changes in incumbent management, proxy contests or changes in control.

Item 3. Quantitative and Qualitative Discloses About Market Risk

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to the increase or decrease in the amount of interest income that we can earn on our cash and cash equivalents and short-term investments. As of September 30, 2007, our short-term investments had an average interest rate of approximately 5.4%. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. We ensure the safety and preservation of our invested principal funds by limiting default risk, market risk and reinvestment risk. We mitigate default risk by investing in AAA investment grade securities. A hypothetical 100 basis point adverse shift in interest rates along the entire interest rate yield curve would not materially affect the fair value of our interest sensitive financial instruments. Declines in interest rates over time will, however, reduce our interest income.

Foreign Currency Risk

We have operated primarily in the United States and most transactions in the three and nine months ended September 30, 2007, have been made in U.S. dollars. Accordingly, we have not had any material exposure to foreign currency rate fluctuations, nor do we have any foreign currency hedging instruments in place.

We are currently conducting clinical trials in Europe in conjunction with several CRO’s. While invoices from these CRO’s relating to work done on our European clinical trials are generally denominated in U.S. dollars, our financial results could be affected by factors such as inflation in foreign currencies, in relation to the U.S. dollar, in markets where the CRO’s are assisting us in conducting these clinical trials.

The transactions related to our subsidiaries in Singapore and Norway are denominated primarily in foreign currencies, including Euros, British Pounds, Canadian Dollars, Norwegian Kroner, Swedish Krona, and Singaporean Dollars. Although to date the fluctuations in the applicable foreign currency exchange rates have not had a material impact on our condensed consolidated financial statements, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets where Inovio conducts business.

We do not use derivative financial instruments for speculative purposes. We do not engage in exchange rate hedging or hold or issue foreign exchange contracts for trading purposes. We do not expect the impact of fluctuations in the relative fair value of other currencies to be material in 2007.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, as appropriate to allow timely decisions regarding required disclosure.

Based on an evaluation carried out as of the end of the period covered by this quarterly report, under the supervision and with the participation of our management, including our CEO and CFO, our CEO and CFO have concluded that, as of the end of such period, our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of September 30, 2007.

Changes in Internal Control Over Financial Reporting

An evaluation was also performed under the supervision and with the participation of our management,

including our CEO and CFO, of any change in our internal control over financial reporting that occurred during our last fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There have not been any changes in our internal control over financial reporting (as defined in Rules 13a—15(f) and 15d—15(f) under the Securities Exchange Act of 1934) that occurred during the three and nine months ended September 30, 2007, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

Neither we nor any of our subsidiaries are involved in any material legal proceedings.

Item 1A. Risk Factors

You should carefully consider and evaluate all of the information in this quarterly report on Form 10-Q in combination with the more detailed description of our business in our annual report on Form 10-K for the year ended December 31, 2006, which we filed with the Securities and Exchange Commission on March 16, 2007, for a more complete understanding of the risks associated with an investment in our securities. There have been material changes in the Risk Factors as previously disclosed in our annual report on Form 10-K for the year ended December 31, 2006 and such changes are reflected immediately below. The following risk factors, as well those contained in our annual report on Form 10-K for the year ended December 31, 2006 and risk factors included elsewhere in this report are not the only risks that could potentially face our company. Additional issues not now known to us or that we may currently deem immaterial may also impair our ability to commercialize our technology and the therapies we believe are derivable therefrom resulting in our business outlook being compromised and the trading price of our common stock declining.

WE HAVE UNRESOLVED SECURITIES AND EXCHANGE COMMISSION STAFF COMMENTS ON OUR PREVIOUSLY FILED 2006 FORM 10-K

We received an original comment letter from the staff of the Securities and Exchange Commission (“SEC”) on September 17, 2007 and a subsequent comment letter on October 10, 2007 regarding our Form 10-K for the fiscal year ending December 31, 2006. We have unresolved comments in response to which we are continuing to provide the SEC with additional information. Should we be unsuccessful in resolving these comments with the SEC staff, we may be required to amend our Form 10-K for the fiscal year ending December 31, 2006, and this and prior interim reports on Form 10-Q.

SALES OF SUBSTANTIAL AMOUNTS OF OUR SHARES, OR EVEN THE AVAILABILITY OF OUR SHARES FOR SALE, IN THE OPEN MARKET COULD CAUSE THE MARKET PRICE OF OUR SHARES TO DECLINE.

Under our registration statement that the SEC declared effective on May 25, 2006, we have registered an aggregate of $75,000,000 of our equity securities that we may issue from time to time, in one or more offerings at prices and on terms that we will determine at the time of each offering. Under that registration statement, we have registered multiple kinds of our equity securities, including our common stock, preferred stock, warrants and a combination of these securities, or units. Through September 30, 2007, we have “taken-down” from our shelf registration statement, and issued and sold, an aggregate of 9,035,378 shares of our common stock valued at $26,899,119 and warrants to purchase up to 1,575,919 shares of our common stock valued at $4,324,276 and, if those warrants are fully exercised, we will have issued an additional 1,575,919 shares of our common stock under that shelf registration statement. In other words, the shares of common stock we have sold in offerings from our shelf registration statement as of the date of this report represent approximately 36% of the value of the aggregate equity securities from our shelf registration statement (42% if the warrants we have sold from our shelf registration statement are fully exercised). While that amount is a relatively small percentage of our outstanding shares of common stock as of September 30, 2007 (approximately 24%), future issuances and sales of our common stock or

securities exercisable for or convertible into our common stock pursuant to our existing shelf registration statement, if in substantial numbers, and even the availability for issuance of the securities registered under our shelf registration statement, could adversely affect the market price of our shares.

In addition to the shares and warrants we have issued from our shelf registration statement, within the first nine months of 2007 we have also issued 2,201,644 shares of our common stock and warrants to purchase up to 938,475 shares of our common stock in other recent offerings, as well as other restricted shares pursuant to consulting arrangements and other registered securities pursuant to our stock incentive plan. Sales of substantial amounts of our stock at any one time or from time to time by the investors to whom we have issued them, or even the availability of these shares for sale, could cause the market price of our common stock to decline.

IF WE ARE UNABLE TO DEVELOP COMMERCIALLY SUCCESSFUL PRODUCTS, INCLUDING OUR SELECTIVE ELECTROCHEMICAL TUMOR ABLATION (SECTA) THERAPY, IN VARIOUS MARKETS FOR MULTIPLE INDICATIONS, PARTICULARLY FOR THE TREATMENT OF HEAD & NECK AND SKIN CANCERS, OUR BUSINESS WILL BE HARMED AND WE MAY BE FORCED TO CURTAIL OR CEASE OPERATIONS.

Our Selective Electrochemical Tumor Ablation (SECTA) therapy uses bleomycin sulfate delivered intratumorally using our proprietary MedPulser^® electroporation system. Our ability to achieve and sustain operating profitability depends on our ability, directly or with strategic partners, to successfully commercialize our SECTA therapy in Europe and in the US for use in treating solid tumors, particularly for the treatment of head and neck cancer, and other indications. This will depend in large part on our ability to commence, execute and complete clinical programs and obtain regulatory approvals for our SECTA therapy. While we have received various regulatory approvals in Europe for use of SECTA in treating solid tumors, the products related to such regulatory approval have not yet been commercialized. The FDA has been notified that most of our study population will be from non-English speaking sites in Eastern Europe whose outcome data may be considered to be unlike the United States, Canada and Western Europe. Further clinical trials are still necessary before we can seek regulatory approval to sell our products in the United States for treating solid tumors. We cannot assure you that we will receive approval for our SECTA therapy for the treatment of head and neck cancer or other types of cancer or indications in the United States or in other countries or, if approved, that we or a partner will achieve a significant level of sales. If we fail to partner or commercialize our products, we may be forced to curtail or cease operations.

We have completed additional clinical studies of SECTA in different indications, such as our Phase I/II breast cancer, and are also in the pre-clinical stages of research and development with other new product candidates using our electroporation technology. These new indications and product candidates will require significant costs to advance through the development stages. Even if such product candidates are advanced through clinical trials, the results of such trials may not gain FDA approval. Even if approved, our products may not be commercially successful.

We cannot assure you that we will successfully develop any products. If we fail to develop or successfully commercialize any products, we may be forced to curtail or cease operations. Additionally, much of the commercialization efforts for our products must be carried forward by a licensing partner. To date our business plan for the SECTA therapy has been focused on generating a set of clinical data across multiple indications to aid in securing a marketing and sales partner and further characterize the therapy’s clinical benefits, cost savings, and profit potential necessary to make this product viable and attractive to a partner to take it to the marketplace. Management’s primary goal for SECTA is to secure an industry partner capable of launching the SECTA product, with the European market the initial priority. Although discussions with multiple partner candidates are in progress, we may not be able to obtain such a partner. In an alternative approach, we will consider an agreement with a financial partner pursuant to which we would contemplate creating an operating entity, to be funded and staffed independently of Inovio, with a mandate and certain resources to commercialize SECTA, which would allow us to retain ownership in the entity but minimize Inovio’s ongoing capital obligations for the commercialization efforts. Our management intends to work diligently in an effort to secure a suitable partnership deal to advance commercialization of the SECTA therapy.

PRE-CLINICAL AND CLINICAL TRIALS OF HUMAN-USE EQUIPMENT ARE UNPREDICTABLE, AND IF WE EXPERIENCE UNSUCCESSFUL TRIAL RESULTS, OUR BUSINESS WILL SUFFER.

Before any of our human-use equipment can be sold, the FDA or applicable foreign regulatory authorities

must determine that the equipment meets specified criteria for use in the indications for which approval is requested, including obtaining appropriate regulatory approvals. Satisfaction of regulatory requirements typically takes many years, and involves compliance with requirements covering research and development, testing, manufacturing, quality control, labeling and promotion of drugs for human use. To obtain regulatory approvals, we must, among other requirements, complete clinical trials demonstrating that our product candidates are safe and effective for a particular cancer type or other disease. Regulatory approval of a new drug is never guaranteed. The FDA will make this determination based on the results from our pre-clinical testing and clinical trials and has substantial discretion in the approval process. Despite the time and experience exerted, failure can occur at any stage, and we could encounter problems causing us to abandon clinical trials.

The intended purpose of our SECTA therapy is to provide treated patients with quality of life benefits compared to the use of surgery, with equivalency in terms of local tumor control and survival. Our multiple clinical studies in several different cancer indications seek evidence reflecting this intended purpose. We have now completed enrollment of 13 patients in the FDA-approved Phase I/II clinical study of recurrent breast cancer patients. We have also completed enrollment of 92 patients in a European pre-marketing study of head and neck cancer patients. We are also enrolling patients in a European pre-marketing study of patients with skin cancer. The protocol allows for up to 100 patients to be treated. For the benefit of concurrently analyzing data from multiple clinical studies and additional strategic reasons such as partnering, the company may decide to stop enrollment prior to enrolling 100 patients to expedite analysis of the data in this open label trial. Each cancer indication is the subject of a separate clinical development program owing to the unique and different clinical and biological attributes of each type of cancer the company is evaluating. We have also completed Phase II clinical trials for the treatment of recurrent and second primary head and neck cancers.

However, current or future clinical trials may demonstrate the SECTA therapy is neither safe nor effective, and some clinical trials planned or in progress may not be completed as we initially intended. On June 5, 2007, we announced that we had stopped enrollment of patients in Phase III clinical studies designed to evaluate the use of our SECTA therapy as a treatment for resectable recurrent and second primary squamous cell carcinomas of the head and neck (SCCHN), based on a recommendation from the trial’s independent data monitoring committee (DMC). The studies were accruing North American and European patients with tumors in the anterior and posterior areas of the oral cavity. The primary endpoint of these two Phase III trials was preservation of function status at four and eight months as measured by the Performance Status Scale (which assesses the ability of a patient to eat “normal” foods, speak understandably, and eat in public). The DMC expressed concern about efficacy and serious adverse events, including higher mortality rates on the SECTA arm of the study than on the surgery arm. In the DMC’s opinion, although no single parameter was sufficient to warrant recommending a review of the trial, the totality of data for the recurrent head and neck cancer study suggested an unfavorable benefit-to-risk profile for the SECTA arm relative to the surgery arm. The DMC also noted that slow enrollment presented a possible challenge in meeting the patient enrollment goals of each of these two trials, but that, if timely enrollment could allow reaching the target of 400 patients in the combined trials, this would provide enhanced insights regarding the benefit-to-risk profile of the SECTA treatment. Without conducting further analysis, we stopped enrollment to allow the company to conduct its own interim analysis of the unaudited and unblinded data on the 212 patients enrolled to date.

We currently have five ongoing clinical studies of our SECTA therapy in patients with head and neck, cutaneous/subcutaneous, and breast cancer. In each study, patients are potentially at a high risk of morbidity complications and mortality due to the nature and late stage of their disease. The following serious adverse events (SAEs) were related to treatment with our SECTA therapy have been reported during these clinical studies: sudden death (suspected heart attack), sudden death (suspected internal bleeding), sudden death (unknown cause), hemorrhage, obstruction of the airway (pharynx/nasopharynx), edema, pain, weight loss (anorexia) and carotid artery injury. The parties conducting these studies need to carefully manage such safety issues as bleeding is a potential SAE that can occur anytime until the wound is healed. Because our studies are controlled and ongoing, and thus we do not have full access to the developing clinical data from such studies, we cannot assure you that these or other SAEs will not disrupt or otherwise delay or prevent the completion of such studies or the approval of our product by the FDA.

In addition, any of our clinical trials for treatment using our SECTA therapy may be delayed or halted at any time for various other reasons, including:

• The electroporation-mediated delivery of drugs or other agents may be found to be ineffective or be considered to cause harmful side effects, including death;

• Our clinical trials may take longer than anticipated for any of a number of reasons, including a scarcity of subjects that meet the physiological or pathological criteria for entry into the study and a scarcity of subjects that are willing to participate through the end of the trial, or follow-up visits;

• The reported clinical data may change over time as a result of the continuing evaluation of patients or the current assembly and review of existing clinical and pre-clinical information;

• Data from various sites participating in the clinical trials may be incomplete or unreliable, which could result in the need to repeat the trial or abandon the project; and

• Pre-clinical and clinical data can be interpreted in many different ways, and the FDA and other regulatory authorities may interpret our data differently than we do, which could halt or delay our clinical trials or prevent regulatory approval.

If any of the above events arise during our clinical trials or data review, we would expect this to have a serious negative impact on our company. Any termination of ongoing enrollment or other delay or change in the conduct of our clinical trials may not always be understood or accepted by the capital markets and announcements of such scientific results and related actions may adversely affect the market price of our common stock.

Any delays or difficulties we have encountered or will encounter in our pre-clinical research and clinical trials, in particular the Phase III clinical trials of our SECTA therapy for the treatment of recurrent head and neck cancer, may delay or preclude regulatory approval. Our product development costs will increase if we experience delays in testing or regulatory approvals or if we need to perform more extensive or larger clinical trials than planned. Any such events could also delay or preclude the commercialization of our SECTA therapy or any other product candidates.

Clinical trials are unpredictable, especially human-use trials. Results achieved in early stage clinical trials may not be repeated in later stage trials, or in trials with more patients. When early positive results were not repeated in later stage trials, pharmaceutical and biotechnology companies have suffered significant setbacks. Not only are commercialization timelines pushed back, but some companies, particularly smaller biotechnology companies with limited cash reserves, have discontinued business after releasing news of unsuccessful clinical trial results. We cannot be certain the results we observed in our pre-clinical testing will be confirmed in clinical trials or the results of any of our clinical trials will support FDA approval. If we experience unexpected, inconsistent or disappointing results in connection with a clinical or pre-clinical trial our business will suffer.

Despite the FDA’s designation of our SECTA therapy as a Fast Track product, such FDA designation is independent of the FDA’s Priority Review and Accelerated Approval designations and we may encounter delays in the regulatory approval process due to additional information requirements from the FDA, unintentional omissions from our PMA for our SECTA therapy, or other delays in the FDA’s review process. We may encounter delays or rejections in the regulatory approval process because of additional government regulation from future legislation or administrative action or changes in FDA policy during the period of product development, clinical trials and FDA regulatory review.

A majority of our operating expenses relate to our clinical trials. A delay in our clinical trials, for whatever reason, will probably require us to spend additional funds to keep our product(s) moving through the regulatory process. If we do not have or cannot raise additional funds, then the testing of our human-use products could be discontinued. In the event our clinical trials are not successful, we will have to determine whether to continue to fund our programs to address the deficiencies, or whether to abandon our clinical development programs for our products in tested indications. Loss of our human-use product line would be a significant setback for our company.

Because there are so many variables inherent in clinical trials, we cannot predict whether any of our future regulatory applications to conduct clinical trials will be approved by the FDA or other regulatory authorities, whether our clinical trials will commence or proceed as planned, and whether the trials will ultimately be deemed to be successful. To date, our experience has been that submission and approval of clinical protocols has taken longer than desired or expected.

WE CANNOT PREDICT THE SAFETY PROFILE OF THE USE OF OUR MEDPULSER^®ELECTROPORATION THERAPY SYSTEM WHEN USED IN COMBINATION WITH OTHER THERAPIES.

Our current oncology trials involve the use of our SECTA therapy which consists of our MedPulser^®electroporation therapy system in combination with bleomycin sulfate, an anti-cancer drug. While the data we have evaluated to date suggest the SECTA therapy does not increase the adverse effects of other therapies, we cannot predict if this outcome will continue to be true or whether possible adverse side effects directly attributable to other drugs will compromise the safety profile of our SECTA therapy when used in certain combination therapies or if used off-label with other drugs by physicians.

WE HAVE A HISTORY OF LOSSES, WE EXPECT TO CONTINUE TO INCUR LOSSES AND WE MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY

As of September 30, 2007, we had an accumulated deficit of $141,939,420. We have operated at a loss since 1994, and we expect this to continue for some time. The amount of the accumulated deficit will continue to increase, as it will be expensive to continue clinical, research and development efforts. If these activities are successful and if we receive approval from the FDA to market equipment, then even more funding will be required to market and sell the equipment. The outcome of these matters cannot be predicted at this time. We are evaluating potential partnerships as an additional way to fund operations, but there is no assurance we will be able to secure partnerships that will provide the required funding, if at all. We will continue to rely on outside sources of financing to meet our capital needs beyond next year, however such funds may not always be readily available when needed.

Further, there can be no assurance, assuming we successfully raise additional funds, that we will achieve positive cash flow. If we are not able to secure additional funding, we will be required to further scale back our research and development programs, preclinical studies and clinical trials, general, and administrative activities and may not be able to continue in business. Including the cash proceeds received from financings, various licensing payments, the exercise of employee stock options and investor warrants, we believe we have sufficient funds to fund operations into the fourth quarter of 2009.

OUR ABILITY TO UTILIZE OUR NET OPERATING LOSSES AND CERTAIN OTHER TAX ATTRIBUTES MAY BE LIMITED.

As disclosed in our annual report on Form 10-K for the 2006 fiscal year, we have significant net operating loss (NOL) carryforwards for both federal and state income tax purposes. We also have federal research tax carryforwards which begin to expire at the end of 2007 unless previously utilized. Under Section 382 of the Internal Revenue Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOLs, research tax credit carryforwards and other pre-change tax attributes to offset its post-change income may be limited. An ownership change is generally defined as a greater than 50% change in its equity ownership by value over a three-year period. We believe that there are built-in gains inherent in the value of our assets that, when recognized, may increase this annual limitation during the five-year period from the date of an ownership change. We are currently assessing the extent of these built-in gains. Any limitation on our net operating loss carryforwards that could be used to offset post-ownership change in taxable income would adversely affect our liquidity and cash flow, as and when we become profitable.

A SMALL NUMBER OF LICENSING PARTNERS ACCOUNT FOR A SUBSTANTIAL PORTION OF OUR REVENUE IN EACH PERIOD AND OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION COULD SUFFER IF WE LOSE THESE LICENSING PARTNERS OR FAIL TO ADD ADDITIONAL LICENSING PARTNERS IN THE FUTURE.

We derive a significant portion of our revenue from a limited number of licensing partners in each period. Accordingly, if we fail to sign additional future contracts with major licensing partners, if a licensing contract is delayed or deferred, or if an existing licensing contract expires or is cancelled and we fail to replace the contract with new business, our revenue could be adversely affected. Until commercialization of our Medpulser^® Electroporation Therapy System, we expect that a limited number of licensing partners will continue to account for a substantial portion of our revenue in each quarter in the foreseeable future. During the three and nine months ended September 30, 2007, one licensing partner, Merck, accounted for approximately 55% and 69%, respectively, of our consolidated revenue and another licensing partner, Wyeth, accounted for 15% of our consolidated revenue. During the three and nine months ended September 30, 2006, Merck accounted for approximately 69% and 62%, respectively, of our consolidated revenue.

IF WE CANNOT MAINTAIN OUR EXISTING CORPORATE AND ACADEMIC ARRANGEMENTS AND ENTER INTO NEW ARRANGEMENTS, WE MAY BE UNABLE TO DEVELOP PRODUCTS EFFECTIVELY, OR AT ALL.

Our strategy for the research, development and commercialization of our product candidates may result in us entering into contractual arrangements with corporate collaborators, academic institutions and others. We have entered into sponsored research, license and/or collaborative arrangements with several entities, including Merck, Wyeth, Vical, Valentis, the U.S. Navy, Chiron and the University of South Florida, as well as numerous other institutions that conduct clinical trials work or perform pre-clinical research for us. Our success depends upon our collaborative partners performing their responsibilities under these arrangements and complying with the regulations and requirements governing clinical trials. We cannot control the amount and timing of resources our collaborative partners devote to our research and testing programs or product candidates, or their compliance with regulatory requirements which can vary because of factors unrelated to such programs or product candidates. These relationships may in some cases be terminated at the discretion of our collaborative partners with only limited notice to us.

Merck can terminate its May 2004 license and collaboration agreement with us at any time in its sole discretion, without cause, by giving ninety days’ advance notice to us. If this agreement is terminated by Merck at any time during the first two years of the collaboration term, then Merck shall continue, for a six-month period beginning on the date of such termination, to make payments previously approved by the project’s joint collaboration committee in relation to scientists and outside contractors engaged by us in connection with the agreement. During the three and nine months ended September 30, 2007, Merck accounted for approximately 55% and 69%, respectively, of our consolidated revenue. During the three and nine months ended September 30, 2006, Merck accounted for approximately 69% and 62%, respectively, of our consolidated revenue.

We may not be able to maintain our existing arrangements, enter into new arrangements or negotiate current or new arrangements on acceptable terms, if at all. Some of our collaborative partners may also be researching competing technologies independently from us to treat the diseases targeted by our collaborative programs.

CHANGES IN FOREIGN EXCHANGE RATES MAY AFFECT OUR FUTURE OPERATING RESULTS.

In January 2005, we acquired Inovio AS, a Norwegian company. During the three and nine months ended September 30, 2007, Inovio AS contributed approximately $86,154 and $89,722 to our revenue, respectively, which amounted to approximately 18% and 6% of our total revenue. Inovio AS conducts its operations primarily in foreign currencies, including the Euro, Norwegian Kroner and Swedish Krona. In September 2006, we established Inovio Asia Pte. Ltd., a company incorporated in the Republic of Singapore, which conducts its operations primarily in Singaporean dollars. Fluctuation in the values of these foreign currencies relative to the U.S. dollar will affect our financial results which are reported in U.S. dollars and will cause U.S. dollar translation of such currencies to vary from one period to another. We cannot predict the scope of any fluctuations in the values of these foreign currencies relative to the U.S. dollar nor the effect of exchange rate fluctuations upon our future operating results.

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Default Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

(a) Exhibits

Exhibit Number		Description of Document

31.1		Certification of Chief Executive Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

INOVIO BIOMEDICAL CORPORATION

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Inovio Biomedical Corporation


Date: November 8, 2007	By:	/s/ Peter Kies
		Peter Kies
		Authorized Officer and Chief Financial
		Officer