##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 10-Q
 
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 0-6533
 
 ALSERES PHARMACEUTICALS, INC.
 (Exact Name of Registrant as Specified in Its Charter)
 
 Delaware
    
    87-0277826(State or Other Jurisdiction of
    
    (IRS EmployerIncorporation or Organization)
    
    Identification No.)
 239 South Street, Hopkinton, Massachusetts
    
    01748(Address of Principal Executive Offices)
    
    (Zip Code)
 (508) 497-2360
(Registrants Telephone Number, Including Area Code)
 None
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



ALSERES PHARMACEUTICALS, INC.
FORM 10-Q
TABLE OF CONTENTS
 PagePart I FINANCIAL INFORMATIONItem 1 Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009
    
    
    3Condensed Consolidated Statements of Operations for the three and six months ended June
30, 2010 and 2009, and for the period from inception (October 16, 1992) to June 30,
2010
    
    
    4Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2010
and 2009, and for the period from inception (October 16, 1992) to June 30, 2010
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4T Controls and Procedures
    
    
    20Part II OTHER INFORMATIONItem 1 Legal Proceedings
    
    
    20Item 6 Exhibits
    
    
    21SIGNATURESEX-31.1EX-31.2EX-32.1EX-32.2
 ®
  2




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##### Table of Contents



Part I  FINANCIAL INFORMATION
 
 Item 1   Financial Statements
 Alseres Pharmaceuticals, Inc.
 
  (Unaudited)June 30,
    
    
    December 31,2010
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    30,341
    
    
    $
    314,964Security deposits
    
    
    7,536
    
    
    
    38,928Prepaid expenses and other current assets
    
    
    99,373
    
    
    
    34,231Total current assets
    
    
    137,250
    
    
    
    388,123Fixed assets, net
    
    
    75,667
    
    
    
    106,272Indemnity fund
    
    
    115,617
    
    
    
    115,720Security deposits and other assets
    
    
    180,700
    
    
    
    180,700Total assets
    
    $
    509,234
    
    
    $
    790,815LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable and accrued expenses
    
    $
    4,069,749
    
    
    $
    3,522,581Notes payable
    
    
    2,735,000
    
    
    
    1,350,000Accrued lease (Note 7)
    
    
    61,188
    
    
    
    51,493Total current liabilities
    
    
    6,865,937
    
    
    
    4,924,074Convertible notes payable
    
    
    34,529,940
    
    
    
    34,155,632Accrued interest payable
    
    
    4,929,084
    
    
    
    4,057,086Accrued lease, excluding current portion (Note 7)
    
    
    64,692
    
    
    
    96,426Total liabilities
    
    
    46,389,653
    
    
    
    43,233,218Commitments and contingencies (Note 8)Series F convertible redeemable preferred stock, $.01
par value; 200,000 shares designated; 196,000 shares
issued and outstanding at June 30, 2010 and December
31, 2009; (liquidation preference of $4,900,000 at June
30, 2010)
    
    
    5,250,037
    
    
    
    5,066,919Stockholders deficit:Preferred stock, $.01 par value; 1,000,000 shares
authorized; 25,000 shares designated Convertible
Series A, 500,000 shares designated Convertible
Series D and 800 shares designated Convertible
Series E; no shares issued and outstanding at June
30, 2010 and December 31, 2009, respectively
    
    
    
    
    
    
    Common stock, $.01 par value; 80,000,000 shares
authorized; 27,055,645 and 25,555,645 shares issued
and outstanding at June 30, 2010 and December 31,
2009, respectively
    
    
    270,556
    
    
    
    255,556Additional paid-in capital
    
    
    146,780,018
    
    
    
    146,913,395Deficit accumulated during development stage
    
    
    (198,181,030
    )
    
    
    (194,678,273
    )Total stockholders deficit
    
    
    (51,130,456
    )
    
    
    (47,509,322
    )Total liabilities and stockholders deficit
    
    $
    509,234
    
    
    $
    790,815
  3




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##### Table of Contents



Alseres Pharmaceuticals, Inc.
 
 
 From Inception(October 16, 1992)Three Months Ended June 30,
    
    
    Six Months Ended June 30,
    
    
    to2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    June 30, 2010Revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    900,000Operating expenses:Research and development
    
    
    206,424
    
    
    
    892,520
    
    
    
    681,232
    
    
    
    2,720,535
    
    
    
    116,164,062General and administrative
    
    
    755,121
    
    
    
    1,092,946
    
    
    
    1,483,240
    
    
    
    3,063,068
    
    
    
    65,607,694Purchased in-process research and development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,146,544Total operating expenses
    
    
    961,545
    
    
    
    1,985,466
    
    
    
    2,164,472
    
    
    
    5,783,603
    
    
    
    193,918,300Loss from operations
    
    
    (961,545
    )
    
    
    (1,985,466
    )
    
    
    (2,164,472
    )
    
    
    (5,783,603
    )
    
    
    (193,018,300
    )Other income (expense)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,000
    
    
    
    (1,517,878
    )Interest expense, net
    
    
    (682,665
    )
    
    
    (630,501
    )
    
    
    (1,339,365
    )
    
    
    (1,249,051
    )
    
    
    (11,346,361
    )Investment income
    
    
    407
    
    
    
    1,887
    
    
    
    1,080
    
    
    
    5,218
    
    
    
    7,703,509Net loss
    
    
    (1,643,803
    )
    
    
    (2,614,080
    )
    
    
    (3,502,757
    )
    
    
    (6,962,436
    )
    
    
    (198,179,030
    )Preferred stock beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,062,712
    )Accrual of preferred stock dividends and modification of warrants held by preferred stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,229,589
    )Net loss attributable to common stockholders
    
    
    (1,643,803
    )
    
    
    (2,614,080
    )
    
    
    (3,502,757
    )
    
    
    (6,962,436
    )
    
    
    (207,471,331
    )Basic and diluted net loss attributable to common stockholders per share
    
    $
    (0.06
    )
    
    $
    (0.11
    )
    
    $
    (0.13
    )
    
    $
    (0.30
    )Weighted average common shares outstanding
    
    
    27,055,645
    
    
    
    23,309,004
    
    
    
    26,318,076
    
    
    
    22,971,047
  4




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##### Table of Contents



Alseres Pharmaceuticals, Inc.
 
 
 From Inception(October 16,1992) toSix Months Ended June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010Cash flows from operating activities:Net loss
    
    $
    (3,502,757
    )
    
    $
    (6,962,436
    )
    
    $
    (198,179,030
    )Adjustments to reconcile net loss to net cash used for operating activities:Purchased in-process research and development
    
    
    
    
    
    
    
    
    
    
    12,146,544Write-off of acquired technology
    
    
    
    
    
    
    
    
    
    
    3,500,000Interest expense settled through issuance of notes payable
    
    
    
    
    
    
    
    
    
    
    350,500Non-cash interest expense
    
    
    391,413
    
    
    
    350,206
    
    
    
    3,616,336Non-cash charges related to options, warrants and common stock
    
    
    51,713
    
    
    
    1,371,180
    
    
    
    11,104,594Amortization of financing costs
    
    
    13,027
    
    
    
    
    
    
    
    13,027Amortization and depreciation
    
    
    30,604
    
    
    
    39,574
    
    
    
    2,821,921Changes in operating assets and liabilities:(Increase) decrease in prepaid expenses and other current assets
    
    
    (85,246
    )
    
    
    10,212
    
    
    
    603,089Increase (decrease ) in accounts payable and accrued expenses
    
    
    474,490
    
    
    
    (734,114
    )
    
    
    3,161,668Increase in accrued interest payable
    
    
    944,677
    
    
    
    898,846
    
    
    
    5,064,501(Decrease) increase in accrued lease
    
    
    (22,039
    )
    
    
    (25,994
    )
    
    
    125,880Net cash used for operating activities
    
    
    (1,704,118
    )
    
    
    (5,052,526
    )
    
    
    (155,670,970
    )Cash flows from investing activities:Cash acquired through Merger
    
    
    
    
    
    
    
    
    
    
    1,758,037Purchases of fixed assets
    
    
    
    
    
    
    
    
    
    
    (1,652,114
    )Decrease (increase) in security deposits and other assets
    
    
    34,392
    
    
    
    42,041
    
    
    
    (385,371
    )Decrease (increase) in indemnity fund
    
    
    103
    
    
    
    (320
    )
    
    
    (115,617
    )Purchases of marketable securities
    
    
    
    
    
    
    
    
    
    
    (132,004,923
    )Sales and maturities of marketable securities
    
    
    
    
    
    
    
    
    
    
    132,004,923Net cash provided by (used for) investing activities
    
    
    34,495
    
    
    
    41,721
    
    
    
    (395,065
    )Cash flows from financing activities:Proceeds from issuance of common stock
    
    
    
    
    
    
    1,000,000
    
    
    
    66,731,339Proceeds from issuance of preferred stock
    
    
    
    
    
    
    3,000,000
    
    
    
    39,922,170Preferred stock conversion inducement
    
    
    
    
    
    
    
    
    
    
    (600,564
    )Proceeds from issuance of promissory notes
    
    
    1,385,000
    
    
    
    1,000,000
    
    
    
    54,320,000Proceeds from issuance of convertible debentures
    
    
    
    
    
    
    
    
    
    
    9,000,000Principal payments of notes payable
    
    
    
    
    
    
    
    
    
    
    (7,146,967
    )Dividend payments on Series E Cumulative Convertible Preferred Stock
    
    
    
    
    
    
    
    
    
    
    (516,747
    )Payments of financing costs
    
    
    
    
    
    
    (25,188
    )
    
    
    (5,612,855
    )Net cash provided by financing activities
    
    
    1,385,000
    
    
    
    4,974,812
    
    
    
    156,096,376Net (decrease) increase in cash and cash equivalents
    
    
    (284,623
    )
    
    
    (35,993
    )
    
    
    30,341Cash and cash equivalents, beginning of period
    
    
    314,964
    
    
    
    73,974
    
    
    
    Cash and cash equivalents, end of period
    
    $
    30,341
    
    
    $
    37,981
    
    
    $
    30,341Supplemental cash flow disclosures:Non-cash transactionsCash paid for interest
    
    $
    
    
    
    $
    
    
    
    $
    628,406
  5




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##### Table of Contents



Alseres Pharmaceuticals, Inc.
 1. Basis of Presentation
      2. Net Loss Per Share
   6




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##### Table of Contents



3. Comprehensive Loss
  4. Accounting for Stock-Based Compensation
     Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Research and development
    
    $
    
    
    
    $
    836
    
    
    $
    
    
    
    $
    447,612General and administrative
    
    
    36,698
    
    
    
    57,130
    
    
    
    51,713
    
    
    
    723,569$
    36,698
    
    
    $
    57,966
    
    
    $
    51,713
    
    
    $
    1,171,181Impact on basic and
diluted net loss
attributable to common
stockholders per share
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.05
    )
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Expected term
    
    
    
    
    
    
    
    
    
    
    
    
    
    5 yearsRisk-free interest rate
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    1.36
    %Stock volatility
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    90
    %Dividend yield
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    0
    %
    7




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##### Table of Contents



Six months ended June 30,2010
    
    
    2009Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at beginning of year
    
    
    3,695,745
    
    
    $
    1.63
    
    
    
    4,184,403
    
    
    $
    2.90Granted
    
    
    
    
    
    
    
    
    
    
    2,732,500
    
    
    
    1.15Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited and expired
    
    
    (35,162
    )
    
    
    5.23
    
    
    
    (2,900,214
    )
    
    
    2.87Outstanding at end of period
    
    
    3,660,583
    
    
    $
    1.59
    
    
    
    4,016,689
    
    
    $
    1.73Options exercisable at end of period
    
    
    3,556,001
    
    
    $
    1.59
    
    
    
    3,741,689
    
    
    $
    1.75
   Options Outstanding
    
    
    Options ExercisableWeighted-
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    Weighted-
    
    
    
    
    
    
    Average
    
    
    Weighted-Remaining
    
    
    Average
    
    
    
    
    
    
    Remaining
    
    
    AverageNumber
    
    
    Contractual
    
    
    Exercise
    
    
    Number
    
    
    Contractual
    
    
    ExerciseRange of Exercise Prices
    
    Outstanding
    
    
    Life
    
    
    Price
    
    
    Exercisable
    
    
    Life
    
    
    Price$1.15  $1.36
    
    
    2,713,000
    
    
    3.9 years
    
    $
    1.15
    
    
    
    2,608,418
    
    
    3.8 years
    
    $
    1.15$2.00  $3.00
    
    
    649,980
    
    
    5.1 years
    
    
    2.33
    
    
    
    649,980
    
    
    5.1 years
    
    
    2.33$3.10  $4.65
    
    
    255,363
    
    
    6.2 years
    
    
    3.40
    
    
    
    255,363
    
    
    6.2 years
    
    
    3.40$4.99  $6.96
    
    
    28,500
    
    
    3.5 years
    
    
    5.47
    
    
    
    28,500
    
    
    3.5 years
    
    
    5.47$8.95  $13.06
    
    
    8,740
    
    
    1.2 years
    
    
    10.55
    
    
    
    8,740
    
    
    1.2 years
    
    
    10.55$15.62  $22.36
    
    
    5,000
    
    
    0.5 years
    
    
    15.63
    
    
    
    5,000
    
    
    0.5 years
    
    
    15.633,660,583
    
    
    4.2 years
    
    $
    1.59
    
    
    
    3,556,001
    
    
    4.2 years
    
    $
    1.60
   5. Notes Payable and Debt
 Notes Payable to Significant Stockholders
  April
    
    $
    200,000May
    
    $
    235,000June
    
    $
    150,000Total
    
    $
    585,000
   8




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##### Table of Contents



6. Related Party Transactions
  7. Exit Activities
 Office Relocation
    CashPayments,Accrual at
    
    
    Net of Sublease
    
    
    Accrual atDecember 31, 2009
    
    
    Receipts 2010
    
    
    June 30, 2010Lease Amendment
    
    $
    147,919
    
    
    $
    22,039
    
    
    $
    125,880Short-term portion of lease accrual
    
    
    51,493
    
    
    
    
    
    
    
    61,188Long-term portion of lease accrual
    
    $
    96,426
    
    
    
    
    
    
    $
    64,692
  9




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##### Table of Contents



8. Commitments and Contingencies
  License Agreements
    9. Income taxes
  10. Fair Value Measurements
       10




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##### Table of Contents



11




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##### Table of Contents



Fair Value Measurement at Reporting Date UsingQuoted Prices in
    
    
    SignificantCarrying Value
    
    
    Active Markets
    
    
    Other
    
    
    Significantat
    
    
    for
    
    
    Observable
    
    
    UnobservableJune 30,
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    2010
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Cash equivalents and money market
funds  current assets
    
    $
    30,341
    
    
    $
    30,341
    
    
    $
    
    
    
    $
    Money market funds  long term assets
    
    $
    115,617
    
    
    $
    115,617
    
    
    $
    
    
    
    $
    Total
    
    $
    145,958
    
    
    $
    145,958
    
    
    $
    
    
    
    $
    
 Fair Value Measurement at Reporting Date UsingQuoted Prices in
    
    
    SignificantCarrying Value
    
    
    Active Markets
    
    
    Other
    
    
    Significantat
    
    
    for
    
    
    Observable
    
    
    UnobservableDecember 31,
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Cash equivalents and money market
funds  current assets
    
    $
    314,964
    
    
    $
    314,964
    
    
    $
    
    
    
    $
    Money market funds  long term assets
    
    $
    115,720
    
    
    $
    115,720
    
    
    $
    
    
    
    $
    Total
    
    $
    430,684
    
    
    $
    430,684
    
    
    $
    
    
    
    $
    
   11. New Accounting Pronouncements
  12. Subsequent Events
  12




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##### Table of Contents



Item 2
    
     Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
 Description of Company
  
    
    Molecular imaging program focused on the diagnosis of i)
Parkinsonian Syndromes, or PS, including Parkinsons
Disease, or PD, and ii) Dementia with Lewy Bodies, or DLB;
    
    Regenerative therapeutics program, primarily focused on
nerve repair and restoring movement and sensory function
in patients who have had significant loss of CNS function
resulting from trauma such as spinal cord injury, or SCI,
stroke, and optic nerve damage utilizing technology
referred to as axon regeneration.
 Development Stage Entities Accounting and Reporting by
Development Stage Enterprises
   13




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##### Table of Contents



Product Development
 Molecular Imaging Program
   Regenerative Therapeutics Program  Nerve Repair
   Sales and Marketing and Government Regulation
  Research and Development
  From InceptionFor the Three
    
    
    For the Six
    
    
    (October 16, 1992)Months Ended
    
    
    Months Ended
    
    
    toProgram
    
    June 30, 2010
    
    
    June 30, 2010
    
    
    June 30, 2010Molecular imaging
    
    $
    200,000
    
    
    $
    670,000
    
    
    $
    27,801,000Regenerative therapeutics
    
    $
    16,000
    
    
    $
    23,000
    
    
    $
    28,944,000Neurodegenerative disease
    
    $
    
    
    
    $
    20,000
    
    
    $
    1,151,000
 14




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##### Table of Contents



Critical Accounting Policies and Estimates
  Going Concern Basis of Accounting
  Research Contracts
  15




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##### Table of Contents



Fair Value and Classification of Financial Instruments
    Lease Accrual
  Stock-Based Compensation
  Results of Operations
 Three Months Ended June 30, 2010 and 2009
   16




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##### Table of Contents



Six Months Ended June 30, 2010 and 2009
       Liquidity and Capital Resources
   17




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##### Table of Contents



Securities or DebtDate
    
    Net Proceeds Raised
    
    Instrument IssuedJune 2010
    
    $0.2 million
    
    Promissory NoteMay 2010
    
    $0.2 million
    
    Promissory NoteApril 2010
    
    $0.2 million
    
    Promissory NoteMarch 2010
    
    $0.3 million
    
    Promissory NoteFebruary 2010
    
    $0.2 million
    
    Promissory NoteJanuary 2010
    
    $0.3 million
    
    Promissory NoteDecember 2009
    
    $0.3 million
    
    Promissory NoteNovember 2009
    
    $1.0 million
    
    Common StockSeptember 2009
    
    $0.7 million
    
    Convertible Preferred StockAugust 2009
    
    $0.6 million
    
    Convertible Preferred StockJuly 2009
    
    $0.6 million
    
    Convertible Preferred Stock
 18




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##### Table of Contents



Securities or DebtDate
    
    Net Proceeds Raised
    
    Instrument IssuedJune 2009
    
    $0.5 million
    
    Convertible Preferred StockMay 2009
    
    $1.0 million
    
    Convertible Preferred StockApril 2009
    
    $0.5 million
    
    Convertible Preferred StockMarch 2009
    
    $1.0 million
    
    Convertible Preferred StockFebruary 2009
    
    $0.2 million
    
    Common StockFebruary 2009
    
    $1.0 million
    

Promissory
NotesJanuary 2009
    
    $1.0 million
    
    Common StockNovember 2008
    
    $1.0 million
    
    Common StockJune 2008
    
    $5.0 million
    
    Convertible Promissory NotesMarch 2008
    
    $5.0 million
    
    Convertible Promissory NotesAugust 2007
    
    $10.0 million
    
    Convertible Promissory NotesMay 2007
    
    $6.0 million
    
    Convertible Promissory NotesMarch 2007
    
    $9.0 million
    
    Convertible Promissory NotesFebruary 2007
    
    $2.0 million
    
    Convertible Promissory Notes(1)October 2006
    
    $6.0 million
    
    Convertible Promissory Notes(1)
 
 (1)
    
    Converted to shares of our common stock in June 2007.     Contractual Obligations and Commitments
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Item 3  Quantitative and Qualitative Disclosures About Market Risk
   
 Item 4T  Controls and Procedures
   
 Part II  OTHER INFORMATION
 
 Item 1  Legal Proceedings
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Item 6  Exhibits
 31.1*
    
    Certification of the Chief Executive Officer pursuant to Section 1350 of Title 18, United States Code, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of the Chief Financial Officer pursuant to Section 1350 of Title 18, United States Code, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith. 21




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SIGNATURES
  ALSERES PHARMACEUTICALS, INC
(Registrant)DATE: August 16, 2010
    /s/ Peter G. SavasPeter G. SavasChief Executive Officer
(Principal Executive Officer)DATE: August 16, 2010
    /s/ Kenneth L. Rice, Jr.Kenneth L. Rice, Jr.Executive Vice President Finance and
Administration And Chief Financial Officer
(Principal Financial and Accounting Officer) 22