UNITED STATES SECURITIES AND EXCHANGE COMMISSION ~~Washington, D.C. 20549~~

WASHINGTON, D.C. 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 June 30, 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

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 June 30, 2010


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: 0-23280

NEUROBIOLOGICAL TECHNOLOGIES, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		94-3049219
(State of incorporation)		(I.R.S. Employer Identification No.)

2000 Powell Street, Suite 800, Emeryville, California		94608
(Address of principal executive office)		(Zip Code)

(510) 595-6000 (Registrant’s telephone number, including area code)

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

~~Securities~~Title ~~registered~~of ~~under~~Each ~~Section 12(b)~~Class Name of ~~the~~Each ~~Act:~~ Exchange on Which Registered Common Stock, $0.001 par value

Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, $0.001 par value		The NASDAQ Stock Market LLC
Preferred Share Purchase Rights		(NASDAQ Capital Market)

Securities registered pursuant to Section 12(g) of the act: None

Indicate by check mark whether 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 whether 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 Web site, 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 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 þ

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)

~~(Do~~Indicate ~~not~~by check ifmark awhether ~~smaller~~the ~~reporting~~registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

~~Indicate~~The byaggregate ~~check~~market ~~mark~~value ~~whether~~of the ~~registrant~~voting isstock aheld ~~shell~~by ~~company~~non-affiliates of the registrant based (upon the closing price of the Common Stock as ~~defined~~quoted inon the Pink Sheets on December 31, 2009 was ~~Rule~~approximately $1.4 ~~12b-2~~million. Shares of Common Stock held by each executive officer and director and by each person or group who owns 10% or more of the ~~Exchange~~outstanding Common Stock at December 31, 2009 ~~Act)~~have been excluded. ~~Yes o No o~~ Exclusion of such shares should not be construed to indicate that any such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant or that such person is controlled by or under common control with the registrant.

~~The~~On ~~aggregate market value of the voting stock held by non-affiliates of the registrant based upon the closing price of the Common Stock on the NASDAQ Capital Market on December~~September 3128, ~~2008~~2010 ~~was~~there ~~$3.5 million.~~were ~~Shares of Common Stock held by each executive officer and director and by each person or group who owns 10% or more of the outstanding Common Stock at December 31~~27,019,805 ~~2008 have been excluded. Exclusion of such~~ shares ~~should not be construed to indicate that any such person possesses the power, direct or indirect, to direct or cause the direction~~ of the ~~management or policies of the~~ registrant’s ~~or that such person is controlled by or under~~ common ~~control~~ ~~with the registrant~~stock outstanding.

On July 31, 2009 there were 26,929,805 shares of the registrant’s common stock outstanding.


Part I

Item 1 Business			3

Item 1A Risk Factors			4

Item 1B Unresolved Staff Comments			7

Item 2 Properties			7

Item 3 Legal Proceedings			7

Item 4 (Removed and Reserved)			7

Part II

Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			7

Item 6 Selected Financial Data			8

Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations			8

Item 7A Quantitative and Qualitative Disclosures about Market Risk			12

Item 8 Financial Statements and Supplementary Data			13

Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			32

Item 9A Controls and Procedures			32

Item 9B Other Information			33

Part III

Item 10 Directors, Executive Officers and Corporate Governance			33

Item 11 Executive Compensation			34

Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			36

Item 13 Certain Relationships and Related Transactions, and Director Independence			38

Item 14 Principal Accounting Fees and Services			38

Part IV

Item 15 Exhibits, Financial Statement Schedules			39

Exhibit 21.1
Exhibit 31.1
Exhibit 32.1

Part I
	Item 1	Business	2
	Item 1A	Risk Factors	4
	Item 1B	Unresolved Staff Comments	7
	Item 2	Properties	7
	Item 3	Legal Proceedings	7
	Item 4	Submission of Matters to a Vote of Security Holders	8
Part II
	Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	8
	Item 6	Selected Financial Data	9
	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
	Item 7A	Quantitative and Qualitative Disclosures about Market Risk	18
	Item 8	Financial Statements and Supplementary Data	19
	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	39
	Item 9A(T)	Controls and Procedures	39
	Item 9B	Other Information	40
Part III
	Item 10	Directors, Executive Officers and Corporate Governance	40
	Item 11	Executive Compensation	43
	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	46
	Item 13	Certain Relationships and Related Transactions, and Director Independence	49
	Item 14	Principal Accounting Fees and Services	49
Part IV
	Item 15	Exhibits, Financial Statement Schedules	50
EX-10.11
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I

ITEM 1. BUSINESS

This report contains forward-looking statements. These forward-looking statements are based on our current expectations about ~~our~~the ~~business,~~status ~~industry~~of ~~and~~our ~~plans~~dissolution ~~for~~and ~~liquidation~~our business. In some cases, these statements may be identified by terminology such as “anticipates,” “believes,” “continue,” “estimates,” “expects,” “may,” “plans,” “potential,” “predicts,” “should,” “will,” or the negative of such terms and other comparable terminology. These statements involve known and unknown risks and uncertainties that may cause our ~~results~~dissolution payments, ~~levels~~ ofcash ~~activity~~available to common stockholders, financial results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to such ~~differences~~ differences include, among others, those discussed in this report under Item 1A. — “Risk Factors.” Except as may be required by law, we do not intend to update any forward-looking statement to reflect events after the date of this report. “We,” “us,” “NTI” and the “Company” as used in this report refer to Neurobiological Technologies, Inc., a Delaware corporation in dissolution, and, as applicable, our subsidiary, NTI-Empire, Inc.

Overview

We ~~are~~were apreviously ~~biopharmaceutical company historically~~ focused on developing investigational drugs ~~for~~to ~~central~~treat ~~nervous~~human ~~system conditions~~diseases. InOn October 27, ~~January~~ 2009, ~~we terminated development of~~ our ~~most~~ ~~advanced~~stockholders ~~product~~approved ~~candidate, Viprinextm, which~~the ~~was~~dissolution ~~studied~~of inthe ~~Phase~~Company 3pursuant ~~clinical~~to ~~trials as~~ a ~~potential~~plan ~~new~~of ~~drug~~complete toliquidation ~~treat~~and ~~acute~~dissolution ~~ischemic~~earlier ~~stroke.~~approved ~~The~~by ~~decision~~our toboard ~~terminate development~~ of ~~Viprinex~~directors ~~followed~~on anAugust 27, ~~interim analysis of the~~2009 ~~Phase 3 clinical trials which indicated that~~ (the ~~drug~~“Plan ~~did~~of ~~not meet pre-established efficacy criteria~~Dissolution”). InOn ~~January~~November 4, ~~and March~~ 2009, we ~~notified~~redeemed ~~the~~all ~~Buck Institute~~ of ~~Age Research, or~~ the ~~Buck~~outstanding ~~Institute,~~shares ~~that we did not intend to extend the funding~~ of our ~~early-stage research programs in Huntington’s~~ ~~disease~~Series A ~~and~~Preferred ~~Alzheimer’s~~Stock ~~disease,~~for ~~respectively~~$0.50 Inper ~~June 2009~~share, wethe ~~entered~~original ~~into~~issue anprice ~~agreement~~of tothe ~~terminate~~Series A ~~our~~Preferred ~~collaboration~~Stock and ~~license~~its ~~agreements~~liquidation ~~with the Buck Institute~~preference. ~~In June 2009~~Thereafter, wefollowing ~~also~~payments ~~entered~~of ~~into~~extraordinary andividends ~~agreement with affiliates~~ of ~~Celtic~~$0.75 ~~Pharma~~and ~~pursuant~~$0.18 toper ~~which,~~share ~~among other things, our obligation to provide services to Celtic Pharma relating to the clinical development~~ of ~~XERECEPT,~~common ~~which~~stock ~~previously~~on ~~extended to~~ November ~~2011~~ 18, ~~was~~2009 ~~terminated~~and ~~as of June~~December 309, 2009., Werespectively, ~~retained~~on ~~our~~December 17, ~~rights~~2009 towe ~~receive~~filed ~~payments~~a ifcertificate ~~XERECEPT,~~of adissolution ~~phase~~with ~~3 investigational~~the ~~drug~~Secretary ~~for~~of ~~brain~~State ~~edema~~of ~~associated~~the ~~with cerebral~~State ~~tumors,~~of isDelaware ~~successfully~~(the ~~developed~~“Certificate ~~and~~of ~~commercialized~~Dissolution”) byand ~~Celtic Pharma~~completed orthe isvoluntary ~~sold~~delisting toof aour ~~third~~common stock ~~party.~~from ~~Subsequent~~the toNasdaq ~~our~~Capital ~~fiscal year~~Market. ~~end~~On December 17, ~~in August~~ 2009, we ~~entered~~also ~~into~~closed ~~an agreement to terminate~~ our ~~license~~stock ~~and~~transfer ~~cooperation agreement with Merz~~books ~~Pharmaceuticals GmbH~~ and ~~Children’s~~discontinued ~~Medical~~recording ~~Center Corporation,~~transfers ~~effective as~~ of ~~July 31,~~our ~~2009~~common stock.

InAs ~~March~~a ~~2009~~corporation in dissolution, ~~our~~we ~~Board~~are ofnot ~~Directors~~allowed ~~hired~~to ~~RBC~~carry ~~Capital~~on ~~Markets,~~any business except for the orpurpose ~~RBC,~~of aswinding ~~our~~down ~~financial~~the ~~advisor~~business toand ~~assist~~affairs of the Company. We are in the ~~evaluation~~process of ~~various~~discharging ~~options~~any toremaining ~~enhance~~liabilities ~~stockholder~~under ~~value,~~dissolution ~~including~~procedures aprovided for under the General ~~potential~~Corporation ~~sale~~Law of the ~~Company~~State orof ~~our~~Delaware ~~major~~(the ~~assets~~“DGCL”). ToWe ~~date,~~intend ~~no transactions~~to ~~have~~make ~~been~~at ~~identified~~least ~~that~~one additional liquidating distribution to our ~~Board~~stockholders at the conclusion of ~~Directors~~this process, although the amount ~~believes~~and ~~would~~timing ~~return~~cannot apresently ~~greater~~be ~~value~~determined. toIn ~~stockholders~~accordance ~~than~~with athe DGCL, our corporate existence ~~complete~~will ~~liquidation~~continue ~~and~~until ~~dissolution~~at least three years from the date we filed the Certificate of Dissolution, or December 17, 2012.

~~Approval of Plan of Complete~~ Liquidation ~~and~~Basis ~~Dissolution~~ of ~~the~~Accounting ~~Company~~

~~Subsequent~~Following tothe ~~our~~filing ~~fiscal~~of ~~year~~the ~~end,~~Certificate of Dissolution with the State of Delaware on ~~August 27~~December 17, 2009, ~~our Board~~we began reporting on a liquidation basis of ~~Directors~~accounting ~~determined,~~instead ~~after~~of ~~extensive~~a ~~and~~going ~~careful consideration~~concern basis of ~~the~~accounting. ~~Company’s~~Under ~~strategic~~the ~~alternatives~~liquidation ~~and analysis~~basis of accounting, the ~~prevailing~~Statement ~~economic~~of ~~and~~Net ~~industry~~Assets ~~conditions,~~(Liquidation ~~that~~Basis) itand isStatement of Changes in ~~the~~Net ~~best~~Assets ~~interests~~(Liquidation ofBasis) are the ~~Company~~principal ~~and~~financial statements presented. In these statements, our assets are stated at their estimated net realizable ~~stockholders~~value, towhich ~~liquidate~~is the ~~Company’s~~amount of cash into which the assets ~~and~~are ultimately expected to be converted, ~~dissolve~~less ~~the~~any ~~Company~~conversion costs. AtLiabilities ~~that~~are ~~time~~reported at their estimated settlement amount, which is the ~~Board~~amount of ~~Directors~~cash expected to be paid to liquidate the obligation, including any direct costs of ~~approved~~the liquidation. Additionally, we have established a ~~Plan~~reserve offor ~~Complete~~all ~~Liquidation~~estimated future general and administrative ~~Dissolution~~expenses ofand ~~the Company~~other costs expected to be incurred while we are in dissolution, orwhich under the ~~Plan,~~DGCL ~~subject~~is expected to ~~stockholder~~be ~~approval~~at least three years. The reserve for these estimated expenses ~~Company~~primarily ~~intends~~includes toaccruals ~~hold~~including apersonnel ~~special~~costs ~~meeting~~for ofadministrative ~~stockholders~~work, tofacilities ~~seek~~including ~~approval~~previously ofunaccrued ~~the~~future ~~Plan~~lease and ~~expects~~other toobligations, ~~file~~professional ~~related~~services, ~~proxy~~legal ~~materials~~and ~~with~~accounting ~~the~~costs, ~~Securities~~corporate expenses (insurance, directors’ fees and ~~Exchange~~statutory ~~Commission,~~fees) and estimated expenses to establish a trust or ~~the~~another facility to preserve our continuing interest in ~~SEC~~XERECEPT®, inwhich ~~early~~is ~~September~~an ~~2009~~investigational drug being developed by another party. These estimates will be periodically reviewed and adjusted as appropriate. There can be no assurance that these estimated values will ultimately be realized.

We currently retain an economic interest in an investigational drug called XERECEPT®, which is a synthetic preparation of Corticotropin-Releasing Factor, a natural human peptide. XERECEPT® ~~Viprinex~~is being developed by Celtic Pharma as a treatment for swelling around brain tumors and other cancer indications. We are entitled to receive payments if Celtic successfully develops and commercializes XERECEPT, including up to $7.5 million in milestone payments upon regulatory approvals in key areas of the world, payments of 22% on profit margins in the United States and graduated royalties of 15-20% on sales elsewhere in the world, or, if Celtic sells its rights to XERECEPT, 13-22% of the net proceeds that are received by Celtic Pharma in the transaction. As we do not exercise any control over Celtic’s development of XERECEPT and the information we receive from Celtic is limited, we are unable to estimate if or when we will receive any payments related to the development of XERECEPT.

In December 2008, we announced that an independent Data Safety Monitoring Board, or DSMB, had determined that the phase 3 clinical trials of Viprinex (ancrod) for the treatment of acute ischemic stroke were unlikely to show benefit. Prior to this determination, substantially all of our drug development efforts since 2004 were focused on Viprinex. Following the DSMB recommendation, we immediately terminated further enrollment

in the trials. After additional analysis of the data, we subsequently determined that further development of Viprinex was not warranted, since no patient groups appeared to benefit from treatment. An analysis of the primary endpoint of the trials, which was the modified Rankin Score (a measure of stroke-related disability) 90 days following stroke, yielded a 39.1% response rate for Viprinex-treated subjects compared to a 37.2% response rate for placebo-treated subjects (p=0.47), well below criteria established for continuation of the trial. A different measure of stroke-related disability, the NIH Stroke Scale, which was evaluated as a secondary endpoint in the trial, yielded a slight advantage for placebo over Viprinex. Overall, the treatment and placebo arms of the study were well balanced for baseline characteristics. While the 90 day mortality was similar between the groups, there was a trend toward higher symptomatic intracranial hemorrhage in the Viprinex-treated subjects. In March 2009, we notified Abbott Laboratories that we were terminating the license agreement for Viprinextm, in accordance with its terms, effective June 10, 2009.

Memantine

In April 1998, we entered into a license and cooperation agreement with Merz Pharmaceuticals GmbH (formerly Merz + Co. GmbH & Co.), or Merz, and Children’s Medical Center Corp., or CMCC, for the clinical development and commercialization of memantine. Pursuant to this agreement, as amended in February 2008, we had the right to receive royalty payments from sales of Namenda/Ebixa (memantine) for Alzheimer’s disease in the United States. Under the February 2008 amendment, there were staged reductions in the royalty rates we received for sales of memantine in the United States and we stopped receiving royalties on sales of memantine outside of the United States. Under the amendment, Merz agreed that they would not provide us notice of termination of the agreement before July 1, 2009; thereafter they had the ability to cancel at any time with a six-month notice before the termination becomes effective. Subsequent to our fiscal year end, in August 2009, we entered into an agreement to terminate our license and cooperation agreement with Merz and CMCC, effective as of July 31, 2009, and Merz agreed to make a final payment of $4.9 million to us. We are not entitled to any further royalty or other payments for the sales of memantine.

XERECEPT®

XERECEPT® is a synthetic preparation of Corticotropin-Releasing Factor, a natural human peptide, which is being developed by Celtic Pharma as a treatment for swelling around brain tumors. XERECEPT has received orphan drug designation for this indication from the FDA, which generally provides for seven years of market exclusivity from time of approval.

In November 2005, we sold all of our worldwide rights and assets related to XERECEPT to two subsidiaries of Celtic Pharma. Under the terms of the sales agreement, if Celtic Pharma markets XERECEPT we are entitled to receive up to an additional $7.5 million in payments upon regulatory approvals in key areas of the world. In addition, if XERECEPT is approved we are entitled to receive profit-sharing payments of 22% on profit margins in the United States and royalty payments of 15-20% on sales elsewhere in the world. If Celtic Pharma sells or sublicenses its rights to XERECEPT to another entity, we are entitled to receive 13-22% of the net proceeds that are received by Celtic Pharma in lieu of the milestones and royalties that are payable in the event Celtic Pharma markets the drug.

In conjunction with our sale of XERECEPT to Celtic Pharma, we entered into a collaboration and services agreement with Celtic Pharma, pursuant to which we agreed to provide certain services in connection with Celtic Pharma’s development of XERECEPT. In June 2009, we entered into an agreement with affiliates of Celtic Pharma, pursuant to which, among other things, our obligation to provide services to Celtic Pharma relating to the clinical development of XERECEPT, which previously extended to November 2011, was terminated as of June 30, 2009. We no longer provide any services to Celtic Pharma for its development of XERECEPT.

In June 2009, Celtic Pharma announced the results of its phase 3 clinical trial of XERECEPT, showing that XERECEPT enabled decreases in steroid usage and steroid-associated side effects in both acute and long-term treatment of patients with edema associated with either primary or metastatic brain tumors, although the clinical trial did not demonstrate statistical significance for its primary endpoint, a composite of steroid reduction, neurological examination results and functional impairment. Celtic Pharma has also announced that it has retained an investment bank to assist with the sale of the worldwide commercial rights to XERECEPT.

Preclinical Programs Licensed from the Buck Institute for Age Research

In our 2008 fiscal year, we entered into collaboration and license agreements with the Buck Institute for early-stage research programs for proteins for the treatment of Alzheimer’s and Huntington’s diseases. In January and March 2009, we notified the Buck Institute that we did not intend to extend the funding of these programs. In June 2009, we entered into an agreement to terminate our collaboration and license agreements with the Buck Institute.

Employees

As of June 30, ~~2009~~2010, we had ~~four~~no full or part-time employees. ~~Additionally,~~ weWe use consultants tothat ~~complement~~are ~~our staffing as~~paid ~~needed.~~on ~~Our~~an ~~employees~~hourly ~~are~~basis ~~not subject~~ to ~~any~~continue ~~collective bargaining~~the ~~agreements,~~process ~~and~~of wewinding ~~regard~~down our ~~relations with employees to be good~~operations.

Available ~~Information~~ ~~and Website Address~~Information

Our ~~website address is www.ntii.com. We make available free of charge through our website, our~~ Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to these reports asare ~~soon~~electronically asfiled ~~reasonably practicable~~with ~~after~~or ~~filing~~furnished ~~with~~to the Securities and Exchange Commission, or SEC. ~~They~~These ~~also~~reports may be obtained directly from the SEC’s website, www.sec.gov. ~~The~~ ~~contents of our website are not incorporated by reference into this report.~~

ITEM 1A. RISK FACTORS

Risks Related to ~~Our~~the Wind-down of our Business and Affairs

~~Our company~~If the amount of our contingency reserve is ininsufficient ato ~~transition~~satisfy ~~phase,~~the aggregate amount of our liabilities and ~~its~~other ~~future~~obligations, iseach stockholder may be liable to our creditors for the amount ~~uncertain~~of liquidating distributions received by such stockholder under the Plan of Dissolution, which could also have adverse tax consequences.

InOur corporate existence will continue until at least December 17, ~~2008~~2012, wethree ~~announced~~years ~~that~~from the ~~clinical~~date we ~~trials~~filed the Certificate of ~~Viprinex~~ ~~did~~Dissolution. However, as a corporation in dissolution, we are not allowed ~~pass~~to ancarry ~~interim~~on ~~futility~~any ~~analysis~~business except for the purpose of winding down the business and weaffairs ~~stopped~~of ~~enrolling~~the ~~patients~~Company. ~~into~~After we filed the ~~clinical~~Certificate ~~trials~~of Dissolution, we ~~were conducting.~~commenced Inthe ~~January~~elective dissolution ~~2009~~process, ~~after~~under ~~review~~Sections 280 and 281(a) of the ~~data~~General ~~obtained from~~Corporation Law of the ~~clinical~~State ~~trials~~of Delaware, weor ~~announced~~DGCL, ~~that~~which weinvolves ~~would~~providing ~~not~~notice ~~develop~~of our dissolution to potential claimants and ~~Viprinex~~paying ~~further.~~or Inmaking ~~connection~~reasonable ~~with~~provision ~~this~~to ~~decision,~~pay ~~we implemented~~all ~~staff~~claims ~~reductions~~and ~~aggregating~~obligations, ~~approximately~~including ~~75%~~all ofcontingent, ~~our~~conditional ~~earlier~~or ~~workforce~~unmatured contractual or statutory claims, ~~and~~known ~~subsequently~~to ~~reduced~~us. ~~additional~~We may also obtain and ~~management~~maintain insurance coverage or establish and ~~staff~~set ~~following~~aside ~~completion~~a reasonable amount of cash or other ~~contractual~~assets as a contingency reserve to satisfy claims against and obligations ~~that~~of wethe ~~had~~Company. WeIn ~~currently~~the ~~have~~event that ~~only~~the ~~four~~amount ~~full-time employees~~of the contingency reserve, insurance and ~~plan~~other measures calculated to ~~reduce~~provide ~~our~~for the ~~headcount~~satisfaction ~~further~~of ~~starting~~liabilities ~~in September~~and ~~2009.~~claims ~~Since~~are insufficient to satisfy the ~~termination~~aggregate amount ultimately found payable in respect of our ~~Viprinex~~liabilities ~~program~~and claims against us, each stockholder wecould ~~have~~be ~~also~~held ~~terminated~~liable ~~our~~for ~~two~~amounts ~~preclinical~~due ~~research~~to ~~programs~~creditors up to the amounts distributed to such ~~with~~stockholder under the ~~Buck~~Plan ~~Institute~~of Dissolution. ~~Presently~~In such event, a stockholder could be required to return any amounts received as distributions pursuant to the ~~marketing~~Plan ~~and~~of Dissolution. Moreover, for ~~development~~U.S. federal income tax purposes, payments made by a stockholder in satisfaction of our liabilities not covered by the ~~remaining~~cash ~~single~~or ~~product~~other ~~candidate~~assets in ~~which~~our contingency reserve or otherwise wesatisfied ~~have~~through insurance or other reasonable means generally would produce a ~~retained~~capital ~~interest~~loss for ~~(XERECEPT®)~~such stockholder in the year the liabilities are paid. The deductibility of any such capital loss isgenerally ~~controlled~~would bybe asubject ~~third~~to ~~party~~limitations under the Internal Revenue Code of 1986, as amended.

WeFinal ~~have~~liquidating ~~engaged~~distributions ~~RBC as our financial advisor~~ to ~~assist in the evaluation of various options to enhance stockholder value, including a sale of the Company or~~ our ~~major assets. However, we have been unable to find a buyer interested in pursuing a transaction that would be of higher value for our~~ stockholders ~~than~~ a complete liquidation and dissolution of the Company. Although the Board has approved a Plan of Complete Liquidation and Dissolution of the Company, it remains subject to stockholder approval. We may not obtain the necessary stockholder vote to approve the Plan, and actions by our stockholders could ~~jeopardize~~be delayed or ~~delay~~reduced ~~the vote, which could result in fluctuations~~ or a decline in our stock price. Further, because the amount of cash ultimately distributed to our stockholders pursuant to the Plan depends on the amount of our liabilities, obligations and expenses and claims against us, and contingency reserves that we establish during the liquidation process, the distributions made to stockholders may benever ~~less than~~be ~~expected~~made.

IfAny ~~our~~final ~~stockholders~~liquidating dodistributions ~~not approve the Plan,~~ we ~~will~~make explore what, if any, alternatives are available for the future of the Company, particularly given that we have terminated substantially all of our management and employees and have been minimizing expenses and terminating contractual relationships. There is currently little active business left to ~~operate and rehiring employees and retaining or rebuilding~~ our ~~management team~~stockholders ~~may~~could ~~not~~ be ~~possible~~delayed, ordepending ~~would take several months at a cost~~on wemany ~~are~~factors, ~~unable~~including, towithout ~~estimate.~~limitation:

• if a creditor or other third party seeks an injunction against the making of distributions to our stockholders on the ground that the amounts to be distributed are needed to provide for the satisfaction of our liabilities or other obligations;

• if we become a party to lawsuits or other claims asserted by or against us, including any claims or litigation arising in connection with our decision to liquidate and dissolve, payments to suppliers or other vendors or claims from patients in our clinical trials;

• if we are unable to liquidate our remaining auction rate security, or ARS, or if such liquidation takes longer than expected;

• if we are unable to resolve claims with creditors or other third parties, or if such resolutions take longer than expected; or

• the elective dissolution process is not completed in a timely manner due to all of the steps required to complete such a process, including any potential delay in the Delaware Court of Chancery, which could delay final approval of our petition.

Any of the foregoing could delay or substantially diminish the amount available for distribution ~~We only~~to ~~have~~our ~~very~~stockholders. ~~limited~~In ~~control~~addition, ~~over~~under the ~~development~~DGCL, claims and ~~commercialization~~ ofdemands may be asserted against us at ~~XERECEPT®~~any time before December 17, ~~which~~ 2012. Accordingly, we ~~have~~may ~~sold~~retain funds to ~~Celtic~~obtain ~~Pharma,~~and maintain insurance coverage or establish and set aside a reasonable amount of cash or other assets as a contingency reserve to satisfy claims against and obligations of the Company that may arise during that three-year period. As a result of these factors, we may ~~not realize~~retain for distribution at a ~~significant~~later ~~portion~~date, some or all of the ~~potential~~estimated amounts ~~value~~that we expect to distribute to our stockholders. At the conclusion of ~~this~~the process for ~~product~~dissolution, ~~candidate~~there may not be any remaining cash available for distribution to stockholders.

InWe ~~November~~may ~~2005,~~not webe ~~completed~~able ~~the~~to ~~sale~~settle of all ~~our rights and assets related to XERECEPT to two newly-formed subsidiaries~~ of ~~Celtic~~ ~~Pharma. Under~~ our ~~agreement~~obligations ~~with the Celtic Pharma subsidiaries, we are eligible~~ to receive milestone payments upon the achievement of certain regulatory objectives, and if XERECEPT is approved for commercial sale we are eligible to receive payments on profit margins of XERECEPT in the United States and royalties on sales elsewhere in the worldcreditors. ~~However,~~ because Celtic Pharma has assumed control of the clinical development of XERECEPT throughout the world, our ability to receive these payments largely depends on Celtic Pharma. Celtic Pharma controls the execution of clinical trials and will direct the final regulatory approval process and commercialization, if the product is approved. If Celtic Pharma is unable to successfully develop and market XERECEPT, we will not receive any development milestone payments or any royalty or profit-sharing payments, which would harm our financial condition and results of operations.

Our estimate of the final distributions to our stockholders takes into account all of our known obligations and our best estimate of the amount reasonably required to satisfy other estimated obligations. As part of the dissolution process, we will attempt to settle all obligations with our creditors. We cannot assure you that we will be able to settle all of these obligations or that they can be settled for the amounts we have estimated for purposes of calculating the likely distribution to stockholders.

Although the time-period for known creditors to submit claims to us under Sections 280 and 281(a) of the DGCL ended on May 8, 2010, there may be additional unknown creditors that have yet to submit a valid claim. If we are unable to reach agreement with a creditor submitting such a claim, that creditor may bring a lawsuit against us. Amounts required to settle obligations or defend lawsuits in excess of the estimated amounts will result in distributions to stockholders that are smaller than those that we presently estimate or may eliminate distributions entirely.

We have no control over the development and commercialization of XERECEPT^®, which we have sold to Celtic Pharma, and as a result, we are dependent upon Celtic Pharma to obtain any value from this product candidate.

In November 2005, we completed the sale of all our rights and assets related to XERECEPT to two newly-formed subsidiaries of Celtic Pharma. Under our agreement with the Celtic Pharma subsidiaries, we are eligible to receive milestone payments upon the achievement of certain regulatory objectives, and if XERECEPT is approved for commercial sale we are eligible to receive payments on profit margins of XERECEPT in the United States and royalties on sales elsewhere in the world. However, because Celtic Pharma has assumed control of the clinical development of XERECEPT throughout the world, our ability to receive these payments depends on Celtic Pharma. Celtic Pharma controls the execution of clinical trials and will direct the final regulatory approval process and commercialization, if the product is approved. If Celtic Pharma is unable to successfully develop and market XERECEPT, we will not receive any development milestone payments or any royalty or profit-sharing payments, which would reduce the potential for future distributions to our stockholders.

The approval of XERECEPT^®, the only investigational drug in which we retain any interest, by the FDA or other regulatory authorities is uncertain and will involve the commitment of substantial time and resources.

In June 2009, Celtic Pharma announced the results of its Phase 3 clinical trial of XERECEPT, showing that XERECEPT enabled decreases in steroid usage and steroid-associated side effects in both acute and long-term treatment of patients with edema associated with either primary or metastatic brain tumors. However, the clinical trial did not demonstrate statistical significance for its primary endpoint, a composite of steroid reduction, neurological examination results and functional impairment, which could hinder the future development of XERECEPT.

AsIn ~~part of the regulatory approval process~~April 2010, aCeltic ~~drug~~Pharma ~~sponsor~~announced ~~must conduct~~the ~~preclinical~~initiation ~~research~~of ~~and~~Phase 1/2 clinical trials ~~for~~of ~~each product~~XERECEPT ~~candidate sufficient to demonstrate its safety and~~in ~~efficacy~~pediatric topatients ~~the~~suffering ~~satisfaction~~from ofprimary, ~~the~~recurrent ~~FDA~~or inmetastatic ~~the~~brain ~~United~~tumors, ~~States~~as ~~and other~~well ~~regulatory~~as ~~agencies in~~ the ~~countries where the product~~ ~~candidate~~results ~~will~~from beseveral ~~marketed, if approved. The number of~~ preclinical studies ~~and~~of ~~clinical~~XERECEPT® ~~trials~~in ~~that~~established ~~will~~models befor ~~required varies depending on the product~~breast, ~~the~~colon ~~disease or condition for which the product is in development~~ and ~~the regulations~~ ~~applicable~~brain ~~to any particular product~~tumors. ~~The~~These ~~regulatory~~are ~~process typically~~very ~~also~~early ~~includes~~studies aand ~~review~~significant offurther ~~the~~development ~~manufacturing~~efforts ~~process to ensure compliance with applicable regulations~~ and ~~standards,~~time ~~including~~will ~~the~~be ~~FDA’s~~required ~~current~~before ~~Good~~any ~~Manufacturing~~potential ~~Practice,~~value ~~or cGMP,~~would ~~regulations.~~likely ~~The~~be ~~FDA can delay, limit or decline to grant~~realized. ~~approval for many reasons, including:~~

As part of the regulatory approval process, a drug sponsor must conduct preclinical research and •clinical trials for each product candidate sufficient to demonstrate its safety and efficacy to the satisfaction of the FDA in the United States and other regulatory agencies in the countries where the product candidate will be marketed, if approved. The number of preclinical studies and clinical trials that will be required varies depending on the product, the disease or condition for which the product is in development and the regulations applicable to any particular product. The regulatory process typically also includes a review of the manufacturing process to ensure compliance with applicable regulations and standards, including the FDA’s current Good Manufacturing Practice, or cGMP, regulations. The FDA can delay, limit or decline to grant approval for many reasons, including their determination that a product candidate is not safe or effective or ~~effective;~~their determination that the manufacturing processes or facilities do not meet specified requirements, among others. The denial of approval, or any delay or limitation on approval, of XERECEPT would substantially harm our ability to receive future payments tied to the success of XERECEPT.

• their determination that the manufacturing processes or facilities do not meet specified requirements; or

• changes to their approval policies, guidelines or new regulations that affect us in an unfavorable manner.

The denial of approval, or any delay or limitation on approval, of XERECEPT would substantially harm our ability to receive future payments tied to the success of XERECEPT.

Even if XERECEPT® is approved for commercialization, it may not be successfully commercialized or generate meaningful product revenues for us.

If XERECEPT is approved for commercialization and commercialized by Celtic Pharma, we would be entitled to receive payments from Celtic Pharma based on the approvals as well as royalty and/or profit sharing payments. For us to receive these payments, Celtic Pharma would need to either market the drug directly (which would require them to recruit and train a direct sales force), or enter into a collaborative arrangement with a larger biotechnology or pharmaceutical company with an existing sales force to sell, market and distribute the product. Although we are entitled to a percentage of the proceeds received by Celtic Pharma if Celtic Pharma licenses or sells its interest in XERECEPT, we do not have any control or influence over Celtic Pharma’s commercialization decision. Any commercialization arrangement that Celtic Pharma ultimately enters into might not result in generating any meaningful product royalties or other payments to us.

Even if XERECEPT^® is approved for commercialization, it may not be successfully commercialized or generate meaningful product revenues for us.

If XERECEPT is approved for commercialization and commercialized by Celtic Pharma, we would be entitled to receive payments from Celtic Pharma based on the approvals as well as royalty and/or profit sharing payments. For us to receive these payments, Celtic Pharma would need to either market the drug directly, which would require them to recruit and train a direct sales force, or enter into a collaborative arrangement with a larger biotechnology or pharmaceutical company with an existing sales force to sell, market and distribute the product. Although we are entitled to a percentage of the proceeds received by Celtic Pharma if Celtic Pharma licenses or sells its interest in XERECEPT, we do not have any control or influence over Celtic Pharma’s commercialization decision. Any commercialization arrangement that Celtic Pharma ultimately enters into might not result in generating any meaningful product royalties or other payments to us.

Celtic Pharma may not be successful in selling its rights to XERECEPT.

Celtic Pharma has previously announced that it has retained an investment bank to assist with the sale of the worldwide commercial rights to XERECEPT. If Celtic Pharma sells or sublicenses its rights to XERECEPT to another entity, we are entitled to receive 13- to 22% of the net proceeds that are received by Celtic Pharma in lieu of the milestones and royalties that are payable in the ~~event~~ event Celtic Pharma markets the drug directly. Celtic Pharma may not be successful in selling XERECEPT, in which case Celtic Pharma might decide not to continue with further development. Further, even if Celtic Pharma does sell XERECEPT, it is likely that some or all of the consideration it receives would be contingent upon the future development or successful commercialization of the drug, which would substantially delay any payments that we would receive.

Risks Related to Our Financial Condition

The auction rate ~~securities~~security we hold in our portfolio ~~are~~trades ~~currently not~~infrequently, ~~actively~~its ~~trading~~value has been estimated, and we may have to sell ~~all~~it ~~or some of these securities~~ at a loss.

As of June 30, ~~2009~~2010, our investments included a ~~variety~~single of remaining interest-bearing ARS for which we paid a total of $~~7.5 million~~700,000, and are carrying at an estimated value of $5588,000.~~5 million.~~ ~~These~~The ARS ~~investments~~investment is ~~are~~ intended to provide liquidity via an auction process that resets the applicable interest rates at predetermined calendar intervals, allowing investors to either roll over their holdings or obtain immediate liquidity by selling such investments at par. Since February 2008, the auctions for our ARS have failed to settle on their respective settlement dates. Consequently, the investment ~~investments~~is ~~are~~ not currently liquid and we are not able to access these funds until a future auction is successful, the investments are called by the issuer, or we find a buyer outside the auction process. ~~Maturity~~ ~~dates~~The maturity date for ~~these~~the ARS ~~investments~~is ~~range~~not ~~from~~until ~~2030~~2031 ~~to 2045.~~and ~~All~~we ofare ~~these~~unlikely ~~ARS~~to ~~investments~~be ~~are~~able ~~investment grade quality~~to ~~and~~hold ~~were~~the inARS ~~compliance with our~~ investment ~~policy~~to atmaturity. ~~the~~The ~~time~~value of ~~acquisition.~~ ~~Because~~this wesecurity ~~are~~has ~~planning~~been toestimated, ~~dissolve~~ and ~~liquidate~~its actual ~~the~~value ~~Company,~~upon wesale ~~are~~may ~~unlikely to~~ be ~~able~~less tothan ~~hold~~we ~~these~~have ~~ARS investments to maturity~~estimated. We may experience a further loss on sale of ~~the~~ the ARS, reducing the capital weavailable ~~have~~ to distribute to stockholders.

Risks Related to Our Common Stock

Our common stock stopped trading on the Nasdaq Capital Market on December 17, 2009, and we closed our stock transfer books as of this date, each of which will make it difficult for stockholders to trade their shares.

On December 17, 2009, we closed our stock transfer books after we filed the Certificate of Dissolution. We are now prohibited from recording transfers of record ownership of our common stock, and stock certificates evidencing the shares of our common stock are no longer assignable or transferable on our books. Trading of our common stock was halted on the Nasdaq Capital Market as of the beginning of business on December 17, 2009, and trading of our common stock is now conducted in the Pink Sheets, an electronic bulletin board established for unlisted securities. Such trading has reduced the market liquidity of our common stock. As a result, an investor will find it more difficult to dispose of, or obtain accurate quotations for the price of, our common stock.

The market price of our common stock has been, and is likely to continue to be, highly volatile.

~~The~~As ~~average~~we ~~daily~~are no longer an operating company, the only value underlying the trading ~~volume~~price of our common stock ~~has historically~~is ~~been~~the ~~low,~~right ~~even~~to ~~when~~receive ~~compared~~further todistributions, ~~that~~if any, as part of ~~other biopharmaceutical~~the ~~companies.~~liquidation process. Because of ~~our~~the ~~relatively~~difficulty ~~low trading~~in ~~volume,~~estimating ~~our~~the ~~stock~~amount ~~price~~and ~~can~~timing beof ~~highly~~the ~~volatile.~~liquidating ~~Our~~distributions and ~~liquidation~~due ~~plans~~to ~~may~~the ~~increase~~other ~~this~~risk ~~volatility.~~factors ~~Any~~discussed, ~~large sales of~~ our common stock ~~could~~is ~~have~~likely ato ~~negative~~continue ~~effect~~to onbe ~~the~~subject ~~stock price.~~to ~~Additional~~significant ~~factors~~volatility ~~that~~and may ~~affect~~trade above or below the ~~price~~amount ~~include:~~of any future liquidating distribution that may be made.

• announcements of our plans regarding the future of the Company; • announcements or actions by our major stockholders relating to the announcement of the planned liquidation and dissolution of the Company; • announcements of the results of clinical trials of Celtic Pharma or any of its potential competitors; • announcements regarding Celtic Pharma’s planned sale of XERECEPT; • the status of our compliance with Nasdaq’s listing standards; • government regulation and health care legislation; and • market conditions for life science companies’ stocks in general.

We are not likely to continue to meet the listing standards of the NASDAQ Capital Market, which could result in our delisting and negatively impact the price of our common stock and our ability to access the capital markets.

Our common stock is listed on the NASDAQ Capital Market. The NASDAQ Capital Market provides various continued listing requirements that a company must meet in order for its stock to continue trading on NASDAQ. The requirements state that a company’s stock may be delisted if the bid price of its stock drops below $1.00 for a period

of 30 consecutive business days. Our stock is currently trading below $1.00 per share. Although Nasdaq temporarily suspended the enforcement of rules requiring a minimum $1.00 closing bid price, the suspension ended on July 31, 2009. If we fail to comply with the continued listing standards of the NASDAQ Capital Market, our common stock may be delisted. The delisting of our common stock would significantly affect the ability of investors to trade our securities and would significantly negatively affect the value and liquidity of our common stock. These factors could contribute to lower prices and larger spreads in the bid and ask prices for our common stock.

FORWARD-LOOKING STATEMENTS

This report, including the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business,” contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We may, in some cases, use words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “potentially,” “will,” or “may,” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements in this report may include statements about:

• the ~~approval, timing and consequences of the anticipated plan of liquidation and dissolution; • the~~ development and commercialization or sale of XERECEPT by Celtic Pharma; • projections of expenditures and liabilities, as well as of cash or other assets available for distribution to stockholders; • our ability to ~~retain and hire necessary employees, board members, trustees and others necessary for a dissolution of the Company; • our ability to~~ successfully liquidate our remaining ARS and other assets of the Company for distribution to the stockholders; and • any statements regarding future cash levels, future ~~revenues~~costs and/or ~~future~~net ~~expenses~~assets in liquidation.

There are a number of important factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements. These ~~important~~ factors include those that we discuss in this report under the caption “Risk Factors.” You should read these factors and the other cautionary statements made in this report as being applicable to all related forward-looking statements wherever they appear in this report. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance or achievements may ~~vary~~ vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our principal executive offices are located in an approximately 10,000 square foot facility in Emeryville, California that is occupied under an operating lease expiring inon November 30, 2010. InMost ~~addition,~~of weour ~~lease~~facility ~~approximately~~has ~~6,000 square~~been ~~feet~~empty ~~of office~~since ~~space~~we infiled ~~Edgewater,~~for ~~New Jersey~~dissolution, ~~under~~and anwe ~~operating~~believe ~~lease~~ that ~~expires in October 2009~~, ~~which~~if iswe ~~currently subleased~~need ~~through~~office ~~the~~space ~~term~~after expiration of our ~~underlying~~existing lease, ~~commitment.~~we Wewould ~~believe that our existing facilities are adequate to meet our needs for the foreseeable future and that suitable alternative space is~~ readily ~~available should we choose to or~~ be ~~unable~~able to ~~renew~~find ~~our~~suitable ~~leases at the conclusion of their terms~~space.

ITEM 3. LEGAL PROCEEDINGS

While we are not currently a party to any material pending legal proceedings, from time to time we are named as a party to lawsuits in the normal course of our business.

ITEM 4. (REMOVED AND RESERVED) 7

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock iswas traded on the ~~NASDAQ~~Nasdaq Capital Market under the symbol “NTII” through the close of business on December 16, 2009. Beginning with the opening of business on December 17, 2009, we closed our stock transfer books and voluntarily delisted from the Nasdaq Capital Market. Although we no longer allow transfers among stockholders of record, “street-name” stockholders, or those that hold there shares in a brokerage account, generally can still trade their stock in the Pink Sheets, where our common stock is listed under the symbol “NTII”, but certain quotation systems require the symbol to be entered as “NTII.PK” The following table sets forth the high and low reported intraday sale prices of our common stock during the past two fiscal years as reported by the ~~NASDAQ~~ Nasdaq Capital Market or as listed in the Pink Sheets.

Fiscal Year 2009	High		Low
Fiscal Year 2010	High		Low
Fourth Quarter	$	0.9409	$	0.6507
Third Quarter	$	0.7215	$	0.3007
Second Quarter	$	0.97	$	0.19
Second Quarter (December 17 — 31, 2009) on Pink Sheets	$	0.14	$	0.05
First Quarter	$	1.67	$	0.57
Second Quarter (October 1 — December 16, 2009) on Nasdaq Capital Market	$	0.97	$	0.11
First Quarter	$	1.05	$	0.62

Fiscal Year 2008	High		Low
Fourth Quarter	$	3.47	$	1.15
Third Quarter	$	3.15	$	2.00
Second Quarter	$	5.19	$	2.06
First Quarter	$	12.60	$	3.46

As of July 31, 2009, there were approximately 200 holders of record of our common stock and a total of 26,929,805 shares of common stock outstanding. The number of holders of record does not include holders in “street name” which comprise the majority of our stockholders. No dividends have been paid on our common stock to date, but we currently intend to pay an extraordinary dividend subsequent to stockholder approval of the Plan.


Fiscal Year 2009	High		Low
Fourth Quarter	$	0.94	$	0.65
Third Quarter	$	0.72	$	0.30
Second Quarter	$	0.97	$	0.19
First Quarter	$	1.67	$	0.57

As of September 28, 2010, there were approximately 200 holders of record of our common stock and a total of 27,019,805 shares of common stock outstanding. The number of holders of record does not include holders in “street name” which comprise the majority of our stockholders. Following stockholder approval of our plan of dissolution, we paid extraordinary dividends of $0.75 and $0.18 per share on November 18, 2009 and December 9, 2009, respectively. We plan to pay an additional extraordinary dividend and/or liquidating distribution to stockholders following completion of the dissolution process, liquidation of all assets and payment of substantially all of our liabilities, although the amount and timing of this dividend or distribution has not yet been determined, and it may never be paid if liabilities exceed present estimates.

ITEM 6. SELECTED FINANCIAL DATA

~~The~~Not ~~selected financial data presented below summarize certain financial information from the consolidated financial statements~~applicable. ~~The information below is not necessarily indicative~~ of results of future operations. This information should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes in Item 8 of this Annual Report on Form 10-K in order to fully understand factors that may affect the comparability of the information presented below.

	Fiscal Year Ended June 30,
	2009			2008			2007			2006			2005
	(In thousands, except per share data)
Statement of Operations Data:
Total revenues	$	26,350		$	14,760		$	17,673		$	12,339		$	3,100
Expenses:
Research and development		17,584			24,581			26,737			22,808			10,749
Acquired in-process research and development		—			—			—			11,501			12,650
Provision for impairment of property and equipment		193			—			—			—			—
General and administrative		5,082			6,876			6,537			5,968			4,927
Total expenses		22,859			31,457			33,274			40,277			28,326
Operating income (loss)		3,491			(16,697	)		(15,601	)		(27,938	)		(25,226	)
Interest income		748			1,254			493			399			249
Interest expense		—			(2,479	)		—			—			—
Other income (expense)		(1,116	)		1,600			980			—			—
Income (loss) before income taxes		3,123			(16,322	)		(14,128	)		(27,539	)		(24,977	)
Provision for income taxes		—			—			—			(300	)		—
Net income (loss)	$	3,123		$	(16,322	)	$	(14,128	)	$	(27,839	)	$	(24,977	)
Basic and diluted net income (loss) per share	$	0.12		$	(0.84	)	$	(3.26	)	$	(6.84	)	$	(6.59	)
Shares used in basic net income (loss) per share calculation		26,926			19,437			4,338			4,070			3,790
Shares used in diluted net income (loss) per share calculation		26,946			19,437			4,338			4,070			3,790

	As of June 30,
	2009			2008			2007			2006			2005
	(In thousands)
Balance Sheet Data:
Cash, cash equivalents and short-term investments	$	24,049		$	29,980		$	8,957		$	15,248		$	8,506
Working capital		23,423			21,817			(3,973	)		12,055			5,290
Total assets		24,660			43,187			10,921			22,499			9,815
Total current liabilities		1,115			9,042			14,222			9,609			3,816
Accumulated deficit		(122,468	)		(125,591	)		(109,269	)		(95,141	)		(67,302	)
Stockholders’ equity (deficit)		23,545			20,286			(22,093	)		(11,402	)		5,999

Selected quarterly financial information is summarized below:

	Quarterly Periods in the Fiscal Year Ended June 30, 2009
	September 30			December 31			March 31			June 30			Total
	(In thousands, except per share data)
	(quarterly amounts are unaudited)
Quarterly Results of Operations:
Total revenues	$	3,565		$	3,491		$	3,013		$	16,281		$	26,350
Research and development expenses		(5,452	)		(10,199	)		(1,857	)		(76	)		(17,584	)
General and administrative expenses		(1,331	)		(1,201	)		(1,438	)		(1,112	)		(5,082	)
Interest income		249			264			136			99			748
Other income (expense)		207			(193	)		(285	)		(1,038	)		(1,309	)
Net income (loss)	$	(2,762	)	$	(7,838	)	$	(431	)	$	14,154		$	3,123
Basic and diluted net income (loss) per share	$	(0.10	)	$	(0.29	)	$	(0.02	)	$	0.53		$	0.12
Shares used in basic net income (loss) per share calculation		26,924			26,924			26,927			26,927			26,926
Shares used in diluted net income (loss) per share calculation		26,924			26,924			26,927			26,941			26,946

	Quarterly Periods in the Fiscal Year Ended June 30, 2008
	September 30			December 31			March 31			June 30			Total
	(In thousands, except per share data)
	(quarterly amounts are unaudited)
Quarterly Results of Operations:
Total revenues	$	3,900		$	3,663		$	3,684		$	3,513		$	14,760
Research and development expenses		(5,460	)		(7,416	)		(5,945	)		(5,760	)		(24,581	)
General and administrative expenses		(1,659	)		(1,912	)		(1,757	)		(1,548	)		(6,876	)
Interest income		28			452			540			234			1,254
Other income (expense)		2,269			(1,670	)		(1,585	)		107			(879	)
Net loss	$	(922	)	$	(6,883	)	$	(5,063	)	$	(3,454	)	$	(16,322	)
Basic and diluted net loss per share	$	(0.19	)	$	(0.36	)	$	(0.19	)	$	(0.13	)	$	(0.84	)
Shares used in basic and diluted net loss per share calculation		4,772			19,313			26,913			26,913			19,437

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW ~~AND KEY DEVELOPMENTS IN FISCAL 2009~~

We are a ~~biopharmaceutical~~ company ~~historically~~that previously focused on developing investigational drugs ~~for~~to ~~central~~treat ~~nervous system~~human ~~conditions~~diseases. InOn ~~January~~October 27, 2009, weour ~~terminated~~stockholders ~~development~~approved the dissolution of ~~our most~~the ~~advanced~~Company ~~product~~pursuant ~~candidate,~~to ~~Viprinextm, which~~a ~~was~~plan ~~studied~~of incomplete ~~Phase~~liquidation 3and ~~clinical~~dissolution ~~trials~~earlier asapproved aby ~~potential~~our ~~new~~board of directors on August ~~drug~~27, to2009 ~~treat~~(the ~~acute~~“Plan ~~ischemic~~of ~~stroke~~Dissolution”). ~~The~~On ~~decision~~November 4, to2009, ~~terminate~~we redeemed all of the outstanding ~~development~~shares of ~~Viprinex~~our ~~followed~~Series A anPreferred ~~interim~~Stock ~~analysis~~for $0.50 per share, the original issue price of the Series ~~Phase~~A 3Preferred ~~clinical~~Stock ~~trials~~ which ~~indicated~~was ~~that~~also ~~the~~its ~~drug~~liquidation ~~did~~preference. ~~not~~Thereafter, following payments of ~~meet~~extraordinary ~~pre-established~~dividends ~~efficacy~~of ~~criteria~~$0.75 Inand ~~June~~$0.18 per share of common stock on November 18, 2009 and December 9, 2009, respectively, on December 17, 2009 we ~~terminated~~ ~~our~~filed ~~collaboration~~a ~~and~~certificate ~~license~~of ~~agreements~~dissolution with the ~~Buck~~Secretary ~~Institute.~~of InState ~~June~~of ~~2009,~~the weState ~~also~~of ~~terminated~~Delaware ~~our~~(the ~~obligations~~“Certificate of Dissolution”) and completed the tovoluntary ~~provide~~delisting ~~on-going~~of ~~drug~~our ~~development~~common ~~support~~stock ~~services~~from ~~for XERECEPT® to~~the ~~Celtic~~Nasdaq ~~Pharma~~Capital Market. InAlso ~~August~~on ~~2009~~December 17, 2009, we ~~terminated~~closed our ~~license~~stock transfer books and ~~cooperation~~ ~~agreement~~discontinued ~~with~~recording ~~Merz~~transfers ~~and~~of ~~CMCC,~~our ~~which~~common ~~entitled~~stock. usWe toare ~~receive~~in ~~certain~~the ~~royalties~~process onof ~~the~~discharging ~~U.S. product~~any ~~sales~~remaining ~~of memantine,~~liabilities inunder ~~return~~dissolution ~~for~~procedures ~~Merz’~~provided ~~agreement~~for under tothe ~~make~~DGCL. aWe ~~final payment~~intend to ~~us.~~make ~~Remaining~~at inleast ~~our~~one ~~drug~~additional ~~development~~liquidating ~~portfolio~~distribution ~~are~~to our ~~rights~~stockholders toat ~~receive~~the ~~payments~~conclusion ifof ~~XERECEPT~~this process, aalthough ~~phase~~the ~~3 investigational~~amount ~~drug~~and ~~for~~timing ~~brain~~cannot presently be determined.

Liquidation Basis of Accounting 10

Following the filing of the Certificate of Dissolution with the State of Delaware on December 17, 2009, we began reporting on a liquidation basis of accounting instead of a going concern basis of accounting. Under the liquidation basis of accounting, the Statement of Net Assets (Liquidation Basis) and Statement of Changes in Net Assets (Liquidation Basis) are the principal financial statements presented. In these statements, our assets are stated at their estimated net realizable value, which is the amount of cash into which the assets are ultimately expected to be converted, less any conversion costs. Liabilities are reported at their estimated settlement amount, which is the amount of cash expected to be paid to liquidate the obligation, including any direct costs of the liquidation. Additionally, we have established a reserve for all estimated future general and administrative expenses and other costs expected to be incurred while we are in dissolution, which under the DGCL is expected to be at least three years. The reserve for these estimated expenses primarily includes accruals such as personnel costs for administrative work, facilities including previously unaccrued future lease and other obligations, professional services, legal and accounting costs, corporate expenses (insurance, directors’ fees and statutory fees) and estimated expenses to establish a trust or other facility to preserve our continuing economic interest in XERECEPT^®, which is an investigational drug being developed by another party. The estimated future costs are reviewed at least quarterly and adjusted as appropriate. There can be no assurance that these estimated values will ultimately be realized.

edema associated with cerebral tumors, is successfully developed and commercialized by Celtic Pharma or sold to a third party.

In March 2009, our Board of Directors hired RBC as our financial advisor to assist in the evaluation of various options to enhance stockholder value, including a potential sale of the Company or its major assets. To date, no transactions have been identified which the Board of Directors believes would return a greater value to stockholders than a liquidation. Subsequent to our fiscal year end, in August 2009, our Board of Directors approved a Plan of Complete Liquidation and Dissolution of the Company, subject to stockholder approval.

Critical Accounting Policies

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make judgments, assumptions and estimates that affect the ~~amounts~~ amounts reported and the disclosures made. Actual results could ~~differ~~ differ materially from those estimates. The following are critical accounting policies and estimates that we believe are the most important and/or subjective items used in determining our ~~financial~~net ~~condition~~assets ~~and~~in liquidation, changes in these net assets, as well as the results of operations as presented in the consolidated financial statements.

Liquidation Accounting and Estimates Involved in Determining Accrued Liquidation Expenses

Because future costs to be incurred during the dissolution period are currently not known with any degree of certainty, we have estimated these future costs in our statement of net assets. Our estimate includes personnel costs for administrative work, facilities including lease and other obligations, professional services expected to be used, legal and accounting costs, corporate expenses (such as insurance, directors’ fees and statutory fees) and estimated expenses to establish a trust or other facility to preserve our continuing interest in XERECEPT^®, which is an investigational drug being developed by another party. These estimates are reviewed at least quarterly and adjusted as appropriate. Estimates for future levels of costs are highly subjective, and as an example of this subjectivity, as of June 30, 2010 we decreased the estimate by $239,000 from the level established on December 17, 2009. This is comprised of both a “reduction in the estimated settlement amount of liabilities” and a “reduction in income taxes payable”. In the future, the estimated realizable value of assets and liabilities may decrease or increase, so stockholders should be aware of the risks that their dissolution payments, if any, may be less than estimated in the consolidated statement of net assets (liquidation basis).

Estimates Involved in Determining Fair Value of Investments

We estimate the fair value of our investments in Auction Rate Securities, or ARS, based on models of discounted cash flow and assumptions regarding future interest rates. The Company’s investments in ARS were initially structured to provide liquidity via an auction process that reset the applicable interest rate at predetermined calendar intervals. Beginning in February 2008, failed auctions occurred throughout the ARS market, and since then all auctions for our ARS have been unsuccessful. While the credit rating of these securities remains high and the ARS are paying interest according to their terms, as a result of the potentially long maturity and lack of liquidity for ARS, we have recorded impairment charges to reflect our judgment that the decline in value is other-than-temporary. Models estimating the value of ARS are complex and require estimates that can significantly change their value.

Revenue recognition

~~Revenue~~During the period prior to our filing for dissolution, revenue from nonrefundable up-front fees where we continue involvement through a service agreement or other obligation ~~is initially~~was initially classified as “deferred revenue,” a liability on our consolidated balance sheet. We subsequently ~~amortize~~amortized the deferred revenue into “collaboration service revenue” in the consolidated statement of operations over the period of our service obligations. Technology and collaboration service revenue iswas recognized according to the terms of the contractual agreements to which we ~~are~~were a party, when our performance requirements ~~have~~were ~~been~~ fulfilled, the amount iswas fixed and determinable, and collection iswas reasonably assured. Revenue from license fees with non-cancelable, non-refundable terms and no future performance obligations is was recognized when collection iswas assured. Milestone payments ~~are~~ were recognized when we ~~have~~ fulfilled development milestones and collection iswas ~~also~~ assured. Revenue from services performed for other parties iswas recorded during the period in which the expenses ~~are~~were incurred. ~~In fiscal 2009, we terminated the~~ collaboration and services agreement with Celtic Pharma effective June 30, 2009, and accordingly recognized the remaining deferred revenue related to this agreement. As of June 30, 2009, we no longer had any deferred revenue on our balance sheet.

Royalty revenue iswas generally recorded when payments ~~are~~ were received, which is often was one to two quarters after the period in which the products sales ~~have~~ occurred, because there iswas no ~~information~~ information available to us on the product sales until the time we receive the royalty payment.

Revenue arrangements with multiple components ~~are~~were divided into separate units of accounting if certain criteria ~~are~~were met, including whether the delivered component ~~has~~had stand-alone value to the customer, and whether there iswas objective reliable evidence of the fair value of the undelivered items. Consideration received iswas allocated among the separate units of accounting based on their relative fair values, and the applicable revenue recognition criteria ~~are~~were identified and ~~applied~~ applied to each of the units.

9 ~~Research and development expenses~~

Our research and development costs are expensed as incurred. Research and development includes clinical trial costs, development and manufacturing costs for investigational drugs, payments to clinical and contract research organizations, compensation expenses for drug development personnel, consulting and advisor costs, preclinical studies and other costs related to development of our product candidates. Research and development expenses include expenses that are incurred over multiple reporting periods, such as fees for contractors and consultants, patient treatment costs related to clinical trials and investigational drug manufacturing costs. We assess the level and related costs of the services provided during each reporting period, including the percentage of work completed through each reporting period, to determine the portion to expense in each period. The assessment of the percentage of work completed that determines the amount of research and development expense that should be recognized in a given period sometimes requires significant judgment. We apply our judgment and base our estimates on historical experience and the information available at the time of reporting.

Estimates Involved in Determining Fair Value of Investments

We estimate the fair value of our investments in Auction Rate Securities, or ARS, based on models of discounted cash flow and assumptions regarding future interest rates. The Company’s investments in ARS were initially structured to provide liquidity via an auction process that reset the applicable interest rate at predetermined calendar intervals. Beginning in February 2008, failed auctions occurred throughout the ARS market, and since then all auctions for our ARS have been unsuccessful. While the credit rating of these securities remains high and the ARS are paying interest according to their terms, as a result of the potentially long maturity and lack of liquidity for ARS, we believe that the value of the ARS in our portfolio has been impaired and we have recorded impairment charges to reflect our judgment that the decline in value is other-than-temporary. Models estimating the value of ARS are complex and require estimates that can significantly change their value.

Equity Financing Warrants

We have issued warrants in connection with sales of our common stock to raise capital. We generally account for warrants we issue as a component of stockholders’ equity when permitted under accounting rules. However, when the terms of the warrants require registered shares to be delivered to the investors, or require potential cash payments to be made under specified circumstances, we account for the estimated fair value of the warrants as a liability under the terms of Emerging Issues Task Force 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. This standard specifies that our ability to deliver registered shares upon an exercise of the warrants and our potential obligation to cash-settle the warrants are deemed to be beyond our control, and therefore the value of the warrants must be accounted for as a liability. As with stock-based compensation, there is a high degree of subjectivity involved in determining the input values needed to estimate the fair value of the warrants. Changes in these assumptions, particularly the estimated volatility, can materially affect the resulting estimates of the fair values of the warrants on our consolidated balance sheet.

Stock-based compensation

We account for stock options granted to employees using an estimate of the fair value of the stock option on the date that it is granted. This estimated fair value is recognized as an expense in the consolidated statement of operations on a straight-line basis over the vesting period of the underlying stock option, generally four years for employees and one to three years for directors. There is a high degree of subjectivity involved in estimating the input values needed to estimate the fair value of stock options. Changes in these assumptions, particularly the estimated volatility and the estimated term of the options, can materially affect the resulting estimates of the fair values of the options that are granted. The expenses recorded for stock-based compensation in our financial statements may differ significantly from the actual value realized by the recipients of the stock options. Due to the declines in our stock price over the past several years, stock options that we have issued have resulted in little or no value to the recipients. Under accounting requirements, the expenses recorded in the consolidated financial statements are not adjusted to the actual amounts, if any, realized by stock option recipients. Users of the financial statements should understand that the expenses we recognize for stock-based compensation do not result in any payments of cash by us.

Recent Accounting Pronouncements

InWe ~~October~~do ~~2008,~~not ~~the~~believe ~~Financial~~there ~~Accounting~~are ~~Standards~~any ~~Board,~~recent ~~or FASB,~~accounting ~~issued~~pronouncements FASB Staff Position FSP SFAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active. FSP SFAS 157-3 clarifies the application of SFAS No. 157 in a market that isare ~~not~~likely ~~active~~to ~~and~~be ~~addresses~~material ~~application issues such as the~~to ~~use of internal assumptions when relevant observable data does not exist,~~ the ~~use~~presentation ofor ~~observable~~amounts ~~market~~we ~~information~~report ~~when~~in ~~the market~~our isfinancial ~~not~~statements ~~active~~under ~~and~~ the ~~use~~liquidation ofbasis ~~market quotes when assessing the relevance~~ of ~~observable and unobservable data. The guidance~~ ~~in FSP SFAS 157-3 was effective immediately upon adoption and did not have a significant impact on our consolidated financial position or results of operations~~accounting.

InCHANGES ~~April~~IN ~~2009,~~ESTIMATED ~~the~~NET ~~FASB~~REALIZABLE ~~issued~~VALUE ~~FSP FAS 107-1 and~~OF ~~APB 28-1, Interim~~ASSETS ~~Disclosures~~AND ~~about Fair Value of Financial~~LIABILITIES Instruments. This FSP amends SFAS No. 107, Disclosures About Fair Value of Financial Instruments, to require disclosures regarding fair value of financial instruments. This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require certain disclosures in summarized financial information at interim reporting

Upon adoption of the liquidation basis of accounting following our filing the Certificate of Dissolution, we wrote-off all assets to a net book value of zero because of our belief that no 12value would be recovered from the sale of the assets. Included in the write-off of assets were prepaid and other expenses of $493,000, which included prepaid insurance for policies that did not provide for refunds for unused portion of the premiums and policies for coverage over the dissolution period. In addition, our unsold property and equipment, such as desks and computers, were determined to have no value to other parties. Also, upon adoption of the liquidation basis of accounting, we accrued the estimated costs expected to be incurred during the dissolution period, which under DGCL must be a minimum of three years of corporate existence. Therefore, we accrued estimated costs for this three-year period, including personnel costs for administrative work, facilities including previously unaccrued future lease and other contractual obligations, professional services and legal costs, directors’ fees, statutory fees and estimated future expenses to establish a facility (such as a trust) to preserve our continuing economic interest in XERECEPT®, which is an investigational drug being developed by another party.

~~Table~~We periodically review and re-evaluate the estimates of ~~Contents~~future expenses through the liquidation process. Following the May 8, 2010 termination of the period for creditors to submit certain claims to the Company and a review of actual dissolution expenses from December 18, 2009 through June 30, 2010, the Company has recorded a reduction of $186,000 in the estimated settlement amount of liabilities and has recorded this as an increase in the estimated net assets available to common stockholders. In addition, the Company has recorded a reduction of $53,000 in its estimated income taxes payable.

periods. This FSP is effective for reporting periods ending after June 15, 2009. On June 30, 2009, we adopted this FSP, which did not have a material effect on the determination or reporting of our financial results.

In April 2009, the FASB issued FSP FAS 157-4, 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 FSP provides additional guidance for estimating fair value in accordance with SFAS No. 157, Fair Value Measurements, when the volume and level of activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 provides guidance on how to determine the fair value of assets and liabilities under SFAS 157 in the current economic environment and reemphasizes that the objective of a fair value measurement remains an exit price. If the Company were to conclude that there has been a significant decrease in the volume and level of activity of the asset or liability in relation to normal market activities, quoted market values may not be representative of fair value and the Company may conclude that a change in valuation technique or the use of multiple valuation techniques may be appropriate. This FSP is effective for reporting periods ending after June 15, 2009. On June 30, 2009, we adopted this FSP, which did not have a material effect on the determination or reporting of our financial results.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events, (“SFAS 165”). SFAS 165 establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Among other things, SFAS 165 requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. The adoption of SFAS 165 effective June 30, 2009 did not have a material effect on our consolidated financial statements.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162, (“SFAS 168”). SFAS 168 establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 will be effective for our interim financial statements for the quarter ending September 30, 2009. SFAS 168 does not change GAAP and therefore will not have a material impact on our consolidated financial statements.

RESULTS OF OPERATIONS

After filing the Certificate of Dissolution, we adopted the liquidation basis of accounting and accordingly do not present a statement of operations for the period subsequent to the filing. ~~Overview~~Therefore, a discussion regarding the results of operations is not applicable for periods after December 17, 2009. Please refer to the discussion under “Changes in Estimated Net Realizable Value of Assets and Liabilities” immediately above for the discussion of changes subsequent to December 17, 2009.

We reported net income for the fiscal year ended June 30, 2009 primarily due to our terminating an agreement for which we were required to provide on-going services to a corporate collaborator, resulting in the recognition of approximately $18.8 million in revenue that had previously been deferred. In addition, for the fiscal year ended June 30, 2009, we received approximately $7.1 million in royalties which were also recognized as revenue. Our operating expenses totaled approximately $22.9 million, substantially all of which resulted in an outflow of cash. Because we recognized revenue into the statement of operations for which the cash was previously received, in addition to the revenue for which cash was received in 2009, there was a significant difference between our net income and our cash flows. For the fiscal year ended June 30, 2009, net income was approximately $3.1 million, and cash used in operations was approximately $16.4 million. More detailed descriptions of key components of the fiscal 2009 results of operations follows, along with comparisons to the results of operations for fiscal years 2008 and 2007.

Revenues

Prior to filing the certificate of dissolution, we recorded revenues of approximately $6.0 million ~~The~~for ~~major~~the ~~components~~170-day period ended December 17, 2009, primarily from receipt of ~~our~~one-time ~~revenue~~payments following ~~are~~the termination of a contractual agreement between NTI and Merz Pharmaceuticals GmbH, or Merz. We recorded the entire amount received as ~~follows~~revenue ~~(in~~because we have no further obligations to ~~thousands):~~Merz. There were no other material sources of revenue during the period that ended on December 17, 2009.

							Increase (Decrease)
	Fiscal Year Ended June 30,						from Prior Year
	2009		2008		2007		2009/2008			2008/2007
XERECEPT sale	$	18,792	$	5,500	$	5,500	$	13,292		$	—
Collaboration services		493		1,007		5,320		(514	)		(4,313	)
Technology sale and collaboration services		19,285		6,507		10,820		12,778			(4,313	)
Royalty		7,065		8,253		6,853		(1,188	)		1,400
	$	26,350	$	14,760	$	17,673	$	11,590		$	(2,913	)

During the fiscal year ended June 30, 2009, we recorded royalty revenue of $7.1 million compared to $8.3 million for the fiscal year ended June 30, 2008. Royalties were lower in the fiscal year ended June 30, 2009 because of scheduled reductions in the royalty rate we were entitled to receive following a 2008 amendment to the Merz agreement. During the fiscal year ended June 30, 2009, we recorded technology sale and collaboration services revenue of $19.3 million compared to $6.5 million for the fiscal year ended June 30, 2008. The increase in revenue of $12.8 million in fiscal 2009 was primarily due to the termination of an agreement under which we were obligated to provide services to Celtic. When the service agreement was terminated in fiscal 2009 we no longer had any contractual service obligations remaining, therefore we recognized the remaining unamortized deferred revenue (previously reported as a liability on the balance sheet) as revenue in the statement of operations.

Total revenues of $26,350,000 for fiscal year ended June 30, 2009 increased by $11,590,000 from revenues of $14,760,000 in fiscal 2008. Our fiscal 2009 revenues included $18,792,000 deferred earlier from the sale of XERECEPT, which we recognized in fiscal 2009 because we terminated our obligation to provide on-going services to Celtic Pharma. In addition, we recognized and received $7,065,000 from royalties on the commercial sales of memantine by Merz and its marketing partners and $493,000 from the reimbursement of the direct expenses incurred for services provided to Celtic Pharma for the development of XERECEPT in the United States. Revenue from the sale of XERECEPT was higher in fiscal 2009 than in fiscal 2008 because we terminated our services agreement with Celtic Pharma in fiscal 2009, requiring us to recognize additional revenue previously deferred. Royalties were lower in fiscal year 2009 compared to fiscal 2008 because of scheduled reductions in the royalty rate we receive following a 2008 amendment to the Merz agreement. Revenues from collaboration services declined by $514,000, or 51%, because we completed the transition of all remaining XERECEPT drug development work to Celtic Pharma during fiscal 2009.

Total revenues of $14,760,000 for fiscal year ended June 30, 2008 decreased by $2,913,000 from revenues of $17,673,000 in fiscal 2007. Our fiscal 2008 revenues consisted of $8,253,000 from royalties on the commercial sales of memantine by Merz and its marketing partners, $5,500,000 recognized from the fiscal 2006 sale of our rights and interests in XERECEPT to Celtic Pharma, and $1,007,000 from the reimbursement of the direct expenses incurred for services provided to Celtic Pharma for administering the Phase 3 clinical trials and manufacturing of XERECEPT in the United States. Royalties were higher for fiscal year 2008 compared to fiscal 2007 because of higher sales of memantine by Merz and its marketing partners. Revenues from the sale of XERECEPT were the same for fiscal 2008 and 2007 because we recognized the up-front payment of $33 million we received in November 2005 on a straight-line basis over the contractual and estimated term of our obligations, which extended to November 2011 prior to the amendment in June 2009. Revenues from collaboration services declined by $4,313,000, or 81%, to $1,007,000 for fiscal 2008 compared to fiscal 2007 because we transitioned most of the XERECEPT drug development work to Celtic Pharma.

In future periods, we do not expect to record any further revenue from our sale of XERECEPT to Celtic Pharma, or from the provision of collaboration services to Celtic Pharma for XERECEPT. We expect royalty revenue to increase in the first quarter of fiscal 2010 as compared to the first quarter of fiscal 2009 following receipt of a final payment from Merz resulting from our agreement with Merz and CMCC to terminate the license under which we previously received royalties. After the first quarter of fiscal 2010, we do not expect to record any additional royalty revenue from the sales of memantine in the United States or elsewhere.

Research and Development Expenses

During the 170-day period ended December 17, 2009 we did not record any research and development ~~Because~~expenses because we ~~have~~terminated ~~been~~our inresearch and development programs prior to the ~~business~~beginning of ~~drug~~the fiscal ~~development~~year. ~~and~~For ~~our~~a portion of the year ended June 30, 2009 we were engaged in the development of ~~drug~~an ~~candidates~~investigational ~~have~~new ~~not~~drug ~~been~~to ~~approved~~treat ~~for~~acute ~~sale~~ischemic stroke, ~~our~~and we recorded research ~~and~~ and development ~~costs~~expenses ~~have~~of ~~been~~$17.6 million. ~~expensed~~These asfiscal ~~incurred.~~2009 ~~Research~~ research and development ~~includes~~expenses included costs for conducting our clinical trial ~~costs~~and manufacturing of the investigational drug during the first half of the fiscal year, ~~development~~as well as costs to close down the clinical trial and close the dedicated manufacturing ~~costs~~facility for ~~investigational~~the ~~drugs~~drug during the second half of the fiscal year, as ~~payments~~well toas employee termination costs for those that had been working on the program. The fiscal ~~clinical~~2009 ~~and~~costs ~~contract~~of $17.6 million were lower than the research ~~organizations,~~and ~~compensation~~ development expenses ~~for~~of $24.6 million in fiscal 2008 because the drug development ~~personnel,~~program ~~consulting~~was terminated approximately mid-way through fiscal 2009, and lower ~~advisor~~expenses as a result of the shorter duration of the stroke drug program in 2009 more than offset the incremental expenses incurred during 2009 to close down the program.

10 14

costs, preclinical studies and other costs related to development of our product candidates. The following table shows our research and development costs by product under development (in thousands):

							Increase/(Decrease)
	Fiscal Year Ended June 30,						from Prior Year
	2009		2008		2007		2009/2008			2008/2007
Viprinex for stroke	$	16,247	$	22,071	$	21,208	$	(5,824	)	$	863
XERECEPT		487		1,061		5,529		(574	)		(4,468	)
Preclinical programs for Alzheimer’s and Huntington’s diseases		850		1,449		—		(599	)		1,449
	$	17,584	$	24,581	$	26,737	$	(6,997	)	$	(2,156	)

In fiscal 2009, 2008 and 2007, the majority of our research and development efforts were focused on Viprinex, an investigational drug for the treatment of acute ischemic stroke, to which we acquired rights in July 2004. Following a December 16, 2008 interim analysis of the Viprinex Phase 3 trials, we learned that the efficacy of the drug did not meet predetermined criteria for continued development, and we terminated the program.

During the fiscal year ended June 30, 2009, we incurred expenses of $16,247,000 related to the development of Viprinex for acute ischemic stroke, a decrease of $5,824,000, or 26% from the expenses for the fiscal year ended June 30, 2008. Costs for the Viprinex program decreased because we terminated the clinical trial following receipt of the interim analysis in December 2008, significantly reducing clinical trial costs by almost $10.0 million. Partially offsetting the reduction in Viprinex clinical trial costs were expenses of approximately $3.7 million incurred to terminate our agreements for the snake farm and dedicated facility for the supply and purification of the venom used as an active ingredient in Viprinex. Expenses incurred for the development of XERECEPT declined $574,000 in fiscal 2009 compared to fiscal 2008 as we completed transition of all XERECEPT development work to Celtic Pharma during the year ended June 30, 2009. The decrease in our research and development costs for XERECEPT is comparable to the decrease in revenue for reimbursement of these costs by Celtic Pharma. Expenses for our preclinical programs declined by $599,000 during the year ended June 30, 2009, as compared to the year ended June 30, 2008, because we terminated these programs following the termination of the further development of Viprinex.

During the fiscal year ended June 30, 2008, our expenditures on Viprinex aggregated $22,071,000, an increase of 4% from expenses of $21,208,000 for fiscal 2007. The Viprinex clinical trial expenses increased in fiscal year 2008 due to additional patient enrollment into our clinical trials. The increased clinical trial costs were partially offset by lower manufacturing expenses following the completion of certain development work on the snake farm and purification facility. In fiscal 2008, our expenditures for XERECEPT of decreased by $4,468,000 from the level in fiscal 2007 as we transitioned substantially all drug development activities to Celtic Pharma. The decrease in our research and development costs for XERECEPT was comparable to the decrease in revenue for reimbursement of these costs by Celtic Pharma. During the fiscal year ended June 30, 2008, we entered into two collaboration and license agreements with Buck for the development of proteins in preclinical development for the treatment of Alzheimer’s and Huntington’s diseases. Under these agreements, we funded specified preclinical research work as performed by Buck in return for development rights to the proteins that were the subject of their research, and there were no comparable costs for fiscal 2007.

If stockholders approve the Plan, we do not expect to incur significant research and development costs in any future periods.

General and Administrative Expenses

General and administrative expenses ~~consist~~were ~~primarily~~approximately ~~of personnel~~$1.5 million ~~costs~~ for ~~executive~~the ~~management~~170-day period from July 1, ~~finance~~2009 through December 17, ~~business~~2009, representing costs associated with the preparation for the ~~development~~wind-down ~~and~~of ~~human~~the ~~resources,~~Company’s asoperations ~~well~~during asthis ~~professional~~period. Costs for the fiscal year ending June ~~expenses~~30, ~~such~~2009 asincluded ~~legal~~general and ~~audit~~administrative expenses associated with an operating entity, and aggregated ~~facilities~~$5.1 million, ~~costs~~a ~~such~~decrease ~~as rent~~of $1.8 million from fiscal 2008, when general and administrative ~~insurance~~expenses totaled $6.9 million. General and administrative expenses ~~were~~decreased asin ~~follows~~fiscal ~~(in~~2009 ~~thousands):~~compared to fiscal 2008 due to a lower number of administrative employees and termination of various consulting services previously used.

						(Decrease) Increase
Fiscal Year Ended June 30,						from Prior Year
2009		2008		2007		2009/2008			2008/2007
$	5,082	$	6,876	$	6,537	$	(1,794	)	$	339

General and administrative expenses decreased $1,794,000, or 26%, for the fiscal year ended June 30, 2009 compared to the fiscal year ended June 30, 2008. The lower expenses were primarily the result of a reduction in the number of employees following the failure of our Viprinex program, partially offset by severance payments to the terminated employees. In addition, we terminated substantially all investor relation activities and closed our office in New Jersey, further reducing costs in fiscal 2009.

General and administrative expenses increased $339,000, or 5%, for the fiscal year ended June 30, 2008 compared to the fiscal year ended June 30, 2007. The increase was primarily due to an increase in compensation and benefits after we hired additional personnel to address earlier material weaknesses in our internal control and an increase in legal and consulting fees related to new contracts, which was partially offset by a reduction in audit and consulting fees following our hiring of the additional administrative personnel.

As a result of the winding-down of our activities to date, we expect cash general and administrative expenses to be less than $1.0 million during each of the quarters ending September 30 and December 31, 2009, including additional employee termination costs. These costs are expected to be reduced further if the Plan is approved.

Impairment Charge for Property and Equipment

WeDuring ~~recorded~~the a170-day ~~charge~~period ofended ~~$193~~December 17,~~000~~ ~~for~~2009, ~~specialized~~we ~~equipment utilized~~recorded inan ~~the~~impairment ~~purification~~charge of ~~snake~~$34,000 ~~venom~~on property ~~used~~and asequipment ~~the~~remaining ~~active ingredient~~ in our ~~investigational~~office ~~drug~~prior ~~Viprinex.~~to ~~Following~~its ~~the termination~~closure. ofDuring the ~~clinical~~fiscal ~~trial~~year ~~program~~ended June 30, 2009 we ~~determined~~recorded ~~that the~~an ~~carrying~~impairment ~~costs~~charge ~~for~~of ~~the~~$193,000 ~~asset~~for ~~were~~specialized noequipment ~~longer~~used ~~recoverable~~in ~~and~~the ~~recorded~~manufacture ~~the~~of ~~impairment~~our ~~charge~~investigational ~~during~~drug ~~the fiscal year ended June 30, 2009~~Viprinex. There were no comparable charges ~~for~~during the fiscal ~~years~~year ended June 30, 2008 ~~or 2007~~.

Impairment Charge for Decrease in Fair Value of Investments

We recorded charges of $1,013,000 and $1,778,000 for the fiscal years ended June 30, 2009 and 2008, respectively, for the decrease in value of our investments in ARS. ARS were structured to provide liquidity via an auction process that resets the applicable interest rate at predetermined calendar intervals. Beginning in February 2008, auctions failed to settle for the ARS held in our investment portfolio and we believe the value of these investments have been impaired. The write-down of the values of the ARS held in our portfolio is based on a model of discounted cash flows. Further charges were recorded in fiscal 2009 in addition to the charges in fiscal 2008 due to further deterioration of the credit markets in fiscal 2009. There were no comparable charges for fiscal 2007.

Interest Income

Interest income decreased toduring ~~$748,000 for~~ the ~~fiscal~~170-day ~~year~~period ended ~~June~~ December 3017, 2009 ~~from~~compared ~~$1,254,000~~to ~~for~~ the fiscal year ended June 30, ~~2008,~~2009 adue ~~reduction~~to ofthe ~~$506,000,~~shorter orduration ~~40%.~~of ~~The lower interest income in fiscal 2009 was~~ the ~~result~~reporting ofperiod ~~both lower interest rates~~ and lower ~~balances in our~~ average cash and ~~investments accounts~~investment account balances. Interest income ~~increased~~decreased toin ~~$1,254,000 for~~ the fiscal year ended June 30, 2009 ~~2008~~compared ~~from~~to ~~$493,000 for~~ the fiscal year ended June 30, ~~2007~~2008 due to ~~substantially~~both ~~higher~~lower average cash and investment ~~investments~~account balances ~~following~~and anlower ~~underwritten public offering in November 2007, more than offsetting the decline in~~ interest ~~rates~~ ~~between the periods~~rates.

Realized Gain on Sale of Long-term Investments

During the 170-day period ended December 17, 2009 we recorded gains of $0.2 million on sales of investments, which was comparable to the gains reported for the fiscal year ended June 30, 2009. Gains (or losses) on sales of investments will vary based on the opportunities to sell individual investment securities. During the fiscal year ended June 30, 2008 the Company did not record any gains or losses on sales of long-term investments.

Impairment charge for decrease in fair value of investments

No impairment charge was recorded for the 170-day period ended December 17, 2009 as we did not conclude that any of our investment securities experienced an other-than-temporary decline in value. During the fiscal years ended June 30, 2009 and 2008, we recorded charges of $1.0 million and $1.8 million, respectively, for the decrease in value of our investments in ARS. Because auctions failed to settle for the ARS held in our investment portfolio, we believed the value of these investments had been impaired and accordingly recorded the charges based on models of discounted cash flows. Further charges were recorded in fiscal 2009 in addition to the charges in fiscal 2008 due to further deterioration of the credit markets in fiscal 2009. Following various sales of ARS previously held in our portfolio, as of June 30, 2010, we continued to hold one ARS valued at $588,000.

Interest Expense

Interest expense for the fiscal year ended June 30, 2008 relates to charges incurred for a bridge financing transaction ~~in fiscal 2008~~ for which there was no comparable transaction in ~~fiscal~~the ~~years~~170-day period ended December 17, 2009 or ~~2007~~the fiscal year ended June 30, 2009.

Non-cash gain (loss) on change in fair value of warrants 16

Based on declines in our stock price and a decrease in our estimate for stock price volatility during the 170-day period ended December 17, 2009, we recorded a non-cash gain based on the decrease in the estimated fair value of warrants issued during an earlier financing transaction. During the fiscal year ended June 30, 2009, we recorded a non-cash loss due to an increase in the fair value of the warrants, which was largely driven by an increase in our stock price volatility, related to the announcement, as well as anticipation of the announcement, of our clinical trial results. During the fiscal year ended June 30, 2008 we recorded a non-cash gain based on the decrease in the fair value of the warrants, which was largely the result of a decrease in the price of our common stock.

~~Non-cash (Loss)~~Provision ~~Gain~~for onincome ~~Change in Fair Value of Warrants~~taxes

During the ~~fiscal~~170-day ~~year~~period ended ~~June~~December 3017, 2009, we recorded a provision for income taxes of ~~non-cash~~$53,000 ~~loss~~comprised of $~~255~~16,000 onfor ~~the~~federal ~~increase~~alternative inminimum ~~the~~tax ~~estimated~~(“AMT”), ~~fair value~~due ofto ~~equity~~certain limitations ~~warrants~~on wethe ~~previously~~utilization ~~issued.~~of ~~The~~prior ~~increase~~years ~~in estimated~~net ~~fair~~operating ~~value~~loss ofcarryforwards ~~the~~to ~~warrants~~offset ~~was~~current year ~~primarily~~alternative ~~due~~taxable toincome, ~~an increase~~and in$37,000 ~~the~~for ~~volatility~~California ofstate ~~our~~income ~~common stock~~taxes, ~~which~~due isto ~~a key~~temporary ~~component~~provisions ~~used~~enacted in ~~estimating~~California ~~the~~that ~~fair~~prevent ~~value~~utilization of ~~equity~~certain ~~warrants. The~~net ~~volatility~~operating ~~increased during fiscal 2009 as a result of~~loss ~~overall~~carryforwards ~~market~~and ~~volatility~~research ~~increasing,~~and asdevelopment ~~well~~tax ascredit ~~our announcement~~carryforwards. ofWe ~~the~~did ~~failure~~not ofrecord ~~our~~a ~~clinical trials to~~provision ~~demonstrate~~for ~~efficacy~~income taxes for ~~Viprinex.~~either ~~During~~of the ~~fiscal~~ years ended June 2030, 2009 or 2008 ~~and~~due ~~2007,~~to wethe ~~recorded~~earlier accumulation ~~non-cash~~of ~~gains~~net ~~on decreases~~operating inloss ~~the~~carryforwards ~~fair~~and ~~value~~our ofability ~~warrants,~~to ~~primarily~~utilize ~~due~~these losses to offset ~~decreasing~~taxable ~~prices~~income, ofor ~~our~~due ~~common~~to ~~stock~~losses ~~into~~reported ~~which~~in the ~~warrants were~~reporting ~~exercisable~~periods.

The non-cash changes in the estimated fair value of warrants represent changes in the Black-Scholes value of warrants we issued in April 2007. The April 2007 warrants require us to provide the investors with registered shares upon the warrants’ exercise. The warrants may also require cash payments to be made in connection with certain fundamental transactions involving us or our common stock. Because accounting rules specify that delivery of registered shares is beyond the control of the company that issued the warrants, and also because in some circumstances there may be cash payments to the investors in lieu of a warrant exercise, we are required to account for the value of these warrants as a liability. We have estimated the liability based on the Black-Scholes option pricing model, and this warrant liability is re-valued on each reporting date with changes in the fair value from prior periods reported as a non-cash charge or gain to earnings.

LIQUIDITY AND CAPITAL RESOURCES

We assess liquidity primarily by the cash ~~and~~which ~~investments available~~we believe is necessary to fund the wind-down of our operations and our remaining contractual obligations, ~~which~~as ~~have~~well ~~been~~as ~~significantly~~to allow for reasonable ~~curtailed~~contingencies ~~since~~identified in the ~~failure~~dissolution ofprocess. ~~Viprinex~~Short-term ~~for~~investments ~~acute~~are ~~ischemic~~also considered if ~~stroke.~~there Weis ~~also~~a ~~assess~~high ~~liquidity~~assurance byof ~~the~~our ~~working~~ability ~~capital~~to convert them into cash. Investments such as our ARS, ~~modified~~for towhich ~~exclude~~we ~~deferred~~do ~~revenue~~not ~~and~~believe ~~the~~there ~~warrant~~is ~~liability~~a high assurance of our ability to readily convert to cash, ~~available~~are tonot ~~fund~~considered ~~operations~~for this liquidity analysis. WeBased ~~exclude~~on ~~deferred~~our ~~revenue~~liquidity assessments, and following ~~the~~stockholder ~~warrant~~approval ~~liability~~of ~~from~~ our ~~working~~Plan ~~capital~~of inDissolution, ~~the~~on ~~table~~October 27, 2009, our board of directors ~~below~~declared asan weextraordinary dodividend ~~not~~of ~~believe~~$0.75 ~~these~~per ~~items~~share, ~~will~~which ~~ever~~was ~~require payments~~paid ~~from~~to our ~~funds~~common stockholders on November 18, 2009. ~~The~~On November 19, 2009, following ~~table~~the ~~shows~~sale of most of our ~~cash~~remaining ~~and~~ARS, our ~~short-term~~board ~~investments~~of ~~and~~directors ~~working~~declared ~~capital~~an ~~(in~~additional ~~thousands)~~extraordinary dividend of $0.18 per share, which was paid to our common stockholders on December 9, 2009. These two payments aggregated $0.93 per share, or approximately $25.1 million.

	June 30,		June 30,
	2009		2008
Cash, cash equivalents and short-term investments	$	24,049	$	29,980
Working capital (excluding deferred revenue and the warrant liability)	$	23,718	$	27,357

Following completion of the process specified under the DGCL to allow potential claims to be submitted to the Company and resolved, we intend to distribute any remaining cash to our stockholders, although we have not determined the timing for this distribution. The currently estimated amount of the cash expected to be available at the conclusion of the liquidation process is approximately $1.5 million, and is represented in the financial statements by the “net assets in liquidation available to common stockholders” as of June 30, 2010. In order for this amount to be ultimately distributed to our stockholders, claims would need to come in at or below our current estimates and costs of the dissolution process would need to come in at or below our current estimates. If either claims or costs are higher, stockholders would receive less, and it is possible that there could be no further distributions other than those which have already been made.

~~Since~~In ~~our inception in 1987~~addition, ~~we have applied~~ the ~~majority~~“net ofassets our resources to our research and development programs and have generated only limited operating revenue. Following the termination of our Viprinex program, our Board of Directors conducted a review of strategic options, seeking a greater return for stockholders than would be received in a liquidation~~, while~~ ~~simultaneously~~available ~~concluding and terminating our existing contractual commitments. Subsequent~~ to ~~our~~common ~~fiscal~~stockholders” ~~year~~includes ~~end~~$588, in000 ~~August~~which ~~2009,~~we ~~our~~estimate ~~Board~~we ofcan ~~Directors~~recover ~~approved~~from athe ~~Plan~~sale of ~~Complete Liquidation~~our ~~and~~remaining ~~Dissolution of the Company~~ARS, ~~subject~~and ~~to stockholder~~if ~~approval.~~this Weamount ~~are~~is ~~in the process of reducing expenses~~not ~~and~~recoverable ~~terminating~~as ~~contractual~~we ~~relationships~~estimate, ~~and~~there ~~expect~~will ~~to distribute~~be ~~the~~less ~~majority of our remaining~~ cash toavailable for our ~~stockholders~~ ~~upon~~common ~~approval of the Plan~~stockholders.

As of June 30, 2009, our combined balance of cash, cash equivalents and short-term investments was approximately $24.0 million. Working capital as defined above was $23.7 million. Included in these balances are $5.5 million in ARS, which do not currently have active markets. Excluding the ARS, the cash, cash equivalents and investment securities we hold as of June 30, 2009 for which there are active markets are valued at approximately $18.5 million.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our consolidated financial condition, changes in our consolidated financial condition, expenses, consolidated results of operations, liquidity, capital expenditures or capital resources.

Contractual Obligations

Our noncancelable contractual obligations currently aggregate $85,000 and are ~~summarized~~all due before November 30, 2010. These are accrued in the ~~following table~~consolidated statement of net assets (liquidation basis). Noncancelable contractual obligations do not include services which we will require as we go through the dissolution process, which are also included in ~~thousands):~~our reserve for estimated costs during the liquidation period.

	Payments Due by Period
			Less Than 1
	Total		Year		1-3 Years		Over 3 Years
Operating lease obligation	$	397	$	292	$	105	$	—
Total	$	397	$	292	$	105	$	—

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

12 18

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm		2014
Audited Financial Statements
Consolidated Balance Sheets		21
Consolidated Statement of Net Assets (Liquidation Basis) as of June 30, 2010		15
Consolidated Statements of Operations		22
Consolidated Statement of Changes in Net Assets (Liquidation Basis) from December 18, 2009 to June 30, 2010		16
Consolidated Statements of Stockholders’ Equity (Deficit)		23
Consolidated Balance Sheet (Going Concern Basis) as of June 30, 2009		17
Consolidated Statements of Cash Flows		24
Consolidated Statements of Operations (Going Concern Basis) for the 170-Day Period ended December 17, 2009 and for the years ended June 30, 2009 and 2008		18
Notes to Consolidated Financial Statements		25
Consolidated Statements of Stockholders’ Equity (Deficit) (Going Concern Basis) for the 170-Day Period ended December 17, 2009 and for the years ended June 30, 2009 and 2008		19
Consolidated Statements of Cash Flows (Going Concern Basis) for the 170-Day Period ended December 17, 2009 and for the years ended June 30, 2009 and 2008		20
Notes to Consolidated Financial Statements		21

All schedules are omitted because they are not required or the required information is included in the consolidated financial statements or notes thereto.

13 19

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders Neurobiological Technologies, Inc.

We have audited the accompanying consolidated balance sheet of Neurobiological Technologies, Inc. as of June 30, 2009, the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for each of the two fiscal years in the period ended June 30, 2009, and the consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the period from July 1, 2009 through December 17, 2009. In addition, we have audited the consolidated statement of net assets in liquidation as of June 30, 2010, and the related consolidated statements of changes in net assets in liquidation for the period from December 18, 2009 through June 30, 2010. 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.

We have audited the accompanying consolidated balance sheets of Neurobiological Technologies, Inc. as of June 30, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for each of the three fiscal years in the period ended June 30, 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.

We conducted our audits in accordance with 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. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly we express no such opinion. An audit also 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 audits provide a reasonable basis for our opinion.

InAs ~~our~~described ~~opinion,~~in Note 1 to the consolidated financial statements ~~audited by us present fairly~~, ~~in all material respects,~~ the ~~consolidated financial~~stockholders ~~position~~ of Neurobiological Technologies, Inc. ~~at June 30,~~approved ~~2009~~a plan of liquidation and ~~2008~~dissolution on October 27, 2009, and the ~~consolidated~~Company ~~results~~filed ofa ~~its operations~~certificate ~~and~~of ~~its~~dissolution ~~cash~~on ~~flows~~December 17, ~~for~~2009. ~~each~~As ofa result, the Company ~~three~~has ~~fiscal~~changed ~~years in~~its ~~the~~basis ~~period~~of ~~ended~~accounting ~~June~~for periods subsequent to December 3017, 2009, infrom ~~conformity with~~the ~~U.S. generally~~going ~~accepted~~concern ~~accounting~~basis ~~principles~~to a liquidation basis.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Neurobiological Technologies, Inc. at June 30, 2009, the consolidated results of its operations and its cash flows for each of the two fiscal years in the period ended June 30, 2009 and for the period from July 1, 2009 to December 17, 2009, its consolidated net assets in liquidation as of June 30, 2010, and the consolidated changes in its net assets in liquidation for the period from December 18, 2009 to June 30, 2010, in conformity with U.S. generally accepted accounting principles applied on the bases described in the preceding paragraph.

/s/ Odenberg, Ullakko, Muranishi & Co. LLP

San Francisco, California September 27, 2010

14 ~~August 28, 2009~~

NEUROBIOLOGICAL TECHNOLOGIES, INC.

CONSOLIDATED ~~BALANCE~~STATEMENT ~~SHEETS~~ OF NET ASSETS (LIQUIDATION BASIS)

	June 30,
	2009			2008
	(In thousands, except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	8,230		$	27,941
Short-term investments		15,819			2,039
Accounts receivable		184			599
Prepaid expenses and other current assets		305			280
Total current assets		24,538			30,859
Deposits		52			85
Long-term investments		—			11,850
Property and equipment, net		70			393
	$	24,660		$	43,187
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	21		$	588
Accrued clinical trial expenses		25			1,075
Accrued professional expenses		493			252
Accrued manufacturing and related expenses		—			581
Other accrued liabilities		281			1,006
Deferred revenue, current portion		—			5,500
Warrant liability		295			40
Total current liabilities		1,115			9,042
Deferred revenue, net of current portion		—			13,292
Long term clinical trial expenses and other liabilities		—			567
Total liabilities		1,115			22,901
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 shares authorized; 3,000 authorized shares designated as Series A convertible preferred stock, 2,332 shares issued, 494 shares outstanding at June 30, 2009 and 2008, with aggregate liquidation preference of $247		247			247
Common stock, $0.001 par value, 50,000 shares authorized, 26,930 and 26,924 shares issued and outstanding at June 30, 2009 and 2008, respectively		27			27
Additional paid-in capital		145,739			145,113
Accumulated deficit		(122,468	)		(125,591	)
Accumulated other comprehensive income		—			490
Total stockholders’ equity		23,545			20,286
	$	24,660		$	43,187

(in thousands)


	June 30, 2010

ASSETS

Cash and cash equivalents	$	1,842
Short-term investments		738


Total assets		2,580


LIABILITIES AND NET ASSETS

Accounts payable		5
Accrued employee severance		68
Reserve for estimated costs during the liquidation period		967


Total liabilities		1,040


Net assets in liquidation available to common stockholders	$	1,540

See accompanying notes.

15 21

NEUROBIOLOGICAL TECHNOLOGIES, INC.

CONSOLIDATED ~~STATEMENTS~~STATEMENT OF ~~OPERATIONS~~ CHANGES IN NET ASSETS (LIQUIDATION BASIS)

	Fiscal Year Ended June 30,
	2009			2008			2007
	(In thousands, except per share amounts)
REVENUES:
Royalty	$	7,065		$	8,253		$	6,853
Technology sale and collaboration services		19,285			6,507			10,820
Total revenues		26,350			14,760			17,673
EXPENSES:
Research and development		17,584			24,581			26,737
General and administrative		5,082			6,876			6,537
Loss on impairment of property and equipment		193			—			—
Total expenses		22,859			31,457			33,274
Operating income (loss)		3,491			(16,697	)		(15,601	)
Interest income		748			1,254			493
Realized gain on sale of long-term investments		152			—			—
Impairment charge for decrease in fair value of investments		(1,013	)		(1,778	)		—
Interest expense, including non-cash amortization of $2,336 discount on notes in 2008		—			(2,479	)		—
Non-cash (loss) gain on change in fair value of warrants		(255	)		3,378			980
Net income (loss)	$	3,123		$	(16,322	)	$	(14,128	)
Basic and diluted net income (loss) per share	$	0.12		$	(0.84	)	$	(3.26	)
Shares used in basic net income (loss) per share calculation		26,926			19,437			4,338
Shares used in diluted net income (loss) per share calculation		26,946			19,437			4,338

(in thousands)


	December 18, 2009
	to
	June 30, 2010

Stockholders’ equity as of December 17, 2009	$	3,322
Effects of adopting the liquidation basis of accounting:
Initial adjustment of assets to estimated net realizable value		(521	)
Initial adjustment of liabilities to estimated settlement amounts		(1,500	)


Net assets on liquidation basis as of December 18, 2009		1,301

Changes in estimated net realizable value of assets and liabilities
Reduction in estimated settlement amount of liabilities		186
Reduction in income taxes payable		53


Net assets on liquidation basis available to common stockholders as of June 30, 2010	$	1,540

See accompanying notes.

16 22

NEUROBIOLOGICAL TECHNOLOGIES, INC.

CONSOLIDATED ~~STATEMENTS~~BALANCE ~~OF STOCKHOLDERS’~~SHEET ~~EQUITY~~ (~~DEFICIT~~GOING CONCERN BASIS)

	Convertible															Accumulated			Total
	Series A									Additional						Other			Stockholders’
	Preferred Stock				Common Stock					Paid-In			Accumulated			Comprehensive			Equity
	Shares		Amount		Shares			Amount		Capital			Deficit			Income (Loss)			(Deficit)
	(In thousands, except per share amounts)
Balances at June 30, 2006		494	$	247		4,223		$	4	$	83,507		$	(95,141	)	$	(19	)	$	(11,402	)
Issuance of common stock upon exercise of stock options		—		—		37			—		473			—			—			473
Common stock received as consideration for exercise of stock options		—		—		(8	)		—		(150	)		—			—			(150	)
Issuance of common stock under employee stock purchase plan						4			—		47			—			—			47
Issuance of common stock and warrants at $16.10 per share of common stock, net of issuance costs		—		—		435			1		6,493			—			—			6,494
Reclassification of fair value of warrants issued to warrant liability		—		—		—			—		(4,398	)		—			—			(4,398	)
Stock-based compensation expense		—		—		—			—		958			—			—			958
Comprehensive loss:
Net loss		—		—		—			—		—			(14,128	)		—			(14,128	)
Unrealized gain on securities		—		—		—			—		—			—			13			13
Total comprehensive loss		—		—		—			—		—			—			—			(14,115	)
Balances at June 30, 2007		494		247		4,691			5		86,930			(109,269	)		(6	)		(22,093	)
Issuance of common stock under employee stock purchase plan		—		—		22			—		42			—			—			42
Issuance of common stock at deemed price of $5.95 per share in bridge financing transaction, net of issuance costs		—		—		393			—		2,326			—			—			2,326
Issuance of common stock at $2.75 per share in public offering, net of issuance costs		—		—		21,818			22		54,809			—			—			54,831
Stock-based compensation expense		—		—		—			—		1,006			—			—			1,006
Comprehensive loss:
Net loss		—		—		—			—		—			(16,322	)		—			(16,322	)
Unrealized gain on securities		—		—		—			—		—			—			496			496
Total comprehensive loss		—		—		—			—		—			—			—			(15,826	)
Balances at June 30, 2008		494		247		26,924			27		145,113			(125,591	)		490			20,286
Issuance of common stock under employee stock purchase plan		—		—		6			—		1			—			—			1
Stock-based compensation expense		—		—		—			—		625			—			—			625
Comprehensive income:
Net income		—		—		—			—		—			3,123			—			3,123
Unrealized loss on securities		—		—		—			—		—			—			(490	)		(490	)
Total comprehensive income		—		—		—			—		—			—			—			2,633
Balances at June 30, 2009		494	$	247		26,930		$	27	$	145,739		$	(122,468	)	$	—		$	23,545

(in thousands, except per share amounts)


	June 30, 2009
ASSETS
Current assets:
Cash and cash equivalents	$	8,230
Short-term investments		15,819
Accounts receivable		184
Prepaid expenses and other current assets		305

Total current assets		24,538

Deposits		52
Property and equipment, net		70


Total assets	$	24,660


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	21
Accrued professional expenses		493
Other accrued liabilities		306
Warrant liability		295

Total liabilities		1,115


Commitments and contingencies

Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 shares authorized; 3,000 authorized shares designated as Series A convertible preferred stock, 2,332 shares issued, 494 shares outstanding, with aggregate liquidation preference of $247		247
Common stock, $0.001 par value, 50,000 shares authorized, 26,930 shares issued and outstanding		27
Additional paid-in capital		145,739
Accumulated deficit		(122,468	)


Total stockholders’ equity		23,545


Total liabilities and stockholders’ equity	$	24,660

See accompanying notes.

17 23

NEUROBIOLOGICAL TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF ~~CASH~~OPERATIONS ~~FLOWS~~ (GOING CONCERN BASIS)

	Fiscal Year Ended June 30,
	2009			2008			2007
	(In thousands, except per share amounts)
OPERATING ACTIVITIES
Net income (loss)	$	3,123		$	(16,322	)	$	(14,128	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		132			205			230
Stock-based compensation expense		625			1,006			958
Gain on sale of investments		(152	)		—			—
Loss on impairment of investments		1,013			1,778			—
Loss on impairment of property and equipment		193			—			—
Amortization of note discount		—			2,336			—
Non-cash loss (gain) on change in fair value of warrants		255			(3,378	)		(980	)
Changes in assets and liabilities:
Accounts receivable		415			(169	)		1,140
Notes receivable		—			—			4,000
Prepaid expenses and other current assets		8			582			(45	)
Accounts payable and accrued expenses		(3,249	)		(1,235	)		1,195
Deferred revenue		(18,792	)		(5,500	)		(5,500	)
Net cash used in operating activities		(16,429	)		(20,697	)		(13,130	)
INVESTING ACTIVITIES
Purchase of investments		(42,078	)		(22,918	)		(52,038	)
Sales and maturities of investments		38,797			11,166			54,172
Purchases of property and equipment		(2	)		(11	)		(66	)
Net cash provided by (used in) investing activities		(3,283	)		(11,763	)		2,068
FINANCING ACTIVITIES
Proceeds from stock options and employee stock purchase		1			42			370
Issuance of common stock and warrants, net of issuance costs		—			54,831			6,493
Issuance of common stock and notes in bridge financing transaction, net of issuance costs		—			5,990			—
Repayment of notes issued in bridge financing transaction		—			(6,000	)		—
Net cash provided by financing activities		1			54,863			6,863
Increase (decrease) in cash and cash equivalents		(19,711	)		22,403			(4,199	)
Cash and cash equivalents at beginning of period		27,941			5,538			9,737
Cash and cash equivalents at end of period	$	8,230		$	27,941		$	5,538
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest expense	$	—		$	143		$	—
Cash paid for income taxes	$	—		$	—		$	275

(in thousands, except per share amounts)


	170-Day Period
	Ended
	December 17,			Fiscal Year Ended June 30,
	2009			2009			2008
REVENUES:
Royalty	$	6,019		$	7,065		$	8,253
Technology sale and collaboration services		7			19,285			6,507


Total revenues		6,026			26,350			14,760


EXPENSES:
Research and development		—			17,584			24,581
General and administrative		1,541			5,082			6,876
Loss on impairment of property and equipment		34			193			—


Total expenses		1,575			22,859			31,457


Operating income (loss)		4,451			3,491			(16,697	)
Interest income		44			748			1,254
Realized gain on sale of long-term investments		206			152			—
Impairment charge for decrease in fair value of investments		—			(1,013	)		(1,778	)
Interest expense, including non-cash amortization of $2,336 discount on notes in 2008		—			—			(2,479	)
Non-cash gain (loss) on change in fair value of warrants		295			(255	)		3,378


Income (loss) before provision for income taxes		4,996			3,123			(16,322	)

(Provision) for income taxes		(53	)		—			—


Net income (loss)	$	4,943		$	3,123		$	(16,322	)


Basic and diluted net income (loss) per share	$	0.18		$	0.12		$	(0.84	)


Shares used in basic net income (loss) per share calculation		26,955			26,926			19,437

Shares used in diluted net income (loss) per share calculation		26,969			26,946			19,437

See accompanying notes.

18 24

NEUROBIOLOGICAL TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (GOING CONCERN BASIS)

(in thousands, except per share amounts)


	Convertible																Accumulated			Total
	Series A										Additional						Other			Stockholders’
	Preferred Stock						Common Stock				Paid-In			Accumulated			Comprehensive			Equity
	Shares			Amount			Shares		Amount		Capital			Deficit			Income (Loss)			(Deficit)

Balances at June 30, 2007		494		$	247			4,691	$	5	$	86,930		$	(109,269	)	$	(6	)	$	(22,093	)
Issuance of common stock under employee stock purchase plan		—			—			22		—		42			—			—			42
Issuance of common stock at deemed price of $5.95 per share in bridge financing transaction, net of issuance costs		—			—			393		—		2,326			—			—			2,326
Issuance of common stock at $2.75 per share in public offering, net of issuance costs		—			—			21,818		22		54,809			—			—			54,831
Stock-based compensation expense		—			—			—		—		1,006			—			—			1,006

Comprehensive loss:
Net loss		—			—			—		—		—			(16,322	)		—			(16,322	)
Unrealized gain on securities		—			—			—		—		—			—			496			496


Total comprehensive loss		—			—			—		—		—			—			—			(15,826	)


Balances at June 30, 2008		494			247			26,924		27		145,113			(125,591	)		490			20,286
Issuance of common stock under employee stock purchase plan		—			—			6		—		1			—			—			1
Stock-based compensation expense		—			—			—		—		625			—			—			625

Comprehensive income:
Net income		—			—			—		—		—			3,123			—			3,123
Unrealized loss on securities		—			—			—		—		—			—			(490	)		(490	)


Total comprehensive income		—			—			—		—		—			—			—			2,633


Balances at June 30, 2009		494			247			26,930		27		145,739			(122,468	)		—			23,545
Issuance of common stock upon exercise of stock options		—			—			90		—		59			—			—			59
Redemption of Convertible Series A Preferred Stock		(494	)		(247	)		—		—		—			—			—			(247	)
Payment of extraordinary dividends		—			—			—		—		(25,128	)		—			—			(25,128	)
Stock-based compensation expense		—			—			—		—		150			—			—			150
Net income / comprehensive income		—			—			—		—		—			4,943			—			4,943


Balances at December 17, 2009		—		$	—			27,020	$	27	$	120,820		$	(117,525	)	$	—		$	3,322

See accompanying notes.

NEUROBIOLOGICAL TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (GOING CONCERN BASIS)

(in thousands)


	170-Day Period
	Ended
	December 17,			Fiscal Year Ended June 30,
	2009			2009			2008
OPERATING ACTIVITIES
Net income (loss)	$	4,943		$	3,123		$	(16,322	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		8			132			205
Stock-based compensation expense		150			625			1,006
Gain on sale of investments		(206	)		(152	)		—
Loss on impairment of investments		—			1,013			1,778
Loss on impairment of property and equipment		34			193			—
Amortization of note discount		—			—			2,336
Non-cash loss (gain) on change in fair value of warrants		(295	)		255			(3,378	)
Changes in assets and liabilities:
Accounts receivable		(126	)		415			(169	)
Prepaid expenses and other current assets		(135	)		8			582
Accounts payable and accrued expenses		353			(3,249	)		(1,235	)
Income taxes payable		53			—			—
Deferred revenue		—			(18,792	)		(5,500	)


Net cash provided by (used in) operating activities		4,779			(16,429	)		(20,697	)


INVESTING ACTIVITIES
Purchase of investments		(11,088	)		(42,078	)		(22,918	)
Sales and maturities of investments		26,270			38,797			11,166
Purchases of property and equipment		—			(2	)		(11	)


Net cash provided by (used in) investing activities		15,182			(3,283	)		(11,763	)


FINANCING ACTIVITIES
Proceeds from stock options and employee stock purchase		59			1			42
Redemption of Series A Preferred Stock		(247	)		—			—
Payment of extraordinary dividends		(25,128	)		—			—
Issuance of common stock and warrants, net of issuance costs		—			—			54,831
Issuance of common stock and notes in bridge financing transaction, net of issuance costs		—			—			5,990
Repayment of notes issued in bridge financing transaction		—			—			(6,000	)


Net cash (used in) provided by financing activities		(25,316	)		1			54,863


Increase (decrease) in cash and cash equivalents		(5,355	)		(19,711	)		22,403
Cash and cash equivalents at beginning of period		8,230			27,941			5,538


Cash and cash equivalents at end of period	$	2,875		$	8,230		$	27,941


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for interest expense	$	—		$	—		$	143
Cash paid for income taxes	$	—		$	—		$	—

See accompanying notes.

NEUROBIOLOGICAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tabular amounts in thousands, except per share amounts, percentages and years)

Note 1. Description of Business and Summary of Significant Accounting Policies

Business Description and Basis of Presentation

Neurobiological Technologies, Inc. (“NTI” or the “Company”) is a ~~biopharmaceutical~~ company ~~historically~~that previously focused on developing investigational drugs ~~for~~ ~~central~~to ~~nervous~~treat ~~system~~human ~~conditions~~diseases. ~~The~~On ~~company~~October 27, ~~recently~~2009, the ~~terminated~~Company’s ~~development~~stockholders approved the dissolution of ~~its~~the ~~most~~Company ~~advanced~~pursuant ~~product~~to ~~candidate~~a plan of complete liquidation and dissolution earlier approved by the Company’s board of directors on August 27, 2009 ~~Viprinextm~~ (~~ancrod~~the “Plan of Dissolution”). On November 4, ~~which~~2009, ~~was~~the ~~studied~~Company inredeemed ~~Phase~~all 3of ~~clinical~~the ~~trials~~outstanding shares asof aits Series A Preferred Stock for $0.50 per share, the original issue price of the Series ~~potential~~A ~~new~~Preferred ~~drug~~Stock toand ~~treat~~its ~~acute~~liquidation ~~ischemic~~preference. ~~stroke~~Thereafter, following payments of extraordinary dividends of $0.75 ~~NTI~~and ~~has~~$0.18 ~~more~~per share of common stock on November 18, 2009 and December 9, 2009, ~~recently~~respectively, ~~chosen~~on ~~not~~December 17, to2009 ~~extend~~the ~~its~~Company ~~early-stage~~filed ~~research~~a ~~programs~~certificate of dissolution with the ~~for~~Secretary ~~Huntington’s~~of State of the State of Delaware (the “Certificate of Dissolution”) and ~~Alzheimer’s~~completed ~~diseases~~the voluntary delisting of its common stock from the Nasdaq Capital Market. ~~NTI~~On ~~has~~December 17, 2009, the ~~rights~~Company toalso ~~receive~~closed ~~payments~~its ~~from~~stock antransfer ~~investigational~~books ~~drug~~and ~~which~~discontinued isrecording transfers of its common stock. The Company is in ~~development~~the process of discharging any remaining liabilities under dissolution procedures provided for ~~edema~~under the General Corporation Law of the State of Delaware (~~swelling~~the “DGCL”). The ~~associated~~Company ~~with~~intends ~~cerebral~~to make at least one additional liquidating distribution to its stockholders at ~~tumors~~the conclusion of this process, although the amount and timing cannot presently be determined.

~~The~~Liquidation ~~accompanying~~Basis ~~consolidated financial statements include the accounts~~ of ~~the Company and its wholly-owned subsidiary,~~Accounting NTI-Empire, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company operates in one business segment, the discovery and development of pharmaceutical products.

Following the filing of the Certificate of Dissolution with the State of Delaware on December 17, 2009, the Company began reporting on a liquidation basis of accounting instead of a going concern basis of accounting. Under the liquidation basis of accounting, the Statement of Net Assets (Liquidation Basis) and Statement of Changes in Net Assets (Liquidation Basis) are the principal financial statements presented. In these statements, the assets are stated at their estimated net realizable value, which is the amount of cash into which an asset is ultimately expected to be converted, less any conversion costs. Liabilities are reported at their estimated settlement amount, which is the amount of cash expected to be paid to liquidate the obligation, including any direct costs of the liquidation. Additionally, the Company has established a reserve for all estimated future general and administrative expenses and other costs expected to be incurred while the Company is in dissolution, which under the DGCL is expected to be at least three years from December 2009. The reserve for these estimated expenses primarily includes accruals including personnel costs for administrative work, facilities including previously unaccrued future lease and other obligations, professional services and legal costs, corporate expenses (insurance, directors’ fees and statutory fees) and estimated expenses to establish a facility to preserve the Company’s continuing interest in XERECEPT^®, which is an investigational drug being developed by another party. These estimates will be periodically reviewed and adjusted as appropriate. There can be no assurance that these estimated values will ultimately be realized.

The valuation of assets at their net realizable value and liabilities at their anticipated settlement amounts represent estimates, based on present facts and circumstances, of the net realizable value of the assets and the costs associated with carrying out the Plan of Dissolution. The actual values and costs associated with carrying out the Plan of Dissolution may differ from amounts reflected in the financial statements because of the inherent uncertainty in estimating future events. These differences may be material. In particular, the estimates of costs will vary with the length of time necessary to complete the liquidation process and resolve potential claims, some of which may not have been submitted to the Company at this time. Accordingly, it is not possible to predict the timing or aggregate amount which will ultimately be distributed to stockholders and no assurance can be given that the distributions will equal or exceed the estimate presented in the accompanying Statement of Net Assets (Liquidation Basis).

Upon transition to the liquidation basis of accounting, the Company recorded the following adjustments to reduce assets to net realizable value:


Initial Adjustment to Reduce Assets to Estimated Net Realizable Value	Amount
Write-down of prepaid and other current assets	$	493
Write-down of property and equipment		28


	$	521

The adjustments of assets were the result of these assets not having a realizable value upon liquidation of the Company.

The Company was required to make significant estimates and exercise judgment in determining the accrued costs of liquidation at December 17, 2009. The accrued costs of liquidation were recorded as an adjustment to increase liabilities to their estimated settlement amount.

The transition from the going concern basis to the liquidation basis of accounting required management to make significant estimates and judgments. Upon transition to the liquidation basis of accounting, the Company accrued the following costs expected to be incurred in liquidation:


Accrued Costs of Liquidation	Amount
Outside services and wind-down expenses	$	1,213
Contractual commitments		287


	$	1,500

Subsequent to the initial recording of estimated outside services and wind-down expenses as of December 17, 2009, and following the termination of the creditor-notification process under the DGCL on May 8, 2010, the Company re-evaluated its accrued liabilities and reduced its estimated liabilities by $186,000, which has been recorded in the consolidated statement of changes in net assets (liquidation basis) as a reduction in the estimated settlement amount of liabilities.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual amounts may differ from these estimates.

Revenue Recognition

Revenues are recognized according to the terms of contractual agreements to which NTI is a party, when the Company’s performance requirements have been fulfilled, the amount is fixed and determinable, and collection is reasonably assured. Revenue from license fees with non-cancelable, non-refundable terms and no future performance obligations is recognized when collection is assured. Milestone payments are recognized when the Company has fulfilled development milestones and collection is assured. Revenue from services performed for other parties is recorded during the period in which the expenses are incurred.

Royalty revenue is recorded when payments are received since the Company is unable to estimate the amount of royalties as they are earned.

Revenue arrangements with multiple components are divided into separate units of accounting if certain criteria are met, including whether the delivered component has stand-alone value to the customer, and whether there is objective reliable evidence of the fair value of the undelivered items. Consideration received is allocated among the separate units of accounting based on their relative fair values, and the applicable revenue recognition criteria are identified and applied to each of the units.

Cash Equivalents and Investments

The Company’s investments include securities of the U.S. government and its agencies, municipalities, corporations and auction rate securities. All securities which are highly liquid and purchased with original maturities of 90 days or less are recorded as cash equivalents. Securities which the Company does not intend to hold to maturity are generally classified as available-for-sale securities, and carried at estimated fair value, based on available market information, with unrealized gains and losses reported as a component of accumulated other ~~comprehensive~~ comprehensive income or loss in stockholders’ equity. A decline in the market value of a security below its cost that is deemed to be other than temporary is charged to earnings, and results in the establishment of a new cost basis for the security. In determining whether an impairment is other than temporary, the Company evaluates, among other factors, general market conditions, the financial condition of the investee, the duration and extent to which fair value is less than cost, ~~and~~ and whether the Company’s intends to sell the debt securities before recovering their cost. Realized gains or losses, amortization of premiums, accretion of discounts and earned interest are included in interest and other income. The cost of securities when sold is based upon specific identification.

NEUROBIOLOGICAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

gains or losses, amortization of premiums, accretion of discounts and earned interest are included in interest income. The cost of securities when sold is based upon specific identification.

Concentration of Credit and Other Risks and Uncertainties

Financial instruments which potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents and investments. The Company’s cash and cash equivalents are generally invested in deposit accounts, money market accounts, commercial paper, and ~~high quality~~ government and corporate debt securities. A deposit account balance may exceed the amount covered by insurance for loss.

Fair Value of Financial Instruments

The carrying value of financial instruments, including cash and cash equivalents, accounts ~~receivable and accounts~~ payable and accrued liabilities, is representative of their respective fair values due to their short maturities. Investments in available-for-sale securities are carried at fair value.

Property and Equipment

~~Property~~Under the liquidation method of accounting, property and equipment are stated at the estimated value the Company is expected to recover from the assets. Under the going concern method of accounting, property and equipment were stated at cost, less accumulated depreciation and amortization. Depreciation iswas calculated on a straight-line basis over the estimated useful lives of the respective assets, generally two to seven years. Amortization of leasehold improvements is was calculated on a straight-line basis over the shorter of the useful life of the asset or the remaining lease term.

Impairment of Long-Lived Assets

~~The~~Under the going concern method of accounting, the Company ~~reviews~~reviewed long-lived assets, primarily its property and equipment, for impairment whenever events or changes in ~~business~~ business circumstances ~~indicate~~indicated that the carrying amount of the assets may not be fully recoverable. An impairment loss is was recognized when future estimated cash flows expected to result from the use of the asset, and its eventual disposition, ~~are~~ were less than the carrying amount of the asset. The impairment loss is was based on the excess of the carrying value over its respective fair value.

Warrants Issued in Connection with Equity Financings

~~The~~Under the going concern method of accounting, the Company generally ~~accounts~~accounted for warrants issued in connection with equity financings as a component of equity, unless there ~~is a~~was a possibility that the Company may have to settle warrants in cash. For the warrants issued with possibility of cash settlement, the Company ~~records~~recorded the fair value of the issued warrants as a liability at each balance sheet date and ~~records~~ recorded changes in the estimated fair value as a non-cash gain or loss in the consolidated statement of operations.

Revenue Recognition

Prior to the Company’s filing the Certificate of Dissolution, revenues were recognized according to the terms of contractual agreements, when the Company’s performance requirements were fulfilled, the amount was fixed and determinable, and collection was reasonably assured. Revenue from license fees with non-cancelable, non-refundable terms and no future performance obligations was recognized when collection was assured. Milestone payments were recognized when the Company had fulfilled development milestones and collection was assured. Revenue from services performed for other parties was recorded during the period in which the expenses were incurred.

Royalty revenue was recorded when payments were received since the Company was unable to estimate the amount of royalties as they are earned.

Revenue arrangements with multiple components were divided into separate units of accounting if certain criteria were met, including whether the delivered component had stand-alone value to the customer, and whether there was objective reliable evidence of the fair value of the undelivered items. Consideration received was allocated among the separate units of accounting based on their relative fair values, and the applicable revenue recognition criteria were identified and applied to each of the units.

Research and Development Expenses

~~The~~During the period in which the Company reported its results in a statement of operations, the Company’s research and development costs ~~are~~were expensed as incurred. Research and development included ~~includes~~ clinical trial costs, development and manufacturing costs for investigational drugs, payments to clinical and contract research organizations, compensation expenses for drug development personnel, consulting and advisor costs, preclinical studies and other costs related to to development of its product candidates.

Stock-Based Compensation

~~Stock~~During ~~options~~the period when the Company had stock-based compensation programs, stock options granted to employees ~~are~~were accounted for using an estimate of the fair value of the stock option on the date it is was granted. The estimated fair value on the grant date is was recognized ininto the consolidated statement of operations on a straight-line basis over the vesting period of the ~~underlying~~ underlying stock option.

NEUROBIOLOGICAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Comprehensive Income (Loss)

~~Components~~Under the going concern method of accounting, components of other comprehensive income (loss), including unrealized gains and losses on available for sale investments, ~~are~~ were included as part of total comprehensive income (loss). For all operating periods presented, comprehensive income (loss) has been included in the consolidated statements of stockholders’ equity.

Operating Leases

~~The~~Under the going concern method of accounting, the Company ~~recognizes~~recognized rental expense on a straight-line basis over the term of each operating lease.

Net Income (Loss) per Share

~~Basic~~Under the going concern method of accounting, basic net income or loss per common share is was calculated using the weighted-average number of shares of common stock outstanding during ~~the~~ each period. Diluted net income per common share iswas calculated based on the weighted-average number of shares of our common stock outstanding as well as other potentially dilutive securities outstanding during the period, using the treasury stock method. For the ~~year~~period ~~ended~~from July 1, 2009 through ~~June~~December 3017, 2009, dilutive securities included options to purchase 2090,000 shares of common stock. Because their effect would have been anti-dilutive, ~~for the year ended June 30, 2009,~~ dilutive securities excluded options to purchase ~~817~~747,000 shares of common stock, warrants to purchase 544,000 shares of common stock and the conversion of convertible preferred stock into 71,000 shares of common stock. InFor ~~fiscal~~the ~~2008~~year ended ~~and~~June 30, ~~2007~~2009, ~~the~~dilutive ~~net~~securities ~~loss~~included ~~position~~options ofto ~~the Company~~purchase ~~resulted~~20,000 inshares ~~basic~~of ~~and diluted net loss per share being~~common ~~the same~~stock. ~~The~~Because ~~computation~~their ofeffect ~~diluted~~would ~~net~~have ~~loss~~been ~~per~~anti-dilutive, ~~share~~ for the ~~fiscal~~ year ended June 30, ~~2008 excluded the potentially~~2009, dilutive ~~impact~~securities ofexcluded options to purchase 1817,~~909,~~000 shares of common stock, warrants to purchase 544,000 shares of common stock, and the conversion of convertible preferred stock into 71,000 shares of common stock. For the year ended June 30, 2008, the net loss position of the Company resulted in basic and diluted net loss per share being the same. The computation of diluted net loss per share for the fiscal year ended June 30, ~~2007~~ 2008 excluded the potentially dilutive impact of options to purchase ~~426~~ 1,909,000 shares of common stock, warrants to purchase 544,000 shares of common stock, and the conversion of convertible preferred stock into 71,000 shares of common stock.

Income Taxes

~~The~~Under the going concern method of accounting, the Company ~~uses~~used the liability method of accounting for income taxes, and ~~determines~~determined deferred tax assets and liabilities based on on differences between the financial reporting and the tax reporting basis of assets and liabilities. The Company ~~measures~~ measured these assets and liabilities using enacted tax rates and laws that ~~are~~ were scheduled to be in effect when the differences ~~are~~ were expected to reverse. Because the realization of deferred tax assets iswas dependent upon future earnings, if any, and the Company’s future earnings were ~~are~~ uncertain, all of the Company’s net deferred tax assets ~~have~~were ~~been~~ fully offset by a valuation allowance at each financial reporting date. The Company ~~recognizes~~recognized interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

Recent Accounting Pronouncements

InUnder ~~October 2008,~~ the ~~Financial~~liquidation ~~Accounting~~basis ~~Standards~~of ~~Board (“FASB”) issued FASB Staff Position FSP SFAS 157-3~~accounting, ~~Determining~~ the ~~Fair~~Company Value of a Financial Asset When the Market for That Asset Is Not Active. FSP SFAS 157-3 clarifies the application of SFAS No. 157 in a market that is not active and addresses application issues such as the use of internal assumptions when relevant observable data does ~~not~~ ~~exist, the use of observable market information when the market is~~ not ~~active~~expect ~~and~~any ~~the~~recent ~~use of market quotes when assessing~~accounting ~~the~~pronouncements ~~relevance~~to ~~of observable and unobservable data. The guidance in FSP SFAS 157-3 was effective immediately upon adoption and did not have a significant~~ impact on the ~~Company’s~~Consolidated ~~consolidated~~Statement ~~financial position~~of orNet ~~results~~Assets of(Liquidation ~~operations~~Basis).

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. This FSP amends SFAS No. 107, Disclosures About Fair Value of Financial Instruments, to require disclosures regarding fair value of financial instruments. This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require certain disclosures in summarized financial information at interim reporting

NEUROBIOLOGICAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

periods. This FSP is effective for reporting periods ending after June 15, 2009. On June 30, 2009, the Company adopted this FSP, which did not have a material effect on the determination or reporting of the Company’s financial results.

In April 2009, the FASB issued FSP FAS 157-4, 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 FSP provides additional guidance for estimating fair value in accordance with SFAS No. 157, Fair Value Measurements, when the volume and level of activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 provides guidance on how to determine the fair value of assets and liabilities under SFAS 157 in the current economic environment and reemphasizes that the objective of a fair value measurement remains an exit price. If the Company were to conclude that there has been a significant decrease in the volume and level of activity of the asset or liability in relation to normal market activities, quoted market values may not be representative of fair value and the Company may conclude that a change in valuation technique or the use of multiple valuation techniques may be appropriate. This FSP is effective for reporting periods ending after June 15, 2009. On June 30, 2009, the Company adopted this FSP, which did not have a material effect on the determination or reporting of the Company’s financial results.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162, (“SFAS 168”). SFAS 168 establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 will be effective for the Company’s interim financial statements for the quarter ending September 30, 2009. SFAS 168 does not change GAAP and therefore will not have a material impact on the Company’s consolidated financial statements.

Reclassifications

In order to conform to the current year’s presentation, the Company has reclassified certain prior period items.

NEUROBIOLOGICAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 2. Investments

Available-for-sale securities were as follows:

	June 30,
	2009					2008
	2010					2009
				Fair					Fair
	Cost			Value		Cost			Value
Type of security and term
U.S government and agency obligations
Maturing within one year	$	~~10,292~~150		$	~~10,292~~150	$	—10,292		$	—10,292
Auction rate securities (“ARS”)
Maturing in 21 to 36 years		5,527	*		5,527		11,372	*		11,850
Maturing in December 2031		575	*		588		5,527	*		5,527
Corporate debt obligations
Total investments	$	725		$	738	$	15,819		$	15,819
Maturing within one year		—			—		2,027			2,039
Total investments	$	15,819		$	15,819	$	13,399		$	13,889
Classification
Short-term				$	15,819				$	2,039
Long-term					—					11,850
Total investments				$	15,819				$	13,889

* Cost represents purchase price less impairment charge of $1125,~~973,~~000 and $1,~~768~~973,000 on securities still held at June 30, ~~2009~~2010 and ~~2008~~2009, respectively.

The Company’s investments in ARS were structured to provide liquidity via an auction process that reset the applicable interest rate at predetermined calendar intervals. Beginning in ~~February~~ February 2008, ~~failed~~ auctions ~~occurred~~failed throughout the ARS market, and since then all auctions for NTI’s ARS have ~~been~~ been unsuccessful. While the credit rating of these securities remains high and the ARS are paying interest according to their terms, as a result of the potentially long maturity and lack of liquidity for ARS, the Company believes the value of the ARS in NTI’s portfolio has been impaired. During the fiscal years ended June 30, 2009 and 2008, the Company recorded other than temporary impairment charges of $1,013,000 and $1,778,000, respectively, in its realized losses, based on models of discounted future cash flows and assumptions regarding interest rates. All other unrealized gains and losses were immaterial at June 30, ~~2009~~2010 and ~~2008~~2009.

Custody of the Company’s investments is held by Fidelity Investments. 29

NEUROBIOLOGICAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table shows additional information regarding the individual ARS held by the Company:

			June 30, 2009
			Par		Estimated
ARS	CUSIP		Value		Fair Value
Vermont St. Student Assistance Loan Corp., due 12/15/2041		92428CFG4	$	2,000	$	1,480
Pennsylvania St. Higher Ed. Assistance Agency, due 09/01/2045		709163EQ8		1,950		1,362
Panhandle Plains Student Fin. Corp., due 12/01/2031		69847RAA0		1,300		1,067
Brazos Texas Higher Ed. Authority, due 12/01/2034		106238FU7		1,200		900
Pennsylvania St. Higher Ed. Assistance Agency, due 12/01/2045		709163EV7		500		349
Alameda Calif. Power & Telecom Elec. Sys., due 07/01/2030		01080PAN5		400		257
Others		—		150		112
Total			$	7,500	$	5,527

Custody of the Company’s investments is held by Fidelity Investments. The majority of the Company’s cash and cash equivalents consist of commercial paper, which is also held in custody at Fidelity Investments.

3. Fair Value of Financial Instruments

The following table provides the fair value measurements of our financial assets according to a hierarchy based on three levels of input objectivity as defined in ~~FAS~~ASC 820, ~~157~~Fair Value Measurements and Disclosures:


	Carrying
	Value as of		Fair Value Measurements at June 30, 2010
	June 30,		Using Inputs from
	2010		Level 1		Level 2		Level 3
Cash and cash equivalents	$	1,842	$	1,342	$	500	$	—
U.S government and agency obligations		150		—		150		—
Auction rate securities		588		—		—		588


Total	$	2,580	$	1,342	$	650	$	588


	Carrying
	Value as of		Fair Value Measurements at June 30, 2009
	June 30,		Using Inputs from
	2009		Level 1		Level 2		Level 3
Cash and cash equivalents	$	8,230	$	8,230	$	—	$	—
U.S government and agency obligations		10,292		—		10,292		—
Auction rate securities		5,527		—		—		5,527


Total	$	24,049	$	8,230	$	10,292	$	5,527

Level 1 inputs in the table above are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are quoted prices in active markets for similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable for the asset or liability. Level 3 inputs are based on management’s own assumptions used to measure the fair value of assets and liabilities, which are supported by little or no market activity. Level 1 and Level 2 inputs are considered observable, while Level 3 inputs are considered unobservable. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The input levels and the methodology used for valuing securities are not necessarily an indication of the credit risk associated with the securities.

Fair values are based on quoted market prices, where available. These fair values are obtained primarily from third party pricing services, which generally use Level 1 or Level 2 inputs for the determination of fair value in accordance with ~~SFAS 157~~ASC 820. Third party pricing services normally derive the security prices through recently reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information. For securities not actively traded, ~~the~~ the third party pricing services may use quoted market prices of comparable instruments or discounted cash flow analyses, incorporating inputs that are currently observable in ~~the~~ the markets for similar securities. Inputs that are often used in the valuation methodologies include, but are not limited to, benchmark yields, broker quotes, credit spreads, default rates and prepayment speed. The Company performs a review of the prices received from third parties to determine whether the prices are reasonable estimates of fair value and are classified in accordance with the ASC 820 fair value hierarchy. The Company’s analysis included, as needed, a comparison of pricing services’ valuations to other pricing services’ valuations for the identical security.

The Company’s investments in ARS are generally classified within Level 3 because there are no active markets for the ARS and the Company is unable to obtain independent valuations from market sources. However, they will be classified as Level 2 if they represent ARS with reliable observable inputs, such as recent sales for the same or similar CUSIPs. Level 3 ARS were valued using discounted cash flow models, and certain inputs to the cash flow model are unobservable in the market. The changes in level 3 assets measured at fair value for the fiscal year ended June 30, 2009 were as follows:

NEUROBIOLOGICAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

reasonable estimates of fair value and are classified in accordance with the SFAS 157 fair value hierarchy. The Company’s analysis included, as needed, a comparison of pricing services’ valuations to other pricing services’ valuations for the identical security.

The Company’s investments in ARS are generally classified within Level 3 because there are no active markets for the ARS and the Company is unable to obtain independent valuations from market sources. However, they will be classified as Level 2 if they represent ARS with reliable observable inputs, such as recent sales for the same or similar CUSIPs. Level 3 ARS were valued using discounted cash flow models, and certain inputs to the cash flow model are unobservable in the market. The changes in Level 3 assets measured at fair value for the fiscal year ended June 30, 2009 were as follows:


Balance at June 30, 2008	$	11,850
Unrealized losses included in other comprehensive loss		—
Sales of securities		(5,310	)
Impairment charge recognized in net loss		(1,013	)

Balance at June 30, 2009	$	5,527

~~Note 4. Property and Equipment. Net~~25

PropertyTable and equipment consisted of the following: Contents

	June 30,
	2009			2008
Manufacturing equipment	$	—		$	501
Furniture, fixtures and leasehold improvements		274			300
Machinery and equipment		193			289
		467			1,090
Less accumulated depreciation and amortization		(397	)		(697	)
	$	70		$	393

The changes in Level 3 assets measured at fair value for the period from July 1, 2009 through December 17, 2009 were as follows:


Balance at June 30, 2009	$	5,527
Unrealized gains included in other comprehensive income		—
Sales of securities		(4,685	)
Transfer to Level 2 assets		—

Balance at December 17, 2009	$	842

The changes in Level 3 assets measured at fair value for the period from December 18, 2009 through June 30, 2010 were as follows:


Balance at December 18, 2009	$	842
Unrealized gains		—
Sales of securities		(254	)
Transfer to Level 2 assets		—

Balance at June 30, 2010	$	588

The balance of Level 3 securities at June 30, 2010 represents one student loan ARS, CUSIP 69847RAA0, issued by Panhandle Plains Student Fin. Corp., with a maturity date of December 1, 2031 and a par value of $700,000.

Note 4. Property and Equipment, Net

Property and equipment consists of the following:


	June 30,
	2010			2009
Manufacturing equipment	$	—		$	—
Furniture, fixtures and leasehold improvements		—			274
Machinery and equipment		—			193

		—			467
Less accumulated depreciation and amortization		(—	)		(397	)


	$	—		$	70

Upon adoption of the liquidation basis of accounting on December 17, 2009, the Company wrote-off its property and equipment that previously had a net book value of $28,000 as management did not believe the amount was likely to be recoverable in liquidation.

Note 5. Warrant Liability

~~The~~Under the going-concern basis of accounting, the fair value of warrants issued by the Company in connection with an April 2007 sale of common stock ~~has~~was ~~been~~ estimated based on a Black-Scholes option pricing model,. ~~with~~Changes ~~key~~in ~~assumptions~~the fair value of the warrants were included in the statement of operations. Key inputs and assumptions used to value the warrants were as follows:

	June 30,
	December 17, 2009			June 30, 2009
	2009			2008
Per-share exercise price of warrants	$	16.80		$	16.80
Volatility of common stock		2.96			0.70
Market price of common stock	$	0.11		$	0.68
Term of warrants (in years)		2.75			3.75
Volatility of common stock		1.00			2.96
Risk-free interest rate		1.25	%		3.0	%
Term of warrants (in years)		2.25			2.75
Risk-free interest rate		1.25	%		1.25	%
Dividend rate		—			—
Per-share value of warrants based on above inputs	$	—		$	0.64

~~Note~~Based 6on the large difference between the warrant exercise price and the Company’s stock price on December 17, 2009, the warrants had no value at the time of filing the Certificate of Dissolution. ~~Commitments~~Under the liquidation basis of accounting, the Company does not believe the warrants will be exercised and ~~Contingencies~~accordingly has not assigned any value for their settlement.

26 The Company has operating leases in place for two office locations. The lease for the Company’s principal executive office in Emeryville, California expires in November 2010. The lease for the Company’s vacant office in Edgewater, New Jersey expires in October 2009. Because the Company does not expect to receive any future benefit for the vacant office in New Jersey, it has accrued the future minimum lease payments of $12,000 as a liability in its

~~NEUROBIOLOGICAL TECHNOLOGIES,~~Note ~~INC~~6. Commitments and Contingencies

The Company has one remaining operating lease with an initial commitment of over 12 months. This lease, for the Company’s principal executive office in Emeryville, California, expires in ~~NOTES~~November ~~TO CONSOLIDATED~~2010 ~~FINANCIAL~~and future minimum lease payments aggregate $85,000, all of which is due in the ~~STATEMENTS~~fiscal year ending June ~~— (Continued)~~30, 2011. Under the liquidation basis of accounting, the full amount of future lease payments is currently accrued in the reserve for estimated costs during the liquidation period.

~~consolidated~~Total ~~financial~~lease ~~statements.~~expense ~~Future~~for ~~minimum~~the ~~lease~~170-day ~~payments~~period ended December 17, 2009 was $144,000. Included in ~~due~~the ~~for~~adjustments upon adoption of the ~~Emeryville~~liquidation ~~facility~~basis ~~are~~of asaccounting ~~follows~~were atadditional committed lease costs of $198,000 (which includes the above-noted committed term after June 30, 2010). Total lease expense for the fiscal years ended June 30, 2009: and 2008 was $366,000 and $340,000, respectively.

Fiscal year ending June 30:
2010	$	292
2011		105
	$	397

As permitted under Delaware law and in accordance with its Bylaws, NTI indemnifies its officers and directors for certain expenses incurred from legal or other proceedings that arose as a result of the director or officer’s service to the Company. There is no limitation on the term of the indemnification and the maximum amount of potential future indemnification is unlimited. The Company has a director and officer insurance policy that limits NTI’s exposure and may enable the Company to recover a portion of any future amounts paid. The Company believes the fair value of these indemnification agreements is minimal, and, accordingly, has not recorded any liabilities for these agreements as of June 30, 2010.

The Company also provided indemnifications of varying scope to clinical research organizations ~~Total~~and ~~lease~~investigators ~~expense~~against ~~for~~claims made by third parties arising from the ~~fiscal~~use ~~years~~of ~~ended~~its ~~June 30,~~products and ~~2009~~processes in clinical trials. To date, ~~2008~~costs ~~and~~related ~~2007~~to ~~was~~these ~~$366~~indemnification provisions have been immaterial. The Company also has previously established liability insurance policies that may limit exposure under the terms of the policies. The Company believes the fair value of its indemnification agreements is minimal and,~~000,~~ ~~$340~~accordingly,~~000~~ ~~and~~has ~~$336~~not recorded any liabilities for these agreements as of June 30,~~000,~~ 2010. The Company is unable to estimate the maximum potential impact of ~~respectively~~these indemnification provisions on its future results of operations.

The Company also provided indemnifications of varying scope to clinical research organizations and investigators against claims made by third parties arising from the use of its products and processes in clinical trials. To date, costs related to these indemnification provisions have been immaterial. The Company also has previously established liability insurance policies that may limit exposure under the terms of the policies. The Company believes the fair value of its indemnification agreements is minimal and, accordingly, has not recorded any liabilities for these agreements as of June 30, 2009. The Company is unable to estimate the maximum potential impact of these indemnification provisions on its future results of operations.

From time to time, NTI may be involved in claims and other legal matters arising in the ordinary course of business. Management is not currently aware of any matters that it believes are likely to have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.

Note 7. Stockholders’ Equity

Series A Convertible Preferred Stock

~~Each~~On ~~share~~November 4, 2009, the Company redeemed all outstanding shares of Series A ~~preferred~~Convertible Preferred ~~stock~~Stock isfor ~~convertible,~~its ~~at the~~issue ~~holder’s~~price ~~option,~~and ~~into~~aggregate ~~one-seventh~~liquidation preference of $247,000. On October 27, 2009, by a ~~share~~vote of both the preferred and common ~~stock.~~ ~~Additionally~~stockholders, ~~each~~the ~~share~~terms of the Series A ~~preferred~~ ~~stock~~Convertible ~~will~~Preferred beStock ~~automatically~~were ~~converted~~amended ~~into~~to ~~one-seventh~~allow offor aredemption. Prior to the redemption, each share of ~~common~~Series A ~~stock~~preferred ~~upon~~Stock ~~the~~was ~~affirmative~~convertible, ~~vote~~at ofthe aholder’s ~~majority~~option, ~~of the~~into ~~then~~one-~~outstanding~~seventh ~~shares~~ of ~~Series A~~a share ~~preferred~~of common stock. ~~The~~ While outstanding, the holders of preferred stock ~~are~~were entitled to the number of votes equal to the number of shares of common stock into which their preferred stock is was convertible. Each share of Series A convertible preferred stock ~~has~~had a liquidation preference of $0.50 per share plus any declared but unpaid dividends. ~~The~~No ~~holders of the Series A preferred stock are entitled to receive annual noncumulative~~ dividends ofwere 8%ever ~~per share, when and if~~ declared byon the Series A ~~Board~~Convertible ofPreferred ~~Directors~~Stock.

Common Stock Transactions

On November 2, 2007, the Company issued 21,818,000 shares of common stock in an underwritten offering at a ~~public offering~~ price of $2.75 per share, for gross proceeds of $60.0 million. After underwriting commissions and expenses, net proceeds were $54.8 million.

On September 12, 2007, the Company entered into a debt and equity financing agreement under which the Company issued senior secured promissory notes with a principal amount of $6.0 million and 393,000 shares of common stock. The gross proceeds of $6.0 million were allocated to the promissory notes and common stock based on their relative fair values. The amount allocated to the common stock, $2,336,000, was recorded as a discount to the notes and amortized to interest expense using the effective interest method over the term of the notes, which were repaid in November 2007. The notes provided for interest at 15% per annum. The effective annual interest rate on the notes was 326% based on the stated interest rate, the amount of the note discount, and the term of the notes.

27 32

NEUROBIOLOGICAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

on their relative fair values. The amount allocated to the common stock, $2,336,000, was recorded as a discount to the notes and amortized to interest expense using the effective interest method over the term of the notes, which were repaid in November 2007. The notes provided for interest at 15% per annum. The effective annual interest rate on the notes was 326% based on the stated interest rate, the amount of the note discount, and the term of the notes.

On April 4, 2007, the Company issued 435,000 shares of common stock in a registered direct offering at a price of $16.10 per share for gross proceeds of $7.0 million. After placement agent fees and expenses, net proceeds were $6.5 million. In connection with the placement, the Company also issued 461,000 warrants exercisable at $16.80 per share to the investors and the placement agent. The warrants expire in April 2012.

Securities Convertible into Common Stock

At June 30, 2009, the ~~Company~~only ~~had~~securities ~~reserved~~convertible into the ~~following~~Company’s common stock were 461,000 ~~number~~warrants ofexpiring ~~shares~~in ofApril 2012, ~~common~~with ~~stock~~an ~~for~~exercise ~~future~~price ~~issuance:~~of $16.80 per share.

Stock option and purchase plans			3,795
Warrants			544
Series A Convertible Preferred Stock			71
			4,410

Key terms of warrants outstanding at June 30, 2009 were as follows:

Expiration Date	Exercise Price		Number of Shares
August 2009	$	47.11		83
April 2012	$	16.80		461
				544

Note 8. Stock-based compensation

~~The~~On December 17, 2009, the Company ~~has~~terminated its two stock-based compensation plans, the 2003 Equity Incentive Plan (the “Equity Plan”) and the 2003 Employee Stock Purchase Plan (the “ESPP”).

The Equity Plan ~~provides~~provided for the issuance of stock options and stock awards to employees, officers, directors and consultants. In ~~general~~Under the Equity Plan, options ~~are~~were granted with an exercise price equal to or higher than the market price of the underlying common stock on the date of the grant, ~~have~~had terms of up to 10 years and ~~become~~ became exercisable over vesting periods of up to four years. As ofDue ~~June 30,~~to ~~2009,~~ the ~~Company~~termination ~~has~~of ~~reserved~~the aEquity ~~total~~Plan, as of ~~3,759,000~~ June ~~shares~~30, of2010 ~~common~~no stock ~~for~~options ~~issuance~~are ~~under~~outstanding, ~~the~~no ~~Equity~~shares ~~Plan~~are ~~and~~available ~~one~~for ~~additional~~the ~~option~~future ~~granted~~grant ~~under~~of ~~similar terms~~stock options, and ~~2,922,000~~ no shares ~~remain~~of ~~available~~common ~~for~~stock ~~the future~~are ~~grant~~reserved offor ~~stock~~future ~~options~~issuance under ~~the~~stock ~~Equity Plan~~options.

The ESPP ~~permits~~permitted eligible employees to purchase common stock through payroll deductions during defined six month accumulation periods. The price at which the stock is purchased iswas equal to to the lower of 85% of the fair value of the stock on the last trading day before the commencement of the applicable offering period or 85% of the fair value of the common stock on the last ~~trading~~ trading day of the accumulation period. AsFollowing ~~of June 30, 2009,~~ the ~~Company~~termination ~~has~~of ~~reserved~~the aESPP, ~~total~~as of ~~71,000~~June 30, 2010 no shares of common stock are reserved for issuance under the ESPP~~, and 36,000 shares remain available for future issuance~~.

~~The~~Prior to the termination of the equity compensation plans, the fair value of each option award was is estimated on the date of grant using a Black-Scholes option valuation model. ~~Expected~~This valuation model used required various input assumptions, including volatility of the common stock and the expected option term. Expected volatility for the Company’s common stock iswas based on ~~historical~~ historical volatility of the Company’s common stock for the expected term of the option granted. The expected term of options iswas generally based on the ~~simplified~~average ~~method~~of ~~provided~~the instock ~~Staff Accounting~~option ~~Bulletins~~vesting ~~107~~period and ~~110~~the stock option term. The ~~Company~~risk ~~continued~~free tointerest ~~use~~ rate was based on the ~~simplified~~U.S. ~~method~~Treasury ~~for~~yield ~~estimating~~curve in effect at the ~~terms~~time of ~~the~~grant. The expected dividend yield was zero for all options granted. ~~between~~The ~~January 1,~~Company’s forfeiture ~~2008~~assumptions ~~and~~were ~~November 13,~~based ~~2008~~on historical data. The following table shows the assumptions ~~because~~that ~~its~~were ~~management~~used ~~believes~~to determine the ~~magnitude~~estimated fair value of the ~~November 2007~~options ~~underwritten~~granted ~~public~~under ~~offering~~the ~~qualifies~~Company’s stock-based ascompensation aplans:

Period ended

4 year vesting

3 year vesting

1 year vesting

December 17, 2009:

7 year term

10 year term

7 year term

10 year term

No stock options granted

—


Fiscal Year ended
June 30, 2009:
Expected volatility	—	0.67		—	0.80
Expected term (in years)	—	6.25		—	5.50
Risk-free interest rate	—	2.8	%	—	2.6	%


Fiscal Year ended
June 30, 2008:
Expected volatility	0.75		0.90		0.80		0.82
Expected term (in years)	4.75		6.25		4.50		5.75
Risk-free interest rate	3.4	%	2.9	%	4.7	%	3.5	%

The weighted-average fair value of options granted during fiscal years 2009 and 2008 was $0.90 and $1.29 per share, respectively. Total stock-based compensation expense recognized in the statement of operations was as follows:


	170-Day Period
	Ended
	December 17,		Fiscal Year Ended June 30,
	2009		2009		2008

Research and development	$	—	$	252	$	283
General and administrative		150		373		723


	$	150	$	625	$	1,006

The Company did not record any income tax benefits for stock-based compensation arrangements ~~NEUROBIOLOGICAL TECHNOLOGIES~~as the Company had cumulative operating losses, ~~INC~~for which a valuation allowance was established.

A summary of stock option activity for the period prior to the cancellation of the Equity Plan ~~NOTES~~on December ~~TO CONSOLIDATED~~17, ~~FINANCIAL STATEMENTS~~2009 and for the fiscal years ended June ~~— (Continued)~~30, 2009 and 2008, is summarized as follows:

recapitalization of the Company, which is a significant structural change rendering historical option exercise data potentially unreasonable for estimating the expected term of options granted subsequently. Nevertheless, an expected-term analysis based on historical stock option grants for the Company’s outstanding stock options at December 31, 2008 approximated the expected term under the simplified method. No options were granted after November 13, 2008, the date of the Company’s most recent annual meeting of shareholders. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is zero for all options granted, as the Company does not anticipate paying dividends in the near future. The Company’s forfeiture assumptions are based on historical data. The following assumptions were used to determine the estimated fair value of the options granted under the Company’s stock-based compensation plans:


				Options Outstanding
							Weighted
	Options Available						Average Exercise
	for Future Grant			Number of Shares			Price
Balance at June 30, 2007		107			426		$	21.84
Options authorized		3,200			—
Options granted		(1,417	)		1,417		$	2.36
Options granted outside of plan		—			150		$	2.47
Options canceled and expired		36			(84	)	$	18.39
Options exercised		—			—			—


Balance at June 30, 2008		1,926			1,909		$	6.04
Options granted		(201	)		201		$	0.90
Options canceled and expired		1,197			(1,273	)	$	4.66
Options exercised		—			—			—


Balance at June 30, 2009		2,922			837		$	6.91
Options granted		—			—			—
Options canceled and expired		(2,922	)		(747	)	$	7.66
Options exercised		—			(90	)	$	0.65


Balance at December 17, 2009		—			—			—

	4 Year Vesting	4 Year Vesting	3 Year Vesting	1 Year Vesting
	7 Year Term	10 Year Term	7 Year Term	10 Year Term
June 30, 2009:
Expected volatility	—	0.67	—	0.80
Expected term (in years)	—	6.25	—	5.50
Risk-free interest rate	—	2.8%	—	2.6%
June 30, 2008:
Expected volatility	0.75	0.90	0.80	0.82
Expected term (in years)	4.75	6.25	4.50	5.75
Risk-free interest rate	3.4%	2.9%	4.7%	3.5%
June 30, 2007:
Expected volatility	0.79 - 0.93	1.08	0.80	0.89 - 0.90
Expected term (in years)	4.75	6.25	4.50	5.50
Risk-free interest rate	4.6% - 4.7%	4.7%	4.7%	4.6% - 4.7%

There were 465,000 and 442,000 options exercisable at June 30, 2009 and 2008, respectively.

The weighted-average fair value of options granted during fiscal years 2009, 2008 and 2007 was $0.90, $1.29, and $13.10 per share, respectively. Total stock-based compensation expense recognized in the statement of operations was as follows:

	Fiscal Year Ended June 30,
	2009		2008		2007
Research and development	$	252	$	283	$	346
General and administrative		373		723		612
	$	625	$	1,006	$	958

The Company has not recorded any income tax benefits for stock-based compensation arrangements as the Company has cumulative operating losses, for which a valuation allowance has been established. As of June 30, 2009, total compensation cost related to unvested stock options that has not yet been recognized in the financial statements was $0.5 million, which will be expensed over the next 2.9 years.

NEUROBIOLOGICAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of stock option activity for fiscal years 2007 through 2009 is summarized as follows:

				Options Outstanding
							Weighted
	Options Available						Average Exercise
	for Future Grant			Number of Shares			Price
Balance at June 30, 2006		202			369		$	22.26
Options granted		(105	)		105		$	17.57
Options canceled and expired		10			(11	)	$	22.35
Options exercised		—			(37	)	$	12.67
Balance at June 30, 2007		107			426		$	21.84
Options granted		(1,417	)		1,417		$	2.36
Option granted outside of plan		—			150		$	2.47
Options canceled and expired		36			(84	)	$	18.39
Options exercised		—			—			—
Options authorized		3,200			—			—
Balance at June 30, 2008		1,926			1,909		$	6.04
Options granted		(201	)		201		$	0.90
Options canceled and expired		1,197			(1,273	)	$	4.66
Options exercised		—			—			—
Balance at June 30, 2009		2,922			837		$	6.91

The following table summarizes information concerning options outstanding and exercisable as of June 30, 2009:

	Options Outstanding						Options Exercisable
			Weighted
			Average
			Remaining		Weighted				Weighted
Range of Exercise			Contractual		Average				Average
Prices	Shares		Term in Years		Exercise Price		Shares		Exercise Price
$0.65		90		9.4	$	0.65		—	$	—
1.10 - 3.00		600		8.3		2.55		320		2.71
6.23 - 49.44		147		4.2		28.47		145		28.65
$0.65 - 49.44		837		7.7	$	6.91		465	$	10.79

There were 442,000 and 288,000 options exercisable at June 30, 2008 and 2007, respectively. As of June 30, 2009, the aggregate intrinsic value of options outstanding was $3,000, based on a June 30, 2009 closing stock price of $0.68, and none of these options were exercisable.

Note 9. Impairment Charge

The Company recognized an impairment loss of $193,000 during the ~~current~~ fiscal year ended June 30, 2009 related to specialized property and equipment used for snake venom purification. Determination of the impairment loss for the ~~specialized~~ equipment was made following the Company’s decision to terminate its Viprinex drug development program, which used snake venom from the Malayan pit viper as the active pharmaceutical ingredient.

Note 10. Collaboration Agreements

In July 2004, the Company acquired Empire Pharmaceuticals, Inc. (“Empire”) to obtain the rights to Viprinex, which Empire had licensed from Abbott Laboratories (“Abbott’). Under the terms of the license agreement, NTI had an obligation to use commercially reasonable efforts to develop Viprinex for the treatment of acute ischemic stroke. Following the failure of Viprinex to meet specified efficacy criteria at an interim analysis and NTI’s determination not to develop Viprinex further, NTI returned the Viprinex development and commercialization rights to Abbott. During the 170-day period ended December 17, 2009 and the fiscal years ended June 30, 2009 and 2008, no payments were made to Abbott under the license.

In April 1998, the Company entered into a license and cooperation agreement with Children’s Medical Center Corp. (“CMCC”) and Merz + Co. GmbH & Co. (“Merz”) covering certain uses of 35memantine, an approved drug for the treatment of Alzheimer’s disease. Merz in turn has licensed certain memantine rights to Forest Laboratories, Inc., H. Lundbeck A/S and Daiichi Suntory Pharma Co., Ltd., who are marketing the drug in different territories. Under terms of the agreement, as amended in February 2008, the Company received royalties from Merz on the sales of memantine in the United States, and through September 30, 2007 also received royalties from sales of memantine for Alzheimer’s disease in Europe. Beginning July 1, 2008, a staged reduction in royalty rates for product sales in the United States commenced. Merz had the right to terminate the license agreement upon six months notice, but not before a notice date of July 1, 2009. In August 2009, the license was terminated with respect to NTI, and Merz agreed to make a final one-time payment of approximately $6.0 million to NTI. During the 170-day period ended December 17, 2009, the Company recognized revenue of $6.0 million under the license and cooperation agreement with CMCC and Merz. During the fiscal years ended June 30, 2009 and 2008, the Company recognized royalty revenue of $7.1 million and $8.3 million, respectively.

In November 2005, the Company sold its worldwide rights and assets related to XERECEPT, an investigational drug for brain edema associated with cerebral tumors, to two subsidiaries of Celtic ~~NEUROBIOLOGICAL~~Pharma Holdings, L.P. (“Celtic”). Under the terms of the sale, the Company received $33 million in ~~TECHNOLOGIES~~non-refundable upfront payments from Celtic. The Company is also entitled to receive payments upon the achievement of certain regulatory objectives and to receive profit-sharing payments or royalties if the product is approved and commercialized by Celtic. In connection with the XERECEPT sales agreement, ~~INC~~the Company entered into a collaboration and services agreement under which the Company provided on-going services to Celtic in exchange for reimbursement of the direct expenses incurred. The Company and Celtic terminated the collaboration and services agreement effective June 30, 2009. NTI recognized the costs incurred for the collaboration and services agreement in its operating expenses, and recognized the reimbursements from Celtic as revenue when the expenses were incurred. The Company recognized the $33 million in up-front payments as revenue on a straight-line basis over the term the Company was obligated to provide on-going services to Celtic (which was a six year period prior to the June 2009 termination). When the collaboration and services agreement was terminated in June 2009, the Company recognized the remaining deferred revenue as revenue in the statement of operations since NTI had no further performance obligations. During the 170-day period ended December 17, 2009, the Company recognized $7,000 as revenue for Celtic’s reimbursement of NTI’s expenses associated with the development of XERECEPT. During the fiscal years ended June 30, 2009 and 2008, the Company recognized $0.5 million and $1.0 million, respectively, as revenue for Celtic’s reimbursement of NTI’s expenses associated with the development of XERECEPT. During the fiscal years ended June 30, 2009 and 2008, the Company also recognized $18.8 million and $5.5 million, respectively, as revenue from the non-refundable up-front payments received in fiscal year 2006.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

commercially reasonable efforts to develop Viprinex for the treatment of acute ischemic stroke. Following the failure of Viprinex to meet specified efficacy criteria at an interim analysis and NTI’s determination not to develop Viprinex further, NTI returned its development and commercialization rights to Viprinex to Abbott. During the fiscal years ended June 30, 2009, 2008 and 2007, no payments were made to Abbott under the license.

In April 1998, the Company entered into a license and cooperation agreement with Children’s Medical Center Corp. (“CMCC”) and Merz + Co. GmbH & Co. (“Merz”) covering certain uses of memantine, an approved drug sold for the treatment of Alzheimer’s disease. Merz in turn has licensed rights covering memantine to Forest Laboratories, Inc., H. Lundbeck A/S and Daiichi Suntory Pharma Co., Ltd., who are marketing the drug in different territories. Under terms of the agreement, as amended in February 2008, the Company received royalties from Merz on the sales of memantine in the United States, and through September 30, 2007 also received royalties from sales of memantine for Alzheimer’s disease in Europe. Beginning July 1, 2008, a staged reduction in royalty rates for product sales in the United States commenced. Merz had the right to terminate the license agreement upon six months notice, but not before a notice date of July 1, 2009. In August 2009, the license was terminated with respect to NTI, and Merz agreed to make a final payment to NTI (see Note 13, Subsequent Events). During the fiscal years ended June 30, 2009, 2008 and 2007, the Company recognized royalty revenue of $7.1 million, $8.3 million and $6.9 million, respectively.

In November 2005, the Company sold its worldwide rights and assets related to XERECEPT, an investigational drug for brain edema associated with cerebral tumors, to two subsidiaries of Celtic Pharma Holdings, L.P. (“Celtic”). Under the terms of the sale, the Company received $33 million in non-refundable upfront payments from Celtic. The Company is also entitled to receive payments upon the achievement of certain regulatory objectives and to receive profit-sharing payments or royalties if the product is approved and commercialized by Celtic. In connection with the XERECEPT sales agreement, the Company entered into a collaboration and services agreement under which the Company provided on-going services to Celtic in exchange for reimbursement of the expenses incurred. The Company and Celtic terminated the collaboration and services agreement effective June 30, 2009. The Company recognized the costs incurred for the collaboration and services agreement in its operating expenses, and recognized the reimbursements from Celtic as revenue when the expenses were incurred. The Company also recognized the $33 million in up-front payments as revenue on a straight-line basis over the term the Company was obligated to provide on-going services to Celtic (which was a six year period prior to the June 2009 termination). When the collaboration and services agreement was terminated in June 2009, the Company recognized the remaining deferred revenue as revenue in the statement of operations since the Company has no further performance obligations. During the fiscal years ended June 30, 2009, 2008 and 2007, the Company recognized $0.5 million, $1.0 million and $5.3 million, respectively, as revenue for Celtic’s reimbursement of NTI’s expenses associated with the development of XERECEPT. During the fiscal years ended June 30, 2009, 2008 and 2007, the Company also recognized $18.8 million, $5.5 million and $5.5 million, respectively, as revenue from the up-front payments received in fiscal year 2006.

In November 2007, the Company entered into a research collaboration and license agreement with the Buck Institute for Age Research (“Buck”) to develop pre-clinical proteins for the treatment of Huntington’s disease (“HD”). In February 2008, the Company entered into a research collaboration and license agreement with Buck to develop pre-clinical proteins for the treatment of Alzheimer’s disease (“AD”). Under the terms of the agreements, the Company received a license to various patent rights for the use of specified proteins to treat HD and AD and agreed to make certain payments to Buck. During the fiscal year ended June 30, 2009, the Company and Buck terminated the HD and AD agreements. During the fiscal years ended June 30, 2009 and 2008, the Company recorded expenses of $0.9 million and $1.4 million, respectively, for the Buck collaborations.

Note 11. Income Taxes

~~There~~The isincome notax provision for ~~income taxes for~~ the ~~year~~170-day period ended ~~June~~ December 3017, 2009 ~~because~~was ~~the Company’s net operating losses~~$53, ~~which had previously been reserved through a valuation allowance~~000, ~~offset any taxable income as a result~~ comprised of:

• $16,000 for federal alternative minimum tax (“AMT”), due to certain limitations on the utilization of prior years net operating loss carryforwards to offset current year alternative 36taxable income and

~~Table~~• $37,000 for California state income taxes, due to temporary provisions enacted in California that limit utilization of ~~Contents~~net operating loss carryforwards and research and development tax credit carryforwards.

Subsequent to December 17, 2009, the Internal Revenue Service (“IRS”) issued new guidance regarding recent application of net operating loss carryforwards in alternative minimum tax ~~NEUROBIOLOGICAL TECHNOLOGIES~~situations, ~~INC~~and the Company was able to reduce its estimated federal tax payable to zero on the liquidation basis of accounting. Estimated California taxes payable were also reduced to zero.

~~NOTES~~There was no provision for income taxes for the year ended June TO30, 2009 because the Company’s ~~CONSOLIDATED~~net ~~FINANCIAL~~operating losses, which had previously been reserved through a valuation allowance, offset ~~STATEMENTS — (Continued)~~taxable income.

the Company’s net income during the fiscal year. For tax return purposes, the Company reported revenue in its federal and state tax returns for the fiscal year ended June 30, 2006 which was deferred for financial statement purposes and recognized for financial statement purposes through the fiscal year ended June 30, 2009, with the majority of the amount recognized during the fiscal year ended June 30, 2009. There was no provision for income taxes for the fiscal ~~years~~ year ended June 30, 2008 ~~and 2007~~ because the Company ~~has~~ incurred operating losses.

Deferred tax assets reflect the net tax effects of net operating loss and tax credit carryforwards and temporary differences between the carrying amounts of assets for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:

	June 30,
	2009			2008
	2010			2009
Deferred tax assets:
Net operating losses	$	21,~~155~~318		$	1521,~~834~~155
Deferred revenue		—			7,443
Accrued liabilities		217			1,193
Accrued liabilities		1,193			1,140
Stock compensation		417			353
Stock compensation		353			104
Research and other credits		56			94
Research and other credits		94			74
Other		26			22
Other		22			86
Total deferred tax assets		22,034			22,817
Total deferred tax assets		22,817			24,681
Valuation allowance		(22,034	)		(22,817	)
Valuation allowance		(22,817	)		(24,681	)
Net deferred tax assets	$	—		$	—

Realization of the deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the Company’s net deferred tax assets have been fully offset by a valuation allowance. During the fiscal year ended June 30~~, 2009, the valuation allowance decreased~~ ~~by $1,864,000. During the fiscal years ended June 30, 2008 and 2007, the valuation allowance increased by $797,000 and $4,944,000, respectively.~~

As of June 30, 2009, the Company had net operating loss (“NOL”) carryforwards for federal income tax purposes of approximately $54.4 million, which will expire in fiscal years 2013 through 2029. As of June 30, 2009, the Company also had NOL carryforwards for state income tax purposes in California of approximately $37.0 million, which will expire in fiscal years 2013 through 2029. The Internal Revenue Code (the “Code”) provides limitations on the use of NOL carryforwards and R&D credit carryforwards when the Company’s ownership changes, as defined in the Code. The Company has determined that an ownership change occurred on November 2, 2007, which will result in the expiration of certain NOL carryforwards and R&D tax credits before they can be used. The NOL and R&D credits available to the Company have been reduced to reflect the limitations provided in the Code. In addition, federal and state NOLs totaling $41.5 million and $25.8 million, respectively, at June 30, 2009 are subject to annual limitations as a result of ownership changes. Future ownership changes may result in additional annual limitations of NOL carryforwards and R&D credit carryforwards.

Realization of the deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain, particularly due to the Company’s filing for dissolution. ~~NEUROBIOLOGICAL~~Accordingly, the Company’s net deferred tax assets have been fully offset by a valuation allowance. ~~TECHNOLOGIES~~During the fiscal years ended June 30, ~~INC~~2010 and 2009, the valuation allowance decreased by $783,000 and $1,864,000, respectively. During the fiscal year ended June 30, 2008, the valuation allowance increased by $797,000.

As of June 30, 2010, the Company had net operating loss (“NOL”) carryforwards for federal ~~NOTES~~income tax purposes of approximately $55 TOmillion, which will expire in fiscal years 2013 through ~~CONSOLIDATED~~2029. ~~FINANCIAL~~As of June 30, 2010, the Company also had NOL carryforwards for state income tax purposes in ~~STATEMENTS~~California of approximately $37 — million, which will expire in fiscal years 2013 through 2029. The Internal Revenue Code (~~Continued~~the “Code”) provides limitations on the use of NOL carryforwards and R&D credit carryforwards when the Company’s ownership changes, as defined in the Code. The Company has determined that an ownership change occurred on November 2, 2007, which will result in the expiration of certain NOL carryforwards and R&D tax credits before they can be used. The NOL and R&D credits available to the Company have been reduced to reflect the limitations provided in the Code. In addition, federal and state NOLs totaling approximately $40 million and $25 million, respectively, at June 30, 2010 are subject to annual limitations as a result of ownership changes. Future ownership changes, if any, may result in additional annual limitations of NOL carryforwards and R&D credit carryforwards.

A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective income tax rate is as follows:

	Fiscal Year Ended June 30,
	170 Day
	2009			2008			2007
	Period
Tax expense (benefit) at federal statutory rate		35.0	%		(35.0	)%		(35.0	)%
	Ended
	December 17,			Fiscal Year ended June 30,
	2009			2009			2008
Tax expense (benefit) at federal statutory rate		35.0	%		35.0	%		(35.0	)%
Effect of:
State tax expense (benefit), net		5.05			(5.30	)		(45.13	)
Share-based compensation expenses		—			1.9			1.7
Utilization of capital loss carryforwards		(25.6	)		—			—
Warrant loss (gain)		2.9			(7.2	)		(2.4	)
Share-based compensation expenses		—			—			1.9
Reduction in valuation allowance		(59.7	)		—			—
Warrant loss (gain)		2.6			2.9			(7.2	)
Research and development tax credits		16.8			—			—
Reduction in valuation allowance		(12.3	)		(59.7	)		—
Losses not benefited		—			45.6			39.8
Research and development tax credits		(4.3	)		16.8			—
Total provision for income taxes		—	%		—	%		—	%
Impact of alternative minimum tax		0.2			—			—
Losses not benefited		—			—			45.6
Total provision for income taxes		1.1	%		—	%		—	%

On July 1, 2007, the Company adopted FIN 48, Accounting for Uncertainty in Taxes. Upon adoption, the Company reversed certain fully reserved deferred tax assets for uncertain tax benefits related to R&D credits totaling $660,000 and the related valuation allowance. The following is a tabular reconciliation of the total amount of unrecognized tax benefits ~~for~~through the fiscal year ended June 30, ~~2009~~2010:

Balance at July 1, 2008	$	660
Increase (decrease) for current period tax positions		—
Balance at June 30, 2009	$	660
Increase (decrease) for current period tax positions		—
Balance at June 30, 2010	$	660

31 The Company does not currently expect any significant changes to the unrecognized tax benefits within 12 months of June 30, 2009. As of June 30, 2009, the Company’s U.S. federal income tax returns remain subject to examination by tax authorities for fiscal years 1991 through 2009, and its state income tax returns remain subject to examination for fiscal years 1999 through 2009.

Note 12. 401(k) Savings Plan

The Company maintains a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code (the “Savings Plan”). The Savings Plan covers substantially all full-time employees. Participating employees may defer a portion of their pretax earnings, up to the limit established by the Internal Revenue Service, and are fully vested in their salary deferrals at all times. The Company currently matches the first $500 of each employee’s contributions, which vests over 2 years, and records these matching contributions as expense. The Company’s matching contributions to the plan were $8,000, $15,000 and $13,000 for the fiscal years ended June 30, 2009, 2008, and 2007, respectively.

Note 13. Subsequent Events

The Company evaluated subsequent events after the balance sheet date of June 30, 2009, through August 28, 2009, the date the consolidated financial statements were issued.

On August 7, 2009, the Company and Merz terminated the memantine license and cooperation agreement with respect to NTI, and Merz agreed to make a final payment of $4.9 million to NTI.

On August 27, 2009 the Company’s Board of Directors approved a plan of Complete Liquidation and Dissolution of the Company, subject to stockholder approval.

The Company does not currently expect any significant changes to the unrecognized tax benefits within 12 months of June 30, 2010. As of June 30, 2010, the Company’s U.S. federal income tax returns remain subject to examination by tax authorities for fiscal years 1991 through 2010, and its state income tax returns remain subject to examination for fiscal years 1999 through 2010.

Note 12. 401(k) Savings Plan

The Company maintained a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code (the “Savings Plan”) until it was terminated in December 2009. Prior to its termination, the Savings Plan covered substantially all full-time employees. Participants in the Savings Plan could defer a portion of their pretax earnings, up to the limits established by the Internal Revenue Service, and were fully vested in their salary deferrals at all times. The Company matched the first $500 of each employee’s contributions, vested this matching contribution over 2 years, and recorded these matching contributions as expense. The Company made no matching contributions for the 170-day period from July 1, 2009 through December 17, 2009. The Company’s matching contributions to the plan were $8,000 and $15,000 for the fiscal years ended June 30, 2009 and 2008.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A~~(T)~~. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal accounting officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our principal executive officer and principal accounting officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the material information required to be included in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to us, including our consolidated subsidiary, and was made known to them by others within those entities, particularly during the period when this report was being prepared.

There were no changes in our internal controls or in other factors that could significantly affect these controls subsequent to the Evaluation Date.

Management’s Report on Internal Control over Financial Reporting

We are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f) under the Exchange Act). Under the supervision and with the participation of our management, including our principal executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Controls — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and the related guidance provided in Internal Control Over Financial Reporting — Guidance for Smaller Public Companies also issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the preparation and fair presentation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our 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. Also, 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.

32 Based on our evaluation under the framework in Internal Controls — Integrated Framework, our management concluded that our internal control over financial reporting was effective as of June 30, 2009.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our internal control over financial reporting was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.

Based on our evaluation under the framework in Internal Controls — Integrated Framework, our management concluded that our internal control over financial reporting was effective as of June 30, 2010.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our internal control over financial reporting is not subject to attestation by our independent registered public accounting firm due to our filing status as a smaller reporting company.

ITEM 9B. OTHER INFORMATION

In our fiscal fourth quarter which ended June 30, ~~2009~~2010, we had no events that were required to be reported on Form 8-K ~~that were not filed to date~~.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table sets forth the members of our Board of Directors, the year each director was first elected a director, the age of each director, and the positions with the Company ~~currently~~ currently held by each director~~, and the year each~~. ~~director’s current term will expire:~~

Nominee or Director’s
Nominee or Director’s Name and Year
Name and Year First Became a				Year Current Term
First Became a Director	Age		Position(s) with the Company
Director	Age		Position(s) with the Company	Will Expire
William A. Fletcher (2007)		63	Director
Abraham E. Cohen (1993)		73	Chairman of the Board of		2011
Matthew M. Loar (2009)		47	Acting Chief Executive and Financial Officer
			Directors
John B. Stuppin (1988)		77	Director
William A. Fletcher (2007)		62	Acting Chief Executive		2009
			Officer and Director
Theodore L. Eliot, Jr. (1992)		81	Director		2009
F. Van Kasper (2004)		72	Director		2011
Abraham D. Sofaer (1997)		71	Director		2010
John B. Stuppin (1988)		76	Director		2010

~~Abraham~~William EA. ~~Cohen~~Fletcher has served as a director of the Company ~~since~~ ~~March 1993 and has been Chairman of the Board of Directors~~ since ~~August 1993~~February 2007. ~~From 1982 to 1992,~~ Mr. ~~Cohen~~Fletcher also served as ~~Senior~~ ~~Vice~~Acting ~~President~~Chief ofExecutive ~~Merck &~~Officer ~~Co., or Merck, and~~ from ~~1977~~January 2009 tothrough ~~1988~~December 2009. asMr. Fletcher was ~~President~~Chairman of ~~the~~Teva ~~Merck~~Pharmaceuticals ~~Sharp & Dohme~~North ~~International~~America ~~Division,~~from orDecember 2004 ~~MSDI~~until September 2010. ~~While~~Prior to atbeing ~~Merck~~appointed Chairman, he ~~played a~~was ~~key~~President ~~role~~and inChief ~~the~~Executive ~~development~~Officer of ~~Merck~~Teva’s ~~international~~North American ~~business~~activities, ~~initially~~where inhe ~~Asia,~~started ~~then~~employment in ~~Europe~~1985. ~~and,~~Mr. Fletcher ~~subsequently,~~ served as Vice President, ofSales ~~MSDI,~~and Marketing ~~which~~of ~~manufactures~~the ~~and~~Pennsylvania-based ~~markets~~Lemmon ~~human health~~Company ~~products~~(1980 ~~outside~~to ~~the~~1983) ~~United~~and ~~States.~~then ~~Since~~as ~~his~~President ~~retirement~~(1983-1985) ~~from~~following ~~Merck~~the company’s acquisition by Teva and ~~MSDI~~WR inGrace. ~~January~~Prior ~~1992~~to 1980, Mr. ~~Cohen~~Fletcher ~~has~~was ~~been~~Business ~~active~~Development asManager anand ~~international~~International ~~business~~Marketing ~~consultant.~~Manager Heof isSynthelabo, ~~currently~~a pharmaceutical subsidiary ~~Chairman~~of ~~and~~L’Oreal ~~President~~in ofParis. ~~Kramex~~From ~~Company~~1970 ~~and~~to is1977 ~~also~~he ~~chairman~~served ~~of the~~in ~~board~~various ofinternational ~~Vasomedical,~~sales ~~Inc~~and marketing positions for Hoffman-LaRoche. Mr. ~~Cohen~~Fletcher ~~serves~~graduated asin ~~a director~~International ofMarketing ~~the~~from ~~following public companies: Chugai~~Woolwich ~~Pharmaceutical Co.~~Polytechnic, ~~MannKind~~London ~~Corporation~~(now ~~and~~Greenwich ~~Teva~~University) ~~Pharmaceutical Industries,~~in ~~Ltd~~1969.

~~William~~Matthew AM. ~~Fletcher~~Loar ~~has~~was ~~served~~designated as Acting Chief Executive ~~Officer~~ ~~since January 2009~~ and asFinancial aOfficer ~~director~~in ~~of the Company since~~ February ~~2007. Mr.~~ ~~Fletcher~~2010 and has ~~been~~served ~~Chairman~~as ofdirector ~~Teva Pharmaceuticals North America~~ since December ~~2004~~ 2009. ~~Prior~~He ~~to that,~~previously heserved ~~was~~as Vice President and Chief Financial ~~Executive~~ Officer of ~~Teva~~ the Company from April 2008 to December 2009, when Mr. Loar’s ~~North~~employment ~~American~~with the ~~activities~~Company ~~from~~was ~~1985~~terminated ~~until~~following the ~~end~~Company’s ~~of 2004~~filing for dissolution. Mr. ~~Fletcher~~Loar ~~served~~is licensed in California as ~~Vice~~a ~~President,~~certified ~~Sales~~public accountant and ~~Marketing~~ has over 20 years of ~~the~~financial ~~Pennsylvania-based~~management experience. ~~Lemmon~~Mr. Loar joined the Company ~~(1980~~from ~~to 1983) and~~Osteologix, ~~then~~Inc., aswhere ~~President (1983-1985) following~~he ~~the~~served ~~company’s~~as ~~acquisition~~Chief byFinancial Officer ~~Teva~~from ~~and~~September 2006 WRto ~~Grace~~April 2008. Prior to ~~1980~~his tenure at Osteologix, Mr. ~~Fletcher~~Loar was ~~Business Development~~Chief ~~Manager~~Financial ~~and~~Officer ~~International Marketing Manager~~ of ~~Synthelabo~~Genelabs Technologies, ~~a pharmaceutical~~Inc. ~~subsidiary~~beginning ~~of L’Oreal~~ in ~~Paris~~2001. ~~From~~Prior ~~1970~~ to ~~1977~~ hebeing ~~served~~appointed inCFO ~~various~~at Genelabs, ~~international~~Mr. Loar ~~sales~~was Vice President, Finance and ~~marketing positions~~Controller for ~~Hoffman-LaRoche~~approximately six years. HeEarlier, Mr. Loar ~~serves~~held asfinance apositions ~~board~~with ~~member~~an ~~for several~~international ~~Teva~~manufacturing ~~subsidiary~~company ~~companies~~and inwas ~~North~~audit ~~America~~manager with ~~and~~a ~~Europe~~major public accounting firm. Mr. ~~Fletcher~~Loar ~~graduated~~holds ina ~~International~~B.A. ~~Marketing~~degree from ~~Woolwich~~ ~~Polytechnic,~~the ~~London (now Greenwich~~ University) inof California, ~~1969~~Berkeley.

Theodore L. Eliot, Jr. has served as a director of the Company since August 1992. Previously, he served as a director of the Company from September 1988 until April 1992, and as a Vice President from September 1988 until September 1991. Mr. Eliot retired from the United States Department of State in 1978, after a 30-year career in which he held senior posts in Washington and was Ambassador to Afghanistan. He was Dean of the Fletcher School of Law and Diplomacy from 1978 to 1985 and a director of Raytheon Co. from 1983 to 1998. He is currently a board member of the Sonoma County (CA) Community Foundation and of The Asia Foundation. Mr. Eliot holds B.A. and M.P.A. degrees from Harvard University.

F. Van Kasper has served as a director of the Company since January 2004. Mr. Kasper served as Chairman of Wells Fargo Securities, the institutional brokerage and investment bank for Wells Fargo & Company, prior to his

retirement in March 2003. Mr. Kasper entered the brokerage business in 1964 with Merrill Lynch and Co., Inc. and in 1978 co-founded Van Kasper and Company, a regional investment bank. As Chairman and Chief Executive Officer of Van Kasper and Company, he guided its growth from a handful of employees to a bank with over 350 employees in 15 offices in 4 states when it was sold in 1999. During his investment career, Mr. Kasper was elected as a Governor of the National Association of Securities Dealers and as a Director and Vice Chairman of the Securities Industry Association. Mr. Kasper is active in the San Francisco, California area non-profit community, most recently as a director and member of the Investment Committee for the University of California San Francisco Foundation, and serves as Chairman Emeritus for San Francisco’s Exploratorium Museum. Mr. Kasper holds a B.S. degree from California State University.

Abraham D. Sofaer has served as a director of the Company since April 1997. Mr. Sofaer is the first George P. Shultz Distinguished Scholar & Senior Fellow at the Hoover Institution, Stanford University, appointed in 1994. He has also been a Professor of Law (by courtesy) at Stanford Law School. From 1990 to 1994, Mr. Sofaer was a partner at the law firm of Hughes, Hubbard & Reed in Washington, D.C., where he represented several major U.S. public companies. From 1985 to 1990, he served as the Legal Adviser to the United States Department of State, where he was principal negotiator on several international disputes. From 1979 to 1985, he served as a federal judge in the Southern District of New York. Mr. Sofaer is registered as a qualified arbitrator with the International Chamber of Commerce Arbitration Committee and the American Arbitration Association and is a member of the National Panel of the Center for Public Resolution of Disputes. Mr. Sofaer is on the boards of directors of Gen-Probe, Inc., and Rambus, Inc. and the International Advisory Committee of Chugai Biopharmaceuticals, Inc. He is president of the American Friends of the Koret Israel Economic Development Fund and a director of the Koret Foundation. He also serves on the board of directors of the National Museum of Jazz in Harlem. Mr. Sofaer holds a B.A. degree from Yeshiva College and an L.L.B. degree from New York University.

John B. Stuppin is a founder of the Company and has served as a director of the Company since September 1988. From September 1987 until October 1990, Mr. Stuppin served as President of the Company, from November 1990 to August 1993 as co-chairman of the Board of Directors, from October 1990 until September 1991 as Executive Vice President, and from April 1991 until July 1994 as Treasurer. He also served as the acting Chief Financial Officer of the Company from the Company’s inception through December 1993 and served as a part-time employee of the Company in a business development capacity from December 1990 to December 2005. Mr. Stuppin is an investment banker and a venture capitalist. He has over 40 years’ experience in the start up and management of companies active in emerging technologies and has been the president of a manufacturing company. He is chairman of the board of Energy Focus, Inc. Mr. Stuppin holds an A.B. degree from Columbia University.

33 During the fiscal year ended June 30, 2009, our Board of Directors held thirteen meetings. Each director attended at least 75% of the meetings of the Board of Directors and meetings of the committees of which he was a member in our last fiscal year. Our Board of Directors has standing Audit, Compensation, and Nominating and Corporate Governance committees. In addition, following the termination of Paul E. Freiman as President and Chief Executive Officer, the Board of Directors formed a Special Committee to assist the Company’s senior management team with selected strategic and operational matters. All members of our Board of Directors serving at the time of the 2008 Annual Meeting of Stockholders attended that meeting.

Board Committees

Audit Committee. Our Audit Committee is comprised of Messrs. Kasper (Chairman), Eliot and Sofaer. Our Audit Committee oversees the accounting and financial reporting processes of the Company and audits of our financial statements and reviews the effectiveness of our internal control over financial reporting. In that regard, the Audit Committee’s responsibilities are, among other things, to appoint and provide for the compensation of our independent registered public accounting firm, to oversee and evaluate its performance, to review our interim and annual financial statements, independent audit reports and management letters, and to perform other duties specified in the Audit Committee Charter. The Audit Committee met five times in fiscal 2009. Our Board of Directors has determined that all members of the Audit Committee satisfy the current independence standards promulgated by both The NASDAQ Stock Market (including independence standards for audit committee members) and the SEC. Our Board of Directors has also determined that Mr. Kasper is an audit committee financial expert, as the SEC has defined that term in Item 407 of Regulation S-K.

~~Compensation~~During ~~Committee. Our~~the ~~Compensation Committee~~fiscal isyear ~~comprised~~ended ~~of Messrs.~~June ~~Sofaer~~30, ~~(Chairman)~~2010, ~~Cohen and~~our ~~Eliot. Our Compensation Committee assists the~~ Board of Directors ~~with~~held ~~respect~~ten ~~to compensation for our executive officers and independent directors and administers our equity-based compensation plans~~meetings. ~~In that regard, the~~Each ~~Compensation~~director ~~Committee’s~~attended ~~responsibilities~~at ~~are,~~least ~~among~~75% ~~other things, to determine the level and form~~ of ~~compensation for our executive officers, including~~ the ~~Chief~~meetings ~~Executive Officer, and directors, to oversee administration~~ of ~~our equity-based compensation plans, to report annually to our stockholders on executive compensation, and to perform other duties specified in~~ the ~~Compensation Committee Charter. The Compensation Committee met four times in fiscal 2009. Our~~ Board of Directors ~~has determined~~and ~~that~~meetings ~~all members~~ of the committees ~~Compensation~~of ~~Committee satisfy~~which ~~the~~he ~~current~~was ~~independence~~a ~~standards~~member ~~promulgated~~in byour ~~The NASDAQ~~last ~~Stock~~fiscal ~~Market~~year.

Nominating and Corporate Governance Committee. Our Nominating and Corporate Governance Committee is comprised of Messrs. Stuppin (Chairman), Fletcher and Sofaer. Our Nominating and Corporate Governance Committee identifies, evaluates and recommends individuals for election as directors at each annual or special meeting of the stockholders, oversees the evaluation of the Board’s ~~performance, develops and recommends to the Board~~Committees of Directors corporate governance guidelines, and provides oversight with respect to corporate governance and ethical conduct. Procedures for the consideration of director nominees recommended by stockholders are set forth in our amended and restated bylaws. The Nominating and Corporate Governance Committee met once in fiscal 2009. Our Board of Directors has determined that all members of the Nominating and Corporate Governance Committee, other than Mr. Fletcher, satisfy the current independence standards promulgated by The NASDAQ Stock Market.

~~Charters~~Prior ~~for~~to ~~our~~filing ~~Audit~~of ~~Committee,~~the ~~Compensation~~Certificate ~~Committee,~~of ~~and Nominating~~Dissolution ~~and~~on ~~Corporate~~December 17, ~~Governance~~2009, ~~Committee~~the ~~are~~Board ~~posted~~had ~~on our~~the ~~website~~following atstanding ~~www.ntii.com.~~committees:

~~Special~~• Audit Committee~~. In~~, ~~June~~which ~~2008,~~oversaw the ~~Board~~accounting ~~of Directors~~and ~~formed~~financial areporting ~~Special~~processes ~~Committee comprised~~ of ~~Messrs. Fletcher~~ ~~(Chairman) and Stuppin to assist~~ the Company’s ~~senior management team with selected strategic~~ and ~~operational~~audits ~~matters.~~of ~~The~~our ~~Special~~financial ~~Committee was disbanded as of August 31~~statements, ~~2009.~~

•

Compensation Committee, which assisted the Board of Directors with respect to compensation for our executive officers and independent directors, and administered our equity-based compensation plans, and

•

Nominating and Corporate Governance Committee, which had the responsibility to identify, evaluate and recommend individuals for election as directors at each annual or special meeting of the stockholders, oversee the evaluation of the Board’s performance, develop and recommend to the Board of Directors corporate governance guidelines, and provide oversight with respect to corporate governance and ethical conduct.

These functions, to the extent applicable, have been assumed directly by the Board since the filing of the Certificate of Dissolution and cessation of our business and operations.

EXECUTIVE OFFICERS

~~Our~~Matthew ~~current~~M. ~~executive~~Loar ~~officers~~is ~~and~~our ~~their~~only ~~respective~~current ~~positions are set forth in the following table. Biographical information regarding the~~ executive officer, ~~who~~and ishis ~~not~~title ~~also~~and abackground information ~~director~~ is ~~set~~ ~~forth~~located ~~following the table~~above.

Name	Age		Position
William A. Fletcher		62	Acting Chief Executive Officer
Matthew M. Loar		46	Vice President and Chief Financial Officer

Matthew M. Loar was appointed Vice President and Chief Financial Officer in April 2008. Mr. Loar is licensed in California as a certified public accountant and has over 20 years of financial management experience. Mr. Loar joined the Company from Osteologix, Inc., where he served as Chief Financial Officer from September 2006 to April 2008. Prior to his tenure at Osteologix, Mr. Loar was Chief Financial Officer of Genelabs Technologies, Inc. beginning in 2001. Prior to being appointed CFO at Genelabs, Mr. Loar was Vice President, Finance and Controller for approximately six years. Earlier, Mr. Loar held finance positions with an international manufacturing company and was audit manager with a major public accounting firm. Mr. Loar holds a B.A. degree from the University of California, Berkeley.

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics (“Code of Conduct”) that applies to all of our directors, officers and employees. ~~We have posted a copy of the Code of Conduct on our website at www.ntii.com.~~ You may also request a printed copy of the Code of Conduct, without charge, by writing us at 2000 Powell Street, Suite 800, Emeryville, California 94608, Attn: Investor Relations. In the event of an amendment to, or a waiver from, any provision of the Code of Conduct that applies to any director or executive officer, we will publicly disclose ~~any~~ any such amendment or waiver asto the extent required by applicable law or ~~regulations~~ ~~or NASDAQ and post such amendment on our website~~regulations.

Corporate Governance Guidelines

Our Nominating and Corporate Governance Committee has adopted Corporate Governance Guidelines (“Guidelines”) to assist our Board of Directors in exercising its responsibilities. ~~These Guidelines reflect our Board of Directors’ commitment to building long-term stockholder value with an emphasis on corporate governance.~~ You may request a printed copy of the Guidelines, without charge, by writing us at 2000 Powell Street, Suite 800, Emeryville, California 94608, Attn: Investor Relations.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all reports filed under Section 16(a). To the Company’s knowledge, based ~~solely~~ on information ~~the~~provided ~~review of copies of the reports furnished~~ to the Company, all executive officers, directors and greater than 10% stockholders were in compliance with all applicable Section 16(a) filing requirements in fiscal ~~2009, except~~ ~~that a Form 4 was not timely filed by Mr~~2010. ~~Freiman in~~ ~~connection with his sale of 2,466 shares of common stock from December 10, 2008 to December 17, 2008. The Form 4 was subsequently filed on February 12, 2009.~~

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table summarizes compensation paid, awarded or earned for services rendered during fiscal ~~2009~~2010 by our Acting Chief Executive and Financial Officer, and our former ~~Chief~~Acting Chief Executive Officer, ~~our Chief Financial Officer~~ (~~the~~all ~~only remaining~~ executive ~~officer whose~~officers ~~salary~~who ~~and~~held ~~bonus~~the ~~for~~position ~~fiscal~~of ~~2009~~principal ~~exceeded~~executive ~~$100,000)~~officer and ~~one additional former officer who would have been among~~ the ~~Company’s~~ ~~two~~only ~~most highly compensated~~ executive officers~~, other~~ ~~than~~whose ~~the~~salary ~~Chief~~and ~~Executive~~bonus ~~Officer, but~~ for ~~the~~fiscal ~~fact~~2010 ~~that~~exceeded ~~he was not serving as an executive officer at the end of the last completed fiscal year~~$100,000). We refer to these ~~four~~two executive officers as our named executive officers.

					Non-Equity				~~All Other~~
	Fiscal				Incentive Plan		Option		~~Compensation~~All Other
Name and Principal Position(s)	Year		Salary		Compensation (1)		Awards (2)		Compensation (3)		Total
William A. Fletcher(4)		2009	$	—	$	—	$	31,941	$	165,000	$	196,941
Matthew M. Loar (4)		2010		88,473		77,000		—		180,300		345,773
Acting Chief Executive Officer and Director
Acting Chief Executive		2009		279,167		56,000		—		—		335,167
Paul E. Freiman(5)		2009		206,667		—		73,931		2,500		283,098
and Financial Officer		2008		68,750		17,188		423,540		25,000		534,478
Former President, Chief		2008		400,000		100,000		223,603		—		723,603
(starting February 12, 2010), Formerly Vice President and Chief Financial Officer (through December 17, 2009)
Executive Officer and Director
William A. Fletcher (5)		2010		—		35,000		—		118,975		153,975
Matthew M. Loar(6)		2009		279,167		56,000		176,354		—		511,521
Former Acting Chief		2009		—		—		6,591		165,000		171,591
Vice President and Chief		2008		68,750		17,188		27,571		25,000		138,509
Executive Officer (through December 17, 2009)
Financial Officer
Warren W. Wasiewski, M.D.		2009		224,167		—		111,863		132,396		468,426
Former Vice President and Chief Medical Officer		2008		295,000		76,250		65,872		36,875		473,997

(1)		The Company awarded non-equity incentive plan amounts related to fiscal 2008 performance in September 2008. The Company did not award any non-equity incentive plan amounts for fiscal 2009, except to Mr. Loar under a retention plan which paid $28,000 on each of March 31, 2009 and June 30, 2009.
(2)		The amounts set forth under “Option Awards” relate to outstanding option awards, including those granted during and prior to the fiscal year ended June 30, 2009, and are valued based on a Black-Scholes option pricing model as used in our consolidated financial statements pursuant to Statement of Accounting Standards No. 123R, “Share-Based Payment.” The Black-Scholes option pricing model reflects certain assumptions regarding variable factors such stock price volatility and the term of the option. Stock options have value to the

		recipient only as a result of appreciation in the price of our common stock. For the purposes of establishing the values shown in the table, the model assumed a dividend yield of zero, risk-free interest rates of 2.6% to 4.7%, volatility factors of 67% to 90%, and an expected life of the options of 43/4 to 61/4 years. For financial reporting purposes, we also used an estimated forfeiture rate, but this rate has not been included in the balances in the table because the forfeiture rate is an overall estimate for the organization as a whole and cannot be attributed specifically to any of our executive officers. None of the named executive officers received any options to purchase common stock during the fiscal year ended June 30, 2009, other than Mr. Fletcher, who received his option grant in connection with his services as a non-employee director. This option to purchase 15,000 shares at an exercise price of $0.65 per share (the closing price on the date of grant) was granted on November 13, 2008, had a grant-date value of $6,591, and contained terms identical to those granted to other non-employee directors at the time (see “Director Compensation” below). All option grants provided to Mr. Fletcher prior to the fiscal year ended June 30, 2009 were also for his service as a non-employee director.
(1)		Non-equity incentive payments for the fiscal year ended June 30, 2010 included $35,000 awarded by our Board of Directors to each of Mr. Loar and Mr. Fletcher for their services in connection with the winding down of the business and operations of the Company and preparing for its liquidation, and $42,000 to Mr. Loar under an employee retention plan. Non-equity incentive payments for the fiscal year ended June 30, 2009 were paid to Mr. Loar under an employee retention plan. The Company awarded non-equity incentive plan amounts related to fiscal 2008 performance in September 2008.
(3)		All other compensation for Mr. Fletcher represents fees earned as member of our Board of Directors and for board committee service, including fees of $25,000 per month for service as Acting Chief Executive Officer. All other compensation for Mr. Freiman represents consulting fees for assistance in winding down certain corporate contracts. For Mr. Loar, the amount represents a bonus paid upon his commencement of employment at NTI in fiscal 2008. For Dr. Wasiewski, in fiscal 2009 the amount includes $106,666 for severance payments following termination of his employment, $2,095 for payout of accrued vacation, and $23,635 for expenses related to the rental of an apartment near our office in New Jersey; in fiscal 2008 the amount includes expenses related to the rental of an apartment near our office in New Jersey.
(2)		Option Award amounts reflect the aggregate grant date fair value of stock options using the Black-Scholes option pricing model for option awards granted during the respective fiscal year, computed in accordance with ASC 718, Compensation-Stock Compensation, excluding the effect of estimated forfeitures. No stock option or other equity awards were granted during the fiscal year ended June 30, 2010. The values of the option awards for the fiscal year ended June 30, 2009 for Mr. Fletcher and for the fiscal year ended June 30, 2008 for Mr. Loar have been revised from our previous proxy disclosures to reflect their grant date fair value in accordance with revised SEC disclosure requirements that have been implemented since the previous filings were made. Stock options were granted with an exercise price equal to the fair value of the stock on the grant date, or $0.65 for Mr. Fletcher’s fiscal 2009 award and $2.47 for Mr. Loar’s fiscal 2008 award. For the purposes of establishing the values of the stock options on the grant date, the stock option pricing model assumed a dividend yield of zero, risk-free interest rates of 2.6% to 4.7%, volatility factors of 67% to 90%, and an expected life of the options of 43/4 to 61/4 years.
(4)		Mr. Fletcher was appointed Acting Chief Executive Officer on January 30, 2009 and receives fees of $25,000 per month for his services, beginning in February 2009, in addition to his regular board fees of $7,500 per quarter. He also received a fee of $10,000 for January 2009 related to his service on the Special Committee before being named Acting Chief Executive Officer.
(3)		All other compensation for Mr. Loar during the fiscal year ended June 30, 2010 represents six months of severance pay, which aggregated $140,000, consulting fees of $30,300 and Board of Director fees of $10,000. For the year ended June 30, 2008, the amount represents a bonus paid upon his commencement of employment.
(5)		Mr. Freiman’s employment as President and Chief Executive Officer was terminated by the Board of Directors effective December 31, 2008.
		All other compensation for Mr. Fletcher represents fees earned as member of our Board of Directors and for board committee service, including fees of $25,000 per month for service as Acting Chief Executive Officer from January 30, 2009 through August 31, 2009, and $12,500 per month from September 1, 2009 through December 17, 2009, in addition to his regular board fees of $7,500 per quarter through December 17, 2009. After December 17, 2009, board fees were reduced to $5,000 per quarter. Mr. Fletcher also received a fee of $10,000 in January 2009 related to his service as a member of a special committee established by the Board of Directors to assist management with selected strategic and operational issues while the position of Chief Executive Officer remained vacant.
(6)		Mr. Loar was hired as Vice President and Chief Financial officer effective April 1, 2008.
(4)		Mr. Loar was designated Acting Chief Executive and Financial Officer on February 12, 2010, and serves in that capacity as part-time consultant to the Company. He served as Vice President and Chief Financial officer from April 1, 2008 to December 17, 2009.
(5)		Mr. Fletcher served as Acting Chief Executive Officer from January 30, 2009 to December 17, 2009. He served in that capacity as part-time consultant to the Company.

Outstanding Equity Awards at Fiscal Year-End

~~The~~There ~~following~~were ~~table~~no ~~shows information regarding~~ outstanding equity awards atas of June 30, ~~2009 for our named executive officers~~2010.

	Option Awards
	Number of			Number of
	Securities			Securities
	Underlying			Underlying			Option
	Unexercised			Unexercised			Exercise		Option
	Options (#)			Options (#)			Price		Expiration
Name	Exercisable			Unexercisable			($)		Date
William A. Fletcher		7,142			—		$	19.25		2/20/2017
		1,428			—			2.54		11/16/2017
		30,000	(1)		10,000			3.00		5/30/2018
		—			15,000	(2)		0.65		11/13/2018
Paul E. Freiman		none			none			—		—
Matthew M. Loar		65,625	(3)		159,375	(3)		2.47		4/1/2018
Warren W. Wasiewski		none			none			—		—

(1)		This option becomes fully vested with respect to one-half of the underlying shares on the date of grant (May 30, 2008) and vests with respect to one-quarter of the underlying shares on each of the first and second anniversaries of the date of grant.
(2)		The options vest and become fully exercisable upon the first anniversary of the grant date (November 13, 2008), provided that Mr. Fletcher is a director at such time.

(3) 225,000 options were granted on April 1, 2008 and vest with respect to one-eighth of the underlying shares six months from the date of grant and then ratably on a monthly basis over the next 42 months.

Option Exercises

~~During~~The ~~the~~following ~~fiscal~~table ~~year~~shows ~~ended~~all ~~June 30,~~stock ~~2009,~~options ~~none~~exercised ofby ~~our~~ named executive officers, ordirectors and former directors ~~exercised~~during ~~any~~the ~~stock options~~fiscal year ended June 30, 2010.


	Option Awards
	Number of Shares
	Acquired on		Value Realized
Name	Exercise		on Exercise ⁽¹⁾
William A. Fletcher		15,000	$	3,900
Abraham E. Cohen		15,000		4,500
Theodore L. Eliot, Jr.		15,000		3,900
F. Van Kasper		15,000		3,900
Abraham D. Sofaer		15,000		3,900
John B. Stuppin		15,000		3,900


⁽¹⁾		Value realized on exercise represents the difference between the closing stock market price of NTI common stock on the date of exercise and the stock option exercise price. All stock options exercised during the fiscal year ended June 30, 2010 had an exercise price of $0.65 per share. Mr. Cohen exercised his options on November 6, 2009 when the closing stock price was $0.95 per share. All other stock option exercises occurred on October 27, 2009, when the closing stock market price was $0.91 per share.

Pension Benefits

We do not have a defined benefit plan. Our named executive officers did not participate in, or otherwise receive any special benefits under, any pension or retirement plan sponsored by us during fiscal ~~2009~~2010.

Nonqualified Deferred Compensation

During fiscal ~~2009~~2010, our named executive officers did not contribute to, or earn any amounts with respect to, any defined contribution or other plan sponsored by us that provides for the deferral of compensation on a basis that is not tax-qualified.

Potential Payments upon Termination or Change in Control

~~Matthew~~None M.of ~~Loar,~~ our Vice President and Chief Financial Officer, is eligible to receive cash severance equal to six months base salary if he is involuntarily terminated. There are no other severance or change in control agreements in place for any of our named executive officers. Our 2003 Equity Incentive Plan provides that the time-based (but not performance-based) vesting of all outstanding equity awards will fully accelerate in the event of a “change in control,” which is defined under the plan as (A) any merger, consolidation or ~~other transaction~~directors ~~to which we or an affiliate~~ are aeligible ~~party~~for and in which our beneficial stockholders, immediately before the transaction, beneficially own securities representing 50% or less of our total combined voting power or value immediately after the transaction or (B) any ~~other~~payments ~~transaction~~upon ~~or corporate event deemed by the Board of Directors to constitute~~ a change in control ~~including, but not limited to, (i) a transaction or series~~ of ~~transactions in which any person or entity, including a “group” as contemplated by Section 13(d)(3) of~~ the Exchange Act, acquires securities holding 30% or more of our total combined voting power or value, or (ii) as a result of or in connection with a contested election of our directors, the persons who were our directors immediately before the election cease to constitute a majority of the Board of DirectorsCompany.

Assuming that a change in control occurred as of the end of fiscal 2009, and based on our closing stock price on the last day of trading that year ($0.68), none of the named executive officers would have received change in control benefits of more than $500 because the exercise prices of then outstanding options was generally higher than the closing price of our stock.

Director Compensation

NTI’s ~~non-employee~~current directors are each paid cash compensation ~~according~~ ~~to the following schedule: Chairman~~ of ~~the Board of Directors,~~ $105,000 per ~~quarter;~~calendar ~~Chairman of the audit committee, $8,750 per~~ quarter~~; other board members, $7,500 per quarter~~. As ~~a member of the Special Committee, beginning January 1, 2009 Mr. Stuppin received an additional fee of $10,000 per month.~~

~~Each~~Prior ~~non-employee director also receives an option~~ to ~~purchase 15,000~~December ~~shares of the Company’s common stock at the annual meeting of stockholders~~17, ~~with the exercise price equal to the fair market value of the Company’s common stock~~2009, as reflected by the closing price on the date of grant. The options vest and become fully exercisable upon the earlier of (i) the first anniversary of the date of grant, provided that the optionee is a director at such time, or (ii) a change in control of the Company, as defined in the 2003 Equity Incentive Plan. On November 13, 2008, each of the CompanyNTI’s non-employee directors ~~received~~were anpaid ~~option~~according ~~grant~~ to ~~purchase 15,000 shares of~~ the ~~Company’s common~~following ~~stock at an exercise price of $0.65 per share.~~schedule:

Chairman of the Board of Directors, $10,000 per quarter; 45

~~Table~~Chairman of ~~Contents~~the audit committee, $8,750 per quarter;

~~The~~Other ~~following~~board ~~table~~members, ~~shows~~$7,500 ~~for~~per ~~fiscal 2009 certain summary information with respect to the compensation of all of the Company’s directors who are not Named Executive Officers~~quarter.

	Fees Earned or
Name	Paid in Cash		Option Awards(1)		Total
Abraham E. Cohen	$	40,000	$	45,440	$	85,440
Theodore L. Eliot, Jr.		30,000		31,992		61,992
F. Van Kasper		35,000		40,060		75,060
Abraham D. Sofaer		30,000		31,992		61,992
John B. Stuppin		90,000		42,449		132,449

Abraham E. Cohen, Theodore L. Eliot, Jr., F. Van Kasper and Abraham D, Sofaer resigned from the Board of Directors on December 17, 2009, effective upon the filing of the Certificate of Dissolution.

~~(1)~~ The ~~amounts~~following ~~set~~table ~~forth~~shows ~~under~~for ~~“Option Awards” relate to outstanding option awards, including those granted during and prior to the~~ fiscal ~~year~~2010 ended June 30, 2009, and are valued based on a Black-Scholes option pricing model as used in our consolidated financial statements pursuant to Statement of Accounting Standards No. 123R, “Share-based Payment.” The Black-Scholes option pricing model reflects certain ~~assumptions~~summary ~~regarding~~information ~~variable~~with ~~factors~~respect ~~such stock price volatility and the term of the option. Stock options have value~~ to the compensation ~~recipient only as a result~~ of ~~appreciation~~all ~~in the price~~ of ~~our common stock. For~~ the ~~purposes~~Company’s ofdirectors ~~establishing~~who ~~the~~are value shown in the table, the model assumed a dividend yield of zero, risk-free interest rates of 2.6% to 4.7%, volatility factor of 80%, and an expected life of the options of 41/2 to 51/2 years. For financial reporting purposes, we also used an estimated forfeiture rate, but this rate has not ~~been~~Named ~~included~~Executive ~~in the balances in the table because the forfeiture rate is an overall estimate for the organization as a whole and cannot be attributed specifically to any of our directors~~Officers. ~~The grant-date value of the option grants made to each of our non-employee directors on November 13, 2008 was $6,591.~~


	Fees Earned or
Name	Paid in Cash		Option Awards ⁽¹⁾		Total
Abraham E. Cohen	$	18,478		—	$	18,478
Theodore L. Eliot, Jr.		13,859		—		13,859
F. Van Kasper		16,168		—		16,168
Abraham D. Sofaer		13,859		—		13,859
John B. Stuppin		28,120		—		28,120


⁽¹⁾		No option awards were granted to our directors during the fiscal year ended June 20, 2010. All outstanding and unexercised options were terminated on December 17, 2009 upon the filing of the Certificate of Dissolution.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information regarding beneficial ownership of our common stock as of June 30, ~~2009~~2010 based on information available to us and filings with the SEC by:

• each of our directors ~~and director nominees~~; • each of our “named executive officers” as defined under the Executive Compensation caption below; • all of our current directors and executive officers as a group; and • each person or group of affiliated persons known by us to be the beneficial owner of more than 5% of our common stock.

36 Beneficial ownership and percentage ownership are determined in accordance with the rules of the SEC and include voting or investment power with respect to shares of stock. This information does not necessarily indicate beneficial ownership for any other purpose. Under these rules, shares of common stock issuable under stock options that are exercisable within 60 days of June 30, 2009 and upon conversion of shares of Series A Preferred Stock are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options or Series A Preferred Stock, but are not deemed outstanding for the purpose of computing the percentage ownership of any other person.

~~Unless~~Beneficial ~~otherwise~~ownership ~~indicated~~ and ~~subject~~percentage toownership ~~applicable~~are ~~community property~~determined ~~laws,~~in toaccordance ~~our~~with ~~knowledge,~~the ~~each~~rules ~~stockholder named in the~~of ~~following~~the ~~table~~SEC ~~possesses~~and ~~sole~~include voting ~~and~~or investment power ~~over their shares of common stock, except for those jointly owned~~ with ~~that~~respect ~~person’s~~to ~~spouse.~~shares ~~Percentage~~ of ~~beneficial ownership of common~~ stock. isThis ~~based on 26,929,805 shares of~~information ~~common~~does ~~stock~~not ~~outstanding~~necessarily asindicate ~~of June 30, 2009. Percentage of~~ beneficial ownership offor ~~Series A~~any ~~Preferred~~other ~~Stock~~purpose. isShares ~~based on~~with ~~494,000 shares~~right ~~of Series A Preferred Stock~~to ~~outstanding~~acquire aswithin ~~of June~~60 ~~30,~~days ~~2009.~~represents ~~Unless~~warrants ~~otherwise~~with ~~noted below,~~an ~~the~~exercise ~~address~~price of ~~each~~$16.80 ~~person~~per ~~listed~~share, onwhich the ~~table is~~ ~~c/o Neurobiological Technologies,~~Company ~~Inc.,~~does ~~2000~~not ~~Powell~~expect ~~Street,~~to ~~Suite 800, Emeryville,~~ever ~~California~~be ~~94608~~exercised.

			Shares							Shares of
	Shares of		with Right to							Series A		Percentage
	Common		Acquire		Total		Percentage			Preferred		of Series A
	Stock		within 60		Beneficial		of Common			Stock		Preferred
Name and Address	Owned		Days		Ownership		Stock			Owned		Stock
MAK Capital One(1)		5,220,057		72,856		5,292,913		19.6	%
590 Madison Avenue, 9th Floor New York, NY 10022
BVF, Inc.(2)		5,288,754		—		5,288,754		19.6	%
900 N. Michigan Avenue, Suite 1100 Chicago, Illinois 60611
Highland Capital Management, L.P.(3)		4,737,479		—		4,737,479		17.6	%		—		—
Two Galleria Tower
13455 Noel Road, Suite 800 Dallas, Texas 75240
Millennium Technology Ventures(4)		1,969,880		—		1,969,880		7.3	%		—		—
747 Third Avenue, 38th Floor
New York, New York 10017
John B. Stuppin		174,484		59,997		234,481		*			100,000		20.2	%
Abraham E. Cohen		118,707		55,350		174,057		*			—		—
Abraham D. Sofaer		110,931		54,635		165,566		*			100,000		20.2	%
F. Van Kasper		43,600		66,139		109,739		*			—		—
William A. Fletcher		68,600		38,570		107,170		*			—		—
Matthew M. Loar		25,000		75,000		100,000		*			—		—
Theodore L. Eliot, Jr.		2,617		40,350		42,967		*			—		—
Paul E. Freiman(5)		14,920		—		14,920		*			—		—
Warren W. Wasiewski		—		—		—		*			—		—
All current executive officers and directors as a group (7 persons)		543,939		390,041		933,980		3.5	%		200,000		40.4	%

Unless otherwise indicated and subject to applicable community property laws, to our knowledge, each stockholder named in the following table possesses sole voting and investment power over their shares of common stock, except for those jointly owned with that person’s spouse. Percentage of beneficial ownership of common stock is based on 27,019,805 shares of common stock outstanding as of June 30, 2010. Unless otherwise noted below, the address of each person listed on the table is c/o Neurobiological Technologies, Inc., 2000 Powell Street, Suite 800, Emeryville, California 94608.

* Less than one percent.


			Shares
	Shares of		with Right
	Common		to Acquire		Total		Percentage
	Stock		within 60		Beneficial		of Common
Name and Address	Owned		days		Ownership		Stock

MAK Capital One ⁽¹⁾ 590 Madison Avenue, 9^th Floor New York, NY 10022		5,220,057		72,856		5,292,913		19.5	%

Highland Capital Management, L.P. ⁽²⁾ Two Galleria Tower 13455 Noel Road, Suite 800 Dallas, Texas 75240		4,737,479		—		4,737,479		17.5	%

Firefly Value Partners, LP ⁽³⁾ 551 Fifth Avenue, 36^th Floor New York, NY 10176		4,613,222		—		4,613,222		17.1	%

Millennium Technology Ventures ⁽⁴⁾ 747 Third Avenue, 38th Floor New York, New York 10017		1,969,880		—		1,969,880		7.3	%

John B. Stuppin		183,876		—		183,876		*

William A. Fletcher		83,600		—		83,600		*

Matthew M. Loar		25,000		—		25,000		*

All current executive officers and directors as a group (3 persons)		292,476		—		292,476		1.1	%

(1)		Shares of common stock owned are based on information contained in a Schedule 13G/A filed November 18, 2008 by MAK Capital One LLC (“MAK Capital”), Michael A. Kaufman (“Kaufman”), MAK Capital Fund LP (“MAK Fund”), Paloma International LP (“Paloma”) and S. Donald Sussman (“Sussman”) According to the Schedule 13G/A, (i) MAK Capital beneficially owned 5,220,057 shares of common stock; (ii) Kaufman beneficially owned 5,220,057 shares of common stock; (iii) MAK Fund beneficially owned 3,627,192 shares of common stock; (iv) Paloma beneficially owned 1,592,865 shares of common stock; and (iv) Sussman beneficially owned 1,592,865 shares of common stock as of November 14, 2008. MAK Capital, Kaufman and MAK Fund have shared power to direct the vote and disposition of the 3,627,192 shares of common stock owned by MAK Fund. Paloma, Sussman, MAK Capital and Kaufman have shared power to direct the vote and disposition of the 1,592,865 shares of common stock owned by Paloma. Paloma owns its shares through a subsidiary, Sunrise Partners Limited Partnership.
*		Less than one percent.
(2)		Based on information contained in a Schedule 13D/A filed December 24, 2008 by Biotechnology Value Fund, L.P. (“BVF”), Biotechnology Value Fund II, L.P. (“BVF2”), BVF Investments, L.L.C. (“Investments”), Investment 10, L.L.C. (“ILL10”), BVF Partners L.P. (“Partners”) and BVF Inc. (“BVF Inc.”). According to
(1)		Shares of common stock owned are based on information contained in a Schedule 13G/A filed November 18, 2008 by MAK Capital One LLC (“MAK Capital”), Michael A. Kaufman (“Kaufman”), MAK Capital Fund LP (“MAK Fund”), Paloma International LP (“Paloma”) and S. Donald Sussman (“Sussman”) According to the Schedule 13G/A, (i) MAK Capital beneficially owned 5,220,057 shares of common stock; (ii) Kaufman beneficially owned 5,220,057 shares of common stock; (iii) MAK Fund beneficially owned 3,627,192 shares of common stock; (iv) Paloma beneficially owned 1,592,865 shares of common stock; and (iv) Sussman beneficially owned 1,592,865 shares of common stock as of November 14, 2008. MAK Capital, Kaufman and MAK Fund have shared power to direct the vote and disposition of the 3,627,192 shares of common stock owned by MAK Fund. Paloma, Sussman, MAK Capital and Kaufman have shared power to direct the vote and disposition of the 1,592,865 shares of common stock owned by Paloma. Paloma owns its shares through a subsidiary, Sunrise Partners Limited Partnership. Stock holdings were unchanged based on a Schedule 13F filed May 17, 2010 by MAK Capital.

37 47

		the Schedule 13D, (i) BVF beneficially owned 1,241,336 shares of common stock; (ii) BVF2 beneficially owned 843,807 shares of common stock; (iii) Investments beneficially owned 2,853,250 shares of common stock; and (iv) ILL10 beneficially owned 350,361 shares of common stock as of October 29, 2007. Accordingly, beneficial ownership by Partners and BVF Inc. includes a total of 5,288,754 shares of common stock. Pursuant to the operating agreement of Investments, Partners is authorized, among other things, to invest the funds of Ziff Asset Management, L.P., the majority member of Investments, in shares of the common stock and to vote and exercise dispositive power over those shares of the common stock. Partners and BVF Inc. share voting and dispositive power over shares of the common stock beneficially owned by BVF, BVF2, Investments and those owned by ILL10, on whose behalf Partners acts as an investment manager and, accordingly, Partners and BVF Inc. have beneficial ownership of all of the shares of the common stock owned by such parties.
(2)		Based on information contained in a Schedule 13G/A filed February 17, 2009 by Highland Capital Management, L.P. (“Highland”), Strand Advisors, Inc. (“Strand”) and James Dondero (“Dondero”). According to the Schedule 13G/A, (i) Highland beneficially owned 4,737,479 shares of common stock; (ii) Strand beneficially owned 4,737,479 shares of common stock; and (iii) Dondero beneficially owned 4,737,479 shares of common stock as of December 31, 2008. Highland Capital principally serves as an investment adviser and/or manager to other persons; Highland Capital may be deemed to beneficially own shares owned and/or held by and/or for the account of and/or benefit of other persons. Strand serves as the general partner of Highland Capital; Strand may be deemed to beneficially own shares owned and/or held by and/or for the account of and/or benefit of Highland Capital. Dondero is the President and a director of Strand; Dondero may be deemed to beneficially own shares owned and/or held by and/or for the account of and/or benefit of Strand. Stock holdings were unchanged based on a Schedule 13F filed May 17, 2010 by Highland.
(3)		Based on information contained in a ~~Schedule~~Form ~~13G/A~~4 filed ~~February~~June 179, ~~2009~~2010 by ~~Highland~~Firefly ~~Capital~~Value ~~Management~~Partners, ~~L.P.~~LP (“~~Highland~~Firefly”)~~, Strand Advisors, Inc~~. ~~(“Strand”) and James Dondero (“Dondero”).~~ According to the ~~Schedule~~Form ~~13G/A, (i) Highland beneficially owned~~ 4,~~737,479~~ ~~shares~~FVP ofMater ~~common~~Fund ~~stock;~~L.P. ~~(ii) Strand~~ beneficially owned 42,~~737~~618,~~479~~424 shares of common stock; and ~~(iii)~~FVP ~~Dondero~~US-Q, LP beneficially owned 41,~~737~~994,~~479~~798 shares of common stock ~~as of December 31, 2008~~. Highland Capital principally serves as an investment adviser and/or manager to other persons; Highland Capital may be deemed to beneficially own shares owned and/or held by and/or for the account of and/or benefit of other persons. Strand serves as the general partner of Highland Capital; Strand may be deemed to beneficially own shares owned and/or held by and/or for the account of and/or benefit of Highland Capital. Dondero is the President and a director of Strand; Dondero may be deemed to beneficially own shares owned and/or held by and/or for the account of and/or benefit of Strand.
(4)		Based on information contained in a Schedule 13D filed January 23, 2009 by Daniel Burstein and Samuel L. Schwerin on behalf of Millennium Technology Value Partners RCM LP. According to the Schedule 13D, Daniel Burstein and Samuel L. Schwerin each beneficially owned 1,969,880 shares of common stock, including 991,259 shares of common stock directly owned by Millennium RCM LP and 978,621 shares owned directly by Millennium LP. ~~In addition, Samuel L. Schwerin is the direct beneficial owner of 110,909 shares for which he has sole dispositive and voting power.~~
(5)		Based on information contained in the Form 4 filed with the SEC by Mr. Freiman on February 12, 2009. We have no knowledge of any changes in Mr. Freiman’s holdings subsequent to that filing.

The following table provides certain information as of June 30, 2009 with respect to shares of our common stock that could have been issued at that time under our equity compensation plans.

Number of Securities

Weighted-Average

Remaining Available for

to be Issued Upon

Exercise

Future Issuance Under Equity

Exercise of

Price of Outstanding

Compensation Plans

Outstanding Options,

Options, Warrants

(Excluding Securities

Warrants and Rights

and Rights

Reflected in Column (a))

Plan Category

(a)

(b)

(c)

Equity compensation plans approved by security holders —

Stock Option Plans

687,000

7.88

2,922,000

Stock Purchase Plan

—

36,000

Equity compensation plans not approved by security holders — Inducement stock option grant provided under NASDAQ Marketplace Rule 4350

150,000

2.47

—

Total

837,000

6.91

2,958,000

Our equity compensation plans do not contain evergreen provisions.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Director Independence

~~Our~~As ~~Board~~ of ~~Directors~~June 30, ~~annually~~2010, ~~determines~~ the ~~independence~~Board ~~of each~~consisted of ~~our~~William ~~directors~~A. ~~and~~Fletcher, ~~nominees~~Matthew ~~in accordance with the independence standards set forth in the NASDAQ Marketplace Rules~~M. ~~These~~Loar ~~rules provide that “independent” directors are those who are independent of management~~ and ~~free from~~John ~~any relationship that, in the judgment of the Board of~~B. ~~Directors, would interfere with their exercise of independent judgment~~Stuppin. NoThe ~~director qualifies as independent unless the~~ Board of ~~Directors affirmatively determines that the director~~ has ~~no material~~determined ~~relationship with us (either directly or as a partner, stockholder or officer of an organization~~ that ~~has a relationship with us)~~Mr. Stuppin ~~Members~~is ofan ~~the Audit Committee must be~~ independent ~~and~~director ~~must~~as ~~also~~defined ~~satisfy~~by ~~a separate independence requirement pursuant to~~ the ~~Exchange Act, which requires, among~~ ~~other~~rules ~~things,~~of ~~that~~The ~~they~~Nasdaq ~~may~~Stock ~~not accept directly or indirectly any consulting, advisory or other compensatory fee from us, other than their directors’ compensation~~Market.

Based on its review, our Board of Directors has determined that all current directors, other than Mr. Fletcher, who has been serving as Acting Chief Executive Officer since January 30, 2009, are “independent directors” as defined by the rules of The NASDAQ Stock Market In making its determination regarding the independence of the directors, the Board of Directors considered, among other things, the stock holdings of the directors and to what extent such holdings may affect their ability to exercise independent judgment, as well as the length of service and duties of Mr. Fletcher in his role as Acting Chief Executive Officer. None of these independent directors is a party to any transaction, relationship or arrangement not disclosed pursuant to Item 404(a) of Regulation S-K. There are no family relationships among any of our directors or executive officers.

Related Party Transaction Review and Approval

~~Our~~We ~~Board~~have ofentered ~~Directors~~into ~~has~~indemnification ~~adopted~~agreements ~~policies~~with ~~and~~each ~~procedures~~of ~~for the~~our ~~review~~directors ~~and~~for ~~approval~~the indemnification of ~~related~~them ~~party transactions and has delegated~~ to the ~~Audit~~fullest ~~Committee~~extent ~~the~~permitted ~~authority~~by tolaw. ~~review~~The ~~and approve~~indemnification ~~the~~agreements ~~material~~also allow ~~terms~~advancement of ~~any~~expenses ~~proposed~~to ~~related~~the ~~party transactions~~directors.

~~Pursuant~~Our toBoard ~~our~~of ~~Code~~Directors ofhas ~~Business~~adopted ~~Conduct~~policies and ~~Ethics,~~procedures ~~each~~for ofthe ~~our executive~~review ~~officers, directors~~ and ~~employees~~approval ~~must disclose transactions involving actual or apparent conflicts~~ of ~~interests, such as~~ related party transactions, toand ~~his~~reviews orand ~~her direct~~approves ~~supervisor or~~ the ~~Chief~~material ~~Executive~~terms ~~Officer. In order to avoid such conflicts, our executive officers, directors and employees may not receive any payments, compensation or gifts, other than gifts~~ of ~~nominal value, from~~ any ~~entity~~proposed ~~that does~~related ~~business~~party ~~or seeks to do business with us~~transactions. ~~Furthermore, our~~ ~~executive officers, directors and employees may not use property or information belonging to us or their position with us for improper personal gain.~~

InPursuant ~~determining whether~~ to ~~approve~~our orCode ~~ratify~~of aBusiness ~~related-party transaction,~~Conduct ~~the~~and ~~Audit Committee may consider~~Ethics, ~~among~~each ~~other factors~~of itour ~~deems~~executive ~~appropriate~~officers, ~~the potential benefits to us, the~~directors ~~impact~~and onemployees amust ~~director’s~~disclose ortransactions ~~nominee’s~~involving ~~independence~~actual or ~~an executive~~apparent ~~officer’s~~conflicts ~~relationship~~of ~~with or service to us~~interests, such ~~whether~~as ~~the~~ related party ~~transaction~~transactions, ~~is on terms no less favorable than terms generally available~~ to ~~an unaffiliated third party under~~ the ~~same~~Acting orChief ~~similar~~Executive ~~circumstances and the extent of the related party’s interest in the transaction~~Officer. In ~~deciding~~order to ~~approve~~avoid ~~a transaction~~such conflicts, ~~the~~our ~~Audit~~executive ~~Committee may~~officers, in ~~its~~directors ~~sole~~and ~~discretion,~~employees ~~impose~~may ~~such~~not ~~conditions~~receive asany ~~it deems~~payments, ~~appropriate~~compensation ~~on us~~ or ~~the~~gifts, ~~related~~other ~~party~~than ingifts ~~connection with its approval~~ of ~~any~~nominal ~~transaction. Any transactions involving the compensation of executive officers~~value, ~~however,~~from ~~are~~any toentity bethat ~~reviewed and~~does ~~approved~~business ~~by the Compensation Committee. If a related-party~~or ~~transaction~~seeks ~~will be ongoing, the Audit Committee may establish guidelines~~ to bedo ~~followed~~business ~~in our ongoing dealings~~ with ~~the related party~~us. ~~Thereafter~~Furthermore, ~~the~~our ~~Audit~~executive ~~Committee~~officers, ondirectors ~~at least an annual basis, will review~~ and ~~assess~~employees ~~ongoing~~may ~~relationships with~~not ~~the~~use ~~related~~property ~~party~~or toinformation ~~see~~belonging ~~that~~to ~~they~~us ~~are~~or intheir ~~compliance~~position with ~~the committee’s~~us ~~guidelines~~for ~~and~~improper ~~that~~personal ~~the related-party transaction remains appropriate~~gain.

In determining whether to approve or ratify a related-party transaction, the Board of Directors may consider, among other factors it deems appropriate, the potential benefits to us, the impact on a director’s or nominee’s independence or an executive officer’s relationship with or service to us, whether the related party transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party’s interest in the transaction. In deciding to approve a transaction, the Board of Directors may, in its sole discretion, impose such conditions as it deems appropriate on us or the related party in connection with its approval of any transaction. Any transactions involving the compensation of executive officers are also to be reviewed and approved by the Board of Directors. If a related-party transaction will be ongoing, the Board may establish guidelines to be followed in our ongoing dealings with the related party. Thereafter, the Board, on at least an annual basis, will review and assess ongoing relationships with the related party to see that they are in compliance with the committee’s guidelines and that the related-party transaction remains appropriate.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

~~The~~Our ~~Audit Committee of our~~ Board of Directors has selected Odenberg, Ullakko, Muranishi & Co. LLP (“OUM”) as our independent registered public accounting firm for the fiscal year ending June 30, ~~2009,~~ ~~and the selection of OUM was ratified by our stockholders at the annual meeting held on November 13, 2008~~2010.

38 49

Audit Fees

The following is a summary of the fees billed to the Company by OUM for professional services:

	Year Ended June 30,
	Year ended June 30,
	2009		2008
	2010		2009
Audit Fees:
Consists of fees billed or to be billed for professional services rendered for the audit of the Company’s financial statements for the respective fiscal years, reviews of the interim financial statements included in the Company’s quarterly reports and reviews, consents and comfort letters relating to registration statements.	$	~~194~~122,~~447~~437	$	~~329~~194,~~354~~447
Tax Fees:
Consists of fees billed for tax planning, assistance with the preparation of tax returns and advice on other tax-related matters rendered during the respective fiscal years. Fees for fiscal 2009 include analysis of tax loss limitations related to historical ownership changes that result in limitations on annual utilization of tax loss carryforwards.		3521,~~050~~800		1835,~~500~~050
Total All Fees:	$	~~229~~144,~~497~~237	$	~~347~~229,~~854~~497

There were no audit-related fees or other fees billed by OUM in addition to the fees noted in the schedule above. The ~~Audit Committee~~Board of Directors reviews audit and non-audit services performed by our independent registered public accounting firm, as well as the fees charged for such services. In its review of non-audit service fees, the ~~Audit~~Board ~~Committee~~of Directors considers, among other things, ~~the~~ the possible impact of the performance of such services on our independent registered accounting firms’ independence. All audit-related fees, tax fees and other fees are pre-approved by the ~~Audit~~the ~~Committee~~Board ~~or its Chairman~~of Directors.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements and Schedules:

Financial statements as of June 30, ~~2009~~2010 and ~~2008~~2009, and for the three years ended June 30, ~~2009~~ 2010, are included in Item 8. All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

(b) Exhibits:

The following exhibits are incorporated by reference or filed as part of this report.

Exhibit				Incorporated by Reference		~~Filed~~
No.			Description	Form	Date of Filing	Filed Herewith
	3	.1	Amended and Restated Certificate of Incorporation.	S-3	2/25/2005
	3.1		Amended and Restated Certificate of Incorporation.	S-3	2/25/2005
	3(i)	.1	Certificate of Amendment to Amended and Restated Certificate of Incorporation.	10-Q	2/10/2006
	3(i).1		Certificate of Amendment to Amended and Restated Certificate of Incorporation.	10-Q	2/10/2006
	3	.2	Amended and Restated Bylaws of Neurobiological Technologies, Inc.	8-K	6/20/2007
	3.2		Amended and Restated Bylaws of Neurobiological Technologies, Inc.	8-K	6/20/2007
	3	.3	Certificate of Designation, Preferences and Rights of Series RP Preferred Stock of Registrant.	8-A	5/20/2005
	4.1		Form of Common Stock Certificate.	10-K	9/16/2008
	4	.1	Form of Common Stock Certificate.	10-K	9/16/2008
	4.4		Form of Common Stock Warrant issued to certain institutional investors as a component of the units in a private placement transaction on April 4, 2007.	8-K	4/2/2007
	4	.2	Form of Warrant to Purchase Common Stock, issued March 1, 2004 to investors in a private placement transaction.	8-K	3/4/2004
	10.1		Form of Indemnity Agreement between the Company and its directors and officers. *	10-K	9/16/2008
	4	.3	Form of Rights Certificate for RP Preferred Stock.	8-A	5/20/2005
	10.2		Office Lease Agreement, dated April 22, 2005, by and between CA-Emeryville Properties Limited Partnership and the Company.	10-Q	5/10/2005
	4	.4	Form of Common Stock Warrant issued to certain institutional investors as a component of the units in a private placement transaction on April 4, 2007.	8-K	4/2/2007
	10.3		Termination Agreement, dated as of May 4, 2009, by and between the Company and Nordmark Arzneimittel GmbH & Co. KG.	10-Q	5/8/2009
	10.4		Agreement to Terminate the License and Cooperation Agreement, effective as of July 31, 2009, with Respect to Neurobiological Technologies, Inc., by and between Merz Pharmaceuticals GmbH and the Company.	10-K	8/31/2009

39 50

Exhibit				Incorporated by Reference		~~Filed~~
No.			Description	Form	Date of Filing	Filed Herewith
	10	.1	Form of Indemnity Agreement between the Company and its directors and officers.*	10-K	9/16/2008
	10.5		Termination Agreement to Master Clinical Services Agreement, effective as of May 29, 2009, by and between the Company and ICON Clinical Research Limited	8-K	6/2/2009
	10	.2	Rights Agreement, dated May 19, 2005, by and between American Stock Transfer & Trust Co., as Rights Agent, and the Company.	8-A	5/20/2005
	10.6		Asset Purchase Agreement, dated September 19, 2005, by and between the Company, Neutron ROW Ltd. and Neutron Ltd.	10-Q	11/9/2005
	10	.3	Amendment No. 1 to Rights Agreement	8-A	11/5/2007
	10.7		Amendment and Addendum to Collaboration and Services Agreement, dated June 23, 2009, by and between Neutron Ltd., Celtic Pharma Development Services America, Inc. and the Company.	8-K	6/26/2009
	10	.4	Amendment No. 2 to Rights Agreement	8-A	11/5/2008
	10.8		Collaboration and License Agreement, entered into as of November 29, 2007, by and between Buck Institute for Age Research and the Company for the fibroblast growth factor-2. +	10-Q	5/12/2008
	10	.5	1993 Stock Plan.*	14A	10/9/2001
	10.9		Collaboration and License Agreement, entered into as of February 29, 2008, by and between Buck Institute for Age Research and the Company for the Netrin-1 protein. +	10-Q	5/12/2008
	10	.6	Amended and Restated 2003 Equity Incentive Plan.*	14A	4/3/2008
	10.10		Termination Agreement to Collaboration and License Agreements, entered into as of June 12, 2009, by and between Buck Institute for Age Research and the Company.	8-K	6/15/2009
	10	.7	2003 Employee Stock Purchase Plan.*	14A	10/9/2003
	10.11		Employment Offer Letter, dated March 18, 2008, by and between the Company and Matthew M. Loar. *	8-K	4/3/2008
	10	.8	Office Lease Agreement, dated April 22, 2005, by and between CA-Emeryville Properties Limited Partnership and the Company.	10-Q	5/10/2005
	21.1		Subsidiary of the Company.			x
	10	.9	Commercial Sublease, dated May 18, 2005, between the Company and Refac.	10-K	9/28/2005
	24.1		Powers of Attorney. (Contained on Signature Page)			x
	10	.10	Termination Agreement, dated as of May 4, 2009, by and between the Company and Nordmark Arzneimittel GmbH & Co. KG.	10-Q	5/8/2009
	31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			x
	10	.11	Agreement to Terminate the License and Cooperation Agreement, effective as of July 31, 2009, with Respect to Neurobiological Technologies, Inc., by and between Merz Pharmaceuticals GmbH and the Company.			x
	32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.			x
	10	.12	Termination Agreement to Master Clinical Services Agreement, effective as of May 29, 2009, by and between the Company and ICON Clinical Research Limited	8-K	6/2/2009
	10	.13	Asset Purchase Agreement, dated September 19, 2005, by and between the Company, Neutron ROW Ltd. and Neutron Ltd.	10-Q	11/9/2005
	10	.14	Amendment and Addendum to Collaboration and Services Agreement, dated June 23, 2009, by and between Neutron Ltd., Celtic Pharma Development Services America, Inc. and the Company.	8-K	6/26/2009
	10	.15	Collaboration and License Agreement, entered into as of November 29, 2007, by and between Buck Institute for Age Research and the Company for the fibroblast growth factor-2.+	10-Q	5/12/2008
	10	.16	Collaboration and License Agreement, entered into as of February 29, 2008, by and between Buck Institute for Age Research and the Company for the Netrin-1 protein.+	10-Q	5/12/2008
	10	.17	Termination Agreement to Collaboration and License Agreements, entered into as of June 12, 2009, by and between Buck Institute for Age Research and the Company.	8-K	6/15/2009
	10	.18	Employment Offer Letter, dated March 18, 2008, by and between the Company and Matthew M. Loar.*	8-K	4/3/2008
	21	.1	Subsidiary of the Company.			x
	23	.1	Consent of Odenberg, Ullakko, Muranishi & Co. LLP, Independent Registered Public Accounting Firm.			x
	24	.1	Powers of Attorney. (Contained on Signature Page)			x
	31	.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			x
	31	.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			x
	32	.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.			x
	32	.2	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.			x


+		Confidential treatment has been granted with respect to portions of this exhibit pursuant to an application requesting confidential treatment under Rule 24b-2 of the Exchange Act. A complete copy of this exhibit, including the redacted terms, has been separately filed with the Securities and Exchange Commission.

*		This exhibit is a management contract or compensatory plan or arrangement.

40 51

SIGNATURE ~~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.

Neurobiological Technologies, Inc.


	Neurobiological Technologies, Inc.
	By:	/s/ Matthew M. Loar
Dated: September 28, 2010		Matthew M. Loar
		Acting Chief Executive and Financial Officer

By: /s/ William A. Fletcher

William A. Fletcher

Acting Chief Executive Officer

Dated: August 31, 2009

POWERS OF ATTORNEY AND SIGNATURES

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints ~~William A. Fletcher and~~ Matthew M. Loar, ~~and each of them,~~ as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said ~~attorneys~~attorney-in-fact and ~~agents,~~ ~~and~~agent ~~each of them,~~ full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said ~~attorneys~~attorney-in-fact and agent ~~agents,~~ or ~~any~~his ofsubstitute ~~them or their substitutes~~ may lawfully do or cause to be done by virtue hereof.

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	~~Title~~Date	~~Date~~
/s/ William A. Fletcher William A. Fletcher	Director	~~Director~~September ~~and~~28, ~~Acting Chief Executive Officer (Principal Executive Officer)~~2010	~~August 31, 2009~~
/s/ Matthew M. Loar Matthew M. Loar	Acting Chief Executive and Financial Officer (Principal Executive, Financial and Accounting Officer)	~~Vice~~September ~~President~~28, ~~and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)~~2010	~~August 31, 2009~~
/s/ Abraham E. Cohen Abraham E. Cohen		Chairman of the Board	August 31, 2009
/s/ JOHN B. STUPPIN John B. Stuppin	Director	September 28, 2010
/s/ Theodore L. Eliot, Jr. Theodore L. Eliot, Jr.		Director	August 31, 2009
/s/ F. Van Kasper F. Van Kasper		Director	August 31, 2009
/s/ Abraham D. Sofaer Abraham D. Sofaer		Director	August 31, 2009
/s/ John B. Stuppin John B. Stuppin		Director	August 31, 2009

41 52

EXHIBIT INDEX


Exhibit			Incorporated by Reference
No.		Description	Form	Date of Filing	Filed Herewith
	3.1	Amended and Restated Certificate of Incorporation.	S-3	2/25/2005
	3(i).1	Certificate of Amendment to Amended and Restated Certificate of Incorporation.	10-Q	2/10/2006
	3.2	Amended and Restated Bylaws of Neurobiological Technologies, Inc.	8-K	6/20/2007
	4.1	Form of Common Stock Certificate.	10-K	9/16/2008
	4.4	Form of Common Stock Warrant issued to certain institutional investors as a component of the units in a private placement transaction on April 4, 2007.	8-K	4/2/2007
	10.1	Form of Indemnity Agreement between the Company and its directors and officers. *	10-K	9/16/2008
	10.2	Office Lease Agreement, dated April 22, 2005, by and between CA-Emeryville Properties Limited Partnership and the Company.	10-Q	5/10/2005
	10.3	Termination Agreement, dated as of May 4, 2009, by and between the Company and Nordmark Arzneimittel GmbH & Co. KG.	10-Q	5/8/2009
	10.4	Agreement to Terminate the License and Cooperation Agreement, effective as of July 31, 2009, with Respect to Neurobiological Technologies, Inc., by and between Merz Pharmaceuticals GmbH and the Company.	10-K	8/31/2009
	10.5	Termination Agreement to Master Clinical Services Agreement, effective as of May 29, 2009, by and between the Company and ICON Clinical Research Limited	8-K	6/2/2009
	10.6	Asset Purchase Agreement, dated September 19, 2005, by and between the Company, Neutron ROW Ltd. and Neutron Ltd.	10-Q	11/9/2005
	10.7	Amendment and Addendum to Collaboration and Services Agreement, dated June 23, 2009, by and between Neutron Ltd., Celtic Pharma Development Services America, Inc. and the Company.	8-K	6/26/2009
	10.8	Collaboration and License Agreement, entered into as of November 29, 2007, by and between Buck Institute for Age Research and the Company for the fibroblast growth factor-2. +	10-Q	5/12/2008
	10.9	Collaboration and License Agreement, entered into as of February 29, 2008, by and between Buck Institute for Age Research and the Company for the Netrin-1 protein. +	10-Q	5/12/2008
	10.10	Termination Agreement to Collaboration and License Agreements, entered into as of June 12, 2009, by and between Buck Institute for Age Research and the Company.	8-K	6/15/2009
	10.11	Employment Offer Letter, dated March 18, 2008, by and between the Company and Matthew M. Loar. *	8-K	4/3/2008
	21.1	Subsidiary of the Company.			x
	24.1	Powers of Attorney. (Contained on Signature Page)			x
	31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			x
	32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.			x


+		Confidential treatment has been granted with respect to portions of this exhibit pursuant to an application requesting confidential treatment under Rule 24b-2 of the Exchange Act. A complete copy of this exhibit, including the redacted terms, has been separately filed with the Securities and Exchange Commission.

*		This exhibit is a management contract or compensatory plan or arrangement.

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Filing Compare · NEUROBIOLOGICAL TECHNOLOGIES INC /CA/