10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2009
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 0-6533

ALSERES PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

DELAWARE	87-0277826
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
239 SOUTH STREET HOPKINTON, MASSACHUSETTS (Address of principal executive offices)	01748 (Zip Code)

Registrant’s telephone number, including area code (508) 497-2360
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $.01 par value (Excluding Rights to Purchase Preferred Stock)

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ

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 þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  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 the 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 o
Non-accelerated filer o	Smaller reporting company þ
(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 þ

Based on the last sales price of the registrant’s Common Stock as reported on the NASDAQ Capital Market on June 30, 2009 (the last business day of our most recently completed second fiscal quarter), the aggregate market value of the shares of voting stock held by non-affiliates of the registrant was $4,587,530.

As of March 22, 2010, there were 25,555,645 shares of the registrant’s Common Stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission relative to the registrant’s 2010 Annual Meeting of Stockholders are incorporated by reference into Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K.

TABLE OF CONTENTS

PART I
	ITEM 1.	BUSINESS	3
	ITEM 1A.	RISK FACTORS	16
	ITEM 1B.	UNRESOLVED STAFF COMMENTS	34
	ITEM 2.	PROPERTIES	34
	ITEM 3.	LEGAL PROCEEDINGS	34
	ITEM 4.	NOT USED	34
PART II
	ITEM 5.	MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	35
	ITEM 6.	SELECTED CONSOLIDATED FINANCIAL DATA	36
	ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	37
	ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	50
	ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	51
	ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	82
	ITEM 9A(T).	CONTROLS AND PROCEDURES	82
	ITEM 9B.	OTHER INFORMATION	83
PART III
	ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	84
	ITEM 11.	EXECUTIVE COMPENSATION	84
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	84
	ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	84
	ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	84
PART IV
	ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	85
EX-10.19
EX-10.25
EX-10.33
EX-10.42
EX-10.49
EX-10.51
EX-10.52
EX-10.53
EX-10.54
EX-21
EX-23.1
EX-23.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2

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PART I

Item 1.   Business.

Overview

We are a biotechnology company focused on the development of therapeutic and diagnostic products primarily for disorders in the central nervous system, or CNS. Our clinical and preclinical product candidates are based on three proprietary technology platforms:

•  Molecular imaging program focused on the diagnosis of i) Parkinsonian Syndromes, or PS, including Parkinson’s Disease, or PD, and ii) Dementia with Lewy Bodies, or DLB;

•  Regenerative therapeutics program, primarily focused on nerve repair and restoring movement and sensory function in patients who have had significant loss of CNS function resulting from trauma such as spinal cord injury, or SCI, stroke, and optic nerve damage utilizing technology referred to as axon regeneration.

As of December 31, 2009, we have experienced total net losses since inception of approximately $203,969,000 , stockholders’ deficit of approximately $47,509,000 and a net working capital deficit of approximately $4,536,000. The cash and cash equivalents available at December 31, 2009 will not provide sufficient working capital to meet our anticipated expenditures for the next twelve months. At March 22, 2010, we had cash and cash equivalents of approximately $130,000 which combined with our ability to control administrative expenses will enable us to meet our anticipated cash expenditures into April, 2010. We must immediately raise additional funds in order to continue operations and to fund the approximately $34 million of investment required to complete the Altropane clinical development program. This funding is not available at present and there can be no assurance that such funds will be available on acceptable terms if at all.

In order to continue as a going concern, we must immediately raise funds through one or more of the following: a debt financing, an equity offering, or a collaboration, merger, acquisition or other transaction with one or more pharmaceutical or biotechnology companies. We are currently engaged in fundraising efforts. There can be no assurance that we will be successful in our fundraising efforts or that additional funds will be available on acceptable terms, if at all. We also cannot be sure that we will be able to obtain additional credit from, or effect additional sales of debt or equity securities to certain of our existing investors described below in Liquidity and Capital Resources. If we are unable to raise additional or sufficient capital, we will need to cease operations or reduce, cease or delay one or more of our research or development programs, adjust our current business plan and may not be able to continue as a going concern. If we violate a debt covenant or default under the March 2008 Amended Purchase Agreement or the June 2008 Purchase Agreement (described below in Liquidity and Capital Resources) we may need to cease operations or reduce, cease or delay one or more of our research or development programs, adjust our current business plan and may not be able to continue as a going concern. Additionally, our common stock was delisted from trading on the NASDAQ Capital Market as a result of our failure to meet continued listing requirements of NASDAQ. On May 8, 2009 we began trading on the Pink Sheets OTC Market. This delisting could have an adverse affect on our ability to obtain future financing and could adversely impact our stock price and the liquidity of our common stock. See the risk factor entitled “Our common stock has been delisted from the NASDAQ Capital Market.”

In connection with the common stock financing completed by us in March 2005, or the March 2005 Financing, we agreed with the purchasers in such financing, including Robert Gipson, Thomas Gipson, and Arthur Koenig, or the March 2005 Investors, that, subject to certain exceptions, we would not issue any shares of our common stock at a per share price less than $2.50 without the prior consent of the March 2005 Investors holding at least a majority of the shares issued in the March 2005 Financing. On March 22, 2010, the closing price of our common stock was $.21. The failure to receive the requisite waiver or consent of the

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March 2005 Investors could have the effect of delaying or preventing the consummation of a financing by us should the price per share in such financing be set at less than $2.50.

Our ability to advance our clinical programs, including the development of Altropane, is affected by the availability of financial resources. Financial considerations have caused us to suspend planned development activities for our clinical and preclinical programs until we are able to secure additional working capital. If we are not able to raise additional capital, we will not have sufficient funds to complete the clinical trial programs for the Altropane molecular imaging agent.

In light of current conditions in the global financial markets and our severe cash constraints we have taken steps to reduce our on-going cash expenses. In January and September 2009, we terminated a total of ten employees, reduced the salary of most of the remaining employees and cut back certain employee benefits. The costs related to these actions consist primarily of one-time termination costs. The terminations and salary reductions are expected to reduce compensation costs by approximately $1,500,000 annually.

We were organized in 1992 and are incorporated in Delaware. Our principal executive offices are located at 239 South Street, Hopkinton, Massachusetts 01748, and our telephone number is (508) 497-2360. In this Annual Report on Form 10-K, the terms “Alseres Pharmaceuticals”, the “Company”, “we”, “us” and “our” include Alseres Pharmaceuticals, Inc. and its subsidiaries. The following are trademarks of ours that are mentioned in this Annual Report on Form 10-K: Alseres^®, Altropane^®, Cethrin^®, and Fluoratec^tm. Other trademarks used in this Annual Report on Form 10-K are the property of their respective owners.

Product Development

Molecular Imaging Program

Altropane Molecular Imaging Agent

Background

The Altropane molecular imaging agent is being developed for the differential diagnosis of PS, including PD, and non-PS in patients with an upper extremity tremor. In July 2007, we completed enrollment in a study that optimized Altropane’s image acquisition protocol which we believe will enhance Altropane’s commercial use. After a series of discussions with the U.S. Food and Drug Administration, or FDA, and our expert advisors, the POET-2 program was designed as a two-part Phase III program using the optimized Altropane image acquisition protocol. The first part of the program enrolled 54 subjects in a multi-center clinical study to acquire a set of Altropane images which will be used to train the expert readers, as is the customary process for clinical trials of molecular imaging agents. Enrollment in the first part of POET-2 was completed in January 2009. In April, 2009 we reached agreement with the FDA under the Special Protocol Assessment, or SPA, process for the second part of the Phase III clinical trial program of Altropane. A SPA is a process by which sponsors and the FDA reach an agreement on the size, design and analysis of clinical trials that will form the primary basis of approval. The Phase III program is designed to confirm the diagnostic utility of the agent in anticipation of drug registration. The second portion of the Phase III, POET-2 program consists of two clinical trials in up to 480 subjects in total to be conducted in parallel at up to 40 medical facilities throughout the US. The subjects to be tested will be 40-80 years of age and have had a tremor in their hand(s) or arm(s) for less than three years. Each subject will be assessed by a general neurologist, an Altropane imaging procedure and a Movement Disorder Specialist considered the “gold standard”. The success of the trial will be determined by measuring the diagnostic efficacy of the neurologist diagnosis compared with the diagnosis determined by the Altropane scan versus the MDS gold standard diagnosis. Based on the trial design and scope covered by the Special Protocol Assessment Agreement for POET-2, we estimate that the total costs to complete the POET-2 program and prepare and submit an NDA for Altropane in the U.S. will be approximately $34 million. This funding is not available at present and there can be no assurance that such funds will be available on acceptable terms if at all.

We believe in the current environment that, due to their proximity to commercialization and return on investment, late stage development programs may continue to be of significant interest to potential partners and investors. To maximize the value of our molecular imaging program, we are focusing on obtaining the

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funding necessary to execute the Altropane Phase III registration program. We are pursuing the capital necessary to enable us to advance the Altropane program through our own means. In parallel, we are seeking to partner our molecular imaging program with a firm or firms with the resources necessary for the completion of the Phase III clinical program, for the manufacturing and supply of Altropane, and for the launch and commercialization of Altropane. We can provide no assurances that a partnership transaction will occur. We believe that the expansion of the program into other indications such as DLB and other countries including those in Europe could increase the value of the program for the partner and us. All of these activities require additional funding not presently available and as such have been suspended. There can be no assurance that the required funding to advance the Altropane program will be available on acceptable terms if at all.

The Altropane molecular imaging agent is a radiolabeled imaging agent that contains the radioactive element iodine isotope ¹²³I and binds with extremely high affinity and specificity to the dopamine transporter, or DAT. The DAT is a protein that is on the surface membrane of specialized neurons in the brain that produce dopamine, a key neurotransmitter. We believe that the amount of Altropane taken up by the brain is directly proportional to the number of DATs that are present in any given area of the brain. Since DATs are on the membrane of dopamine-producing neurons, death of these neurons results in decreased numbers of DATs. Therefore, PD, which is caused by a decreased number of dopamine producing cells, is associated with a marked decrease in the number of DATs. As a result, when Altropane is administered to patients with PD, its binding is substantially diminished as compared to patients without PD. This decrease in Altropane binding in patients with PD is the theoretical basis for using Altropane imaging as a diagnostic test for PS, including PD.

Altropane is administered by intravenous injection. Since Altropane contains radioactive ¹²³I, it can be used as a nuclear imaging agent that can be detected using a specialized nuclear medicine instrument known as a Single Photon Emission Computed Tomography, or SPECT, camera. The strength of the SPECT signal generated by Altropane is proportional to the number of DATs present and produces images that distinguish PS and non-PS patients. SPECT cameras are widely available in both community and academic medical centers. The scanning procedure using Altropane takes less than one hour to complete. Results of these tests are usually available the same day as the scanning procedure.

We have licensed worldwide exclusive rights to develop Altropane from Harvard University and its affiliated hospitals, which we refer to as Harvard and its Affiliates, including the Massachusetts General Hospital. The license agreement provides for milestone payments and royalties based on product sales that are consistent with industry averages for such products.

Altropane Diagnostic for Parkinsonian Syndromes (PS)

Background

PS is characterized by loss of dopamine-producing neurons resulting in a variety of movement disorders, especially tremors and gait problems. The most prevalent form of PS is PD which is a chronic, irreversible, neurodegenerative disease that generally affects people over 50 years old. PD is caused by a significant decrease in the number of dopamine producing neurons in specific areas of the brain. Inadequate production of dopamine causes, at least in part, the PD symptoms of tremor, muscle retardation and rigidity. PD can be difficult to diagnose using subjective analyses and can be confused with Essential Tremor, or ET. ET manifests with clinical symptoms very similar to those of PD. However, ET patients do not need the drugs routinely prescribed to PD patients.

Need for an Objective Diagnosis

To our knowledge, there is presently no approved objective test commercially available in the United States to diagnose PS and to differentiate it from other movement disorders. According to published data, clinical criteria used to diagnose PS is prone to high error rates, especially in early stages of PD. This highlights the critical need for an effective diagnostic. Presently, patients who have experienced tremors and other evidence of a movement disorder may pursue diagnosis and treatment with a number of medical professionals. These include an internist or general practitioner, also known as a primary care physician, or

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PCP, a neurologist, or a movement disorder specialist, or MDS, whose practice is focused on movement disorders.

Patients can exhibit symptoms and/or have clinical histories that are inconclusive. A primary tool utilized to diagnose PD or PS is a clinical history and a physical exam. However, studies in the literature have reported error rates in diagnosing PD or PS from a low of 10% for MDSs to as high as 40 to 50% for PCPs.

This high error rate is driving the need for a diagnostic test that provides physicians with additional clinical information to help them make a definitive diagnosis when clinical symptoms and the patient’s history are inconclusive. Further, while the accuracy of MDSs is reported to be higher, the number of MDSs in the United States is limited with current estimates between 300 and 500. The limited availability of MDSs underscores the potential utility of a widely available diagnostic tool such as Altropane.

There are a number of important and potentially harmful results associated with misdiagnosis. These include:

•  Patients who are improperly diagnosed as having PD but actually do not (false positive) may be administered medications for PD. These drugs can have damaging effects on individuals who do not actually have PD.

•  Patients who are improperly diagnosed as not having PD but actually do (false negative), may not benefit from available treatments, thereby suffering further worsening of symptoms and progression of their disease.

Phase I and Phase II Trials

Our Phase I trials for Altropane enrolled 39 patients. Our Phase II trial for Altropane enrolled 37 patients and the results showed that patients with early or mild PD were reliably differentiated from unaffected patients based on the Altropane molecular imaging agent scan. There were no Altropane-related serious adverse events reported in the studies.

Phase III Trial — Differentiate PS Movement Disorders from Non-PS Movement Disorders

Our initial Phase III study was designed to confirm the utility of imaging with Altropane to differentiate PS movement disorders (including PD) from other non-PS movement disorders. The study assessed SPECT scans using Altropane in a sample population representative of those individuals that consult with neurologists or internists for undiagnosed movement disorders. The trial’s endpoints for sensitivity and specificity were met on a statistically significant basis. The study enrolled 100 subjects having the clinical diagnosis of PS and 65 patients having non-PS movement disorders. The clinical diagnosis of patients in the trial was made by MDSs. Altropane SPECT scans were performed on each subject and reviewed by an independent three-member panel of nuclear medicine physicians specializing in neuroimaging who had no knowledge of the clinical diagnosis. The Altropane scans were read and categorized as being consistent with either PS or non-PS and were then compared to the expert clinical diagnosis. There were no Altropane-related serious adverse events reported in the study. Following completion of our initial Phase III trial, we had a series of meetings and discussions with the Food and Drug Administration, or the FDA, regarding the clinical trial data that we had accumulated to date. The purpose of these communications and conferences was to determine what additional clinical information would be required for a New Drug Application, or NDA.

Phase III Trial — Parkinson’s or Essential Tremor (POET-1)

We initiated a Phase III program of Altropane designed to distinguish PS from non-PS in patients with tremors. The Phase III program specified two sequential clinical protocols: 1) Parkinson’s or Essential Tremor-1, or POET-1, and 2) Parkinson’s or Essential Tremor-2, or POET-2. Under the SPA, interim analysis of the blinded data was not permitted and monitoring of un-blinded data was allowed. Publication of the detailed results of POET-1 prior to the completion of POET-2 was also prohibited to avoid biasing POET-2. A diagnosis of a MDS was utilized as the “gold standard.” The primary endpoint for POET-1 was the

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confirmation that the diagnostic accuracy of the Altropane molecular imaging agent is statistically superior to the diagnostic accuracy of a PCP.

Based on certain statistical and modeling assumptions, we initially estimated that POET-1 would require enrollment of approximately 332 patients to meet the endpoints and be statistically significant. These assumptions included published reports in scientific journals that indicated a 20 to 30 percent misdiagnosis rate in the early stages of PD. Our review of the un-blinded data from the initial patients enrolled in POET-1 indicated that the error rate of PCPs who participated in POET-1 was higher than anticipated. As such, statistical modeling indicated that, provided the performance of Altropane in POET-1 was consistent with its historical performance in earlier trials, statistical significance could be achieved with fewer patients than originally projected. After a series of discussions with the FDA and our expert advisors, we notified the FDA that we elected to terminate our SPA and end POET-1 enrollment so that we could analyze the complete set of clinical data for efficacy. The results of the 206 patients in POET-1 were statistically significant and with the exception of one “possibly-related” urinary tract infection that resolved after treatment, there were no drug-related serious adverse events.

Phase III Trial — Parkinson’s or Essential Tremor (POET-2)

In July 2007, our collaborators completed enrollment in a study that optimized Altropane’s image acquisition protocol which we believe will enhance Altropane’s commercial use. After a series of discussions with the FDA and our expert advisors, the POET-2 program was designed as a two-part Phase III program using the optimized Altropane image acquisition protocol. The first part of the program enrolled 54 subjects in a multi-center clinical study to acquire a set of Altropane images which will be used to train the expert readers, as is the customary process for clinical trials of molecular imaging agents. Enrollment in the first part of POET-2 was completed in January 2009. In April, 2009 we reached agreement with the FDA under the Special Protocol Assessment, or SPA, process for the second part of the Phase III clinical trial program of Altropane. A SPA is a process by which sponsors and the FDA reach an agreement on the size, design and analysis of clinical trials that will form the primary basis of approval. The Phase III program is designed to confirm the diagnostic utility of the agent in anticipation of drug registration. The second portion of the Phase III, POET-2 program consists of two clinical trials in up to 480 subjects in total to be conducted in parallel at up to 40 medical facilities throughout the US. The second portion of the POET-2 program is expected to cost $34 million and there can be no assurances that these funds will be available to the Company.

Market Opportunity

It has been estimated that approximately 180,000 individuals in the United States per year present to their physician with new, undiagnosed cases of PD and ET, and are therefore candidates for a scan using the Altropane molecular imaging agent to diagnose or rule out early PS. It has also been estimated by the National Institute of Neurological Disorders and Stroke and the National Parkinson’s Foundation, that the number of people in the United States with PD is between 500,000 and 1,500,000. It has been estimated by the Tremor Action Network that there are approximately 10,000,000 people in the United States with ET. In addition, a study done by the World Health Organization claims that approximately 2,000,000 individuals suffer from PD in Europe. We expect the number of individuals affected by PD to grow substantially as people continue to live longer and the overall population ages.

Altropane Diagnostic for Dementia with Lewy Bodies (DLB)

DLB is a progressive brain disease and the second most common cause of neurodegenerative dementia. The symptoms of DLB are caused by the build-up of Lewy bodies inside the section of the brain that controls particular aspects of memory and motor control. The similarity of symptoms between DLB and PD, and between DLB and Alzheimer’s disease, can make it difficult to accurately diagnose. As with PD, there is no objective diagnostic tool available in the United States. We believe that the underlying basis for DLB coupled with our existing preclinical and clinical data supports the potential development of Altropane as a diagnostic for DLB. We also believe the potential use of our molecular imaging agents for the diagnosis of DLB could be strategic in our partnering efforts for our molecular imaging program.

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It has been estimated by the Alzheimer’s Association that there are approximately 7,000,000 to 10,000,000 people in the United States with dementia of which the journal Age and Ageing estimates that up to approximately 3,000,000 people have DLB. According to Alzheimer Europe, there were approximately 1,800,000 people in Europe with DLB.

Technetium-Based Molecular Imaging Agent

We have licensed the rights to develop and commercialize a second generation compound that will selectively bind the same DAT protein recognized by Altropane. The new compound will incorporate the technetium-99m, or ^99mTc, radiolabel, which is routinely available from a ^99mTc generator in hospital radiopharmacies. The SPECT imaging agent will be prepared on site by a nuclear medicine department using our supplied kit rather than being centrally prepared and distributed as Altropane is today. This new agent will be designed to function in a SPECT scan in a very similar manner to that of Altropane. The imaging agent developed will be administered by intravenous injection and is expected to rapidly and selectively bind the DAT protein in the brain (striatum region) with high affinity. The unbound agent is intended to clear the brain rapidly to allow high contrast SPECT scans on the day of administration. Under the correct conditions, the SPECT scan data reflect the number of DAT proteins. This may be useful in the diagnoses and detection of diseases or conditions that reduce or increase the number of dopamine neurons or the concentration of DAT proteins on the neurons, such as in PD or Attention Deficit Hyperactivity Disorder. We believe that the ability to follow Altropane to market with a second-generation technetium-based molecular imaging agent could give us a long-term competitive advantage. The use of technetium could offer ease-of-use, cost, manufacturing and distribution advantages.

We licensed from Harvard and its Affiliates worldwide exclusive rights to develop ^99mTc-based molecular imaging agents similar to Altropane. The license agreement provides for milestone payments and royalties based on product sales that are consistent with industry averages for such products.

Early primate studies using our two ^99mTc-incorporated compounds previously developed, Technepine and Fluoratec^tm, have demonstrated that they are taken up by the DAT proteins in the normal brain in sufficient quantity to provide a readable image. In addition, primates with experimentally-induced PD had markedly decreased uptake of both imaging agents. In 2007, we devised a new radiolabeling procedure as a prelude to obtaining definitive images in non-human primates.

Resource constraints have forced us to cease all development efforts related to the Technetium-based imaging agent and we can provide no assurances when, if ever, development of these products will resume.

Regenerative Therapeutics Program — Nerve Repair

Background

Injuries to the brain and spinal cord can result in severe disability. In a limited way, backup or so-called accessory nerve pathways can partially compensate for those that have been destroyed, resulting in some recovery with rehabilitation. It has been widely believed that human beings are not capable of regenerating damaged or destroyed nerves in their CNS leading to the conclusion that recovery of function in severely injured patients is not possible or likely. Most research to date has focused on preventing further damage to nerves as a result of a stroke, spinal cord injury or traumatic brain injury; so-called “neuroprotection”. However, ongoing research by our scientific collaborators and others has indicated that axons, the portion of nerves that permit connections and signaling between nerve cells, can be induced to grow, potentially enabling function controlled by damaged nerves to return. Published studies have begun to describe and analyze biochemical pathways inside and outside of nerve cells that facilitate nerve repair, allowing molecular targets for product candidates to be identified and evaluated. These studies have identified certain factors that stimulate axon regeneration and others whose presence inhibits axon regeneration. Importantly, these studies have reduced the uncertainty around functional recovery based on axon regeneration and clearly distinguished it from neuroprotection. This research could potentially provide an avenue by which drug intervention could be utilized to support functional recovery in severe CNS injury.

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Our nerve repair program is focused on restoring movement and sensory function in patients who have had significant loss of CNS function resulting from traumas such as SCI, stroke, traumatic brain injury, or TBI, and optic nerve damage. Our efforts are aimed at the use of proprietary regenerative drugs and/or methods to induce nerve fibers to regenerate and form new connections that restore compromised abilities. Licensing or acquiring the rights to the technologies of complementary approaches for nerve repair is part of our strategy of creating competitive advantages by assembling a broad portfolio of related technologies and intellectual property.

Our lead product candidate for nerve repair during early 2009 was Cethrin. Cethrin contains a proprietary protein which studies indicate inactivates a key enzyme called Rho resulting in the promotion of nerve repair. Cethrin was being investigated to determine its effectiveness in facilitating the restoration of movement and sensory function following a major injury to the spinal cord.

In December 2006, we entered into a license agreement, or the Cethrin License, with BioAxone Therapeutic Inc., a Canadian corporation, or BioAxone, pursuant to which we were granted an exclusive, worldwide license to develop and commercialize specified compounds including, but not limited to, Cethrin, as further defined in the Cethrin License. The Cethrin License called for us to conduct development and commercialization activities of Cethrin and to pay certain pre-commercialization milestones and on-going royalties on sales of Cethrin when and if approved for marketing. The Cethrin License provided for a series of performance milestones any of which, if not achieved by us in the timeframes agreed in the Cethrin License, could form the basis of a claim for compensation to BioAxone and possibly the termination of some or all of our rights under the Cethrin License. The Cethrin License further provided us with relief from our performance obligations in the event that such performance is effectively rendered impossible due to safety or efficacy issues with Cethrin during its development. Additionally, the Cethrin License provided a warranty that all of the clinical materials provided to us by BioAxone in connection with the Cethrin License were manufactured in accordance with current Good Manufacturing Practices, or cGMP.

Cethrin License Dispute

In January 2009, the Company received notice from BioAxone alleging that we had failed to meet one of the performance milestones in the Cethrin License that was required to have been met on or before January 1, 2009. This notice purported to terminate the Cethrin License, sought payment of a $2,000,000 penalty from us to BioAxone for such purported failure and requested that we transfer to BioAxone our rights to the Master Cell Bank (as defined in the Cethrin License) and all licensed intellectual property under the Cethrin License.

We believed that the purported termination was without effect. Our performance obligations under the Cethrin License were specifically excused in the event that a safety issue renders such performance impossible. Our prior discovery that the Master Cell Bank from which Cethrin is manufactured may contain an unintended animal derived contaminant rendering it not in compliance with the requirements of cGMP, represented such a safety risk for Cethrin. We notified BioAxone of the contamination issue and our position that the purported termination and demand for payment is considered to be without effect.

In April 2009 we announced that we entered into an Amendment Agreement, or the Amendment, with BioAxone Therapeutic, Inc., pursuant to which the Cethrin License, was amended. The Amendment replaces all of the pre-commercial financial and performance-related milestones contained in the Cethrin License with a formula-based approach to sharing of any and all income under a sub-license. The Amendment establishes provisions under which we would use reasonable commercial efforts to enter into a Sub-license Agreement for the technology covered by the Cethrin License. The Amendment also provides for the mutual release of claims that each party had previously alleged against the other under the Cethrin License. During 2009 our efforts were focused on identifying and negotiating with appropriate sublicensing candidates. Under the terms of the Amendment Agreement, our right to sublicense Cethrin has expired and all rights granted to us in the Cethrin License have reverted to BioAxone. The Amendment provides that, in the event BioAxone is able to license or partner the Cethrin technology in the future, we are entitle to receive a 30% share of any and all proceeds received by BioAxone connected with such transaction. It is unclear if or when BioAxone will license the Cethrin technology to a third party, so we may not realize any revenue at all under the Amendment.

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Other Regenerative Factors

We have rights to other technologies and factors that may be involved in nerve repair and regenerative therapeutics, including INOSINE and Oncomodulin, two proprietary regenerative factors that promote axon outgrowth in CNS neurons. We entered into two license agreements, or the CMCC Licenses, with Children’s Medical Center Corporation (also known as Children’s Hospital Boston), or CMCC, to acquire the exclusive worldwide rights to new axon regeneration technologies. The CMCC Licenses provide us exclusive rights to develop INOSINE, Oncomodulin and other therapeutic approaches to stimulate nerve repair. The CMCC Licenses calls for us to pay milestone payments and royalties based on product sales that are consistent with industry averages for such products.

Our development efforts with these candidate compounds has been suspended due to resource constraints and it is unclear when, if ever, they will resume. We are pursuing partnership transactions for these assets but there can be no assurances that any such transactions will occur.

Inosine is a purine nucleoside that is a naturally-occurring compound. We refer to the manufactured drug product candidate formulated for human administration as INOSINE to differentiate it from the naturally-occurring compound which we refer to as inosine. Oncomodulin is a naturally-occurring protein that is reported by our scientific collaborators to enhance axon regeneration in animal models. Using recombinant Oncomodulin, our collaborating scientists have been able to stimulate regeneration of the optic nerve to a degree greater than had previously been documented in scientific literature and showed that the regenerated fibers passed through an optic nerve crush injury and extend for several millimeters along the degenerated optic nerve tract towards the brain. Oncomodulin is being evaluated as a therapeutic for potential ocular indications, including re-growth of axons after optic nerve injury or damage of retinal ganglion cells from intraocular pressure caused by glaucoma.

In September 2003, we entered into an agreement with Codman & Shurtleff, Inc., or Codman, a Johnson & Johnson subsidiary whereby Codman provided us with implantable pumps and intracerebroventricular catheters for our preclinical studies of INOSINE. In exchange for their support of our development program and regulatory submissions, Codman received a right of first refusal to exclusively license our intellectual property regarding INOSINE including, but not limited to, a right to co-develop INOSINE with Codman’s medical devices in the event that we offer similar rights to others. Codman’s rights are subject to specified terms and could extend from the date of certain completed pilot studies through the completion of Phase II clinical testing of INOSINE. However, we can provide no assurances that we will ever offer such rights to another party or that Codman will exercise its right of first refusal.

We believe that experiments and animal tests, including those conducted by our collaborating scientists, Dr. Larry Benowitz and Dr. Zhigang He and their colleagues at CMCC, demonstrate significant progress in the search for potentially important nerve repair agents for stroke and SCI. In published work, Dr. Benowitz and his colleagues showed that INOSINE stimulated axon growth in an animal model of SCI. Almost all of the treated animals showed signs of extensive axon regeneration from the uninjured to the injured side of the spinal cord, specifically the corticospinal tract. In related published work, INOSINE treatment was also shown to produce functional recovery in an experimental rat model of stroke. The improvement in forelimb and hindlimb function in the treated animals was statistically significant over the control group rats. Work in the laboratory of Dr. He has shown in vitro that inhibitors of the epidermal growth factor receptor can overcome the growth inhibition induced by myelin and stimulate nerve outgrowth.

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Scientific Collaborators

A summary of the key scientific, research and development professionals with whom we worked in 2009, and a composite of their professional backgrounds and affiliations is as follows:

Larry I. Benowitz, Ph.D., Director, Laboratories for Neuroscience Research in Neurosurgery, Children’s Hospital, Boston; Associate Professor of Neurosurgery, Harvard Medical School;

Zhigang He, Ph.D., BM, Research Associate, Department of Neurology, Children’s Hospital Boston; Associate Professor of Neurology, Department of Neurology, Harvard Medical School.

Robert S. Langer, Sc.D., Institute Professor of Chemical and Biomedical Engineering, Massachusetts Institute of Technology; and

Peter Meltzer, Ph.D., President, Organix, Inc., Woburn, MA.

Research and Development

We rely on licensing from third parties as our source for new technologies and product candidates, and we maintain only limited internal research and development personnel. Research and development expenses for the years ended December 31, 2009, 2008 and 2007 were approximately $3.7 million, $10.9 million and $10.5 million, respectively.

Licensing Agreements, Patents and Intellectual Property

We have obtained exclusive licenses to patent portfolios related to our product candidates in development. However, as to one or more of the patents and patent applications of the patent portfolios, which we have licensed from a university or academic institution, the United States government holds a nonexclusive, royalty-free, license in exchange for providing research funding.

Our intellectual property strategy is to vigorously pursue patent protection for our technologies in the United States and major developed countries. As of December 31, 2009, we owned or licensed 41 issued U.S. patents and 29 pending U.S. patent applications. International patent applications corresponding to certain of these U.S. patent applications have also been filed. Generally, each license agreement is effective until the last patent licensed relating to the technology expires or a fixed and determined date.. The patents for the Altropane molecular imaging agent expire beginning in 2013. The patents for the technetium-based molecular imaging agents expire beginning in 2017. The patents for Inosine expire in 2017.

The patent positions of pharmaceutical and biotechnology companies, including ours, are uncertain and involve complex and evolving legal and factual questions. We cannot guarantee that any patents will issue from any pending or future patent applications owned by, or licensed to us. Existing or future patents may be challenged, infringed upon, invalidated, found to be unenforceable or circumvented by others. We cannot guarantee that any of our rights under any issued patents will provide sufficient protection against competitive products or otherwise cover commercially valuable products or processes. We may not have identified all United States and foreign patents that pose a risk of infringement. In addition, even if we secure patent protection, our product candidates may still infringe on the patents or rights of other parties, and these patent holders may decide not to grant a license to us. We may be required to change our product candidates or processes, engage in legal challenges to the validity of third party patents that block our ability to market a product, pay licensing fees, or cease certain activities because of the patent rights of third parties. Any of these events could cause additional unexpected costs and delays.

In the event that a third party has a patent or patent application overlapping an invention claimed in one of our patents or patent applications, we may be required to participate in a patent interference proceeding declared by the United States Patent and Trademark Office, or USPTO, to determine priority of invention. A patent interference could result in substantial uncertainties and cost for us, even if the eventual outcome is favorable to us. We cannot provide assurance that our patents and patent applications, if issued, would be held valid by a court of competent jurisdiction.

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We also rely on trade secrets and proprietary know-how. We seek to protect this information through confidentiality agreements with our collaborators and consultants. There can be no guarantee that these procedures and agreements will not be breached or that we will have adequate remedies for such breach. In addition, if consultants, scientific advisors, or other third parties apply technological information which they have developed separate from us to our technologies, there may be disputes as to the ownership of such information which may not be resolved in our favor.

Competition

The biotechnology and pharmaceutical industries are highly competitive, rapidly changing and are dominated by larger, more experienced and better-capitalized companies. Thus, we compete with a number of pharmaceutical and biotechnology companies that have financial, technical and marketing resources and experience significantly greater than ours. Such greater experience and financial strength may enable them to bring their products to market sooner than us, thereby gaining a competitive advantage. In addition, research related to the causes of, and possible treatments for, diseases for which we are trying to develop products are developing rapidly, and there is a potential for extensive technological innovation in relatively short periods of time. Given that many of our competitors have greater financial resources, there can be no assurance that we will be able to effectively compete with any new technological developments. In addition, many of our competitors and potential competitors have significantly greater experience than we do in completing preclinical and clinical testing of new pharmaceutical products and obtaining FDA and other regulatory approvals of products. These advantages could enable them to bring products to market faster than us.

We expect that our products will compete with a variety of products currently offered and under development by a number of pharmaceutical and biotechnology companies that have greater financial and marketing resources than ours. We believe that our product candidates, if successfully developed, will compete with these products principally on the basis of improved and extended efficacy and safety, and the overall economic benefit to the health care system offered by such products. However, there can be no assurance that our product candidates, if developed, will achieve better efficacy and safety profiles than current drugs now offered or products under development by our competitors. Competition among pharmaceutical products approved for sale also may be based on, among other things, patent position, availability and price. In addition, we expect that our competitors will have greater marketing resources and experience than we do, which may enable them to market their products more successfully than we market ours.

A significant amount of research and development in the biotechnology industry is conducted by academic institutions, governmental agencies and other public and private research organizations. We rely on collaborations with these entities to acquire new technologies and product candidates. These entities often seek patent protection and enter into licensing arrangements to collect royalties for use of technology or for the sale of products they have discovered or developed. We face competition in our licensing or acquisition activities from pharmaceutical and biotechnology companies that also seek to collaborate with or acquire technologies or product candidates from these entities. Accordingly, we may have difficulty licensing or acquiring technologies or product candidates on acceptable terms.

To our knowledge, there is presently no approved diagnostic in the United States for PD and/or DLB. To our knowledge, there is only one company, GE Healthcare (formerly Nycomed/Amersham), that has marketed a diagnostic imaging agent for PD and DLB, DaTSCAN^®. To date, GE Healthcare has obtained marketing approval in Europe. GE Healthcare has significantly greater infrastructure and financial resources than us, and if they obtained marketing approval in the United States they could significantly adversely affect our competitive position. Their established market presence, and greater financial strength in the European market may make it difficult for us to successfully market Altropane in Europe.

Regulatory Considerations

Our technologies must undergo a rigorous regulatory approval process, which includes extensive preclinical and clinical testing, to demonstrate safety and efficacy before any resulting product can be marketed. To date, neither the FDA nor any of its international equivalents has approved any of our technologies for

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marketing. In the biotechnology industry, it has been estimated that less than five percent of the technologies for which clinical efforts are initiated ultimately result in an approved product. The clinical trial and regulatory approval process can require many years and substantial cost, and there can be no guarantee that our efforts will result in an approved product.

Our activities are regulated by a number of government authorities in the United States and other countries, including the FDA pursuant to the Federal Food, Drug, and Cosmetic Act. The FDA regulates drugs, including their research, development, testing, manufacturing, labeling, packaging, storage, advertising and promotion, and distribution. Data obtained from testing is subject to varying interpretations which can delay, limit or prevent FDA approval. In addition, changes in existing regulatory requirements could prevent or affect the timing of our ability to achieve regulatory compliance. Federal and state laws, regulations and policies may be changed with possible retroactive effect, and how these rules actually operate can depend heavily on administrative policies and interpretations over which we have no control.

Obtaining FDA approvals is time-consuming and expensive. The steps required before any of our product candidates may be marketed in the United States include:

•  Development of suitable manufacturing processes for preclinical, clinical and commercial drug supply;

•  Preclinical laboratory tests, animal studies and formulation studies according to good laboratory practice regulations;

•  Submission to the FDA of an IND application, which must become effective before United States human clinical trials may commence;

•  Adequate and well-controlled human clinical trials according to good clinical practice regulations, or GCP, to establish the safety and efficacy of the product for its intended use;

•  Submission to the FDA of an NDA;

•  Satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; and

•  FDA review and approval of the application(s) prior to any commercial sale or shipment of the drug.

Once a drug candidate is identified for development it enters the preclinical testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information and analytical data, to the FDA as part of the IND. Some preclinical or non-clinical testing may continue even after the IND is submitted. In addition to including the results of the preclinical studies, the IND will also include a protocol detailing, among other things, the objectives of the first phase of the clinical trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated if the first phase lends itself to an efficacy determination. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA places the clinical trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin.

All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP. These regulations include the requirement that all research subjects provide informed consent. Further, an Institutional Review Board, or IRB, at each institution participating in the clinical trial must review and approve the protocol before a clinical trial commences at that institution. Each new clinical protocol must be submitted to the FDA as part of the IND. Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

Phase I:  The drug is initially introduced into healthy human subjects or patients with the disease and tested for safety, dosage tolerance, pharmacokinetics, pharmacodynamics, absorption, metabolism, distribution and excretion.

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Phase II:  Involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

Phase III:  Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population. These studies are intended to establish the overall risk-benefit ratio of the product and provide, if appropriate, an adequate basis for product labeling.

Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. The FDA or an IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Success in early stage clinical trials does not assure success in later stage clinical trials.

Concurrent with clinical trials, companies usually complete additional animal studies and also must develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in accordance with cGMP requirements. The results of product development, preclinical studies and clinical studies, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, and other relevant information are submitted to the FDA as part of the NDA requesting approval to market the product. The submission of an NDA is subject to payment of user fees, but a waiver of such fees may be obtained under specified circumstances. The FDA reviews all NDAs submitted before it accepts them for filing. If a submission is accepted for filing, the FDA begins an in-depth review, including inspecting the manufacturing facilities. The FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or may require additional clinical or other data. Even if such data are submitted, the FDA may ultimately decide not to approve the NDA.

There is no guarantee that approvals will be granted for any of our product candidates, or that the FDA review process will not involve delays that significantly and negatively affect our product candidates. We also may encounter similar delays in foreign countries. In addition, even if we receive regulatory approvals, they may have significant limitations on the uses for which any approved products may be marketed. After approval, some types of changes to the approved product are subject to further FDA review and approval. Any marketed product and its manufacturer are subject to periodic review, and any discovery of previously unrecognized problems with a product or manufacturer could result in suspension or limitation of approvals. Failure to comply with the applicable FDA requirements at any time during the product development process, approval process, or after approval, may subject an applicant to administrative or judicial sanctions, including the FDA’s refusal to approve pending applications, withdrawal of approval, a clinical hold, warning letters, product recalls and seizures, total or partial suspension of production or distribution, or injunctions, fines, civil penalties or criminal prosecution.

Pharmaceutical Pricing and Reimbursement

In both domestic and foreign markets, sales of any products for which we receive regulatory approval for commercial sales will depend in part on the availability of reimbursement for third party payors. Third party payors include government health care program administrative authorities, managed care providers, private health insurers and other organizations. These third party payors are increasingly challenging the price and examining the cost-effectiveness of medical products and services. In addition, significant uncertainty exists as to the scope of coverage and payment amounts for newly approved heath care products. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the cost-effectiveness of our products. Our products may not be considered medically necessary or cost-effective. Adequate third party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.

Manufacturing

We currently outsource manufacturing for all of our product candidates and expect to continue to outsource manufacturing in the future. We believe our current suppliers of Altropane will be able to manufacture our products efficiently in sufficient quantities and on a timely basis, while maintaining product

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quality. We seek to maintain quality control over manufacturing through ongoing inspections, rigorous review, control over documented operating procedures and thorough analytical testing by outside laboratories. We believe that our current strategy of primarily outsourcing manufacturing is cost-effective since we avoid the high fixed costs of plant, equipment and large manufacturing staffs. FDA regulations require that we establish manufacturing sources for each of our product candidates under the cGMP regulations established by the FDA.

MDS Nordion, Inc., or MDS Nordion, a Canadian corporation and well-recognized manufacturer of ¹²³I and nuclear medicine labeled imaging agents, has supplied Altropane to us since 2001. We are highly dependent upon MDS Nordion. Under the terms of our agreement, which currently expires on December 31, 2010, MDS Nordion manufactures the Altropane molecular imaging agent for our clinical trials in exchange for minimum monthly cash payments. We do not presently have arrangements with any other suppliers in the event that MDS Nordion is unable or unwilling to manufacture Altropane for us. We could encounter a significant delay before another supplier could manufacture Altropane for us due to the time required to establish a cGMP manufacturing process for Altropane. We hope to sign an extension with MDS Nordion before December 31, 2010 but there can be no assurance that we will be able to or that the terms will be acceptable. We do not have a manufacturing agreement relating to the commercial production of Altropane with MDS Nordion or any other manufacturer. We can provide no assurances that such an agreement will be executed on acceptable terms or that if we are unable to satisfy our monthly minimum payment obligations to MDS Nordion that our existing agreement will remain in force.

Marketing and Sales

Although we currently sell no products, our strategy is to pursue partnering opportunities in order to accelerate and maximize commercialization of our clinical product candidates and strategic collaborations for development of our preclinical product candidates. These collaborators may provide financial and other resources, including capabilities in research, development, manufacturing, marketing and sales. There can be no assurances that we will be successful in our collaboration efforts.

Employees

As of December 31, 2009, we employed 5 full-time employees. None of our employees are covered by a collective bargaining agreement.

Other Information

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and, accordingly, file reports, proxy statements and other information with the Securities and Exchange Commission. Such reports, proxy statements and other information can be read and copied at the public reference facilities maintained by the Securities and Exchange Commission at the Public Reference Room, 100 F Street, N.E., Room 1580, Washington, DC 20549. Information regarding the operation of the Public Reference Room may be obtained by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains a web site (http://www.sec.gov) that contains material regarding issuers that file electronically with the Securities and Exchange Commission.

Our Internet address is www.alseres.com. We are not including the information contained on our web site as a part of, or incorporating it by reference into, this Annual Report on Form 10-K. We make available free of charge on our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

Additional financial information is contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of Part II, and in Item 8 of Part II of this Annual Report on Form 10-K.

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Item 1A.   Risk Factors.

Statements contained or incorporated by reference in this Annual Report on Form 10-K that are not based on historical fact are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. These forward-looking statements regarding future events and our future results are based on current expectations, estimates, forecasts, and projections, and the beliefs and assumptions of our management including, without limitation, our expectations regarding our product candidates, including the success and timing of our preclinical, clinical and development programs, the submission of regulatory filings and proposed partnering arrangements, the outcome of any litigation, collaboration, merger, acquisition and fund raising efforts, results of operations, selling, general and administrative expenses, research and development expenses and the sufficiency of our cash for future operations. Forward-looking statements may be identified by the use of forward-looking terminology such as “may,” “could,” “will,” “expect,” “estimate,” “anticipate,” “continue,” or similar terms, variations of such terms or the negative of those terms.

We cannot assure investors that our assumptions and expectations will prove to have been correct. Important factors could cause our actual results to differ materially from those indicated or implied by forward-looking statements. Such factors that could cause or contribute to such differences include those factors discussed below. We undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. If any of the following risks actually occur, our business, financial condition or results of operations would likely suffer.

Risks Related to our Financial Results and Need for Additional Financing

WE ARE A DEVELOPMENT STAGE COMPANY. WE HAVE INCURRED LOSSES FROM OUR OPERATIONS SINCE INCEPTION AND ANTICIPATE LOSSES FOR THE FORESEEABLE FUTURE. WE WILL NOT BE ABLE TO ACHIEVE PROFITABILITY UNLESS WE OBTAIN REGULATORY APPROVAL AND MARKET ACCEPTANCE OF OUR PRODUCT CANDIDATES. WE WILL NEED SUBSTANTIAL ADDITIONAL FUNDING IN ORDER TO CONTINUE OUR BUSINESS AND OPERATIONS. IF WE ARE UNABLE TO SECURE SUCH FUNDING ON ACCEPTABLE TERMS, WE WILL NEED TO CEASE OPERATIONS, SIGNIFICANTLY REDUCE, DELAY OR CEASE ONE OR MORE OF OUR RESEARCH OR DEVELOPMENT PROGRAMS, OR SURRENDER RIGHTS TO SOME OR ALL OF OUR TECHNOLOGIES. IF WE VIOLATE A DEBT COVENANT OR DEFAULT UNDER OUR DEBT AGREEMENTS, WE MAY NEED TO CEASE OPERATIONS OR REDUCE, CEASE OR DELAY ONE OR MORE OF OUR RESEARCH OR DEVELOPMENT PROGRAMS, ADJUST OUR CURRENT BUSINESS PLAN AND MAY NOT BE ABLE TO CONTINUE AS A GOING CONCERN.

Biotechnology companies that have no approved products or other sources of revenue are generally referred to as development stage companies. We have never generated revenues from product sales and we do not currently expect to generate revenues from product sales for at least the next three years. If we do generate revenues and operating profits in the future, our ability to continue to do so in the long term could be affected by the introduction of competitors’ products and other market factors. We expect to incur significant operating losses for at least the next three years. The level of our operating losses may increase in the future if more of our product candidates begin human clinical trials. We will never generate revenues or achieve profitability unless we obtain regulatory approval and market acceptance of our product candidates. This will require us to be successful in a range of challenging activities, including clinical trial stages of development, obtaining regulatory approval for our product candidates, and manufacturing, marketing and selling them. We may never succeed in these activities, and may never generate revenues that are significant enough to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

We require significant funds to conduct research and development activities, including preclinical studies and clinical trials of our technologies, and to commercialize our product candidates. Because the successful

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development of our product candidates is uncertain, we are unable to estimate the actual funds we will require to develop and commercialize them. Our funding requirements depend on many factors, including:

•  The scope, rate of progress and cost of our clinical trials and other research and development activities;

•  Future clinical trial results;

•  The terms and timing of any collaborative, licensing and other arrangements that we may establish;

•  The cost and timing of regulatory approvals and of establishing sales, marketing and distribution capabilities;

•  The cost of establishing clinical and commercial supplies of our product candidates and any products that we may develop;

•  The cost of obtaining and maintaining licenses to use patented technologies;

•  The effect of competing technological and market developments; and

•  The cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights and other patent-related costs, including litigation costs and the results of such litigation.

Until such time, if ever, as we can generate substantial revenue from product sales or through collaborative arrangements with third parties, we will need to raise additional capital. To date, we have experienced negative cash flows from operations and have funded our operations primarily from equity and debt financings.

As of December 31, 2009, we have experienced total net losses since inception of approximately $203,969,000 , stockholders’ deficit of approximately $47,509,000 and a net working capital deficit of approximately $4,536,000. The cash and cash equivalents available at December 31, 2009 will not provide sufficient working capital to meet our anticipated expenditures for the next twelve months. At March 22, 2010, we had cash and cash equivalents of approximately $130,000 which combined with our ability to control administrative expenses will enable us to meet our anticipated cash expenditures into April, 2010. We must immediately raise additional funds in order to continue operations.

In order to continue as a going concern, we must immediately raise additional funds through one or more of the following: a debt financing, an equity offering, or a collaboration, merger, acquisition or other transaction with one or more pharmaceutical or biotechnology companies. We are currently engaged in fundraising efforts. There can be no assurance that we will be successful in our fundraising efforts or that additional funds will be available on acceptable terms, if at all. We also cannot be sure that we will be able to obtain additional credit from, or effect additional sales of debt or equity securities to certain of our existing investors described below in Liquidity and Capital Resources. If we are unable to raise additional or sufficient capital, we will need to cease operations or reduce, cease or delay one or more of our research or development programs, adjust our current business plan and may not be able to continue as a going concern. If we violate a debt covenant or default under the March 2008 Amended Purchase Agreement or the June 2008 Purchase Agreement (described below in Liquidity and Capital Resources) we may need to cease operations or reduce, cease or delay one or more of our research or development programs, adjust our current business plan and may not be able to continue as a going concern. Additionally, our common stock was delisted from trading on the NASDAQ Capital Market as a result of our failure to meet continued listing requirements of NASDAQ. On May 8, 2009 we began trading on the Pink Sheets OTC Market. This delisting has had an adverse affect on our ability to obtain future financing and could continue to adversely impact our stock price and the liquidity of our common stock. See the risk factor entitled “Our common stock has been delisted from the NASDAQ Capital Market.”

In connection with the March 2005 Financing, we agreed with the March 2005 Investors, that, subject to certain exceptions, we would not issue any shares of our common stock at a per share price less than $2.50 without the prior consent of the March 2005 Investors holding at least a majority of the shares issued in the March 2005 Financing. On March 22, 2010, the closing price of our common stock was $.21. The failure to receive the requisite waiver or consent of the March 2005 Investors could have the effect of delaying or

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preventing the consummation of a financing by us should the price per share in such financing be set at less than $2.50.

Alternatively, to secure funds, we may be required to enter financing arrangements with others that may require us to surrender rights to some or all of our technologies or grant licenses on terms that are not favorable to us. If the results of our current or future clinical trials are not favorable, it may negatively affect our ability to raise additional funds. If we are successful in obtaining additional equity and/or debt financing, the terms of such financing will have the effect of diluting the holdings and the rights of our stockholders. Estimates about how much funding will be required are based on a number of assumptions, all of which are subject to change based on the results and progress of our research and development activities. If we are unable to raise additional capital we will need to reduce, cease or delay one or more of our research or development programs and adjust our current business plan.

Our ability to advance our clinical programs, including the development of Altropane, is affected by the availability of financial resources. Financial considerations have caused us to suspend planned development activities for our clinical and preclinical programs until we are able to secure additional working capital. If we are not able to raise additional capital, we will not have sufficient funds to complete the clinical trial programs for the Altropane molecular imaging agent.

In light of current conditions in the global financial markets and our severe cash constraints we have taken steps to reduce our on-going cash expenses. In January and September 2009, we terminated a total of ten employees, reduced the salary of most of the remaining employees and cut back certain employee benefits. The costs related to these actions consist primarily of one-time termination costs. The terminations and salary reductions are expected to reduce compensation costs by approximately $1,500,000 annually.

OUR ESTIMATES OF OUR LIABILITY UNDER OUR BOSTON, MASSACHUSETTS LEASE MAY CHANGE.

Our lease in Boston, Massachusetts expires in 2012. We have entered into two sublease agreements covering all 6,600 square feet under this lease through the date of expiration. In determining our obligations under the lease that we do not expect to occupy, we have made certain assumptions for the discounted estimated cash flows related to the rental payments that our subtenants have agreed to pay. We may be required to change our estimates in the future as a result of, among other things, the default of one or both of our subtenants with respect to their payment obligations. Any such adjustments to the estimate of liability could be material.

Risks Related to Commercialization

OUR SUCCESS DEPENDS ON OUR ABILITY TO SUCCESSFULLY DEVELOP OUR PRODUCT CANDIDATES INTO COMMERCIAL PRODUCTS.

To date, we have not marketed, distributed or sold any products and, with the exception of Altropane, all of our technologies and early-stage product candidates are in preclinical development. The success of our business depends primarily upon our ability to successfully develop and commercialize our product candidates. Successful research and product development in the biotechnology industry is highly uncertain, and very few research and development projects produce a commercial product. In the biotechnology industry, it has been estimated that less than five percent of the technologies for which research and development efforts are initiated ultimately result in an approved product. If we are unable to successfully commercialize Altropane or any of our other product candidates, our business would be materially harmed.

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EVEN IF WE RECEIVE APPROVAL TO MARKET OUR PRODUCT CANDIDATES, THE MARKET MAY NOT BE RECEPTIVE TO OUR PRODUCT CANDIDATES UPON THEIR COMMERCIAL INTRODUCTION, WHICH COULD PREVENT US FROM SUCCESSFULLY COMMERCIALIZING OUR PRODUCTS AND FROM BEING PROFITABLE.

Even if our drug candidates are successfully developed, our success and growth will also depend upon the acceptance of these product candidates by physicians and third-party payors. Acceptance of our product development candidates will be a function of our products being clinically useful, being cost effective and demonstrating superior diagnostic or therapeutic effect with an acceptable side effect profile as compared to existing or future treatments. In addition, even if our products achieve market acceptance, we may not be able to maintain that market acceptance over time. Factors that we believe will materially affect market acceptance of our product candidates under development include:

•  The timing of our receipt of any marketing approvals, the terms of any approval and the countries in which approvals are obtained;

•  The safety, efficacy and ease of administration of our products;

•  The competitive pricing of our products;

•  The success of our education and marketing programs;

•  The sales and marketing efforts of competitors; and

•  The availability and amount of government and third-party payor reimbursement.

If our products do not achieve market acceptance, we will not be able to generate sufficient revenues from product sales to maintain or grow our business.

BUSINESS COMBINATIONS, INCLUDING MERGERS, JOINT VENTURES AND ACQUISITIONS, PRESENT MANY RISKS, AND WE MAY NOT REALIZE THE ANTICIPATED FINANCIAL AND STRATEGIC GOALS FOR ANY SUCH TRANSACTIONS.

We may in the future engage in business combinations to gain access to complementary companies, products and technologies. Such transactions involve a number of risks, including:

•  We may find that the target company or assets do not further our business strategy, or that we overpaid for the company or assets, or that economic conditions change, all of which may generate a future impairment charge;

•  We may have difficulty integrating the operations and personnel of an acquired business, and may have difficulty retaining the key personnel of an acquired business;

•  We may have difficulty incorporating acquired technologies;

•  We may encounter technical difficulties or failures with the performance of any acquired technologies or drug products or may experience unfavorable results in the clinical studies related to such technologies or products;

•  We or our business partner(s) may face product liability risks associated with the sale of the combined company’s products;

•  Our ongoing business and management’s attention may be disrupted or diverted by transition or integration issues and the complexity of managing diverse locations;

•  We may have difficulty maintaining uniform standards, internal controls, procedures and policies across locations;

•  The transaction may result in litigation from terminated employees or third-parties; and

•  We may experience significant problems or liabilities associated with product quality, technology and legal contingencies.

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These factors could have a material adverse effect on our business, results of operations and financial condition or cash flows, particularly in the case of a larger acquisition or multiple acquisitions in a short period of time. From time to time, we may enter into negotiations for acquisitions that are not ultimately consummated. Such negotiations could result in significant diversion of management time, as well as out-of-pocket costs.

The consideration paid in connection with an acquisition also affects our financial results. If we were to proceed with one or more significant acquisitions in which the consideration included cash, we could be required to use a substantial portion of our available cash to consummate any acquisition. To the extent we issue shares of stock or other rights to purchase stock, including options or other rights, existing stockholders may be diluted and earnings per share may decrease. In addition, acquisitions may result in the incurrence of debt, large one-time write-offs (such as acquired in-process research and development costs) and restructuring charges. They may also result in goodwill and other intangible assets that are subject to impairment tests, which could result in future impairment charges.

Risks Related to Regulation

IF OUR PRECLINICAL TESTING AND CLINICAL TRIALS ARE NOT SUCCESSFUL, WE WILL NOT OBTAIN REGULATORY APPROVAL FOR COMMERCIAL SALE OF OUR PRODUCT CANDIDATES.

We will be required to demonstrate, through preclinical testing and clinical trials, that our product candidates are safe and effective before we can obtain regulatory approval for the commercial sale of our product candidates. Preclinical testing and clinical trials are lengthy and expensive and the historical rate of failure for product candidates is high. Product candidates that appear promising in the early phases of development, such as in preclinical study or in early human clinical trials, may fail to demonstrate safety and efficacy in clinical trials.

Except for Altropane, we have not yet received IND authorization from the FDA for our other product candidates which will be required before we can begin clinical trials in the United States. We may not submit INDs for our product candidates if we are unable to accumulate the necessary preclinical data for the filing of an IND. The FDA may request additional preclinical data before allowing us to commence clinical trials. The FDA or other applicable regulatory authorities may suspend clinical trials of a drug candidate at any time if we or they believe the subjects or patients participating in such trials are being exposed to unacceptable health risks or for other reasons. Adverse side effects of a drug candidate on subjects or patients in a clinical trial could result in the FDA or foreign regulatory authorities refusing to approve a particular drug candidate for any or all indications of use.

There is no assurance that the results obtained to date and/or any further work completed in the future will be sufficient to achieve the approvability of Altropane.

Clinical trials require sufficient patient enrollment which is a function of many factors, including the size of the potential patient population, the nature of the protocol, the availability of existing treatments for the indicated disease and the eligibility criteria for enrolling in the clinical trial. Delays or difficulties in completing patient enrollment can result in increased costs and longer development times.

We cannot predict whether we will encounter problems with any of our completed, ongoing or planned clinical trials that will cause us or regulatory authorities to delay or suspend those trials, or delay the analysis of data from our completed or ongoing clinical trials. We have however encountered problems with the Cethrin License. See the risk factor entitled “We in-license a significant portion of our intellectual property and if we fail to comply with our obligations under any of the related agreements, we could lose license rights that are necessary to develop our product candidates.” Any of the following could delay the initiation or the completion of our ongoing and planned clinical trials:

•  Ongoing discussions with the FDA or comparable foreign authorities regarding the scope or design of our clinical trials;

•  Delays in enrolling patients and volunteers into clinical trials;

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•  Lower than anticipated retention rate of patients and volunteers in clinical trials;

•  Negative or inconclusive results of clinical trials or adverse medical events during a clinical trial could cause a clinical trial to be repeated or a program to be terminated, even if other studies or trials related to the program are successful;

•  Insufficient supply or deficient quality of drug candidate materials or other materials necessary for the conduct of our clinical trials;

•  Serious and unexpected drug-related side-effects experienced by participants in our clinical trials; or

•  The placement of a clinical trial on hold.

OUR PRODUCT CANDIDATES ARE SUBJECT TO RIGOROUS REGULATORY REVIEW AND, EVEN IF APPROVED, REMAIN SUBJECT TO EXTENSIVE REGULATION.

Our technologies and product candidates must undergo a rigorous regulatory approval process which includes extensive preclinical and clinical testing to demonstrate safety and efficacy before any resulting product can be marketed. Our research and development activities are regulated by a number of government authorities in the United States and other countries, including the FDA pursuant to the Federal Food, Drug, and Cosmetic Act. The clinical trial and regulatory approval process usually requires many years and substantial cost. To date, neither the FDA nor any of its international equivalents has approved any of our product candidates for marketing.

The FDA regulates drugs in the United States, including their testing, manufacturing and marketing. Data obtained from testing is subject to varying interpretations which can delay, limit or prevent FDA approval. The FDA has stringent laboratory and manufacturing standards which must be complied with before we can test our product candidates in people or make them commercially available. Examples of these standards include Good Laboratory Practices and current Good Manufacturing Practices, or cGMP. Our compliance with these standards is subject to initial certification by independent inspectors and continuing audits thereafter. In addition, manufacturers of our product candidates are subject to the FDA’s cGMP regulations and similar foreign standards and we do not have control over compliance with these regulations by our manufacturers. If any third-party manufacturer fails to perform as required, this could impair our ability to deliver our products on a timely basis or cause delays in our clinical trials and applications for regulatory approval.

Obtaining FDA approval to sell our product candidates is time-consuming and expensive. The FDA usually takes at least 12 to 18 months to review an NDA which must be submitted before the FDA will consider granting approval to sell a product. If the FDA requests additional information, it may take even longer for the FDA to make a decision especially if the additional information that they request requires us to complete additional studies. We may encounter similar delays in foreign countries. After reviewing any NDA we submit, the FDA or its foreign equivalents may decide not to approve our products. Failure to obtain regulatory approval for a product candidate will prevent us from commercializing our product candidates.

Other risks associated with the regulatory approval process include:

•  Regulatory approvals may impose significant limitations on the uses for which any approved products may be marketed;

•  Any marketed product and its manufacturer are subject to periodic reviews and audits, and any discovery of previously unrecognized problems with a product or manufacturer could result in suspension or limitation of approvals;

•  Changes in existing regulatory requirements, or the enactment of additional regulations or statutes, could prevent or affect the timing of our ability to achieve regulatory compliance. Federal and state laws, regulations and policies may be changed with possible retroactive effect, and how these rules actually operate can depend heavily on administrative policies and interpretation over which we have no control, and we may possess inadequate experience to assess their full impact upon our business; and

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•  The approval may impose significant restrictions on the indicated uses, conditions for use, labeling, advertising, promotion, marketing and/or production of such product, and may impose ongoing requirements for post-approval studies, including additional research and development and clinical trials.

OUR PRODUCTS COULD BE SUBJECT TO RESTRICTIONS OR WITHDRAWAL FROM THE MARKET AND WE MAY BE SUBJECT TO PENALTIES IF WE FAIL TO COMPLY WITH REGULATORY REQUIREMENTS, OR IF WE EXPERIENCE UNANTICIPATED PROBLEMS WITH OUR PRODUCTS, WHEN AND IF ANY OF THEM ARE APPROVED.

Any product for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and other regulatory bodies. These requirements include submissions of safety and other post-marketing information and reports, registration requirements, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. The manufacturer and the manufacturing facilities we use to make any of our product candidates will also be subject to periodic review and inspection by the FDA. The subsequent discovery of previously unknown problems with a product, manufacturer or facility may result in restrictions on the product or manufacturer or facility, including withdrawal of the product from the market. Even if regulatory approval of a product is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product. Later discovery of previously unknown problems with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in:

•  Restrictions on such products, manufacturers or manufacturing processes;

•  Warning letters;

•  Withdrawal of the products from the market;

•  Refusal to approve pending applications or supplements to approved applications that we submit;

•  Recall;

•  Fines;

•  Suspension or withdrawal of regulatory approvals;

•  Refusal to permit the import or export of our products;

•  Product seizure; and

•  Injunctions or the imposition of civil or criminal penalties.

FAILURE TO OBTAIN REGULATORY APPROVAL IN FOREIGN JURISDICTIONS WOULD PREVENT US FROM MARKETING OUR PRODUCTS ABROAD.

Although we have not initiated any marketing efforts in foreign jurisdictions, we intend in the future to market our products outside the United States. In order to market our products in the European Union and many other foreign jurisdictions, we must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval abroad may differ from that required to obtain FDA approval. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval and we may not obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or approval by the FDA. We may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our

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products in any market outside the United States. The failure to obtain these approvals could materially adversely affect our business, financial condition and results of operations.

FOREIGN GOVERNMENTS TEND TO IMPOSE STRICT PRICE CONTROLS WHICH MAY ADVERSELY AFFECT OUR REVENUES, IF ANY.

The pricing of prescription pharmaceuticals is subject to governmental control in some foreign countries. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be adversely affected.

Risks Related to our Intellectual Property

IF WE ARE UNABLE TO SECURE ADEQUATE PATENT PROTECTION FOR OUR TECHNOLOGIES, THEN WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY AS A BIOTECHNOLOGY COMPANY.

At the present time, we do not have patent protection for all uses of our technologies. There is significant competition in the field of CNS diseases, our primary scientific area of research and development. Our competitors may seek patent protection for their technologies, and such patent applications or rights might conflict with the patent protection that we are seeking for our technologies. If we do not obtain patent protection for our technologies, or if others obtain patent rights that block our ability to develop and market our technologies, our business prospects may be significantly and negatively affected. Further, even if patents can be obtained, these patents may not provide us with any competitive advantage if our competitors have stronger patent positions or if their product candidates work better in clinical trials than our product candidates. Our patents may also be challenged, narrowed, invalidated or circumvented, which could limit our ability to stop competitors from marketing similar products or limit the length of term of patent protection we may have for our products.

Our patent strategy is to obtain broad patent protection, in the United States and in major developed countries, for our technologies and their related medical indications. Risks associated with protecting our patent and proprietary rights include the following:

•  Our ability to protect our technologies could be delayed or negatively affected if the United States Patent and Trademark Office, or USPTO, requires additional experimental evidence that our technologies work;

•  Our competitors may develop similar technologies or products, or duplicate any technology developed by us;

•  Our competitors may develop products which are similar to ours but which do not infringe our patents or products;

•  Our competitors may successfully challenge one or more of our patents in an interference or litigation proceeding;

•  Our technologies may infringe the patents or rights of other parties who may decide not to grant a license to us. We may have to change our products or processes, pay licensing fees or stop certain activities because of the patent rights of third parties which could cause additional unexpected costs and delays;

•  Patent law in the fields of healthcare and biotechnology is still evolving and future changes in such laws might conflict with our existing and future patent rights, or the rights of others;

•  Our collaborators, employees and consultants may breach the confidentiality agreements that we enter into to protect our trade secrets and proprietary know-how. We may not have adequate remedies for such breach; and

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•  There may be disputes as to the ownership of technological information developed by consultants, scientific advisors or other third parties which may not be resolved in our favor.

WE IN-LICENSE A SIGNIFICANT PORTION OF OUR INTELLECTUAL PROPERTY AND IF WE FAIL TO COMPLY WITH OUR OBLIGATIONS UNDER ANY OF THE RELATED AGREEMENTS, WE COULD LOSE LICENSE RIGHTS THAT ARE NECESSARY TO DEVELOP OUR PRODUCT CANDIDATES.

We have entered into license agreements with Harvard University and its affiliated hospitals, or Harvard and its Affiliates, and Children’s Medical Center Corporation, or CMCC, that give us rights to intellectual property that is necessary for our business. These license arrangements impose various development, royalty and other obligations on us. If we breach these obligations and fail to cure such breach in a timely manner, these exclusive licenses could be converted to non-exclusive licenses or the agreements could be terminated, which would result in our being unable to develop, manufacture and sell products that are covered by the licensed technology.

In order to continue to expand our business we may need to acquire additional product candidates including those in clinical development through in-licensing that we believe will be a strategic fit with us. We may not be able to in-license suitable product candidates at an acceptable price or at all. Engaging in any in-license will incur a variety of costs, and we may never realize the anticipated benefits of any such in-license.

IF WE BECOME INVOLVED IN PATENT LITIGATION OR OTHER PROCEEDINGS RELATED TO A DETERMINATION OF RIGHTS, WE COULD INCUR SUBSTANTIAL COSTS AND EXPENSES, SUBSTANTIAL LIABILITY FOR DAMAGES OR BE REQUIRED TO STOP OUR PRODUCT DEVELOPMENT AND COMMERCIALIZATION EFFORTS.

A third party may sue us for infringing its patent rights. Likewise, we may need to resort to litigation to enforce a patent issued or licensed to us or to determine the scope and validity of third-party proprietary rights. In addition, a third party may claim that we have improperly obtained or used its confidential or proprietary information. There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and biotechnology industries. In addition to infringement claims against us, we may become a party to other patent litigation and other proceedings, including interference proceedings declared against us by the USPTO, regarding intellectual property rights with respect to our products and technology. The cost to us of any litigation or other proceeding relating to intellectual property rights, even if resolved in our favor, could be substantial, and the litigation would divert our management’s efforts. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. Uncertainties resulting from the initiation and continuation of any litigation could limit our ability to continue our operations.

If any parties successfully claim that our creation or use of proprietary technologies infringes upon their intellectual property rights, we might be forced to pay damages, potentially including treble damages, if we are found to have willfully infringed on such parties’ patent rights. In addition to any damages we might have to pay, a court could require us to stop the infringing activity or obtain a license. Any license required under any patent may not be made available on commercially acceptable terms, if at all. In addition, such licenses are likely to be non-exclusive and, therefore, our competitors may have access to the same technology licensed to us. If we fail to obtain a required license and are unable to design around a patent, we may be unable to effectively market some of our technology and products, which could limit our ability to generate revenues or achieve profitability and possibly prevent us from generating revenue sufficient to sustain our operations. We might be required to redesign the formulation of a product candidate so that it does not infringe, which may not be possible or could require substantial funds and time. Ultimately, we could be prevented from commercializing a product or be forced to cease some aspect of our business operations if we are unable to enter into license agreements that are acceptable to us.

Moreover, we expect that a number of our collaborations will provide that royalties payable to us for licenses to our intellectual property may be offset by amounts paid by our collaborators to third parties who

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have competing or superior intellectual property positions in the relevant fields, which could result in significant reductions in our revenues from products developed through collaborations.

CONFIDENTIALITY AGREEMENTS WITH EMPLOYEES AND OTHERS MAY NOT ADEQUATELY PREVENT DISCLOSURE OF TRADE SECRETS AND OTHER PROPRIETARY INFORMATION.

In order to protect our proprietary technology and processes, we rely in part on confidentiality agreements with our collaborators, employees, consultants, outside scientific collaborators and sponsored researchers, and other advisors. These agreements may be breached, may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such party. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

Risks Related to our Dependence on Third Parties

IF ANY COLLABORATOR TERMINATES OR FAILS TO PERFORM ITS OR THEIR OBLIGATIONS UNDER AGREEMENTS WITH US, THE DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCT CANDIDATES COULD BE DELAYED OR TERMINATED.

We are dependent on expert advisors and our collaborations with research and development service providers. Our business could be adversely affected if any collaborator terminates its collaboration agreement with us or fails to perform its obligations under that agreement. Most biotechnology and pharmaceutical companies have established internal research and development programs, including their own facilities and employees which are under their direct control. By contrast, we have limited internal research capability and have elected to outsource substantially all of our research and development, preclinical and clinical activities. As a result, we are dependent upon our network of expert advisors and our collaborations with other research and development service providers for the development of our technologies and product candidates. These expert advisors are not our employees but provide us with important information and knowledge that may enhance our product development strategies and plans. Our collaborations with research and development service providers are important for the testing and evaluation of our technologies, in both the preclinical and clinical stages.

Many of our expert advisors are employed by, or have their own collaborative relationship with Harvard and its Affiliates or CMCC. A summary of the key scientific, research and development professionals with whom we work, and a composite of their professional background and affiliations is as follows:

•  Larry I. Benowitz, Ph.D., Director, Laboratories for Neuroscience Research in Neurosurgery, Children’s Hospital, Boston; Associate Professor of Neurosurgery, Harvard Medical School.

•  Zhigang He, Ph.D., BM, Research Associate, Department of Neurology, Children’s Hospital Boston; Associate Professor of Neurology, Department of Neurology, Harvard Medical School.

•  Robert S. Langer, Jr., Sc.D., Institute Professor of Chemical and Biomedical Engineering, Massachusetts Institute of Technology.

•  Peter Meltzer, Ph.D., President, Organix, Inc., Woburn, MA.

Dr. Benowitz, Dr. Bianchine, Dr. He, and Dr. Langer provided scientific consultative services resulting in total obligations of approximately $100,000 for 2009. Dr. Benowitz and Dr. He provided scientific consultative services primarily related to our nerve repair program. Dr. Langer provided consultative services primarily related to scientific and business services. Resource constraints forced us to terminate these relationships in 2009 and there can be no assurances that, should the services of these collaborators be required in the future, they will be available to us.

At December 31, 2009 and March 31, 2010 Drs. Benowitz, He and Langer were owed a total of $116,000 by the company for past services.

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We do not have a consulting agreement with Dr. Meltzer but do enter into research and development contracts from time to time with Organix, Inc., of which Dr. Meltzer is president.

Our significant collaborations include:

•  Children’s Hospital in Boston, Massachusetts where certain of our collaborating scientists perform their research efforts. We terminated our research agreement with Children’s Hospital in March 2009;

•  Harvard Medical School in Boston, Massachusetts where certain of our collaborating scientists perform their research efforts;

•  MDS Nordion in Vancouver, British Colombia which manufactures the Altropane molecular imaging agent; and

•  Organix, Inc. in Woburn, Massachusetts which provides non-radioactive Altropane for FDA mandated studies and synthesizes our compounds for the treatment of PD and for axon regeneration.

We generally have a number of collaborations with research and development service providers ongoing at any point in time. These agreements generally cover a specific project or study, are usually for a duration between one month to one year, and expire upon completion of the project. Under these agreements, we are sometimes required to make an initial payment upon execution of the agreement with the remaining payments based upon the completion of certain specified milestones such as completion of a study or delivery of a report.

We cannot control the amount and timing of resources our advisors and collaborators devote to our programs or technologies. Our advisors and collaborators may have employment commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. If any of our advisors or collaborators were to breach or terminate their agreement with us or otherwise fail to conduct their activities successfully and in a timely manner, the preclinical or clinical development or commercialization of our technologies and product candidates or our research programs could be delayed or terminated. Any such delay or termination could have a material adverse effect on our business, financial condition or results of operations.

Disputes may arise in the future with respect to the ownership of rights to any technology developed with our advisors or collaborators. These and other possible disagreements could lead to delays in the collaborative research, development or commercialization of our technologies, or could require or result in litigation to resolve. Any such event could have a material adverse effect on our business, financial condition or results of operations.

Our advisors and collaborators sign agreements that provide for confidentiality of our proprietary information. Nonetheless, they may not maintain the confidentiality of our technology and other confidential information in connection with every advisory or collaboration arrangement, and any unauthorized dissemination of our confidential information could have a material adverse effect on our business, financial condition or results of operations.

MDS Nordion, Inc., or MDS Nordion, a Canadian corporation and well-recognized manufacturer of ¹²³I and nuclear medicine labeled imaging agents, has supplied Altropane to us since 2001. We are highly dependent upon MDS Nordion. Under the terms of our agreement, which currently expires on December 31, 2010, MDS Nordion manufactures the Altropane molecular imaging agent for our clinical trials in exchange for minimum monthly cash payments. We do not presently have arrangements with any other suppliers in the event that MDS Nordion is unable or unwilling to manufacture Altropane for us. We could encounter a significant delay before another supplier could manufacture Altropane for us due to the time required to establish a cGMP manufacturing process for Altropane. We hope to sign an extension with MDS Nordion before December 31, 2010 but there can be no assurance that we will be able to or that the terms will be acceptable. We do not have a manufacturing agreement relating to the commercial production of Altropane with MDS Nordion or any other manufacturer. We can provide no assurances that such an agreement will be executed on acceptable terms or that if we are unable to satisfy our monthly minimum payment obligations to MDS Nordion that our existing agreement will remain in force.

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IF WE ARE UNABLE TO MAINTAIN OUR KEY WORKING RELATIONSHIPS WITH OUR LICENSORS, INCLUDING HARVARD AND ITS AFFILIATES AND CMCC, WE MAY NOT BE SUCCESSFUL SINCE SUBSTANTIALLY ALL OF OUR CURRENT TECHNOLOGIES WERE LICENSED FROM SUCH LICENSORS.

We maintain relationships with our licensors, Harvard and its Affiliates, and CMCC. Substantially all of our technologies are licensed from these licensors. Under the terms of our license agreements with Harvard and its Affiliates and CMCC, we acquired the exclusive, worldwide license to make, use, and sell the technology covered by each respective agreement. Among other things, the technologies licensed under these agreements include:

•  Altropane molecular imaging agent compositions and methods of use;

•  Technetium-based molecular imaging agent compositions and methods of use;

•  Inosine methods of use; and

•  DAT blocker compositions and methods of use.

Generally, each of these license agreements is effective until the last patent licensed relating to the technology expires or a fixed and determined date. The patents on the Altropane molecular imaging agent expire beginning in 2013. The patents on the technetium-based molecular imaging agents expire beginning in 2017. The patents for Inosine expire beginning in 2017. The patents for our DAT blockers expire beginning in 2012.

We are required to make certain payments under our license agreements with our licensors which generally include:

•  An initial licensing fee payment upon the execution of the agreement and annual license maintenance fee;

•  Reimbursement payments for all patent related costs incurred by the licensor, including fees associated with the filing of continuation-in-part patent applications;

•  Milestone payments as licensed technology progresses through each stage of development (filing of IND, completion of one or more clinical stages and submission and approval of an NDA); and

•  Royalty payments on the sales of any products based on the licensed technology.

We have entered into license agreements, or the CMCC Licenses, with CMCC to acquire the exclusive worldwide rights to certain axon regeneration technologies. The CMCC Licenses provide for future milestone payments of up to an aggregate of approximately $425,000 for each product candidate upon achievement of certain regulatory milestones.

We have entered into license agreements, or the Harvard License Agreements, with Harvard and its Affiliates to acquire the exclusive worldwide rights to certain technologies within our molecular imaging and neurodegenerative disease programs. The Harvard License Agreements obligate us to pay up to an aggregate of approximately $2,520,000 in milestone payments in the future. The future milestone payments are generally payable only upon achievement of certain regulatory milestones.

Our license agreements with Harvard and its Affiliates and CMCC generally provide for royalty payments equal to specified percentages of product sales, annual license maintenance fees and continuing patent prosecution costs.

Universities and other not-for-profit research institutions are becoming increasingly aware of the commercial value of their findings and are becoming more active in seeking patent protection and licensing arrangements to collect royalties for the use of technology that they have developed. The loss of our relationship with one or more of our key licensors could adversely affect our ongoing development programs and could make it more costly and difficult for us to obtain the licensing rights to new scientific discoveries.

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IF WE ARE UNABLE TO ESTABLISH, MAINTAIN AND RELY ON NEW COLLABORATIVE RELATIONSHIPS, THEN WE MAY NOT BE ABLE TO SUCCESSFULLY DEVELOP AND COMMERCIALIZE OUR TECHNOLOGIES.

To date, our operations have primarily focused on the preclinical development of most of our technologies, as well as conducting clinical trials for certain of our technologies. We currently expect that the continued development of our technologies will result in the initiation of additional clinical trials. We expect that these developments will require us to establish, maintain and rely on new collaborative relationships in order to successfully develop and commercialize our technologies. We face significant competition in seeking appropriate collaborators. Collaboration arrangements are complex to negotiate and time consuming to document. We may not be successful in our efforts to establish additional collaborations or other alternative arrangements, and the terms of any such collaboration or alternative arrangement may not be favorable to us. There is no certainty that:

•  We will be able to enter into such collaborations on economically feasible and otherwise acceptable terms and conditions;

•  Such collaborations will not require us to undertake substantial additional obligations or require us to devote additional resources beyond those we have identified at present;

•  Any of our collaborators will not breach or terminate their agreements with us or otherwise fail to conduct their activities on time, thereby delaying the development or commercialization of the technology for which the parties are collaborating; and

•  The parties will not dispute the ownership rights to any technologies developed under such collaborations.

IF ONE OF OUR COLLABORATORS WERE TO CHANGE ITS STRATEGY OR THE FOCUS OF ITS DEVELOPMENT AND COMMERCIALIZATION EFFORTS WITH RESPECT TO OUR RELATIONSHIP, THE SUCCESS OF OUR PRODUCT CANDIDATES AND OUR OPERATIONS COULD BE ADVERSELY AFFECTED.

There are a number of factors external to us that may change our collaborators’ strategy or focus with respect to our relationship with them, including:

•  The amount and timing of resources that our collaborators may devote to the product candidates;

•  Our collaborators may experience financial difficulties;

•  We may be required to relinquish important rights such as marketing and distribution rights;

•  Should a collaborator fail to develop or commercialize one of our product candidates, we may not receive any future milestone payments and will not receive any royalties for the product candidate;

•  Business combinations or significant changes in a collaborator’s business strategy may also adversely affect a collaborator’s willingness or ability to complete its obligations under any arrangement;

•  A collaborator may not devote sufficient time and resources to any collaboration with us, which could prevent us from realizing the potential commercial benefits of that collaboration;

•  A collaborator may terminate their collaborations with us, which could make it difficult for us to attract new collaborators or adversely affect how we are perceived in the business and financial communities; and

•  A collaborator could move forward with a competing product candidate developed either independently or in collaboration with others, including our competitors.

If any of these occur, the development and commercialization of one or more drug candidates could be delayed, curtailed or terminated because we may not have sufficient financial resources or capabilities to continue such development and commercialization on our own.

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Risks Related to Competition

WE ARE ENGAGED IN HIGHLY COMPETITIVE INDUSTRIES DOMINATED BY LARGER, MORE EXPERIENCED AND BETTER CAPITALIZED COMPANIES.

The biotechnology and pharmaceutical industries are highly competitive, rapidly changing, and are dominated by larger, more experienced and better capitalized companies. Such greater experience and financial strength may enable them to bring their products to market sooner than us, thereby gaining the competitive advantage of being the first to market. Research on the causes of, and possible treatments for, diseases for which we are trying to develop therapeutic or diagnostic products are developing rapidly and there is a potential for extensive technological innovation in relatively short periods of time. Factors affecting our ability to successfully manage the technological changes occurring in the biotechnology and pharmaceutical industries, as well as our ability to successfully compete, include:

•  Many of our potential competitors in the field of CNS research have significantly greater experience than we do in completing preclinical and clinical testing of new pharmaceutical products, the manufacturing and commercialization process, and obtaining FDA and other regulatory approvals of products;

•  Many of our potential competitors have products that have been approved or are in late stages of development;

•  Many of our potential competitors may develop products or other novel technologies that are more effective, safer or less costly than any that we are developing;

•  Many of our potential competitors have collaborative arrangements in our target markets with leading companies and research institutions;

•  The timing and scope of regulatory approvals for these products;

•  The availability and amount of third-party reimbursement;

•  The strength of our patent position;

•  Many of our potential competitors are in a stronger financial position than us, and are thus better able to finance the significant cost of developing, manufacturing and selling new products; and

•  Companies with established positions and prior experience in the pharmaceutical industry may be better able to develop and market products for the treatment of those diseases for which we are trying to develop products.

To our knowledge, there is presently no approved diagnostic in the United States for PD and/or DLB. To our knowledge, there is only one company, GE Healthcare (formerly Nycomed/Amersham), that has marketed a diagnostic imaging agent for PD and DLB, DaTSCAN^®. To date, GE Healthcare has obtained marketing approval in Europe. GE Healthcare has significantly greater infrastructure and financial resources than us, and if they obtained marketing approval in the United States they could significantly adversely affect our competitive position. Their established market presence, and greater financial strength in the European market may make it difficult for us to successfully market Altropane in Europe.

To our knowledge, there is presently no approved therapeutic focused on the nerve repair of CNS disorders resulting from traumas, such as SCI. We are aware of other companies who are developing therapeutics to treat the CNS disorders resulting from SCI. These companies have significantly greater infrastructure and financial resources than us and if they were to able to obtain marketing approval for their products it could significantly adversely affect our competitive position. Given the challenges of achieving functional recovery in severe CNS disorders, we believe some of these competitors are developing devices or drugs that could potentially be used in conjunction with the therapeutics we are developing.

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IF WE ARE UNABLE TO COMPETE EFFECTIVELY, OUR PRODUCT CANDIDATES MAY BE RENDERED NONCOMPETITIVE OR OBSOLETE.

Our competitors may develop or commercialize more effective, safer or more affordable products, or obtain more effective patent protection, than we are able to. Accordingly, our competitors may commercialize products more rapidly or effectively than we are able to, which would adversely affect our competitive position, the likelihood that our product candidates will achieve initial market acceptance, and our ability to generate meaningful revenues from our product candidates. Even if our product candidates achieve initial market acceptance, competitive products may render our products obsolete, noncompetitive or uneconomical. If our product candidates are rendered obsolete, we may not be able to recover the expenses of developing and commercializing those product candidates.

IF THIRD-PARTY PAYORS DO NOT ADEQUATELY REIMBURSE OUR CUSTOMERS FOR ANY OF OUR PRODUCTS THAT ARE APPROVED FOR MARKETING, THEY MIGHT NOT BE ACCEPTED BY PHYSICIANS AND PATIENTS OR PURCHASED OR USED, AND OUR REVENUES AND PROFITS WILL NOT DEVELOP OR INCREASE.

Substantially all biotechnology products are distributed to patients by physicians and hospitals, and in most cases, such patients rely on insurance coverage and reimbursement to pay for some or all of the cost of the product. In recent years, the continuing efforts of government and third party payors to contain or reduce health care costs have limited, and in certain cases prevented, physicians and patients from receiving insurance coverage and reimbursement for medical products, especially newer technologies. We believe that the efforts of governments and third-party payors to contain or reduce the cost of healthcare will continue to affect the business and financial condition of pharmaceutical and biopharmaceutical companies. Obtaining reimbursement approval for a product from each governmental or other third-party payor is a time-consuming and costly process that could require us to provide to each prospective payor scientific, clinical and cost-effectiveness data for the use of our products. If we succeed in bringing any of our product candidates to market and third-party payors determine that the product is eligible for coverage; the third-party payors may nonetheless establish and maintain price levels insufficient for us to realize a sufficient return on our investment in product development. Moreover, eligibility for coverage does not imply that any product will be reimbursed in all cases.

Our ability to generate adequate revenues and operating profits could be adversely affected if such limitations or restrictions are placed on the sale of our products. Specific risks associated with medical insurance coverage and reimbursement include:

•  Significant uncertainty exists as to the reimbursement status of newly approved health care products;

•  Third-party payors are increasingly challenging the prices charged for medical products and services;

•  Adequate insurance coverage and reimbursement may not be available to allow us to charge prices for products which are adequate for us to realize an appropriate return on our development costs. If adequate coverage and reimbursement are not provided for use of our products, the market acceptance of these products will be negatively affected;

•  Health maintenance organizations and other managed care companies may seek to negotiate substantial volume discounts for the sale of our products to their members thereby reducing our profit margins; and

•  In recent years, bills proposing comprehensive health care reform have been introduced in Congress that would potentially limit pharmaceutical prices and establish mandatory or voluntary refunds. It is uncertain if any legislative proposals will be adopted and how federal, state or private payors for health care goods and services will respond to any health care reforms.

U.S. drug prices may be further constrained by possible Congressional action regarding drug reimportation into the United States. Some proposed legislation would allow the reimportation of approved drugs originally manufactured in the United States back into the United States from other countries where the drugs are sold at a lower price. Some governmental authorities in the U.S. are pursuing lawsuits to obtain expanded

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reimportation authority. Such legislation, regulations, or judicial decisions could reduce the prices we receive for any products that we may develop, negatively affecting our revenues and prospects for profitability. Even without legislation authorizing reimportation, increasing numbers of patients have been purchasing prescription drugs from Canadian and other non-United States sources, which has reduced the price received by pharmaceutical companies for their products.

The Centers for Medicare and Medicaid Services, or CMS, the agency within the Department of Health and Human Services that administers Medicare and that is responsible for setting Medicare reimbursement payment rates and coverage policies for any product candidates that we commercialize, has authority to decline to cover particular drugs if it determines that they are not “reasonable and necessary” for Medicare beneficiaries or to cover them at lower rates to reflect budgetary constraints or to match previously approved reimbursement rates for products that CMS considers to be therapeutically comparable. Third-party payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and both Medicare and other third-party payors may have sufficient market power to demand significant price reductions.

Moreover, marketing and promotion arrangements in the pharmaceutical industry are heavily regulated by CMS, and many marketing and promotional practices that are common in other industries are prohibited or restricted. These restrictions are often ambiguous and subject to conflicting interpretations, but carry severe administrative, civil, and criminal penalties for noncompliance. It may be costly for us to implement internal controls to facilitate compliance by our sales and marketing personnel.

As a result of the trend towards managed healthcare in the United States, as well as legislative proposals to constrain the growth of federal healthcare program expenditures, third-party payors are increasingly attempting to contain healthcare costs by demanding price discounts or rebates and limiting both coverage and the level of reimbursement of new drug products. Consequently, significant uncertainty exists as to the reimbursement status of newly approved healthcare products.

MEDICARE PRESCRIPTION DRUG COVERAGE LEGISLATION AND FUTURE LEGISLATIVE OR REGULATORY REFORM OF THE HEALTH CARE SYSTEM MAY AFFECT OUR ABILITY TO SELL OUR PRODUCT CANDIDATES PROFITABLY.

A number of legislative and regulatory proposals to change the healthcare system in the United States and other major healthcare markets have been proposed in recent years. In addition, ongoing initiatives in the United States have exerted and will continue to exert pressure on drug pricing. In some foreign countries, particularly countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. Significant changes in the healthcare system in the United States or elsewhere, including changes resulting from the implementation of the Medicare prescription drug coverage legislation and adverse trends in third-party reimbursement programs, could limit our ability to raise capital and successfully commercialize our product candidates.

In particular, the Medicare Prescription Drug Improvement and Modernization Act of 2003 established a new Medicare prescription drug benefit. The prescription drug program and future amendments or regulatory interpretations of the legislation could affect the prices we are able to charge for any products we develop and sell for use by Medicare beneficiaries and could also cause third-party payors other than the federal government, including the states under the Medicaid program, to discontinue coverage for any products we develop or to lower reimbursement amounts that they pay. The legislation changed the methodology used to calculate reimbursement for drugs that are administered in physicians’ offices in a manner intended to reduce the amount that is subject to reimbursement. In addition, the Medicare prescription drug benefit program that took effect in January 2006 directed the Secretary of Health and Human Services to contract with procurement organizations to purchase physician- administered drugs from manufacturers and provided physicians with the option to obtain drugs through these organizations as an alternative to purchasing from manufacturers, which some physicians may find advantageous. Because we have not received marketing approval or established a price for any product, it is difficult to predict how this new legislation will affect us, but the legislation generally is expected to constrain or reduce reimbursement for certain types of drugs.

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Further federal, state and foreign healthcare proposals and reforms are likely. While we cannot predict the legislative or regulatory proposals that will be adopted or what effect those proposals may have on our business, including the future reimbursement status of any of our product candidates, the announcement or adoption of such proposals could have an adverse effect on potential revenues from product candidates that we may successfully develop.

WE HAVE NO MANUFACTURING CAPACITY AND LIMITED MARKETING INFRASTRUCTURE AND EXPECT TO BE HEAVILY DEPENDENT UPON THIRD PARTIES TO MANUFACTURE AND MARKET APPROVED PRODUCTS.

We currently have no manufacturing facilities for either clinical trial or commercial quantities of any of our product candidates and currently have no plans to obtain additional facilities. To date, we have obtained the limited quantities of drug product required for preclinical and clinical trials from contract manufacturing companies. We intend to continue using contract manufacturing arrangements with experienced firms for the supply of material for both clinical trials and any eventual commercial sale.

We will depend upon third parties to produce and deliver products in accordance with all FDA and other governmental regulations. We may not be able to contract with manufacturers who can fulfill our requirements for quality, quantity and timeliness, or be able to find substitute manufacturers, if necessary. The failure by any third party to perform their obligations in a timely fashion and in accordance with the applicable regulations may delay clinical trials, the commercialization of products, and the ability to supply product for sale. In addition, any change in manufacturers could be costly because the commercial terms of any new arrangement could be less favorable and because the expenses relating to the transfer of necessary technology and processes could be significant.

MDS Nordion has supplied Altropane to us since 2001. We are highly dependent upon MDS Nordion. Under the terms of our agreement, which currently expires on December 31, 2009, MDS Nordion manufactures the Altropane molecular imaging agent for our clinical trials. We do not presently have arrangements with any other suppliers in the event that MDS Nordion is unable or unwilling to manufacture Altropane for us. We could encounter a significant delay before another supplier could manufacture Altropane for us due to the time required to establish a cGMP manufacturing process for Altropane. We hope to sign an extension with MDS Nordion before December 31, 2009 but there can be no assurance that we will be able to or that the terms will be acceptable. We do not have a manufacturing agreement relating to the commercial production of Altropane with MDS Nordion or any other manufacturer. We can provide no assurances that such an agreement will be executed on acceptable terms.

We currently have a limited marketing infrastructure. In order to earn a profit on any future product, we will be required to invest in the necessary sales and marketing infrastructure or enter into collaborations with third parties with respect to executing sales and marketing activities. We may encounter difficulty in negotiating sales and marketing collaborations with third parties on favorable terms for us. Most of the companies who can provide such services are financially stronger and more experienced in selling pharmaceutical products than we are. As a result, they may be in a position to negotiate an arrangement that is more favorable to them. We could experience significant delays in marketing any of our products if we are required to internally develop a sales and marketing organization or establish collaborations with a partner. There are risks involved with establishing our own sales and marketing capabilities. We have no experience in performing such activities and could incur significant costs in developing such a capability.

USE OF THIRD PARTY MANUFACTURERS MAY INCREASE THE RISK THAT WE WILL NOT HAVE ADEQUATE SUPPLIES OF OUR PRODUCT CANDIDATES.

Reliance on third party manufacturers entails risks to which we would not be subject if we manufactured product candidates or products ourselves, including:

•  Reliance on the third party for regulatory compliance and quality assurance;

•  The possible breach of the manufacturing agreement by the third party; and

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•  The possible termination or nonrenewal of the agreement by the third party, based on its own business priorities, at a time that is costly or inconvenient for us.

If we are not able to obtain adequate supplies of our product candidates and any approved products, it will be more difficult for us to develop our product candidates and compete effectively. Our product candidates and any products that we successfully develop may compete with product candidates and products of third parties for access to manufacturing facilities. Our contract manufacturers are subject to ongoing, periodic, unannounced inspection by the FDA and corresponding state and foreign agencies or their designees to ensure strict compliance with cGMP regulations and other governmental regulations and corresponding foreign standards. We cannot be certain that our present or future manufacturers will be able to comply with cGMP regulations and other FDA regulatory requirements or similar regulatory requirements outside the United States. We do not control compliance by our contract manufacturers with these regulations and standards. Failure of our third party manufacturers or us to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates and products.

Risks Related to Employees and Growth

IF WE ARE UNABLE TO RETAIN OUR KEY PERSONNEL AND/OR RECRUIT ADDITIONAL KEY PERSONNEL IN THE FUTURE, THEN WE MAY NOT BE ABLE TO OPERATE EFFECTIVELY.

Our success depends significantly upon our ability to attract, retain and motivate highly qualified scientific and management personnel who are able to formulate, implement and maintain the operations of a biotechnology company such as ours. We consider retaining Peter Savas, our Chairman and Chief Executive Officer and Kenneth L. Rice, Jr., our Executive Vice President Finance and Administration and Chief Financial Officer to be key to our efforts to develop and commercialize our product candidates. The loss of the service of these key executives may significantly delay or prevent the achievement of product development and other business objectives. We do not presently carry key person life insurance on any of our scientific or management personnel.

We currently outsource most of our research and development, preclinical and clinical activities. If we decide to increase our internal research and development capabilities for any of our technologies, we may need to hire additional key management and scientific personnel to assist the limited number of employees that we currently employ. There is significant competition for such personnel from other companies, research and academic institutions, government entities and other organizations. If we fail to attract such personnel, it could have a significant negative effect on our ability to develop our technologies.

Risks Related to our Stock

OUR STOCK PRICE MAY CONTINUE TO BE VOLATILE AND CAN BE AFFECTED BY FACTORS UNRELATED TO OUR BUSINESS AND OPERATING PERFORMANCE.

The market price of our common stock has in the past, and may continue to fluctuate significantly in response to factors that are beyond our control. The stock market in general periodically experiences significant price and volume fluctuations. The market prices of securities of pharmaceutical and biotechnology companies have been volatile, and have experienced fluctuations that often have been unrelated or disproportionate to the operating performance of these companies. These broad market fluctuations could result in significant fluctuations in the price of our common stock, which could cause a decline in the value of your investment. The market price of our common stock may be influenced by many factors, including:

•  Announcements of technological innovations or new commercial products by our competitors or us;

•  Announcements in the scientific and research community;

•  Developments concerning proprietary rights, including patents;

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•  Delay or failure in initiating, conducting, completing or analyzing clinical trials or problems relating to the design, conduct or results of these trials;

•  Announcement of FDA approval or non-approval of our product candidates or delays in the FDA review process;

•  Developments concerning our collaborations;

•  Publicity regarding actual or potential medical results relating to products under development by our competitors or us;

•  Failure of any of our product candidates to achieve commercial success;

•  Our ability to manufacture products to commercial standards;

•  Conditions and publicity regarding the life sciences industry generally;

•  Regulatory developments in the United States and foreign countries;

•  Changes in the structure of health care payment systems;

•  Period-to-period fluctuations in our financial results or those of companies that are perceived to be similar to us;

•  Departure of our key personnel;

•  Future sales of our common stock;

•  Investors’ perceptions of us, our products, the economy and general market conditions;

•  Differences in actual financial results versus financial estimates by securities analysts and changes in those estimates; and

•  Litigation.

ITEM 1B.   Unresolved Staff Comments.

Not applicable.

ITEM 2.   Properties.

Our corporate office is located in Hopkinton, Massachusetts. We lease approximately 16,000 square feet of office space which expires in 2011.

We also lease office space in Boston, Massachusetts pursuant to a lease that expires in 2012. We do not occupy this space. We have entered into two sublease agreements covering all 6,600 square feet under our lease through the expiration of such lease.

We believe that our existing facilities are adequate for their present and anticipated purposes, except that additional facilities will be needed if we elect to expand our space to include laboratory and/or manufacturing activities.

ITEM 3.   Legal Proceedings.

We are subject to legal proceedings in the normal course of business. We are not currently a party to any material legal proceedings.

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

Not Used.

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PART II

Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.

Market Information

Our common stock trades on the Pink Sheets OTC Market under the symbol ALSE.PK. Prior to May 8, 2009, our common stock was traded on the NASDAQ Capital Market under the symbol ALSE. Prior to June 7, 2007, our common stock was traded on the NASDAQ Capital Market under the symbol BLSI.

The following table sets forth the high and low per share sales prices for our common stock for each of the quarters in the period beginning January 1, 2008 through December 31, 2009 as reported on the NASDAQ Capital Market and/or the Pink Sheets OTC Market.

Quarter Ended	High		Low
March 31, 2008	$	3.09	$	2.15
June 30, 2008	$	2.94	$	1.95
September 30, 2008	$	3.00	$	2.05
December 31, 2008	$	2.50	$	0.92
March 31, 2009	$	1.88	$	0.49
June 30, 2009	$	1.18	$	0.55
September 30, 2009	$	1.01	$	0.51
December 31, 2009	$	0.75	$	0.19

Holders

As of March 22, 2010, there were approximately 2,800 holders of record of our common stock. As of March 22, 2010, there were approximately 8,100 beneficial holders of our common stock.

Dividends

We have not paid or declared any cash dividends on our common stock and do not expect to pay cash dividends on our common stock in the foreseeable future.

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Item 6.   Selected Consolidated Financial Data.

The selected consolidated financial data set forth below with respect to our consolidated statement of operations for each of the years in the three-year period ended December 31, 2009 and our consolidated balance sheets as of December 31, 2009 and 2008 are derived from and qualified by reference to our audited consolidated financial statements and the related notes thereto found at “Item 8. Financial Statements and Supplementary Data” herein. The consolidated statement of operations data for each of the years ended December 31, 2006 and 2005 and the consolidated balance sheet data as of December 31, 2007, 2006 and 2005 are derived from our audited consolidated financial statements not included in this Annual Report on Form 10-K. The selected consolidated financial data set forth below should be read in conjunction with and is qualified in its entirety by our audited consolidated financial statements and related notes thereto found at “Item 8. Financial Statements and Supplementary Data” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” which are included elsewhere in this Annual Report on Form 10-K.

	Year Ended December 31,
	2009			2008			2007			2006			2005
Statement of Operations Data
Revenues	$	—		$	—		$	—		$	—		$	—
Operating expenses		8,325,982			18,710,812			18,881,125			26,434,736			11,647,984
Net loss		(10,776,937	)		(20,847,459	)		(19,548,348	)		(26,355,243	)		(11,501,442	)
Accrual of preferred stock dividends and modification of warrants held by preferred stock stockholders		—			—			—			—			(715,515	)
Net loss attributable to common stockholders		(10,776,937	)		(20,847,459	)		(19,548,348	)		(26,355,243	)		(12,216,957	)
Basic and diluted net loss per share attributable to common stockholders	$	(0.46	)	$	(1.00	)	$	(1.04	)	$	(1.59	)	$	(1.03	)
Weighted average number of common shares outstanding		23,361,458			20,883,066			18,874,070			16,525,154			11,806,153
Balance Sheet Data
Cash and cash equivalents	$	314,964		$	73,974		$	2,933,292		$	1,508,665		$	578,505
Marketable securities		—			—			1,240,543			—			8,750,832
Total assets		790,815			845,250			5,623,677			2,368,887			10,515,488
Working capital (deficit) (excludes restricted cash and restricted marketable securities)		(4,535,951	)		(4,623,816	)		1,421,887			(16,853,334	)		7,466,080
Long-term debt and accrued interest payable		38,212,718			35,769,464			24,075,527			—			—
Stockholders’(deficit) equity	$	(47,509,322	)	$	(40,013,361	)	$	(22,414,471	)	$	(16,571,907	)	$	7,891,306

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Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Our management’s discussion and analysis of our financial condition and results of operations include the identification of certain trends and other statements that may predict or anticipate future business or financial results that are subject to important factors that could cause our actual results to differ materially from those indicated. See Item 1A, “Risk Factors.”

Overview

Description of Company

We are a biotechnology company focused on the development of therapeutic and diagnostic products primarily for disorders in the central nervous system, or CNS. Our clinical and preclinical product candidates are based on three proprietary technology platforms:

•  Molecular imaging program focused on the diagnosis of i) Parkinsonian Syndromes, or PS, including Parkinson’s Disease, or PD, and ii) Dementia with Lewy Bodies, or DLB;

•  Regenerative therapeutics program, primarily focused on nerve repair and restoring movement and sensory function in patients who have had significant loss of CNS function resulting from trauma such as spinal cord injury, or SCI, stroke, and optic nerve damage utilizing technology referred to as axon regeneration.

At December 31, 2009, we were considered a “development stage enterprise” as defined in ASC 915, Development Stage Entities (“ASC 915”) (formerly SFAS No. 7, Accounting and Reporting by Development Stage Enterprises), and will continue to be so until we commence commercial operations. The development stage is from October 16, 1992 (inception) through December 31, 2009.

As of December 31, 2009, we have experienced total net losses since inception of approximately $203,969,000, stockholders’ deficit of approximately $47,509,000 and a net working capital deficit of approximately $4,536,000. The cash and cash equivalents available at December 31, 2009 will not provide sufficient working capital to meet our anticipated expenditures for the next twelve months. At March 22, 2010, we had cash and cash equivalents of approximately $130,000 which combined with our ability to control certain costs, including those related to clinical trial programs, preclinical activities, and certain general and administrative expenses will enable us to meet our anticipated cash expenditures into April, 2010. We must immediately raise additional funds in order to continue operations and to fund the estimated $34 million of development costs related to the Altropane POET-2 program. This funding is not available at present and there can be no assurance that such funds will be available on acceptable terms if at all.

In order to continue as a going concern, we must immediately raise additional funds through one or more of the following: a debt financing, an equity offering or a collaboration, merger, acquisition or other transaction with one or more pharmaceutical or biotechnology companies. We are currently engaged in fundraising efforts. There can be no assurance that we will be successful in our fundraising efforts or that additional funds will be available on acceptable terms, if at all. We also cannot be sure that we will be able to obtain additional credit from, or effect additional sales of debt or equity securities to the Purchasers as described in Note 4 to our consolidated financial statements. If we are unable to raise additional or sufficient capital, or if we violate a debt covenant or default under the March 2008 Amended Purchase Agreement of convertible promissory notes, or the June 2008 Purchase Agreement as described in Note 4 to our consolidated financial statements we will need to cease operations or reduce, cease or delay one or more of our research or development programs and/or adjust its current business plan and in any such event may not be able to continue as a going concern. Additionally, our common stock was delisted from trading on the NASDAQ Capital Market as a result of our failure to meet continued listing requirements of NASDAQ. On May 8, 2009 we began trading on the Pink Sheets OTC Market. This delisting has had an adverse affect on our ability to

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obtain future financing and could continue to adversely impact our stock price and the liquidity of our common stock.

In connection with the common stock financing completed by us in March 2005, or the March 2005 Financing, we agreed with the purchasers in such financing, including Robert Gipson, Thomas Gipson, and Arthur Koenig, or the March 2005 Investors, that, subject to certain exceptions, we would not issue any shares of our common stock at a per share price less than $2.50 without the prior consent of the March 2005 Investors holding at least a majority of the shares issued in the March 2005 Financing. On March 22, 2010, the closing price of our common stock was $.21. The failure to receive the requisite waiver or consent of the March 2005 Investors could have the effect of delaying or preventing the consummation of a financing by us should the price per share in such financing be set at less than $2.50.

Our ability to continue to advance our clinical programs, including the development of Altropane and Cethrin, is affected by the availability of financial resources to fund each program. Financial considerations have caused us to modify planned development activities for our clinical programs and we have decided to suspend development of our preclinical programs until we are able to secure additional working capital. If we are not able to raise additional capital, we will not have sufficient funds to complete the clinical trial programs for the Altropane molecular imaging agent or Cethrin.

In order to effect an acquisition, we may need additional financing. We cannot be certain that any such financing will be available on terms favorable or acceptable to us, or at all. If we raise additional funds through the issuance of equity, equity-related or debt securities, these securities may have rights, preferences or privileges senior to those of the rights of our common stockholders, who would then experience dilution. There can be no assurance that we will be able to identify or successfully complete any acquisitions.

Product Development

Molecular Imaging Program

The Altropane molecular imaging agent is being developed for the differential diagnosis of PS, including PD, and non-PS in patients with an upper extremity tremor. In July 2007, we completed enrollment in a study that optimized Altropane’s image acquisition protocol which we believe will enhance Altropane’s commercial use. After a series of discussions with the U.S. Food and Drug Administration, or FDA, and our expert advisors, the POET-2 program was designed as a two-part Phase III program using the optimized Altropane image acquisition protocol. The first part of the program enrolled 54 subjects in a multi-center clinical study to acquire a set of Altropane images which will be used to train the expert readers, as is the customary process for clinical trials of molecular imaging agents. Enrollment in the first part of POET-2 was completed in January 2009. In April, 2009 we reached agreement with the FDA under the Special Protocol Assessment, or SPA, process for the second part of the Phase III clinical trial program of Altropane. A SPA is a process by which sponsors and the FDA reach an agreement on the size, design and analysis of clinical trials that will form the primary basis of approval. The Phase III program is designed to confirm the diagnostic utility of the agent in anticipation of drug registration. The second portion of the Phase III, POET-2 program consists of two clinical trials in up to 480 subjects in total to be conducted in parallel at up to 40 medical facilities throughout the US. The subjects to be tested will be 40-80 years of age and have had a tremor in their hand(s) or arm(s) for less than three years. Each subject will be assessed by a general neurologist, an Altropane imaging procedure and a Movement Disorder Specialist, or MDS considered the “gold standard”. The success of the trial will be determined by measuring the diagnostic efficacy of the neurologist diagnosis compared with the diagnosis determined by the Altropane scan versus the MDS gold standard diagnosis. Based on the trial design and scope covered by the Special Protocol Assessment Agreement for POET-2, we estimate that the total costs to complete the POET-2 program and prepare and submit a New Drug Application, or NDA for Altropane in the U.S. will be approximately $34 million. This funding is not available at present and there can be no assurance that such funds will be available on acceptable terms if at all.

We believe in the current environment that, due to their proximity to commercialization and return on investment, late stage development programs may continue to be of significant interest to potential partners and investors. To maximize the value of our molecular imaging program, we are focusing on obtaining the

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funding necessary to execute the Altropane Phase III registration program. We are pursuing the capital necessary to enable us to advance the Altropane program through our own means. In parallel, we are seeking to partner our molecular imaging program with a firm or firms with the resources necessary for the completion of the Phase III clinical program, for the manufacturing and supply of Altropane, and for the launch and commercialization of Altropane. We can provide no assurances that a partnership transaction will occur. We believe that the expansion of the program into other indications such as DLB and other countries including those in Europe could increase the value of the program for the partner and us. All of these activities require additional funding and as such are proceeding, if at all, only as available resources permit. There can be no assurance that the required funding to advance the Altropane program will be available on acceptable terms if at all.

Regenerative Therapeutics Program — Nerve Repair

Our nerve repair program is focused on restoring movement and sensory function in patients who have had significant loss of CNS function resulting from traumas such as SCI, stroke, traumatic brain injury, or TBI, and optic nerve damage. Our efforts are aimed at the use of proprietary regenerative drugs and/or methods to induce nerve fibers to regenerate and form new connections that restore compromised abilities. Licensing or acquiring the rights to the technologies of complementary approaches for nerve repair is part of our strategy of creating competitive advantages by assembling a broad portfolio of related technologies and intellectual property.

Our lead product candidate for nerve repair during early 2009 was Cethrin. Cethrin contains a proprietary protein which studies indicate inactivates a key enzyme called Rho resulting in the promotion of nerve repair. Cethrin was being investigated to determine its effectiveness in facilitating the restoration of movement and sensory function following a major injury to the spinal cord. After an SCI, approximately two-thirds of patients undergo decompression/stabilization surgery. During surgery, Cethrin is delivered in a single application to the injured region of the spinal cord using a fibrin sealant as a carrier.

In December 2006, we entered into a license agreement, or the Cethrin License, with BioAxone Therapeutic Inc., a Canadian corporation, or BioAxone, pursuant to which we were granted an exclusive, worldwide license to develop and commercialize specified compounds including, but not limited to, Cethrin, as further defined in the Cethrin License. The Cethrin License called for us to conduct development and commercialization activities of Cethrin and to pay certain pre-commercialization milestones and on-going royalties on sales of Cethrin when and if approved for marketing. The Cethrin License provided for a series of performance milestones any of which, if not achieved by us in the timeframes agreed in the Cethrin License, could form the basis of a claim for compensation to BioAxone and possibly the termination of some or all of our rights under the Cethrin License. The Cethrin License further provided us with relief from our performance obligations in the event that such performance is effectively rendered impossible due to safety or efficacy issues with Cethrin during its development. Additionally, the Cethrin License provided a warranty that all of the clinical materials provided to us by BioAxone in connection with the Cethrin License were manufactured in accordance with current Good Manufacturing Practices, or cGMP.

Cethrin License Dispute

In January 2009, the Company received notice from BioAxone alleging that we had failed to meet one of the performance milestones in the Cethrin License that was required to have been met on or before January 1, 2009. This notice purported to terminate the Cethrin License, sought payment of a $2,000,000 penalty from us to BioAxone for such purported failure and requested that we transfer to BioAxone our rights to the Master Cell Bank (as defined in the Cethrin License) and all licensed intellectual property under the Cethrin License.

We believed that the purported termination was without effect. Our performance obligations under the Cethrin License were specifically excused in the event that a safety issue renders such performance impossible. Our prior discovery that the Master Cell Bank from which Cethrin is manufactured may contain an unintended animal derived contaminant rendering it not in compliance with the requirements of cGMP, represented such a

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safety risk for Cethrin. We notified BioAxone of the contamination issue and our position that the purported termination and demand for payment is considered to be without effect.

In April 2009 we announced that we entered into an Amendment Agreement, or the Amendment, with BioAxone Therapeutic, Inc., pursuant to which the Cethrin License, was amended. The Amendment replaces all of the pre-commercial financial and performance-related milestones contained in the Cethrin License with a formula-based approach to sharing of any and all income under a sub-license. The Amendment establishes provisions under which we would use reasonable commercial efforts to enter into a Sub-license Agreement for the technology covered by the Cethrin License. The Amendment also provides for the mutual release of claims that each party had previously alleged against the other under the Cethrin License. During 2009 our efforts were focused on identifying and negotiating with appropriate sublicensing candidates. Under the terms of the Amendment Agreement, our right to sublicense Cethrin has expired and all rights granted to us in the License Agreement have reverted to BioAxone. The Amendment Agreement provides that, in the event BioAxone is able to license or partner the Cethrin technology in the future, we are entitle to receive a 30% share of any and all proceeds received by BioAxone connected with such transaction. It is unclear if or when BioAxone will license the Cethrin technology to a third party, so we may not realize any revenue at all under the Amendment Agreement.

Sales and Marketing and Government Regulation

To date, we have not marketed, distributed or sold any products and, with the exception of Altropane and Cethrin, all of our other product candidates are in preclinical development. Our product candidates must undergo a rigorous regulatory approval process which includes extensive preclinical and clinical testing to demonstrate safety and efficacy before any resulting product can be marketed. The FDA has stringent standards with which we must comply before we can test our product candidates in humans or make them commercially available. Preclinical testing and clinical trials are lengthy and expensive and the historical rate of failure for product candidates is high. Clinical trials require sufficient patient enrollment which is a function of many factors. Delays and difficulties in completing patient enrollment can result in increased costs and longer development times. The foregoing uncertainties and risks limit our ability to estimate the timing and amount of future costs that will be required to complete the clinical development of each program. In addition, we are unable to estimate when material net cash inflows are expected to commence as a result of the successful completion of one or more of our programs.

Research and Development

Following is information on the direct research and development costs incurred on our principal scientific technology programs currently under development. These amounts do not include research and development employee and related overhead costs which total approximately $30,549,000 on a cumulative basis.

	For the Three			For the Year		From Inception
	Months Ended			Ended		(October 16, 1992) to
Program	December 31, 2009			December 31, 2009		December 31, 2009
Molecular imaging	$	(147,000	)	$	480,000	$	27,131,000
Regenerative therapeutics	$	28,000		$	334,000	$	28,920,000
Neurodegenerative disease	$	—		$	20,000	$	1,131,000

Estimating costs and time to complete development of a specific program or technology is difficult due to the uncertainties of the development process and the requirements of the FDA which could require additional clinical trials or other development and testing. Results of any testing could lead to a decision to change or terminate development of a technology, in which case estimated future costs could change substantially. In the event we were to enter into a licensing or other collaborative agreement with a corporate partner involving sharing or funding by such corporate partner of development costs, the estimated development costs incurred by us could be substantially less than estimated. Additionally, research and development costs are extremely difficult to estimate for early-stage technologies due to the fact that there are generally less comprehensive data available for such technologies to determine the development activities that would be required prior to the filing of a New Drug Application, or NDA. As a result, we cannot reasonably estimate the cost and the date of

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completion for any technology that is not at least in Phase III clinical development due to the uncertainty regarding the number of required trials, the size of such trials and the duration of development. Even in Phase III clinical development, estimating the cost and the filing date for an NDA can be challenging due to the uncertainty regarding the number and size of the required Phase III trials. Based on the trial design and scope covered by the Special Protocol Assessment Agreement for POET-2, we estimate that the total costs to complete the POET-2 program and prepare and submit an NDA for Altropane in the U.S. will be approximately $34 million.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements which have been prepared by us in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Our estimates include those related to marketable securities, research contracts, the fair value and classification of financial instruments, our lease accrual and stock-based compensation. We base our estimates on historical experience and on various other assumptions that we believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Going Concern Basis of Accounting

The consolidated financial statements have been prepared on the basis that we will continue as a going concern. We have incurred significant operating losses and negative cash flows from operating activities since our inception. As of December 31, 2009, these conditions raised substantial doubt as to our ability to continue as a going concern. There can be no assurance that we will be successful in our efforts to raise additional capital or that we will be able to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability of the carrying amount of the recorded assets or the amount of liabilities that might result from the outcome of this uncertainty. In the event that we concluded that we would not be able to continue as a going concern, we would potentially present our financial statements on a liquidation basis of accounting.

Research Contracts

We regularly enter into contracts with third parties to perform research and development activities on our behalf in connection with our scientific technologies. Costs incurred under these contracts are recognized ratably over the term of the contract or based on actual enrollment levels which we believe corresponds to the manner in which the work is performed. Clinical trial, contract services and other outside costs require that we make estimates of the costs incurred in a given accounting period and record accruals at period end as the third party service periods and billing terms do not always coincide with our period end. We base our estimates on our knowledge of the research and development programs, services performed for the period, past history for related activities and the expected duration of the third party service contract, where applicable.

Fair Value and Classification of Financial Instruments

Historically, we have issued warrants to purchase shares of our common stock in connection with our debt and equity financings. We record each of the securities issued on a relative fair value basis up to the amount of the proceeds received. We estimate the fair value of the warrants using the Black-Scholes valuation model. The Black-Scholes valuation model is dependent on a number of variables and estimates including interest rates, dividend yield, volatility and the expected term of the warrants. Our estimates are based on market interest rates at the date of issuance, our past history for declaring dividends, our estimated stock price volatility and the contractual term of the warrants. The value ascribed to the warrants in connection with debt offerings is considered a cost of capital and amortized to interest expense over the term of the debt.

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We have, at certain times, issued preferred stock and notes, which were convertible into common stock at a discount from the common stock market price at the date of issuance. The amount of the discount associated with such conversion rights represents an incremental yield, or “beneficial conversion feature” that is recorded when the consideration allocated to the convertible security, divided by the number of common shares into which the security converts, is below the fair value of the common stock at the date of issuance of the convertible instrument.

A beneficial conversion feature associated with the preferred stock is recognized as a return to the preferred stockholders and represents a non-cash charge in the determination of net loss attributable to common stockholders. The beneficial conversion feature is recognized in full immediately if there is no redemption date for the preferred stock, or over the period of issuance through the redemption date, if applicable. A beneficial conversion feature associated with debentures, notes or other debt instruments is recognized as a discount to the debt and is amortized as additional interest expense using the effective interest method over the remaining term of the debt instrument.

Lease Accrual

We are required to make significant judgments and assumptions when estimating the liability for our net ongoing obligations under our amended lease agreement relating to our former executive offices located in Boston, Massachusetts. We use a discounted cash-flow analysis to calculate the amount of the liability. We applied a discount rate of 15% representing our best estimate of our credit-adjusted risk-free rate. The discounted cash-flow analysis is based on management’s assumptions and estimates of our ongoing lease obligations, and income from sublease rentals, including estimates of sublease timing and sublease rental terms. It is possible that our estimates and assumptions will change in the future, resulting in additional adjustments to the amount of the estimated liability, and the effect of any adjustments could be material. We review our assumptions and judgments related to the lease amendment on at least a quarterly basis, until the outcome is finalized, and make whatever modifications we believe are necessary, based on our best judgment, to reflect any changes in circumstances.

Stock-Based Compensation

We measure compensation costs for all share-based awards at fair value on grant date and recognize it as expense over the requisite service period or expected performance period of the award. We estimate the fair value of stock-based awards using the Black-Scholes valuation model on the grant date. The Black-Scholes valuation model requires us to make certain assumptions and estimates concerning the expected term of the awards, the rate of return of risk-free investments, our stock price volatility, and our anticipated dividends. If any of our estimates or assumptions prove incorrect, our results could be materially affected.

Marketable Securities

From time to time, we invest in marketable securities. These marketable securities consist exclusively of investments in United States agency bonds and corporate debt obligations. These marketable securities are adjusted to fair value on the Consolidated Balance Sheet through other comprehensive income. If a decline in the fair value of a security is considered to be other than temporary, the investment is written down to a new cost basis and the unrealized loss is removed from accumulated other comprehensive loss and recorded in the Consolidated Statements of Operations. We evaluate whether a decline in fair value is other than temporary based on factors such as the significance of the decline, the duration of time for which the decline has been in existence and our ability and intent to hold the security to maturity. To date, we have not recorded any other than temporary impairments related to our marketable securities. These marketable securities are classified as current assets because they are highly liquid and are available, as required, to meet working capital and other operating requirements.

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Results of Operations

Years Ended December 31, 2009 and 2008

Global market and economic conditions have been, and continue to be, disruptive and volatile. In particular, the cost of raising money in the debt and equity markets has increased substantially while the availability of funds from those markets has diminished significantly. Recent distress in the financial markets has adversely affected our ability to raise capital. We must immediately raise additional funds in order to continue operations.

Our net loss and net loss attributable to common stockholders was $10,776,937 during the year ended December 31, 2009 as compared with $20,847,459 during the year ended December 31, 2008. Net loss attributable to common stockholders totaled $0.46 per share during 2009 as compared with $1.00 per share during 2008. The decrease in net loss in 2009 was primarily due to lower operating expenses resulting from our decision to significantly curtail operations pending additional funding. The decrease in net loss attributable to common stockholders on a per share basis in 2009 was primarily due to the decrease in net loss in 2009 and an increase in weighted average shares outstanding of approximately 2,478,000 shares in 2009, which was primarily the result of common stock issuances during 2009.

Research and development expenses were $3,702,781 during the year ended December 31, 2009 as compared with $10,851,844 during the year ended December 31, 2008. The decrease in 2009 was primarily attributable to our decision to scale back operations specifically resulting in (i) lower costs of approximately $4,254,000 associated with our nerve repair program, primarily related to Cethrin clinical costs including our Phase I/IIa trial and suspended preparations for our Phase IIb trial; (ii) lower costs of approximately $1,375,000 associated with our molecular imaging program primarily related to decreased Altropane clinical costs and (iii) lower compensation and related costs of approximately $1,332,000 primarily related to lower headcount. Subject to our ability to raise additional capital, we are currently planning for an increase in our research and development expenses over the next twelve months although there may be significant fluctuations on a quarterly basis. This expected increase is primarily related to higher Altropane clinical costs. Our current working capital constraints may limit our planned expenditures.

General and administrative expenses were $4,623,201 during the year ended December 31, 2009 as compared with $7,858,968 during the year ended December 31, 2008. The decrease in 2009 was primarily related to (i) lower compensation and related costs of approximately $1,974,000 primarily related to decreased headcount; (ii) lower commercialization and communication costs of approximately $532,000 and (iii) lower legal, patent and consulting costs of approximately $459,000 primarily related to slowdowns in operations and resolution of the dispute with BioAxone. We currently anticipate that our general and administrative expenses will decrease over the next twelve months primarily related to reduced headcount, although there may be significant fluctuations on a quarterly basis.

Interest expense totaled $2,523,095 during the year ended December 31, 2009 as compared to $2,215,663 during the year ended December 31, 2008. The increase in the 2009 period was primarily attributable to the issuance of $10,000,000 in convertible promissory notes in 2008 which bear interest at the rate of 5% per annum and the issuance of $1,350,000 in promissory notes in 2009 which bear interest at the rate of 7% per annum.

Investment income was $7,140 during the year ended December 31, 2009 as compared with investment income of $79,016 during the year ended December 31, 2008. The decrease in 2009 was primarily due to lower average cash, cash equivalent and marketable securities balances in 2009 than in 2008.

At December 31, 2009, we had net deferred tax assets of approximately $50,538,000 for which a full valuation allowance has been established. As a result of our concentrated efforts on research and development, we have a history of incurring net operating losses, or NOLs, and expect to incur additional net operating losses for the foreseeable future. Accordingly, we have concluded that it is more likely than not that the future benefits related to the deferred tax assets will not be realized and, therefore, we have provided a full valuation allowance for these assets. In the event we achieve profitability, these deferred tax assets may be available to offset future income tax liabilities and expense, subject to limitations that may occur from ownership changes under provisions of the Internal Revenue Code. In 1995 and 2005, we experienced a change in ownership as defined by Section 382 of the Internal Revenue Code. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the

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stock of a corporation by more than 50 percentage points over a three-year period. Since our formation, we have raised capital through the issuance of capital stock on several occasions which, combined with stockholders’ subsequent disposition of those shares, has resulted in two changes of control, as defined by Section 382. As a result of the 2005 ownership change, utilization of our NOLs is subject to an annual limitation under Section 382 determined by multiplying the value of our stock at the time of the ownership change by the applicable long-term tax-exempt rate resulting in an annual limitation amount of approximately $1,000,000. Any unused annual limitation may be carried over to later years, and the amount of the limitation may, under certain circumstances, be subject to adjustment if the fair value of our net assets are determined to be below or in excess of the tax basis of such assets at the time of the ownership change, and such unrealized loss or gain is recognized during the five-year period after the ownership change. Federal research and development tax credits were also impaired by the ownership change and were reduced accordingly.

Years Ended December 31, 2008 and 2007

Our net loss and net loss attributable to common stockholders was $20,847,459 during the year ended December 31, 2008 as compared with $19,548,348 during the year ended December 31, 2007. Net loss attributable to common stockholders totaled $1.00 per share during 2008 as compared with $1.04 per share during 2007. The increase in net loss in 2008 was primarily due an increase in interest expense. The decrease in net loss attributable to common stockholders on a per share basis in 2008 was primarily due to an increase in weighted average shares outstanding of approximately 2,009,000 shares in 2008, which was primarily the result of the conversion of notes payable into common stock in June 2007.

Research and development expenses were $10,851,844 during the year ended December 31, 2008 as compared with $10,475,158 during the year ended December 31, 2007. The increase in 2008 was primarily attributable to higher costs of approximately $1,165,000 associated with our nerve repair program, primarily related to Cethrin clinical costs including our Phase I/IIa trial and preparations for future clinical development. The increase was partially offset by (i) lower costs of approximately $337,000 associated with our molecular imaging program primarily related to our second generation technetium-based molecular imaging agent and (ii) lower compensation and related costs of approximately $309,000 primarily related to lower recruiting and temporary staffing costs in 2008.

General and administrative expenses were $7,858,968 during the year ended December 31, 2008 as compared with $8,405,967 during the year ended December 31, 2007. The decrease in 2008 was primarily related to (i) lower legal, patent and consulting costs of approximately $582,000 and (ii) lower commercialization and communication costs of approximately $157,000. The decrease was partially offset by higher compensation and related costs of approximately $306,000 primarily related to employee severance costs.

Interest expense totaled $2,215,663 during the year ended December 31, 2008 as compared to $876,071 during the year ended December 31, 2007. The increase in the 2008 period was attributable to the issuance of $10,000,000 and $25,000,000 in convertible promissory notes in 2008 and 2007, respectively that bear interest at the rate of 5% per annum and the related non-cash interest expense of approximately $621,000 related to the beneficial conversion features. In March 2007, we issued amended and restated notes which eliminated all outstanding principal and accrued interest due under notes previously issued in August 2006, October 2006 and February 2007. In June 2007, the $10,000,000 in amended and restated promissory notes was converted into 4,000,000 shares of common stock.

Investment income was $79,016 during the year ended December 31, 2008 as compared with investment income of $208,848 during the year ended December 31, 2007. The decrease in 2008 was primarily due to lower average cash, cash equivalent and marketable securities balances in 2008 than in 2007.

Liquidity and Capital Resources

Global market and economic conditions have been, and continue to be, disruptive and volatile. In particular, the cost of raising money in the debt and equity markets has increased substantially while the availability of funds from those markets has diminished significantly. Recent distress in the financial markets has adversely affected our ability to raise capital. We must immediately raise additional funds in order to continue operations.

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Net cash used for operating activities, primarily related to our net loss, totaled $8,060,298 in 2009 as compared to $14,983,246 in 2008. The decrease in net loss in 2009 is primarily related to reductions in R&D and G&A spending in 2009 totaling $10,384,830 partially offset by decreases in accounts payable and prepaid expenses totaling $3,194,158. There can be no assurances that the Company will be able to continue these payment terms. Net cash provided by investing activities totaled $76,476 in 2009 as compared to cash provided by investing activities of $1,121,387 in 2008. The change in investing activities is primarily associated with the sale of marketable securities used to fund operations. Net cash provided by financing activities totaled $8,224,812 in 2009 as compared to $11,002,541 in 2008. The decrease in 2009 primarily reflects the decrease in notes payable issued in 2009.

To date, we have dedicated most of our financial resources to the research and development of our product candidates, general and administrative expenses (including costs related to obtaining and protecting patents). Since inception, we have primarily satisfied our working capital requirements from the sale of our securities through private placements. These private placements have included the sale and issuance of preferred stock, common stock, promissory notes and convertible debentures.

A summary of financings completed during the three years ended March 31, 2010 is as follows:

Date	Net Proceeds Raised		Securities or Debt Instrument Issued
March 2010	$	0.3 million	Promissory Note
February 2010	$	0.2 million	Promissory Note
January 2010	$	0.3 million	Promissory Note
December 2009	$	0.3 million	Promissory Note
November 2009	$	1.0 million	Common Stock
September 2009	$	0.7 million	Convertible Preferred Stock
August 2009	$	0.6 million	Convertible Preferred Stock
July 2009	$	0.6 million	Convertible Preferred Stock
June 2009	$	0.5 million	Convertible Preferred Stock
May 2009	$	1.0 million	Convertible Preferred Stock
April 2009	$	0.5 million	Convertible Preferred Stock
March 2009	$	1.0 million	Convertible Preferred Stock
February 2009	$	0.2 million	Common Stock
February 2009	$	1.0 million	Promissory Notes
January 2009	$	1.0 million	Common Stock
November 2008	$	1.0 million	Common Stock
June 2008	$	5.0 million	Convertible Promissory Notes
March 2008	$	5.0 million	Convertible Promissory Notes
August 2007	$	10.0 million	Convertible Promissory Notes
May 2007	$	6.0 million	Convertible Promissory Notes
March 2007	$	9.0 million	Convertible Promissory Notes

In the future, our working capital and capital requirements will depend on numerous factors, including the progress of our research and development activities, the level of resources that we devote to the developmental, clinical, and regulatory aspects of our technologies, and the extent to which we enter into collaborative relationships with pharmaceutical and biotechnology companies.

As of December 31, 2009, we have experienced total net losses since inception of approximately $203,969,000 , stockholders’ deficit of approximately $47,509,000 and a net working capital deficit of approximately $4,536,000. The cash and cash equivalents available at December 31, 2009 will not provide sufficient working capital to meet our anticipated expenditures for the next twelve months. At March 22, 2010, we had cash and cash equivalents of approximately $130,000 which combined with our ability to control certain costs, including those related to clinical trial programs, preclinical activities, and certain general and

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administrative expenses will enable us to meet our anticipated cash expenditures into April, 2010. We must immediately raise additional funds in order to continue operations.

In order to continue as a going concern, we will need to raise additional capital through one or more of the following: a debt financing, an equity offering, or a collaboration, merger, acquisition or other transaction with one or more pharmaceutical or biotechnology companies. We are currently engaged in fundraising efforts. There can be no assurance that we will be successful in our fundraising efforts or that additional funds will be available on acceptable terms, if at all. We also cannot be sure that we will be able to obtain additional credit from, or effect additional sales of debt or equity securities to certain of our existing investors (described below). If we are unable to raise additional or sufficient capital or if we violate a debt covenant or default under the March 2008 Amended Purchase Agreement or the June 2008 Purchase Agreement (described below) we may need to cease operations or reduce, cease or delay one or more of our research or development programs and/or adjust our current business plan and in any such event may not be able to continue as a going concern. Additionally, our common stock was delisted from trading on the NASDAQ Capital Market as a result of our failure to meet continued listing requirements of NASDAQ. On May 8, 2009 we began trading on the Pink Sheets OTC Market. This delisting could have an adverse affect on our ability to obtain future financing and could adversely impact our stock price and the liquidity of our common stock. See the risk factor entitled “Our common stock has been delisted from, the NASDAQ Capital Market.”

In connection with the common stock financing completed by us in March 2005, or the March 2005 Financing, we agreed with the purchasers in such financing, including Robert Gipson, Thomas Gipson, and Arthur Koenig, or the March 2005 Investors, that, subject to certain exceptions, we would not issue any shares of our common stock at a per share price less than $2.50 without the prior consent of the March 2005 Investors holding at least a majority of the shares issued in the March 2005 Financing. On March 22, 2010, the closing price of our common stock was $.21. The failure to receive the requisite waiver or consent of the March 2005 Investors could have the effect of delaying or preventing the consummation of a financing by us should the price per share in such financing be set at less than $2.50.

Convertible Notes Payable

In March 2007, we entered into a convertible promissory note purchase agreement, or the March 2007 Purchase Agreement, with Robert Gipson, Thomas Gipson and Arthur Koenig, referred to as the Purchasers and also the March 2007 Note Holders, pursuant to which we could borrow up to $15,000,000 from the March 2007 Note Holders prior to December 31, 2007. In March 2007, we issued convertible promissory notes to the March 2007 Note Holders in the aggregate principal amount of $9,000,000 pursuant to the March 2007 Purchase Agreement. Certain of the material terms of the convertible promissory notes are described below.

In May 2007, we amended and restated the March 2007 Purchase Agreement, or the May 2007 Amended Purchase Agreement, to (i) eliminate the requirement for the March 2007 Note Holders to make further advances under the March 2007 Purchase Agreement and (ii) add Highbridge International, LLC, or Highbridge, as a Purchaser. In May 2007, we issued a convertible promissory note to Highbridge in the aggregate principal amount of $6,000,000 pursuant to the May 2007 Amended Purchase Agreement.

In August 2007, we amended and restated the May 2007 Amended Purchase Agreement, or the August 2007 Amended Purchase Agreement, to (i) increase the amount we could borrow by $10,000,000 to $25,000,000 and (ii) add Ingalls & Snyder Value Partners LP, or ISVP, as a Purchaser. In August 2007, we issued a convertible promissory note to ISVP in the aggregate principal amount of $10,000,000 pursuant to the August 2007 Amended Purchase Agreement.

In March 2008, we amended and restated the August 2007 Amended Purchase Agreement, or the March 2008 Amended Purchase Agreement, to (i) increase the amount we could borrow by $5,000,000 to $30,000,000 and (ii) provide that we may incur up to an additional $5,000,000 of indebtedness from the Purchasers upon the same terms and conditions as the March 2008 Amended Purchase Agreement. In March 2008, we issued a convertible promissory note to Robert Gipson, or the March 2008 RG Note, in the aggregate principal amount of $5,000,000 pursuant to the March 2008 Amended Purchase Agreement.

The amounts borrowed by us under the March 2008 Amended Purchase Agreement bear interest at the rate of 5% per annum and may be converted, at the option of the Purchasers into (i) shares of our common stock at a

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conversion price per share of $2.50, (ii) the right to receive future royalty payments related to our molecular imaging products (including Altropane and Fluoratec) in amounts equal to 2% of our pre-commercial revenue related to such products plus 0.5% of future net sales of such products for each $1,000,000 of outstanding principal and interest that a Purchaser elects to convert into future payments, or (iii) a combination of (i) and (ii). Any outstanding notes that are not converted into our common stock or into the right to receive future payments will become due and payable by the earlier of December 31, 2010 or the date on which a Purchaser declares an event of default (as defined in the March 2008 Amended Purchase Agreement). However, each Purchaser is prohibited from effecting a conversion if at the time of such conversion the common stock issuable to such Purchaser, when taken together with all shares of common stock then held or otherwise beneficially owned by a Purchaser exceeds 19.9%, or 9.99% for Highbridge and ISVP, of the total number of issued and outstanding shares of our common stock immediately prior to such conversion unless and until our stockholders approve the conversion of all of the shares of common stock issuable thereunder.

In June 2008, we entered into a convertible promissory note purchase agreement, or the June 2008 Purchase Agreement, with Robert Gipson pursuant to which we could borrow up to $5,000,000. In June 2008, we issued a convertible promissory note to Robert Gipson, or the June 2008 RG Note, in the aggregate principal amount of $5,000,000 pursuant to the June 2008 Purchase Agreement. The terms of the June 2008 Purchase Agreement are consistent with those of the March 2008 Amended Purchase Agreement described above.

We are subject to certain debt covenants pursuant to the March 2008 Amended Purchase Agreement and the June 2008 Purchase Agreement, or Purchase Agreements. If we (i) fail to pay the principal or interest due under the Purchase Agreements, (ii) file a petition for action for relief under any bankruptcy or similar law or (iii) an involuntary petition is filed against us, all amounts borrowed under the Purchase Agreements may become immediately due and payable by us. In addition, without the consent of the Purchasers, we may not (i) create, incur or otherwise permit to be outstanding any additional indebtedness for money borrowed, (ii) declare or pay any cash dividend, or make a distribution on, repurchase, or redeem, any class of our stock, subject to certain exceptions or sell, lease, transfer or otherwise dispose of any of our material assets or property or (iii) dissolve or liquidate. In January 2010 the Purchasers agreed to amend the Purchase Agreements to allow us to make additional borrowings of up to $5,000,000 on terms acceptable to our Board of Directors.

Promissory Notes

In December 2009 we issued a promissory note to Robert Gipson in the amount of $350,000 and payable on demand. The Note bears interest at the rate of 7% per annum.

Convertible Preferred Stock

During 2009 the we completed the following sales of Series F Convertible Preferred Stock to Robert Gipson:

	Number of Shares
Date of Issuance	Issued		Gross Proceeds
March 19, 2009		20,000	$	500,000
March 31, 2009		20,000		500,000
April 16, 2009		20,000		500,000
May 12, 2009		40,000		1,000,000
June 10, 2009		20,000		500,000
July 9, 2009		12,000		300,000
July 23, 2009		12,000		300,000
August 11, 2009		12,000		300,000
August 26, 2009		12,000		300,000
September 10, 2009		12,000		300,000
September 28, 2009		16,000		400,000
		196,000	$	4,900,000

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The key terms of the Series F Stock are summarized below:

Dividend.  The Series F Stock is entitled to receive any dividend that is paid to holders of our common stock. Any subdivisions, combinations, consolidations or reclassifications to the common stock must also be made accordingly to Series F Stock, respectively.

Liquidation Preference.  In the event of our liquidation, dissolution or winding up, before any payments are made to holders of our common stock or any other class or series of our capital stock ranking junior as to liquidation rights to the Series F Stock, the holders of the Series F Stock will be entitled to receive the greater of (i) $25.00 per share (subject to adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares) plus any outstanding and unpaid dividends thereon and (ii) such amount per share as would have been payable had each share been converted into common stock. After such payment to the holders of Series F Stock and the holders of shares of any other series of our preferred stock ranking senior to the common stock as to distributions upon liquidation, the remaining our assets will be distributed pro rata to the holders of our common stock.

Voting Rights.  Each share of Series F Stock shall entitle its holder to a number of votes equal to the number of shares of our common stock into which such share of Series F Stock is convertible.

Conversion.  Each share of Series F Stock is convertible at the option of the holder thereof at any time. Each share of Series F Stock is initially convertible into 25 shares of common stock, subject to adjustment in the event of certain dividends, stock splits or stock combinations affecting the Series F Stock or the common stock, and subject to adjustment on a weighted-average basis in the event of certain issuances by us of securities for a price less than the then-current price at which the Series F Stock converts into common stock.

Redemption.  At any time after September 1, 2011, any holder of Series F Stock may elect to have some or all of such shares redeemed by us at a price equal to the aggregate of (i) $25 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares), or the Original Issue Price, plus (ii) all declared but unpaid dividends thereon, plus (iii) an amount computed at a rate per annum of 7% of the Original Issue Price from March 19, 2009 until the redemption date.

The terms of the Series F Stock contain provisions that may require redemption in circumstances that are beyond the Company’s control. Therefore, the shares have been recorded, net of issuance costs of approximately $25,000, as convertible, redeemable stock outside of permanent equity. The Series F Stock was recorded at fair value on the date of issuance. As of December 31, 2009, the Company recorded approximately $192,000 in accretion on the Series F Stock.

Common Stock

In November 2008, we completed a private placement with Robert Gipson of 543,478 shares of our common stock which raised $1,000,000 in gross proceeds. In connection with the November 2008 private placement, we also issued warrants to Mr. Gipson (the “November 2008 Warrants”) to purchase 543,478 additional shares of common stock that were exercisable at $1.84 per share between six months and two years after the closing. In connection with the private placement, we agreed with Mr. Gipson (the “Letter Agreement”) that if we sold shares of our common stock at a price below $1.84, subject to certain exceptions, prior to December 31, 2009, Mr. Gipson would be entitled to receive, for no additional consideration, additional shares of common stock and warrants in accordance with a pre-determined formula. In addition, Dawson James Securities, Inc., (“Dawson James”) in its capacity as agent for the private placement, was entitled to a warrant to purchase 38,043 shares of common stock (the “Agent Warrant”). The Agent Warrant had a term of five years and was exercisable at a price equal to $1.84. In February 2009, Dawson James gave up its right to the Agent Warrant.

In January 2009, we completed a private placement with Robert Gipson of 1,000,000 shares of its common stock which raised $1,000,000 in gross proceeds. In addition, we issued an additional 456,522 shares of our common stock to Mr. Gipson pursuant to a Letter Agreement. In connection with the January 2009 private placement, Mr. Gipson agreed to the cancellation of the November 2008 Warrants.

48

In February 2009, we entered into a private placement with Cato Holding Company (“Cato”) of 200,000 shares of our common stock at a purchase price of $1.00 per share. In connection with the February 2009 private placement, we agreed with Cato that if we sell shares of our common stock, or securities convertible into common stock, prior to September 30, 2009, and the purchaser of such securities receives warrants to purchase additional shares of common stock (a “Qualified Financing”), subject to certain exceptions, Cato shall be entitled to receive, for no additional consideration, a warrant to purchase shares of common stock with the same terms and conditions as those provided to a purchaser in a Qualified Financing.

In November 2009, we entered into a private placement with Robert Gipson of 2,500,000 shares of our common stock which raised $1,000,000 in gross proceeds. In addition, in March 2010 we issued an additional 1,500,000 shares of our common stock to Mr. Gipson pursuant to a Letter Agreement.

Contractual Obligations and Commitments

As of December 31, 2009, our approximate future minimum contractual obligations were as follows:

	Payments Due by Period
			Less Than One		One to		Three to Five		More Than
Contractual Obligations	Total		Year		Three Years		Years		Five Years
Operating Lease Obligations(1)	$	1,247,000	$	592,000	$	655,000	$	—	$	—
Convertible Notes Payable(2)		34,880,000		—		34,880,000		—		—
Other Contractual Obligations(3)		29,000		19,000		10,000		—		—
Total	$	36,156,000	$	611,000	$	35,545,000	$	—	$	—

(1)	Such amounts primarily consist of minimum rental payments for our Hopkinton, Massachusetts office lease through its expiration in 2011. In addition, we have an office lease in Boston, Massachusetts that expires in 2012 for which we have entered into two sublease agreements covering the entire leased space. Total rent expense under all of our leases was approximately $277,000 for the year ended December 31, 2009.
(2)	Such amount was adjusted for the beneficial conversion features reducing the carrying values of the notes.
(3)	Such amounts primarily reflect research and development commitments with third parties.

Recent Accounting Pronouncements

In April 2009, the Financial Accounting Standards Board, or FASB, issued FASB Accounting Standards Codification, or ASC, 825-10-65, “Interim Disclosures about Fair Value of Financial Instruments.” ASC 825-10-65 amends ASC 825-10 to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as annual financial statements. The ASC requires a publicly traded company to include disclosures about the fair value of its financial instruments whenever it issues summarized financial information for interim reporting periods. Such entity is required to disclose in the body or in the accompanying notes of its summarized financial information for interim reporting periods and in its financial statements for annual reporting periods the fair value of all financial instruments for which it is practicable to estimate that value, whether recognized or not recognized in the statement of financial position. Fair value information disclosed in the notes must be presented together with the related carrying amount in a form that makes it clear whether the fair value and carrying amount represent assets or liabilities and how the carrying amount relates to what is reported in the statement of financial position. Such entity also must disclose the methods and significant assumptions used to estimate the fair value of financial instruments and describe changes in methods and significant assumptions during the period. We adopted this ASC for the quarter ended June 30, 2009 and the adoption did not have a material impact on our consolidated results of operations and financial position.

In April 2009, FASB issued ASC 820-10-65, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.” This ASC provides additional guidance for estimating fair value in accordance with ASC 820, “Fair

49

Value Measurements”, when the volume and level of activity for the asset or liability have significantly decreased. This ASC also includes guidance on identifying circumstances that indicate a transaction is not orderly. This ASC emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. We adopted this ASC for the quarter ended June 30, 2009 and the adoption did not have a material impact on our consolidated results of operations and financial position.

In May 2009, the FASB issued ASC 855-10, “Subsequent Events” to establish accounting and disclosure standards for events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It defines financial statements as available to be issued, requiring the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, whether it be the date the financial statements were issued or the date they were available to be issued. We adopted this pronouncement upon issuance. This standard had no material impact on our financial position, results of operations or cash flows.

In June 2009, the FASB issued ASC 105-10, “The FASB Accounting Standards Codification, and the Hierarchy of Generally Accepted Accounting Principles,” or the Codification as the single source of authoritative nongovernmental Generally Accepted Accounting Principles in the United States. The Codification is effective for interim and annual periods ending after September 15, 2009. Upon the effective date, the Codification will be the single source of authoritative accounting principles to be applied by all nongovernmental U.S. entities. All other accounting literature not included in the Codification will be nonauthoritative. The adoption of the Codification had no material impact on our financial position or results of operations.

Off-Balance Sheet Arrangements

We had no “off balance sheet arrangements” (as defined in Item 303(a)(4) of Regulation S-K) during the year ended December 31, 2009.

Item 7A.   Quantitative and Qualitative Disclosures about Market Risk.

We generally maintain a portfolio of cash equivalents, and short-term and long-term marketable securities in a variety of securities which can include commercial paper, certificates of deposit, money market funds and government and non-government debt securities. The fair value of these available-for-sale securities are subject to changes in market interest rates and may fall in value if market interest rates increase. Our investment portfolio includes only marketable securities with active secondary or resale markets to help insure liquidity. We have implemented policies regarding the amount and credit ratings of investments. Due to the conservative nature of these policies, we do not believe we have material exposure due to market risk. We may not have the ability to hold our fixed income investments until maturity, and therefore our future operating results or cash flows could be affected if we are required to sell investments during a period in which increases in market interest rates have adversely affected the value of our securities portfolio. For fixed rate debt, changes in interest rates generally affect the fair market value of the debt instrument, but not earnings or cash flows. We do not have an obligation to prepay any fixed rate debt prior to maturity and, therefore, interest rate risk and changes in the fair market value of fixed rate debt should not have a significant impact on earnings or cash flows until such debt is refinanced, if necessary. The terms related to our fixed rate debt are described in Note 5 to the consolidated financial statements. For variable rate debt, changes in interest rates generally do not impact the fair market value of the debt instrument, but do affect future earnings and cash flows. We did not have any variable rate debt outstanding during the fiscal year ended December 31, 2009.

50

Item 8.   Financial Statements and Supplementary Data.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Alseres Pharmaceuticals, Inc.

We have audited the accompanying consolidated balance sheets of Alseres Pharmaceuticals, Inc. and Subsidiaries (the “Company”) (a development stage enterprise) as of December 31, 2009 and 2008, and the related consolidated statements of operations, comprehensive loss and stockholders’ (deficit) equity and cash flows for each of the three years in the period ended December 31, 2009 and for the period from October 16, 1992 (Inception) to December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements for the period from October 16, 1992 (inception) to December 31, 2006 were audited by other auditors and our opinion, insofar as it relates to cumulative amounts included for such prior periods, is based solely on the reports of such other auditors.

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

In our opinion, based on our audits and the reports of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Alseres Pharmaceuticals, Inc. and Subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009 and the period from October 16, 1992 (Inception) to December 31, 2009, in conformity with U.S. generally accepted accounting principles.

We were not engaged to examine management’s assessment of the effectiveness of Alseres Pharmaceuticals, Inc. and Subsidiaries’ internal control over financial reporting as of December 31, 2009, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting, and, accordingly, we do not express an opinion thereon.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations, its total liabilities exceed its total assets, and it has determined that it will need to raise additional capital. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ McGladrey & Pullen, LLP

Burlington, Massachusetts

March 31, 2010

51

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Alseres Pharmaceuticals, Inc.:

In our opinion, the consolidated statements of operations, of comprehensive loss and stockholders’ (deficit) equity and of cash flows for the period from October 16, 1992 (date of inception) to December 31, 2006 (not separately presented herein) present fairly, in all material respects, the results of operations and cash flows of Alseres Pharmaceuticals, Inc. (formerly Boston Life Sciences, Inc.) and its subsidiaries (a development stage enterprise) for the period from October 16, 1992 (date of inception) to December 31, 2006 (not separately presented herein) in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has a net working capital deficit, a stockholders’ deficit and has suffered recurring losses and negative cash flows from operations that raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/  PricewaterhouseCoopers LLP

Boston, Massachusetts

April 2, 2007

52

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

CONSOLIDATED BALANCE SHEETS

	December 31,			December 31,
	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	314,964		$	73,974
Marketable securities (Note 2)		—			—
Security deposits		38,928			79,728
Prepaid expenses and other current assets		34,231			163,706
Total current assets		388,123			317,408
Fixed assets, net (Note 3)		106,272			178,643
Indemnity fund (Note 10)		115,720			115,462
Security deposits and other assets		180,700			233,737
Total assets	$	790,815		$	845,250
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued expenses (Note 4)	$	3,522,581		$	4,895,799
Notes payable (Note 5)		1,350,000			—
Accrued lease (Note 6)		51,493			45,425
Total current liabilities		4,924,074			4,941,224
Convertible notes payable (Note 5)		34,155,632			33,456,374
Accrued interest payable (Note 5)		4,057,086			2,313,090
Accrued lease, excluding current portion (Note 6)		96,426			147,923
Total liabilities		43,233,218			40,858,611
Commitments and contingencies (Note 9)
Series F convertible redeemable preferred stock, $.01 par value; 200,000 shares designated; 196,000 and 0 shares issued and outstanding at December 31, 2009 and 2008, respectively (liquidation preference of $4,900,000 at December 31, 2009)		5,066,919			—
Stockholders’ deficit:
Preferred stock, $.01 par value; 1,000,000 shares authorized; 25,000 shares designated Convertible Series A, 500,000 shares designated Convertible Series D, and 800 shares designated Convertible Series E; no shares issued and outstanding at December 31, 2009 and 2008		—			—
Common stock, $.01 par value; 80,000,000 shares authorized; 25,555,645 and 21,399,123 shares issued and outstanding at December 31, 2009 and 2008, respectively		255,556			213,991
Additional paid-in capital		146,913,395			143,671,984
Deficit accumulated during development stage		(194,678,273	)		(183,899,336	)
Total stockholders’ deficit		(47,509,322	)		(40,013,361	)
Total liabilities and stockholders’ deficit	$	790,815		$	845,250

The accompanying notes are an integral part of the consolidated financial statements.

53

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

CONSOLIDATED STATEMENTS OF OPERATIONS

										From Inception
										(October 16,
										1992) to
	For the Year Ended December 31,									December 31,
	2009			2008			2007			2009
Revenues	$	—		$	—		$	—		$	900,000
Operating expenses:
Research and development		3,702,781			10,851,844			10,475,158			115,482,830
General and administrative		4,623,201			7,858,968			8,405,967			64,124,454
Purchased in-process research and development		—			—			—			12,146,544
Total operating expenses		8,325,982			18,710,812			18,881,125			191,753,828
Loss from operations		(8,325,982	)		(18,710,812	)		(18,881,125	)		(190,853,828	)
Other expenses		65,000			—			—			(1,517,878	)
Interest expense		(2,523,095	)		(2,215,663	)		(876,071	)		(10,006,996	)
Investment income		7,140			79,016			208,848			7,702,429
Net loss		(10,776,937	)		(20,847,459	)		(19,548,348	)		(194,676,273	)
Preferred stock beneficial conversion feature		—			—			—			(8,062,712	)
Accrual of preferred stock dividends and modification of warrants held by preferred stock stockholders (Note 7)		—			—			—			(1,229,589	)
Net loss attributable to common stockholders	$	(10,776,937	)	$	(20,847,459	)	$	(19,548,348	)	$	(203,968,574,	)
Basic and diluted net loss attributable to common stockholders per share	$	(0.46	)	$	(1.00	)	$	(1.04	)
Weighted average common shares outstanding		23,361,458			20,883,066			18,874,070

The accompanying notes are an integral part of the consolidated financial statements.

54

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS AND STOCKHOLDERS’ (DEFICIT) EQUITY
For the Period from inception (October 16, 1992) to December 31, 2009

																			Deficit
																	Accumulated		Accumulated			Total
	Preferred Stock						Common Stock										Other		During			Stockholders’
	Number of						Number of				Additional Paid-			Deferred			Comprehensive		Development			(Deficit)
	Shares			Amount			Shares		Par Value		In Capital			Compensation			Income (Loss)		Stage			Equity
Issuance of common stock to founders								304,009	$	3,040	$	45,685										$	48,725
Issuance of common stock upon exercise of warrants and options								1,185,039		11,850		7,584,589											7,596,439
Issuance of common stock and warrants, net of issuance costs of $1,928,421								11,516,790		115,168		56,343,378											56,458,546
Issuance of common stock and warrants upon Merger								723,947		7,239		14,596,709											14,603,948
Issuance of common stock upon conversion of convertible debentures								31,321		313		988,278											988,591
Issuance of warrants in connection with debentures, net of issuance costs of $392,958												3,632,632											3,632,632
Issuance of warrants in connection with preferred series C stock issuance and related beneficial conversion feature, net of issuance costs of $590,890												3,736,789											3,736,789
Accretion of preferred series C stock												(4,327,679	)										(4,327,679	)
Issuance of preferred stock, net of issuance costs of $4,078,821		240,711		$	2,296,355							23,288,101											25,584,456
Conversion of preferred stock into common stock and payment of interest in common stock, net of issuance costs of $27,664		(240,149.7	)		(1,491,474	)		1,553,749		15,538		7,655,122											6,179,186
Conversion of debentures and payment of interest in common stock, net of issuance costs of $307,265								317,083		3,171		4,844,249											4,847,420
Conversion of preferred stock into common stock and modification of warrants		(561.3	)		(3,501,539	)		900,646		9,006		3,492,533											—
Preferred stock conversion inducement												(600,564	)										(600,564	)
Amortization of preferred stock Series E beneficial conversion feature					2,696,658							(2,696,658	)										—
Issuance of warrants in connection with Series E Stock, net of issuance costs of $278,426												2,049,297											2,049,297
Issuance of common stock in connection with cancellation of warrants								42,667		427		(427	)										—
Accrual of dividends on preferred Series E stock												(573,597	)										(573,597	)
Beneficial conversion feature on 10% convertible secured promissory notes												558,000											558,000
Deferred compensation related to stock options and warrants granted												804,607		$	(804,607	)							—
Compensation expense related to stock options and warrants												3,470,199			804,607								4,274,806
Modification of options and warrants												1,804,694											1,804,694
Other								783		8		69,925											69,933
Comprehensive loss:
Net loss from inception (October 16, 1992) to December 31, 2006																			$	(143,503,529	)		(143,503,529	)
Balance at December 31, 2006		—			—			16,576,034		165,760		126,765,862			—			—		(143,503,529	)		(16,571,907	)
Issuance of common stock upon exercise of warrants and options								202,183		2,022		143,683											145,705
Issuance of common stock upon conversion of notes payable								4,000,000		40,000		9,960,000											10,000,000
Beneficial conversion feature on convertible notes payable												1,880,000											1,880,000
Compensation expense related to stock options												1,665,155											1,665,155
Expense related to modification of stock options												5,614											5,614
Comprehensive loss:
Unrealized gain on marketable securities																		9,310					9,310
Net loss																				(19,548,348	)		(19,548,348	)
Comprehensive loss																							(19,539,038	)
Balance at December 31, 2007		—			—			20,778,217		207,782		140,420,314			—			9,310		(163,051,877	)		(22,414,471	)
Issuance of common stock upon exercise of options								1,100		11		2,530											2,541
Issuance of common stock upon conversion of notes payable								48,000		480		119,520											120,000

55

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS AND STOCKHOLDERS’ (DEFICIT) EQUITY — (Continued)
For the Period from inception (October 16, 1992) to December 31, 2009

																	Deficit
														Accumulated			Accumulated			Total
	Preferred Stock				Common Stock									Other			During			Stockholders’
	Number of				Number of				Additional Paid-			Deferred		Comprehensive			Development			(Deficit)
	Shares		Amount		Shares		Par Value		In Capital			Compensation		Income (Loss)			Stage			Equity
Beneficial conversion feature on convertible notes payable										380,000											380,000
Compensation expense related to stock options										1,670,063											1,670,063
Issuance of common stock						571,806		5,718		1,079,557											1,085,275
Comprehensive loss:
Unrealized loss on marketable securities															(9,310	)					(9,310	)
Net loss																		(20,847,459	)		(20,847,459	)
Comprehensive loss																					(20,856,769	)
Balance at December 31, 2008		—	$	—		21,399,123	$	213,991	$	143,671,984		$	—	$	—		$	(183,899,336	)	$	(40,013,361	)
Issuance of common stock upon exercise of options										—											—
Compensation expense related to stock options										1,473,083											1,473,083
Issuance of common stock						4,156,522		41,565		1,960,435											2,002,000
Issuance of preferred stock		196,000	$	5,066,919						(192,107	)							(2,000	)		4,872,812
Comprehensive loss:
Net Loss																		(10,776,937	)		(10,776,937	)
Comprehensive loss																					(10,776,937	)
Balance at December 31, 2009		196,000	$	5,066,919		25,555,645	$	255,556	$	146,913,395		$	—	$	—		$	(194,678,273	)	$	(42,442,403	)

56

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

CONSOLIDATED STATEMENTS OF CASH FLOWS

										From Inception
										(October 16,
										1992) to
	For the Year Ended December 31,									December 31,
	2009			2008			2007			2009
Cash flows from operating activities:
Net loss	$	(10,776,937	)	$	(20,847,459	)	$	(19,548,348	)	$	(194,676,273	)
Adjustments to reconcile net loss to net cash used for operating activities:
Purchased in-process research and development		—			—			—			12,146,544
Write-off of acquired technology		—			—			—			3,500,000
Interest expense settled through issuance of notes payable		—			—			—			350,500
Non-cash interest expense		716,358			638,367			221,523			3,224,923
Non-cash charges related to options, warrants and common stock		1,473,086			1,755,338			1,670,769			11,052,881
Amortization and depreciation		72,371			52,953			84,861			2,791,317
Changes in current assets and liabilities:
Decrease (increase) in prepaid expenses and other current assets		129,475			718,356			(614,330	)		688,335
(Decrease) increase in accounts payable and accrued expenses		(1,435,956	)		1,169,321			(6,947,420	)		2,687,178
Increase in accrued interest payable		1,806,734			1,572,673			740,417			4,119,824
(Decrease) increase in accrued lease		(45,429	)		(42,795	)		(30,753	)		147,919
Net cash used for operating activities		(8,060,298	)		(14,983,246	)		(24,423,281	)		(153,966,852	)
Cash flows from investing activities:
Cash acquired through Merger		—			—			—			1,758,037
Purchases of fixed assets		—			(143,112	)		(36,912	)		(1,652,114	)
Decrease (increase) in security deposits and other assets		76,734			35,550			33,398			(419,763	)
(Increase) in indemnity fund		(258	)		(2,284	)		(5,328	)		(115,720	)
Purchases of marketable securities		—			—			(3,359,879	)		(132,004,923	)
Sales and maturities of marketable securities		—			1,231,233			2,128,646			132,004,923
Net cash provided by (used for) investing activities		76,476			1,121,387			(1,240,075	)		(429,560	)
Cash flows from financing activities:
Proceeds from issuance of common stock		2,000,000			1,002,541			145,705			66,731,339
Proceeds from issuance of preferred stock		4,900,000			—			—			39,922,170
Preferred stock conversion inducement		—			—			—			(600,564	)
Proceeds from issuance of promissory notes		1,350,000			10,000,000			27,000,000			52,935,000
Proceeds from issuance of convertible debentures		—			—			—			9,000,000
Principal payments of notes payable		—			—			—			(7,146,967	)
Dividend payments on Series E Cumulative Convertible Preferred Stock		—			—			—			(516,747	)
Payments of financing costs		(25,188	)		—			(57,722	)		(5,612,855	)
Net cash provided by financing activities		8,224,812			11,002,541			27,087,983			154,711,376
Net increase (decrease) in cash and cash equivalents		240,990			(2,859,318	)		1,424,627			314,964
Cash and cash equivalents, beginning of period		73,974			2,933,292			1,508,665			—
Cash and cash equivalents, end of period	$	314,964		$	73,974		$	2,933,292		$	314,964
Supplemental cash flow disclosures:
Non-cash transactions
Cash paid for interest	$	—		$	—		$	—		$	628,406

The accompanying notes are an integral part of the consolidated financial statements.

57

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   The Company and its Significant Accounting Policies

Alseres Pharmaceuticals, Inc. and its subsidiaries (the “Company”) is a biotechnology company engaged in the development of therapeutic and diagnostic products primarily for disorders in the central nervous system. The Company was founded in 1992 and merged with a publicly held company in 1995 (the “Merger”) whereby the Company changed its name to Boston Life Sciences, Inc. Effective June 7, 2007, the Company changed its name to Alseres Pharmaceuticals, Inc. During the period from inception through December 31, 2009, the Company has devoted substantially all of its efforts to business planning, raising financing, furthering the research and development of its technologies, and corporate partnering efforts. Accordingly, the Company is considered to be in the development stage as defined in Statement of Financial Accounting Standards (“SFAS”) No. 7, “Accounting and Reporting by Development Stage Enterprises.”

The accompanying consolidated financial statements have been prepared on a basis which assumes that the Company will continue as a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The uncertainty inherent in the need to raise additional capital and the Company’s recurring losses from operations raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As of December 31, 2009, we have experienced total net losses since inception of approximately $203,969,000 , stockholders’ deficit of approximately $47,509,000 and a net working capital deficit of approximately $4,536,000. For the foreseeable future, the Company expects to experience continuing operating losses and negative cash flows. The cash and cash equivalents available at December 31, 2009 will not provide sufficient working capital to meet our anticipated expenditures for the next twelve months. At March 22, 2010, we had cash and cash equivalents of approximately $130,000 which combined with our ability to control certain costs, including those related to clinical trial programs, preclinical activities, and certain general and administrative expenses will enable us to meet our anticipated cash expenditures into April, 2010. We must immediately raise additional funds in order to continue operations.

In order to continue as a going concern, the Company must immediately raise additional funds through one or more of the following: a debt financing, an equity offering or a collaboration, merger, acquisition or other transaction with one or more pharmaceutical or biotechnology companies. The Company is currently engaged in fundraising efforts. There can be no assurance that the Company will be successful in its fundraising efforts or that additional funds will be available on acceptable terms, if at all. The Company also cannot be sure that it will be able to obtain additional credit from, or effect additional sales of debt or equity securities to the Purchasers (Note 5). If the Company is unable to raise additional or sufficient capital or if it violates a debt covenant or defaults under the March 2008 Amended Purchase Agreement or the June 2008 Purchase Agreement (Note 5), it will need to cease operations or reduce, cease or delay one or more of its research or development programs and/or adjust its current business plan and in any such event may not be able to continue as a going concern. Additionally, our common stock was delisted from trading on the NASDAQ Capital Market as a result of our failure to meet continued listing requirements of NASDAQ. On May 8, 2009 we began trading on the Pink Sheets OTC Market. This delisting has had an adverse affect on our ability to obtain future financing and could continue to adversely impact our stock price and the liquidity of our common stock.

In connection with the common stock financing completed by the Company in March 2005 (the “March 2005 Financing”), the Company agreed with the purchasers in such financing, including Robert Gipson, Thomas Gipson and Arthur Koenig (the “March 2005 Investors”) that, subject to certain exceptions, it would not issue any shares of its common stock at a per share price less than $2.50 without the prior consent of the March 2005 Investors holding at least a majority of the shares issued in the March 2005 Financing. The failure to receive the requisite waiver or consent of the March 2005 Investors could have the effect of delaying

58

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

or preventing the consummation of a financing by the Company should the price per share in such financing be set at less than $2.50.

A summary of the Company’s significant accounting policies is as follows:

Basis of Presentation

The Company’s consolidated financial statements include the accounts of its six subsidiaries where all of the Company’s operations are conducted. At December 31, 2009, all of the subsidiaries were wholly-owned. All significant intercompany transactions and balances have been eliminated. The Company operates as one segment and all long-lived assets are maintained in the United States of America.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingencies at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Significant estimates in these consolidated financial statements have been made in connection with the calculation of research and development expenses, marketable securities, the fair value and classification of financial instruments, our lease accrual and stock-based compensation expense. The Company bases its estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates. Changes in estimates are reflected in reported results in the period in which they become known.

Cash, Cash Equivalents and Marketable Securities

The Company considers all highly liquid marketable securities purchased with an original maturity of three months or less to be cash equivalents. The Company invests its cash equivalents primarily in overnight repurchase agreements, money market funds, and United States treasury and agency obligations. The Company’s cash balances may exceed federally insured limits periodically throughout the year. However, the Company does not believe that it is subject to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

Marketable securities, which are classified as available-for-sale, are recorded at fair value. Unrealized gains or losses are not immediately recognized in the Consolidated Statements of Operations but are reflected in the Consolidated Statements of Comprehensive Loss and Stockholders’ Deficit as a component of accumulated other comprehensive income (loss) until realized. Realized gains (losses) are determined based on the specific identification method. If a decline in the fair value of a security is considered to be other than temporary, the investment is written down to a new cost basis and the unrealized loss is removed from accumulated other comprehensive loss and recorded in the Consolidated Statement of Operations. The Company evaluates whether a decline in fair value is other than temporary based on factors such as the significance of the decline, the duration of time for which the decline has been in existence and the Company’s ability and intent to hold the security to maturity. To date, the Company has only recorded temporary impairments related to marketable securities. Marketable securities consist of United States agency bonds and corporate debt obligations (Note 2). The Company classifies marketable securities as current assets because they are highly liquid and available, as required, to meet working capital and other operating requirements.

59

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Financial Instruments

The carrying amounts of the Company’s financial instruments, which include cash and cash equivalents, marketable securities, accounts payable and accrued expenses approximate their fair values as of December 31, 2009 and 2008 due to their short maturity. It is not practicable to estimate the fair value of the Company’s convertible debt. However, it is likely that the fair value of the debt would be materially less than the carrying value of the debt because the conversion price of $2.50 is higher than the Company’s stock price of $0.20 as of December 31, 2009.

Fixed Assets

Fixed assets are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets, ranging from three to five years. Leasehold improvements are stated at cost and amortized using the straight-line method over the term of the lease or the estimated useful lives of the assets, whichever is shorter.

Research and Development Expenses

All research and development expenses are expensed as incurred. Research and development expenses include costs incurred in performing research and development activities such as salary and benefits, stock-based compensation expense, facility costs, license fees, contractual services, sponsored research and development, and clinical trial costs.

The Company has entered into licensing agreements with certain collaborators that provide the Company with the rights to certain patents and technologies, and the right to market and distribute any products developed. Obligations initially incurred to acquire these rights are recognized and expensed on the date that the Company acquires the rights due to the early stage of the related technology. Terms of the various license agreements may require the Company to make milestone payments upon the achievement of certain product development objectives and pay royalties on future sales, if any, of commercial products resulting from the collaboration.

Stock-Based Compensation Expense

We measure compensation costs for all share-based awards at fair value on grant date and recognize it as expense over the requisite service period or expected performance period of the award. We estimate the fair value of stock-based awards using the Black-Scholes valuation model on the grant date. The Black-Scholes valuation model requires us to make certain assumptions and estimates concerning the expected term of the awards, the rate of return of risk-free investments, our stock price volatility, and our anticipated dividends. If any of our estimates or assumptions prove incorrect, our results could be materially affected.

The Company recognizes stock-based compensation expense on awards with performance conditions in accordance with Financial Accounting Standards Board (“FASB”) ASC 718, Compensation- Stock Compensation All stock-based awards to non-employees are accounted for in accordance with FASB ASC 505-50 Equity-Based Payments to Non-Employees.

Income Taxes

The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recorded for the expected future tax consequences of temporary differences between the financial reporting and income tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences reverse. A valuation allowance is established to reduce net deferred tax assets to the amount expected to be realized.

60

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Effective January 1, 2007, the Company adopted the provisions of FASB ASC 740, Income Taxes which clarifies the accounting for income tax positions by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. Under ASC 740 the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the tax position. The Company records reserves for uncertain tax positions in accordance with ASC 740.

Net Loss Per Share

Basic and diluted net loss per share attributable to common stockholders has been calculated by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. All potentially dilutive common shares have been excluded from the calculation of weighted average common shares outstanding since their inclusion would be antidilutive.

The following common stock equivalents, on an as exercised or converted basis, were excluded from the computation of diluted net loss per common share because they were anti-dilutive. The exercise of those common stock equivalents outstanding at December 31, 2009 could potentially dilute earnings per share in the future.

	2009		2008		2007
Stock options		3,695,745		4,184,403		4,457,965
Warrants		2,000		583,521		2,000
		3,697,745		4,767,924		4,459,965

Beneficial Conversion Feature

The Company has, at certain times, issued preferred stock and notes which were convertible into common stock at a discount from the common stock market price at the date of issuance. The amount of the discount associated with such conversion rights represents an incremental yield, i.e. a “beneficial conversion feature”, that is recorded when the consideration allocated to the convertible security, divided by the number of common shares into which the security converts, is below the fair value of the common stock at the date of issuance of the convertible instrument.

A beneficial conversion feature associated with preferred stock is recognized as a return to the preferred stockholders and represents a non-cash charge in the determination of net loss attributable to common stockholders. The beneficial conversion feature is recognized in full immediately if there is no redemption date for the preferred stock, or over the period of issuance through the redemption date, if applicable. A beneficial conversion feature associated with debentures, notes or other debt instruments is recognized as discount to the debt and is amortized as additional interest expense using the effective interest method over the remaining term of the debt instrument.

Convertible Redeemable Shares

The Company follows the guidance found in ASR 268 (Rule 5-02.28 of Regulation S-X), as well as ASC 480-10-S99-3 (EITF Topic D-98) in determining if convertible, redeemable shares are more akin to equity or a liability. Due to the fact that the Series F shares are mandatorily redeemable for cash or for a variable, uncapped, number of common shares, they are more akin to a liability and as such are classified outside of permanent equity.

61

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Recent Accounting Pronouncements

In April 2009, the Financial Accounting Standards Board, or FASB, issued FASB Accounting Standards Codification, or ASC, 825-10-65, “Interim Disclosures about Fair Value of Financial Instruments.” ASC 825-10-65 amends ASC 825-10 to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as annual financial statements. The ASC requires a publicly traded company to include disclosures about the fair value of its financial instruments whenever it issues summarized financial information for interim reporting periods. Such entity is required to disclose in the body or in the accompanying notes of its summarized financial information for interim reporting periods and in its financial statements for annual reporting periods the fair value of all financial instruments for which it is practicable to estimate that value, whether recognized or not recognized in the statement of financial position. Fair value information disclosed in the notes must be presented together with the related carrying amount in a form that makes it clear whether the fair value and carrying amount represent assets or liabilities and how the carrying amount relates to what is reported in the statement of financial position. Such entity also must disclose the methods and significant assumptions used to estimate the fair value of financial instruments and describe changes in methods and significant assumptions during the period. We adopted this ASC for the quarter ended June 30, 2009 and the adoption did not have a material impact on our consolidated results of operations and financial position.

In April 2009, FASB issued ASC 820-10-65, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.” This ASC provides additional guidance for estimating fair value in accordance with ASC 820, “Fair Value Measurements”, when the volume and level of activity for the asset or liability have significantly decreased. This ASC also includes guidance on identifying circumstances that indicate a transaction is not orderly. This ASC emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. We adopted this ASC for the quarter ended June 30, 2009 and the adoption did not have a material impact on our consolidated results of operations and financial position.

In May 2009, the FASB issued ASC 855-10, “Subsequent Events” to establish accounting and disclosure standards for events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It defines financial statements as available to be issued, requiring the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, whether it be the date the financial statements were issued or the date they were available to be issued. We adopted this pronouncement upon issuance. This standard had no material impact on our financial position, results of operations or cash flows.

In June 2009, the FASB issued ASC 105-10, “The FASB Accounting Standards Codification, or the Codification, and the Hierarchy of Generally Accepted Accounting Principles,” as the single source of authoritative nongovernmental Generally Accepted Accounting Principles in the United States. The Codification is effective for interim and annual periods ending after September 15, 2009. Upon the effective date, the Codification will be the single source of authoritative accounting principles to be applied by all nongovernmental U.S. entities. All other accounting literature not included in the Codification will be nonauthoritative. The adoption of the Codification had no material impact on our financial position or results of operations.

62

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Risks and Uncertainties

The Company is subject to risks and uncertainties common to the biotechnology industry. Such risks and uncertainties include, but are not limited to: (i) results from current and planned clinical trials, (ii) scientific data collected on the Company’s technologies currently in preclinical research and development, (iii) decisions made by the Food and Drug Administration (“FDA”) or other regulatory bodies with respect to the initiation of human clinical trials, (iv) decisions made by the FDA or other regulatory bodies with respect to approval and commercial sale of any of the Company’s proposed products, (v) the commercial acceptance of any products approved for sale and the ability of the Company to manufacture, distribute and sell for a profit any products approved for sale, (vi) the Company’s ability to obtain the necessary patents and proprietary rights to effectively protect its technologies, (vii) the outcome of any collaborations or alliances entered into by the Company in the future with pharmaceutical or other biotechnology companies, (viii) dependence on key personnel, (ix) maintaining NASDAQ listing requirements, (x) competition with better capitalized companies, (xi) ability to raise additional funds and (xii) compliance with debt agreements.

.

2.   Fixed Assets

Fixed assets consist of the following at December 31:

	2009		2008
Leasehold improvements	$	132,170	$	132,170
Computer equipment		88,985		102,244
Office furniture and equipment		78,403		84,498
		299,558		318,912
Less accumulated depreciation and amortization		193,286		140,269
	$	106,272	$	178,643

Amortization and depreciation expense on fixed assets for the years ended December 31, 2009, 2008 and 2007 was approximately $72,000, $53,000 and $85,000, respectively, and $1,553,000 for the period from inception (October 16, 1992) through December 31, 2009.

3.   Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following at December 31:

	2009		2008
Research and development related	$	1,774,943	$	2,874,827
Accrued compensation and related		124,915		639,390
General and administrative related		328,435		640,123
Accrued interest expense		62,738
Accrued professional fees		1,231,550		741,459
	$	3,522,581	$	4,895,799

63

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4.   Notes Payable and Debt

Convertible Notes Payable to Significant Stockholders

In August 2006, the Company issued to Robert Gipson an unsecured promissory note (the “RG Note”), pursuant to which the Company could borrow up to an aggregate principal amount of $3,000,000 from Robert Gipson. In October 2006, the Company issued an amended and restated unsecured promissory note (the “Amended RG Note”) to Robert Gipson to replace the RG Note. Under the Amended RG Note, (i) the aggregate principal amount that could be borrowed by the Company was increased from $3,000,000 to $4,000,000, and (ii) one of the dates triggering repayment under the definition of Maturity Date (as discussed below) was moved from December 31, 2007 to June 30, 2007.

In October 2006, the Company issued to Thomas Gipson (together with Robert Gipson, the “Lenders”) an unsecured promissory note, pursuant to which the Company could borrow up to an aggregate principal amount of $4,000,000 (the “TG Note,” together the with Amended RG Note, the “First Amended Notes”). The Company borrowed a total of $8,000,000 pursuant to the First Amended Notes. The outstanding principal amount borrowed under the First Amended Notes was due and payable upon the earliest to occur of: (i) June 30, 2007; (ii) the date on which the Company consummates an equity financing in which the gross proceeds to the Company total at least $10,000,000; and (iii) the date on which a Lender declares an event of default (as defined in the Notes), the first of these three events to occur referred to as the “Maturity Date.” Interest accrued on the outstanding principal amount under the First Amended Notes was initially payable on the Maturity Date at a rate of 9% per annum from the date of the advance to the Maturity Date.

In February 2007, the Company issued amended and restated unsecured promissory notes to the Lenders to replace the First Amended Notes (the “Second Amended Notes”). Under the Second Amended Notes, the aggregate principal amount that could be collectively borrowed by the Company was increased from $8,000,000 to $10,000,000. The Company borrowed an additional $2,000,000 from the Lenders, or $10,000,000 in the aggregate, pursuant to the Second Amended Notes.

In March 2007, the Company issued an amended and restated unsecured promissory note of $5,000,000 to each of the Lenders (the “Amended Notes”). The Amended Notes eliminated all outstanding principal and accrued interest due under the Second Amended Notes and the Company’s right to prepay any portion of the Amended Notes. The Amended Notes also required the Lenders to effect a conversion of the outstanding principal under the Amended Notes into shares of the Company’s common stock at a conversion price of $2.50 per share (the “Amended Notes Conversion”) upon approval by the Company’s stockholders of the conversion. The Company recorded a gain related to the forgiveness of interest of approximately $273,000 to net interest expense on the Company’s Consolidated Statement of Operations during the year ended December 31, 2007. On June 7, 2007, the Company’s stockholders approved the Amended Notes Conversion. On June 15, 2007, the Lenders converted the outstanding principal under the Amended Notes into 4,000,000 shares of the Company’s common stock.

March 2008 Amended Purchase Agreement

In March 2007, the Company entered into a convertible promissory note purchase agreement (the “March 2007 Purchase Agreement”) with Robert Gipson, Thomas Gipson and Arthur Koenig (the “Purchasers” and also referred to as the “March 2007 Note Holders”) pursuant to which the Company could borrow up to $15,000,000 from the March 2007 Note Holders prior to December 31, 2007. In March 2007, the Company issued convertible promissory notes to the March 2007 Note Holders (the “March Notes”) in the aggregate principal amount of $9,000,000 pursuant to the March 2007 Amended Purchase Agreement. Certain of the material terms of the convertible promissory notes are described below.

64

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In May 2007, the Company amended and restated the March 2007 Purchase Agreement (the “May 2007 Amended Purchase Agreement”) to (i) eliminate the requirement for the March 2007 Note Holders to make further advances under the March 2007 Purchase Agreement and (ii) add Highbridge as a Purchaser. In May 2007, the Company issued a convertible promissory note to Highbridge (the “Highbridge Note”) in the aggregate principal amount of $6,000,000 pursuant to the May 2007 Amended Purchase Agreement.

In August 2007, the Company amended and restated the May 2007 Amended Purchase Agreement (the “August 2007 Amended Purchase Agreement”) to (i) increase the amount the Company could borrow by $10,000,000 to $25,000,000 and (ii) add ISVP as a Purchaser. In August 2007, the Company issued a convertible promissory note to ISVP (the “2007 ISVP Note”) in the aggregate principal amount of $10,000,000 pursuant to the August 2007 Amended Purchase Agreement.

In March 2008, the Company amended and restated the August 2007 Amended Purchase Agreement (the “March 2008 Amended Purchase Agreement”) to (i) increase the amount the Company could borrow by $5,000,000 to $30,000,000 and (ii) provide that the Company may incur up to an additional $5,000,000 of indebtedness from the Purchasers upon the same terms and conditions as the March 2008 Amended Purchase Agreement. In March 2008, the Company issued a convertible promissory note to Robert Gipson (the “March 2008 RG Note”) in the aggregate principal amount of $5,000,000 pursuant to the March 2008 Amended Purchase Agreement.

All terms of the cumulative $30,000,000 in convertible promissory notes remain as originally agreed to. These amounts borrowed by the Company under the March 2008 Amended Purchase Agreement bear interest at the rate of 5% per annum and may be converted, at the option of the Purchasers, into (i) shares of the Company’s common stock at a conversion price per share of $2.50, (ii) the right to receive future payments related to the Company’s molecular imaging products (including Altropane and FLUORATEC) in amounts equal to 2% of the Company’s pre-commercial revenue related to such products plus 0.5% of future net sales of such products for each $1,000,000 of outstanding principal and interest that a Purchaser elects to convert into future payments, or (iii) a combination of (i) and (ii). Any outstanding notes that are not converted into the Company’s common stock or into the right to receive future payments will become due and payable by the earlier of December 31, 2010 or the date on which a Purchaser declares an event of default (as defined in the March 2008 Amended Purchase Agreement). However, each Purchaser is prohibited from effecting a conversion if at the time of such conversion the common stock issuable to such Purchaser, when taken together with all shares of common stock then held or otherwise beneficially owned by such Purchaser exceeds 19.9%, or 9.99% for Highbridge and ISVP, of the total number of issued and outstanding shares of the Company’s common stock immediately prior to such conversion unless and until the Company’s stockholders approve the conversion of all of the shares of common stock issuable thereunder.

June 2008 Amended Purchase Agreement

In June 2008, the Company entered into a convertible promissory note purchase agreement (the “June 2008 Purchase Agreement”) with Robert Gipson pursuant to which the Company could borrow up to $5,000,000. In June 2008, the Company issued a convertible promissory note to Robert Gipson (the “June 2008 RG Note”) in the aggregate principal amount of $5,000,000 pursuant to the June 2008 Purchase Agreement. The terms of the June 2008 Purchase Agreement are consistent with those of the March 2008 Amended Purchase Agreement described above.

Beneficial Conversion Features

The Highbridge Note was issued with a conversion price of $2.50 which was below the market price of the Company’s common stock on the date the May 2007 Amended Purchase Agreement was entered into. The Company recorded a beneficial conversion feature (“BCF”) of $480,000 (the “Highbridge BCF”) which was

65

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

recognized as a decrease in the carrying value of the Highbridge Note and an increase to additional paid-in capital. The value of the Highbridge BCF is being recognized as interest expense using the effective interest method through December 31, 2010. The Company recorded interest expense related to the Highbridge BCF in the accompanying Consolidated Statement of Operations of approximately $131,000, $123,000 and $78,000 during the years ended December 31, 2009, 2008 and 2007, respectively.

The 2007 ISVP Note was issued with a conversion price of $2.50 which was below the market price of the Company’s common stock on the date the August 2007 Amended Purchase Agreement was entered into. Accordingly, the Company recorded a BCF of $1,400,000 (the “ISVP BCF”) which was recognized as a decrease in the carrying value of the 2007 ISVP Note and an increase to additional paid-in capital. The ISVP BCF is being recognized as interest expense using the effective interest method through December 31, 2010. The Company recorded interest expense related to the ISVP BCF in the accompanying Consolidated Statement of Operations of approximately $434,000, $392,000 and $137,000 during the years ended December 31, 2009, 2008 and 2007, respectively.

The March 2008 RG Note was issued with a conversion price of $2.50 which was below the market price of the Company’s common stock on the date the March 2008 Amended Purchase Agreement was entered into. Accordingly, the Company recorded a BCF of $380,000 (the “2008 RG BCF”) which was recognized as a decrease in the carrying value of the March 2008 RG Note and an increase to additional paid-in capital. The 2008 RG BCF is being recognized as interest expense using the effective interest method through December 31, 2010. The Company recorded interest expense related to the 2008 RG BCF in the accompanying Consolidated Statements of Operations of approximately $135,000 and $99,000 during the years ended December 31, 2009 and 2008, respectively.

In September 2008, Highbridge converted $120,000 of outstanding principal under the Highbridge Note into 48,000 shares of the Company’s common stock. In connection with the conversion, the Company recorded additional interest expense of approximately $6,300 during the year ended December 31, 2008 related to the unamortized portion of the Highbridge BCF.

At December 31, 2009, the aggregate carrying value of the Highbridge Note, the March Notes, the 2007 ISVP Note, the March 2008 RG Note and the June 2008 RG Note of $34,155,632 and the related accrued interest was classified as a long-term liability.

The Company is subject to certain debt covenants pursuant to the March 2008 Amended Purchase Agreement and the June 2008 Purchase Agreement (the “Purchase Agreements”). If the Company (i) fails to pay the principal or interest due under the Purchase Agreements, (ii) files a petition for action for relief under any bankruptcy or similar law or (iii) an involuntary petition is filed against the Company, all amounts borrowed under the Purchase Agreements may become immediately due and payable by the Company. In addition, without the consent of the Purchasers, the Company may not (i) create, incur or otherwise, permit to be outstanding any indebtedness for money borrowed, (ii) declare or pay any cash dividend, or make a distribution on, repurchase, or redeem, any class of the Company’s stock, subject to certain exceptions or sell, lease, transfer or otherwise dispose of any of the Company’s material assets or property or (iii) dissolve or liquidate.

Subsidiary Promissory Note

In February 2009, Neurobiologics, Inc. (the “Subsidiary”), a subsidiary of the Company, issued to Robert Gipson an unsecured promissory note, pursuant to which the Subsidiary borrowed an aggregate principal amount of $1,000,000 (the “Subsidiary Note”). Interest on the Subsidiary Note accrues at the rate of 7% per annum and all principal and accrued interest is due and payable on demand of Mr. Gipson.

66

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

According to a Schedule 13G/A filed with the SEC on January 30, 2009, Robert Gipson beneficially owned approximately 47.2% of the outstanding common stock of the Company on December 31, 2008. Robert Gipson, who serves as a Senior Director of I&S and a General Partner of ISVP, served as a director of the Company from June 15, 2004 until October 28, 2004. According to a Schedule 13G/A filed with the SEC on January 30, 2009, Thomas Gipson beneficially owned approximately 29.0% of the outstanding common stock of the Company on December 31, 2008. According to a Schedule 13G/A filed with the SEC on January 30, 2009, Arthur Koenig beneficially owned approximately 9.7% of the outstanding common stock of the Company on December 31, 2008. According to a Schedule 13G filed with the SEC on January 30, 2009, ISVP owned approximately 16.5% of the outstanding common stock of the Company on December 31, 2008. According to a Schedule 13G filed with the SEC on February 10, 2009, Highbridge beneficially owned approximately 9.50% of the outstanding common stock of the Company on December 31, 2008.

Promissory Notes

In December 2009 the Company issued a promissory note to Robert Gipson in the amount of $350,000 and payable on demand. The Note bears interest at the rate of 7% per annum.

5.   Exit Activities

In September 2005, the Company relocated its headquarters to office space in Hopkinton, Massachusetts. In addition, the Company amended its Lease Agreement (the “Lease Amendment”), dated as of January 28, 2002 by and between the Company and Brentwood Properties, Inc. (the “Landlord”) relating to the Company’s former principal executive offices (the “Premises”) located in Boston, Massachusetts (the “Lease Agreement”). Pursuant to the terms of the Lease Amendment, the Landlord consented to, among other things, two sublease agreements which run through May 30, 2012, the term of the Lease Agreement, and which occupy all rentable square feet of the Premises. In consideration for the Landlord’s consent, the Company agreed to increase its security deposit provided for under the Lease Agreement from $250,000 to $388,600 subject to periodic reduction pursuant to a predetermined formula. At December 31, 2009, the security deposit under the Lease Agreement was approximately $124,500.

As a result of the Company’s relocation, an expense was recorded for the cost associated with the exit activity at its fair value in the period in which the liability is incurred. The liability recorded for the Lease Amendment was calculated by discounting the estimated cash flows for the two sublease agreements and the Lease Agreement using an estimated credit-adjusted risk-free rate of 15%. The expense and accrual recorded requires the Company to make significant estimates and assumptions. These estimates and assumptions will be evaluated and adjusted as appropriate on at least a quarterly basis for changes in circumstances. It is reasonably possible that such estimates could change in the future resulting in additional adjustments, and the effect of any such adjustments could be material.

The activity related to the lease accrual at December 31, 2009, is as follows:

	Accrual at		Cash Payments,		Accrual at
	December 31,		Net of Sublease		December 31,
	2008		Receipts 2009		2009
Lease Amendment	$	193,348	$	45,429	$	147,919
Short-term portion of lease accrual		45,425				51,493
Long-term portion of lease accrual	$	147,923			$	96,426

During the years ended December 31, 2009, 2008 and 2007, the Company recorded approximately $26,000, $34,000 and $38,000, respectively of expense related to the imputed cost of the lease expense accrual included in general and administrative expenses in the accompanying Consolidated Statements of Operations.

67

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In May 2007, the Company decided to consolidate certain activities, cease operations at its Baltimore, Maryland location and terminate the two employees working at that location effective June 30, 2007. The Company recognized approximately $192,000 primarily related to one-time termination benefits in the accompanying Consolidated Statements of Operations during the year ended December 31, 2007.

6.   Stockholders’ Deficit

Common Stock

In November 2008, the Company completed a private placement with Robert Gipson of 543,478 shares of its common stock which raised $1,000,000 in gross proceeds. In connection with the November 2008 private placement, the Company also issued warrants (the “November 2008 Warrants”) to purchase 543,478 additional shares of common stock that were exercisable at $1.84 per share between six months and two years after the closing. In connection with the private placement, the Company agreed with Mr. Gipson (the “Letter Agreement”) that if the Company sold shares of its common stock at a price below $1.84, subject to certain exceptions, prior to December 31, 2009, Mr. Gipson would be entitled to receive, for no additional consideration, additional shares of common stock and warrants in accordance with a pre-determined formula. In addition, Dawson James Securities, Inc., (“Dawson James”) in its capacity as agent for the private placement, was entitled to a warrant to purchase 38,043 shares of common stock (the “Agent Warrant”). The Agent Warrant had a term of five years and was exercisable at a price equal to $1.84. In February 2009, Dawson James gave up its right to the Agent Warrant.

In January 2009, the Company completed a private placement with Robert Gipson of 1,000,000 shares of its common stock which raised $1,000,000 in gross proceeds. In addition, the Company issued an additional 456,522 shares of its common stock to Mr. Gipson pursuant to a Letter Agreement. In connection with the January 2009 private placement, Mr. Gipson agreed to the cancellation of the November 2008 Warrants.

In February 2009, the Company entered into a private placement with Cato Holding Company (“Cato”) of 200,000 shares of its common stock at a purchase price of $1.00 per share. In connection with the February 2009 private placement, the Company agreed with Cato that if the Company sells shares of its common stock, or securities convertible into common stock, prior to September 30, 2009, and the purchaser of such securities receives warrants to purchase additional shares of common stock (a “Qualified Financing”), subject to certain exceptions, Cato shall be entitled to receive, for no additional consideration, a warrant to purchase shares of common stock with the same terms and conditions as those provided to a purchaser in a Qualified Financing.

In November 2009, the Company entered into a private placement with Robert Gipson of 2,500,000 shares of its common stock which raised $1,000,000 in gross proceeds. In addition, in March 2010 the Company issued an additional 1,500,000 shares of its common stock to Mr. Gipson pursuant to a Letter Agreement.

Preferred Stock

The Company has authorized 1,000,000 shares of preferred stock of which 25,000 shares have been designated as Series A Convertible Preferred Stock, 500,000 shares have been designated as Series D Convertible Preferred Stock, and 800 shares have been designated as Series E Cumulative Convertible Preferred Stock (the “Series E Stock”). In March 2009, the Company designated 200,000 shares as Series F Convertible Preferred Stock (“Series F Stock”). The remaining authorized shares have not been designated.

68

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Convertible Preferred Stock

During 2009 the company completed the following sales of Series F convertible Preferred Stock to Robert Gipson:

	Number of Shares
Date of Issuance	Issued		Gross Proceeds
March 19, 2009		20,000	$	500,000
March 31, 2009		20,000		500,000
April 16, 2009		20,000		500,000
May 12, 2009		40,000		1,000,000
June 10, 2009		20,000		500,000
July 9, 2009		12,000		300,000
July 23, 2009		12,000		300,000
August 11, 2009		12,000		300,000
August 26, 2009		12,000		300,000
September 10, 2009		12,000		300,000
September 28, 2009		16,000		400,000
		196,000	$	4,900,000

The key terms of the Series F Stock are summarized below:

Dividend.  The Series F Stock is entitled to receive any dividend that is paid to holders of our common stock. Any subdivisions, combinations, consolidations or reclassifications to the common stock must also be made accordingly to Series F Stock, respectively.

Liquidation Preference.  In the event of our liquidation, dissolution or winding up, before any payments are made to holders of our common stock or any other class or series of our capital stock ranking junior as to liquidation rights to the Series F Stock, the holders of the Series F Stock will be entitled to receive the greater of (i) $25.00 per share (subject to adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares) plus any outstanding and unpaid dividends thereon and (ii) such amount per share as would have been payable had each share been converted into common stock. After such payment to the holders of Series F Stock and the holders of shares of any other series of our preferred stock ranking senior to the common stock as to distributions upon liquidation, the remaining our assets will be distributed pro rata to the holders of our common stock.

Voting Rights.  Each share of Series F Stock shall entitle its holder to a number of votes equal to the number of shares of our common stock into which such share of Series F Stock is convertible.

Conversion.  Each share of Series F Stock is convertible at the option of the holder thereof at any time. Each share of Series F Stock is initially convertible into 25 shares of common stock, subject to adjustment in the event of certain dividends, stock splits or stock combinations affecting the Series F Stock or the common stock, and subject to adjustment on a weighted-average basis in the event of certain issuances by us of securities for a price less than the then-current price at which the Series F Stock converts into common stock.

Redemption.  At any time after September 1, 2011, any holder of Series F Stock may elect to have some or all of such shares redeemed by us at a price equal to the aggregate of (i) $25 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares), or the Original Issue Price, plus (ii) all declared but unpaid dividends

69

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

thereon, plus (iii) an amount computed at a rate per annum of 7% of the Original Issue Price from March 19, 2009 until the redemption date.

Accretion.  The terms of the Series F Stock contain provisions that may require redemption in circumstances that are beyond the Company’s control. Therefore, the shares have been recorded, net of issuance costs of approximately $25,000, as convertible, redeemable stock outside of permanent equity. The Series F Stock was recorded at fair value on the date of issuance. As of December 31, 2009, the Company recorded approximately $192,000 in accretion on the Series F Stock.

Stock Options and Warrants

Stock Option Plans

The Company can issue both nonqualified and incentive stock options to employees, officers, consultants and scientific advisors of the Company under the Amended and Restated 2005 Stock Incentive Plan (the “2005 Plan”). At December 31, 2009, the 2005 Plan provided for the issuance of options, restricted stock, restricted stock units, stock appreciation rights or other stock-based awards to purchase 3,050,000 shares of the Company’s common stock. The 2005 Plan contains a provision that allows for an annual increase in the number of shares available for issuance under the 2005 Plan on the first day of each of the Company’s fiscal years during the period beginning in fiscal year 2006 and ending on the second day of fiscal year 2014. The annual increase in the number of shares shall be equal to the lowest of 400,000 shares; 4% of the Company’s outstanding shares on the first day of the fiscal year; and an amount determined by the Board of Directors. No adjustment to the 2005 Plan was made on January 1, 2010.

The Company also has outstanding stock options in three other stock option plans, the 1998 Omnibus Plan, the Amended and Restated Omnibus Stock Option Plan and the Amended and Restated 1990 Non-Employee Directors’ Non-Qualified Stock Option Plan. Both of these plans have expired and no future issuance of awards is permissible.

The Company’s Board of Directors determines the term, vesting provisions, price, and number of shares for each award that is granted. The term of each option cannot exceed ten years. The Company has outstanding options with performance conditions which, if met, would accelerate vesting upon achievement of the applicable milestones.

Stock-based employee compensation expense recorded during the years ended December 31, 2009, 2008 and 2007 are as follows:

	2009			2008			2007
Research and development	$	447,612		$	506,534		$	522,766
General and administrative		825,471			1,163,660			1,142,389
	$	1,273,083		$	1,670,194		$	1,665,155
Impact on basic and diluted net loss attributable to common stockholders per share	$	(0.05	)	$	(0.08	)	$	(0.09	)

70

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company uses the Black-Scholes option-pricing model to calculate the fair value of each option grant on the date of grant. The fair value of stock options granted during the years ended December 31, 2009, 2008 and 2007 was calculated using the following estimated weighted-average assumptions:

	2009	2008	2007
Expected term	5 years	5 years	6 years
Risk-free interest rate	1.36%	2.5% - 3.7%	3.5% - 5.1%
Stock volatility	90%	76%	90%
Dividend yield	0%	0%	0%

Expected term — The Company determined the weighted-average expected term assumption for “plain vanilla” and performance-based option grants based on historical data on exercise behavior.

Risk-free interest rate — The risk-free interest rate used for each grant is equal to the U.S. Treasury yield curve in effect at the time of grant for instruments with a similar expected term.

Expected volatility — The Company’s expected stock-price volatility assumption is based on historical volatilities of the underlying stock which is obtained from public data sources.

Expected dividend yield — The Company has never declared or paid any cash dividends on its common stock and does not expect to do so in the foreseeable future. Accordingly, the Company uses an expected dividend yield of zero to calculate the grant-date fair value of a stock option.

Stock Options

A summary of the Company’s outstanding stock options for the year ended December 31, 2009 is presented below.

	2009
				Weighted-Average
	Shares			Exercise Price
Outstanding at beginning of year		4,184,403		$	2.90
Granted		2,732,500			1.15
Exercised
Forfeited and expired		(3,221,158	)		2.88
Outstanding at end of year		3,695,745			1.63
Options exercisable at year-end		3,524,495			1.65

71

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes information about stock options outstanding at December 31, 2009:

	Options Outstanding						Options Exercisable
			Weighted-						Weighted-
			Average		Weighted-				Average		Weighted-
			Remaining		Average				Remaining		Average
	Number		Contractual		Exercise		Number		Contractual		Exercise
Range of Exercise Prices	Outstanding		Life		Price		Exercisable		Life		Price
$ 1.15 — $ 1.36		2,713,000		4.4 years	$	1.15		2,541,750		4.2 years	$	1.15
$ 2.00 — $ 3.00		678,642		5.4 years		2.32		678,642		5.4 years		2.32
$ 3.10 — $ 4.65		255,363		6.7 years		3.40		255,363		6.7 years		3.40
$ 4.99 — $ 6.96		28,500		4.0 years		5.47		28,500		4.0 years		5.47
$ 8.95 — $13.06		8,740		1.7 years		10.55		8,740		1.7 years		10.55
$15.62 — $22.36		11,500		0.4 years		17.04		11,500		0.4 years		17.04
		3,695,745		4.7 years	$	1.63		3,524,495		4.6 years	$	1.65

There was no intrinsic value of outstanding and exercisable options as of December 31, 2009. The intrinsic value of options vested during the year ended December 31, 2009 was $0. The intrinsic value of options exercised during the years ended December 31, 2009, 2008 and 2007 was $0, $759 and $50,700, respectively. The weighted-average fair value of options granted at fair market value during 2009, 2008 and 2007 was $0.80, $1.52 and $2.17, respectively.

As of December 31, 2009, 384,172 shares are available for grant under the Company’s option plans.

As of December 31, 2009, there remained approximately $35,000 of compensation costs related to non-vested stock options to be recognized as expense over a weighted-average period of approximately .56 years.

On January 14, 2009, the Company’s compensation committee approved the cancellation of options to purchase an aggregate of 2,617,000 shares of the Company’s common stock and the regrant of options to purchase an aggregate of 2,562,500 shares of the Company’s common stock. The per share exercise prices of the cancelled options ranged from $1.96 to $4.06, with a weighted average exercise price of $2.92. These cancellations were effected under the 2005 Plan and inducement grants pursuant to Nasdaq Marketplace Rule 4350, each of which expressly permitted option exchanges and all regrants were effected under the 2005 Plan. Each of the regranted options contains the following terms: (i) an exercise price equal to the fair market value on the grant date which was the last sale price on January 14, 2009, or $1.15 per share; (ii) exercisable through January 31, 2014; and (iii) 50% vesting on the date of grant, 25% vesting on February 28, 2009, and 25% vesting on March 31, 2009.

Warrants

As of December 31, 2009, warrants outstanding to purchase common stock were as follows:

Date of Issue	Exercise Price per Share		Warrants Outstanding		Expiration Date
October 2001	$	9.50		2,000	October 2011

Each warrant is exercisable into one share of common stock. No warrants were exercised in 2009. At December 31, 2009, the Company has reserved 4,081,917 shares of common stock to meet its option and warrant obligations.

72

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Rights Agreement

On September 11, 2001, the Company entered into a Rights Agreement (the “Rights Plan”) dated as of September 11, 2001, with Continental Stock Transfer & Trust Company, as rights agent (the “Rights Agent”), and declared a dividend of one right (a “Right”) to purchase from the Company one-thousandth of a share of its Series D Preferred Stock at an exercise price of $25 for each outstanding share of the Company’s common stock at the close of business on September 13, 2001. The Rights will expire on September 11, 2011.

In general, the Rights will be exercisable only if a person or group acquires 15% or more of the Company’s common stock or announces a tender offer, the consummation of which would result in ownership by a person or group of 15% or more of the Company’s common stock. If, after the Rights become exercisable, the Company is acquired in a merger or other business combination transaction, or sells 25% or more of its assets or earning power, each unexercised Right will entitle its holder to purchase a number of the acquiring company’s common shares as defined in the Rights Plan. At any time after any person or group has acquired beneficial ownership of 15% or more of the Company’s common stock, the Board, in its sole discretion, may exchange all or part of the then outstanding and exercisable Rights for shares of the Company’s common stock at an exchange ratio of one share of common stock per Right.

In November 2001, the Company and the Rights Agent amended the Rights Plan to provide that the Rights Plan will be governed by the laws of the State of Delaware.

In November 2002, the Company and the Rights Agent amended the Rights Plan to provide that, for purposes of any calculation under the Rights Plan of the percentage of outstanding shares of the Company’s common stock beneficially owned by a person, any shares of the Company’s common stock such person beneficially owns that are not outstanding (such as shares underlying options, warrants, rights or convertible securities) shall be deemed to be outstanding. The amendment also exempted each of I&S, ISVP and Robert Gipson (the “Ingalls Parties”) from being an “Acquiring Person” under the Rights Plan so long as such persons, collectively, together with all affiliates of such persons, shall beneficially own less than 20% of the shares of the Company’s common stock then outstanding.

On March 12, 2003, the Company and the Rights Agent amended the Rights Plan to provide that prior to June 1, 2005, the Ingalls Parties and their affiliates will be deemed not to beneficially own certain convertible notes and warrants of the Company and any common stock issued or issuable upon their conversion or exercise for purposes of determining whether such person is an “Exempt Person” under the Rights Plan.

On December 23, 2003, the Company and the Rights Agent amended the Rights Plan to add Boucher to the list of persons included in the definition of Ingalls Parties who are exempt from being an “Acquiring Person” so long as such persons, collectively, together with all affiliates of such persons, shall beneficially own less than 20% of the shares of the Company’s common stock then outstanding. In addition, the amendment provides that a person shall not be deemed to beneficially own securities held by another person solely by reason of an agreement, arrangement or understanding among such persons to vote such securities, if such agreement, arrangement or understanding is for the purpose of (i) soliciting revocable proxies or consents to elect or remove directors of the Company pursuant to a proxy or consent solicitation made or to be made pursuant to, and in accordance with, the applicable proxy solicitation rules and regulations promulgated under the Securities Exchange Act of 1934, as amended, and/or (ii) nominating one or more individuals (or being nominated) for election to the Company’s Board of Directors or serving as a director of the Company.

On March 14, 2005, the Company and the Rights Agent amended the Rights Plan to amend the definition of Exempt Person to include all purchasers of shares of the Company’s common stock in connection with the Company’s private placement completed in March 2005.

73

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7.   Fair Value Measurements

The Company adopted certain provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820 to evaluate the fair value of certain of its financial instruments required to be measured on a recurring basis. FASB ASC Topic 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Fair value is determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants exclusive of transaction costs.

FASB ASC Topic 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, described below:

Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

The following table sets forth our financial assets that were measured at fair value on a recurring basis at December 31, 2009 by level within the fair value hierarchy. We did not have any non-financial assets or liabilities that were measured or disclosed at fair value on a recurring basis at December 31, 2009. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

			Fair Value Measurement at Reporting Date Using
			Quoted Prices in		Significant
	Carrying Value		Active Markets		Other		Significant
	at		for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Description	2009		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents and money market funds — current assets	$	314,964	$	314,964	$	—	$	—
Money market funds — long term assets	$	115,720	$	115,720	$	—	$	—
Total	$	430,684	$	430,684	$	—	$	—

			Quoted Prices in		Significant
	Carrying Value		Active Markets		Other		Significant
	at		for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
	2008		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents and money market funds — current assets	$	73,974	$	73,974	$	—	$	—
Money market funds — long term assets	$	115,462	$	115,462	$	—	$	—
Total	$	189,436	$	189,436	$	—	$	—

74

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Money market funds are measured at fair value using quoted market prices and are classified within Level 1 of the fair value valuation hierarchy.

8.   Income Taxes

Income tax provision (benefit) consists of the following for the years ended December 31:

	2009			2008			2007
Federal	$	(3,913,000	)	$	(7,138,000	)	$	(6,256,000	)
State		(1,052,000	)		(847,000	)		(568,000	)
		(4,965,000	)		(7,985,000	)		(6,824,000	)
Valuation allowance		4,965,000			7,985,000			6,824,000
	$	—		$	—		$	—

Deferred tax assets consist of the following at December 31:

	2009			2008			2007
Net operating loss carryforwards	$	29,834,000		$	25,667,000		$	20,382,000
Capitalized research and development expenses		15,539,000			17,367,000			15,656,000
Research and development credit carryforwards		—			—			—
License fees		525,000			703,000			546,000
Stock-based compensation expense		2,232,000			1,761,000			1,251,000
Other		2,408,000			1,457,000			1,135,000
Gross deferred tax assets		50,538,000			46,955,000			38,970,000
Valuation allowance		(50,538,000	)		(46,955,000	)		(38,970,000	)
Net deferred tax assets	$	—		$	—		$	—

A reconciliation between the amount of reported tax benefit and the amount computed using the U.S. federal statutory rate of 35% for the year ended December 31 is as follows:

	2009			2008			2007
Benefit at statutory rate	$	(3,772,000	)	$	(7,297,000	)	$	(6,842,000	)
State taxes, net of federal benefit		(638,000	)		(1,206,000	)		(1,135,000	)
Research and development credit		—			—			758,000
Expiring state net operating loss carryforwards		734,000			315,000			236,000
Permanent items		10,000			141,000			107,000
Increase in valuation allowance		3,581,000			7,984,000			6,824,000
Other		85,000			63,000			52,000
	$	—		$	—		$	—

For the years ended December 31, 2009, 2008 and 2007, the Company did not record any federal or state tax expense given its continued net operating loss position. The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of net operating losses (“NOL”) and capitalized research and development expenditures. Management has determined that it is more likely than not that the Company will not recognize the benefits of federal and state

75

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

deferred tax assets and, as a result, a full valuation allowance was established at December 31, 2009 and 2008.

A reconciliation of the unrecognized tax benefits recorded for the year ended December 31 is as follows:

	2009		2008
Balance at January 1	$	2,545,000	$	1,744,000
Additions based on tax positions related to the current year		253,199		801,000
Additions (reductions) for tax positions of prior years		—		—
Settlements		—		—
Lapse of applicable statute of limitations		—		—
Balance at December 31	$	2,798,199	$	2,545,000

The balance of unrecognized tax benefits at December 31, 2009 of approximately $2,798,199 are tax benefits that, if recognized, would not affect the Company’s effective tax rate since they are subject to a full valuation allowance.

As of December 31, 2009, the Company had federal and state NOL carryforwards of approximately $77,622,000 and $51,264,000 respectively and federal and state research and development (“R&D”) credit carryforwards of approximately $1,564,000 and $1,100,000, respectively, which may be available to offset future federal and state income tax liabilities which expire at various dates starting in 2010 and going through 2028. Utilization of the NOL and R&D credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred previously or that could occur in the future provided by Section 382 of the Internal Revenue Code of 1986, as well as similar state and foreign provisions. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In fiscal year 1995 and in fiscal year 2005, the Company experienced a change in ownership as defined by Section 382 of the Internal Revenue Code. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period. Since the Company’s formation, it has raised capital through the issuance of capital stock on several occasions which, combined with stockholders’ subsequent disposition of those shares, has resulted in two changes of control, as defined by Section 382. As a result of the 2005 ownership change, utilization of the Company’s NOLs is subject to an annual limitation under Section 382 determined by multiplying the value of our stock at the time of the ownership change by the applicable long-term tax-exempt rate resulting in an annual limitation amount of approximately $1,000,000. Any unused annual limitation may be carried over to later years, and the amount of the limitation may, under certain circumstances, be subject to adjustment if the fair value of the Company’s net assets are determined to be below or in excess of the tax basis of such assets at the time of the ownership change, and such unrealized loss or gain is recognized during the five-year period after the ownership change. Federal research and development tax credits were also impaired by the ownership change and were reduced accordingly. The Company does not expect to have any taxable income for the foreseeable future. Subsequent ownership changes, as defined in Section 382, could further limit the amount of net operating loss carryforwards and research and development credits that can be utilized annually to offset future taxable income.

The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense. The Company has no accrual for interest and penalties as of December 31, 2009.

The Company is subject to both federal and state income tax for the jurisdictions within which it operates, which are primarily focused in Massachusetts. Within these jurisdictions, the Company is open to examination for tax years ended December 31, 2006 through December 31, 2009. However, because we are

76

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

carrying forward income tax attributes, such as NOLs from 2005 and earlier tax years, these attributes can still be audited when utilized on returns filed in the future. The U.S. Internal Revenue Service (IRS) has proposed an audit of tax year 2007. The company is in discussions with the IRS regarding the timing and scope of this proposed audit.

9.   Commitments and Contingencies

The Company recognizes and discloses commitments when it enters into executed contractual obligations with other parties. The Company accrues contingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

Commitments

Other commitments consist primarily of research and development contractual obligations with third parties. The Company leases office space under noncancelable operating leases. The Company’s current corporate office lease expires in 2011. The Company has entered into sublease agreements for its former corporate office lease which expires in 2012 (Note 6).

As of December 31, 2009, approximate future minimum commitments under the above leases and other contractual obligations are as follows:

	Operating		Sublease Income			Operating
Year Ended December 31,	Leases		(Note 6)			Leases, net		Other
2010		592,000		(231,000	)		361,000		29,000
2011		529,000		(231,000	)		298,000		—
2012		126,000		(96,250	)		29,750		—
2013		—		—			—		—
2014		—		—			—		—
Thereafter		—		—			—		—
	$	1,247,000	$	(558,250	)	$	688,750	$	29,000

Total rent expense under noncancelable operating leases was approximately $277,000, $347,000 and $318,000 for the years ended December 31, 2009, 2008, and 2007, respectively, and approximately $3,554,000 for the period from inception (October 16, 1992) through December 31, 2009. The operating lease commitments above include commitments related to the Premises (Note 6). The Company received approximately $211,000, $211,000 and $211,000 for the years ended December 31, 2009, 2008, and 2007, respectively, related to the sublease of the Premises.

License Agreements

The Company has entered into two license agreements (the “CMCC Licenses”) with Children’s Medical Center Corporation (also known as Children’s Hospital Boston) (“CMCC”) to acquire the exclusive worldwide rights to certain axon regeneration technologies and to replace the Company’s former axon regeneration licenses with CMCC. The CMCC Licenses provide for future milestone payments of up to an aggregate of approximately $425,000 for each product candidate upon achievement of certain regulatory milestones.

The Company has entered into license agreements (the “Harvard License Agreements”) with Harvard University and its affiliated hospitals (“Harvard and its Affiliates”) to acquire the exclusive worldwide rights to certain technologies within its molecular imaging and neurodegenerative disease programs. The Harvard License Agreements obligate the Company to pay up to an aggregate of approximately $2,520,000 in

77

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

milestone payments in the future. The future milestone payments are generally payable only upon achievement of certain regulatory milestones.

The Company’s license agreements with Harvard and its Affiliates and CMCC generally provide for royalty payments equal to specified percentages of product sales, annual license maintenance fees and continuing patent prosecution costs.

In December 2006, the Company entered into a license agreement (the “Cethrin License”) with BioAxone Therapeutic Inc., a Canadian corporation (“BioAxone”), pursuant to which the Company was granted an exclusive, worldwide license to develop and commercialize specified compounds including, but not limited to, Cethrin, as further defined in the Cethrin License. Under the Cethrin License, the Company agreed to pay $10,000,000 in up-front payments, of which it paid BioAxone $2,500,000 upon execution of the Cethrin License and $7,500,000 in March 2007. The Company has also agreed to pay BioAxone up to $25,000,000 upon the achievement of certain milestone events and royalties based on the worldwide net sales of licensed products, subject to specified minimums, in each calendar year until either the expiration of a valid claim covering a licensed product or a certain time period after the launch of a licensed product, in each case applicable to the specific country. The Cethrin License provides for a series of performance milestones any of which, if not achieved by the Company in the timeframes agreed in the Cethrin License, could form the basis of a claim for compensation to BioAxone and possibly the termination of some or all of the Company’s rights under the Cethrin License. The Cethrin License further provides the Company with relief from its performance obligations in the event that such performance is effectively rendered impossible due to safety or efficacy issues with Cethrin during its development. Additionally, the Cethrin License provides a warranty that all of the clinical materials provided to the Company in connection with the Cethrin License were manufactured in accordance with current Good Manufacturing Practices (“cGMP”).

In January 2009, the Company received notice from BioAxone alleging that we had failed to meet one of the performance milestones in the Cethrin License that was required to have been met on or before January 1, 2009. This notice purported to terminate the Cethrin License, sought payment of a $2,000,000 penalty from us to BioAxone for such purported failure and requested that we transfer to BioAxone our rights to the Master Cell Bank (as defined in the Cethrin License) and all licensed intellectual property under the Cethrin License.

We believed that the purported termination was without effect. Our performance obligations under the Cethrin License were specifically excused in the event that a safety issue renders such performance impossible. Our prior discovery that the Master Cell Bank from which Cethrin is manufactured may contain an unintended animal derived contaminant rendering it not in compliance with the requirements of cGMP, represented such a safety risk for Cethrin. We notified BioAxone of the contamination issue and our position that the purported termination and demand for payment is considered to be without effect.

In April 2009 we announced that we entered into an Amendment Agreement, or the Amendment, with BioAxone Therapeutic, Inc., pursuant to which the license agreement between the Company and BioAxone originally executed in December 2006, or the Cethrin License, was amended. The Amendment replaces all of the pre-commercial financial and performance-related milestones contained in the Cethrin License with a formula-based approach to sharing of any and all income under a sub-license. The Amendment establishes provisions under which we would use reasonable commercial efforts to enter into a Sub-license Agreement for the technology covered by the Cethrin License. The Amendment also provides for the mutual release of claims that each party had previously alleged against the other under the Cethrin License. During 2009 our efforts were focused on identifying and negotiating with appropriate sublicensing candidates. Under the terms of the Amendment Agreement, our right to sublicense Cethrin has expired and all rights granted to us in the License Agreement have reverted to BioAxone. The Amendment Agreement provides that, in the event BioAxone is able to license or partner the Cethrin technology in the future, we are entitle to receive a 30% share of any and all proceeds received by BioAxone connected with such transaction. It is unclear if or when

78

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

BioAxone will license the Cethrin technology to a third party, so we may not realize any revenue at all under the Amendment Agreement.

Contingencies

The Company is subject to legal proceedings in the ordinary course of business. One such matter involves a contract manufacturing organization (the “CMO”) for the Cethrin product. The Company was not satisfied with the services rendered by the CMO. The two companies have had a number of meetings to resolve the issues but have been unsuccessful. The Company informed the CMO that the agreement between the parties is considered terminated as the Company believes the CMO materially breached the agreement. Based on the terms of the agreement, the Company requested that the advance payment held by the CMO be offset by the amount payable for work performed to date. The CMO responded claiming they do not believe they breached the agreement and therefore does not accept the termination. In addition, the CMO has demanded the Company pay them for the work performed to date. As of December 31, 2009, no amounts under the agreement with the CMO are accrued in the accompanying Consolidated Balance Sheet relating to a potential settlement of this matter. Included in the accompanying Consolidated Balance Sheet is approximately $561,000 payable to the CMO for work performed as of December 31, 2009. The Company expensed the advance payment of $592,000 during the year ended December 31, 2009. The Company continues to negotiate with the CMO but there can be no assurance as to the outcome of this matter.

On January 9, 2009, we announced that Frank Bobe, Executive Vice President and Chief Business Officer, left our employ. On March 4, 2009, Mr. Bobe filed a lawsuit in the state Superior Court in Middlesex County, Massachusetts naming us as defendant alleging breach of his employment agreement. The complaint alleges damages in the amount of $349,063 for severance and other benefits, plus additional attorney’s fees. On November 4, 2009, the Company entered into a Settlement and Release Agreement with Mr. Bobe pursuant to which all claims of Mr. Bobe against the Company and the Company against Mr. Bobe were released in exchange for a cash payment the amount of which is subject to the confidentiality provisions of the Settlement and Release Agreement. At September 30, 2009 the Company adjusted its accrued liabilities in the accompanying statements of operations at September 30, 2009 to reflect the outcome of this matter.

Guarantor Arrangements

As permitted under Delaware law, the Company has entered into agreements whereby the Company indemnifies its executive officers and directors for certain events or occurrences while the officer or director is, or was serving, at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that limits the Company’s exposure and enables the Company to recover a portion of any future amounts paid. As a result of the Company’s insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal.

The Company enters into arrangements with certain service providers to perform research, development, and clinical services for the Company. Under the terms of these arrangements, such service providers may use the Company’s technologies in performing their services. The Company enters into standard indemnification agreements with those service providers, whereby the Company indemnifies them for any liability associated with their use of the Company’s technologies. The maximum potential amount of future payments the Company would be required to make under these indemnification agreements is unlimited; however, the Company has product liability and general liability policies that enable the Company to recover a portion of any amounts paid. As a result of the Company’s insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal.

79

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In connection with the retirement of S. David Hillson, our former Chairman of the Board and Chief Executive Officer, Mr. Hillson made a written request under the terms of his indemnity agreement with the Company that the Company create an indemnity trust for his benefit and fund the trust in the amount of $100,000. In response to the request, on June 15, 2004, the Company entered into a directors and officers indemnity trust agreement with Mr. Hillson and Boston Private Bank & Trust Company, as trustee (the “Indemnity Trust Agreement”), and funded the trust with $100,000. Mr. Hillson may, from time to time, request withdrawals of funds from the trust in the event that he becomes entitled to receive indemnification payments or advances from the Company. Any amounts not disbursed from the indemnity trust will become unrestricted at such time as the Company and Mr. Hillson agree that the indemnity trust is no longer required. ASC 460, which is the Codification of FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”) requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee. As required under the provisions of ASC 460, the Company has evaluated its obligations under the Indemnity Trust Agreement and has determined that the fair value of this obligation is immaterial at December 31, 2009.

10.   Related Party Transactions

In September 2006, the Company entered into a consulting agreement with Dr. Langer, a member of the Company’s board of directors, for scientific and business consulting services. This Agreement terminated in December 2009. The Company recorded consulting fees totaling approximately $53,000, $53,000 and $53,000 during the years ended December 31, 2009, 2008 and 2007, respectively under the consulting agreement.

Robert L. Gipson, Thomas L. Gipson & Arthur Koenig

Robert Gipson was a director of the Company from June 2004 through October 2004. Robert Gipson is a Senior Director of I&S. Boucher is a Managing Director of I&S. ISVP is an investment partnership managed under an investment advisory contract with I&S. Robert Gipson and Boucher are the general partners of ISVP and share the power to vote securities of the Company held by ISVP.

The Company amended its Rights Plan in connection with agreements with Robert Gipson, Boucher, I&S and ISVP (Note 6).

In March 2007, the Company issued the Amended Notes to Robert Gipson and Thomas Gipson (Note 4).

In March 2008, the Company entered into the March 2008 Amended Purchase Agreement with Robert Gipson, Thomas Gipson, Arthur Koenig, Highbridge and ISVP (Note 4).

In June 2008, the Company entered into the June 2008 Purchase Agreement with Robert Gipson (Note 5).

In November 2008, the Company issued and sold an aggregate of 543,478 shares of its common stock at a purchase price of $1.84 per share in a private placement (Note 6) to Robert Gipson.

In January 2009, the Company sold an aggregate of 1,000,000 shares of its common stock at a purchase price of $1.00 per share in a private placement (Note 6) to Robert Gipson.

In February 2009, the Subsidiary issued to Robert Gipson the Subsidiary Note (Note 5).

In March through September 2009, the Company sold Series F Stock to Robert Gipson (Note 6).

In November 2009 the Company sold common stock to Robert Gipson (Note 6)

In December 2009 the Company issued a promissory note to Robert Gipson in the amount of $350,000 and payable on demand. The Note bears interest at the rate of 7% per annum. (Note 4)

80

ALSERES PHARMACEUTICALS, INC.
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

11.   Employee Benefit Plan

The Company maintains a savings plan (the “Plan”) with employer matching provisions which was designed to be qualified under Section 401(k) of the Internal Revenue Code. Eligible employees are permitted to contribute to the Plan through payroll deductions within statutory and Plan limits. For the years ended December 31, 2009, 2008 and 2007, the Company made matching contributions of approximately $25,000, $264,000 and $347,000, respectively, to the Plan.

12.   Supplementary Quarterly Financial Data (Unaudited)

The following tables present a summary of quarterly consolidated results of operations for the years ended December 31, 2009 and 2008:

	Quarter Ended
	March 31,			June 30,			September 30,			December 31,
2009
Revenues	$	—		$	—		$	—		$	—
Net loss		(4,348,356	)		(2,614,080	)		(2,060,300	)		(1,754,201	)
Basic and diluted net loss per common share	$	(0.19	)	$	(0.11	)	$	(0.09	)	$	(0.07	)
2008
Revenues	$	—		$	—		$	—		$	—
Net loss		(5,325,938	)		(6,114,786	)		(5,111,315	)		(4,295,420	)
Basic and diluted net loss per common share	$	(0.26	)	$	(0.29	)	$	(0.25	)	$	(0.20	)

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Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A(T).   Controls and Procedures.

Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2009. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation our chief executive officer and chief financial officer concluded that, as of December 31, 2009, our disclosure controls and procedures were effective at the reasonable assurance level. During the fiscal quarter ended March 31, 2010, our corporate controller left the company. In light of resource constraints we have no plans to replace this individual with a full time employee. We are utilizing the services of temporary accounting staff and management will continually assess the effectiveness of our internal control over financial reporting during the upcoming fiscal year.

Internal Control Over Financial Reporting

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, 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 principals and includes those policies and procedures that:

•  Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

•  Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

•  Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management, with the participation of our principal executive and principal financial officers, assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

82

Based on our assessment, management concluded that, as of December 31, 2009, our internal control over financial reporting is effective based on those criteria set forth.

The annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended December 31, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. During the fiscal quarter ended March 31, 2010, our corporate controller left the company. In light of resource constraints we have no plans to replace this individual with a full time employee. We are utilizing the services of temporary accounting staff and management will continually assess the effectiveness of our internal control over financial reporting during the upcoming fiscal year.

Item 9B.   Other Information.

In January 2010 the Company amended the Purchase Agreements covering its convertible promissory notes to provide the Company with the ability to borrow up to an additional $5,000,000 on terms acceptable to the Company’s Board of Directors.

In each of January, February and March 2010 the Company issued Promissory Notes to Mr. Robert Gipson totaling $800,000. The Notes bear interest at 7% per annum and are due and payable on demand.

In January 2010 the Company announced that 4 of its 7 directors had resigned their positions effective immediately. These directors were Messrs. Brem, Frashier, Preston and Langer. At the time of their resignations and at March 31, 2010 these directors were owed a total of approximately $250,000 in fees for past services as board members.

83

PART III

Item 10.   Directors, Executive Officers and Corporate Governance.

Code of Business Conduct and Ethics

The Company has adopted a Code of Business Conduct and Ethics (“Code”). The Code constitutes the Company’s Code of Ethics applicable for all of the Company’s directors, officers and employees. The Code is intended to promote honest and ethical conduct, full and accurate reporting, and compliance with laws as well as other matters. The Code can be found on our web site, which is located at www.alseres.com. We intend to make all required disclosures concerning any amendments to, or waivers from, our code of ethics on our web site.

All other information required by this Item 10, with respect to our directors, nominees for election, executive officers, and audit committee is incorporated by reference to the information under the headings “Election of Directors”, “Executive Officers”, “Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance” in the Company’s definitive Proxy Statement for the 2010 Annual Meeting of Stockholders to be filed by the Company with the Securities and Exchange Commission within 120 days after the close of its fiscal year.

Item 11.   Executive Compensation.

The information required by this Item 11 is hereby incorporated by reference to the information under the heading “Executive Compensation” in the Company’s definitive Proxy Statement for the 2010 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the close of its fiscal year. The information specified in Item 407(e)(5) is not incorporated by reference.

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item 12 is hereby incorporated by reference to the information under the heading “Security Ownership of certain Beneficial Owners and Management” in the Company’s definitive Proxy Statement for the 2010 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the close of its fiscal year.

Item 13.   Certain Relationships and Related Transactions, and Director Independence.

We have entered into indemnity agreements with each of our directors and executive officers containing provisions that may require us, among other things, to indemnify those directors and officers against liabilities that may arise by reason of their status or service as directors and officers. The agreements also provide for us to advance to the directors and officers expenses that they expect to incur as a result of any proceeding against them related to their service as directors and officers.

All other information required by this Item 13 is hereby incorporated by reference to the information under the headings “Certain Relationships and Related Transactions” and “Corporate Governance” in the Company’s definitive Proxy Statement for the 2010 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the close of its fiscal year.

Item 14.   Principal Accountant Fees and Services.

The information required by this Item 14 is hereby incorporated by reference to the information under the heading “Auditors’ Fees” in the Company’s definitive Proxy Statement for the 2010 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the close of its fiscal year.

84

PART IV

Item 15.   Exhibits and Financial Statement Schedules.

(a) The following documents are included as part of this Annual Report on Form 10-K.

1. Financial Statements:

Consolidated Financial Statements of the Company:

Consolidated Balance Sheets at December 31, 2009 and 2008

Consolidated Statements of Operations for the fiscal years ended December 31, 2009, 2008 and 2007 and for the period from inception (October 16, 1992) through December 31, 2009

Consolidated Statements of Comprehensive Loss and Stockholders’ (Deficit) Equity for the fiscal years ended December 31, 2009, 2008 and 2007 and for the period from inception (October 16, 1992) through December 31, 2009

Consolidated Statements of Cash Flows for the fiscal years ended December 31, 2009, 2008 and 2007, and for the period from inception (October 16, 1992) through December 31, 2009

Notes to Consolidated Financial Statements

2. Financial Statement Schedules:

Schedules are omitted since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the Consolidated Financial Statements or Notes thereto.

3. Exhibits:

The Exhibits listed in the Exhibit Index immediately preceding the Exhibits are filed as a part of this Annual Report on Form 10-K.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 this 31st day of March, 2010.

Alseres Pharmaceuticals, Inc.

By:  /s/  Peter G. Savas

Peter G. Savas

Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/  Peter G. Savas Peter G. Savas	Chairman and Chief Executive Officer (Principal Executive Officer)	March 31, 2010
/s/  Kenneth L. Rice, Jr. Kenneth L. Rice, Jr.	Executive Vice President Finance and Administration and Chief Financial Officer (Principal Financial and Accounting Officer)	March 31, 2010
/s/  William L.S. Guinness William L.S. Guinness	Director	March 31, 2010
/s/  Michael J. Mullen Michael J. Mullen	Director	March 31, 2010

86

EXHIBIT INDEX

				Incorporated by Reference to
Exhibit					Exhibit	Filing	SEC File
Number			Description	Form	Number	Date	Number
Articles of Incorporation and By-Laws
	3	.1	Amended and Restated Certificate of Incorporation, dated March 28, 1996	10-K/A for 12/31/1998	3.1	3/19/1999	000-6533
	3	.2	Certificate of Amendment of Certificate of Incorporation, dated June 6, 1997	10-K/A for 12/31/1998	3.1	3/19/1999	000-6533
	3	.3	Certificate of Amendment of Amended and Restated Certificate of Incorporation, dated June 28, 1999	10-Q for 9/30/1999	3.5	11/15/1999	000-6533
	3	.4	Certificate of Amendment of Amended and Restated Certificate of Incorporation, dated June 14, 2000	10-K for 12/31/2000	3.3	3/29/2001	000-6533
	3	.5	Certificate of Correction to the Amended and Restated Certificate of Incorporation, dated March 14, 2001	10-K for 12/31/2000	3.3	3/29/2001	000-6533
	3	.6	Form of Certificate of Amendment of Amended and Restated Certificate of Incorporation dated June 11, 2002	Proxy Statement	App. A	5/1/2002	000-6533
	3	.7	Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company, dated as of July 9, 2003	10-Q for 6/30/2003	3.1	8/13/2003	000-6533
	3	.8	Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company, dated as of August 5, 2004	10-Q for 6/30/2004	3.1	8/13/2004	000-6533
	3	.9	Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company, dated as of February 4, 2005	8-K	3.1	2/7/2005	000-6533
	3	.10	Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company, dated as of June 7, 2007	8-K	3.1	6/8/2007	000-6533
	3	.11	Amended and Restated By-Laws, effective as of December 6, 2007	8-K	3.1	12/7/2007	000-6533
Instruments Defining the Rights of Security Holders
	4	.1	Specimen certificate evidencing shares of common stock, par value $.01 per share	10-Q for 6/30/2007	4.1	8/14/2007	000-6533
Series D
	4	.2	Restated Certificate of Designations, Preferences, and Rights of Series D Preferred Stock	8-A/A	Ex. A to 3.3	9/13/2001	000-6533
Series F
	4	.3	Certificate of Designations, Preferences, and Rights of Series F Convertible Preferred Stock	8-K	4.1	3/25/2009	000-6533
Rights Agreement
	4	.4	Rights Agreement, dated as of September 11, 2001, including the form of Certificate of Designation with Respect to the Series D Preferred Stock and the form of Rights Certificate, between the Company and Continental Stock Transfer & Trust Company, as Rights Agent (the “Rights Agreement”)	8-A/A	1	9/13/2001	000-6533

87

				Incorporated by Reference to
Exhibit					Exhibit	Filing	SEC File
Number			Description	Form	Number	Date	Number
	4	.5	Amendment No. 1 to the Rights Agreement, dated November 13, 2001	8-A/A	2	11/25/2002	000-6533
	4	.6	Amendment No. 2 to the Rights Agreement, dated November 22, 2002	8-A/A	3	11/25/2002	000-6533
	4	.7	Amendment No. 3 to the Rights Agreement, dated March 12, 2003	8-K	99.6	3/13/2003	000-6533
	4	.8	Amendment No. 4 to the Rights Agreement, dated December 23, 2003	8-A/A	5	12/29/2003	000-6533
	4	.9	Amendment No. 5 to the Rights Agreement, dated March 14, 2005	8-K	4.1	3/15/2005	000-6533
Miscellaneous
	4	.10	Form of Warrant issued by the Company under the Securities Purchase Agreement dated November 20, 2008	8-K	10.2	11/25/2008	000-6533
	4	.11	Promissory Note dated February 11, 2009 issued by Neurobiologics, Inc. to Robert L. Gipson	8-K	10.1	2/18/2009	000-6533
Ingalls
	4	.12	Amended and Restated Registration Rights Agreement, dated as of March 9, 2005, by and among the Company and Ingalls, Robert L. Gipson and Nickolaos D. Monoyios and other Investors	10-K for 12/31/2004	10.42	3/31/2005	000-6533
	4	.13	Amendment No. 1, dated August 30, 2005, to the Amended and Restated Registration Rights Agreement, dated as of March 9, 2005, by and among the Company and Ingalls, Robert L. Gipson and Nickolaos D. Monoyios and other Investors	10-Q for 9/30/2005	10.6	11/14/2005	000-6533
	4	.14	Common Stock Purchase Agreement, dated March 9, 2005, by and among the Company, Ingalls and other Investors	10-K for 12/31/2004	10.41	3/31/2005	000-6533
	4	.15	Common Stock Purchase Agreement, dated August 30, 2005, by and among the Company, Ingalls and other Investors	10-Q for 9/30/2005	10.5	11/14/2005	000-6533
	4	.16	Mutual Release of Claims, dated as of June 15, 2004, by and among the Company, S. David Hillson, Marc E. Lanser, Robert L. Gipson, Thomas O. Boucher, Jr., Ingalls & Snyder, LLC and Ingalls	8-K	99.3	6/17/2004	000-6533
Material Contracts – Supply, License, Distribution
CMCC
	10	.1+	License Agreement between CMCC and the Company dated as of May 10, 2006 (Dr. Larry Benowitz) (relating to INOSINE)	10-Q for 6/30/2006	10.1	8/14/2006	000-6533
	10	.2+	License Agreement between CMCC and the Company dated as of May 10, 2006 (Dr. Zhigang He) (relating to Oncomodulin)	10-Q for 6/30/2006	10.2	8/14/2006	000-6533

88

				Incorporated by Reference to
Exhibit					Exhibit	Filing	SEC File
Number			Description	Form	Number	Date	Number
Harvard
	10	.3	License Agreement between President and Fellows of Harvard College (“Harvard”) and NeuroBiologics, Inc. (a subsidiary of the Company) dated as of December 10, 1993 (relating to ALTROPANE)	S-4	10.16	4/12/1995	333-91106
	10	.4	Amendment, dated May 7, 2004, to License Agreement between Harvard and the Company dated as of December 10, 1993 (relating to ALTROPANE)	10-Q for 6/30/2005	10.6	8/15/2005	000-6533
	10	.5	License Agreement between Harvard and the Company dated as of March 15, 2000 (relating to ALTROPANE)	S-3/A	10.11	9/3/2002	333-88726
	10	.6	Amendment, dated May 11, 2004, to License Agreement between Harvard and the Company dated as of March 15, 2000 (relating to ALTROPANE)	10-Q for 6/30/2005	10.4	8/15/2005	000-6533
	10	.7	License Agreement, effective as of October 15, 1996, between Harvard and the Company; as amended on August 22, 2001 and on May 4, 2004 (relating to FLUORATEC)	10-Q for 9/30/2005	10.8	11/14/2005	000-6533
	10	.8	Third Amendment, dated April 1, 2007, to License Agreement between Harvard and the Company dated as of October 15, 1996, as amended on August 22, 2001 and on May 4, 2004 (relating to FLUORATEC)	10-Q for 3/31/2007	10.2	5/15/2007	000-6533
Nordion
	10	.9+	Manufacturing Agreement dated August 9, 2000 between the Company and MDS Nordion, Inc. (“Nordion Agreement”)	10-K for 12/31/2001	10.15	3/29/2002	000-6533
	10	.10+	Amendment dated August 23, 2001 to Nordion Agreement	10-K for 12/31/2001	10.16	3/29/2002	000-6533
	10	.11	Amendment No. 2 dated as of September 18, 2002 to Nordion Agreement	10-K for 12/31/2002	10.16	3/31/2003	000-6533
	10	.12	Amendment No. 3 dated as of November 22, 2003 to Nordion Agreement	10-K for 12/31/2003	10.17	3/30/2004	000-6533
	10	.13+	Amendment No. 4 dated as of December 22, 2004 to Nordion Agreement	10-K for 12/31/2004	10.48	3/31/2005	000-6533
	10	.14+	Amendment No. 5 dated as of January 24, 2005 to Nordion Agreement	10-K for 12/31/2004	10.48	3/31/2005	000-6533
	10	.15+	Amendment No. 6 dated as of December 19, 2005 to Nordion Agreement	8-K	99.1	12/19/2005	000-6533
	10	.16+	Amendment No. 7 dated as of December 7, 2006 to Nordion Agreement	8-K	10.1	12/8/2006	000-6533
	10	.17+	Amendment No. 8 dated as of December 4, 2007 to Nordion Agreement	8-K	10.1	12/7/2007	000-6533
	10	.18+	Amendment No. 9 dated as of December 3, 2008 to Nordion Agreement	8-K	10.1	12/8/2008	000-6533

89

				Incorporated by Reference to
Exhibit					Exhibit	Filing	SEC File
Number			Description	Form	Number	Date	Number
	10	.19+	Amendment No. 10 dated as of January 4 , 2010 to Nordion Agreement	*
Organix
	10	.20	License Agreement, effective as of July 1, 2000, between Organix, Inc. and the Company (“Organix Agreement”) (relating to 0-1369)	10-Q for 9/30/2005	10.7	11/14/2005	000-6533
	10	.21	Amendment, dated May 11, 2004, to Organix Agreement (relating to 0-1369)	10-Q for 9/30/2005	10.7	11/14/2005	000-6533
	10	.22	Second Amendment, dated April 1, 2007, to Organix Agreement (relating to 0-1369)	10-Q for 3/31/2007	10.3	5/15/2007	000-6533
BioAxone
	10	.23+	License Agreement, dated December 28, 2006, by and between the Company and BioAxone Therapeutic Inc. (“BioAxone Agreement) (relating to CETHRIN)	8-K	10.1	1/4/2007	000-6533
	10	.24+	First Amendment, dated March 23, 2007, to BioAxone Agreement (relating to CETHRIN)	10-Q for 3/31/2007	10.1	5/15/2007	000-6533
	10	.25	Amendment to BioAxone License Agreement dated as of April 23, 2009	*
Material Contracts – Leases
	10	.24	Lease Agreement, dated as of January 28, 2002, between the Company and Brentwood Properties, Inc. (“Brentwood”)	10-K for 12/31/2004	10.47	3/31/2005	000-6533
	10	.25	Amendment of Lease, dated September 9, 2005, by and between Brentwood and the Company	10-Q for 9/30/2005	10.1	11/14/2005	000-6533
	10	.26	Lease Agreement, dated as of June 9, 2005, by and between Straly Corporation and the Company	10-Q for 6/30/2005	10.3	8/15/2005	000-6533
	10	.27	Sublease, dated September 9, 2005, by and between Small Army, Inc. and the Company	10-Q for 9/30/2005	10.2	11/14/2005	000-6533
	10	.28	Sublease, dated September 9, 2005, by and between Dell Mitchell Architects, Inc. and the Company	10-Q for 9/30/2005	10.3	11/14/2005	000-6533
Material Contracts – Stock Purchase, Financing and Credit Agreements
	10	.29	Third Amended and Restated Convertible Promissory Note Purchase Agreement (unsecured), dated March 18, 2008 by and among the Company and the purchasers listed therein	8-K	10.1	3/20/2008	000-6533
	10	.30	Convertible Promissory Note Purchase Agreement (unsecured) dated June 25, 2008, by and between the Company and Robert L. Gipson	8-K	10.1	6/30/2008	000-6533
	10	.31	Securities Purchase Agreement, dated November 20, 2008, by and between the Company and Robert L. Gipson	8-K	10.1	11/25/2008	000-6533
	10	.32	Letter Agreement, dated November 20, 2008, by and between the Company and Robert L. Gipson	8-K	10.3	11/25/2008	000-6533
	10	.33	Securities Purchase Agreement, dated January 8, 2009, by and between the Company and Robert L. Gipson	*

90

				Incorporated by Reference to
Exhibit					Exhibit	Filing	SEC File
Number			Description	Form	Number	Date	Number
	10	.34	Securities Purchase Agreement, dated February 24, 2009, by and between the Company and Cato Holding Company	8-K	10.1	2/27/2009	000-6533
	10	.35	Letter Agreement, dated February 24, 2009, by and between the Company and Cato BioVentures	8-K	10.2	2/27/2009	000-6533
	10	.36	Securities Purchase Agreement, dated March 19, 2009, by and between the Company and Robert L. Gipson	8-K	10.1	3/25/2009	000-6533
	10	.37	Securities Purchase Agreement, dated April 16, 2009, by and between the Company and Robert L. Gipson	8-K	10.7	4/22/2009	000-6533
	10	.38	Securities Purchase Agreement, dated May 12, 2009, by and between the Company and Robert L. Gipson	10-Q	10.2	8/14/2009	000-6533
	10	.39	Securities Purchase Agreement, dated June 10, 2009, by and between the Company and Robert L. Gipson	8-K	10.7	6/22/2009	000-6533
	10	.40	Securities Purchase Agreement, dated July 9, 2009, by and between the Company and Robert L. Gipson	8-K	10.7	7/13/2009	000-6533
	10	.41	Securities Purchase Agreement, dated July 23, 2009, by and between the Company and Robert L. Gipson	8-K	10.7	7/29/2009	000-6533
	10	.42	Securities Purchase Agreement, dated August 11, 2009, by and between the Company and Robert L. Gipson	*
	10	.43	Securities Purchase Agreement, dated August 26, 2009, by and between the Company and Robert L. Gipson	8-K	10.7	9/1/2009	000-6533
	10	.44	Securities Purchase Agreement, dated September 10, 2009, by and between the Company and Robert L. Gipson	8-K	10.7	9/16/2009	000-6533
	10	.45	Securities Purchase Agreement, dated September 28, 2009, by and between the Company and Robert L. Gipson	8-K	10.7	10/2/2009	000-6533
	10	.46	Securities Purchase Agreement, dated November 4, 2009, by and between the Company and Robert L. Gipson	8-K	10.7	11/10/2009	000-6533
	10	.47	Promissory Note issued by the Company to Robert Gipson dated December 23, 2009	8-K	10.7	12/28/2009	000-6533
	10	.48	Promissory Note issued by the Company to Robert Gipson dated January 28, 2010	8-K	10.7	1/28/2010	000-6533
	10	.49	Promissory Note issued by the Company to Robert Gipson dated February 10, 2010	*
	10	.50	Promissory Note issued by the Company to Robert Gipson dated February 26, 2010	8-K	10.7	3/4/2010	000-6533
	10	.51	Promissory Note issued by the Company to Robert Gipson dated March 9, 2010	*

91

				Incorporated by Reference to
Exhibit					Exhibit	Filing	SEC File
Number			Description	Form	Number	Date	Number
	10	.52	Promissory Note issued by the Company to Robert Gipson dated March 25, 2010	*
Management Contract or Compensatory Plan or Arrangement
	10	.53#	Non-Employee Director Compensation Summary	*
	10	.54#	Executive Officer Compensation Summary	*
	10	.55#	Form of Indemnity for Directors and Executive Officers	10-K for 12/31/2003	10.32	3/30/2004	000-6533
	10	.56#	Form of Incentive Stock Option Agreement, as amended	10-Q for 3/31/2005	10.1	5/16/2005	000-6533
	10	.57#	Form of Non-Statutory Stock Option Agreement, as amended	10-Q for 3/31/2005	10.2	5/16/2005	000-6533
	10	.58#	Form of Incentive Stock Option Agreement for 2005 Stock Incentive Plan	10-K for 12/31/2005	10.54	3/31/2006	000-6533
	10	.59#	Form of Non-Statutory Stock Option Agreement for 2005 Stock Incentive Plan	10-K for 12/31/2005	10.55	3/31/2006	000-6533
	10	.60#	Amended and Restated 1990 Non-Employee Directors’ Non Qualified Stock Option Plan, as amended	10-K for 12/31/2008	10.44	3/31/2009	000.6533
	10	.61#	Amended and Restated Omnibus Stock Option Plan	10-K for 12/31/2008	10.45	3/31/2009	000.6533
	10	.62#	Amended and Restated 1998 Omnibus Stock Option Plan	10-K for 12/31/2008	10.46	3/31/2009	000.6533
	10	.63#	Amended and Restated 2005 Stock Incentive Plan	10-K for 12/31/2008	10.47	3/31/2009	000.6533
	10	.64#	Director and Officer Indemnity Trust Agreement, dated June 15, 2004, between S. David Hillson, Boston Private Bank & Trust Company and the Company	8-K	99.6	6/17/2004	000-6533
	10	.65#	Amended and Restated Employment Agreement, dated December 31, 2008, between the Company and Peter G. Savas	8-K	10.1	1/6/2009	000-6533
	10	.66#	Amended and Restated Employment Agreement, dated December 31, 2008, between the Company and Mark J. Pykett	8-K	10.2	1/6/2009	000-6533
	10	.67#	Amended and Restated Employment Agreement, dated December 31, 2008, between the Company and Kenneth L. Rice, Jr.	8-K	10.3	1/6/2009	000-6533
	10	.68#	Consulting Agreement dated September 29, 2006, by and between the Company and Robert S. Langer, Jr.	8-K	10.1	10/4/2006	000-6533
Additional Exhibits
	21		Subsidiaries of the Registrant	*
	23	.1	Consent of McGladrey & Pullen, LLP	*
	23	.2	Consent of PricewaterhouseCoopers, LLP	*
	31	.1	Certification of Chief Executive Officer pursuant to Rule 13a- 14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended	*

92

				Incorporated by Reference to
Exhibit					Exhibit	Filing	SEC File
Number			Description	Form	Number	Date	Number
	31	.2	Certification of Chief Financial Officer pursuant to Rule 13a- 14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended	*
	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
(#)	Management contract or compensatory plan or arrangement filed as an exhibit to this Form pursuant to Item 15(b) of Form 10-K.
(+)	Confidential treatment has been requested as to certain portions, which portions have been filed separately with the Securities and Exchange Commission.

93

EX-10.19

Exhibit 10.19

Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.

December 18, 2009

Ken Rice
Alseres Pharmaceuticals Inc.
239 South Street
Hopkinton, MA 01748
USA

RE: Amendment #10 to Altropane Agreement

Reference is made to the agreement between MDS Nordion, a division of MDS (Canada) Inc., and Alseres Pharmaceuticals Inc., (“ALSE”) dated the 9^th day of August, 2000 as amended (the “Agreement”).

In consideration of $1.00 and other valuable consideration the sufficiency of which is hereby acknowledged, the parties desire to further amend the Agreement as follows:

1.	Section 3.4 of the Agreement is hereby amended and in its entirety shall read as follows:
	“Nordion shall be responsible for, and bear the cost of, performing routine maintenance to the Facility required to maintain it in satisfactory operating condition as required by the current Specifications, Process and cGMPs, and all other applicable laws, regulations or orders.
	The cost of repairs, preventive maintenance and service contracts for the Moveable Equipment and any non-routine maintenance activities to the Facility that may be required shall be borne by ALSE and paid in advance. Nordion shall provide the cost of such activity in writing to Alseres, and Alseres shall provide its consent to such activity within ten (10) business days of receipt of Nordion’s notice. During such period and until the activities are completed, Nordion may suspend its supply obligations under this Agreement. In the event Alseres does not provide its consent and provide payment in advance within the aforementioned ten (10) business day period, then Nordion may, notwithstanding anything to the contrary in this Agreement and in addition to any other remedy available, immediately terminate the Agreement upon written notice.”
2.	Section 5.1 of the Agreement is amended by adding the following to the end of the paragraph:
	“Any Batches required by ALSE for Clinical Trials shall be provided by Nordion under the terms and conditions specified in the Agreement or as set out in Schedule G.”
3.	Schedule G is hereby added to the Agreement as follows:

“Schedule G

Batch description:

• up to 20 shippable vials of 5 mCi Altropane, or

• up to 12 shippable vials of 8 mCi Altropane

• dose calibration is as at 15:00 PT the day after manufacture

Price per Batch and minimum purchase obligation:

	Price / Batch	Minimum purchase or
		payment obligation
		(Batches / month) per
		calendar quarter
For Batches delivered during the period January 1 2010 to December 31 2010	$[**]	Q1 – [**] Q2 – [**] Q3 – [**] Q4 – [**]
For Batches delivered during the period January 1 2011 to December 31 2011 (if the renewal option is exercised by ALSE pursuant to Section 16.1)	$[**] increased by the percentage increase in the US Producer Price Index for Pharmaceutical Preparations for the 12 month period ending October 31 2010	Q1 – [**] Q2 – [**] Q3 – [**] Q4 – [**]

Notes:

• Currency is United States Dollars

• Point of delivery is Ex Works, Nordion’s facility in Vancouver, BC, Canada. Freight is prepaid by Nordion and charged to ALSE as incurred.

• Payment terms are net 30 days from date of invoice; however Nordion reserves the right to require payment in advance.”

4. Section 13.7 of the Agreement is amended by adding the following:
“Any Facility or Process changes or enhancements that are required due to new or changed regulatory requirements shall be borne by ALSE and paid in advance. Nordion shall provide the cost of such change or enhancement in writing to Alseres, and Alseres shall provide its consent to such change or enhancement within ten (10) business days of receipt of Nordion’s notice. During such period and until the change or enhancement are completed, Nordion may suspend its supply obligations under this Agreement. In the event Alseres does not provide its consent and provide payment in advance within the aforementioned ten (10) business day period, then Nordion may, notwithstanding anything to the contrary in this Agreement and in addition to any other remedy available, immediately terminate the Agreement upon written notice.”

5.	Section 16.1 of the Agreement is hereby amended and in its entirety shall read as follows: “The term of the Agreement shall commence upon the Effective Date and unless terminated earlier pursuant to this Agreement, shall expire on December 31, 2010. ALSE shall have the option to extend the term by an additional one (1) year period to December 31, 2011 by providing written notice to Nordion to extend the term at least three (3) months prior to December 31, 2010.”
6.	Section 16.2 of the Agreement is hereby amended and in its entirety shall read as follows: “ALSE may terminate this Agreement without cause on thirty (30) days prior written notice to Nordion provided that, in the event that ALSE exercises its right to terminate this Agreement under this Section 16.2, an exit fee equal to the following two (2) months minimum purchase obligation shall have been paid to Nordion. Upon such termination Nordion shall be entitled to retain all amounts paid by ALSE and ALSE shall pay to Nordion all amounts due and /or earned but not yet paid and Nordion shall return, at ALSE’s expense, the Moveable Equipment.”
7.	All other terms and conditions in the Agreement shall remain in full force and effect.
8.	This Amending Agreement shall be effective as of January 1, 2010.

If you agree with the foregoing, please execute this Amending Agreement in the space provided below and return one (1) executed original to the attention of the undersigned.

IN WITNESS WHEREOF the parties hereto have executed this Amending Agreement as of the 21^st day of December 2009.

MDS Nordion, a division of MDS (Canada) Inc.	Alseres Pharmaceuticals Inc.
/s/ Chris Wagner Signature	/s/ Kenneth Rice Signature
Chris Wagner Name	Kenneth Rice Name
Sr. V.P., Sales & Marketing Title	EVP & CFO Title

EX-10.25

Exhibit 10.25

AMENDMENT NO. 1 TO LICENSE AGREEMENT

     THIS AMENDMENT (this “Amendment”) dated as of April 23, 2009 (“Amendment Effective Date”) is between Alseres Pharmaceuticals, Inc. (f/k/a Boston Life Sciences, Inc.), a Delaware corporation with offices at 85 Main Street, Hopkinton, MA 01748 (“Alseres”) and BioAxone Therapeutic Inc., a Canadian corporation with offices at 1100 Rene-Levesque West, 25^th Floor, Montreal, QC H3B 5C9 Canada (“BA” and collectively with Alseres, the “Parties”).

Background

     WHEREAS Alseres and BA entered into that certain License Agreement dated as of December 28, 2006 (“License Agreement”) whereby BA exclusively licensed to Alseres patent rights and know-how relating to fusion proteins, the whole as provided in the License Agreement.

     WHEREAS the parties have entered into that certain Option Agreement dated as of April 30, 2008 (the “Option Agreement”) whereby an option to amend the License Agreement was granted by BA to Alseres (the “Option”).

     WHEREAS the Option has expired on December 31, 2008.

     WHEREAS the parties desire to provide for a period of time during which Alseres will attempt to enter into a sublicense of its rights under the License Agreement, and to provide for the termination of the License Agreement in the event no such sublicense is entered into, all on the terms and conditions set forth in this Amendment.

     NOW THEREFORE, BA and Alseres agree as follows:

     1. Definitions. When used in this Amendment, each of the following terms shall have the meanings set forth below and such definitions shall be included in Article 1 of the License Agreement. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the License Agreement.

     “Minimum Terms” shall mean the following: (i) total cash upfront and milestones payments to Alseres by sublicensee shall not be less than Fifteen Million Dollars (US $15,000,000); (ii) royalties payable to Alseres by sublicensee shall not be less than five percent (5%) of Net Sales of Licensed Products for treatment of spinal cord injury; and (iii) sublicensee shall undertake to make sufficient investments to complete the regeneration of the Master Cell Bank and the placebo-controlled Phase IIB clinical trial, and shall demonstrate the capacity to make such investment.

     “Sublicense Agreement” means a definitive agreement between Alseres and a third party unrelated, directly or indirectly, to Alseres or its directors, officers, employees, shareholders or lenders, pursuant to which Alseres sublicenses to such third party all of Alseres’ licenses under the License Agreement, and which contains the Minimum Terms.

     “Sublicense Period” means a period of six (6) months beginning on the Amendment Effective Date, as extended, if applicable, in accordance with Section 2 of this Amendment.

     2. Diligence.

          (a) The text of Section 3.1(b) of the License Agreement is hereby replaced in its entirety by the indication “INTENTIONALLY DELETED.”

          (b) The text of Section 3.1(c) of the License Agreement is hereby replaced in its entirety by the indication “INTENTIONALLY DELETED.”

          (c) Section 3.2 of the License Agreement is hereby replaced in its entirety as follows:

“Sublicense Period. During the Sublicense Period, Alseres will use reasonable commercial efforts to enter into a Sublicense Agreement. The Sublicense Period shall be automatically extended for an additional ninety (90) days if, prior to the expiration of the initial six (6) month period, Alseres shall have executed a binding term sheet (subject only to ordinary due diligence) with respect to a Sublicense Agreement. In the event that Alseres wishes to enter into a Sublicense Agreement which does not include the Minimum Terms, then Alseres shall provide a written notice to BA prior to the expiry of the Sublicense Period together with the terms and conditions of the proposed Sublicense Agreement. Alseres and BA shall promptly meet to discuss in good faith whether Alseres should be permitted to enter into such Sublicense Agreement. Alseres shall not be entitled to execute such Sublicense Agreement without the approval of BA. The Sublicense Period shall automatically terminate in case of insolvency of Alseres (as described in Section 8.4). The terms and conditions of the Sublicense Agreement shall not be less stringent than those set forth herein. Alseres shall provide to BA a copy of the Sublicense Agreement at least five (5) business days prior to its execution and, when executed, a copy of the executed version. Alseres shall require the sublicensee to comply with the provision hereof as applicable. Alseres hereby guarantees, and shall remain primarily liable for, the performance of the sublicensee under this Agreement. The Sublicense Agreement shall include an obligation for the sublicensee to account for and report its Net Sales to Alseres and BA.”

          (d) Section 3.4 of the License Agreement is hereby replaced in its entirety as follows:

“Reporting and Cooperation. During the Sublicense Period, Alseres shall have sole and exclusive control of the process leading up to a Sublicense Agreement. However, if BA identifies potential sublicense candidates, BA shall immediately inform Alseres of any such potential sublicense candidates and immediately turn over control of the relationship with such candidate to Alseres. Alseres will use reasonable efforts to pursue all such leads provided by BA. Neither BA nor any of its representatives will in any way attempt to negotiate on behalf of Alseres or hold itself out as an agent of Alseres. On the first (1st) and fifteenth (15th) day of each month during the Sublicense Period, Alseres will provide BA with a written

status report of its sublicense efforts, including but not limited to parties contacted, status of discussions and any other pending matters.”

          (e) Exhibit E and Exhibit F of the License Agreement are hereby deleted in their entirety.

          (f) The text of Section 2.1(b) of the License Agreement is hereby replaced in its entirety by the indication “INTENTIONALLY DELETED.”

          3. Financial Provisions. Sections 4.2 through 4.8 of the License Agreement are hereby deleted in their entirety and replaced with the following new Section 4.2:

“Sublicense Income. If Alseres enters into a Sublicense Agreement during the first three (3) months of the Sublicense Period, forty-five percent (45%) of all payments (of whatever nature and whether in cash or otherwise) to be received by Alseres pursuant to the Sublicense Agreement shall be paid to BA within five (5) days of receipt by Alseres. If Alseres enters into a Sublicense Agreement after the first three (3) months of the Sublicense Period but before the end of the Sublicense Period, fifty percent (50%) of all payments (of whatever nature and whether in cash or otherwise) to be received by Alseres pursuant to the Sublicense Agreement shall be paid to BA within five (5) days of receipt by Alseres. The Sublicense Agreement shall provide that BA shall be entitled to request that payments owed to it be made directly to it by the third party sublicensee.”

     4. Termination.

          (a) The text of Section 8.2 of the License Agreement is hereby replaced in its entirety by the indication “INTENTIONALLY DELETED.”

          (b) The text of Section 8.3 of the License Agreement is hereby replaced in its entirety as follows:

“Default. Either Party may terminate this Agreement, if the other Party is in material breach of its material obligations or breach or misstatement of its representations and warranties under the Agreement. The non-breaching Party shall give the breaching Party written notice of termination prior to terminating this Agreement. Such notice shall state the causes for termination. The breaching Party shall have sixty (60) days from the date of the notice to remedy the stated cause(s) for termination, failing which the non-breaching Party shall have the option to terminate this Agreement, without further notice or delay.”

          (c) Section 8.5 of the License Agreement is hereby replaced in its entirety as follows:

“Failure to Enter Sublicense Agreement. If Alseres does not enter into a Sublicense Agreement during the Sublicense Period, then upon the expiration of the Sublicense Period and without any further delay or notice, the License Agreement shall automatically terminate and the provisions of Section 8.6 of the

License Agreement shall apply. In such event, Alseres shall be entitled to receive thirty percent (30%) of all payments (of whatever nature and whether in cash or otherwise) received by BA from a third party in consideration of a license or other grant of rights to or under the Licensed Intellectual Property or the Compounds within five (5) days of receipt by BA. The agreement shall provide that Alseres shall be entitled to request that payments owed to it be made directly to it by the third party. Notwithstanding the foregoing, for a period of ninety (90) days following the end of the Sublicense Period, BA shall not be entitled to enter into an agreement regarding a license or other grant of rights to or under the Licensed Intellectual Property or the Compounds unless such agreement includes the Minimum Terms. In the event that BA wishes to enter into an agreement regarding a license or other grant of rights to or under the Licensed Intellectual Property or the Compounds which does not include the Minimum Terms during such period of ninety (90) days, then BA shall provide a written notice to Alseres prior to the expiry of such period together with the terms and conditions of the proposed agreement. Alseres and BA shall promptly meet to discuss in good faith whether BA shall be permitted to enter into such agreement. BA shall not be entitled to execute such agreement without the approval of Alseres. For greater certainty, the Minimum Terms shall not apply after the ninety (90) day period mentioned above in this Section 8.5 and accordingly BA shall be entitled to enter into any agreement which does not include the Minimum Terms after the expiry of the ninety (90) day period.”

          (d) Section 8.6 of the License Agreement is hereby replaced in its entirety as follows:

“Effect of Termination. In any case of termination, Alseres shall promptly transfer and assign to BA, at Alseres’ cost and expense, the Master Cell Bank, all Licensed Intellectual Property and Confidential Information related to the terminated Compounds and/or Licensed Products, and all rights, titles and interests in any Regulatory Materials related to a Licensed Product or a Compound and all non-clinical, clinical and other reports, records, data and other information developed or generated by the Development and Commercialization of a Compound or Licensed Product that are reasonably required for BA or its future licensees to continue Development, Commercialization and to satisfy requirements imposed by applicable Regulatory Authorities, and cooperate with BA and its future licensees, at Alseres’ expense, to effect an orderly transfer of Development and regulatory responsibilities, including the transition of existing clinical studies, to BA as promptly as practicable. If BA decides to continue to Develop and/or Commercialize the Compounds and/or the Licensed Products, BA may do so under the same trademark as those used by Alseres and Alseres will assign any and all trademarks associated with any Licensed Product or Compound.”

     5. Option Agreement. The Parties hereby acknowledge that the Option Agreement has expired and is no longer valid.

     6. Releases. In consideration of the mutual promises contained herein, each Party, for itself and for each of its Affiliates, hereby generally, irrevocably, unconditionally and completely releases and forever discharges the other Party, such other Party’s Affiliates, and its and their officers, directors, stockholders, agents, employees, heirs, administrators, executors, predecessors, successors and assigns (hereinafter, the “Released Parties”) from, and hereby irrevocably, unconditionally and completely waives and relinquishes, each of such Party’s Released Claims. The Parties acknowledge they are aware that they may hereafter discover facts in addition to or different from those now known or believed to be true with respect to the subject matter of this release, but that it is their intention to hereby fully, finally and forever settle and release all such claims, disputes and differences, known or unknown, suspected or unsuspected, that now exist or heretofore have existed between the parties and that in furtherance of such intention, this release shall remain in effect as a full and complete release notwithstanding the discovery or existence of any such additional or different facts. The term “Released Claims,” when used herein with respect to a Party, shall mean and include each and every claim, charge, complaint, demand, action, cause of action, suit, right, debt, sum of money, cost, reckoning, covenant, contract, agreement, promise, doing, omission, damage, execution, obligation, liability, and expense (including attorneys’ fees and costs), of every kind and nature, whether at law or in equity, that such Party may have had in the past, may now have or may have in the future against the Released Parties, and which has arisen or arises directly or indirectly out of, or relates directly or indirectly to, any circumstance, agreement, activity, action, omission, event or matter occurring or existing on or prior to the Amendment Effective Date to the extent such claim relates to or arises under the License Agreement or the Option Agreement; provided, however, that the Released Claims shall exclude any and all rights to seek and obtain enforcement of, or a remedy or indemnification arising out of the breach of, any obligation provided for in the License Agreement (as amended by this Amendment) occurring after the Amendment Effective Date.

     7. Public Announcements. BA acknowledges that Alseres is obligated by law to file a form 8-K describing this Amendment with the U.S. Securities and Exchange Commission within four (4) business days of the Amendment Effective Date. Further, Alseres may, at its option, choose to issue a press release to disclose the content of this Amendment. In the event that Alseres chooses to issue such a press release, Alseres agrees to provide the content of the proposed release to BA in advance for approval by BA, which approval shall not be unreasonably withheld. In the event that BA chooses to issue a press release of its own, BA agrees to provide the content of the proposed release to Alseres in advance for approval by Alseres, which approval shall not be unreasonably withheld.

     8. Miscellaneous.

          (a) Except as specifically amended herein, all provisions of the License Agreement shall remain in full force and effect in accordance with their terms. In the event of a conflict between the provisions of the License Agreement and those of this Amendment, this Amendment shall control. This Amendment, together with the License Agreement, represents the entire agreement between the Parties regarding the subject matter hereof, and there are no prior or contemporaneous written or oral promises or representation relating to this subject not incorporated herein. No amendment or modification of the terms and conditions of this

Amendment shall be binding on any Party unless reduced to a writing referencing this Amendment and signed by an authorized officer of the Party to be bound.

          (b) On and after the Amendment Effective Date, each reference in the License Agreement to “this License Agreement,” “this Agreement,” “hereunder,” “hereof,” “herein,” or words of like import shall mean and be a reference to the License Agreement as amended hereby. No reference to this Amendment need be made in any instrument or document at any time referring to the License Agreement, a reference to the License Agreement in any of such instrument or document to be deemed to be a reference to the License Agreement as amended hereby.

          (c) This Amendment may be executed in two or more counterparts, each of which shall be deemed an original for all purposes, but all of which together shall constitute one and the same instrument. This Amendment may be executed and delivered by facsimile and upon such delivery the facsimile signature will be deemed to have the same effect as if the original signature had been delivered to the other Party.

          (d) All matters affecting the interpretation, validity and performance of this Amendment shall be governed by the laws applicable to agreements made in, and to be performed in, the State of New York, without regard to its conflict of law principles.

     IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first set forth above.

ALSERES PHARMACEUTICALS, INC.
By:	/s/ Kenneth L. Rice Jr
Title:	EVP & CFO
BIOAXONE THERAPEUTIC, INC.
By: Title:	/s/ Lisa McKerracher Director

EX-10.33

Exhibit 10.33

SECURITIES PURCHASE AGREEMENT

     THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of January 8, 2009, by and among Alseres Pharmaceuticals, Inc., a Delaware corporation with headquarters located at 239 South Street, Hopkinton, MA 01748 (the “Company”), and each investor identified on the signature pages hereto (individually, an “Investor” and collectively, the “Investors”).

PREAMBLE

     A. The Company and each Investor is executing and delivering this Agreement in reliance upon the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act.

     B. Each Investor, severally and not jointly, wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement (i) that aggregate number of shares of the common stock, par value $0.01 per share, of the Company (the “Common Stock”), set forth on such Investor’s signature page to this Agreement (which aggregate amount for all Investors together shall be not more than 1,000,000 shares of Common Stock and shall collectively be referred to herein as the “Common Shares”). The Company shall in no event issue shares of Common Stock and Warrant Shares in excess of 19.99% of the then outstanding Common Stock of the Company or to any one Investor which would result in such Investor beneficially owning more than 19.99% of the then outstanding Common Stock of the Company immediately after the Closings (including shares issued pursuant to the letter agreement referenced in paragraph D below of this Preamble) unless such Investor owned more than 19.99% of the outstanding Common Stock of the Company immediately prior to the Initial Closing. Each Investor, in consideration of this transaction agrees to immediately cancel all outstanding warrants issued to each Investor as part of the share purchase transaction between such Investor and the Company that was effective as of November 20, 2008.

     C. The purchase price for each Common Share to be issued at the Closing shall be one dollar ($1.00) per share (the “Purchase Price”). The Common Shares are collectively referred to herein as the “Securities.”

     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Investors, severally and not jointly, agree as follows:

ARTICLE I
DEFINITIONS

     1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated:

     “Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Securities Act.

     “Agreement” has the meaning set forth in the Preamble.

     “Business Day” means any day other than Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in The State of New York are authorized or required by law or other governmental action to close.

     “Closing” has the meaning set forth in the Preamble.

     “Closing Date” has the meaning set forth in Section 2.1.

     “Company” has the meaning set forth in the Preamble.

     “Company Counsel” means Wilmer Cutler Pickering Hale and Dorr LLP, counsel to the Company.

     “Common Shares” has the meaning set forth in the Preamble.

     “Common Stock” has the meaning set forth in the Preamble.

     “Contingent Obligation” has the meaning set forth in Section 3.1(aa).

     “Convertible Securities” means any stock or securities (other than Options) convertible into or exercisable or exchangeable for Common Stock.

     “Cut-Back Shares” has the meaning set forth in Section 6.1(d).

     “Disclosure Materials” has the meaning set forth in Section 3.1(f).

     “Effective Date” means the date that the Registration Statement is first declared effective by the SEC.

     “Effectiveness Period” has the meaning set forth in Section 6.1(b).

     “Environmental Laws” has the meaning set forth in Section 3.1(dd).

     “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     “Filing Date” means the date that is sixty (60) days after the Closing Date or, if such date is not a Business Day, the next date that is a Business Day.

     “FINRA” has the meaning set forth in Section 3.2(c).

     “GAAP” has the meaning set forth in Section 3.1(f).

     “Hazardous Materials” has the meaning set forth in Section 3.1(dd).

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     “Indebtedness” has the meaning set forth in Section 3.1(aa).

     “Indemnified Party” has the meaning set forth in Section 6.4(c).

     “Indemnifying Party” has the meaning set forth in Section 6.4(c).

     “Intellectual Property Rights” has the meaning set forth in Section 3.1(t).

     “Investor” has the meaning set forth in the Preamble.

     “Lien” means any lien, charge, claim, security interest, encumbrance, right of first refusal or other restriction.

     “Losses” means any and all losses, claims, damages, liabilities, settlement costs and expenses, including, without limitation, reasonable attorneys’ fees.

     “Material Adverse Effect” means (i) a material adverse effect on the results of operations, assets, business or financial condition of the Company and the Subsidiaries taken as a whole on a consolidated basis or (ii) material and adverse impairment of the Company’s ability to perform its obligations under any of the Transaction Documents, provided, that none of the following alone shall be deemed, in and of itself, to constitute a Material Adverse Effect: (i) a change in the market price or trading volume of the Common Stock or (ii) changes in general economic conditions or changes affecting the industry in which the Company operates generally (as opposed to Company-specific changes) so long as such changes do not have a disproportionate effect on the Company and its Subsidiaries taken as a whole.

     “Material Permits” has the meaning set forth in Section 3.1(v).

     “Options” means any outstanding rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.

     “Person” has the meaning set forth in Section 3.1(aa).

     “Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, a partial proceeding, such as a deposition), whether commenced or threatened in writing.

     “Prospectus” means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

     “Registrable Securities” means the Common Shares and the Warrant Shares issued or issuable pursuant to the Transaction Documents, together with any securities issued or issuable

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upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing.

     “Registration Statement” means each registration statement required to be filed under Article VI, including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

     “Regulation D” has the meaning set forth in the Preamble.

     “Required Effectiveness Date” means (i) if the Registration Statement does not become subject to review by the SEC, the date which is the earlier of (a) ninety (90) days after the Filing Date or (b) five (5) Trading Days after the Company receives notification from the SEC that the Registration Statement will not become subject to review, or (ii) if the Registration Statement becomes subject to review by the SEC, the date which is the earlier of (a) one hundred and twenty (120) days after the Filing Date or (b) five (5) Trading Days after the Company receives notification from the SEC that the SEC has no further comment to the Registration Statement.

     “Restriction Termination Date” has the meaning set forth in Section 6.1(d).

     “Rule 144,” “Rule 172”, “Rule 415,” and “Rule 424” means Rule 144, Rule 415 and Rule 424, respectively, promulgated by the SEC pursuant to the Securities Act, as such Rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.

     “SEC” has the meaning set forth in the Preamble.

     “SEC Reports” has the meaning set forth in Section 3.1(f).

     “SEC Restrictions” has the meaning set forth in Section 6.1(d).

     “Securities” has the meaning set forth in the Preamble.

     “Securities Act” has the meaning set forth in the Preamble.

     “Short Sales” has the meaning set forth in Section 3.2(i).

     “Subsidiary” has the meaning set forth in Section 3.1(a).

     “Trading Day” means (i) a day on which the Common Stock is traded on a Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not listed or quoted on a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not listed or quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by the Pink Sheets LLC (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in

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the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

     “Trading Market” means whichever of the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or the OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.

     “Transaction” has the meaning set forth in Section 3.2(i).

     “Transaction Documents” means this Agreement and the Warrants.

     “Transfer Agent” means Continental Stock Transfer & Trust Company, or any successor transfer agent for the Company.

ARTICLE II
PURCHASE AND SALE

     2.1 Closing. The Closing shall take place on the third business day after which all conditions for such Closing have been satisfied or are capable of being satisfied, or such other date as agreed to by the Company and the Investors (the “Closing Date”) at 10:00 a.m., at the offices of Company Counsel, or at such other times and places as shall be mutually agreed to by the Company and the Investors.

     2.2 Closing Deliveries.

          (a) At the Closing, the Company shall deliver or cause to be delivered to each Investor the following:

               (i) evidence of a direct registration account in such Investor’s name as set forth on such Investor’s signature page to this Agreement, and the deposit, by direct registration, into such account of the number of Common Shares purchased by such Investor;

               (ii) a certificate of the Secretary of the Company, dated as of the Closing Date, (a) certifying the resolutions adopted by the Board of Directors of the Company approving the transactions contemplated by the Transaction Documents and the issuance of the Securities, (b) certifying as to the certificate of incorporation, as amended and by-laws of the Company and (c) certifying as to the signatures and authority of persons signing the Transaction Documents and related documents on behalf of the Company; and

               (iii) a certificate of the Chief Executive Officer or Chief Financial Officer of the Company, dated as of the Closing Date, certifying to the fulfillment of the conditions specified in Section 5.1(a) and (b).

          (b) At the Closing, each Investor shall deliver or cause to be delivered to the Company the purchase price set forth on such Investor’s signature page to this Agreement in United States dollars and in immediately available funds, by wire transfer to an account designated in writing to such Investor by the Company for such purpose.

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ARTICLE III
REPRESENTATIONS AND WARRANTIES

     3.1 Representations and Warranties of the Company. The Company hereby represents and warrants to the Investors as follows (which representations and warranties shall be deemed to apply, where appropriate, to each Subsidiary of the Company):

          (a) Subsidiaries. The Company owns or controls, directly or indirectly, all of the capital stock or comparable equity interests of each Subsidiary free and clear of any Lien, and all issued and outstanding shares of capital stock or comparable equity interest of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights. The Company owns or controls, directly or indirectly, only the following corporations, partnerships, limited liability partnerships, limited liability companies, associations or other entities: (i) Acumed Pharmaceuticals, Inc., a Delaware corporation, (ii) Ara Pharmaceuticals, Inc., a Delaware corporation, (iii) Boston Life Sciences International, Inc., a Delaware corporation, (iv) Coda Pharmaceuticals, Inc., a Delaware corporation, (v) Neurobiologics, Inc., a Delaware corporation and (vi) ProCell Pharmaceuticals, Inc., a Delaware corporation (each, a “Subsidiary”).

          (b) Organization and Qualification. The Company and each Subsidiary is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with the requisite power and authority to own and occupy its properties and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate of incorporation or bylaws. The Company and each Subsidiary is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

          (c) Authorization; Enforcement. The Company has the requisite corporate authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of the Company and no further consent or action is required by the Company, its Board of Directors or its stockholders. Each of the Transaction Documents has been (or upon delivery will be) duly executed by the Company and, assuming the due authorization, execution and delivery by the other parties thereof, is, or when delivered in accordance with the terms hereof, will constitute, the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

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          (d) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby do not, and will not, (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate of incorporation or bylaws, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other agreement to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary are bound, or affected, except to the extent that such conflict, default, termination, amendment, acceleration or cancellation right would not reasonably be expected to have a Material Adverse Effect, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or any Subsidiary is subject (including, assuming the accuracy of the representations and warranties of the Investors set forth in Section 3.2 hereof, federal and state securities laws and regulations and the rules and regulations of any self-regulatory organization to which the Company or its securities are subject), or by which any property or asset of the Company or any Subsidiary is bound or affected, except to the extent that such violation would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

          (e) The Securities. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens and will not be subject to preemptive or similar rights of stockholders (other than those provided for in the Transaction Documents). The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable upon exercise of the Warrants.

          (f) SEC Reports; Financial Statements. The Company has filed all documents required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof on a timely basis or has received a valid extension of such time of filing and has filed any such documents prior to the expiration of any such extension and has filed all documents required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof, such documents, together with any materials filed or furnished by the Company under the Exchange Act, whether or not any such reports were required being collectively referred to herein as the “SEC Reports” and, together with this Agreement, the “Disclosure Materials”. As of their respective dates (or, if amended or superseded by a filing prior to the Initial Closing Date, then on the date of such filing), the SEC Reports filed by the Company complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the SEC promulgated thereunder, and none of the SEC Reports, when filed (or, if amended or superseded by a filing prior to the Initial Closing Date, then on the date of such filing) by the Company, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing (or, if amended or superseded by a

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filing prior to the Initial Closing Date, then on the date of such filing). Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements, the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP or may be condensed or summary statements, and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, year-end audit adjustments.

          (g) Capitalization. The authorized capital stock of the Company as of October 31, 2008, consisted of 80,000,000 shares of Common Stock, of which [21,351,123] were issued and outstanding as of such date and 1,000,000 shares of preferred stock, $.01 par value per share, of which 25,000 shares are designated as Series A Convertible Preferred Stock, 500,000 shares are designated as Series D Convertible Preferred Stock and 800 shares designated Series E Convertible Preferred Stock, of which no shares were issued and outstanding as of such date. All outstanding shares of capital stock are duly authorized, validly issued, fully paid and nonassessable and have been issued in compliance in all material respects with all applicable securities laws. Except as disclosed in or contemplated the SEC Reports, the Company does not have outstanding any other Options, script rights to subscribe to, calls or commitments relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or entered into any agreement giving any Person any right to subscribe for or acquire, any shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. Except as set forth in the SEC Reports, and except for customary adjustments as a result of stock dividends, stock splits, combinations of shares, reorganizations, recapitalizations, reclassifications or other similar events, there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) and the issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Investors and the Agent) and will not result in a right of any holder of the Company’s securities to adjust the exercise, conversion, exchange or reset price under such securities.

          (h) Material Changes; Undisclosed Events, Liabilities or Developments; Solvency. Since the date of the latest audited financial statements included within the SEC Reports, except as disclosed in the SEC Reports, (i) there has been no event, occurrence or development that, individually or in the aggregate, has had a Material Adverse Effect, (ii) the Company has not incurred any material liabilities other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the SEC, (iii) the Company has not altered its method of accounting or changed its auditors, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders, in their capacities as such, or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock-based plans. The Company has not taken any steps to seek protection pursuant to any bankruptcy law nor does the Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy

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proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so.

          (i) Absence of Litigation. Except as disclosed in the SEC Reports, there is no action, suit, claim, or Proceeding, or, to the Company’s knowledge, inquiry or investigation, before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary that would, individually or in the aggregate, have a Material Adverse Effect.

          (j) Compliance. Except as would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect, (i) neither the Company nor any Subsidiary is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received written notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) neither the Company nor any Subsidiary is in violation of any order of any court, arbitrator or governmental body, or (iii) neither the Company nor any Subsidiary is or has been in violation of any statute, rule or regulation of any governmental authority.

          (k) Title to Assets. Neither the Company nor any Subsidiary owns real property. The Company and each Subsidiary has good and marketable title in all personal property owned by them that is material to the business of the Company and each Subsidiary, in each case free and clear of all Liens, except for Liens that do not, individually or in the aggregate, have or result in a Material Adverse Effect. Any real property and facilities held under lease by the Company or any Subsidiary is held by it under valid, subsisting and enforceable leases of which the Company and each Subsidiary is in material compliance.

          (l) No General Solicitation. Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Securities.

          (m) Private Placement; Investment Company; U.S. Real Property Holding Corporation. Neither the Company nor any of its Affiliates nor, any Person acting on the Company’s behalf has, directly or indirectly, at any time within the past six months, made any offer or sale of any security or solicitation of any offer to buy any security under circumstances that would (i) eliminate the availability of the exemption from registration under Regulation D under the Securities Act in connection with the offer and sale by the Company of the Securities as contemplated hereby or (ii) cause the offering of the Securities pursuant to the Transaction Documents to be integrated with prior offerings by the Company. Assuming the accuracy of the representations and warranties of the Investors set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Investors as contemplated hereby. The sale and issuance of the Securities hereunder does not contravene the rules and regulations of any Trading Market on which the Common Stock is listed or quoted. The Company is not an “investment company” within the meaning of the Investment Company

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Act of 1940, as amended. The Company is not required to be registered as a United States real property holding corporation within the meaning of the Foreign Investment in Real Property Tax Act of 1980.

          (n) Form S-3 Eligibility. The Company is eligible to register the Common Shares and the Warrant Shares for resale by the Investors using Form S-3 promulgated under the Securities Act.

          (o) Listing and Maintenance Requirements. The Company has not, in the twelve months preceding the date hereof, received notice (written or oral) from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. Except as set forth in the SEC Reports, as of the date hereof there are no proceedings pending or, to the Company’s knowledge, threatened against the Company relating to the continued listing of its Common Stock.

          (p) Registration Rights. Other than as disclosed in the SEC Reports, the Company has not granted or agreed to grant to any Person any rights (including “piggy-back” registration rights) to have any securities of the Company registered with the SEC or any other governmental authority that have not expired or been satisfied or waived, other than to the Investors and the Agent.

          (q) Application of Takeover Protections. The Company and its Board of Directors have taken all necessary action, if any, to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s charter documents or the laws of its state of incorporation that is or could become applicable to any of the Investors as a result of the Investors and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including, without limitation, as a result of the Company’s issuance of the Securities and the Investors’ ownership of the Securities.

          (r) Disclosure. The Company confirms that neither it nor any of its officers, directors or Affiliates, has provided any of the Investors (other than Excluded Investors or those certain investors who signed a confidentiality agreement with the Company) or their agents or counsel with any information that constitutes or might constitute material, nonpublic information (other than the existence and terms of the issuance of Securities, as contemplated by this Agreement). The Company understands and confirms that each of the Investors (other than Excluded Investors or those certain investors who signed a confidentiality agreement with the Company) will rely on the foregoing representations in effecting transactions in securities of the Company. To the Company’s knowledge, except for the transactions contemplated by this Agreement, no event or circumstance has occurred or information exists with respect to the Company or any Subsidiary or their businesses, properties, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed. The Company acknowledges and agrees that no Investor (other than Excluded Investors) makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those set forth in the Transaction Documents.

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          (s) Acknowledgment Regarding Investors’ Purchase of Securities. Based upon the assumption that the transactions contemplated by this Agreement are consummated in all material respects in conformity with the Transaction Documents, the Company acknowledges and agrees that each of the Investors (other than Excluded Investors) is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that no Investor (other than Excluded Investors) is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by any Investor (other than Excluded Investors) or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Investors’ purchase of the Securities. The Company further represents to each Investor that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its advisors and representatives.

          (t) Patents and Trademarks. The Company and each Subsidiary owns, or possesses adequate rights or licenses to use, all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights (“Intellectual Property Rights”) necessary to conduct their respective businesses as now conducted. None of the Company’s or any Subsidiary’s Intellectual Property Rights have expired or terminated, or are expected to expire or terminate within three years from the date of this Agreement. Neither the Company nor any Subsidiary has received any written notice of, or have any actual knowledge of, any infringement by the Company of Intellectual Property Rights of any third party, that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. Except as disclosed in the SEC Reports, there is no claim, action or proceeding being made or brought, or to the knowledge of the Company, being threatened, against the Company or any Subsidiary regarding its Intellectual Property Rights.

          (u) Insurance. The Company and each Subsidiary is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as it believes are prudent and customary in the businesses and locations in which the Company and each Subsidiary is engaged.

          (v) Regulatory Permits. The Company and each Subsidiary possesses all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as presently conducted and described in the SEC Reports (“Material Permits”), except where the failure to possess such permits would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, and neither the Company nor any Subsidiary has received any written notice of proceedings relating to the revocation or modification of any Material Permit.

          (w) Transactions With Affiliates and Employees. Except as set forth in the SEC Reports, no transaction has occurred between or among the Company, on the one hand, and its Affiliates, officers or directors or any Affiliates of any such officer or director, on the other hand, that is required to be disclosed pursuant to Regulation S-K Item 404(a) that was not disclosed.

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          (x) Internal Accounting Controls. The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

          (y) Sarbanes-Oxley Act. The Company is in compliance in all material respects with applicable requirements of the Sarbanes-Oxley Act of 2002 and applicable rules and regulations promulgated by the SEC thereunder, except where such noncompliance would not have, individually or in the aggregate, a Material Adverse Effect.

          (z) Foreign Corrupt Practices. Neither the Company nor any Subsidiary nor, to the knowledge of the Company, any director, officer, agent, employee or other Person acting on behalf of the Company or any Subsidiary has, in the course of its actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee or to any foreign or domestic political parties or campaigns from corporate funds; (iii) violated or is in violation in any material respect of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

          (aa) Indebtedness. Except as disclosed in the SEC Reports, neither the Company nor any Subsidiary (i) has any outstanding Indebtedness (as defined below), (ii) is in violation of any term of or is in default under any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in a Material Adverse Effect, and (iii) is a party to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is reasonably expected to have a Material Adverse Effect. For purposes of this Agreement: (x) “Indebtedness” of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any

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mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above; (y) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; and (z) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, a government or any department or agency thereof.

          (bb) Employee Relations. Neither the Company nor any Subsidiary is a party to any collective bargaining agreement or employs any member of a union. The Company believes that its relations with its employees are as disclosed in the SEC Reports. To the knowledge of the Company or any Subsidiary, no executive officer of the Company or any Subsidiary is in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company or any Subsidiary to any liability with respect to any of the foregoing matters.

          (cc) Labor Matters. The Company and each Subsidiary is in compliance in all material respects with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

          (dd) Environmental Laws. The Company and each Subsidiary (i) is in compliance in all material respects with any and all Environmental Laws (as hereinafter defined), (ii) has received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) is in compliance in all material respects with all terms and conditions of any such permit, license or approval where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

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          (ee) Subsidiary Rights. The Company or one of its Subsidiaries has the unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive dividends and distributions on, all capital securities of its Subsidiaries as owned by the Company or such Subsidiary.

          (ff) Tax Status. The Company and each Subsidiary (i) has made or filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

          (gg) Certain Fees. Other than fees payable to the Agent (for which the Company shall be responsible), no brokers’, finders’ or financial advisory fees or commissions will be payable by the Company with respect to the transactions contemplated by this Agreement.

     3.2 Representations and Warranties of the Investors. Each Investor hereby, as to itself only and for no other Investor, represents and warrants to the Company as follows:

          (a) Organization; Authority. Such Investor is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate, partnership or other power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by such Investor of the Securities hereunder has been duly authorized by all necessary corporate, partnership or other action on the part of such Investor. This Agreement has been duly executed and delivered by such Investor and constitutes the valid and binding obligation of such Investor, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

          (b) No Public Sale or Distribution. Such Investor is (i) acquiring the Common Shares and the Warrants and (ii) upon exercise of the Warrants will acquire the Warrant Shares issuable upon exercise thereof, in the ordinary course of business for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities laws, and such Investor does not have a present intention to effect any distribution of the Securities to or through any person or entity; provided, however, that by making the representations herein, such Investor does not agree to hold any of the Securities for any

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minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act.

          (c) Investor Status. At the time such Investor was offered the Securities, it was, at the date hereof it is, and on the date which it exercises any Warrants it will be an “accredited investor” as defined in Rule 501(a) under the Securities Act or a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. Such Investor is not a registered broker dealer registered under Section 15(a) of the Exchange Act, nor required to be registered as such, or a member of The Financial Industry Regulatory Authority (“FINRA”) or an entity engaged in the business of being a broker dealer. Except as otherwise disclosed in writing to the Company on Exhibit B-2 (attached hereto) on or prior to the date of this Agreement, such Investor is not affiliated with any broker dealer registered under Section 15(a) of the Exchange Act, or a member of FINRA or an entity engaged in the business of being a broker dealer.

          (d) General Solicitation. Such Investor is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media, broadcast over television or radio, disseminated over the Internet or presented at any seminar or any other general solicitation or general advertisement.

          (e) Experience of Such Investor. Such Investor, either alone or together with its representatives has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, including the risk of total loss of the Investor’s investment, and has so evaluated the merits and risks of such investment. Such Investor understands that it must bear the economic risk of this investment in the Securities indefinitely, and is able to bear such risk and is able to afford a complete loss of such investment. The Investor understands that the market price of the Common Stock can be volatile and that no representation is being made as to the future value of the Common Stock.

          (f) Access to Information. Such Investor acknowledges that it has reviewed the Disclosure Materials and has been afforded: (i) the opportunity to ask such questions as it has deemed necessary of representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information (other than material non-public information for those certain investors who did not enter into a confidentiality agreement with the Company) about the Company and each Subsidiary and their respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Neither such inquiries nor any other investigation conducted by or on behalf of such Investor or its representatives or counsel shall modify, amend or affect such Investor’s right to rely on the Company’s representations and warranties contained herein. Such Investor acknowledges that no third party has made or will make any representation or warranty to such Investor regarding the adequacy or completeness for such

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Investor’s purpose of the information such Investor has requested. Such Investor acknowledges receipt of copies of the SEC Reports filed through the date hereof.

          (g) No Governmental Review. Such Investor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

          (h) No Conflicts. The execution, delivery and performance by such Investor of this Agreement and the consummation by such Investor of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of such Investor or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such Investor is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to such Investor, except in the case of clauses (ii) and (iii) above, for such that are not material and do not otherwise affect the ability of such Investor to consummate the transactions contemplated hereby.

          (i) Prohibited Transactions; Confidentiality. Such Investor, directly or indirectly, has not and no Person acting on behalf of or pursuant to any understanding with such Investor, has engaged in any purchases or sales in the securities, including derivatives, of the Company (including, without limitation, any Short Sales (a “Transaction”) involving any of the Company’s securities) since the time that such Investor was first contacted by the Company, Dawson James Securities, Inc. (the “Agent”) or any other Person regarding the investment in the Company contemplated by this Agreement. Such Investor covenants that neither it nor any Person acting on its behalf or pursuant to any understanding with such Investor will engage, directly or indirectly, in any Transactions in the securities of the Company (including Short Sales) prior to the time the transactions contemplated by this Agreement are publicly disclosed. “Short Sales” include, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, short sales, swaps, derivatives and similar arrangements (including on a total return basis), and sales and other transactions through non-U.S. broker-dealers or foreign regulated brokers.

          (j) Restricted Securities. Such Investor understands that the Securities are characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances and that the Company is relying upon the truth and accuracy of, and the Investor’s compliance with, representations, warranties, agreements, acknowledgements, understandings of such Investor set forth herein (including the Registration Statement Questionnaire) in order to determine the availability of such exemptions of the Investor and the eligibility of such Investor to acquire the Securities.

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          (k) Legends. It is understood that, except as provided in Section 4.1(b) of this Agreement, certificates evidencing such Securities may bear the legend set forth in Section 4.1(b).

          (l) No Legal, Tax or Investment Advice. Such Investor understands that nothing in this Agreement or any other materials presented by or on behalf of the Company to the Investor in connection with the purchase of the Securities constitutes legal, tax or investment advice. Such Investor has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Securities. Such Investor understands that the Agent has acted solely as the agent of the Company in this placement of the Securities, and that the Agent makes no representation or warranty with regard to the merits of this transaction or as to the accuracy of any information such Investor may have received in connection therewith. Such Investor acknowledges that he has not relied on any information or advice furnished by or on behalf of the Agent.

          (m) Offering Documents. Such Investor understands that other than this Agreement and the SEC Reports, no disclosure or offering document will be provided or prepared in connection with the offer and sale of the Securities contemplated hereby.

          (n) Restrictions on Securities. Such Investor acknowledges that the Company has represented that no action has been or will be taken in any jurisdiction outside the United States by the Company that would permit an offering of the Securities, or possession or distribution of offering materials in connection with the issuance of the Securities, in any jurisdiction outside the United States where action for that purpose is required. If such Investor is located or domiciled outside the United States, it agrees to comply with all applicable laws and regulations in each foreign jurisdiction in which it purchases, offers, sells or delivers Securities or has in its possession or distributes any offering material, in all cases at its own expense.

          (o) Acquiring Person. Such Investor, after giving effect to the transactions contemplated hereby, will not, either individually or with a group (as defined in Section 13(d)(3) of the Exchange Act), be the beneficial owner of 15% or more of the Company’s outstanding Common Stock. For purposes of this Section 3.2(o), beneficial ownership shall be determined pursuant to a Rule 13d-3 under the Exchange Act.

          (p) Agent Acknowledgement. The Purchaser acknowledges that the Company has engaged the Agent in connection with the sale of the Common Shares and Warrants and, as consideration for its services, has agreed to pay the Agent, on the Subsequent Closing Date (so long as the same occurs on or before December 15, 2008), an aggregate cash commission equal to 7% of the gross proceeds resulting from such sale (exclusive of any proceeds received from Ingalls & Snyder LLC or their Affiliates), and to reimburse the Agent for up to 2% of certain of their expenses incurred in connection with such sale, and to issue the Agent Warrants to purchase [     ] shares of Common Stock. The Agent Warrants will have a term of five years and will be exercisable at a price equal to $[     ]¹.

¹ Fair market value on the Subsequent Closing Date.

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ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES

     4.1 Transfer Restrictions.

     (a) Each Investor, severally but not jointly, covenants to the Company that the Securities will only be disposed of pursuant to an effective registration statement under, and in compliance with the requirements of, the Securities Act or pursuant to an available exemption from the registration requirements of the Securities Act, and in compliance with any applicable state securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or to the Company, or pursuant to Rule 144, the Company may require the transferor to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration under the Securities Act. Notwithstanding the foregoing, the Company hereby consents to and agrees to register on the books of the Company and with its Transfer Agent, without any such legal opinion any transfer of Securities by an Investor to an Affiliate of such Investor, provided that the transferee certifies to the Company that it is an “accredited investor” as defined in Rule 501(a) under the Securities Act and provided that such Affiliate does not request any removal of any existing legends on any certificate evidencing the Securities.

     (b) Each Investor, severally but not jointly, agrees to the imprinting, until no longer required by this Section 4.1(b), of the following legend on any certificate evidencing any of the Securities, together with any additional legend required by (i) any applicable state securities laws and (ii) any securities exchange upon which such Securities may be listed:

“NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.”

Certificates evidencing the Common Shares and the Warrant Shares shall not be required to contain such legend or any other legend (i) while a registration statement (including the Registration Statement) covering the resale of the Common Shares and the Warrant Shares is effective under the Securities Act and a prospectus meeting the requirements of Section 10 of the Securities Act is available with respect to such Common Shares or Warrant Shares, (ii) following any sale of such Common Shares or Warrant Shares pursuant to Rule 144, or (iii) if such

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Common Shares or Warrant Shares are eligible for sale under Rule 144(b)(1), or (iv) if such legend is not required under applicable requirements of the Securities Act (including pronouncements issued by the Staff of the SEC). At such time as a legend is no longer required for certain Common Shares and Warrant Shares, the Company will, no later than three Trading Days following the delivery by an Investor to the Company or the Company’s Transfer Agent of a legended certificate representing such Common Shares or Warrant Shares, and a request for legend removal, accompanied in the case of a request under Section 4.1(c)(iv) by an opinion of counsel to an Investor to the effect that such legend is not required, deliver or cause to be delivered to such Investor a certificate representing such Common Shares or Warrant Shares that is free from all restrictive and other legends. The Company may not give instructions to any transfer agent of the Company that enlarge the restrictions on transfer set forth in this Section 4.1(b).

     (c) The Company will not object to and shall permit (except as prohibited by law) an Investor to pledge or grant a security interest in some or all of the Securities in connection with a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement, and if required under the terms of such arrangement, the Company will not object to and shall permit (except as prohibited by law) such Investor to transfer pledged or secured Securities to the pledgees or secured parties. Except as required by law, such a pledge or transfer would not be subject to approval of the Company, no legal opinion of the pledgee, secured party or pledgor shall be required in connection therewith (but such legal opinion shall be required in connection with a subsequent transfer or foreclosure following default by the Investor transferee of the pledge), and no notice shall be required of such pledge. Each Investor acknowledges that the Company shall not be responsible for any pledges relating to, or the grant of any security interest in, any of the Securities or for any agreement, understanding or arrangement between any Investor and its pledgee or secured party. At the appropriate Investor’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities, including the preparation and filing of any required prospectus supplement under Rule 424(b)(3) of the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders thereunder. Provided that the Company is in compliance with the terms of this Section 4.1(c), the Company’s indemnification obligations pursuant to Section 6.4 shall not extend to any Proceeding or Losses arising out of or related to this Section 4.1(c).

     4.2 Furnishing of Information. Until the date that any Investor owning Common Shares or Warrant Shares may sell all of them under Rule 144 of the Securities Act (or any successor provision), the Company covenants to use its reasonable best efforts to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. The Company further covenants that it will take such further action as any holder of Securities may reasonably request, to the extent required from time to time to enable such Investor to sell such Common Shares and Warrant Shares without registration under the Securities Act.

     4.3 Integration. The Company shall not, and shall use its reasonable best efforts to ensure that no Affiliate thereof shall, sell, offer for sale or solicit offers to buy or otherwise

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negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to the Investors or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market.

     4.4 Reservation of Securities. At all times during which the Warrants remain exercisable, the Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may be required to fulfill its obligations to issue such Warrant Shares under the Transaction Documents. In the event that at any time the then authorized shares of Common Stock are insufficient for the Company to satisfy its obligations to issue such Warrant Shares under the Transaction Documents, the Company shall promptly take such actions as may be required to increase the number of authorized shares.

     4.5 Securities Laws Disclosure; Publicity. The Company shall, at or before 9:00 a.m., Boston time, on the first Trading Day following execution of this Agreement, issue a press release disclosing all material terms of the transactions contemplated hereby. Within four business days of the Initial Closing Date, the Company shall file a Current Report on Form 8-K with the SEC describing the terms of the transactions contemplated by the Transaction Documents and including as exhibits to such Current Report on Form 8-K the Transaction Documents (including the names of the Investors and the amount(s) of Securities respectively purchased) and the form of Warrants, in the form required by the Exchange Act. Thereafter, the Company shall timely file any filings and notices required by the SEC or applicable law with respect to the transactions contemplated hereby and provide copies thereof to the Investors promptly after filing. Except as herein provided, neither the Company nor any Subsidiary shall publicly disclose the name of any Investor, or include the name of any Investor in any press release without the prior written consent of such Investor (which consent shall not be unreasonably withheld or delayed), unless otherwise required by law, regulatory authority or Trading Market. Neither the Company nor any Subsidiary shall, nor shall any of their respective officers, directors, employees and agents, provide any Investor with any material nonpublic information regarding the Company or any Subsidiary from and after the issuance of the above referenced press release without the express written consent of such Investor.

     4.6 Use of Proceeds. The Company intends to use the net proceeds from the sale of the Securities for working capital and general corporate purposes and to fund the Company’s Phase III development of ALTROPANE^® for Parkinson’s Disease. The Company also may use a portion of the net proceeds, currently intended for general corporate purposes, to acquire or invest in technologies, products or services that complement its business. Pending these uses, the Company intends to invest the net proceeds from this offering in short-term, interest-bearing, investment-grade securities, or as otherwise pursuant to the Company’s customary investment policies.

     4.7 Registration Questionnaire. Each Investor has completed or caused to be completed the Registration Statement Questionnaire attached hereto as Exhibit B-2 (or has otherwise provided in a written form the information requested in such Registration Statement Questionnaire) and the signature page hereto, each for use in preparation of the Registration

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Statement Questionnaire, and the information contained in such completed Registration Statement Questionnaire (or such other form provided by the Investor) and on such signature page are true and correct in all material respects as of the date of this Agreement and will be true and correct on each Closing Date and the Effective Date. The Investor covenants that, upon the Company’s reasonable written request, it will promptly notify the Company of any changes in such information or other information as the Company may reasonably request in connection with any registration referred to in Article VI.

     4.8 FINRA Compliance. Each Investor acknowledges that if it is a Registered Representative (as defined by the FINRA) of a FINRA member firm, the Investor must give such firm the notice required by the FINRA’s Rules of Fair Practice, receipt of which must be acknowledged by such firm on the signature page hereof.

     4.9 No Sale of Securities. Each Investor hereby, severally but not jointly, covenants with the Company not to make any sale of the Securities without (i) complying with the provisions of this Agreement and (ii) satisfying the requirements of the Securities Act and the rules and regulations promulgated thereunder, including, without limitation, causing the prospectus delivery requirement under the Securities Act to be satisfied if the Investor is notified by the Company pursuant to Section 6.2(j) hereof that the conditions specified in Rule 172(c) of the Securities Act were not satisfied and, as a result thereof, the Investors are required to deliver a Prospectus in connection with any disposition of Registrable Securities. Each Investor acknowledges that there may occasionally be times when the Company determines that, subject to the limitations of Section 6.1, it must suspend the use of the prospectus forming a part of the Registration Statement until such time as an amendment to the Registration Statement has been filed by the Company and declared effective by the SEC, an appropriate report has been filed by the Company with the SEC pursuant to the Exchange Act or until the Company has amended or supplemented such prospectus. Each Investor hereby, severally but not jointly, covenants that it will not sell any Securities pursuant to the Registration Statement during the period commencing at the time at which the Company gives each Investor written notice of any suspension of the use of the Registration Statement and ending at the time the Company gives each Investor written notice that each Investor may thereafter effect sales pursuant to the Registration Statement.

     4.10 Treatment of Non-Public Information. The Investor covenants and agrees with the Company (a) to hold the existence, terms and conditions of the transactions contemplated by the Transaction Documents in confidence and not to disclose the same to any other person until such time as the Company files with the SEC a Current Report on Form 8-K disclosing the offering or publicly announces the offering, and (b) to hold all matters disclosed to it by the Company (other than any matters included in the SEC Reports) in confidence and not to disclose the same to any other person until such time as the Company files with the SEC a report publicly disclosing such information. The Investor understands that the federal securities laws impose restrictions on trading based on information regarding the transactions contemplated by the Transaction Documents.

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ARTICLE V
CONDITIONS

     5.1 Conditions Precedent to the Obligations of the Investors. The obligation of each Investor to purchase the Securities at each Closing is subject to the satisfaction or waiver by such Investor, at or before each Closing, of each of the following conditions:

          (a) Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct in all material respects as of the date when made and as of each Closing as though made on and as of such date (except for representations and warranties that speak as of a specific date, which shall be true and correct in all material respects as of such date).

          (b) Performance. The Company and each other Investor shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to each Closing.

          (c) No Suspensions of Trading in Common Stock; Listing. Trading in the Common Stock shall not have been suspended by the SEC or any Trading Market (except for any suspensions of trading of not more than one Trading Day solely to permit dissemination of material information regarding the Company) at any time since the date of execution of this Agreement, and the Common Stock shall have been at all times since such date listed for trading on a Trading Market.

          (d) Absence of Litigation. No action, suit or proceeding by or before any court or any governmental body or authority, against the Company or any Subsidiary or pertaining to the transactions contemplated by this Agreement or their consummation, shall have been instituted on or before each Closing Date, which action, suit or proceeding would, if determined adversely, have a Material Adverse Effect.

     5.2 Conditions Precedent to the Obligations of the Company. The obligation of the Company to sell the Securities at each Closing is subject to the satisfaction or waiver by the Company, at or before each Closing, of each of the following conditions:

          (a) Representations and Warranties. The representations and warranties of the Investors contained herein shall be true and correct in all material respects as of the date when made and as of each Closing Date as though made on and as of such date (except for representations and warranties that speak as of a specific date, which shall be true and correct in all material respects as of such date); and

          (b) Performance. The Investors shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Investors at or prior to each Closing.

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ARTICLE VI
REGISTRATION RIGHTS

     6.1 Registration Statement.

     (a) Subject to the receipt of necessary information from the Investors and the Agent, including the information requested in the Registration Statement Questionnaire, as promptly as possible, and in any event on or prior to the Filing Date, the Company shall prepare and file with the SEC a Registration Statement covering the resale of all Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance with the Securities Act and the Exchange Act) and shall contain (except if otherwise requested by the SEC) the “Plan of Distribution” in substantially the form attached hereto as Exhibit C.

     (b) Subject to the receipt of necessary information from the Investors and the Agent, including the information requested in the Registration Statement Questionnaire, the Company shall use its reasonable best efforts to cause the Registration Statement to be declared effective by the SEC as promptly as possible after the filing thereof, but in any event prior to the Required Effectiveness Date, and shall use its reasonable best efforts to keep the Registration Statement continuously effective under the Securities Act until the earlier of the date that all Registrable Securities covered by such Registration Statement have been sold or can be sold publicly under Rule 144 without any volume, manner of sale or other restrictions (the “Effectiveness Period”); provided that, upon notification by the SEC that a Registration Statement will not be reviewed or is no longer subject to further review and comments, the Company shall request acceleration of such Registration Statement within five (5) Trading Days after receipt of such notice and request that it become effective on 4:00 p.m. Boston time on the Effective Date and file a prospectus supplement for any Registration Statement, if required under Rule 424 (or otherwise), by 9:00 a.m. Boston time the day after the Effective Date.

     (c) Notwithstanding anything in this Agreement to the contrary, after 60 consecutive Trading Days of continuous effectiveness of the initial Registration Statement filed and declared effective pursuant to this Agreement, the Company may, by written notice to the Investors and the Agent, suspend sales under a Registration Statement after the Effective Date thereof and/or require that the Investors and the Agent immediately cease the sale of shares of Common Stock pursuant thereto and/or defer the filing of any subsequent Registration Statement if (i) the Company is engaged in a merger, acquisition or sale and the Board of Directors of the Company determines in good faith, by appropriate resolutions, that, as a result of such activity, (A) it would be materially detrimental to the Company (other than as relating solely to the price of the Common Stock) to maintain a Registration Statement at such time or (B) it is in the best interests of the Company to suspend sales under such registration at such time, (ii) requested by the SEC or any other federal or state governmental authority during the Effectiveness Period of the Registration Statement for amendments or supplements to a Registration Statement or related Prospectus or for additional information; (iii) the SEC or any other federal or state governmental authority issued any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose; (iv) the Company receives any notification with

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respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (v) the Company elected to delay the disclosure of material non-public information concerning the Company, the disclosure of which at the time is not, in the good faith judgment of the Board of Directors of the Company, in the best interest of the Company; or (vi) any event or circumstance which necessitates the making of any changes in the Registration Statement or Prospectus, or any document incorporated or deemed to be incorporated therein by reference, so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Upon receipt of such notice, each Investor and the Agent shall immediately discontinue any sales of Registrable Securities pursuant to such registration until such Investor and the Agent are advised in writing by the Company that the current Prospectus or amended Prospectus, as applicable, may be used. In no event, however, shall this right be exercised to suspend sales beyond the period during which (in the good faith determination of the Company’s Board of Directors) the failure to require such suspension would be materially detrimental to the Company. The Company’s rights under this Section 6.1(c) may be exercised for a period of no more than 20 Trading Days at a time and not more than three times in any twelve-month period. Immediately after the end of any suspension period under this Section 6.1(c), the Company shall take all necessary actions (including filing any required supplemental prospectus) to restore the effectiveness of the applicable Registration Statement and the ability of the Investors and the Agent to publicly resell their Registrable Securities pursuant to such effective Registration Statement.

     (d) Notwithstanding the other provisions of this Agreement, if at any time the SEC takes the position that some or all of the Registrable Securities may not be included in the Registration Statement because (i) the inclusion of such Registrable Securities violates the provisions of Rule 415 as a result of the number of shares included in such Registration Statement, (ii) the Registrable Securities cannot be sold as an “at the market offering,” and/or (iii) the Warrant Shares may not be registered prior to exercise of the Warrants and/or many not be sold on a delayed or continuous basis under Rule 415, the Company shall (A) remove from the Registration Statement such portion of the Registrable Securities (the “Cut Back Shares”) and/or (B) agree to such restrictions and limitations on the registration and resale of the Registrable Securities as the SEC may require to assure the Company’s compliance with the requirements of Rule 415 (collectively, the “SEC Restrictions”). Any cut-back imposed pursuant to this Section 6.1(d) shall be allocated among the Investors and the Agent on a pro rata basis and shall be allocated first to any Warrant Shares. From and after such time as the Company is able to effect the registration of the Cut Back Shares in accordance with any SEC Restrictions (such date, the “Restriction Termination Date”) all of the provisions of this Section 6.1(d) shall again be applicable to the Cut Back Shares; provided, however, that for such purposes the Filing Date shall be deemed to be the Restriction Termination Date.

     6.2 Registration Procedures. In connection with the Company’s registration obligations hereunder, the Company shall:

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     (a) Not less than three Trading Days prior to the filing of a Registration Statement or any related Prospectus or any amendment or supplement thereto, furnish via email to those Investors who have supplied the Company with email addresses copies of all such documents proposed to be filed, which documents (other than any document that is incorporated or deemed to be incorporated by reference therein) will be subject to the review (but not approval) of such Investors; provided that, the failure of any Investor or his, her or its counsel to respond to such proposed documents within two Trading Days after the Investors have been so furnished with copies of such documents shall be deemed approval of same; and provided, further, that no such review and comment shall inhibit the Company from filing the Registration Statement, any Prospectus or any such amendment or supplement within five Business Days after such notice has been provided or otherwise from complying with its obligations hereunder.

     (b) (i) Subject to Section 6.1(c), prepare and file with the SEC such amendments, including post-effective amendments, to each Registration Statement and the Prospectus used in connection therewith as may be necessary to keep the Registration Statement continuously effective, as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the SEC such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any comments received from the SEC with respect to the Registration Statement or any amendment thereto; and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the applicable period in accordance with the intended methods of disposition by the Investors and the Agent thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented.

     (c) During the Effectiveness Period, notify the Investors and the Agent as promptly as reasonably possible, and if requested by the Investors and the Agent confirm such notice in writing no later than two Trading Days thereafter, of any of the following events: (i) the SEC notifies the Company whether there will be a “review” of any Registration Statement; (ii) the SEC comments in writing on any Registration Statement; (iii) any Registration Statement or any post-effective amendment is declared effective; (iv) the SEC or any other federal or state governmental authority requests any amendment or supplement to any Registration Statement or Prospectus or requests additional information related thereto; (v) the SEC issues any stop order suspending the effectiveness of any Registration Statement or initiates any Proceedings for that purpose; (vi) the Company receives notice of any suspension of the qualification or exemption from qualification of any Registrable Securities for sale in any jurisdiction, or the initiation or threat of any Proceeding for such purpose; or (vii) the financial statements included in any Registration Statement become ineligible for inclusion therein or any Registration Statement or Prospectus or other document contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

     (d) Use its reasonable best efforts to avoid the issuance of or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of any Registration Statement, or

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(ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, as soon as possible.

     (e) Prior to any public offering of Registrable Securities, use reasonable best efforts to register or qualify or cooperate with the selling Investors in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Investor requests in writing, to keep each such registration or qualification (or exemption therefrom) effective for so long as required, but not to exceed the duration of the Effectiveness Period, and to do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by a Registration Statement; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject or provide any undertaking that causes the Company undue expense or burden.

     (f) Upon any sale of Registrable Securities pursuant to the Registration Statement for the account of an Investor, cooperate with the Investors to facilitate the timely preparation and delivery of certificates representing such Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by this Agreement and under law, of all restrictive legends, and to enable such certificates to be in such denominations and registered in such names as any such Investors may reasonably request; provided, that, the delivery of such certificates shall be subject to the payment by the Investor of any transfer taxes, if applicable.

     (g) The Company, as promptly as reasonably possible, shall prepare a supplement or amendment, including a post-effective amendment, to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

     (h) Comply in all material respects with all rules and regulations of the SEC with respect to the Registration Statement and the disposition of all Registrable Securities covered by the Registration Statement.

     (i) It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of any particular Investor that such Investor furnish to the Company the information specified in Exhibits B-1, B-2 and B-3 hereto and such other information regarding itself, the Registrable Securities and other shares of Common Stock held by it and the intended method of disposition of the Registrable Securities held by it (if different from the Plan of Distribution set forth on Exhibit C hereto) as shall be reasonably required to effect the registration of such Registrable Securities and shall complete and execute such documents in connection with such registration as the Company may reasonably request. Upon the Company’s reasonable written request, an

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Investor will promptly notify the Company of any changes in the information set forth in the Registration Statement or the Registration Statement Questionnaire regarding such Investor or its plan of distribution or other information as the Company may reasonably request in connection with any registration referred to in Article VI. The Company shall not be required to include any Common Shares or Warrant Shares held by an Investor in the Registration Statement if such Investor fails to complete or update the Registration Statement Questionnaire or provide the information requested in the Registration Statement Questionnaire in accordance with this Section 6.2(i).

     (j) The Company shall use reasonable best efforts to comply with all applicable rules and regulations of the SEC under the Securities Act and the Exchange Act, including, without limitation, Rule 172 under the Securities Act, file any final Prospectus, including any supplement or amendment thereof, with the SEC pursuant to Rule 424 under the Securities Act, promptly inform the Investors and the Agent in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172(c) and, as a result thereof, the Investors and the Agent are required to deliver a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder.

     6.3 Registration Expenses. The Company shall pay all fees and expenses incident to the performance of or compliance with Article VI of this Agreement by the Company, including without limitation (a) all registration and filing fees and expenses, including without limitation those related to filings with the SEC, any Trading Market and in connection with applicable state securities or Blue Sky laws, (b) printing expenses (including without limitation expenses of printing certificates for Registrable Securities), (c) messenger, telephone and delivery expenses, (d) fees and disbursements of counsel for the Company, (e) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement, and (f) all listing fees to be paid by the Company to the Trading Market.

     6.4 Indemnification

          (a) Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Investor, the officers, directors, partners, members, agents and employees of each of them, each Person who controls any such Investor (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, partners, members, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all Losses (as determined by a court of competent jurisdiction in a final judgment not subject to appeal or review), as incurred, arising out of or relating to (i) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (ii) any breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby or (iii) any untrue statement of a material fact contained in the Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto, or arising out of or relating to any omission of a material fact required to be stated therein or necessary to make the statements

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therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading; provided however that the Company will not be liable in any such case to the extent that (A) such untrue statements or omissions are based solely upon information regarding such Investor furnished in writing to the Company by such Investor for use therein, or to the extent that such information relates to such Investor or such Investor’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved by such Investor in writing expressly for use in the Registration Statement (including without limitation the information set forth in the Registration Statement Questionnaire), (B) the failure of the Investor to comply with the covenants and agreements contained in Section 4.9 or 6.2(j) of this Agreement with respect to resale of Registrable Securities, or (C) with respect to any prospectus, an untrue statement or omission of material fact contained in such prospectus that was corrected on a timely basis in the prospectus, as then amended or supplemented, if such corrected prospectus was timely made available by the Company to the Investor, and the Investor seeking indemnity hereunder was advised in writing not to use the incorrect prospectus prior to the use giving rise to Losses.

          (b) Indemnification by Investors. Each Investor shall, severally and not jointly, indemnify and hold harmless the Company and its directors and officers, and each Person, if any, that controlled the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, to the fullest extent permitted by applicable law, from and against all Losses (as determined by a court of competent jurisdiction in a final judgment not subject to appeal or review), as incurred, arising out of or relating to any untrue statement of a material fact contained in the Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto, or arising out of or relating to any omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, but only to the extent that such untrue statements or omissions are based solely upon information regarding such Investor furnished in writing to the Company by such Investor for use therein. In no event shall the liability of any selling Investor hereunder be greater in amount than the dollar amount of the net proceeds received by such Investor upon the sale of the Registrable Securities giving rise to such indemnification obligation.

          (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party.

     An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel

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shall be at the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (iii) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of separate counsel shall be at the expense of the Indemnifying Party). It shall be understood, however, that the Indemnifying Party shall not, in connection with any one such Proceeding (including separate Proceedings that have been or will be consolidated before a single judge) be liable for the fees and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties, which firm shall be appointed by a majority of the Indemnified Parties. The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

     All reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section 6.4) shall be paid to the Indemnified Party, as incurred, within 20 Trading Days of written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder).

          (d) Contribution. If a claim for indemnification under Section 6.4(a) or (b) is unavailable to an Indemnified Party (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue statement of a material fact or omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 6.4(c), any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have

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been indemnified for such fees or expenses if the indemnification provided for in this Section 6.4 was available to such party in accordance with its terms.

     The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6.4(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 6.4(d), no Investor shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Investor from the sale of the Registrable Securities subject to the Proceeding exceed the amount of any damages that such Investor has otherwise been required to pay by reason of such untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

     The indemnity and contribution agreements contained in this Section 6.4 are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

     6.5 Dispositions. Each Investor agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement and shall sell its Registrable Securities in accordance with the Plan of Distribution set forth in the Prospectus. Each Investor further agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Sections 6.2(c)(v), (vi) or (vii), such Investor will discontinue disposition of such Registrable Securities under the Registration Statement until such Investor is advised in writing by the Company that the use of the Prospectus, or amended Prospectus, as applicable, may be resumed. The Company may provide appropriate stop orders to enforce the provisions of this paragraph. Each Investor, severally and not jointly with the other Investors, agrees that the removal of the restrictive legend from certificates representing Securities as set forth in Section 4.1 is predicated upon the Company’s reliance that the Investor will comply with the provisions of this subsection. Both the Company and the Transfer Agent, and their respective directors, officers, employees and agents, may rely on this subsection.

     6.6 Registration of Other Securities. Notwithstanding anything contained herein to the contrary and for the avoidance of doubt, the parties hereto acknowledge that (a) the Company has granted registration rights to other security holders, and (b) any Registration Statement prepared, filed and made effective under this Article VI may also cover the resale of securities held by such security holders to the extent that the Company has an obligation to register such securities under any of the agreements listed in the SEC Reports.

     6.7 Withdrawal of Registration Statement. After the termination of the Effectiveness Period, the Company shall be entitled to withdraw the Registration Statement, and the Investors shall have no further right to offer or sell any of the Registrable Securities pursuant to the Registration Statement.

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ARTICLE VII
MISCELLANEOUS

     7.1 Termination. This Agreement may be terminated by the Company or any Investor, by written notice to the other parties, if the Initial Closing has not been consummated by the third Trading Day following the date of this Agreement; provided that no such termination will affect the right of any party to sue for any breach by the other party (or parties).

     7.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commission (other than for persons engaged by any Investor or its investment advisor) relating to or arising out of the issuance of the Securities pursuant to this Agreement. The Company shall pay, and hold each Investor harmless against, any liability, loss or expense (including, without limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any such claim for fees arising out of the issuance of the Securities pursuant to this Agreement. The Investors shall pay, and hold the Company harmless against, any liability, loss or expense (including, without limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any claim for fees from persons engages by any Investor or their investment advisors arising out of the issuance of the Securities pursuant to this Agreement. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the sale and issuance of the applicable Securities.

     7.3 Entire Agreement. The Transaction Documents, together with the Exhibits thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. At or after each Closing, and without further consideration, the Company will execute and deliver to the Investors such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under the Transaction Documents.

     7.4 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address specified in this Section 7.4 prior to 6:30 p.m. (Boston time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address specified in this Section 7.4 on a day that is not a Trading Day or later than 6:30 p.m. (Boston time) on any Trading Day, (c) the Trading Day following the date of deposit with a nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The addresses, facsimile numbers and email addresses for such notices and communications are those set forth on the signature pages hereof, or such other address or facsimile number as may be designated in writing hereafter, in the same manner, by any such Person.

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     7.5 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and each of the Investors or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Investors under Article VI may be given by Investors holding at least a majority of the Registrable Securities to which such waiver or consent relates.

     7.6 Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

     7.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investors. Any Investor may assign its rights under this Agreement to any Person to whom such Investor assigns or transfers any Securities, provided (i) such transferor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company after such assignment, (ii) the Company is furnished with written notice of (x) the name and address of such transferee or assignee and (y) the Registrable Securities with respect to which such registration rights are being transferred or assigned, (iii) following such transfer or assignment, the further disposition of such securities by the transferee or assignee is restricted under the Securities Act and applicable state securities laws, (iv) such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions hereof that apply to the “Investors” and (v) such transfer shall have been made to an “accredited investor” as that term is defined in Rule 501(a) of Regulation D of the Securities Act and in accordance with the applicable requirements of this Agreement and with all laws applicable thereto.

     7.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except that each Indemnified Party is an intended third party beneficiary of Section 6.4 and (in each case) may enforce the provisions of such Section directly against the parties with obligations thereunder.

     7.9 Governing Law; Venue; Waiver of Jury Trial. THE CORPORATE LAWS OF THE STATE OF DELAWARE SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. THE COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE

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STATE OF DELAWARE FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR ANY INVESTOR HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.

     7.10 Survival. The representations and warranties, agreements and covenants contained herein shall survive the Initial Closing until the date that is one year after the Initial Closing Date (at which time they shall expire and be of no further force or effect).

     7.11 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or email attachment, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or email-attached signature page were an original thereof.

     7.12 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

     7.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any Investor exercises a right, election, demand or option owed to such Investor by the Company under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then, prior to the performance by the Company of the Company’s related obligation, such Investor may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.

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     7.14 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and the execution by the holder thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and hold harmless the Company for any losses in connection therewith. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities.

     7.15 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Investors and the Company will be entitled to seek specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agree to waive in any action for specific performance of any such obligation (other than in connection with any action for a temporary restraining order) the defense that a remedy at law would be adequate.

     7.16 Payment Set Aside. To the extent that the Company makes a payment or payments to any Investor hereunder or any Investor enforces or exercises its rights hereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company by a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

     7.17 Adjustments in Share Numbers and Prices. In the event of any stock split, subdivision, dividend or distribution payable in shares of Common Stock (or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly shares of Common Stock), combination or other similar recapitalization or event occurring after the date hereof, each reference in any Transaction Document to a number of shares or a price per share shall be amended to appropriately account for such event.

     7.18 Independent Nature of Investors’ Obligations and Rights. The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Documents. The decision of each Investor to purchase Securities pursuant to this Agreement has been made by such Investor independently of any other Investor and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company which may have been made or given by any other Investor or by any agent or employee of any other Investor, and no Investor or any of its agents or employees shall have any liability to any other Investor (or any other person) relating to or arising from any such information, materials, statements or opinions.

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Nothing contained herein or in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Document. Each Investor acknowledges that no other Investor has acted as agent for such Investor in connection with making its investment hereunder and that no other Investor will be acting as agent of such Investor in connection with monitoring its investment hereunder. Each Investor shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any Proceeding for such purpose.

[SIGNATURE PAGES TO FOLLOW]

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     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

ALSERES PHARMACEUTICALS, INC.
By:	/s/ Kenneth L. Rice Jr.
	Name:
	Title:

Address for Notice:

239 South Street

Hopkinton, MA 01748

Tel: (508) 497-2360 

Fax: (508) 497-9964 

Attn: Chief Executive Officer

With a copy to:

Wilmer Cutler Pickering Hale and Dorr LLP

60 State Street

Boston, Massachusetts 02109

Tel (617) 526-6439 

Fax: (617) 526-5000 

Attn: Philip Rossetti, Esq.

COMPANY SIGNATURE PAGE

Investor Signature Page

     By its execution and delivery of this signature page, the undersigned Investor hereby joins in and agrees to be bound by the terms and conditions of the Securities Purchase Agreement dated as of January 8, 2009 (the “Purchase Agreement”) by and among Alseres Pharmaceuticals, Inc. and the Investors (as defined therein), as to the number of shares of Common Stock and Warrants set forth below, and authorizes this signature page to be attached to the Purchase Agreement or counterparts thereof.

Name of Investor:
By:	/s/ Robert Gipson
	Name:
	Title:

Address:

Telephone No.:                                                                              

Facsimile No.:                                                                              

Email Address:                                                                               

Number of Shares:                                                                          

Number of Warrants:                                                                        

Aggregate Purchase Price: $                                         

Delivery Instructions (if different than above):

c/o:                                                                                  
Address:                                                                                        
                                                                                                          
Telephone No.:                                                                                     

Facsimile No.:                                                                     

Other Special Instructions:                                         

Exhibits:

A     Form of Warrant

B     Instruction Sheet for Investors

C     Plan of Distribution

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Exhibit A-1

FORM OF WARRANT

A-1-1 

Exhibit A-2

FORM OF AGENT WARRANT

A-2-1 

Exhibit B

INSTRUCTION SHEET FOR INVESTOR

(to be read in conjunction with the entire Securities Purchase Agreement)

A. Complete the following items in the Securities Purchase Agreement:

1.	Complete and execute the Investor Signature Page. The Agreement must be executed by an individual authorized to bind the Investor.
2.	Exhibit B-1 — Stock Certificate Questionnaire:

Provide the information requested by the Stock Certificate Questionnaire;

3. Exhibit B-2 — Registration Statement Questionnaire:

Provide the information requested by the Registration Statement Questionnaire.

4. Exhibit B-3 — Investor Certificate:

Provide the information requested by the Investor Certificate.

5. Return, via facsimile, the signed Securities Purchase Agreement including the properly completed Exhibits B-1 through B-3, to:

Facsimile:
Telephone:
Attn:

6. After completing instruction number five (5) above, deliver the original signed Securities Purchase Agreement including the properly completed Exhibits B-1 through B-3 to:

Address:

B. Instructions regarding the wire transfer of funds for the purchase of the Securities will be telecopied to the Investor by the Company at a later date.

B-1

Exhibit B-1

ALSERES PHARMACEUTICALS, INC.

STOCK CERTIFICATE QUESTIONNAIRE

	Please provide us with the following information:
1.	The exact name that the Securities are to be registered in (this is the name that will appear on the stock and warrant certificate(s)). You may use a nominee name if appropriate:
2.	The relationship between the Investor of the Securities and the Registered Holder listed in response to item 1 above:
3.	The mailing address, telephone and telecopy number and email address of the Registered Holder listed in response to item 1 above:
4.	The Tax Identification Number of the Registered Holder listed in response to item 1 above:

B-1-1 

Exhibit B-2

ALSERES PHARMACEUTICALS, INC.

REGISTRATION STATEMENT QUESTIONNAIRE

     In connection with the Registration Statement, please provide us with the following information regarding the Investor.

1. Please state your organization’s name exactly as it should appear in the Registration Statement:

2. Address of your organization:

Telephone:

Fax:

Contact Person:

3. Beneficial Ownership of Registrable Securities:

(a)	Number of Registrable Securities owned by you:
(b)	Number of Registrable Securities requested to be registered:

4. Have you or your organization had any position, office or other material relationship within the past three years with the Company or its affiliates? (Include any relationships involving you or any of your affiliates, officers, directors, or principal equity holders (5% or more) that has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.)

                     Yes                                  No

If yes, please indicate the nature of any such relationship below:

B-2-1 

5. Are you the beneficial or registered owner of any other securities of the Company? (Include any equity securities that you beneficially own or have a right to acquire within 60 days after the date hereof, and as to which you have sole voting power, shared voting power, sole investment power or shared investment power.)

                     Yes                                 No

	If yes, please describe the nature and amount of such ownership as of a recent date.
6.	Except as set forth below, you wish that all the shares of the Company’s common stock beneficially owned by you or that you have the right to acquire from the Company be offered for your account in the Registration Statement.
	State any exceptions here:
7.	Do you intend to distribute the Registrable Securities in accordance with the “Plan of Distribution” section set forth in the Registration Statement?

                     Yes                                 No

If yes, please describe the nature and amount of such arrangements.

8. Selling Stockholder Affiliations

          (a) Is the Selling Stockholder a registered broker-dealer?

          (b) Is the Selling Stockholder an affiliate of a registered broker-dealer(s)? (For purposes of this response, an “affiliate” of, or person “affiliated ” with, a specified person, is a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified.)

          (c) If the answer to Item (8)(b) is yes, identify the registered broker-dealer(s) and describe the nature of the affiliation(s):                     

          (d) If the answer to Item (6)(b) is yes, did you acquire the Registrable Securities in the ordinary course of business (if not, please explain)?

          (e) If the answer to Item (8)(b) is yes, did you, at the time of purchase of the Registrable Securities, have any agreements, plans or understandings, directly or indirectly, with any person to distribute the Registrable Securities (if yes, please explain)?

B-2-2 

ACKNOWLEDGEMENT

     The undersigned hereby agrees to notify the Company promptly of any changes in the foregoing information which should be made as a result of any developments, including the passage of time. The undersigned also agrees to provide the Company and the Company’s counsel any and all such further information regarding the undersigned promptly upon request in connection with the preparation, filing, amending, and supplementing of the Registration Statement (or any prospectus contained therein). The undersigned hereby consents to the use of all such information in the Registration Statement.

     The undersigned understands and acknowledges that the Company will rely on the information set forth herein for purposes of the preparation and filing of the Registration Statement.

     The undersigned understands that the undersigned may be subject to serious civil and criminal liabilities if the Registration Statement, when it becomes effective, either contains an untrue statement of a material fact or omits to state a material fact required to be stated in the Registration Statement or necessary to make the statements in the Registration Statement not misleading. The undersigned represents and warrants that all information it provides to the Company and its counsel is currently accurate and complete and will be accurate and complete at the time the Registration Statement becomes effective and at all times subsequent thereto, and agrees during the Effectiveness Period and any additional period in which the undersigned is making sales of Shares under and pursuant to the Registration Statement, and agrees during such periods to notify the Company immediately of any misstatement of a material fact in the Registration Statement, and of the omission of any material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading.

     Pursuant to Section 6.1 of the Agreement, the undersigned acknowledges that the Company may, by written notice to the undersigned, suspend or withdraw the Registration Statement and require that the undersigned immediately cease sales of Registrable Securities pursuant to the Registration Statement under certain circumstances described in the Agreement. At any time that such notice has been given, the undersigned may not sell Registrable Securities pursuant to the Registration Statement.

     The undersigned hereby acknowledges receipt of a draft of the Registration Statement dated                                          ___, ___and confirms that the undersigned has reviewed such draft including, without limitation, the sections captioned “Selling Stockholders” and “Plan of Distribution,” and confirms that, to the best of the undersigned’s knowledge, the same is true, complete and accurate in every respect except as indicated in this Questionnaire. The undersigned hereby further acknowledges that pursuant to Section 6.4(a) of the Agreement, the undersigned shall indemnify the Company and each of its directors and officers against, and hold the Company and each of its directors and officers harmless from, any losses, claims, damages, expenses or liabilities (including reasonable attorneys fees) to which the Company or its directors and officers may become subject by reason of any statement or omission in the Registration Statement made in reliance upon, or in conformity with, a written statement by the undersigned, including the information furnished in this Questionnaire by the undersigned.

1

     By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items (1) through (8) above and the inclusion of such information in the Registration Statement, any amendments thereto and the related prospectus. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus.

Dated:                    

Name

Signature

Name and Title of Signatory

2

Exhibit B-3

ALSERES PHARMACEUTICALS, INC.

CERTIFICATE FOR CORPORATE, PARTNERSHIP, LIMITED LIABILITY

COMPANY, TRUST, FOUNDATION AND JOINT INVESTORS

If the Investor is a corporation, partnership, limited liability company, trust, pension plan, foundation, joint Investor (other than a married couple) or other entity, an authorized officer, partner, or trustee must complete, date and sign this Certificate.

CERTIFICATE

     The undersigned certifies that the representations and responses below are true and accurate:

     (a) The Investor has been duly formed and is validly existing and has full power and authority to invest in the Company. The person signing on behalf of the undersigned has the authority to execute and deliver the Securities Purchase Agreement on behalf of the Investor and to take other actions with respect thereto.

     (b) Indicate the form of entity of the undersigned:

                            Limited Partnership

                            General Partnership

                            Limited Liability Company

                            Corporation

                  Revocable Trust (identify each grantor and indicate under what circumstances the trust is revocable by the grantor):

(Continue on a separate piece of paper, if necessary.)

                  Other type of Trust (indicate type of trust and, for trusts other than pension trusts, name the grantors and beneficiaries):

(Continue on a separate piece of paper, if necessary.)

                  Other form of organization (indicate form of organization (     ).

     (c) Indicate the approximate date the undersigned entity was formed:              .

     (d) Indicate name and address of principal place of business:

B-3-1 

     (e) Was entity formed for the specific purpose of this investment?

                  Yes                                      No

     If answer is yes, each equity owner (shareholder, partner, etc.) of the entity must complete an Investor Questionnaire for Individual Investors.

     (f) Please indicate the amount of the entity’s proposed investment in the Company. $             

     (g) In order for the Company to offer and sell the Securities in conformance with state and federal securities laws, the following information must be obtained regarding your investor status. Please initial each category applicable to you as an investor in the Company.

1.	A bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity;
2.	A broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934;
3.	An insurance company as defined in Section 2(13) of the Securities Act;
4.	An investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act;
5.	A Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958;
6.	A plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000;
7.	An employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, which satisfies one of the following criteria: (i) if the investment decision for such plan is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, (ii) such plan has total assets in excess of $5,000,000 or (iii) if such plan is a self-directed plan, and its investment decisions are made solely by persons who are “accredited investors” within the meaning of Rule 501(a) under the Securities Act;

B-3-2

8.	A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940;
9.	Any partnership or corporation or any organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, a Massachusetts or similar business trust, or partnership, which was not formed for the specific purpose of investing in the Company, and which has total assets in excess of $5,000,000;
10.	A trust, with total assets in excess of $5,000,000, which was not formed for the specific purpose of investing in the Company and whose investment in the Company directed by a person with such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of an investment in the Company;
11.	Any entity in which all of the equity owners are “accredited investors” within the meaning of Rule 501(a) under the Securities Act;
12.	An entity in which all of the equity owners qualify under any of the above subparagraphs. If the undersigned belongs to this investor category only, list the equity owners of the undersigned, and the investor category which each such equity owner satisfies: _______________________________________________________________________                   (Continue on a separate piece of paper, if necessary.)

     (h) If the entity has any pre-existing personal or business relationship with the Company or any of its officers, directors or controlling persons, please describe the nature and duration of such relationship.

     (i) Please provide information detailing the business, financial and investment experience of the entity and/or the investment manager of such entity which gives such entity or investment manager the capacity to evaluate the merits and risks of the proposed investment.

     Please set forth in the space provided below the (i) states, if any, in the U.S. in which you maintained your principal office during the past two years and the dates during which you maintained your office in each state, (ii) state(s), if any, in which you are incorporated or otherwise organized and (iii) state(s), if any, in which you pay income taxes.

B-3-3 

     The above information is true and correct in all material respects. The undersigned recognizes that the Company is relying on the truth and accuracy of such information so that it may rely on certain exemptions from registration contained in the Securities Act of 1933, as amended, and the securities laws of certain states. The undersigned agrees to notify the Company promptly of any changes in the foregoing information which may occur prior to the investment.

Dated:                                        , 2008

Print Name of Investor

Name:

Title:

(Signature and title of authorized officer, partner or trustee)

B-3-4 

Exhibit C

PLAN OF DISTRIBUTION

     The selling stockholders may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The selling stockholders may use any one or more of the following methods when selling shares:

• ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

• block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

• purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

• an exchange distribution in accordance with the rules of the applicable exchange;

• privately negotiated transactions;

• short sales;

• broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;

• a combination of any such methods of sale; and

• any other method permitted pursuant to applicable law.

     The selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.

     Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. Any profits on the resale of shares of common stock by a broker-dealer acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by a selling stockholder. The selling stockholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under the Securities Act.

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     The selling stockholders may from time to time pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time under this prospectus after we have filed a supplement to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 supplementing or amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.

     The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus after we have filed a supplement to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 supplementing or amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.

     The selling stockholders and any broker-dealers or agents that are involved in selling the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares of common stock purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.

     We are required to pay all fees and expenses incident to the registration of the shares of common stock. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

     The selling stockholders have advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their shares of common stock, nor is there an underwriter or coordinating broker acting in connection with a proposed sale of shares of common stock by any selling stockholder. If we are notified by any selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares of common stock, if required, we will file a supplement to this prospectus. If the selling stockholders use this prospectus for any sale of the shares of common stock, they will be subject to the prospectus delivery requirements of the Securities Act.

     The anti-manipulation rules of Regulation M under the Securities Exchange Act of 1934 may apply to sales of our common stock and activities of the selling stockholders.

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ANNEX I
SCHEDULE OF INVESTORS

ANNEX II
Legend

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

EX-10.42

Exhibit 10.42

SECURITIES PURCHASE AGREEMENT

     THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of August 11, 2009, by and among Alseres Pharmaceuticals, Inc., a Delaware corporation with headquarters located at 239 South Street, Hopkinton, MA 01748 (the “Company”) and each investor identified on the signature pages hereto (individually, an “Investor” and collectively, the “Investors).

PREAMBLE

     A. The Company and each Investor is executing and delivering this Agreement in reliance upon the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of Regulation D as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act.

     B. Each Investor, severally and not jointly, wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement and for a purchase price of $25 per share, that aggregate number of shares of Series F Convertible Preferred Stock, par value $0.01 per share, of the Company (the “Series F Stock”), set forth on such Investor’s signature page to this Agreement (which aggregate amount for all Investors together shall be up to 100,000 shares of Series F Stock and shall collectively be referred to herein as the “Shares”).

     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Investors, severally and not jointly, agree as follows:

ARTICLE I
DEFINITIONS

     1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated:

     “Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Securities Act.

     “Agreement” has the meaning set forth in the Preamble.

     “Business Day” means any day other than Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in The State of New York are authorized or required by law or other governmental action to close.

     “Closing” has the meaning set forth in the in Section 2.1.

     “Closing Date” has the meaning set forth in Section 2.1.

     “Company” has the meaning set forth in the Preamble.

     “Company Counsel” means Wilmer Cutler Pickering Hale and Dorr LLP, counsel to the Company.

     “Common Stock” means shares of common stock, par value $0.01 per share, of the Company.

     “Convertible Securities” means any stock or securities (other than Options) convertible into or exercisable or exchangeable for Common Stock.

     “Disclosure Materials” has the meaning set forth in Section 3.1(e).

     “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     “FINRA” has the meaning set forth in Section 3.2(c).

     “Investor” has the meaning set forth in the Preamble.

     “Lien” means any lien, charge, claim, security interest, encumbrance, right of first refusal or other restriction.

     “Material Adverse Effect” means (i) a material adverse effect on the results of operations, assets, business or financial condition of the Company and its subsidiaries taken as a whole on a consolidated basis or (ii) material and adverse impairment of the Company’s ability to perform its obligations under this Agreement, provided, that none of the following alone shall be deemed, in and of itself, to constitute a Material Adverse Effect: (i) a change in the market price or trading volume of the Common Stock or (ii) changes in general economic conditions or changes affecting the industry in which the Company operates generally (as opposed to Company-specific changes) so long as such changes do not have a disproportionate effect on the Company and its subsidiaries taken as a whole.

     “Options” means any outstanding rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.

     “Restricted Shares” has the meaning set forth in Section 4.1(a).

     “SEC” has the meaning set forth in the Preamble.

     “SEC Reports” has the meaning set forth in Section 3.1(e).

     “Series F Stock” has the meaning set forth in the Preamble.

     “Shares” has the meaning set forth in the Preamble.

     “Securities Act” has the meaning set forth in the Preamble.

     “Short Sales” has the meaning set forth in Section 3.2(i).

     “Trading Day” means (i) a day on which the Common Stock is traded on a Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not listed or quoted

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on a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not listed or quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by the Pink Sheets LLC (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

     “Trading Market” means whichever of the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or the OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.

     “Transaction” has the meaning set forth in Section 3.2(i).

     “Transfer Agent” means Continental Stock Transfer & Trust Company, or any successor transfer agent for the Company.

ARTICLE II
PURCHASE AND SALE

     2.1 Closing. The Closing (the “Closing”) of the sale and purchase of the Shares under this Agreement shall take place on the date hereof (the “Closing Date”), at the offices of Company Counsel or remotely via the exchange of documents and signatures.

     2.2 Closing Deliveries.

          (a) At the Closing, the Company shall deliver or cause to be delivered to each Investor evidence of a direct registration account in such Investor’s name as set forth on such Investor’s signature page to this Agreement, and the deposit, by direct registration, into such account of the number of Shares purchased by such Investor.

          (b) At the Closing, each Investor shall deliver or cause to be delivered to the Company the purchase price set forth on such Investor’s signature page to this Agreement in United States dollars and in immediately available funds, by wire transfer to an account designated in writing to such Investor by the Company for such purpose.

ARTICLE III
REPRESENTATIONS AND WARRANTIES

     3.1 Representations and Warranties of the Company. The Company hereby represents and warrants to the Investors as follows:

          (a) Organization and Qualification. The Company is an entity duly organized, validly existing and in good standing under the laws of the State of Delaware, with the requisite power and authority to own and occupy its properties and to carry on its business as currently conducted. The Company is not in violation of any of the provisions of its certificate of incorporation or bylaws. The Company is duly qualified to do business and is in good standing

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as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

          (b) Authorization; Enforcement. The Company has the requisite corporate authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company and no further consent or action is required by the Company, its Board of Directors or its stockholders. This Agreement has been (or upon delivery will be) duly executed by the Company and, assuming the due authorization, execution and delivery by the Investors, is, or when delivered in accordance with the terms hereof, will constitute, the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

          (c) No Conflicts. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby do not, and will not, (i) conflict with or violate any provision of the Company’s certificate of incorporation or bylaws, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company debt or otherwise) or other agreement to which the Company is a party or by which any property or asset of the Company is bound, or affected, except to the extent that such conflict, default, termination, amendment, acceleration or cancellation right would not reasonably be expected to have a Material Adverse Effect, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including, assuming the accuracy of the representations and warranties of the Investors set forth in Section 3.2 hereof, federal and state securities laws and regulations and the rules and regulations of any self-regulatory organization to which the Company or its securities are subject), or by which any property or asset of the Company is bound or affected, except to the extent that such violation would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

          (d) Issuance of Shares and Common Stock. The issuance, sale and delivery of the Shares in accordance with this Agreement, and the issuance and delivery of the shares of Common Stock issuable upon conversion of the Shares, have been duly authorized. The Shares when so issued, sold and delivered against payment therefor in accordance with the provisions of this Agreement, and the shares of Common Stock issuable upon conversion of the Shares, when issued upon such conversion, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens and will not be subject to preemptive or similar rights of stockholders (other than those provided for in this Agreement). The Company has reserved from its duly

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authorized capital stock the number of shares of Common Stock issuable upon conversion of the Shares.

          (e) SEC Reports. The Company has filed all documents required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof on a timely basis or has received a valid extension of such time of filing and has filed any such documents prior to the expiration of any such extension and has filed all documents required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof, such documents, together with any materials filed or furnished by the Company under the Exchange Act, whether or not any such reports were required being collectively referred to herein as the “SEC Reports” and, together with this Agreement, the “Disclosure Materials”. As of their respective dates (or, if amended or superseded by a filing prior to the Closing Date, then on the date of such filing), the SEC Reports filed by the Company complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the SEC promulgated thereunder, and none of the SEC Reports, when filed (or, if amended or superseded by a filing prior to the Closing Date, then on the date of such filing) by the Company, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

          (f) Capitalization. The authorized capital stock of the Company (immediately prior to the Closing) consists of 80,000,000 shares of Common Stock, of which 23,055,645 were issued and outstanding as of such date and 1,000,000 shares of preferred stock, $.01 par value per share, of which 25,000 shares are designated as Series A Convertible Preferred Stock, 500,000 shares are designated as Series D Convertible Preferred Stock, 800 shares are designated as Series E Convertible Preferred Stock and 200,000 shares are designated as Series F Stock, of which 144,000 shares were issued and outstanding as of such date. All outstanding shares of capital stock are duly authorized, validly issued, fully paid and nonassessable and have been issued in compliance in all material respects with all applicable securities laws. Except as disclosed in or contemplated the SEC Reports, the Company does not have outstanding any other Options, script rights to subscribe to, calls or commitments relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or entered into any agreement giving any Person any right to subscribe for or acquire, any shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. Except as set forth in the SEC Reports, and except for customary adjustments as a result of stock dividends, stock splits, combinations of shares, reorganizations, recapitalizations, reclassifications or other similar events, there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) and the issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Investors) and will not result in a right of any holder of the Company’s securities to adjust the exercise, conversion, exchange or reset price under such securities.

          (g) Compliance. Except as would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect, (i) the Company is not in default under or in violation of (and no event has occurred that has not been waived that, with

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notice or lapse of time or both, would result in a default by the Company under), nor has the Company received written notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) the Company is not in violation of any order of any court, arbitrator or governmental body, and (iii) the Company is not in violation of any statute, rule or regulation of any governmental authority.

     3.2 Representations and Warranties of the Investors. Each Investor hereby, as to itself only and for no other Investor, represents and warrants to the Company as follows:

          (a) Organization; Authority. If such Investor is an entity, such Investor is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate, partnership or other power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by such Investor of the Shares hereunder has been duly authorized by all necessary corporate, partnership or other action on the part of such Investor. This Agreement has been duly executed and delivered by such Investor and constitutes the valid and binding obligation of such Investor, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

          (b) No Public Sale or Distribution. Such Investor is acquiring the Shares and upon conversion of the Shares will acquire the Common Stock issuable upon conversion thereof, for its own account for investment and not with a view towards, or for resale in connection with, the public sale or distribution thereof, and such Investor does not have a present intention to effect any distribution of the Shares or such Common Stock to or through any person or entity; provided, however, that by making the representations herein, such Investor does not agree to hold any of the Shares or such Common Stock for any minimum or other specific term and reserves the right to dispose of the Shares and such Common Stock at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act.

          (c) Investor Status. At the time such Investor was offered the Shares, it was, and on the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the Securities Act. Such Investor is not a registered broker dealer registered under Section 15(a) of the Exchange Act, nor required to be registered as such, or a member of The Financial Industry Regulatory Authority (“FINRA”) or an entity engaged in the business of being a broker dealer. Such Investor is not affiliated with any broker dealer registered under Section 15(a) of the Exchange Act, or a member of FINRA or an entity engaged in the business of being a broker dealer.

          (d) General Solicitation. Such Investor is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media, broadcast over television or radio,

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disseminated over the Internet or presented at any seminar or any other general solicitation or general advertisement.

          (e) Experience of Such Investor. Such Investor, either alone or together with its representatives has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares, including the risk of total loss of such Investor’s investment, and has so evaluated the merits and risks of such investment. Such Investor understands that it must bear the economic risk of this investment in the Shares indefinitely, and is able to bear such risk and is able to afford a complete loss of such investment. Such Investor understands that the market price of the Common Stock can be volatile and that no representation is being made as to the future value of the Shares or the Common Stock.

          (f) Access to Information. Such Investor acknowledges that it has reviewed the Disclosure Materials and has been afforded: (i) the opportunity to ask such questions as it has deemed necessary of representatives of the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares; (ii) access to information about the Company and each of its subsidiaries and their respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Neither such inquiries nor any other investigation conducted by or on behalf of such Investor or its representatives or counsel shall modify, amend or affect such Investor’s right to rely on the Company’s representations and warranties contained herein. Such Investor acknowledges that no third party has made or will make any representation or warranty to such Investor regarding the adequacy or completeness for such Investor’s purpose of the information such Investor has requested. Such Investor acknowledges receipt of copies of the SEC Reports filed through the date hereof.

          (g) No Governmental Review. Such Investor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Shares or the fairness or suitability of the investment in the Shares nor have such authorities passed upon or endorsed the merits of the offering of the Shares.

          (h) No Conflicts. The execution, delivery and performance by such Investor of this Agreement and the consummation by such Investor of the transactions contemplated hereby will not (i) result in a violation of the organizational documents, if any, of such Investor or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such Investor is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to such Investor, except in the case of clauses (ii) and (iii) above, for such that are not material and do not otherwise affect the ability of such Investor to consummate the transactions contemplated hereby.

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          (i) Prohibited Transactions; Confidentiality. Such Investor, directly or indirectly, has not and no Person acting on behalf of or pursuant to any understanding with such Investor, has engaged in any purchases or sales in the securities, including derivatives, of the Company (including, without limitation, any Short Sales (a “Transaction") involving any of the Company’s securities) since the time that such Investor was first contacted by the Company or any other Person regarding the investment in the Company contemplated by this Agreement. Such Investor covenants that neither it nor any Person acting on its behalf or pursuant to any understanding with such Investor will engage, directly or indirectly, in any Transactions in the securities of the Company (including Short Sales) prior to the time the transactions contemplated by this Agreement are publicly disclosed. “Short Sales” include, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, short sales, swaps, derivatives and similar arrangements (including on a total return basis), and sales and other transactions through non-U.S. broker-dealers or foreign regulated brokers.

          (j) Restricted Securities. Such Investor understands that the Shares (and the shares of Common Stock into which the Shares are convertible) are characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances and that the Company is relying upon the truth and accuracy of, and such Investor’s compliance with, representations, warranties, agreements, acknowledgements, understandings of such Investor set forth herein in order to determine the availability of such exemptions of such Investor and the eligibility of such Investor to acquire the Shares.

          (k) Legends. It is understood that, except as provided in Section 4.1(b) of this Agreement, certificates evidencing the Restricted Shares may bear the legend set forth in Section 4.1(c).

          (l) No Legal, Tax or Investment Advice. Such Investor understands that nothing in this Agreement or any other materials presented by or on behalf of the Company to such Investor in connection with the purchase of the Shares constitutes legal, tax or investment advice. Such Investor has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with his purchase of the Shares.

          (m) Offering Documents. Such Investor understands that other than this Agreement and the SEC Reports, no disclosure or offering document will be provided or prepared in connection with the offer and sale of the Shares contemplated hereby.

          (n) Restrictions on Shares. Such Investor acknowledges that the Company has represented that no action has been or will be taken in any jurisdiction outside the United States by the Company that would permit an offering of the Shares, or possession or distribution of offering materials in connection with the issuance of the Shares, in any jurisdiction outside the United States where action for that purpose is required. If such Investor is located or domiciled outside the United States, it agrees to comply with all applicable laws and regulations in each

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foreign jurisdiction in which it purchases, offers, sells or delivers Shares or has in its possession or distributes any offering material, in all cases at its own expense.

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ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES

     4.1 Transfer Restrictions.

     (a) Restricted Shares. “Restricted Shares” means (a) the Shares, (b) the shares of Common Stock issued or issuable upon conversion of the Shares, and (c) any other shares of capital stock of the Company issued in respect of such shares (as a result of stock splits, stock dividends, reclassifications, recapitalizations or similar events); provided, however, that shares of Common Stock which are Restricted Shares shall cease to be Restricted Shares (x) upon any sale pursuant to a registration statement under the Securities Act, Section 4(1) of the Securities Act or Rule 144 under the Securities Act or (y) at such time as (i) a period of at least one year, as determined in accordance with paragraph (d) of Rule 144 under the Securities Act, has elapsed since the later of the date the Restricted Shares were acquired from the Company or an Affiliate of the Company and (ii) they become eligible for sale under Rule 144(b)(1)(i) under the Securities Act.

     (b) Requirements for Transfer. Restricted Shares shall not be sold or transferred unless either (i) they first shall have been registered under the Securities Act or (ii) the Company first shall have been furnished with an opinion of legal counsel, reasonably satisfactory to the Company, to the effect that such sale or transfer is exempt from the registration requirements of the Securities Act.

     (c) Legend. Each certificate representing Restricted Shares shall bear a legend substantially in the following form:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL SUCH SHARES ARE REGISTERED UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.”

     The foregoing legend shall be removed from the certificates representing any Restricted Shares, at the request of the holder thereof, at such time as (a) a period of at least one year, as determined in accordance with paragraph (d) of Rule 144 under the Securities Act, has elapsed since the later of the date the Restricted Shares were acquired from the Company or an affiliate of the Company, and (b) the Restricted Shares become eligible for resale pursuant to Rule 144(b)(1)(i) under the Securities Act.

     4.2 Furnishing of Information. Until the date that any Investor may sell all of its Shares (or the shares of Common Stock into which the Shares have at such time converted) under Rule 144 of the Securities Act (or any successor provision), the Company covenants to use its reasonable best efforts to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. The Company further covenants that it will take such further

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action as any Investors holding shares (or the shares of Common Stock into which the Shares have at such time converted) may reasonably request, to the extent required from time to time to enable such Investor to sell such Shares (or the shares of Common Stock into which the Shares have at such time converted) without registration under the Securities Act.

     4.3 Integration. The Company shall not, and shall use its reasonable best efforts to ensure that no Affiliate thereof shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Shares in a manner that would require the registration under the Securities Act of the sale of the Shares to the Investors.

     4.4 Reservation of Securities. At all times during which Shares remain outstanding, the Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to this Agreement in such amount as may be required to fulfill its obligations to issue the shares of Common Stock issuable upon the conversion of the Shares. In the event that at any time the then authorized shares of Common Stock are insufficient for the Company to satisfy its obligations to issue such shares of Common Stock, the Company shall promptly take such actions as may be required to increase the number of authorized shares.

     4.5 Treatment of Non-Public Information. Each Investor covenants and agrees with the Company (a) to hold the existence, terms and conditions of the transactions contemplated by this Agreement in confidence and not to disclose the same to any other person until such time as the Company files with the SEC a Current Report on Form 8-K disclosing the offering or publicly announces the offering, and (b) to hold all matters disclosed to it by the Company (other than any matters included in the SEC Reports) in confidence and not to disclose the same to any other person until such time as the Company files with the SEC a report publicly disclosing such information. Each Investor understands that the federal securities laws impose restrictions on trading based on information regarding the transactions contemplated by this Agreement.

ARTICLE V
MISCELLANEOUS

     5.1 Fees and Expenses. Each party hereto shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Investors shall pay, and hold the Company harmless against, any liability, loss or expense (including, without limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any claim for fees from persons engages by any Investor or their investment advisors arising out of the issuance of the Shares pursuant to this Agreement. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the sale and issuance of the Securities.

     5.2 Entire Agreement. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such document. At or after the Closing, and without further consideration, the

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Company will execute and deliver to the Investors such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under this Agreement.

     5.3 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address specified in this Section 5.3 prior to 6:30 p.m. (Boston time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address specified in this Section 5.3 on a day that is not a Trading Day or later than 6:30 p.m. (Boston time) on any Trading Day, (c) the Trading Day following the date of deposit with a nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The addresses, facsimile numbers and email addresses for such notices and communications are those set forth on the signature pages hereof, or such other address or facsimile number as may be designated in writing hereafter, in the same manner, by any such Person.

     5.4 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and the Investors holding a majority of the shares of Common Stock issued or issuable upon conversion of the Shares (voting as a single class and on an as-converted basis) or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

     5.5 Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

     5.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investors. Any Investor may assign its rights under this Agreement to any Person to whom such Investor assigns or transfers any Shares (or the shares of Common Stock issued upon conversion of the Shares), provided (a) such transferor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company after such assignment, (b) the Company is furnished with written notice of (i) the name and address of such transferee or assignee and (ii) the number of Shares (or the shares of Common Stock issued upon conversion of the Shares) being transferred or assigned, (c) following such transfer or assignment, the further disposition of such shares by the transferee or assignee is restricted under the Securities Act and applicable state securities laws, (d) such transferee agrees in writing to be bound, with respect to the transferred Shares (or the shares of Common Stock issued upon conversion of the Shares), by the provisions hereof that apply to the “Investor” and (e) such transfer shall have been made to an “accredited investor” as that term is defined in Rule 501(a)

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of Regulation D of the Securities Act and in accordance with the applicable requirements of this Agreement and with all laws applicable thereto.

     5.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

     5.8 Governing Law; Venue; Waiver of Jury Trial. THE CORPORATE LAWS OF THE STATE OF DELAWARE SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. THE COMPANY AND THE INVESTORS HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE STATE OF DELAWARE FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR ANY INVESTOR HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND THE INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.

     5.9 Survival. The representations and warranties, agreements and covenants contained herein shall survive the Closing until the date that is one year after the Closing Date (at which time they shall expire and be of no further force or effect).

     5.10 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or email attachment, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or email-attached signature page were an original thereof.

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     5.11 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

     5.12 Replacement of Certificates. If any certificate or instrument evidencing any Shares or the shares of Common Stock issued upon conversion of the Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and the execution by the holder thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and hold harmless the Company for any losses in connection therewith. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement.

[SIGNATURE PAGES FOLLOW]

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     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

ALSERES PHARMACEUTICALS, INC.
By:	/s/ Kenneth L. Rice Jr
	Name:	Kenneth L. Rice Jr.
	Title:	EVP & CFO

Address for Notice: 239 South Street Hopkinton, MA 01748
Tel:	(508) 497-2360
Fax:	(508) 497-9964
Attn:	Chief Executive Officer
With a copy to:
Wilmer Cutler Pickering Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109
Tel	(617) 526-6439
Fax:	(617) 526-5000
Attn:	Philip Rossetti, Esq.

Investor Signature Page

     By its execution and delivery of this signature page, the undersigned Investor hereby joins in and agrees to be bound by the terms and conditions of the Securities Purchase Agreement dated as of August 11, 2009 (the “Purchase Agreement”) by and among Alseres Pharmaceuticals, Inc. and the Investors (as defined therein), as to the number of shares of Series F Convertible Preferred Stock (“Shares”) set forth below, and authorizes this signature page to be attached to the Purchase Agreement or counterparts thereof.

Name of Investor:
Robert Gipson
By:	/s/ Robert Gipson
	Name:
	Title:

Address for Notice:

Telephone No.:

Facsimile No.:

Email Address:

Number of Shares: 12,000

Aggregate Purchase Price: $300,000

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EX-10.49

Exhibit 10.49

PROMISSORY NOTE

February 10, 2010

$100,000  Hopkinton, Massachusetts

     FOR VALUE RECEIVED, Alseres Pharmaceuticals, Inc.. (the “Maker”), promises to pay to Robert L Gipson, or order, at the offices of Robert L. Gipson, c/o Ingalls & Snyder LLC, 61 Broadway, New York, New York 10006 or at such other place as the holder of this Note may designate, the principal sum of $100,000, together with interest on the unpaid principal balance of this Note from time to time outstanding at the rate of 7% per year until paid in full. All principal and accrued interest shall be due and payable on demand of the Holder.

     Interest on this Note shall be computed on the basis of a year of 365 days for the actual number of days elapsed. All payments by the Maker under this Note shall be in immediately available funds.

     Every amount overdue under this Note shall bear interest from and after the date on which such amount first became overdue at an annual rate which is two (2) percentage points above the rate per year specified in the first paragraph of this Note. Such interest on overdue amounts under this Note shall be payable on demand and shall accrue and be compounded monthly until the obligation of the Maker with respect to the payment of such interest has been discharged (whether before or after judgment).

     In no event shall any interest charged, collected or reserved under this Note exceed the maximum rate then permitted by applicable law and if any such payment is paid by the Maker, then such excess sum shall be credited by the holder as a payment of principal.

     All payments by the Maker under this Note shall be made without set-off or counterclaim and be free and clear and without any deduction or withholding for any taxes or fees of any nature whatever, unless the obligation to make such deduction or withholding is imposed by law. The Maker shall pay and save the holder harmless from all liabilities with respect to or resulting from any delay or omission to make any such deduction or withholding required by law.

     Whenever any amount is paid under this Note, all or part of the amount paid may be applied to principal, premium or interest in such order and manner as shall be determined by the holder in its discretion.

     No reference in this Note to any guaranty or other document shall impair the obligation of the Maker, which is absolute and unconditional, to pay all amounts under this Note strictly in accordance with the terms of this Note.

     The Maker agrees to pay on demand all costs of collection, including reasonable attorneys’ fees, incurred by the holder in enforcing the obligations of the Maker under this Note.

     No delay or omission on the part of the holder in exercising any right under this Note shall operate as a waiver of such right or of any other right of such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other

right on any future occasion. The Maker and every endorser or guarantor of this Note regardless of the time, order or place of signing waives presentment, demand, protest and notices of every kind and assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral, and to the addition or release of any other party or person primarily or secondarily liable.

     This Note may be prepaid in whole or in part at any time or from time to time upon five days’ prior written notice with the consent of the holder, with the giving of such consent to be in the sole discretion of the holder. Any such prepayment shall be without penalty or premium.

     None of the terms or provisions of this Note may be excluded, modified or amended except by a written instrument duly executed on behalf of the holder expressly referring to this Note and setting forth the provision so excluded, modified or amended.

     All rights and obligations hereunder shall be governed by the laws of the Commonwealth of Massachusetts and this Note is executed as an instrument under seal.

Alseres Pharmaceuticals, Inc.

By: /s/ Kenneth L. Rice Jr.

Title: EVP & CFO

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EX-10.51

Exhibit 10.51

PROMISSORY NOTE

March 9, 2010

$100,000  Hopkinton, Massachusetts

     FOR VALUE RECEIVED, Alseres Pharmaceuticals, Inc.. (the “Maker”), promises to pay to Robert L Gipson, or order, at the offices of Robert L. Gipson, c/o Ingalls & Snyder LLC, 61 Broadway, New York, New York 10006 or at such other place as the holder of this Note may designate, the principal sum of $100,000, together with interest on the unpaid principal balance of this Note from time to time outstanding at the rate of 7% per year until paid in full. All principal and accrued interest shall be due and payable on demand of the Holder.

     Interest on this Note shall be computed on the basis of a year of 365 days for the actual number of days elapsed. All payments by the Maker under this Note shall be in immediately available funds.

     Every amount overdue under this Note shall bear interest from and after the date on which such amount first became overdue at an annual rate which is two (2) percentage points above the rate per year specified in the first paragraph of this Note. Such interest on overdue amounts under this Note shall be payable on demand and shall accrue and be compounded monthly until the obligation of the Maker with respect to the payment of such interest has been discharged (whether before or after judgment).

     In no event shall any interest charged, collected or reserved under this Note exceed the maximum rate then permitted by applicable law and if any such payment is paid by the Maker, then such excess sum shall be credited by the holder as a payment of principal.

     All payments by the Maker under this Note shall be made without set-off or counterclaim and be free and clear and without any deduction or withholding for any taxes or fees of any nature whatever, unless the obligation to make such deduction or withholding is imposed by law. The Maker shall pay and save the holder harmless from all liabilities with respect to or resulting from any delay or omission to make any such deduction or withholding required by law.

     Whenever any amount is paid under this Note, all or part of the amount paid may be applied to principal, premium or interest in such order and manner as shall be determined by the holder in its discretion.

     No reference in this Note to any guaranty or other document shall impair the obligation of the Maker, which is absolute and unconditional, to pay all amounts under this Note strictly in accordance with the terms of this Note.

     The Maker agrees to pay on demand all costs of collection, including reasonable attorneys’ fees, incurred by the holder in enforcing the obligations of the Maker under this Note.

     No delay or omission on the part of the holder in exercising any right under this Note shall operate as a waiver of such right or of any other right of such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other

right on any future occasion. The Maker and every endorser or guarantor of this Note regardless of the time, order or place of signing waives presentment, demand, protest and notices of every kind and assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral, and to the addition or release of any other party or person primarily or secondarily liable.

     This Note may be prepaid in whole or in part at any time or from time to time upon five days’ prior written notice with the consent of the holder, with the giving of such consent to be in the sole discretion of the holder. Any such prepayment shall be without penalty or premium.

     None of the terms or provisions of this Note may be excluded, modified or amended except by a written instrument duly executed on behalf of the holder expressly referring to this Note and setting forth the provision so excluded, modified or amended.

     All rights and obligations hereunder shall be governed by the laws of the Commonwealth of Massachusetts and this Note is executed as an instrument under seal.

Alseres Pharmaceuticals, Inc.

By: /s/ Kenneth L. Rice Jr.

Title: EVP & CFO

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EX-10.52

Exhibit 10.52

PROMISSORY NOTE

March 25, 2010

$200,000  Hopkinton, Massachusetts

     FOR VALUE RECEIVED, Alseres Pharmaceuticals, Inc.. (the “Maker”), promises to pay to Robert L Gipson, or order, at the offices of Robert L. Gipson, c/o Ingalls & Snyder LLC, 61 Broadway, New York, New York 10006 or at such other place as the holder of this Note may designate, the principal sum of $200,000, together with interest on the unpaid principal balance of this Note from time to time outstanding at the rate of 7% per year until paid in full. All principal and accrued interest shall be due and payable on demand of the Holder.

     Interest on this Note shall be computed on the basis of a year of 365 days for the actual number of days elapsed. All payments by the Maker under this Note shall be in immediately available funds.

     Every amount overdue under this Note shall bear interest from and after the date on which such amount first became overdue at an annual rate which is two (2) percentage points above the rate per year specified in the first paragraph of this Note. Such interest on overdue amounts under this Note shall be payable on demand and shall accrue and be compounded monthly until the obligation of the Maker with respect to the payment of such interest has been discharged (whether before or after judgment).

     In no event shall any interest charged, collected or reserved under this Note exceed the maximum rate then permitted by applicable law and if any such payment is paid by the Maker, then such excess sum shall be credited by the holder as a payment of principal.

     All payments by the Maker under this Note shall be made without set-off or counterclaim and be free and clear and without any deduction or withholding for any taxes or fees of any nature whatever, unless the obligation to make such deduction or withholding is imposed by law. The Maker shall pay and save the holder harmless from all liabilities with respect to or resulting from any delay or omission to make any such deduction or withholding required by law.

     Whenever any amount is paid under this Note, all or part of the amount paid may be applied to principal, premium or interest in such order and manner as shall be determined by the holder in its discretion.

     No reference in this Note to any guaranty or other document shall impair the obligation of the Maker, which is absolute and unconditional, to pay all amounts under this Note strictly in accordance with the terms of this Note.

     The Maker agrees to pay on demand all costs of collection, including reasonable attorneys’ fees, incurred by the holder in enforcing the obligations of the Maker under this Note.

     No delay or omission on the part of the holder in exercising any right under this Note shall operate as a waiver of such right or of any other right of such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other

right on any future occasion. The Maker and every endorser or guarantor of this Note regardless of the time, order or place of signing waives presentment, demand, protest and notices of every kind and assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral, and to the addition or release of any other party or person primarily or secondarily liable.

     This Note may be prepaid in whole or in part at any time or from time to time upon five days’ prior written notice with the consent of the holder, with the giving of such consent to be in the sole discretion of the holder. Any such prepayment shall be without penalty or premium.

     None of the terms or provisions of this Note may be excluded, modified or amended except by a written instrument duly executed on behalf of the holder expressly referring to this Note and setting forth the provision so excluded, modified or amended.

     All rights and obligations hereunder shall be governed by the laws of the Commonwealth of Massachusetts and this Note is executed as an instrument under seal.

Alseres Pharmaceuticals, Inc.

By: /s/ Kenneth L. Rice Jr.

Title: EVP & CFO

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EX-10.53

Exhibit 10.53

Non-Employee Director Compensation Summary

Alseres Pharmaceuticals, Inc.’s (the “Company’s”) non-employee directors at December 31, 2009 consisted of: William L.S. Guinness; Robert S. Langer, Jr.; Michael J. Mullen; John T. Preston; Gary E. Frashier; and Henry Brem.

For the year ended December 31, 2009, the Company’s non-employee director compensation was earned as follows, however, the Company has only paid non-employee director compensation through June 30, 2008 and at December 31, 2009 owed its independent directors a total of $455,000 in compensation:

			Per Board and
			Committee		Annual Fee Per
	2009 Annual
	Retainer		Meeting Fees (1)		Committee Chaired
William L.S. Guinness	$	25,000	$	2,500		—
Robert S. Langer, Jr.	$	25,000	$	2,500	$	10,000
Michael J. Mullen	$	25,000	$	2,500	$	20,000
John T. Preston	$	25,000	$	2,500	$	20,000
Gary E. Frashier	$	25,000	$	2,500	$	10,000
Henry Brem	$	25,000	$	2,500		—

(1) Board and committee fees are paid on a per meeting basis at $2,500 per meeting.

All non-employee directors are reimbursed for ordinary and reasonable expenses of attending any board or committee meetings.

Each new non-employee director is automatically granted an option to purchase 25,000 shares of the Company’s common stock (“New Director Options”) upon initial election or appointment (the “Automatic Grant Date”). The exercise price of any New Director Options granted shall equal the fair market value of shares of the Company’s common stock subject thereto on the Automatic Grant Date. New Director Options immediately vest as to 1/3 of the shares subject to such New Director Options with the remaining 2/3 of the shares subject to such New Director Option vesting in equal monthly installments over two years (“New Director Option Vesting”).

Each non-employee director is automatically granted an option to purchase 25,000 shares of the Company’s common stock each year (“Annual Director Options”). The Annual Director Options are granted in the fourth quarter of each calendar year (the “Annual Grant Date”). The exercise price of any Annual Director Options granted shall equal the fair market value of shares of the Company’s common stock subject thereto on the Annual Grant Date. Annual Director Options vest in equal monthly installments over two years (“Annual Director Option Vesting”). Newly elected non-employee directors are eligible to receive the Annual Director Options in the fourth quarter of the second calendar year of service.

EX-10.54

Exhibit 10.54

Executive Officer Compensation Summary

Alseres Pharmaceuticals, Inc.’s (“the Company’s”) executive officers consist of (i) Peter G. Savas, Chairman and Chief Executive Officer; (ii) Mark J. Pykett, President and Chief Operating Officer; and (iii) Kenneth L. Rice, Jr., Executive Vice President, Finance and Administration, Chief Financial Officer and Secretary.

2009 Base Salary. No Incentive Compensation was earned or paid in 2009.

	2009 Base Salary
Mr. Savas	$	408,085
Mr. Pykett	$	304,260
Mr. Rice	$	257,284

EX-21

Exhibit 21

SUBSIDIARIES OF THE REGISTRANT

Name of Subsidiary	State of Incorporation
Acumed Pharmaceuticals, Inc.	Delaware
Ara Pharmaceuticals, Inc.	Delaware
Boston Life Sciences International, Inc.	Delaware
Coda Pharmaceuticals, Inc.	Delaware
Neurobiologics, Inc.	Delaware
ProCell Pharmaceuticals, Inc.	Delaware

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Registration Statements on Forms S-3 (Nos. 333-146171, 333-113015, 333-112123, 333-88726, 333-44298, 333-40408, 333-89159, 333-75175 and 333-74775), and Forms S-8 (Nos. 333-158375, 333-149108, 333-144516, 333-130454, 333-67384, 333-67386, 333-80065, 333-80067 and 333-80069) of Alseres Pharmaceuticals, Inc. and Subsidiaries of our report dated March 31, 2010, relating to our audit of the consolidated financial statements, which appears in the Annual Report on Form 10-K of Alseres Pharmaceuticals, Inc. and Subsidiaries for the year ended December 31, 2009. Our report dated March 31, 2010, relating to the consolidated financial statements includes an emphasis paragraph relating to an uncertainty as to the Company’s ability to continue as a going concern.

/s/ McGladrey & Pullen, LLP

Burlington, MA
March 31, 2010

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Forms S-3 (File Nos. 333-146171, 333-112123, 333-113015, 333-88726, 333-74775, 333-75175, 333-89159, 333-40408 and 333-44298) and on Forms S-8 (File Nos. 333-144516, 133-149108, 333-80065, 333-80067, 333-80069, 333-67384, 333-67386 and 333-130454) of Alseres Pharmaceuticals, Inc. (formerly known as Boston Life Sciences, Inc.) and its subsidiaries of our report dated April 2, 2007 relating the financial statements, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts
March 31, 2010

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Peter G. Savas, certify that:

1.	I have review this Annual Report on Form 10-K of Alseres Pharmaceuticals, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to any 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 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)) 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, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared
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;
c.	Evaluated the effectiveness of the registrants 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 (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and

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 audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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.

DATE: March 31, 2010	/s/ PETER G. SAVAS
	Peter G. Savas
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Kenneth L. Rice Jr., certify that:

1.	I have review this Annual Report on Form 10-K of Alseres Pharmaceuticals, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to any 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 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)) 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, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared
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;
c.	Evaluated the effectiveness of the registrants 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 (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and

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 audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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.

DATE: March 31, 2010	/s/ KENNETH L. RICE JR.
	Kenneth L. Rice Jr.
	Executive Vice President Finance and Administration 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 Annual Report of Alseres Pharmaceuticals, Inc. (the “Company”) on form 10-K for the year ended December 31, 2009 as filed with the Securities and Exchange Commission (the “Report”), I Peter G. Savas, Chief Executive Officer of the Company, certify, to the best of my knowledge and belief, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 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.

Date: March 31, 2010	/s/ PETER G. SAVAS
	Peter G. Savas
	Chief Executive Officer

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 Annual Report of Alseres Pharmaceuticals, Inc. (the “Company”) on form 10-K for the year ended December 31, 2009 as filed with the Securities and Exchange Commission (the “Report”), I Kenneth L. Rice Jr., Executive Vice President Finance and Administration and Chief Financial Officer of the Company, certify, to the best of my knowledge and belief, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

3.	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
4.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 31, 2010	/s/ KENNETH L. RICE JR.
	Kenneth L. Rice Jr.
	Executive Vice President Finance and Administration and Chief Financial Officer