We own or have the rights to use various trademarks, trade names or service marks, including BioSante^®, BioVant™, NanoVant™, CAP-Oral™, BioAir™, Bio-E-Gel™, Bio-E/P-Gel™, LibiGel™, LibiGel-E/T™ and Bio-T-Gel™. This report also contains trademarks, trade names and service marks that are owned by other persons or entities.

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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BIOSANTE PHARMACEUTICALS, INC.
(a development stage company)
Balance Sheets
March 31, 2005 and December 31, 2004 (Unaudited)
			March 31,			December 31,
			2005			2004
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	56,180		$	1,170,025
Short-term Investments			14,692,902			16,098,663
Prepaid expenses and other sundry assets			204,726			309,585
			14,953,808			17,578,273
PROPERTY AND EQUIPMENT, NET			251,997			249,088
		$	15,205,805		$	17,827,361
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable		$	1,053,039		$	1,169,037
Accrued compensation			506,025			531,882
Other accrued expenses			247,835			202,086
Due to Antares			3,750			3,750
			1,810,649			1,906,755
COMMITMENTS
STOCKHOLDERS' EQUITY
Capital Stock Issued and Outstanding
391,286 (2004 - 391,286) Class C Special Stock			398			398
18,992,800 (2004 - 18,955,181) Common Stock			56,612,619			56,455,451
			56,613,017			56,455,849
Deferred unearned compensation			(410,084	)		(497,959	)
Deficit accumulated during the development stage			(42,807,777	)		(40,037,284	)
			13,395,156			15,920,606
		$	15,205,805		$	17,827,361
See accompanying notes to the financial statements.

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ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
BIOSANTE PHARMACEUTICALS, INC.
(a development stage company)
Statements of Operations
Three months ended March 31, 2005 and 2004 and the cumulative
period from August 29, 1996 (date of incorporation) to March 31, 2005
(Unaudited)
									Cumulative
									period from
									August 29, 1996
									(date of
			Three Months Ended March 31,						incorporation) to
			2005			2004			March 31, 2005
REVENUE
Licensing income		$	-		$	-		$	4,592,943
Grant income			28,677			7,316			96,563
			28,677			7,316			4,689,506
EXPENSES
Research and development			2,151,679			1,456,523			26,218,672
General and administration			720,495			1,000,011			16,002,241
Depreciation and amortization			24,943			23,283			786,306
Loss on disposal of capital assets			-			-			157,545
Costs of acquisition of Structured Biologicals Inc.			-			-			375,219
Purchased in-process research and development			-			-			5,377,000
			2,897,117			2,479,817			48,916,983
OTHER - Interest income			97,947			27,270			1,419,700
NET LOSS		$	(2,770,493	)	$	(2,445,231	)	$	(42,807,777	)
BASIC AND DILUTED NET LOSS PER SHARE		$	(0.14	)	$	(0.17	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING			19,374,775			14,387,175
See accompanying notes to the financial statements.

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ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
BIOSANTE PHARMACEUTICALS, INC.
(a development stage company)
Statements of Cash Flows
Three months ended March 31, 2005 and 2004 and the cumulative
period from August 29, 1996 (date of incorporation) to March 31, 2005
(Unaudited)
									Cummulative
									period from
									August 29,1996
									(date of
									incorporation) to
			Three Months Ended March 31,						March 31,
			2005			2004			2005
CASH FLOWS USED IN OPERATING ACTIVITIES
Net loss		$	(2,770,493	)	$	(2,445,231	)	$	(42,807,777	)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization			24,943			23,283			786,306
Amortization of deferred unearned compensation			-			-			42,290
Repurchase of licensing rights			-			-			125,000
Employee & director compensation - noncash			87,875			293,916			1,004,416
Purchased in-process research and development			-			-			5,377,000
Loss on disposal of equipment			-			-			157,545
Changes in other assets and liabilities
affecting cash flows from operations
Prepaid expenses and other sundry assets			104,859			29,533			(201,758	)
Accounts payable and accrued expenses			(96,106	)		240,341			1,112,258
Due to licensor (Antares/Regents)			-			25,000			3,750
Due from SBI			-			-			(128,328	)
Net cash used in operating activities			(2,648,922	)		(1,833,158	)		(34,529,298	)
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of short term investments, net			1,405,761			-			(14,692,902	)
Purchase of capital assets			(27,852	)		(30,321	)		(1,161,738	)
Net cash provided by (used in) investing activities			1,377,909			(30,321	)		(15,854,640	)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Issuance of convertible debenture			-			-			500,000
Proceeds from sales or conversion of shares			157,168			991,605			49,940,118
Net cash provided by financing activities			157,168			991,605			50,440,118
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS			(1,113,845	)		(871,874	)		56,180
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD			1,170,025			9,134,327			-
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	56,180		$	8,262,453		$	56,180
SUPPLEMENTAL SCHEDULE OF
CASH FLOW INFORMATION
Acquisition of SBI
Purchased in-process research and development		$	-		$	-		$	5,377,000
Other net liabilities assumed			-			-			(831,437	)
						-			4,545,563
Less: common stock issued therefor			-			-			4,545,563
		$	-		$	-		$	-
Income tax paid		$	-		$	-		$	-
Interest paid		$	-		$	630		$	3,421
SIGNIFICANT NON-CASH TRANSACTIONS
Fair value of common stock warrants issued in connection
with the sale of capital stock		$	-		$	-		$	1,053,423
See accompanying notes to the financial statements.

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1.	INTERIM FINANCIAL INFORMATION

2.	BASIC AND DILUTED NET LOSS PER SHARE

3.	LICENSE AGREEMENTS

4.	COMMITMENTS

·	Payment of royalties to the University based on a percentage of the net sales of any products incorporating the licensed technology;

·	Payment of minimum annual royalties to be paid by February 28 of the following year in the amounts set forth below, to be credited against any earned royalties, for the life of the agreement;

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·	Development of products incorporating the licensed technology until a product is introduced to the market;

·	Payment of the costs of patent prosecution and maintenance of the patents included in the agreement, which for the three months ended March 31, 2005 and 2004 amounted to $210 and $124, respectively;

·	Meeting performance milestones relating to:

o	Hiring or contracting with personnel to perform research and development, regulatory and other activities relating to the commercial launch of a proposed product;

o	Testing proposed products and obtaining government approvals;

o	Conducting clinical trials; and

o	Introducing products incorporating the licensed technology into the market; and

·

Indemnifying, holding harmless and defending the University of California and its affiliates, as designated in the license agreement, against any and all claims, suits, losses, damage, costs, fees and expenses resulting from or arising out of the license agreement, including but not limited to, any product liability claims. The Company has not recorded any liability related to this obligation as to the Company’s knowledge no events have occurred that would require indemnification.

5.	STOCK-BASED COMPENSATION

6.	STOCKHOLDERS’ EQUITY

7.	SUBSEQUENT EVENTS

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·	the timing and cost of product development;

·	the progress and cost of preclinical and clinical development programs;

·	the costs of licensure or acquisition of new products;

·	the timing and cost of making necessary regulatory filings and obtaining approvals;

·	the timing and cost of obtaining third party reimbursement; and

·	the cost of sales and marketing activities.

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Our cash, cash equivalents and short-term investments available to fund current operations were $14,749,082 and $17,268,688 at March 31, 2005 and December 31, 2004, respectively. We expect our cash balance to decrease as we continue to use cash to fund our operations. We do not have any debt for borrowed money.

 

We currently do not have sufficient resources to complete the commercialization of any of our proposed products. Based on our current cash balance and commitments, we believe we should be able to maintain our current planned development activities and the corresponding level of expenditures through at least the next twelve months, although no assurance can be given that we will not need additional cash prior to such time. Our future capital requirements will depend upon numerous factors, including:

 

·	the progress and costs of our research and development programs;

 

·	the scope, timing and results of our clinical trials;

 

·	patient recruitment and enrollment in our current and future clinical trials;

 

·	the cost, timing and outcome of regulatory reviews;

 

·	the rate of technological advances;

 

·	ongoing determinations of the potential commercial success of our proposed products;

 

·	our general and administrative expenses, and if we receive FDA approval of any of our proposed products, the amount of resources we devote to sales and marketing capabilities;

 

·	the activities of our competitors; and

 

·	our opportunities to acquire new products or take advantage of other unanticipated opportunities.

 

If we raise additional funds through the issuance of equity securities, our stockholders may experience dilution, which could be significant. Furthermore, additional financing may not be available when needed or, if available, financing may not be on terms favorable to us or our stockholders. If financing is not available when required or is not available on acceptable terms, we may be required to delay, scale back or eliminate some or all of our programs designed to facilitate the development of our proposed products, commercial introduction of our products or restrict us from acquiring new products that we believe may be beneficial to our business.

 

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Uses of Cash and Cash Flow

 

·	research and development programs;

·	pre-clinical studies and clinical trials;

·	regulatory processes;

·	establishment of our own marketing capabilities or a search for third party sales and marketing partners to sell and market our products for us; and

·	the licensure or acquisition of new products.

·	progress, timing and scope of our research and development programs;

·	progress, timing and scope of our pre-clinical studies and clinical trials;

·	time and cost necessary to obtain regulatory approvals;

·	time and cost necessary to establish our own sales and marketing capabilities or to seek marketing partners to market our products for us;

·	time and cost necessary to respond to technological and market developments;

·	changes made or new developments in our existing collaborative, licensing and other commercial relationships; and

·	new collaborative, licensing and other commercial relationships that we may establish.

·	enter into additional leases for new facilities and capital equipment;

·	enter into additional licenses and collaborative agreements; and

·	incur additional expenses associated with being a public company.

·	the timing of the commencement and completion of our clinical trials and other regulatory status of our proposed products;

·	our spending capital on research and development programs, pre-clinical studies and clinical trials, regulatory processes, establishment of marketing capabilities and licensure or acquisition of new products;

·	our existing cash and whether and how long these funds will be sufficient to fund our operations;

·	our need and ability to raise additional capital through future equity and other financings; and

·	our substantial and continuing losses.

·	the timing and cost of product development;

·	the progress and cost of preclinical and clinical development programs;

·	the costs of licensure or acquisition of new products;

·	the timing and cost of obtaining necessary regulatory approvals;

·	the timing and cost of obtaining third party reimbursement; and

·	the timing and cost of sales and marketing activities.