10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2008.

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 number:  0-27718

NEOSE TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	13-3549286
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
102 Rock Road Horsham, Pennsylvania	19044
(Address of principal executive offices)	(Zip Code)

(215) 315-9000

(Registrant’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, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  o	Accelerated filer  x	Non-accelerated filer  o	Smaller reporting company  o
		(Do not check if a smaller reporting company)

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  54,468,181 shares of common stock, $.01 par value, were outstanding as of May 5, 2008.

NEOSE TECHNOLOGIES, INC.

INDEX

			Page
PART I.		FINANCIAL INFORMATION:
	Item 1.	Financial Statements (unaudited)
		Balance Sheets as of March 31, 2008 and December 31, 2007	3
		Statements of Operations for the three months ended March 31, 2008 and 2007	4
		Statements of Cash Flows for the three months ended March 31, 2008 and 2007	5
		Notes to Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
	Item 4.	Controls and Procedures	33
PART II.		OTHER INFORMATION:
	Item 6.	Exhibits	34
SIGNATURES			35

2

PART I. FINANCIAL INFORMATION

Item 1.           Financial Statements

Neose Technologies, Inc

Balance Sheets

(unaudited)

(in thousands, except per share amounts)

	March 31,  2008			December 31,  2007
Assets
Current assets:
Cash and cash equivalents	$	15,954		$	19,282
Accounts receivable, net	1,983			1,758
Prepaid expenses and other current assets	868			1,564
Total current assets	18,805			22,604
Property and equipment, net	13,166			13,564
Other assets	71			71
Total assets	$	32,042		$	36,239
Liabilities and Stockholders’ Equity
Current liabilities:
Note payable	$	338		$	—
Current portion of long-term debt and capital lease obligations	380			658
Accounts payable	896			1,309
Accrued compensation	606			872
Accrued expenses	3,552			2,977
Deferred revenue	1,379			1,517
Total current liabilities	7,151			7,333
Warrant liability	410			4,205
Long-term debt and capital lease obligations	162			182
Deferred revenue	7,107			5,055
Other liabilities	556			548
Total liabilities	15,386			17,323
Stockholders’ equity:
Preferred stock, par value $.01 per share, 5,000 shares authorized, none issued	—			—
Common stock, par value $.01 per share, 150,000 shares authorized; 54,468 shares issued and outstanding	545			545
Additional paid-in capital	313,312			313,216
Accumulated deficit	(297,201		)	(294,845		)
Total stockholders’ equity	16,656			18,916
Total liabilities and stockholders’ equity	$	32,042		$	36,239

The accompanying notes are an integral part of these financial statements.

3

Neose Technologies, Inc.

Statements of Operations

(unaudited)

(in thousands, except per share amounts)

	Three months ended  March 31,
	2008			2007
Revenue from collaborative agreements	$	4,112		$	1,237
Operating expenses:
Research and development	7,761			9,812
General and administrative	2,950			2,965
Total operating expenses	10,711			12,777
Operating loss	(6,599		)	(11,540		)
Decrease (increase) in fair value of warrant liability	3,795			(6,350		)
Interest income	162			272
Interest expense	(17		)	(40		)
Loss before income tax benefit	(2,659		)	(17,658		)
Income tax benefit	303			—
Net loss	$	(2,356	)	$	(17,658	)
Basic and diluted net loss per share	$	(0.04	)	$	(0.47	)
Weighted-average shares outstanding used in computing basic and diluted net loss per share	54,468			37,493

The accompanying notes are an integral part of these financial statements.

4

Neose Technologies, Inc.

Statements of Cash Flows

(unaudited)

(in thousands)

	Three months ended  March 31,
	2008			2007
Cash flows from operating activities:
Net loss	$	(2,356	)	$	(17,658	)
Adjustments to reconcile net loss to net cash used in operating activities:
(Decrease) increase in fair value of warrant liability	(3,795		)	6,350
Depreciation and amortization expense	416			580
Non-cash compensation expense	96			466
Non-cash rent expense	—			130
Loss on disposition of property and equipment	4			3
Changes in operating assets and liabilities:
Accounts receivable	(225		)	(460		)
Prepaid expenses and other current assets	696			(259		)
Other assets	—			(16		)
Accounts payable	(413		)	320
Accrued compensation	(266		)	(312		)
Accrued expenses	575			1,397
Deferred revenue	1,914			(162		)
Other liabilities	8			10
Net cash used in operating activities	(3,346		)	(9,611		)
Cash flows from investing activities:
Purchases of property and equipment	(22		)	(2,636		)
Net cash used in investing activities	(22		)	(2,636		)
Cash flows from financing activities:
Proceeds from issuance of debt	370			366
Repayments of debt	(330		)	(378		)
Proceeds from issuance of common stock and warrants, net	—			40,459
Net cash provided by financing activities	40			40,447
Net (decrease) increase in cash and cash equivalents	(3,328		)	28,200
Cash and cash equivalents, beginning of period	19,282			16,388
Cash and cash equivalents, end of period	$	15,954		$	44,588

The accompanying notes are an integral part of these financial statements.

5

Neose Technologies, Inc.

Notes to Financial Statements

(unaudited)

(in thousands, except per share amounts)

1.Background

Neose Technologies, Inc. is a clinical-stage biopharmaceutical company focused on the development of next-generation therapeutic proteins, which we believe will be competitive with best-in-class protein drugs currently on the market. We have two therapeutic protein candidates in clinical trials: GlycoPEG-GCSF and GlycoPEG-FVIIa, and two therapeutic protein candidates in the research stage: GlycoPEG-FVIII and GlycoPEG-FIX.

GlycoPEG-GCSF is a long-acting version of granulocyte colony stimulating factor (G-CSF) that we are co-developing with BioGeneriX AG, a company of the ratiopharm Group. G-CSF is prescribed to stimulate production of neutrophils (a type of white blood cell) and is approved for sale in major markets around the world for treatment of neutropenia associated with myelosuppressive chemotherapy. In November 2007, we reported data from two Phase I clinical trials. That data demonstrated that GlycoPEG-GCSF is a potent stimulator of neutrophils and mobilizer of peripheral blood progenitor cells, and that at comparable doses to Neulasta® (Amgen’s marketed, long-acting G-CSF), GlycoPEG-GCSF demonstrates a 60% greater bioavailability, leading to a 30% increase in the generation of neutrophils. We expect BioGeneriX to commence a Phase II study in the first half of 2008.

GlycoPEG-FVIIa is a long-acting form of recombinant Factor VIIa that is being developed by our partner, Novo Nordisk A/S, utilizing our GlycoPEGylation technology.  Factor VIIa is used in the treatment of bleeding episodes and for the prevention of bleeding during surgery or invasive procedures in patients with congenital hemophilia with inhibitors to coagulation Factors VIII or IX. In June 2007, Novo Nordisk initiated a Phase I clinical study to assess the safety and pharmacokinetics of GlycoPEG-FVIIa in healthy volunteers.  During 2007, poster presentations of preclinical data for GlycoPEG-FVIIa were presented at annual meetings of the International Society on Thrombosis and Haemostasis and the American Society of Hematology. Novo Nordisk is also developing long-acting forms of recombinant Factor VIII and recombinant Factor IX utilizing our GlycoPEGylation technology. Factor VIII products are used in the treatment of Hemophilia A, and Factor IX products are used in the treatment of Hemophilia B.

In January 2008, we announced the discontinuation of further development of GlycoPEG-EPO (NE-180), our product candidate intended for the treatment of anemia in patients with chronic kidney disease and cancer patients receiving chemotherapy.  The decision to discontinue development was not due to any safety or efficacy concerns about NE-180, but was based on our evaluation of commercial prospects and the likelihood of entering into a timely collaboration for the compound in the context of increased safety concerns in the erythropoiesis-stimulating agent (ESA) category. In connection with the discontinuation of the NE-180 program, we reduced our workforce by approximately 35% (see Note 14).

We believe that our enzymatic pegylation technology, GlycoPEGylation, can improve the drug properties of therapeutic proteins by building out, and attaching polyethylene glycol (PEG)

6

Neose Technologies, Inc.

Notes to Financial Statements

(unaudited)

(in thousands, except per share amounts)

to, carbohydrate structures at specific sites on the proteins.  We are using our technology to develop proprietary versions of protein drugs with proven safety and efficacy and to improve the therapeutic profiles of proteins being developed by our partners.  We expect these modified proteins to offer significant advantages, including less frequent dosing and possibly improved efficacy, over the original versions of the drugs now on the market, as well as to meet or exceed the pharmacokinetic profile of next-generation versions of the drugs now on the market.  We believe this strategy of targeting drugs with proven safety and efficacy allows us to lower the risk profile of our proprietary development portfolio as compared to de novo protein drug development.  We intend to continue to focus our research and development resources on therapeutic proteins that we believe have the greatest probability of achieving clinically meaningful therapeutic improvements from our technology and are in commercially attractive categories.

We have incurred losses each year since inception. As of March 31, 2008, we had an accumulated deficit of $297,201. We expect to spend significant amounts on research and development for our proprietary drug candidates and technology, maintenance of our intellectual property position, and our business development and commercialization efforts. Given our planned level of operating expenses, we expect to continue incurring losses for some time.

We believe that our existing cash and cash equivalents, expected proceeds from collaborations and license arrangements, and interest income should be sufficient to meet our operating and capital requirements at least into the third quarter of 2009, although changes in our collaborative relationships or our business, whether or not initiated by us, may cause us to deplete our cash and cash equivalents sooner than the above estimate. We will require significant amounts of additional capital in the future to fund our operations, and we do not have any assurance that funding will be available when we need it on terms that we find favorable, if at all. If we are unable to raise additional capital when required, we may need to delay, scale back, or eliminate some or all of our research and development programs.

On February 19, 2008, we received notice from The NASDAQ Stock Market LLC (“NASDAQ”) stating that for 30 consecutive business days the bid price for our common stock has closed below the minimum $1.00 per share required for continued listing on the NASDAQ Global Market.  As a result, we no longer meet NASDAQ’s continued listing criteria and have 180 calendar days, or until August 18, 2008, to regain compliance.  The notice has no effect on the listing of our common stock at this time, and our shares will continue to trade on the NASDAQ Global Market during the 180-day period.  We have not yet determined what action, if any, we will take in response to this notice, although we intend to monitor the bid price of our listed securities between now and August 18, 2008, and consider available options if our common stock does not trade at a level necessary to regain compliance with the NASDAQ minimum closing bid price requirement.

7

Neose Technologies, Inc.

Notes to Financial Statements

(unaudited)

(in thousands, except per share amounts)

We have not yet developed any products or commercialized any products or technologies, and we may never be able to do so. Even if we are successful in developing products that are approved for marketing, we will not be successful unless our products, and products incorporating our technology, gain market acceptance. Our operations are subject to risks and uncertainties in addition to those mentioned above, such as, among others, the uncertainty of product development, including our dependence upon third parties to conduct our clinical trials and to manufacture our product candidates and the materials used to make them, and unexpected delays or unfavorable results in our clinical trials; our limited product development and manufacturing experience; our dependence upon collaborative partners to develop and commercialize products incorporating our technology and the success of collaborative relationships; the uncertainty of intellectual property rights; the possibility of development and commercialization of competitive products by others that are more effective, less costly, or otherwise gain greater market acceptance; and the uncertainty of the impact of government regulation on our operations, including achieving regulatory approvals for our products or products incorporating our technology, and changes in health care reimbursement policies.

2.Interim Financial Information

The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles for presentation of interim financial statements. Accordingly, the unaudited financial statements do not include all the information and footnotes necessary for a comprehensive presentation of the financial position, results of operations, and cash flows for the periods presented. In our opinion, however, the unaudited financial statements include all the normal recurring adjustments that are necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. You should not base your estimate of our results of operations for 2008 solely on our results of operations for the three months ended March 31, 2008. You should read these unaudited financial statements in combination with the other Notes in this section; the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing in Item 2 of this Form 10-Q; and the Financial Statements, including the Notes to the Financial Statements, included in our Annual Report on Form 10-K for the year ended December 31, 2007.

3.Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions. Those estimates and assumptions affect the reported amounts of assets and liabilities as of the date of the financial statements, the disclosure of contingent assets and liabilities as of 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.

8

Neose Technologies, Inc.

Notes to Financial Statements

(unaudited)

(in thousands, except per share amounts)

Accounts Receivable

We record accounts receivable net of an allowance for doubtful accounts.  We establish an allowance for doubtful accounts that we believe is adequate to cover anticipated losses on the collection of all outstanding accounts receivable.  The adequacy of the allowance for doubtful accounts is based on historical information and management’s assessment of our collaborators’ ability and intent to pay.  We recognize revenue based on proportional performance of research and development work performed on behalf of our collaborators, which recognition may not correspond with how our collaborators are billed.  We review the unbilled accounts receivable from our collaborators to determine that such amounts are expected to become billable and collectible.  All unbilled receivables are expected to be billed within six months.

Warrant Liability

We follow Emerging Issues Task Force (EITF) No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock (EITF 00-19), which provides guidance for distinguishing among permanent equity, temporary equity and assets and liabilities. EITF 00-19 requires liability classification of warrants that may be settled in cash at the option of warrant holders.  Our warrants issued in March 2007 permit net cash settlement in certain change of control circumstances at the option of the warrant holders, and are, therefore, classified as a liability on our Balance Sheets (see Note 10).

We record the warrant liability at its fair value using the Black-Scholes option-pricing model and revalue it at each reporting date until the warrants are exercised or expire. Changes in the fair value of the warrants are reported in our Statements of Operations as non-operating income or expense. The fair value of the warrants is subject to significant fluctuation based on changes in our stock price, expected volatility, remaining contractual life and the risk-free interest rate. The market price for our common stock has been and may continue to be volatile.  Consequently, future fluctuations in the price of our common stock may cause significant increases or decreases in the fair value of the warrants.

In connection with the March 2007 equity financing, we were obligated to file a registration statement with the SEC for the registration of the total number of shares sold to the investors and shares issuable upon exercise of the warrants. We are required under an agreement to use commercially reasonable efforts to cause the registration statement to be declared effective by the SEC, which we accomplished in May 2007, and to remain continuously effective until such time when all of the registered shares are sold. In the event we fail to meet various legal requirements in regards to the registration statement, we will be obligated to pay the investors, as partial liquidated damages and not as a penalty, an amount in cash equal to 1% of the aggregate purchase price paid by investors for each monthly period that the registration statement is not effective, up to 24%. We follow Financial Accounting Standards Board (FASB) Staff Position No. EITF 00-19-2, Accounting for Registration Payment Arrangements (EITF 00-19-2), which specifies that registration payment arrangements should play no part in determining the initial classification of, and subsequent accounting for, securities to which the payments

9

Neose Technologies, Inc.

Notes to Financial Statements

(unaudited)

(in thousands, except per share amounts)

relate. Contingent obligations in a registration payment arrangement are separately analyzed under Statement of Financial Accounting Standards (SFAS) No. 5, Accounting for Contingencies, and FASB Interpretation No. 14, Reasonable Estimation of the Amount of a Loss. If we determine a registration payment arrangement in connection with the securities issued in March 2007 is probable and can be reasonably estimated, a liability will be recorded. As of March 31, 2008, we concluded the likelihood of having to make any payments under the arrangements was remote, and therefore did not record any related liability.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing net loss by the sum of the weighted-average number of common shares outstanding for the period and the number of additional shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares are excluded from the calculation of diluted net loss per share if the effect on net loss per share is antidilutive. Our diluted net loss per share is equal to basic net loss per share for all reporting periods presented because giving effect in the computation of diluted net loss per share to the exercise of outstanding stock options and warrants or settlement of restricted stock units (RSUs) would have been antidilutive.  See Note 12 for a summary of outstanding options and a description of our RSUs.

Comprehensive Loss

SFAS No. 130, Reporting Comprehensive Income, requires disclosure of comprehensive income (loss) in the financial statements. Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) includes changes to equity that are not included in net income (loss). Our comprehensive loss for the three months ended March 31, 2008 and 2007 was comprised only of our net loss, and was $2,356 and $17,658, respectively.

Fair Value of Financial Instruments

The fair value of financial instruments is the amount for which instruments could be exchanged in a current transaction between willing parties. As of March 31, 2008, the carrying values of cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses, and accrued compensation equaled or approximated their respective fair values because of the short duration of these instruments. The fair value of our debt and capital lease obligations was estimated by discounting the future cash flows of each instrument at rates recently offered to us for similar debt instruments offered by our lenders. As of March 31, 2008, the fair and carrying values of our debt and capital lease obligations were $878 and $880 respectively.

10

Neose Technologies, Inc.

Notes to Financial Statements

(unaudited)

(in thousands, except per share amounts)

Recent Accounting Pronouncements

In December 2007, the FASB issued EITF 07-01, Accounting for Collaborative Arrangements (EITF 07-01).  EITF 07-01 provides guidance concerning determining whether an arrangement constitutes a collaborative arrangement, how costs incurred and revenue generated on sales to third parties and payments between participants pursuant to a collaboration agreement should be presented in the results of operations and what participants should disclose in the notes to the financial statements about a collaborative arrangement. EITF 07-01 is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the impact that the adoption of EITF 07-01 will have, if any, on our financial statements and related disclosures.

In June 2007, the FASB issued EITF 07-03, Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities-(EITF 07-03).  EITF 07-03 specifies that nonrefundable advance payments for future research and development activities should be deferred and capitalized and should be recognized as an expense as the related goods are delivered or the related services are performed. If, subsequent to an advance payment, an entity no longer expects the goods to be delivered or services to be rendered, the capitalized advance payment should be charged to expense. EITF 07-03 is effective for fiscal years beginning after December 15, 2007.  The adoption of EITF 07-03 did not have any impact on our financial statements and related disclosures.

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 No. 159), which allows companies to choose, at specific election dates, to measure eligible financial assets and liabilities at fair value that are not otherwise required to be measured at fair value.  If a company elects the fair value option for an eligible item, changes in that item’s fair value in subsequent reporting periods must be recognized in current earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007.  Adoption of SFAS No. 159 has had no effect on our financial statements and related disclosure because, as permitted under SFAS No. 159, we have not elected to apply the fair value option to any of our financial assets and liabilities.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157).  SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Although SFAS No. 157 does not require any new fair value measurements, its application may, for some entities, change current practices related to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements.  In February 2008, the FASB issued FASB Staff Position 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease

11

Neose Technologies, Inc.

Notes to Financial Statements

(unaudited)

(in thousands, except per share amounts)

Classification or Measurement under Statement 13 (FSP FAS 157-1) and FASB Staff Position 157-2, Effective Date of FASB Statement No. 157 (FSP FAS 157-2).  FSP FAS 157-1 amends SFAS No. 157 to remove certain leasing transactions from its scope. FSP FAS 157-2 defers the effective date of SFAS No. 157 for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis.  We adopted SFAS No. 157, as it applies to our financial instruments, effective January 1, 2008 and the adoption has had no effect on our financial statements and related disclosures.

4.Supplemental Disclosure of Cash Flow Information

The following table contains additional cash flow information for the periods reported:

	Three months ended  March 31,
	2008		2007
Supplemental disclosure of cash flow information: Cash paid for interest, net of amounts capitalized	$	19	$	41
Non-cash investing activities:
Decrease in accrued property and equipment included in accounts payable and accrued expenses	$	—	$	(1,235	)
Assets acquired under capital leases	$	—	$	374
Non-cash financing activities:
Initial measurement of warrant liability (see Note 10)	$	—	$	10,765

5.Accounts Receivable

Accounts receivable consisted of the following:

	March 31,  2008			December 31,  2007
Billed receivables	$	1,018		$	670
Unbilled receivables	984			1,107
	2,002			1,777
Less allowance for doubtful accounts	(19		)	(19		)
	$	1,983		$	1,758

12

Neose Technologies, Inc.

Notes to Financial Statements

(unaudited)

(in thousands, except per share amounts)

6.Prepaid Expenses and Other Current Assets paid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

	March 31,  2008		December 31,  2007
Prepaid insurance	$	354	$	57
Prepaid maintenance agreements	147		159
Prepaid clinical trials and non-clinical studies	88		113
Prepaid contract research and development services	66		1,008
Prepaid rent	66		66
Other prepaid expenses	144		158
Other current assets	3		3
	$	868	$	1,564

7.Property and Equipment

Property and equipment consisted of the following:

	March 31,  2008			December 31,  2007
Leasehold improvements	$	12,984		$	12,984
Laboratory, manufacturing, and office equipment	6,973			6,960
	19,957			19,944
Less accumulated depreciation and amortization	(6,791		)	(6,380		)
	$	13,166		$	13,564

As of March 31, 2008 and December 31, 2007, laboratory, manufacturing, and office equipment included $495 of assets acquired under capital leases. Accumulated depreciation and amortization as of March 31, 2008 and December 31, 2007 included $176 and $148, respectively, related to assets acquired under capital leases. Depreciation expense, which includes amortization of assets acquired under capital leases, was $416 and $457 for the three months ended March 31, 2008 and 2007, respectively. During the three months ended March 31, 2007, we capitalized $9 of interest expense in connection with our facility improvement projects.  We did not capitalize any interest expense incurred during the three months ended March 31, 2008.

13

Neose Technologies, Inc.

Notes to Financial Statements

(unaudited)

(in thousands, except per share amounts)

8.Debt and Capital Lease Obligations

Debt and capital lease obligations consisted of the following:

	March 31,  2008			December 31,  2007
Notes payable to equipment lender, secured by equipment and facility improvements, interest rates from 9.1% to 9.5%, due 2008	$	193		$	327
Term loan from landlord (unsecured), annual interest at 13.0%, due June 2008	79			195
Note payable, secured by insurance policies, annual interest at 4.1%, due January 2009	338			¾
Subtotal	610			522
Capital lease obligations	270			318
Total debt	880			840
Less note payable, secured by insurance policies	(338		)	¾
Less current portion	(380		)	(658		)
Total debt, net of current portion	$	162		$	182

Note Payable Secured by Insurance Policies

In March 2008, we borrowed $370 to finance insurance policy premiums due on certain insurance policies. The insurance policy premiums, net of amortization, are included in prepaid expenses and other current assets on our Balance Sheets at March 31, 2008 (see Note 6). We are required to pay $34 of principal and interest during each of the eleven months beginning on March 15, 2008 and ending on January 15, 2009.  To secure payment of the amounts financed, we granted the lender a security interest in (a) all unearned premiums or dividends payable under the policies, (b) loss payments which may reduce the unearned premiums, subject to any mortgagee or loss payee interests, and (c) any interest in any state guarantee fund relating to the policies.

14

Neose Technologies, Inc.

Notes to Financial Statements

(unaudited)

(in thousands, except per share amounts)

9.Accrued Expenses

Accrued expenses consisted of the following:

	March 31,  2008		December 31,  2007
Clinical trials and non-clinical studies	$	2,285	$	1,544
Professional fees	1,066		788
Contract research and development services	146		390
Other expenses	55		255
	$	3,552	$	2,977

10.Warrant Liability

In March 2007, we sold, through a private placement, 21,415 shares of our common stock and warrants to purchase 9,637 shares of our common stock with an exercise price of $1.96 (see Note 11). The warrants have a five-year term and are immediately exercisable. The warrant agreement contains a net cash settlement feature, which is available to the warrant holders at their option, in certain change of control circumstances. As a result, under EITF 00-19, the warrants are required to be classified as a liability at their current fair value in our Balance Sheets, estimated using the Black-Scholes option-pricing model. Warrants that are classified as a liability are revalued at each reporting date until the warrants are exercised or expire with changes in the fair value reported in our Statements of Operations as non-operating income or expense. Accordingly, we recorded non-operating income of $3,795 during the three months ended March 31, 2008 and non-operating expense of $6,350 during the three months ended March 31, 2007.  The aggregate fair value and the assumptions used for the Black-Scholes option-pricing models as of March 13, 2007, March 31, 2007, December 31, 2007 and March 31, 2008 were as follows:

	March 13,  2007			March 31,  2007			December 31, 2007			March 31,  2008
Aggregate fair value	$	10,765		$	17,115		$	4,205		$	410
Expected volatility	75		%	75		%	69		%	74		%
Remaining contractual term (years)	5.0			4.9			4.2			3.9
Risk-free interest rate	4.4		%	4.5		%	3.3		%	2.1		%
Expected dividend yield	0		%	0		%	0		%	0		%
Common stock price	$	1.79		$	2.57		$	1.07		$	0.28

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Neose Technologies, Inc.

Notes to Financial Statements

(unaudited)

(in thousands, except per share amounts)

11.Stockholders’ Equity

In March 2007, we sold, through a private placement, 21,415 shares of our common stock and warrants to purchase 9,637 shares of our common stock, including 4,950 shares of our common stock and warrants to purchase 2,228 shares of our common stock to investment funds affiliated with certain members of our board of directors, at a price of $2.02 per unit, generating net proceeds of $40,459. Each unit consisted of one share of common stock and a warrant to purchase 0.45 shares of our common stock. The warrants have a five-year term and an exercise price of $1.96 per share.

12.Equity-based Compensation

The following table summarizes the status of stock options as of March 31, 2008 and changes during the three months then ended:

	Shares		Weighted- average  exercise price		Aggregate intrinsic value		Weighted- average remaining  contractual life (years)
Outstanding at January 1, 2008	4,568		$	8.07
Granted	942		0.68
Exercised	¾		¾
Forfeited	(304	)	2.92
Expired	(56	)	4.75
Outstanding at March 31, 2008	5,150		$	7.06	$	—	6.2
Vested at March 31, 2008 and expected to vest	4,298		$	8.12	$	—	5.7
Exercisable at March 31, 2008	3,550		$	9.57	$	—	4.9

Fair Value Disclosures

During the three months ended March 31, 2008 and 2007, we recorded $96 and $466 of compensation cost for share-based payments, respectively, in our Statements of Operations. The weighted-average fair value of stock options granted during the three months ended March 31, 2008 and 2007 was $0.46 and $1.64, respectively. There were no stock options exercised during the three months ended March 31, 2008 and 2007.

The fair value of share-based awards is recognized as expense over the requisite service period, net of estimated forfeitures. We rely primarily on historical experience to estimate expected forfeitures and adjust the annualized forfeiture rate if our historical experience indicates that an adjustment is necessary. During the first quarter of each year, we re-evaluate our

16

Neose Technologies, Inc.

Notes to Financial Statements

(unaudited)

(in thousands, except per share amounts)

forfeiture rate. For the three months ended March 31, 2008, based on our historical experience of option pre-vesting cancellations, we have assumed an annualized forfeiture rate of 34% for our stock options granted to individuals not terminated as a result of a restructuring of our operations (see Note 14). For employees terminated as a result of the restructurings in 2008, 2007 and 2006, we have assumed an annualized forfeiture rate of 100%. For the three months ended March 31, 2007, we assumed an annualized forfeiture rate of 17% for our stock options granted to individuals not terminated as a result of a restructuring of our operations (see Note 14).  Under the provisions of SFAS No. 123R, we will record additional expense if the actual forfeiture rate is lower than we estimated, and will record a recovery of prior expense if the actual forfeiture is higher than we estimated.

As of March 31, 2008, there was $545 of total unrecognized compensation cost, which includes the impact of expected forfeitures, related to unvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 2.1 years.

Restricted Stock Units

A summary of the status of RSUs as of March 31, 2008, and changes during the three months then ended, is presented in the following table:

	Shares	Weighted- average grant-date fair value		Aggregate intrinsic value
Outstanding at January 1, 2008	34	$	2.44
Awarded	¾	¾
Settled	¾	¾
Forfeited	¾	¾
Outstanding at March 31, 2008	34	$	2.44	$	9
Vested at March 31, 2008 and expected to vest	34	$	2.44	$	9

During the three month ended March 31, 2007, we recorded $6 of expense for RSUs. All RSUs were vested as of December 31, 2007.

17

Neose Technologies, Inc.

Notes to Financial Statements

(unaudited)

(in thousands, except per share amounts)

13.Collaborative Agreements and Significant Customer Concentration

A summary of revenue recognized under our collaborative agreements during the three months ended March 31, 2008 and 2007 is presented in the following table:

	Three months ended  March 31,
	2008		2007
Novo Nordisk
Research and development funding	$	2,681	$	556
License fees	174		148
	2,855		704
BioGeneriX
Research and development funding	1,243		519
License fees	14		14
	1,257		533
	$	4,112	$	1,237

Novo Nordisk A/S Agreements

We have agreements with Novo Nordisk A/S to use our GlycoPEGylation technology to develop and commercialize next-generation versions of recombinant Factors VIIa, VIII and IX, one of which, Factor VIIa, is currently marketed by Novo Nordisk. Under these agreements, we received a non-refundable, upfront fee of $4,300, which is being amortized to revenue over the expected performance period. Novo Nordisk is responsible for funding our research and development activities under the agreements, and we may receive up to $52,200 in milestone payments based on the progress of the programs.

BioGeneriX AG Agreements

We have an agreement with BioGeneriX AG to use our proprietary GlycoPEGylation technology to develop a long-acting version of G-CSF. In connection with the agreement, we received from BioGeneriX a non-refundable, upfront fee, which is being recognized to revenue over the expected performance period of 18 years. In October 2006, we entered into an amendment of this agreement. Under the agreement, as amended, we and BioGeneriX shared the expenses of preclinical development, BioGeneriX is responsible for supplying the protein and funding the clinical development program and we are responsible for supplying enzyme reagents and sugar nucleotides. As of January 1, 2007, BioGeneriX became responsible for the cost of reagent supply.

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Neose Technologies, Inc.

Notes to Financial Statements

(unaudited)

(in thousands, except per share amounts)

14.Restructurings and Employee Severance Costs

2008 Restructuring

In January 2008, we announced the discontinuation of further development of NE-180 our product candidate intended for the treatment of anemia in patients with chronic kidney disease and cancer patients receiving chemotherapy. The decision to discontinue development was not due to any safety or efficacy concerns about NE-180, but was based on an evaluation of commercial prospects and the likelihood of entering into a timely collaboration for the compound in the context of increased safety concerns in the ESA category. In connection with the discontinuation of the NE-180 program, we reduced our workforce by approximately 35% (2008 Restructuring). Our net loss for the three months ended March 31, 2008 included $872 of employee severance costs related to the workforce reduction, of which $221 was included in research and development expenses and $651 was included in general and administrative expenses.  Of these amounts, $172 remained unpaid and was included in accrued compensation on our Balance Sheets as of March 31, 2008. The employee severance costs for the 2008 Restructuring were payable pursuant to an employee severance plan established in August 2005 except for one employee who’s severance costs were payable pursuant to her change of control agreement.

In connection with the 2008 Restructuring, we committed to pay future cash retention bonuses to certain employees who were not given notice of termination in January 2008, contingent on their not voluntarily terminating their employment prior to November 28, 2008. Our net loss for the three months ended March 31, 2008 included $43 of expense related to these cash retention bonuses, of which $28 was included in research and development expense and $15 was included in general and administrative expenses. We also granted stock options to all employees as part of an employee retention program. These options will vest 50% on August 4, 2008 for all holders who had not voluntarily terminated their employment prior to that date, and will vest 50% on February 4, 2009 for all holders who have not voluntarily terminated their employment prior to that date. The aggregate fair market value of the options was $247, which is being recognized ratably, net of forfeitures, as compensation expense over the vesting period.

2007 Restructuring

In March 2007, we implemented a restructuring of operations (2007 Restructuring), which included a workforce reduction of approximately 40%. The employee severance costs incurred for the 2007 Restructuring were payable pursuant to an employee severance plan established in August 2005. Our net loss for the three months ended March 31, 2007 included $644 of employee severance costs related to the 2007 Restructuring, of which $568 was included in research and development expenses and $76 was included in general and administrative expenses. All employee severance costs related to the 2007 Restructuring were paid by December 31, 2007.

19

Neose Technologies, Inc.

Notes to Financial Statements

(unaudited)

(in thousands, except per share amounts)

In connection with the 2007 Restructuring, we committed to pay future cash retention bonuses to certain employees who were not given notice of termination in March 2007, contingent on their not voluntarily terminating their employment prior to December 31, 2007. Our net loss for the three months ended March 31, 2007 included $353 of expense related to these cash retention bonuses, of which $236 was included in research and development expense and $117 was included in general and administrative expenses. All of these cash retention bonuses were paid by December 31, 2007. We also granted stock options to all employees as part of an employee retention program. These options vested 50% on September 27, 2007 for all holders who had not voluntarily terminated their employment prior to that date, and 50% on March 27, 2008 for all holders who had not voluntarily terminated their employment prior to that date. The aggregate fair market value of the options was $1,332, which was recognized ratably, net of forfeitures, as compensation expense over the vesting period.

15.Income Tax Benefit

During the three months ended March 31, 2008, we sold Pennsylvania research and development tax credits, resulting in the recognition of $303 of income tax benefit.

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

CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION ACT OF 1995:

This report includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are not historical facts and include, but are not limited to, statements about our plans, objectives, representations and contentions that typically may be identified by use of terms such as “anticipate,” “believe,” “estimate,” “plan,” “may,” “expect,” “intend,” “could,” “potential,” and similar expressions, although some forward-looking statements are expressed differently. These forward-looking statements include, among others, statements about our:

·estimate that our existing cash and cash equivalents, expected proceeds from collaborations and license agreements, and interest income should be sufficient to meet our operating and capital requirements at least into the third quarter of 2009;

·expected losses;

·expectations for future capital requirements;

·expectations for increases in operating expenses;

·expectations for increases in research and development, and marketing, general and administrative expenses in order to develop products, procure commercial quantities of reagents and products, and commercialize our technology;

·expectations regarding the scope and expiration of patents;

·expectations regarding the timing of non-clinical activities, regulatory meetings and submissions, as well as the progression of clinical trials, for GlycoPEG-GCSF and GlycoPEG-Factor VIIa;

·expectations for the development of long-acting versions of G-CSF, Factor VIIa, Factor VIII and Factor IX, and subsequent proprietary drug candidates;

·expectations regarding our stock price and listing qualifications;

·expectations regarding net cash utilization;

·expectations for generating revenue; and

·expectations regarding the timing and character of new or expanded collaborations and for the performance of our existing collaboration partners in connection with the development and commercialization of products incorporating our technology.

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You should be aware that the forward-looking statements included in this report represent management’s current judgment and expectations, but our actual results, events and performance could differ materially from those in the forward-looking statements.  Potential risks and uncertainties that could affect our actual results include the following:

·our ability to obtain the funds necessary for our operations;

·our ability to meet forecasted timelines due to internal or external causes;

·unfavorable non-clinical and clinical results for our product candidates or product categories;

·regulatory developments that adversely affect our ability to market our products or obtain government approvals;

·our ability to develop commercial-scale manufacturing processes for our products and reagents, either independently or in collaboration with others;

·the performance of our contract manufacturers;

·our ability to enter into and maintain collaborative arrangements;

·our ability to obtain adequate sources of proteins and reagents;

·our ability to develop and commercialize products without infringing the patent or intellectual property rights of others;

·our ability to expand and protect our intellectual property and to operate without infringing the rights of others;

·our ability and our collaborators’ ability to develop and commercialize therapeutic proteins and our ability to commercialize our technology;

·our ability to attract and retain key personnel;

·our ability to satisfy the continued listing requirements of The NASDAQ Stock Market LLC;

·our ability to compete successfully in an intensely competitive field; and

·general economic conditions.

These and other risks and uncertainties that could affect our actual results are discussed in this report and in our other filings with the SEC, particularly in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2007 in the section entitled “Risk Factors.”

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance, or achievements. We do not assume responsibility for the accuracy and completeness of the

22

forward-looking statements other than as required by applicable law. We do not undertake any duty to update any of the forward-looking statements after the date of this report to conform them to actual results, except as required by the federal securities laws.

You should read this section in combination with the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31. 2007, included in our Annual Report on Form 10-K for the year ended December 31, 2007.

Overview

We are a clinical-stage biopharmaceutical company focused on the development of next-generation therapeutic proteins, which we believe will be competitive with best-in-class protein drugs currently on the market. We have two therapeutic protein candidates in clinical trials: GlycoPEG-GCSF and GlycoPEG-FVIIa, and two therapeutic protein candidates in the research stage: GlycoPEG-FVIII and GlycoPEG-FIX.

GlycoPEG-GCSF is a long-acting version of G-CSF that we are co-developing with BioGeneriX AG, a company of the ratiopharm Group.  G-CSF is prescribed to stimulate production of neutrophils (a type of white blood cell) and is approved for sale in major markets around the world for treatment of neutropenia associated with myelosuppressive chemotherapy.  In November 2006, BioGeneriX initiated the first of two planned Phase I clinical trials for GlycoPEG-GCSF.  In March 2007, BioGeneriX initiated the second Phase I clinical trial for GlycoPEG-GCSF.  In November 2007, we reported data from both of these Phase I clinical trials. That data demonstrated that GlycoPEG-GCSF is a potent stimulator of neutrophils and mobilizer of peripheral blood progenitor cells, and that at comparable doses to Neulasta® (Amgen’s marketed, long-acting G-CSF), GlycoPEG-GCSF demonstrates a 60% greater bioavailability, leading to a 30% increase in the generation of neutrophils.We expect BioGeneriX to commence a Phase II study in the first half of 2008.

GlycoPEG-FVIIa is a long-acting form of recombinant Factor VIIa that is being developed by our partner, Novo Nordisk, utilizing our GlycoPEGylation technology.  Factor VIIa is used in the treatment of bleeding episodes and for the prevention of bleeding during surgery or invasive procedures in patients with congenital hemophilia with inhibitors to coagulation Factors VIII or IX.  In June 2007, Novo Nordisk initiated a Phase I clinical study for GlycoPEG-Factor VIIa to assess the safety and pharmacokinetics of GlycoPEG-FVIIa in healthy volunteers.  During 2007, poster presentations of preclinical data for GlycoPEG-FVIIa were presented at annual meetings of the International Society on Thrombosis and Haemostasis and the American Society of Hematology. Novo Nordisk is also developing long-acting forms of recombinant Factor VIII and recombinant Factor IX utilizing our GlycoPEGylation technology.  Factor VIII products are used in the treatment of Hemophilia A, and Factor IX products are used in the treatment of Hemophilia B.

In January 2008, we announced the discontinuation of further development of GlycoPEG-EPO (NE-180), our product candidate intended for the treatment of anemia in patients with chronic kidney disease and cancer patients receiving chemotherapy.  The decision to discontinue development was not due to any safety or efficacy concerns about NE-180, but was based on an evaluation of commercial prospects and the likelihood of entering into a timely collaboration for

23

the compound in the context of increased safety concerns in the erythropoiesis-stimulating agent (ESA) category.  In connection with the discontinuation of the NE-180 program, we reduced our workforce by approximately 35%.  These actions allowed us to significantly reduce our expected cash expenditures and extend our cash runway by approximately one year.   We anticipate paying cash severance benefits of approximately $0.9 million in connection with the workforce reduction, of which $0.7 million was paid out during the three months ended March 31, 2008.

We believe that our enzymatic pegylation technology, GlycoPEGylation, can improve the drug properties of therapeutic proteins by building out, and attaching polyethylene glycol (PEG) to, carbohydrate structures at specific sites on the proteins.  We are using our technology to develop proprietary versions of protein drugs with proven safety and efficacy and to improve the therapeutic profiles of proteins being developed by our partners.  We expect these modified proteins to offer significant advantages, including less frequent dosing and possibly improved efficacy, over the original versions of the drugs now on the market, as well as to meet or exceed the pharmacokinetic profile of next-generation versions of the drugs now on the market.  We believe this strategy of targeting drugs with proven safety and efficacy allows us to lower the risk profile of our proprietary development portfolio as compared to de novo protein drug development.  We intend to continue to focus our research and development resources on therapeutic proteins that we believe have the greatest probability of achieving clinically meaningful therapeutic improvements from our technology and are in commercially attractive categories.

We have incurred operating losses each year since our inception.  As of March 31, 2008, we had an accumulated deficit of $297.2 million. We expect additional losses over the next several years as we continue product research and development efforts and expand our intellectual property portfolio. We have financed our operations through private and public offerings of equity securities, proceeds from debt financings, and revenues from our collaborative agreements.

We believe that our existing cash and cash equivalents, expected proceeds from collaborations and license arrangements, and interest income should be sufficient to meet our operating and capital requirements at least into the third quarter of 2009, although changes in our collaborative relationships or our business, whether or not initiated by us, may cause us to deplete our cash and cash equivalents sooner than the above estimate.

Our common stock is currently listed on the Global Market of The NASDAQ Stock Market LLC.  On February 19, 2008, we received a Staff Deficiency Letter from The NASDAQ Stock Market LLC stating that for the last 30 consecutive business days the bid price of our common stock has closed below the minimum $1.00 per share required for continued inclusion on the NASDAQ Global Market, and consequently we are not in compliance with the requirements for continued listing of our common stock.  If we fail to regain compliance with the minimum bid price requirement prior to August 18, 2008, or if at any time we fail to satisfy any of the other requirements for continued listing, our common stock could be delisted from the NASDAQ Global Market.  The delisting of our common stock would significantly affect the ability of investors to trade our securities and would negatively affect the value and liquidity of our common stock.

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If delisted from the NASDAQ Global Market, our common stock will likely be quoted in the over-the-counter market in the so-called “pink sheets” or quoted in the OTC Bulletin Board.  In addition, our common stock would be subject to the rules promulgated under the Securities Exchange Act of 1934 relating to “penny stocks.”  These rules require brokers who sell securities that are subject to the rules, and who sell to persons other than established customers and institutional accredited investors, to complete required documentation, make suitability inquiries of investors and provide investors with information concerning the risks of trading in the security.  These requirements could make it more difficult to buy or sell our common stock in the open market.  In addition, the delisting of our common stock could materially adversely affect our ability to raise capital on terms acceptable to us or at all.  Delisting from the NASDAQ Global Market could also have other negative results, including the potential loss of confidence by suppliers and employees, the loss of institutional investor interest and fewer business development opportunities.

Liquidity and Capital Resources

Overview

We had $16.0 million in cash and cash equivalents as of March 31, 2008, compared to $19.3 million as of December 31, 2007. The decrease was due to the continued funding of our operating activities, including the costs associated with the discontinuation of our NE-180 program, and debt repayments. We anticipate the average quarterly spending, net of cash expected to be received for research and development funding reimbursement and milestone payments from our collaborators, for the remainder of 2008 to be approximately $2.0 million to $5.0 million to fund our operating activities, capital expenditures and debt repayments, without giving effect to the impact of entering into any new collaborative agreements.

The development of next-generation proprietary protein therapeutics, which we are pursuing both independently and in collaboration with selected partners, will require substantial expenditures by us and our collaborators. We plan to continue financing our operations through private and public offerings of equity securities, proceeds from debt financings, and proceeds from existing and future collaborative agreements. Because our 2008 revenues could be substantially affected by entering into new collaborations and by the financial terms of any new collaborations, we cannot estimate our 2008 revenues. Other than proceeds from our collaborations with Novo Nordisk and BioGeneriX, and any future collaborations with others, we do not expect to generate significant revenues until such time as products using our technology are commercialized, which is not expected during the next several years. We expect an additional several years to elapse before we can expect to generate sufficient cash flow from operations to fund our operating and investing requirements. We believe that our existing cash and cash equivalents, expected revenue from collaborations and license arrangements, and interest income should be sufficient to meet our operating and capital requirements at least into the third quarter of 2009. Accordingly, we will need to raise substantial additional funds to continue our business activities and fund our operations until we are generating sufficient cash flow from operations. If we are unable to raise additional capital when required, we may need to delay, scale back, or eliminate some or all of our research and development programs.

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Operating Activities

Net cash used in operating activities was $3.3 million and $9.6 million during the three months ended March 31, 2008 and 2007, respectively. Our net loss for the three months ended March 31, 2008 and 2007, was $2.4 million and $17.7 million, respectively.  Our net loss for the three months ended March 31, 2008 included non-cash income of $3.8 million relating to a decrease in the fair value of our warrant liability.  Our net loss for the three months ended March 31, 2007 included non-cash expense of $6.4 million from the increase in the fair value of our warrant liability. Revenues were $2.9 million higher in 2008 compared to 2007 primarily due to the reimbursement of research and development costs under our collaborations with Novo Nordisk and BioGeneriX. During the first quarter of 2008, we received a $2.2 million milestone payment from one of our collaborators, which also contributed to the reduction of cash used compared to the same period in 2007. Research and development costs decreased by $2.0 million from 2008 to 2007, due to the discontinuation of our NE-180 program and were partially offset by increased costs incurred under our collaborations with Novo Nordisk and BioGeneriX. Fluctuations in operating items vary period-to-period due to, among other factors, the timing of research and development activities, such as the initiation and progress of clinical trials and non-clinical studies.

Investing Activities

During the three months ended March 31, 2008 and 2007, we invested $22,000 and $2.6 million, respectively, in property and equipment. In February 2007, we completed construction of leasehold improvements to a facility that we lease in Horsham, Pennsylvania (Rock Road Facility). We anticipate additional capital expenditures during the remainder of 2008 of approximately $0.5 million. We may finance some or all of these capital expenditures through capital leases or the issuance of new debt or equity. The terms of any new debt could require us to maintain a minimum cash and investments balance, or to transfer cash into an escrow account to collateralize some portion of the debt, or both.

Financing Activities

Equity Financing Activities

In March 2007, we sold, through a private placement, 21.4 million shares of our common stock and warrants to purchase 9.6 million shares of our common stock, including 5.0 million shares of our common stock and warrants to purchase 2.2 million shares of our common stock to investment funds affiliated with certain members of our board of directors, at a price of $2.02 per unit, generating net proceeds of $40.5 million. Each unit consisted of one share of our common stock and a warrant to purchase 0.45 shares of our common stock. The warrants have a five-year term and an exercise price of $1.96 per share.

Debt Financing Activities

Our total debt increased to $0.9 million as of March 31, 2008, compared to $0.8 million as of December 31, 2007. This increase primarily resulted from $0.4 million in proceeds from the issuance of debt to finance insurance policy premiums and was partially offset by planned debt principal repayments of $0.3 million.

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Note Payable Secured by Insurance Policies

In March 2008, we borrowed $0.4 million to finance insurance policy premiums due on certain insurance policies. The insurance policy premiums, net of amortization, are included in prepaid expenses and other current assets on our Balance Sheets as of March 31, 2008. We are required to pay $34,000 of principal and interest during each of the eleven months beginning on March 15, 2008 and ending on January 15, 2009. The interest is calculated based on an annual percentage rate of 4.1%. To secure payment of the amounts financed, we granted the lender a security interest in (a) all unearned premiums or dividends payable under the policies, (b) loss payments which may reduce the unearned premiums, subject to any mortgagee or loss payee interests, and (c) any interest in any state guarantee fund relating to the policies.

Term Loan from Landlord

In May 2004, we borrowed $1.5 million from the landlord of our leased facilities in Horsham, Pennsylvania. As of March 31, 2008, the outstanding principal balance under this agreement was $0.1 million. The terms of the financing require us to pay monthly principal and interest payments over 48 months at an interest rate of 13%. During the twelve months ending March 31, 2009, we will be required to make principal and interest payments totaling $0.1 million under this agreement.

Equipment Loans

As of March 31, 2008, we owed $0.2 million to an equipment lender that financed the purchase of certain equipment and facility improvements, which collateralize the amounts borrowed. Our last payment is scheduled for September 2008, and interest rates applicable to the equipment loans range from 9.1% to 9.5%. During the twelve months ending March 31, 2009, we will make principal and interest payments totaling $0.2 million under these agreements.

Capital Lease Obligations

The terms of our capital leases require us to make monthly payments through February 2012. As of March 31, 2008, the present value of aggregate minimum lease payments under these agreements was $0.3 million. Under these agreements, we will be required to make lease payments totaling $0.1 million during the twelve months ending March 31, 2009.

Operating Leases

We lease laboratory, office, warehouse facilities, and equipment under operating lease agreements. In 2002, we entered into a lease agreement for our Rock Road Facility. The initial term of this lease ends 2022, at which time we have an option to extend the lease for an additional five years, followed by another option to extend the lease for an additional four and one-half years. This lease contains escalation clauses, under which the base rent increases annually by 2%. In January 2007, we entered into a five-year lease agreement for approximately 6,800 square feet of office and warehouse space in Horsham, Pennsylvania.

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Summary of Contractual Obligations

A summary of our obligations to make future payments under contracts existing as of December 31, 2007 is included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2007. The Liquidity and Capital Resources section of this Form 10-Q describes obligations from any material contracts entered into during the three months ended March 31, 2008.

Off-Balance Sheet Arrangements

We are not involved in any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect that is material to investors on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Critical Accounting Policies and Estimates

A discussion of our critical accounting policies and estimates is included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2007. Except as described below, there have not been any changes or additions to our critical accounting policies during the three months ended March 31, 2008.

Stock-based Employee Compensation

The fair value of share-based awards is recognized as expense over the requisite service period, net of estimated forfeitures. We rely primarily on historical experience to estimate expected forfeitures and adjust the annualized forfeiture rate if our historical experience indicates that an adjustment is necessary. During the first quarter of each year, we re-evaluate our forfeiture rate. For the three months ended March 31, 2008, based on our historical experience of option pre-vesting cancellations, we have assumed an annualized forfeiture rate of 34% for our stock options granted to individuals not terminated as a result of a restructuring of our operations. For employees terminated as a result of the restructurings in 2008, 2007 and 2006, we have assumed an annualized forfeiture rate of 100%. For the three months ended March 31, 2007, we assumed an annualized forfeiture rate of 17% for our stock options granted to individuals not terminated as a result of a restructuring of our operations.  Under the provisions of SFAS No. 123R, we will record additional expense if the actual forfeiture rate is lower than we estimated, and will record a recovery of prior expense if the actual forfeiture is higher than we estimated.

Results of Operations

We recorded a net loss of $2.4 million and $17.7 million during the three months ended March 31, 2008 and 2007, respectively. The following sections explain the changes between the reporting periods in each component of net loss.

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Revenue from Collaborative Agreements

Our revenue from collaborative agreements has historically been derived from a few major collaborators. Our collaborative agreements provide for some or all of the following elements: license fees, research and development funding, milestone revenues, and royalties on product sales. A summary of revenue recognized under our collaborative agreements during the three months ended March 31, 2008 and 2007 is presented in the following table (in thousands):

	Three months ended
	March 31,
	2008		2007
Novo Nordisk
Research and development funding	$	2,681	$	556
License fees	174		148
	2,855		704
BioGeneriX
Research and development funding	1,243		519
License fees	14		14
	1,257		533
	$	4,112	$	1,237

Revenue from collaborative agreements increased in 2008 from 2007 primarily due to increased research and development funding from our collaborations with Novo Nordisk and BioGeneriX.

Because our 2008 revenues could be substantially affected by entering into new collaborations and by the financial terms of any new collaborations, we cannot estimate our 2008 revenues. Material cash inflows from proprietary drug development projects are highly uncertain, and we cannot reasonably estimate the period in which we will begin to receive, if ever, material net cash inflows from our major research and development projects. Cash inflows from development-stage products are dependent on several factors, including entering into collaborative agreements, the achievement of certain milestones, and regulatory approvals. We may not receive milestone payments from any existing or future collaborations if a development-stage product fails to meet technical or performance targets or fails to obtain the required regulatory approvals. Further, our revenues from collaborations will be affected by the levels of effort committed and made by our collaborative partners. Even if we achieve technical success in developing drug candidates, our collaborative partners may discontinue development, may not devote the resources necessary to complete development and commence marketing of these products, or they may not successfully market potential products.

Research and Development Expense

We have two therapeutic protein candidates in clinical trials: GlycoPEG-GCSF and GlycoPEG-FVIIa, and two therapeutic protein candidates in the research stage: GlycoPEG-FVIII and GlycoPEG-FIX.

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In January 2008, we announced the discontinuation of further development of NE-180, our product candidate intended for the treatment of anemia in patients with chronic kidney disease and cancer patients receiving chemotherapy.  The decision to discontinue development was not due to any safety or efficacy concerns about NE-180, but was based on an evaluation of commercial prospects and the likelihood of entering into a timely collaboration for the compound in the context of increased safety concerns in the ESA category.  Throughout 2007 we incurred costs for the development of NE-180, including process, non-clinical and clinical development. During the first quarter of 2008, we incurred costs of $1.3 million related to the cessation of clinical development activities for NE-180. During the second quarter of 2008, we expect to complete these activities and incur additional costs of $0.7 million.

We conduct exploratory research, both independently and with collaborators, on therapeutic candidates, primarily proteins, for development using our enzymatic technologies. Successful candidates may be advanced for development through our own proprietary drug program or through our partnering and licensing program, or a combination of the two. Although our primary focus is the development of long-acting proteins, we are also conducting research to assess opportunities to use our enzymatic technologies in other areas, such as glycopeptides and glycolipids. We expect to continue this research during 2008.

Our current research and development projects are divided between two categories: (i) GlycoPEGylation and (ii) Other Glycotechnology Programs, which includes projects investigating opportunities to use our enzymatic technologies in other areas, such as glycolipids. The following chart sets forth our projects in each of these categories and the stage to which each has been developed:

	Development Stage	Status
GlycoPEGylation:
NE-180	Clinical (Phase II)	Discontinued
GlycoPEG-GCSF	Clinical (Phase I)	Active
GlycoPEG-FVIIa	Clinical (Phase I)	Active
GlycoPEG-FIX	Research	Active
GlycoPEG-FVIII	Research	Active
Other Glycotechnology Programs:
Non-protein therapeutic applications	Research	Active

The process of bringing drugs from the preclinical research and development stage through Phase I, Phase II, and Phase III clinical trials to FDA or other regulatory approval is time consuming and expensive. Because our announced product candidates are currently in the research or early clinical and preclinical stages, and there are a variety of potential intermediate clinical and non-clinical outcomes that are inherent in drug development, we cannot reasonably estimate either the timing or costs we will incur to complete these research and development projects. In addition, the timing and costs to complete our research and development projects will be affected by the timing and nature of any collaboration agreements we may enter into with a third party, neither of which we can currently estimate.

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For each of our research and development projects, we incur both direct and indirect expenses. Direct expenses include salaries and other costs of personnel, raw materials, and supplies for each project. We may also incur third-party costs related to these projects, such as contract research, consulting and non-clinical development costs. Indirect expenses include depreciation expense and the costs of operating and maintaining our facilities, property, and equipment, to the extent used for our research and development projects, as well as the costs of general management of our research and development projects.

Our research and development expenses during the three months ended March 31, 2008 and 2007 were $7.8 million and $9.8 million, respectively. The decrease in research and development expenses during the 2008 period as compared to the 2007 period was primarily due to lower payroll, consulting and facility related costs of $1.7 million resulting from the restructurings that were implemented in 2007 and 2008 and lower external costs of $1.7 million incurred for the NE-180 program during the 2008 period. These decreases were partially offset by $1.9 million of additional external costs incurred under our collaborative agreements with Novo Nordisk and BioGeneriX for the 2008 period. The following table illustrates research and development expenses incurred during the three months ended March 31, 2008 and 2007 for our significant groups of research and development projects (in thousands):

	Three months ended  March 31,
	2008		2007
GlycoPEGylation	$	6,052	$	6,492
Other Glycotechnology Programs	13		35
Indirect expenses	1,696		3,285
	$	7,761	$	9,812

GlycoPEGylation

Our GlycoPEGylation expenses result primarily from development activities, including process, non-clinical and clinical development, associated with our proprietary drug development programs. These expenses decreased during the 2008 period compared to 2007 primarily due to lower external costs of $1.7 million incurred for the NE-180 program during 2008 and were partially offset by $1.9 million of additional external costs incurred in 2008 under our collaborative agreements with Novo Nordisk with BioGeneriX.

Other Glycotechnology Programs

Research and development expenses related to our Other Glycotechnology Programs, were consistent for both the 2008 and 2007 periods.

Indirect expenses

Indirect research and development expenses decreased during the 2008 period primarily due to lower payroll, consulting and facility costs of $1.7 million related to the restructurings that were implemented in 2007 and 2008.

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General and Administrative Expense

General and administrative expenses were $3.0 million for each of the three month periods ended March 31, 2008 and 2007. The three month periods ended March 31, 2008 and 2007 includes $0.7 million and $0.1 million, respectively, of severance costs related to the restructuring implemented during those respective periods.

Other Income and Expense

In connection with the sale of our common stock and warrants to purchase shares of our common stock in March 2007, we recorded the warrants as a liability at their initial fair value using the Black-Scholes option-pricing model and revalue them at each reporting date until they are exercised or expire. Changes in the fair value of the warrants are reported in our Statements of Operations as non-operating income or expense. During the three months ended March 31, 2008, we recorded a non-operating income of $3.8 million related to the decrease in fair value of these warrants primarily as a result of a decrease in the market price of our common stock during the three months ended March 31, 2008. The market price for our common stock has been and may continue to be volatile.  Consequently, future fluctuations in the price of our common stock may cause significant increases or decreases in the fair value of these warrants.

Interest income during the three months ended March 31, 2008 and 2007 was $162,000 and $272,000, respectively. The decrease during the 2008 period compared to the 2007 period was primarily due to lower cash balances for 2008. Our interest income during the remainder of 2008 is difficult to project, and will depend largely on prevailing interest rates and whether we receive cash from entering into any new collaborative agreements or by completing any additional equity or debt financings during the year.

Interest expense during the three months ended March 31, 2008 and 2007 was $17,000 and $40,000, respectively. Lower average debt balances in the 2008 period accounted for the decrease. Our interest expense during the remainder of 2008 is difficult to project and will depend on whether we enter into any new debt agreements. See “Financing Activities – Debt Financing Activities” in the Liquidity and Capital Resources section of this Form 10-Q for a description of the material features of our debt financings.

During the three months ended March 31, 2008, we sold Pennsylvania research and development tax credits, resulting in the recognition of $303,000 of income tax benefit.

Item 3.           Quantitative and Qualitative Disclosures About Market Risk

Equity Price Risk

We are exposed to certain risks arising from changes in the price of our common stock, primarily due to the potential effect of changes in fair value of the warrant liability related to the warrants issued in March 2007. The warrant liability is revalued at its current fair value using the Black-Scholes option-pricing model at each reporting date until the warrants are exercised or expire, and is subject to significant increases or decreases in value due to the effects of changes in the price of our common stock at period end and the related calculation of volatility. Changes in the fair value of warrants are reported in our Statements of Operations as non-operating

32

income or expense.  If the closing price of our common stock on March 31, 2008 had been 30% higher, the fair value of our warrant liability would have been $268,000 higher, which would have resulted in a $268,000 increase in our net loss for the three months ended March 31, 2008.  If the closing price of our common stock on March 31, 2008 had been 30% lower, the fair value of our warrant liability would have been $211,000 lower, which would have resulted in a $211,000 decrease in our net loss for the three months ended March 31, 2008.

Foreign Exchange Risk

We have entered into some agreements denominated, wholly or partly, in Euros or other foreign currencies, and, in the future, we may enter into additional, significant agreements denominated in foreign currencies. If the values of these currencies increase against the dollar, our costs would increase. To date, we have not entered into any contracts to reduce the risk of fluctuations in currency exchange rates. In the future, depending upon the amounts payable under any such agreements, we may enter into forward foreign exchange contracts to reduce the risk of unpredictable changes in these costs. However, due to the variability of timing and amount of payments under any such agreements, foreign exchange contracts may not mitigate the potential adverse impact on our financial results.

Item 4.           Controls and Procedures

Disclosure controls and procedures

Our management carried out an evaluation, with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act)), as of the end of the period covered by this report on Form 10-Q.  Based on that evaluation, management concluded that these controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported as specified in SEC rules and forms.  There were no changes in these controls or procedures identified in connection with the evaluation of such controls or procedures that occurred during our last fiscal quarter, or in other factors that have materially affected, or are reasonably likely to materially affect, these controls or procedures.

Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC.  These disclosure controls and procedures include, among other things, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting

There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

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PART II.       OTHER INFORMATION

Item 6. Exhibits

10.1*	Commercial Insurance Premium Finance and Security Agreement between Neose Technologies, Inc. and Cananwill, Inc. dated March 12, 2008.
10.2*††	Form of Change of Control Agreement between Neose Technologies, Inc. and Certain Executive Officers.
10.3*††	Form of Non-Qualified Stock Option Award Agreement under Neose Technologies, Inc. 2004 Equity Incentive Plan.
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*Filed herewith.

††Compensation plans and arrangements for executives and others.

34

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.

		NEOSE TECHNOLOGIES, INC.
Date:	May 8, 2008	By:	/s/ A. Brian Davis
			A. Brian Davis
			Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer and Duly Authorized Signatory)

35

Exhibit Index

Exhibit	Description
10.1	Commercial Insurance Premium Finance and Security Agreement between Neose Technologies, Inc. and Cananwill, Inc. dated March 12, 2008.
10.2	Form of Change of Control Agreement between Neose Technologies, Inc. and Certain Executive Officers.
10.3	Form of Non-Qualified Stock Option Award Agreement under Neose Technologies, Inc. 2004 Equity Incentive Plan.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

36

EX-10.1

Exhibit 10.1

CANANWILL, INC.
1000 MILWAUKEE AVENUE, GLENVIEW, IL 60025 - (800) 544-0666
COMMERCIAL INSURANCE PREMIUM FINANCE AND SECURITY AGREEMENT 3/2/2008 370,622.96						Contract Number
NC LIC, #B-116, SC LIC, #99			Agent Number        A3390			Quote Number      396563A-1
Name and address of Insured(s) (as shown in the policy) and co-obligor if any				Name and Address of Insured’s Agent (“Agent”)
Neose Technologies, Inc.				AON RISK SERVICES INC. OF PA
102 Rock Road				ONE LIBERTY PLACE, SUITE 1000
				1650 MARKET STREET
Horsham, PA 19044				PHILADELPHIA, PA 19103
RE:				Contact: Pat McLean
Telephone Number: (215) 441-5890				Telephone Number: (215) 255-2000
Policyholder Designation    (Check One):		Type of Agreement    (Check One):
	o Proprietorship	x New			Indicate contract number of
					current policy being financed.
o Partnership	x Corporation	o Additional Premium

SCHEDULE OF POLICIES COVERED BY THIS AGREEMENT

FOR COMPANY	POLICY NUMBER		FULL NAME OF INSURANCE COMPANY AND ADDRESS OF BRANCH REPORTING OFFICE AND	TYPE OF INSUR-	TERM IN	POLICY EFFECTIVE DATE	POLICY
USE ONLY	Prefix	Number	FULL NAME AND ADDRESS OF GENERAL AGENT	ANCE	MONTHS	Mo. Day Year	PREMIUM
76201	DOC364951411		ZURICH AMERICAN INSURANCE CO	DO	12	2/15/2008	115,000.00
	Asgn Rsk=N AddCxlDays=0					Taxes	0.00
	Audit=N Min Ernd=0.000					Fees	0.00
15403	FDO705401		LLOYD’S OF LONDON	DO	12	2/15/2008	100,000.00
	Asgn Rsk=N AddCxlDays=0					Taxes	3,000.00
	Audit=N Min Ernd=0.000					Fees	25.00
Total taxes:	3634.00
Total fees:	25.00		(Policies Continued on Next Page)
NY: Charge under §2119 of New York Insurance Law for obtaining and servicing these policies. If none, state ‘None’, $				FLORIDA DOCUMENTARY STAMP TAX			0.00
				CASH PRICE (Total Premiums)			$	405,014.00

	DISCLOSURE STATEMENT - PAYMENT SCHEDULE
	Payment Plan:  x Monthly     o Quarterly     o Annually
	Number of Payments  11	First Payment Due  3/15/2008
	Subsequent payments are due on the same day of each succeeding period.

CASH	*	CASH	=	AMOUNT	+	FINANCE	=	TOTAL OF	AMOUNT OF EACH	ANNUAL
PRICE		DOWN		FINANCED		CHARGE		PAYMENTS	PAYMENT	PERCENTAGE
		PAYMENT		The amount of		The dollar amount		The amount you will have		RATE
				credit provided		the credit will		paid when you have made		The cost of your
				on your behalf.		cost you.		all scheduled payments.		credit as a yearly rate.
$405,014.00		$34,391.04		$370,622.96		$7,678.48		$378,301.44	$34,391.04	4.12	%

CANANWILL, INC. (HEREINAFTER CALLED CANANWILL)

1000 MILWAUKEE AVENUE, GLENVIEW, IL 60025 - (800) 544-0666

Prepayment: The insured may prepay in full at any time and receive a refund of the unearned finance charge, calculated according to the Rule of 78’s (actuarial method in AR, AZ, CA, MA, MO, NJ, OR, PA, VT; short rate method in SC), and subject to a nonrefundable charge stated on page two. Minimum refund is $1.00 (except AK, where there is no minimum refund).

Security interest: The insured assigns to Cananwill as security for payment of this agreement all sums payable to the Insured with reference to the policies listed above, including, among other things, any gross return premiums and any payment on account of loss which results in reduction of unearned premium in accordance with the term of said policies.

Delinquency charge: The Insured agrees that upon default in payment of any installment five days or more (more than 5 days in IL, MS, OH) to pay a Delinquency Charge of 5% of the delinquent installment. In AK, CA, DE, MI, MN, ND, NJ, OR, TN, TX, the Delinquency Charge is not due until installment is in default for ten days or more, more than 10 days in MA, NM 7 days in VA. Maximum delinquency charge is $5 in DE, MT, ND; $100 in MD; $500 in NM; 1 1/2% of the installment in NJ with a minimum of $25. In AK, OR: for delinquent payments of less than $250, the delinquency charge is the lesser of 5% of the payment or $5, otherwise the delinquency charge is 2% of the payment. KS: Delinquency charge is $5 plus 2% of the installment in default.

Cancellation Charge: The Insured agrees that if a default results in cancellation of the policy(ies) to pay a Cancellation Charge in the amount stated on page two. (Not applicable in AK, KY,TX, NC.)

See the provisions on page two for additional information about nonpayment, default, and any repayment in full before the scheduled date and any prepayment refunds or penalties.

QIV# 396563A-1 PRN:3/3/2008 1:40 PM CFG: CustomConfig RT:ARSw/deviation PF:0.00 T:4.52 B1:4.12 B2:4.12
NOTICE TO INSURED:	1. DO NOT SIGN THIS AGREEMENT BEFORE YOU READ IT, INCLUDING THE WRITING ON PAGE TWO, OR IF IT CONTAINS ANY BLANKS. 2. YOU ARE ENTITLED TO A COMPLETELY FILLED IN COPY OF THIS AGREEMENT AT THE TIME YOU SIGN IT. 3. YOU UNDERSTAND AND HAVE RECEIVED A COPY OF THIS AGREEMENT, KEEP IT TO PROTECT YOUR LEGAL RIGHTS. 4. UNDER THE LAW YOU HAVE THE RIGHT TO PAY OFF IN ADVANCE THE FULL AMOUNT DUE AND UNDER CERTAIN CONDITIONS TO OBTAIN A PARTIAL REFUND OF THE FINANCE CHARGE. 5. SEE PAGE TWO FOR IMPORTANT INFORMATION.
When used in this Agreement, “Insured” means the insured and any co-obligor named above and all insureds covered by the Policies listed in the Schedule of Policies. Each Insured jointly and severally agrees to make all payments required by this Agreement and to be bound by all of its provisions including those on page two. The person signing represents and warrants that he or she is authorized to enter into this Agreement on behalf of each Insured and to bind each Insured to this Agreement. Each Insured agrees that Cananwill may send all notices under this Agreement to the Insured’s address shown above. You are not required to enter into an insurance premium financing arrangement as a condition to the purchase of any insurance policy.

By	/s/ A. BRIAN DAVIS	Date	March 6, 2008
	(Signature of insured)
A. BRIAN DAVIS, SVP AND CFO
(Typed Name and Title)

AGENT’S REPRESENTATIONS AND WARRANTIES

The undersigned Agent has read the Insurance Agent’s Representations and Warranties on page two and makes all such representations and warranties recited therein and agrees to be bound by the terms of this Agreement.

By	/s/ RAYMOND M. SUBERS	Date	Mar 12, 2008
	(Signature of Agent)
RAYMOND M. SUBERS
CW-1        QIV  (Ed. 01-03)                 (Typed Name and Title)

Agent Number A3390

Quote Number 396563A-1

ADDENDUM TO COMMERCIAL INSURANCE PREMIUM FINANCE AGREEMENT (“PFA”)

SCHEDULE OF POLICIES COVERED BY THE PFA INCLUDES THE FOLLOWING:

FOR COMPANY USE ONLY			FULL NAME OF INSURANCE COMPANY AND  ADDRESS OF BRANCH REPORTING OFFICE AND FULL NAME AND ADDRESS OF GENERAL AGENT	TYPE OF INSUR- ANCE	TERM IN MONTHS	POLICY EFFECTIVE DATE Mo. Day Year	POLICY PREMIUM
	POLICY NUMBER
	Prefix	Number
03605	EC06400295		ST. PAUL MERCURY INSURANCE CO	EPL	12	2/15/2008	13,500.00
	Asgn Rsk=N AddCxlDays=0					Taxes	0.00
	Audit=N Min Ernd=0.000					Fees	0.00
03605	CR03800094		ST. PAUL MERCURY INSURANCE CO	CR	12	2/15/2008	9,470.00
	Asgn Rsk=N AddCxlDays=0					Taxes	0.00
	Audit=N Min Ernd=0.000					Fees	0.00
03605	EC06400294		ST. PAUL MERCURY INSURANCE CO	FIDU	12	2/15/2008	4,000.00
	Asgn Rsk=N AddCxlDays=0					Taxes	0.00
	Audit=N Min Ernd=0.000					Fees	0.00
73768	35852317		FEDERAL INSURANCE COMPANY	CPAK	12	2/15/2008	68,838.00
	Asgn Rsk=N AddCxlDays=0					Taxes	2.00
	Audit=N Min Ernd=0.000					Fees	0.00
73768	35852317		FEDERAL INSURANCE COMPANY	PROD	12	2/15/2008	37,000.00
	Asgn Rsk=N AddCxlDays=0					Taxes	0.00
	Audit=N Min Ernd=25.000					Fees	0.00
73768	74985874		FEDERAL INSURANCE COMPANY	AUTO	12	2/15/2008	5,917.00
	Asgn Rsk=N AddCxlDays=30					Taxes	0.00
	Audit=N Min Ernd=0.000					Fees	0.00
73768	71634788		FEDERAL INSURANCE COMPANY	WC	12	2/15/2008	32,685.00
	Asgn Rsk=N AddCxlDays=0					Taxes	632.00
	Audit=Y Min Ernd=0.000					Fees	0.00
73768	79813718		FEDERAL INSURANCE COMPANY	UMB	12	2/15/2008	11,445.00
	Asgn Rsk=N AddCxlDays=0					Taxes	0.00
	Audit=N Min Ernd=0.000					Fees	0.00
05125	73243156		GREAT NORTHERN INSURANCE CO	FLIA	12	2/15/2008	3,500.00
	Asgn Rsk=N AddCxlDays=0					Taxes	0.00
	Audit=N Min Ernd=0.000					Fees	0.00

(Pg. 2 of 2)

The Insured (jointly and severally if more than one) agrees as follows:

1. In consideration of the payment by CANANWILL of the Amount Financed, Insured agrees to pay the Cash Down Payment to the insurance company(ies) listed in the Schedule of Policies, and to pay CANANWILL the Total of Payments in accordance with the terms of this Agreement. Interest is computed on an annual basis of 12 months of 30 days each.

2. Insured assigns to CANANWILL as security for the total amount payable hereunder all sums payable to the Insured under the listed Policies, including, among other things, any gross unearned premiums and any payment on account of loss which results in a reduction of unearned premium in accordance with the terms of said policies.

3. Insured hereby irrevocably appoints CANANWILL as its Attorney-in-Fact upon the occurrence of an Event of Default (defined below) and, after proper notice has been mailed as required by law, grants to CANANWILL authority to effect cancellation of
policy(ies) listed in the Schedule of Policies (“Policies”), and to receive any unearned premium or other amounts with respect to the Policies assigned as security herein, and to sign any check or draft issued therefor in Insured’s name and to direct the insurance companies to make said check or draft payable to CANANWILL. Insured agrees that proof of mailing any notice hereunder constitutes proof of receipt of such notice.

4. Insured agrees that any payments made and accepted after Policy cancellation shall not constitute reinstatement or obligate CANANWILL to request reinstatement of such insurance Policy(ies), and Insured acknowledges that CANANWILL has no authority to reinstate coverage, and that such payments may be applied to Insured’s indebtedness hereunder.

5. Insured agrees not to assign the Policy(ies) except for the interest of mortgagees or loss payees, without the written consent of CANANWILL. CANANWILL may assign this Agreement without Insured’s consent, and all rights conferred upon CANANWILL shall inure to CANANWILL’s successors and assigns.

6. Except in KY and VT, Insured agrees to pay a fee of $15.00 in the event of a dishonored check. ($5.00 in CA; $10 in AZ, MA, MD, OH, VI; $7.50 in NV, not to exceed CANANWILL’s cost in NJ).

7. An Event of Default occurs when the Insured does not pay any installment according to the terms of this Agreement or (except in MD) fails to comply with any of the terms of the Agreement or (except in MD) if any of the Policies are cancelled for any reason. If an Event of Default occurs and after giving notice as required by law, all amounts due under this Agreement become immediately due and payable and the Insured is liable for all amounts described herein, including any unpaid balance remaining after application of the unearned premiums. If an Event of Default occurs, CANANWILL may at its option pursue the following remedies:

·After proper notice has been given as required by law, CANANWILL may immediately cancel the Policy(ies) and collect any unearned premiums or other amounts payable under said Policies. Unearned premiums shall be payable to CANANWILL only.

·CANANWILL may take all necessary actions to enforce payment of this debt. To the extent not prohibited or limited by applicable law, CANANWILL is entitled to collection costs and expenses incurred while enforcing its rights under this Agreement and to reasonable attorney’s fees if this Agreement is referred to an attorney who is not a salaried employee of CANANWILL for collection or enforcement (not permitted in KY, NC; total of collection costs and attorney’s fees is limited to 20% of the unpaid balance in AZ, FL, MO, MS, NH, NV, NY, VI; 15% of unpaid balance in TN; 25% of unpaid balance in VT).

·Except in AK, KY, MI, NC, VT and the other states listed herein, after cancellation, Insured agrees to pay interest on the unpaid balance (calculated according to the Rule of 78’s (actuarial method in AR, AZ, CA, NJ, OR, PA; short rate method in SC) as of the scheduled due date of the first delinquent payment leading to cancellation of the Policies) at the rate of 1% per month (in AR, NM, TX, at the Annual Percentage Rate stated on page one), or at the highest rate permitted by law, whichever is less, until the entire balance of this loan is paid in full. In MA, Insured agrees to pay interest at the rate of 1% per month on the difference between the unpaid balance on the date of cancellation (computed according to the actuarial method) and the unearned premiums received by CANANWILL on the cancelled Policies, for the period from the date of cancellation until the balance is paid in full.

·In AL, DC, DE, IL, KS, NY and WA, after cancellation, Insured agrees that CANANWILL may recompute the total finance charge due under this Agreement on the original amount financed, at the rate and in the manner described in this paragraph from the first effective date of the Policies through the last originally scheduled installment date, and Insured agrees to pay this amount, subject to the provisions on prepayment in full. That rate, stated as a dollar amount per year for each $100 of amount financed is as follows: $9 in AL, DE; $10 in DC, IL, WA; $12 in KS; $14 in NY.

·CANANWILL may offset and deduct from any amounts CANANWILL owes to Insured with respect to any Policies financed hereunder, any amounts which Insured owes to CANANWILL under this or (except in KY, MD, NC and TX) any other agreement.

8. Insured agrees to pay a non-refundable service fee of $10 in AK, AZ, CT, DE, KS, LA, MO, NY, PA, WA, WI; $12 in NJ; $12.50 in MT; $15 in AL, KY, NC, RI, SC, TN, VA; $16 in MA; $18 in MI; $20 in DC, FL, GA, MD, MN, OH; $25 in CO, HI, IA, ID, IN, ME, NE, ND, NV, OK, SD, UT, VI, WV, WY; the lesser of $50 or 10% of the amount financed in OR. In CA, the minimum finance charge is $25. In IL, the non-refundable service charge is $20 if the amount financed is less than $500, $30 if the amount financed is $500 or more but less than $1,000, or $40 if the amount financed is over $1,000. In NJ, if this loan is prepaid in full, Insured agrees to pay an additional charge of $20 for any loan of $2,000 or less, 1% of the loan for loans over $2,000 up to and including $5,000 and $100 on loans over $5,000.

9. Insured agrees to pay a cancellation charge of $5 in TN, VI; $10 in MN, ND, OH; $15 in AL, AZ, GA, MO, MS, RI, WI; $25 in CO, HI, IA, ID, IN, LA, ME, NE, OK, SD, UT, WV, WY; the greater of 2% of the unpaid balance or $5 in MA; the difference between the delinquency charge assessed and; $5 in DE, MI, MT, NJ, NY, OR, WA; $10 in DC; $15 in NH; $100 in MD.

10. Insured agrees to pay promptly to the insurer any additional premiums due on the Policies.

11. The Agent is not the agent of CANANWILL and the Agent cannot bind CANANWILL. CANANWILL is not the Agent of any insurer and is not liable for any acts or omissions of any insurer. Insured acknowledges that it has chosen to do business with the Agent and the insurance companies issuing the Policies, and that the insolvency, fraud, defalcation or other action or failure to act by any of them shall not relieve or diminish Insured’s obligations to CANANWILL hereunder.

12. Except in MD, and if not prohibited by applicable law, CANANWILL may insert the name of the insurer, policy numbers and first installment due date if omitted and if policy has not been issued at the time of signature.

13. This Agreement shall have no force or effect until accepted by CANANWILL. All rights and remedies in this Agreement are cumulative and not exclusive. If any part of this Agreement is determined to be invalid or unenforceable, the remaining provisions of this Agreement shall continue to be in full force and effect. Neither CANANWILL nor its assignee shall be liable for any loss or damage to the Insured by reason of failure of any insurance company to issue or maintain in force any of the Policies or by reason of the exercise by CANANWILL or its assignee of the rights conferred herein. This Agreement constitutes the entire Agreement between CANANWILL and Insured and may not be modified except as agreed upon in writing. CANANWILL’s acceptance of late or partial payments shall not be deemed a waiver by CANANWILL of any provisions of this Agreement, and CANANWILL is entitled to require Insured to strictly comply with the terms hereof. Except in AR, this Agreement is governed by the law of the state of the Insured’s address shown on page one of this Agreement. In AR, this Agreement is governed by the law of the state where this Agreement is accepted by CANANWILL. If any amount contracted for or received by CANANWILL is determined to violate any law or regulation, CANANWILL may return such prohibited amount to Insured without any further liability therefor (waiver of liability not appliable in KY).

14. Insured represents and warrants that the proceeds of this loan are to be used to purchase insurance for other than personal, family or household purposes and that all information provided herein or in connection with this agreement is true, correct, complete and not misleading.

15. CALIFORNIA RESIDENTS ONLY:

FOR INFORMATION CONTACT THE DEPARTMENT OF FINANCIAL INSTITUTIONS, STATE OF CALIFORNIA.

Insured agrees that, in accordance with Section 18608 of the California Financial Code, CANANWILL’s liability to Insured upon the exercise of CANANWILL’s authority to cancel the Policies shall be limited to the amount of the principal balance of this loan, except in the event of CANANWILL’s willful failure to mail the notice of cancellation required under California law.

In connection with the Policies scheduled on page one, the Agent represents and warrants to CANANWILL, its successors and assigns that:

1. Deposit premiums are not less than the anticipated premiums to be earned for the full terms of the Policies.

2. All of the scheduled Policies or bonds in this Agreement are cancellable by standard short rate or pro-rata tables.

3. When cancellation is requested by Insured or by CANANWILL, none of the Policies require advance notice of cancellation to any party, other than any notice required to be given by CANANWILL, and there are no audit or reporting form policies, Policies subject to retrospective rating or to minimum earned premiums except as indicated in the Schedule of Policies.

4. We are the authorized policy Issuing Agent of the insurance companies or the broker placing the coverage directly with the insurance company on all Policies except as indicated in the Schedule of Policies.

5. The Insured(s) signature(s) on both pages one and two hereof are genuine, the Insured has not paid for the scheduled Policies other than as described herein, the Insured(s) have received a copy of this Agreement, this Agreement is valid and enforceable and there are no defenses to it, the scheduled Policies are in full force and effect and the premiums indicated are correct for the term of the Policies, and all other information relating to the Policies and the Insured is complete and correct. None of the Policies have been financed on an installment payment plan provided by the insurance company(ies), or are noncancellable policy(ies), or policies written for a term of less than one year. The Agent recognizes the Insured’s assignment of the unearned premiums and upon cancellation of any of the scheduled Policies agrees to pay promptly any unearned commissions to CANANWILL and to pay to CANANWILL the unearned premiums immediately upon receipt Agent shall not deduct any amounts which Insured owes to Agent from any amounts owing to CANANWILL hereunder. The Policies are not for personal, family or household purposes.

6. A proceeding in bankruptcy, receivership or insolvency has not been instituted by or against the Insured or if the Insured is the subject of such a proceeding, it is noted on the Agreement in the space in which the Insured’s name and address is placed.

7. If the Agreement has been signed by the Agent on behalf of the Insured, the Agent has the authority to act in this capacity and the Agent has provided the Insured with a complete copy of this Agreement.

8. There are no exceptions to the Policies financed other than those indicated, and the Policy(ies) comply with CANANWILL’s eligibility requirements.

9. The Cash Down Payment, and any installments due from the Insured which Agent has agreed to collect, have been collected from the Insured.

10. Agent is not an agent of CANANWILL and is not authorized to bind CANANWILL and has not made any representation to the contrary.

The Agent agrees to promptly remit all funds received from CANANWILL and the Insured for the financed Policies and due to the insurance company(ies) issuing such Policies. Agent shall be liable to CANANWILL for any losses, costs, damages or other expenses (including attorney’s fees) incurred by CANANWILL or its assignee as a result of or in connection with any untrue or misleading representation or warranty made by Agent hereunder, or otherwise arising out of the breach by Agent of this Agreement. Agent shall promptly notify CANANWILL of any unpaid increased premiums for the Policies.

CW-1        QIV  (Ed. 01-03)

EX-10.2

Exhibit 10.2

Name	Position	Execution Date
A. Brian Davis	Senior Vice President and Chief Financial Officer	April 30, 2007
Valerie M. Mulligan	Senior Vice President, Quality and Regulatory Affairs	April 30, 2007
Bruce A. Wallin, M.D.	Senior Vice President, Clinical Development and Chief Medical Officer	April 30, 2007
Shawn A. DeFrees, Ph.D.	Senior Vice President, Research and Technical Development	March 14, 2008

CHANGE OF CONTROL AGREEMENT

THIS CHANGE OF CONTROL AGREEMENT (the “Agreement”), is dated as of                         , by and between NEOSE TECHNOLOGIES, INC. (the “Company”) and                          (the “Employee”).

Background

The Employee, a senior executive of the Company, and the Company are parties to a Change of Control Agreement dated                            (“Original Agreement”), pursuant to which the Company and the Employee established certain protections for the Employee in the event of his or her termination of employment.  The parties desire to replace the Original Agreement with this Agreement.

Terms

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, and intending to be bound hereby, the parties agree as follows:

1.Definitions.  As used herein:

1.1.  “Base Salary” means, as of any given date, the annual base rate of salary payable to the Employee by the Company, as then in effect; provided, however, that in the case of a resignation by the Employee for the Good Reason described in Section 1.8.4, “Base Salary” will mean the annual base rate of salary payable to the Employee by the Company, as in effect immediately prior to the reduction giving rise to the Good Reason.

1.2.  “Board” means the Board of Directors of the Company.

1.3.  “Business” means research, development, manufacture, supply, marketing, licensing, use and sale of biologic, pharmaceutical and therapeutic materials and products and related process technology directed to (a) the enzymatic synthesis of complex carbohydrates for use in food, cosmetic, therapeutic, consumer and industrial applications, (b) enzymatic synthesis or modification of the carbohydrate portion of proteins or lipids, or modification of proteins or lipids through the attachment of carbohydrates,  (c) carbohydrate-based therapeutics, and (d) the development of protein therapeutics using sialylation, fucosylation, glycosylation, GlycoPEGylation™, or GlycoConjugation™.

1.4.  “Cause” means fraud, embezzlement, or any other serious criminal conduct that adversely affects the Company committed intentionally by the Employee in connection with

his or her employment or the performance of his or her duties as an officer or director of the Company or the Employee’s conviction of, or plea of guilty or nolo contendere to, any felony.

1.5.  “Change in Control” means a change in ownership or control of the Company effected through:

1.5.1.the direct or indirect acquisition by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities;

1.5.2.a change in the composition of the Board over a period of 36 months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (a) have been board members continuously since the beginning of such period, or (b) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (a) who were still in office at the time such election or nomination was approved by the Board;

1.5.3.the consummation of any consolidation, share exchange or merger of the Company (a) in which the stockholders of the Company immediately prior to such transaction do not own at least a majority of the voting power of the entity which survives/results from that transaction, or (b) in which a shareholder of the Company who does not own a majority of the voting stock of the Company immediately prior to such transaction, owns a majority of the Company’s voting stock immediately after such transaction; or

1.5.4.the liquidation or dissolution of the Company or any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, including stock held in subsidiary corporations or interests held in subsidiary ventures.

1.6.  “Code” means Internal Revenue Code of 1986, as amended.

1.7.  “Disability” means the Employee’s inability, by reason of any physical or mental impairment, to substantially perform his or her regular duties as contemplated by this Agreement, as determined by the Board in its sole discretion (after affording the Employee the opportunity to present his or her case), which inability is reasonably contemplated to continue for at least one year from its commencement and at least 90 days from the date of such determination.

1.8.  “Good Reason” means, without the Employee’s prior written consent, any of the following:

1.8.1.an adverse change in the Employee’s title;

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1.8.2.a reduction in the Employee’s authority, duties or responsibilities, or the assignment to the Employee of duties that are inconsistent, in a material respect, with Employee’s position;

1.8.3.the relocation of the Company’s headquarters more than 15 miles from Horsham, Pennsylvania, unless such move reduces the Employee’s commuting time;

1.8.4.a reduction in the Employee’s Base Salary or in the amount, expressed as a percentage of Base Salary, of the Employee’s Target Bonus;

1.8.5.the Company’s failure to pay or make available any material payment or benefit due under this Agreement or any other material breach by the Company of this Agreement.

However, the foregoing events or conditions will constitute Good Reason only if the Employee provides the Company with written objection to the event or condition within 60 days following the occurrence thereof, the Company does not reverse or otherwise cure the event or condition within 30 days of receiving that written objection and the Employee resigns his or her employment within 90 days following the expiration of that cure period.

1.9.  “Intellectual Property” means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents and patent applications claiming such inventions, (b) all trademarks, service marks, trade dress, logos, trade names, fictitious names, brand names, brand marks and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets (including research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, methodologies, technical data, designs, drawings and specifications), (f) all computer software (including data, source and object codes and related documentation), (g) all other proprietary rights, (h) all copies and tangible embodiments thereof (in whatever form or medium), or similar intangible personal property which have been or are developed or created in whole or in part by the Employee (i) at any time and at any place while the Employee is employed by Company and which, in the case of any or all of the foregoing, are related to and used in connection with the business of the Company, or (ii) as a result of tasks assigned to the Employee by the Company.

1.10.  “Proprietary Information” means any and all information of the Company or of any subsidiary or affiliate of the Company.   Such Proprietary Information shall include, but shall not be limited to, the following items and information relating to the following items: (a) all intellectual property and proprietary rights of the Company (including without limitation Intellectual Property), (b) computer codes or instructions (including source and object code listings, program logic algorithms, subroutines, modules or other subparts of computer programs and related documentation, including program notation), computer processing systems and techniques, all computer inputs and outputs (regardless of the media on which stored or located), hardware and software configurations, designs, architecture and interfaces, (c) business research,

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studies, procedures and costs, (d) financial data, (e) distribution methods, (f) marketing data, methods, plans and efforts, (g) the identities of actual and prospective customers, contractors and suppliers, (h) the terms of contracts and agreements with customers, contractors and suppliers, (i) the needs and requirements of, and the Company’s course of dealing with, actual or prospective customers, contractors and suppliers, (j) personnel information, (k) customer and vendor credit information, and (l) any information received from third parties subject to obligations of non-disclosure or non-use.  Failure by the Company to mark any of the Proprietary Information as confidential or proprietary shall not affect its status as Proprietary Information under the terms of this Agreement.

1.11.  “Pro Rata Bonus” means, with respect to each calendar year, a pro-rata bonus for such year equal to the amount of Employee’s Target Bonus for such year multiplied by a fraction, the numerator of which is the number of days during the year that transpired before the date of the Employee’s termination of employment and the denominator of which is 365.

1.12.  “Release” means a release substantially identical to the one attached hereto as Exhibit A.

1.13.  “Restricted Period” means (i) in the case of a cessation of employment described in Section 3, the period beginning on the date hereof and ending eighteen months after such cessation, and (ii) in the case of any other cessation of employment, the period beginning on the date hereof and ending on the first anniversary of such cessation.

1.14.  “Restrictive Covenants” means the covenants set forth in Sections 6.1, 6.2 and 6.3 of this Agreement.

1.15.  “Target Bonus” means, with respect to any year, the target amount of the annual bonus payable to the Employee with respect to that year, whether under an employment or incentive agreement, under any bonus plan or policy of the Company, or otherwise, and whether or not all applicable performance goals have been met and conditions to the payment of such bonus have been satisfied.

2.Termination.

2.1.  In General.  The Company may terminate the Employee’s employment at any time. The Employee may terminate his or her employment at any time, provided that before the Employee may voluntarily terminate his or her employment with the Company, he or she must provide 30 days prior written notice (or such shorter notice as is acceptable to the Company) to the Company.  Upon any termination of the Employee’s employment with the Company for any reason: (a) the Employee (unless otherwise requested by the Board) concurrently will resign any officer or director positions he or she holds with the Company, its subsidiaries or affiliates, and (b) the Company will pay to the Employee all accrued but unpaid compensation (including without limitation salary and bonus) through the date of termination, and (c) except as explicitly provided in Sections 2, 3 or 4, or otherwise pursuant to COBRA, all compensation and benefits will cease and the Company will have no further liability or obligation to the Employee.  The foregoing will not be construed to limit the Employee’s right to payment or reimbursement for claims incurred under any insurance contract funding an

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employee benefit plan, policy or arrangement of the Company in accordance with the terms of such insurance contract.

2.2.  Termination Without Cause or For Good Reason.  If the Employee’s employment by the Company ceases due to a termination by the Company without Cause or a resignation by the Employee for Good Reason, then, in addition to the payments and benefits provided for in Section 2.1 above and subject to Section 5 below, the Company will:

2.2.1.Pay to the Employee a lump sum cash payment equal to the Pro-Rata Bonus for the calendar year in which the termination occurs;

2.2.2.Pay to the Employee a lump sum cash payment equal to the sum of  (i) Employee’s Base Salary, as in effect on such date, and (ii) Employee’s Target Bonus for the calendar year in which the termination occurs;

2.2.3.Continue to provide medical benefits to the Employee (and, if covered immediately prior to such termination, his or her spouse and dependents) for a period of one year commencing from the date of the Employee’s termination of employment at a monthly cost to the Employee equal to the Employee’s monthly contribution, if any, toward the cost of such coverage immediately prior to such termination; and

2.2.4.Arrange for the provision to the Employee of reasonable executive outplacement services by a provider selected by the mutual agreement of the Company and the Employee.

2.3.  Termination Due to Death or Disability.  If the Employee’s employment by the Company ceases due to death or Disability, then, in addition to the payments and benefits provided for in Section 2.1 above and subject to Section 5 below, the Company will pay to Employee the payments and provide to Employee the benefits described in Sections 2.2.1, 2.2.2, 2.2.3 and 2.2.4, provided that the cash payments described in such Sections will be offset by the actuarial present value of the benefits paid or payable to the Employee (or his or her representatives, heirs, estate or beneficiaries) pursuant to any life insurance or disability plans, policies or arrangements of the Company by virtue of his or her death or such Disability (including, for this purpose, only that portion of such life insurance or disability benefits funded by the Company or by premium payments made by the Company).

2.4.    The payments and benefits described in Sections 2.2 and 2.3 are in lieu of (and not in addition to) any other severance arrangement maintained by the Company.

3.Certain Terminations Following a Change in Control.  If the Employee’s employment with the Company ceases within twelve months following a Change in Control as a result of a termination by the Company without Cause or a resignation by the Employee for Good Reason, then in lieu of the payments and benefits provided for in Section 2.2,:

3.1.  The Company will pay to the Employee on the date of termination a lump sum cash payment equal to the Pro-Rata Bonus for the calendar year in which the termination occurs;

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3.2.  The Company will pay to the Employee on the date of termination a lump sum cash payment equal to the sum of (i) eighteen months of the Employee’s Base Salary as in effect on such date, and (ii) the product of 1.5 times the Employee’s Target Bonus for the calendar year in which the termination occurs;

3.3.  The Company will continue to provide medical benefits to the Employee (and, if covered immediately prior to such term, his or her spouse and dependents) for a period of eighteen months commencing from the date of the Employee’s termination of employment at a monthly cost to the Employee equal to the Employee’s monthly contribution, if any, toward the cost of such coverage immediately prior to such termination;

3.4.  The Company will arrange for the provision to the Employee of reasonable executive outplacement services by a provider selected by the mutual agreement of the Company and the Employee; and

3.5.  All outstanding stock options then held by the Employee will then become fully vested and immediately exercisable and will remain exercisable and, notwithstanding any inconsistent language in any equity incentive plan or agreement, will remain exercisable for the shortest of (a) the 18 month period immediately following the Employee’s termination of employment, (b) the period remaining until the scheduled expiration of the option (determined without regard to the Employee’s termination of employment), or (c) the longest period that does not result in the option becoming subject to an additional tax under Section 409A of the Code.

4.Parachute Payments.

4.1.  Generally.  All amounts payable to the Employee under this Agreement will be made without regard to whether the deductibility of such payments (considered together with any other entitlements or payments otherwise paid or due to the Employee) would be limited or precluded by Section 280G of the Code and without regard to whether such payments would subject the Employee to the excise tax levied on certain “excess parachute payments” under Section 4999 of the Code (the “Parachute Excise Tax”).

4.2.  Gross-Up.  If all or any portion of the payments or other benefits provided under any section of this Agreement, either alone or together with any other payments and benefits which the Employee receives or is entitled to receive from the Company or its affiliates (whether paid or payable or distributed or distributable) pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (the “Payment”) would result in the imposition of a Parachute Excise Tax, the Employee will be entitled to an additional payment (the “Gross-up Payment”) in an amount such that the net amount of the Payment and the Gross-up Payment retained by the Employee after the calculation and deduction of all excise taxes (including any interest or penalties imposed with respect to such taxes) on the Payment and all federal, state and local income tax, employment tax and excise tax (including any interest or penalties imposed with respect to such taxes) on the Gross-up Payment provided for in this Section 4.2, and taking into account any lost or reduced tax deductions on account of the Gross-up Payment, shall be equal to the Payment.

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4.3.  Measurements and Adjustments.  The determination of the amount of the payments and benefits paid and payable to the Employee, and whether and to what extent payments under Section 4.2 are required to be made, will be made at the Company’s expense by an independent auditor selected by mutual agreement of the Company and the Employee, which auditor shall provide the Employee and the Company with detailed supporting calculations with respect to its determination within 15 business days after the receipt of notice from the Employee or the Company that the Employee has received or will receive a payment that is potentially subject to the Parachute Excise Tax.  For the purposes of determining whether any payments will be subject to the Parachute Excise Tax and the amount of such Parachute Excise Tax, such payments will be treated as “parachute payments” within the meaning of Section 280G of the Code, and all “parachute payments” in excess of the “base amount” (as defined under Section 280G(b)(3) of the Code) shall be treated as subject to the Parachute Excise tax, unless and except to the extent that, in the opinion of independent accounting experts reasonably selected by the Company, such payments (in whole or in part) either do not constitute “parachute payments” or represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4) of the Code) in excess of the “base amount,” or such “parachute payments” are otherwise not subject to such Parachute Excise Tax.  For purposes of determining the amount of the Gross-up Payment, if any, the Employee shall be deemed to pay federal income taxes at the highest applicable marginal rate of federal income taxation for the calendar year in which the gross-up payment is to be made and to pay any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the gross-up payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from the deduction of such state or local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of the Employee’s adjusted gross income); and to have otherwise allowable deductions for federal, state and local income tax purposes at least equal to those disallowed because of the inclusion of the gross-up payment in the Employee adjusted gross income.  Any Gross-up Payment shall be paid by the Company at the time the Employee is entitled to receive the Payment.  Any determination by the auditor shall be binding upon the Company and the Employee.

4.4.  Underpayment or Overpayment.  In the event of any underpayment or overpayment to the Employee (determined after the application of Section 4.2), the amount of such underpayment or overpayment will be, as promptly as practicable, paid by the Company to the Employee or refunded by the Employee to the Company, as the case may be, with interest at the applicable federal rate specified in Section 1274(d) of the Code.

5.Timing of Payments Following Termination.

5.1.  Subject to Section 5.2, and notwithstanding any other provision of this Agreement, the payments and benefits described in Sections 2, 3 and 4 are conditioned on the Employee’s execution and delivery to the Company, within 60 days following cessation of employment, of a Release in a manner consistent with the Older Workers Benefit Protection Act and any similar state law that is applicable.  The amounts described in Sections 2.2 or 3 (as applicable) will be paid in a lump sum, on the eighth day following the Employee’s execution and delivery of the Release, provided the Release has not been revoked by the Employee.

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5.2.  To the extent the compliance with requirements of Treas. Reg. §1.409A-3(i)(2) (or any successor provision) is necessary to avoid the application of an additional tax under Section 409A of the Code on payments due to the Employee upon or following separation from service, then notwithstanding any other provision of this Agreement (or any otherwise applicable plan, policy, agreement or arrangement), any such payments that are otherwise due within six months following the Employee’s separation from service will be deferred (without interest) and paid to the Employee in a lump sum immediately following that six month period.

6.Restrictive Covenants.  As consideration for all of the payments to be made to the Employee pursuant to Sections 2, 3, and 4 of this Agreement, the Employee agrees to be bound by the Restrictive Covenants set forth in this Section 6.  The Restrictive Covenants will apply without regard to whether any termination of the Employee’s employment is initiated by the Company or the Employee, and without regard to the reason for that termination.

6.1.Covenant Not To Compete.  The Employee covenants that, during the Restricted Period, the Employee will not (except in his or her capacity as an employee or director of the Company or with the prior consent of the Company) do any of the following, directly or indirectly, anywhere in the world:

6.1.1.engage or participate in any business competitive with the Business;

6.1.2.become interested (as owner, stockholder, lender, partner, co-venturer, director, officer, employee, agent or consultant) in any person, firm, corporation, association or other entity engaged in any business competitive with the Business.  Notwithstanding the foregoing, the Employee may hold up to 4.9% of the outstanding securities of any class of any publicly-traded securities of any company;

6.1.3.engage in any business, or solicit or call on any customer, supplier, licensor, licensee, contractor, agent, representative, advisor, strategic partner, distributor or other person with whom the Company shall have dealt or any prospective customer, supplier, licensor, licensee, contractor, agent, representative, advisor, strategic partner, distributor or other person that the Company shall have identified and solicited at any time during the Employee’s employment by the Company for a purpose competitive with the Business;

6.1.4.influence or attempt to influence any employee, consultant, customer, supplier, licensor, licensee, contractor, agent, representative, advisor, strategic partner, distributor or other person to terminate or adversely modify any written or oral agreement, arrangement or course of dealing with the Company; or

6.1.5.solicit for employment or employ or retain (or arrange to have any other person or entity employ or retain) any person who has been employed or retained by the Company within the 12 months preceding the termination of the Employee’s employment with the Company for any reason.

6.2.  Confidentiality.  The Employee recognizes and acknowledges that the Proprietary Information is a valuable, special and unique asset of the business of the Company.  As a result, both during the Employee’s employment by the Company and thereafter, the

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Employee will not, without the prior written consent of the Company, for any reason either directly or indirectly divulge to any third-party or use for his or her own benefit, or for any purpose other than the exclusive benefit of the Company, any Proprietary Information, provided that the Employee may during his or her employment by the Company disclose Proprietary Information to third parties as may be necessary or appropriate to the effective and efficient discharge of his or her duties as an employee hereunder (provided that the third party recipient has signed the Company’s then-approved confidentiality or similar agreement) or as such disclosures may be required by law.  If the Employee or any of his or her representatives becomes legally compelled to disclose any of the Proprietary Information, the Employee will provide the Company with prompt written notice so that the Company may seek a protective order or other appropriate remedy.  The non-disclosure and non-use obligations with respect to Proprietary Information set forth in this Section 6.2 shall not apply to any information that is in or becomes part of the public domain through no improper act on the part of the Employee.

6.3.  Property of the Company.

6.3.1.Proprietary Information. All right, title and interest in and to Proprietary Information will be and remain the sole and exclusive property of the Company.  The Employee will not remove from the Company’s offices or premises any documents, records, notebooks, files, correspondence, reports, memoranda or similar materials of or containing Proprietary Information, or other materials or property of any kind belonging to the Company unless necessary or appropriate in the performance of his or her duties to the Company.  If the Employee removes such materials or property in the performance of his or her duties, the Employee will return such materials or property to their proper files or places of safekeeping as promptly as possible after the removal has served its specific purpose.  The Employee will not make, retain, remove and/or distribute any copies of any such materials or property, or divulge to any third person the nature of and/or contents of such materials or property or any other oral or written information to which he or she may have access or become familiar in the course of his or her employment, except to the extent necessary in the performance of his or her duties.  Upon termination of the Employee’s employment with the Company, he or she will leave with the Company or promptly return to the Company all originals and copies of such materials or property then in his or her possession.

6.3.2.Intellectual Property.  The Employee agrees that all the Intellectual Property will be considered “works made for hire” as that term is defined in Section 101 of the Copyright Act (17 U.S.C. § 101) and that all right, title and interest in such Intellectual Property will be the sole and exclusive property of the Company.  To the extent that any of the Intellectual Property may not by law be considered a work made for hire, or to the extent that, notwithstanding the foregoing, the Employee retains any interest in the Intellectual Property, the Employee hereby irrevocably assigns and transfers to the Company any and all right, title, or interest that the Employee may now or in the future have in the Intellectual Property under patent, copyright, trade secret, trademark or other law, in perpetuity or for the longest period otherwise permitted by law, without the necessity of further consideration.  The Company will be entitled to obtain and hold in its own name all copyrights, patents, trade secrets, trademarks and other similar registrations with respect to such Intellectual Property.  The Employee further agrees to execute any and all documents and provide any further cooperation or assistance reasonably required by the Company to perfect, maintain or otherwise protect its rights in the

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Intellectual Property.  If the Company is unable after reasonable efforts to secure the Employee’s signature, cooperation or assistance in accordance with the preceding sentence, whether because of the Employee’s incapacity or any other reason whatsoever, the Employee hereby designates and appoints the Company or its designee as the Employee’s agent and attorney-in-fact, to act on his or her behalf, to execute and file documents and to do all other lawfully permitted acts necessary or desirable to perfect, maintain or otherwise protect the Company’s rights in the Intellectual Property.  The Employee acknowledges and agrees that such appointment is coupled with an interest and is therefore irrevocable.

6.4.  Acknowledgments.  The Employee acknowledges that the Restrictive Covenants are reasonable and necessary to protect the legitimate interests of the Company and its affiliates and that the duration and geographic scope of the Restrictive Covenants are reasonable given the nature of this Agreement and the position the Employee holds within the Company.  The Employee further acknowledges that the Restrictive Covenants are included herein in order to induce the Company to enter into this Agreement and that the Company would not have entered into this Agreement in the absence of the Restrictive Covenants.

6.5.  Remedies and Enforcement Upon Breach.

6.5.1.Specific Enforcement. The Employee acknowledges that any breach by him or her, willfully or otherwise, of the Restrictive Covenants will cause continuing and irreparable injury to the Company for which monetary damages would not be an adequate remedy.  The Employee shall not, in any action or proceeding to enforce any of the provisions of this Agreement, assert the claim or defense that such an adequate remedy at law exists.  In the event of any such breach by the Employee, the Company shall have the right to enforce the Restrictive Covenants by seeking injunctive or other relief in any court, without any requirement that a bond or other security be posted, and this Agreement shall not in any way limit remedies of law or in equity otherwise available to the Company.

6.5.2.Judicial Modification.  If any court determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or geographical scope of such provision, such court shall have the power to modify such provision and, in its modified form, such provision shall then be enforceable.

6.5.3.Accounting.  If the Employee breaches any of the Restrictive Covenants, the Company will have the right and remedy to require the Employee to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by the Employee as the result of such breach.  This right and remedy will be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity.

6.5.4.Enforceability.  If any court holds the Restrictive Covenants unenforceable by reason of their breadth or scope or otherwise, it is the intention of the parties hereto that such determination not bar or in any way affect the right of the Company to the relief provided above in the courts of any other jurisdiction within the geographic scope of such Restrictive Covenants.

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6.5.5.Disclosure of Restrictive Covenants.  The Employee agrees to disclose the existence and terms of the Restrictive Covenants to any employer that the Employee may work for during the Restricted Period.

6.5.6.Extension of Restricted Period.  If the Employee breaches Section 6.1 in any respect, the restrictions contained in that section will be extended for a period equal to the period that the Employee was in breach.

7.Miscellaneous.

7.1.  No Liability of Officers and Directors for Severance Upon Insolvency.  Notwithstanding any other provision of the Agreement and intending to be bound by this provision, the Employee hereby (a) waives any right to claim payment of amounts owed to him or her, now or in the future, pursuant to this Agreement from directors or officers of the Company if the Company becomes insolvent, and (b) fully and forever releases and discharges the Company’s officers and directors from any and all claims, demands, liens, actions, suits, causes of action or judgments arising out of any present or future claim for such amounts.

7.2.  Successors and Assigns. The Company may assign this Agreement to any successor to all or substantially all of its assets and business by means of liquidation, dissolution, merger, consolidation, transfer of assets, or otherwise.  The rights of the Employee hereunder are personal to the Employee and may not be assigned by him.

7.3.  Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to the principles of conflicts of laws.

7.4.  Enforcement.  Any legal proceeding arising out of or relating to this Agreement will be instituted in the United States District Court for the Eastern District of Pennsylvania, or if that court does not have or will not accept jurisdiction, in any court of general jurisdiction in the Commonwealth of Pennsylvania, and the Employee and the Company hereby consent to the personal and exclusive jurisdiction of such courts and hereby waive any objections that they may have to personal jurisdiction, the laying of venue of any such proceeding and any claim or defense of inconvenient forum.

7.5.  Waivers; Separability.  The waiver by either party hereto of any right hereunder or any failure to perform or breach by the other party hereto shall not be deemed a waiver of any other right hereunder or any other failure or breach by the other party hereto, whether of the same or a similar nature or otherwise.  No waiver shall be deemed to have occurred unless set forth in a writing executed by or on behalf of the waiving party.  No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived.  If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect.

7.6.  Notices.  All notices and communications that are required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when delivered

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personally or upon mailing by registered or certified mail, postage prepaid, return receipt requested, as follows:

If to the Company, to:

Neose Technologies, Inc.
102 Rock Road
Horsham PA 19044
Attn: General Counsel
Fax: 215-315-9100

With a copy to:

Pepper Hamilton LLP
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103
Attn: Barry M. Abelson, Esquire
Fax: 215-981-4750

If to Employee, to:

or to such other address as may be specified in a notice given by one party to the other party hereunder.

7.7.  Entire Agreement; Amendments.  This Agreement and the attached exhibit contain the entire agreement and understanding of the parties relating to the provision of severance benefits upon termination, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature relating to that subject, including without limitation the Retention Agreement dated                     , the Noncompetition and Confidentiality Agreement dated                   , and the Original Agreement between the Employee and Company.  This Agreement may not be changed or modified, except by an Agreement in writing signed by each of the parties hereto.

7.8.  Withholding.  The Company will withhold from any payments due to Employee hereunder, all taxes, FICA or other amounts required to be withheld pursuant to any applicable law.

7.9.  Headings Descriptive.  The headings of sections and paragraphs of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

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7.10.  Counterparts.  This Agreement may be executed in multiple counterparts, each of which will be deemed to be an original, but all of which together will constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year first above written.

NEOSE TECHNOLOGIES, INC.
By:
	George J. Vergis, Ph.D.
	President and Chief Executive Officer
	Employee

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Exhibit A

Release and Non-Disparagement Agreement

THIS RELEASE AND NON-DISPARAGEMENT AGREEMENT (this “Release”) is made as of the        day of               ,            by and between                                          (the “Employee”) and NEOSE TECHNOLOGIES, INC. (the “Company”).

WHEREAS, the Employee’s employment as an executive of the Company has terminated; and

WHEREAS, pursuant to Section[s] [2] [3] [and 4] of the Change of Control Agreement by and between the Company and the Employee dated as of April 30, 2007 (the “Change of Control Agreement”), the Company has agreed to pay the Employee certain amounts and to provide him or her with certain rights and benefits, subject to the execution of this Release.

NOW THEREFORE, in consideration of these premises and the mutual promises contained herein, and intending to be legally bound hereby, the parties agree as follows:

SECTION 1.Consideration.  The Employee acknowledges that: (a) the payments, rights and benefits set forth in Section[s] [2] [3] [and 4] of the Change of Control Agreement constitute full settlement of all of his or her rights under the Change of Control Agreement,  (b) he or she has no entitlement under any other severance or similar arrangement maintained by the Company, and (c) except as otherwise provided specifically in this Release, the Company does not and will not have any other liability or obligation to the Employee.  The Employee further acknowledges that, in the absence of his or her execution of this Release, the payments and benefits specified in Section[s] [2] [3] [and 4] of the Change of Control Agreement would not otherwise be due to the Employee.

SECTION 2.Release and Covenant Not to Sue.  The Employee hereby fully and forever releases and discharges the Company and its parents, affiliates and subsidiaries, including all predecessors and successors, assigns, officers, directors, trustees, employees, agents and attorneys, past and present, from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, obligations, controversies, debts, costs, expenses, damages, judgments, orders and liabilities, of whatever kind or nature, direct or indirect, in law, equity or otherwise, whether known or unknown, arising through the date of this Release, out of his or her employment by the Company or the termination thereof, including, but not limited to, any claims for relief or causes of action under the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., or any other federal, state or local statute, ordinance or regulation regarding discrimination in employment and any claims, demands or actions based upon alleged wrongful or retaliatory discharge or breach of contract under any state or federal law.  The Employee expressly represents that he or she has not filed a lawsuit or initiated any other administrative proceeding against the Company (including for purposes of this Section 2, its parents, affiliates and subsidiaries), and that he or she has not assigned any claim against the Company (or its parents, affiliates and subsidiaries) to any other person or entity.  The Employee further promises not to initiate a lawsuit or to bring any other claim against the Company (or its parents, affiliates and subsidiaries) arising out of or in any way related to his or her employment by the Company or the termination of that employment.  The forgoing will not be deemed to release the Company from (a) claims solely to enforce this Release, (b) claims solely to enforce Section[s] [2] [3] [and 4] of the Change of Control Agreement, (c) claims for indemnification under the Company’s By-Laws, under any indemnification agreement between the Company and the Employee or under any similar agreement or (d) claims solely to enforce the terms of any equity incentive award agreement

14

between the Employee and the Company.  This Release will not prevent the Employee from filing a charge with the Equal Employment Opportunity Commission (or similar state agency) or participating in any investigation conducted by the Equal Employment Opportunity Commission (or similar state agency); provided, however, that any claims by the Employee for personal relief in connection with such a charge or investigation (such as reinstatement or monetary damages) would be barred.

SECTION 3.Restrictive Covenants.  The Employee acknowledges that the terms of Section 6 of the Change in Control Agreement will survive the termination of his or her employment.  The Employee affirms that the restrictions contained in Section 6 of the Change in Control Agreement are reasonable and necessary to protect the legitimate interests of the Company, that he or she received adequate consideration in exchange for agreeing to those restrictions and that he or she will abide by those restrictions.

SECTION 4.Non-Disparagement.  The Company (meaning, solely for this purpose, Company’s directors and executive officers and other individuals authorized to make official communications on Company’s behalf) will not disparage the Employee or the Employee’s performance or otherwise take any action which could reasonably be expected to adversely affect the Employee’s personal or professional reputation.  Similarly, the Employee will not disparage Company or any of its directors, officers, agents or employees or otherwise take any action which could reasonably be expected to adversely affect the reputation of the Company or the personal or professional reputation of any of the Company’s directors, officers, agents or employees.

SECTION 5.Cooperation.  The Employee further agrees that, subject to reimbursement of his or her reasonable expenses, he or she will cooperate fully with the Company and its counsel with respect to any matter (including litigation, investigations, or governmental proceedings) which relates to matters with which the Employee was involved during his or her employment with Company.  The Employee shall render such cooperation in a timely manner on reasonable notice from the Company.

SECTION 6.Rescission Right.  The Employee expressly acknowledges and recites that (a) he or she has read and understands this Release in its entirety, (b) he or she has entered into this Release knowingly and voluntarily, without any duress or coercion; (c) he or she has been advised orally and is hereby advised in writing to consult with an attorney with respect to this Release before signing it; (d) he or she was provided 21 calendar days after receipt of the Release to consider its terms before signing it (or such longer period as is required for this Release to be effective under the Age Discrimination in Employment Act or any similar state law); and (e) he or she is provided seven (7) calendar days from the date of signing to terminate and revoke this Release (or such longer period required by applicable state law), in which case this Release shall be unenforceable, null and void.  The Employee may revoke this Release during those seven (7) days (or such longer period required by applicable state law) by providing written notice of revocation to the Company.

SECTION 7.Challenge.  If the Employee violates or challenges the enforceability of any provisions of the Noncompetition Agreement or this Release, no further payments, rights or benefits under Section[s] [2] [3] [and 4] of the Change of Control Agreement will be due to the Employee.

SECTION 8.Miscellaneous.

8.1.No Admission of Liability.  This Release is not to be construed as an admission of any violation of any federal, state or local statute, ordinance or regulation or of any duty owed by

15

the Company to the Employee.  There have been no such violations, and the Company specifically denies any such violations.

8.2.No Reinstatement.  The Employee agrees that he or she will not apply for reinstatement with the Company or seek in any way to be reinstated, re-employed or hired by the Company in the future.

8.3.Successors and Assigns.  This Release shall inure to the benefit of and be binding upon the Company and the Employee and their respective successors, executors, administrators and heirs.  The Employee may make any assignment of this Release or any interest herein, by operation of law or otherwise.  The Company may assign this Release to any successor to all or substantially all of its assets and business by means of liquidation, dissolution, merger, consolidation, transfer of assets, or otherwise.

8.4.Severability.  Whenever possible, each provision of this Release will be interpreted in such manner as to be effective and valid under applicable law.  However, if any provision of this Release is held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect any other provision, and this Release will be reformed, construed and enforced as though the invalid, illegal or unenforceable provision had never been herein contained.

8.5.Entire Agreement; Amendments.  Except as otherwise provided herein, this Release contains the entire agreement and understanding of the parties hereto relating to the subject matter hereof, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature relating to the subject matter hereof.  This Release may not be changed or modified, except by an Agreement in writing signed by each of the parties hereto.

8.6.Governing Law.  This Release shall be governed by, and enforced in accordance with, the laws of the Commonwealth of Pennsylvania without regard to the application of the principles of conflicts of laws.

8.7.Counterparts and Facsimiles.  This Release may be executed, including execution by facsimile signature, in one or more counterparts, each of which shall be deemed an original, and all of which together shall be deemed to be one and the same instrument.

IN WITNESS WHEREOF, the Company has caused this Release to be executed by its duly authorized officer, and the Employee has executed this Release, in each case as of the date first above written.

NEOSE TECHNOLOGIES, INC.

By:

Name & Title:

EMPLOYEE

16

EX-10.3

Exhibit 10.3

NEOSE TECHNOLOGIES, INC.
2004 EQUITY INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AWARD AGREEMENT

Neose Technologies, Inc. (the “Company”) hereby grants to                        (the “Optionee”) an option (the “Option”) to purchase a total of                shares of the Company’s Common Stock, at the price and on the terms set forth herein, and in all respects subject to the terms and provisions of the Neose Technologies, Inc. 2004 Equity Incentive Plan (the “Plan”) applicable to Non-Qualified Stock Options, which terms and provisions are incorporated by reference herein.  Unless otherwise defined herein, capitalized terms used but not defined herein shall have the meanings given to them in the Plan.

1.Nature of the Option.  The Option is intended to be a Non-Qualified Stock Option and is NOT intended to be an incentive stock option within the meaning of Section 422 of the Code.

2.Date of Grant.  The Option is granted as of the           , 20     (the “Date of Grant”).

3.Term of Option.  The Option shall have a term of ten years from the Date of Grant and shall terminate at 5:00 p.m. on           ,        unless it is terminated at an earlier date pursuant to the provisions of this Agreement or the Plan.

4.Option Exercise Price.  The Option exercise price is $                 per share.

5.Exercise of Option.

5.1Vesting.  Subject to Section 12 of the Plan, the Option shall become vested and will be exercisable during its term only in accordance with the terms and provisions of the Plan and this Award Agreement,                          the Option becoming exercisable with respect to     % of the shares subject to the Option on                               , until the Option is exercisable with respect to 100% of the shares; provided that vesting shall cease upon the Optionee’s termination of employment or other Service.

5.2Right to Exercise.  Subject to the vesting provisions of Section 5.1 above and the termination provisions of Section 6.7 of the Plan, the Option may be exercised in whole or in part at any time and from time to time during the term of the Option.  Any portion of the Option that is not vested is not exercisable.  The unvested portion of the Option may not be exercised until it becomes vested in accordance with Section 5.1.

5.3Method of Exercise.  The Option shall be exercisable by written notice from the Optionee to the Company setting forth the Optionee’s election to exercise the Option and the number of shares in respect of which the Option is being exercised.  Such notice shall be signed by the Optionee, delivered to the Company in a manner consistent with Section 13.13 of the Plan, and accompanied by payment of the exercise price.  The Option will be deemed to be

exercised upon the receipt by the Company of such notice and payment of the exercise price.  The Optionee shall have no right to vote or receive dividends and shall have no other rights as a stockholder with respect to the shares with respect to which the Option is exercised, notwithstanding the exercise of the Option, until the issuance by the Company (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing the shares that are being issued upon exercise of the Option.  The Company will issue (or cause to be issued) such stock certificates promptly following the exercise of the Option.  The certificate or certificates for the shares as to which the Option shall be exercised shall be registered in the name of the Optionee and shall contain any legend as may be required under the Plan and/or applicable law.

5.4Restrictions on Exercise.  The Option may not be exercised if the issuance of the shares upon such exercise would constitute a violation of any applicable federal or state securities laws or other laws or regulations.  As a condition to the exercise of the Option, the Company may require the Optionee to make any representations and warranties to the Company as may be required by the Plan or any applicable law or regulation.

6.Withholding.  The Company reserves the right to withhold, in accordance with any applicable laws, from any consideration payable to the Optionee any taxes required to be withheld by federal, state or local law as a result of the grant or exercise of the Option or the sale or other disposition of the shares issued upon exercise of the Option.  If the amount of any consideration payable to the Optionee is insufficient to pay such taxes or if no consideration is payable to the Optionee, then upon the request of the Company, the Optionee (or such other person entitled to exercise the Option) shall pay to the Company an amount sufficient for the Company to satisfy any federal, state or local tax withholding requirements the Company may incur as a result of the grant or exercise of the Option or the sale or other disposition of the shares issued upon the exercise of the Option.  Unless otherwise determined by the Board, the minimum required withholding obligation arising in connection with the exercise of the Option may be settled with shares, including shares that would otherwise be payable to the Optionee in connection with the exercise of the Option.

7.The Plan.  This Award Agreement is subject to, and the Company and the Optionee agree to be bound by, all of the terms and conditions of the Plan as it may be amended from time to time in accordance with the terms thereof.  Pursuant to the Plan, the Board is authorized to adopt rules and regulations not inconsistent with the Plan as it shall deem appropriate and proper.  A copy of the Plan in its present form is attached hereto and a copy will be available for inspection during business hours by the Optionee or the persons entitled to exercise the Option at the Company’s principal office.

8.Entire Agreement.  This Award Agreement, together with the Plan, represents the entire agreement between the parties.

9.Governing Law.  This Award Agreement shall be construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to any conflicts of laws.

10.Amendment.  Subject to the provisions of the Plan, this Award Agreement may only be amended by a writing signed by the Company and the Optionee.

2

11.Restriction on Transfer.  Unless otherwise permitted by the Committee or the terms of the Plan, the Option may not be transferred by Optionee in any manner other than by will or the laws of descent or distribution.  The terms of the Option, including the terms and restrictions set forth in the Plan, shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

IN WITNESS WHEREOF, this Award Agreement has been executed by the parties on this                           .

NEOSE TECHNOLOGIES, INC.

By:

3

Acknowledgment

Of Stock Option Grant

Under

Neose Technologies, Inc. 2004 Equity Plan

The Optionee hereby acknowledges receipt of the Stock Option Award Agreement dated                          (“Agreement”), and the Neose Technologies, Inc. 2004 Equity Plan (“Plan”), a copy of which is attached to the Agreement.  Optionee hereby agrees that the Option is subject to the terms and provisions of the Agreement and Plan and agrees to accept as binding, conclusive and final all decisions or interpretations by the Board or the Committee concerning the Plan.

		Signature:
		Name:
Date:	, 200

Please return this acknowledgment to the HR Department within 10 days.

4

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, George J. Vergis, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Neose Technologies, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Securities Exchange Act of 1934 (“Exchange Act”) Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within the registrant, particularly during the period in which this report is being prepared; and

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

5/8/08	/s/ George J. Vergis
Date	George J. Vergis
	Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, A. Brian Davis, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Neose Technologies, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Securities Exchange Act of 1934 (“Exchange Act”) Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within the registrant, particularly during the period in which this report is being prepared; and

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

5/8/08		/s/ A. Brian Davis
Date	A. Brian Davis
	Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Neose Technologies, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, George J. Vergis, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ George J. Vergis
George J. Vergis
Chief Executive Officer and President
Date:		5/8/08

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Neose Technologies, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, A. Brian Davis, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ A. Brian Davis
A. Brian Davis
Senior Vice President and Chief Financial Officer
Date:		5/8/08