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

                                   FORM 10-KSB

              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 OF THE
              SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended June 30, 2000

                                       OR

             [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

             For the transition period from _________ to __________

                         Commission file number: 0-23280

                       NEUROBIOLOGICAL TECHNOLOGIES, INC.
           (Name of small business issuer as specified in its charter)

              Delaware                                  94-3049219
      (State of incorporation)               IRS Employer Identification No.

             3260 Blume Drive Suite 500, Richmond, California 94806
                    (Address of principal executive offices)

                                 (510) 262-1730
              (Registrant's telephone number, including area code)

         Securities registered under Section 12(b) of the Exchange Act:
                                      None

         Securities registered under Section 12(g) of the Exchange Act:
                          Common stock, $.001 Par Value

                                (Title of Class)

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will 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-KSB
or any amendment to this Form 10-KSB. [ ]

         The issuer had no revenue for its most recent fiscal year.

         As of September  1, 2000,  the issuer had  16,311,278  shares of common
stock,  $.001 par value,  outstanding,  and the  aggregate  market  value of the
shares of common stock held by non-affiliates on that date was $97,901,730 based
upon the last sale price of the  issuer's  common  stock  reported on the Nasdaq
SmallCap Market on that date.

         Transitional Small Business Disclosure Format (check one):

         Yes ___  No _X_

<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions  of Item 9 and  Items  10 and 11 of Part  III  incorporate  by
reference  information  from the issuer's Proxy Statement for the Annual Meeting
of Stockholders to be held on November 21, 2000 (the "Proxy Statement").

                                     PART I.

ITEM 1. BUSINESS

         Statements  in this  Business  section  and other  parts of this Annual
Report on Form 10-KSB that are not historical are forward-looking statements and
are subject to a number of risks and  uncertainties  which  could  cause  actual
results  to  differ  materially  from  those  discussed  in the  forward-looking
statements.  Factors  that might cause such a  difference  include,  but are not
limited  to,  those  set  forth  under  "Risks  Associated  with Our  Business,"
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and elsewhere in this Form 10-KSB.

OVERVIEW

         Neurobiological  Technologies,  Inc.  ("NTI(R)" or the  "Company) is an
emerging  drug  development  company  focused on the  clinical  development  and
regulatory  approval  of  neuroscience  drugs.  We develop  neuroprotective  and
neuromodulatory   agents   to   treat   progressive   neurological   impairments
characteristic   of  various  nervous  system  disorders,   including   diabetic
neuropathy, brain cancer, and AIDS dementia syndrome.

         Our strategy is to in-license  and develop early stage drug  candidates
that target  major  medical  needs and that can be rapidly  commercialized.  Our
experienced  management  team oversees the human  clinical  trials  necessary to
establish   preliminary   evidence  of  efficacy  and  seeks  partnerships  with
pharmaceutical  and  biotechnology  companies  for  late-stage  development  and
marketing of our product candidates.

         In May 2000, we presented results of our placebo-controlled  Phase IIB,
dose ranging human clinical  trial of Memantine,  an orally  available  compound
which appears to restore the function of impaired neurons by modulation activity
of the N-methyl-D-aspartate or NMDA receptor,  integral to the membranes of such
cells.  Such  restoration  of  function  appears to  inhibit  injured or damaged
neurons from firing  abnormally,  a pathological  process  associated  with many
neurological conditions,  including dementia,  Alzheimer's disease,  neuropathic
pain  (persistent  pain  resulting  from  abnormal  signals  to the  brain)  and
AIDS-related  dementia.  Results of the 421 patient Phase IIB clinical  trial of
Memantine as a treatment for painful diabetic  neuropathy showed that 44% of the
patients  receiving 40mg dosages  experienced a 50% pain reduction,  compared to
29% in the placebo  group at the end of eight weeks.  Although  positive  trends
were seen in the groups treated with 20mg of Memantine  compared to placebo,  no
statistical significance was observed.

         In  April  2000,  our  alliance  partner,  Merz  + Co.  GmbH  & Co.  of
Frankfurt,  Germany, announced promising results in patients suffering from mild
to moderate vascular  dementia.  Of a total of 900 patients  investigated in two
Phase  III  clinical  trial  studies,  the  Memantine  treated  patients  showed
significant  improvements  in cognitive  abilities  compared to the patients who
received  a  placebo  as  demonstrated  by  two  independent   performance-based
assessments.  Patients who had more severe disease showed the most  improvement,
according to Gordon  Wilcock,  M.D., of Frenchay  Hospital in Bristol,  England,
lead investigator for the U.K. trial.

         In February  2000,  we  announced  that Merz had  reported  significant
positive  results  from a U.S.  Phase III trial of  Memantine  in patients  with
advanced  Alzheimer's  disease.  This  randomized,  6-month  placebo-controlled,
double-blind

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<PAGE>

multicenter  trial aimed at functional  improvement of patients with moderate to
severe Alzheimer's  disease,  enrolled 252 patients in the United States and was
jointly  managed by Quintiles CNS  Therapeutics.  These  clinical  trial results
confirmed the findings of the previously  conducted  Phase III clinical  studies
Merz conducted for registration requirements in Europe and the United States.

         In January  2000, we announced  completion  of patient  enrollment in a
double-blind,  placebo-controlled  Phase II  human  clinical  trial to  evaluate
Memantine's  ability to reduce  symptoms of  dementia  and  neuropathic  pain in
patients  with AIDS.  This trial is funded by the National  Institute of Allergy
and  Infectious  Diseases  (NIAID)  of the  National  Institutes  of Health  and
conducted by the AIDS Clinical Trials Group (ACTG), a clinical trials consortium
funded by the NIAID.  We are supplying the Memantine for the trial and will have
the right to use the resulting data for the commercial  development of Memantine
for that  indication.  We expect results of this trial to be reported by the end
of calendar 2000.

         In June 2000, Merz entered into an agreement with Forest  Laboratories,
Inc. for the development and marketing of Memantine in the United States for the
treatment of Alzheimer's  disease,  neuropathic pain and AIDS-related  dementia.
Under our 1998 strategic research and marketing cooperation agreement with Merz,
we expect to receive a share of the payments Forest  Laboratories,  Inc. will be
providing Merz.

         Subsequent  to fiscal year end, in August  2000,  Merz  entered  into a
strategic license and cooperation agreement with H. Lundbeck A/S, of Copenhagen,
Denmark for the further development and marketing of Memantine for the treatment
of Alzheimer's  disease,  neuropathic pain and AIDS-related  dementia.  Lundbeck
will  acquire  exclusive  rights to  certain  European  markets  and in  Canada,
Australia and South Africa and  semi-exclusive  rights to co-market with Merz in
other markets  worldwide,  not  including the United States and Japan.  Japan is
being  developed by Merz'  collaborative  partner,  Suntory Ltd.  Under our 1998
strategic research and marketing  cooperation  agreement with Merz, we expect to
receive a share of the payments Lundbeck will be providing Merz.

         Memantine  has been  marketed  by Merz in  Germany  since 1989 with the
labeling "dementia syndrome." NTI and Merz are currently assisting each other to
advance our  respective  clinical  development  programs  by sharing  scientific
information and clinical trial data.

         We are also  developing  XERECEPT(TM),  a synthetic  preparation of the
natural human peptide  Corticotropin-Releasing  Factor, as a treatment for brain
swelling due to brain tumors (peritumoral brain edema). XERECEPT received orphan
drug designation for this indication by the FDA.

         Since 1987 when NTI was founded,  we have applied a substantial portion
of our resources to our research and development  programs. We are a development
stage company,  have not received any revenue from the sale of products,  and do
not anticipate  receiving  revenue from the sale of products in the near future.
We have incurred  losses since our  inception  and expect to incur  substantial,
increasing  losses due to ongoing and planned research and development  efforts.
See "Management's  Discussion and Analysis of Financial Condition and Results of
Operations."

                                       3

<PAGE>


<TABLE>
PRODUCT CANDIDATES

<CAPTION>
          Product/Indication                      Development Status              Primary Benefit Sought
----------------------------------       -----------------------------------    --------------------------

<S>                                      <C>                                    <C>
MEMANTINE

Diabetic Neuropathic Pain                Phase IIB trial completed by NTI.      Analgesia.
                                         Results show statistically
                                         significant improvement of 40mg of
                                         Memantine over placebo in reducing
                                         chronic nighttime pain at the end of
                                         eight weeks.

Mild to Moderate Vascular Dementia       Phase III trials completed by Merz     Cognitive improvement.
                                         in the United Kingdom and France.
                                         Results showed significantly
                                         improved cognitive abilities
                                         compared to patients who received
                                         placebo as demonstrated by the
                                         Activities of Daily Living and
                                         cognitive performance evaluations.

Moderate to Severe Dementia and          Phase III trial completed by Merz in   Functional and/or cognitive
Alzheimer's Disease                      the United States. Improvement in      improvement.
                                         functional independence and
                                         reduction in required level of care.

AIDS-Related Dementia and                Phase II trial in progress by NTI.     Improvement in neurological
Neuropathic Pain                         Patient enrollment completed in        function and peripheral
                                         January 2000. Results expected by      neuropathy.
                                         the end of calendar 2000.

XERECEPT(TM) (CORTICOTROPIN-RELEASING FACTOR)

Peritumoral Brain Edema                  Phase II trial enrollment closed at    Stabilization or improvement of
                                         33 patients.  Results confirmatory     neurological function.
                                         but not definitive.
-----------------------------------
</TABLE>

                                       4

<PAGE>

SCIENTIFIC BACKGROUND

         Our  therapeutic  focus is  neuroprotection  and  neuromodulation:  the
prevention and treatment of  neurological  impairment by preserving or restoring
neurological function of damaged neurons. We are developing  neuroprotective and
neuromodulatory  agents which may slow or reverse the  progressive  neurological
impairment associated with multiple nervous system disorders, including diabetic
neuropathy, brain cancer, and AIDS-Dementia Complex.

         Because  neuronal  impairment  contributes  significantly to functional
impairment  in  many  nervous   system   disorders,   scientists   believe  that
neuroprotective  compounds  are  potentially  powerful and flexible  therapeutic
agents. There has been much interest in the business and academic communities to
develop such agents.

         Mechanisms common to progressive neuronal impairment in various medical
conditions are thought to result in multiple neurologic symptoms such as chronic
pain,  motor  difficulties,   memory  loss  and  other  cognitive  deficits.  By
modulating such mechanisms,  neuroprotective  agents may prevent or restore loss
of  neurological  function.  Our current  scientific  focus is on two mechanisms
contributing to progressive neuronal impairment: excitotoxicity and edema. There
is evidence  that  Memantine  prevents or reduces  excitotoxicity,  a cascade of
neuronal cell injury and death associated with the release of abnormal levels of
excitatory  neurotransmitters.   XERECEPT  has  the  potential  to  prevent  the
progressive neuronal impairment resulting directly from cerebral edema (swelling
of the brain),  damage that more frequently results in clinical  impairment than
the damage resulting from the presence of a tumor.

PRODUCTS IN DEVELOPMENT

Memantine

         Memantine is an  orally-available  neuromodulatory  agent that has been
marketed in Germany by Merz since 1989 with the labeling "dementia syndrome." It
is one of a class of agents referred to as NMDA-receptor antagonists. Scientific
research has indicated that modulating the NMDA receptor may protect against the
neuronal  impairment and death  associated with a number of medical  conditions.
Accumulating  evidence from various studies  indicates that  overstimulation  of
NMDA receptors  contributes to the impairment and death of neurons.  This occurs
in a variety of chronic  neurodegenerative  diseases including neuropathic pain,
dementia,  Alzheimer's disease, and Huntington's disease. There are currently no
approved  neuroprotective  treatments for any of the pathologies associated with
NMDA-receptor overstimulation.

         NTI has been  developing  Memantine both as a treatment for neuropathic
pain as well as for neurological  deficits  associated with AIDS.  Estimates are
that  approximately   1,000,000  patients  in  the  United  States  suffer  from
intractable neuropathic pain. In addition, as many as one-third of AIDS patients
eventually  develop  neurological  problems,  such  as  loss  of  cognition  and
coordination.

         Nerve cells in the brain  communicate  by sending  signals to excite or
inhibit  each  other.   These  signals  are  initiated  by  compounds  known  as
neurotransmitters.  The principal excitatory neurotransmitter,  glutamate, binds
to the NMDA receptor embedded in the cell membrane of the neuron. When glutamate
binds to the  receptor,  a channel in the neuron  opens  which  enables  charged
calcium  molecules  to flow  freely  into the  neuron.  Normally,  the influx of
calcium  triggers  chemical  reactions  that  cause the  neuron  to  change  its
electrical charge and fire a message to neighboring neurons. This basic function
of the NMDA receptor is essential for normal movement,  sensation,  memory,  and
cognition.  In certain medical conditions,  glutamate levels surrounding neurons
are elevated,  which results in overstimulation  of the NMDA receptor.  In these
situations,  excessive amounts of calcium enter the

                                       5

<PAGE>

neuron,  releasing  internally  stored glutamate into the surrounding area. This
glutamate further  stimulates NMDA receptors on neighboring  neurons,  causing a
cascade of neuronal cell impairment  and/or death throughout the area,  referred
to as excitotoxicity.

         Neuroscientists  have been  developing  ways to  prevent  the  damaging
influx of excess calcium into neurons. One approach is to prevent glutamate from
binding to the receptor.  This can be accomplished by using either a competitive
NMDA-receptor  antagonist which prevents glutamate from binding to the receptor,
or a closed  NMDA-receptor  channel blocker,  which binds to the entrance of the
closed channel.  However, if such compounds prevent the channel from opening for
too long, they may impede the normal  functioning of the NMDA receptor,  causing
side effects including hallucinations, paranoia, delirium, and amnesia.

         Scientists affiliated with Children's Hospital of Boston, Massachusetts
working on  understanding  the function of the NMDA receptor found  Memantine to
modulate   the  NMDA   receptor's   calcium   ion   channel.   Memantine   binds
uncompetitively to the NMDA receptor and appears to interfere  relatively little
with  normal  functioning,  while  reducing  abnormal  signals  associated  with
excessive  calcium  influx.  Rather than  blocking  the NMDA  receptor  for long
periods of time,  Memantine appears to restore regulation of the channel to near
normal activity, while permitting routine neurotransmission.

         The profound psychotic side effects associated with other NMDA receptor
antagonists  previously evaluated by third parties in human clinical trials were
virtually  absent with  Memantine.  Merz has  carefully  documented  Memantine's
history of safe  clinical  use in Germany  over  years of  post-launch  clinical
experience  and active  surveillance.  In a  post-marketing  surveillance  study
sponsored by Merz with 1,420  dementia  outpatients  treated for up to more than
one year,  Memantine was rated as having very good to good tolerability in 93.8%
of the cases at the end of the observation period.

         Product Development Status

         The Neuropathic Pain of Diabetes

         Diabetes  mellitus is a chronic  disorder  that affects an estimated 16
million  Americans.  One of its  most  common  complications  is  nerve  damage,
particularly  damage to  peripheral  nerves that send  sensory  signals from the
extremities to the central nervous system or CNS. This condition, referred to as
peripheral  diabetic  neuropathy or PDN, is a large,  unmet  medical need.  This
condition most frequently damages nerves in the feet, making walking or standing
painful and difficult.  We estimate that  approximately  800,000 patients in the
United States currently  receive  treatments for the symptoms of PDN,  including
severe,  chronic pain known as neuropathic  pain (persistent pain in the absence
of an obvious stimulus). As the neuropathy progresses, the sensation of pain may
become more intense,  encompass more areas, and become increasingly difficult to
treat with available therapeutic agents.

         Peripheral  nerve damage  disrupts pain pathways in the nervous system,
causing  nerves to send abnormal  signals that the brain  interprets as pain. In
effect,  neurons in the CNS are  bombarded  with  abnormal  signals  until their
ability   to   process   pain   signals   is   compromised.    This   leads   to
hyper-sensitization  of  neurons to pain  impulses  and  results in  progressive
neuronal  impairment in the CNS. Although the precise mechanisms of these events
are not completely  understood,  there is evidence that  overactivation  of NMDA
receptors in the CNS plays an important role.

         Memantine has been shown to inhibit abnormal pain signals by modulating
the NMDA receptor in several  animal models of  neuropathic  pain.  Based on the
results  of  these   studies,   we  sponsored   and   completed  a   122-patient
placebo-controlled  Phase IIA human clinical trial of Memantine in patients with
neuropathic pain due to diabetes or  post-herpetic  neuralgia (a complication of
shingles).  No  treatment

                                       6

<PAGE>

benefit was observed in patients with post-herpetic  neuralgia.  However, trends
indicating  efficacy  of  Memantine  were  observed in  patients  with PDN.  The
strongest  efficacy  trend was the reduction of nocturnal pain  associated  with
PDN. Nocturnal pain is a major problem for these patients, frequently leading to
insomnia and other associated  health and  psychological  problems.  After eight
weeks of  treatment  in our  clinical  trial,  subjects  dosing  with  Memantine
reported a mean nocturnal pain rating of 31.2  millimeters (on a visual analogue
scale of 1-100 millimeters) compared to a mean of 44.4 millimeters for those who
received  placebo.  The  difference  between  these  means  indicates  that  the
Memantine-treated  subjects had 42% less  nocturnal pain than those treated with
placebo.  The results for the other  primary  variables of daytime pain and pain
relief,  although not  statistically  significant,  exhibited  consistent trends
representative of analgesic benefit with Memantine compared to placebo.

         Based on the results  from our Phase IIA trial of Memantine in patients
with neuropathic pain, we initiated a Phase IIB trial of Memantine in the second
quarter of fiscal  1999,  exclusively  in  patients  with PDN.  In May 2000,  we
presented  results of our  placebo-controlled  Phase  IIB,  dose  ranging  human
clinical trial of Memantine at the 52nd Annual  Meeting of the American  Academy
of Neurology in San Diego.  Results of this 421 patient Phase IIB clinical trial
of Memantine as a treatment for painful diabetic  neuropathy  showed that 44% of
the patients receiving 40 mg dosages experienced a 50% pain reduction,  compared
to 29% in the placebo group at the end of eight weeks.  Although positive trends
were seen in the groups treated with 20 mg of Memantine compared to placebo,  no
statistical  significance  was  observed.  We expect Merz and Forest to begin to
work with the FDA to design a Phase III  study for this  indication  during  the
second quarter of fiscal 2001.

         AIDS-Related Dementia and Neuropathic Pain

         Recent research indicates that infection of the CNS with HIV, the virus
associated  with AIDS,  also leads to neuronal  impairment.  Such impairment may
result in neurological complications, including loss of cognition, movement, and
sensation,  referred  to as AIDS  Dementia  Complex.  Approximately  one-half of
children  and  one-third  of adults  with AIDS are  expected  to  develop  these
symptoms.  There  are  currently  no  therapies  specifically  directed  towards
HIV-associated neuronal impairment. Current AIDS therapies, even if effective at
reducing  the  circulating  virus  level,  do  not  appear  to be  effective  at
eliminating AIDS-induced impairment to the CNS.

         Besides the  AIDS-related  cognitive  impairments,  many AIDS  patients
experience  painful  peripheral  neuropathies  due to  overstimulation  of  NMDA
receptors.  This  often  occurs in the later  stages  of AIDS and  results  in a
burning  pain of the feet as well as pain from  anything  that touches the skin.
Walking in particular may become extremely  difficult.  Effective treatments are
still unavailable for this  incapacitating  condition and certain AIDS therapies
may aggravate this type of neuropathic pain.

         Memantine  has been  shown to reduce  NMDA  receptor-mediated  neuronal
impairment in both in vitro (outside the body)  experiments  and in vivo (inside
the body) animal  models.  Neuronal  dysfunction  due to HIV  infection has been
shown to be mitigated by antagonists of the NMDA receptor, including Memantine.

         In December  1996, we announced  the  initiation of a Phase II clinical
trial of  Memantine as a treatment  for  AIDS-related  dementia and  neuropathic
pain.  This study is funded by the National  Institute of Allergy and Infectious
Diseases (NIAID) of the National  Institutes of Health and is being conducted by
the AIDS Clinical Trials Group (ACTG),  a clinical trials  consortium  funded by
the NIAID. In December 1999, enrollment was completed at 140 AIDS patients.  The
ACTG also implemented a protocol extension  permitting  open-label dosing for up
to 60 weeks following the blinded phase of the trial. This open-label phase will
provide data on the long-term  safety of Memantine.  We are supplying  Memantine
for the trial and will have the right to use the  resulting  data to further the
commercial  development  of

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<PAGE>

Memantine for that indication.  If positive trial results are reported,  we will
need  to  discuss  additional  regulatory   requirements  for  this  indication,
including future clinical trials,  with the FDA. We expect results of this trial
to be reported by the end of calendar 2000.

         Agreement with Merz and Additional Indications

         In April 1998,  we entered  into a  strategic  research  and  marketing
cooperation  agreement  with Merz and a new  revenue  sharing  partnership  with
Children's  Medical Center  Corporation to further the clinical  development and
commercialization of Memantine.  Pursuant to this agreement,  Children's Medical
Center  Corporation  terminated  its  existing  license to NTI for  AIDS-related
dementia and neuropathic pain and granted exclusive rights to Merz. NTI and Merz
share   scientific,   clinical  and  regulatory   information  about  Memantine,
particularly safety data, to facilitate regulatory review and marketing approval
by the FDA and foreign  regulatory  authorities.  Pursuant to the agreement with
Merz,  NTI will  share in  future  revenues  from  sales  of  Memantine  for all
indications.

         In April  2000,  Merz  announced  the  results  of two major  Phase III
clinical  trials in the United  Kingdom  and  France  using  Memantine  to treat
vascular  dementia.  The trials were  designed to  investigate  improvements  in
cognition,  a major  focus of drug  therapy  for  dementia.  Of the total of 900
patients  investigated  in two studies,  the Memantine  treated  patients showed
significant  improvements  in cognitive  abilities  compared to the patients who
received  a  placebo,  as  demonstrated  by  two  independent  performance-based
assessments.  Patients who had more severe disease showed the most  improvement,
according to Gordon  Wilcock,  M.D., of Frenchay  Hospital in Bristol,  England,
lead investigator for the U.K. trial.

         Merz has  completed  three Phase III clinical  trials of Memantine  for
moderate to severe  dementia in Europe.  In February  2000,  Merz  announced the
results of a 252  patient  Phase III trial in the United  States for  moderately
severe to severe  Alzheimer's  disease.  Severe  dementia  is  characterized  by
progressive  decline in motor and  cognitive  skills  associated  with  multiple
central nervous system disorders,  chiefly neurodegenerative  conditions such as
Alzheimer's  disease.  According to the NIH,  approximately 4 million people are
affected by  Alzheimer's  disease in the U.S.  There are  currently  no approved
treatments  indicating clinical benefits in patients with severe dementia.  In a
six month study,  patients were assigned to either 20mg Memantine twice a day or
placebo.  In these moderately  severe to severe  Alzheimer's  disease  patients,
Memantine  produced  statistically  significant  results versus placebo in three
major domains: clinical global change, function and cognition. Results indicated
the decline in various  endpoints  was  consistently  smaller for the  Memantine
treatment  group,  although both treatment  groups  worsened  during the 28-week
period.  These results are consistent with trial results previously published by
Merz for Memantine in a population of severely demented inpatients. Although the
disease  process cannot be reversed,  the studies show that Memantine can reduce
the clinical decline over a six-month period.

XERECEPT(TM) (Human Corticotropin-Releasing Factor)

         XERECEPT(TM)  is  our  synthetic   preparation  of  the  human  peptide
Corticotropin-Releasing Factor (hCRF) which we are developing as a treatment for
brain swelling due to brain tumors (peritumoral brain edema).  There is clinical
evidence that XERECEPT may be a safer treatment than synthetic  corticosteroids,
which are associated with serious adverse side effects including muscle wasting,
weight  gain,  immunosuppression,   osteoporosis,  hyperglycemia,  glaucoma  and
psychosis.  Results from  preclinical  studies and pilot human  clinical  trials
previously  sponsored by the Company have demonstrated the compound's  potential
to reduce swelling in brain tissue and to be well-tolerated and apparently safe.
Thus,  XERECEPT has the potential to  significantly  improve the quality of life
for brain

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<PAGE>

cancer patients with  dysfunction  due to brain swelling.  In the United States,
approximately  30,000  patients  are  diagnosed  every year with  brain  tumors.
Patients   with  this   condition  are  in  need  of  a  safe   alternative   to
corticosteroids,  which have serious adverse effects at the high,  chronic doses
required for efficacy.

         The FDA has approved our  application  for orphan drug  designation for
XERECEPT to treat this unmet medical need. Orphan drug designation  provides NTI
with seven years  market  exclusivity  and makes us eligible to receive  federal
monies for clinical research under the Orphan Drug Grant Program.

         CRF is a natural  neuroendocrine  peptide  hormone found in humans both
centrally (within the brain) and peripherally  (outside the brain).  Researchers
discovered anti-edema affects of CRF through systemic  administration.  Research
by scientific  collaborators  of NTI has revealed  that  XERECEPT  significantly
reduces  edema or  swelling  of  damaged  tissue  in animal  models.  Edema is a
condition  characterized  by swelling  after  tissue  injury when fluid,  plasma
proteins,  and  white  blood  cells  flow  from  small  blood  vessels  into the
surrounding  tissues,  further contributing to the destruction of these tissues.
Preclinical  studies  sponsored by the Company have shown that XERECEPT  reduces
the flow of fluid  through blood  vessels at sites of traumatic  tissue  injury.
Specifically,  these studies have shown that XERECEPT injected systemically into
animals can reduce brain edema after injury,  brain edema associated with cancer
tumors, and swelling in muscle tissue following surgical trauma.

         Product Development Status

         Peritumoral Brain Edema

         We  have  been  initially  evaluating  XERECEPT  for the  treatment  of
cerebral  edema caused by brain tumors.  In these  patients,  the tumor promotes
increased  permeability of the small blood vessels in the brain, which result in
the  excess  flow of fluids  into the brain,  swelling  of brain  tissue,  and a
consequent impairment of neurological function. Current treatment of peritumoral
brain edema, primarily corticosteroids,  results in serious adverse side effects
at the high chronic doses  required for efficacy.  Reactions can include  muscle
wasting, weight gain, immunosuppression,  osteoporosis, hyperglycemia, glaucoma,
psychosis and other potentially dose-limiting side effects.

         Although  endogenous  CRF is  involved  in  stimulating  the release of
natural  corticosteroids,  studies  sponsored  by the  Company  have  shown that
XERECEPT  exerts its  anti-edema  action  independent  of cortisol  release when
administered systemically.

         Based on the pharmacologic profile of XERECEPT,  there is evidence that
the compound may be efficacious without the adverse side effects associated with
current  therapies.  XERECEPT has been safely  administered  to several  hundred
healthy volunteers and patients according to numerous studies published by third
parties.  In human clinical trials  sponsored by the Company,  XERECEPT was well
tolerated and appeared to be safe in more than 230 courses of treatment.

         Results from pilot human clinical  trials  previously  sponsored by NTI
demonstrated the potential of XERECEPT to reduce swelling of brain tissue and to
be  well-tolerated  and apparently safe. Based on these results,  we initiated a
Phase II human  clinical  trial in 1997 to evaluate  the efficacy of XERECEPT to
stabilize or improve  neurological  symptoms caused by peritumoral  brain edema.
Patients enrolled in this randomized,  double-blind,  positive-controlled  trial
had neurological symptoms requiring stable dosing of synthetic  corticosteroids,
the  current  standard  treatment.  We closed  enrollment  for this  trial at 33
patients (one third of projected  enrollment) in order to provide  expedited but
abbreviated  analysis  of the data.  All  responders,  as  defined  by the trial
protocol, were in the XERECEPT treatment groups.  However,  rigorous statistical
analysis of the data was not meaningful due to the small numbers  enrolled.

                                       9

<PAGE>

The clinical study should be regarded as  confirmatory  but not definitive  with
regard  to  neurologic  improvements  that  may be  attained  with  XERECEPT  in
symptomatic  brain  tumor  patients.  We are  currently  having  a new  batch of
XERECEPT made to initiate a Phase II trial.

SUPPLIERS

         Memantine   currently  is  being  supplied  to  NTI  by  our  corporate
collaborator, Merz. We have also contracted with external vendors to manufacture
compounds for our other clinical trials.  The manufacturers of clinical products
have  represented  to us that they are  qualified  to  produce  drugs  under FDA
regulations  and that they follow current Good  Manufacturing  Practice  (cGMP).
XERECEPT has been manufactured by established  methods using chemical  synthesis
to NTI  specifications.  We  performed  audits on our  contractors  who supplied
XERECEPT  to  assess  compliance  with the cGMP  regulations.  Alternative  cGMP
suppliers of the bulk drugs and of finished  dosage form  products are available
to us. We currently have no plans to build or develop an in-house  manufacturing
capability.

         We face certain risks by outsourcing manufacturing, including:

         o    the delay of our  preclinical  and human  clinical  testing if our
              contractors are unable to supply sufficient  quantities of product
              candidates  manufactured  in  accordance  with cGMP on  acceptable
              terms;

         o    the  delay of market  introduction  and  subsequent  sales of such
              products   if   we   encounter    difficulties   in   establishing
              relationships   with   manufacturers   to  produce,   package  and
              distribute our products; and

         o    adverse effects on FDA pre-market approvals of the products of our
              collaborators and contract  manufacturers if they do not adhere to
              cGMP regulations.

         Therefore,  our  dependence  on third  parties for the  manufacture  of
products  may  adversely  affect our  results of  operations  and our ability to
develop and deliver products on a timely and competitive basis.

PATENTS AND PROPRIETARY TECHNOLOGY

         In  April  1998,  in  connection  with our  agreement  with  Merz,  our
exclusive  license from  Children's  Medical  Center  Corporation to a series of
patents  and patent  applications  relating  to certain  non-ophthalmic  uses of
Memantine was terminated.

         We hold  non-exclusive  worldwide  licenses to four issued U.S. patents
covering the composition of matter of XERECEPT and various  analogues,  together
with  certain   foreign  patents  and  patent   applications.   Because  of  the
non-exclusivity of the four issued U.S. patents, others may develop, manufacture
and market products that could compete with those we develop.  However,  we also
have exclusive rights to four issued patents and one patent application covering
uses of XERECEPT and analogues.  We are responsible for the costs of prosecuting
the patent applications  related to XERECEPT for which we have exclusive rights.
In  addition  to the patents and  pending  applications  we have  licensed  from
others,   we  hold  U.S.  Patent  No.  5,870,430  which  covers  certain  liquid
formulations of CRF and CRF-related  peptides. In August 2000, we announced that
we had  signed  an  option  with the  University  of  California,  Berkeley  for
Berkeley's  patents on  corticotropin-releasing  hormone  analogues.  The option
agreement  includes  a work  plan  that  will  encompass  in vivo  models of the
hormones  to  screen   CRH-analogues  in  terms  of  arriving  at  the  optimium
CRH-analogue for clinical purposes.

         The  patent  position  of  biotechnology   firms  generally  is  highly
uncertain because:

                                       10

<PAGE>


         o     patents  involve  complex  legal  and  factual  issues  that have
               recently been the subject of much litigation;

         o     no  consistent  policy has emerged from the United  States Patent
               and Trademark  Office  regarding the breadth of claims allowed or
               the degree of protection  afforded under  biotechnology  patents;
               and

         o     others may independently develop similar products,  duplicate any
               of our potential products,  or design around the claims of any of
               our potential patented products.

         In  addition,  because  of the time  delay in patent  approval  and the
secrecy  afforded  United  States patent  applications,  we do not know if other
applications,  which might have priority over our applications, have been filed.
Further,  because  we have  non-exclusive  licenses  to patent  rights  covering
certain uses of XERECEPT,  others may develop,  manufacture  and market products
that could compete with those we develop.

         As a result of all of these  factors,  there can be no  assurance  that
patent applications  relating to our potential products or processes will result
in patents being issued,  or that patents,  if issued,  will provide  protection
against competitors who successfully challenge our patents,  obtain patents that
may have an adverse  effect on our  ability to conduct  business,  or be able to
circumvent our patent position.

         A number of pharmaceutical and biotechnology companies and research and
academic institutions have developed technologies,  filed patent applications or
received  patents on various  technologies  that may be related to our business.
Some of these technologies, applications or patents may conflict with our or any
of our licensors' technologies or patent applications. Such conflict could limit
the scope of the patents,  if any,  that we may be able to obtain or to which we
have a license or result in the denial of our patent  applications or the patent
applications for which we have licenses.  In addition, if patents that cover our
activities have been or are issued to other companies, there can be no assurance
that we would be able to obtain licenses to these patents at a reasonable  cost,
or be able to develop alternative technology.

         In addition to patent protection,  we rely upon trade secret protection
for our  confidential  and proprietary  information.  It is our policy that each
employee  enter  into a  confidentiality  agreement  which  contains  provisions
generally  prohibiting  the  disclosure of  confidential  information  to anyone
outside NTI and requiring disclosure to NTI of ideas, developments,  discoveries
or inventions  conceived during  employment and assignment to NTI of proprietary
rights to such matters  related to the business and technology of NTI.  However,
it is possible that these agreements could be breached. In addition,  others may
independently  develop  substantially  equivalent  proprietary  information  and
techniques  or  otherwise  gain  access to our trade  secrets or  disclose  such
technology.

GOVERNMENT REGULATION

         In  order  to  clinically  test,  produce,   and  market  products  for
therapeutic  use, a company  must comply with  mandatory  procedures  and safety
standards established by the FDA and comparable agencies in foreign countries.

         A company  generally  must conduct  preclinical  testing on  laboratory
animals of new pharmaceutical products prior to commencement of clinical studies
involving  humans.  These studies evaluate the potential  efficacy and safety of
the product. The company then submits the results of these studies to the FDA as
part of an  investigational  new drug  application,  or IND,  which must  become
effective before clinical testing in humans can begin.

                                       11

<PAGE>

         Typically,  human clinical  evaluation  involves a  time-consuming  and
costly three-phase process:

         o     In Phase  I, a  company  conducts  clinical  trials  with a small
               number of subjects to determine a drug's early safety profile and
               its pharmacokinetic pattern.

         o     In Phase II, a company  conducts  clinical  trials with groups of
               patients  afflicted with a specific disease in order to determine
               preliminary  effectiveness,  optimal dosages and further evidence
               of safety.

         o     In Phase  III,  a  company  conducts  large-scale,  multi-center,
               comparative  trials with patients afflicted with a target disease
               in order to provide enough data to demonstrate the  effectiveness
               and safety required by the FDA prior to commercialization.

         The FDA  closely  monitors  the  progress  of each  phase  of  clinical
testing.  The FDA  may,  at its  discretion,  re-evaluate,  alter,  suspend,  or
terminate  testing based upon the data  accumulated  to that point and the FDA's
assessment of the risk/benefit ratio to patients.

         The results of the  preclinical  and clinical  testing are submitted to
the FDA in the form of a new drug  application,  or NDA, for  approval  prior to
commercialization.  In  responding  to an  NDA,  the  FDA  may  grant  marketing
approval,  request additional information,  or deny the application.  Failure to
receive approval for any of our potential products would have a material adverse
effect on NTI. Among the  requirements  for product  approval is the requirement
that each domestic manufacturer of the product conform to the FDA's current Good
Manufacturing  Practice  regulations,  which  must  be  followed  at all  times.
Compliance with the cGMP  regulations  requires that  manufacturers  continue to
expend time,  money and effort in the area of production and quality  control to
ensure full technical compliance.

         Once the sale of a product is  approved,  FDA  regulations  continue to
govern the  manufacturing  process and marketing  activities.  A  post-marketing
testing and  surveillance  program may be  required  to  continuously  monitor a
product's usage and effects in patients.  Product  approvals may be suspended or
withdrawn if compliance with regulatory standards is not maintained.

         Foreign regulatory approval of a product must also be obtained prior to
marketing the product  internationally.  Foreign  approval  procedures vary from
country  to  country.  The time  required  for  approval  may  delay or  prevent
marketing  in  certain  countries.  In  certain  instances,  the  Company or its
collaborative  partners may seek  approval to market and sell  certain  products
outside of the United States before  submitting an application for United States
approval to the FDA. The clinical testing  requirements and the time required to
obtain  foreign  regulatory  approvals  may differ from those  required  for FDA
approval.

         Fulfillment of regulatory requirements for marketing human therapeutics
typically  takes  many  years  and  varies  substantially  based  on  the  type,
complexity,  and novelty of the drug for which  approval  is sought.  Government
regulation may:

         o     delay for a considerable  period of time or prevent  marketing of
               any product that we may develop; and/or

         o     impose costly procedures upon our activities.

Either of these effects of government regulation may provide an advantage to our
competitors.

                                       12

<PAGE>

         There can be no assurance that FDA or other regulatory approval for any
products developed by NTI will be granted on a timely basis or at all. Any delay
in obtaining,  or failure to obtain,  required  approvals would adversely affect
the marketing of our proposed  products and our ability to earn product revenues
or royalties.

         In addition, success in preclinical or early stage clinical trials does
not  assure  success  in later  stage  clinical  trials.  As with any  regulated
product,  additional government  regulations may be instituted which could delay
regulatory approval of our potential products. Additional government regulations
that might result from future  legislation  or  administrative  action cannot be
predicted.

EMPLOYEES

         As of June 30,  2000,  the Company  employed  11 people,  6 of whom are
full-time employees.

ITEM 2. PROPERTIES

         Our executive offices are located in Richmond,  California.  We entered
into a sublease dated May 1, 2000 for approximately  4,333 square feet of space.
The master  lease under which we sublease the property is scheduled to expire in
July 2002. Rental payments are  approximately  $7,600 per month over the term of
the sublease.

         We believe that our  facilities  are adequate for our current needs and
that, if required,  we will be able to lease suitable  alternative or additional
space on commercially acceptable terms.

ITEM 3. LEGAL PROCEEDINGS

         We are not a party to any legal proceedings.

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

         No matters were submitted to a vote of the Company's  security  holders
during the fourth quarter of the fiscal year ended June 30, 2000.

                                    PART II.

ITEM 5. MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS

         From February 1998 to July 2000, the Company's  common stock was traded
on the Nasdaq Stock Market's  Over-the-Counter  (OTC) Bulletin  Board(R).  Since
July 2000,  the  Company's  common stock has been quoted on The Nasdaq  SmallCap
System under the symbol NTII.

         As of June 30, 2000 there were  approximately  265 holders of record of
the Company's common stock and 15,647,397 shares of common stock outstanding. No
dividends have been paid on the common stock since the Company's inception,  and
the Company does not anticipate paying any dividends in the foreseeable future.

         High and low prices  given here refer to the high and low bid quoted on
the OTC Bulletin  Board,  where our common  stock traded until July 2000.  These
quotations reflect  inter-dealer  prices,  without retail mark-up,  mark-down or
commission, and may not represent actual transactions.

              Fiscal 1999                             High      Low
              -----------                             ----      ---

                                       13

<PAGE>

              First Quarter .....................    $1.06     $0.38
              Second Quarter ....................    $0.69     $0.41
              Third Quarter......................    $0.66     $0.47
              Fourth Quarter.....................    $1.44     $0.50

              Fiscal 2000                             High      Low
              -----------                             ----      ---

              First Quarter .....................    $1.53     $0.84
              Second Quarter ....................    $3.75     $0.84
              Third Quarter......................    $9.28     $2.81
              Fourth Quarter.....................    $8.50     $3.88

Recent Sales of Unregistered Securities

         In April 2000, the Company sold 1,200,000 shares of common stock for an
aggregate  consideration  of  $6,360,000  in a private  placement to  accredited
investors under Regulation D. The purchase price was $5.30 per share.

         From August through  November 1999, the Company sold 1,086,940 units of
its securities for an aggregate  consideration of approximately  $4.3 million in
private  placements to  accredited  investors  under  Regulation D. The purchase
price was $4.00 per unit. Each unit consisted of five shares of common stock and
one warrant  (exercisable for 5 years from the date of issuance) to purchase two
shares of common stock at an exercise price of $1.75 per share.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION  AND RESULTS
OF OPERATIONS

OVERVIEW

         NTI is an emerging  drug  development  company  focused on the clinical
development  and regulatory  approval of neuroscience  drugs.  NTI is developing
neuroprotective  and  neuromodulatory  agents to treat progressive  neurological
impairments  characteristic  of  various  nervous  system  disorders,  including
diabetic  neuropathy,  brain cancer and AIDS  Dementia  Complex.  The  Company's
strategy is to in-license and develop  early-stage  drug  candidates that target
major medical needs and that may be rapidly commercialized.

         NTI currently has two product  candidates that have completed or are in
Phase II  human  clinical  testing.  One of  these,  the  orally-dosed  compound
Memantine, appears to restore the function of impaired neurons by modulating the
NMDA receptor, integral to the membranes of such cells. In the second quarter of
fiscal 1999, the Company  initiated a 375-patient  placebo-controlled  Phase IIB
human  clinical  trial to evaluate the ability of  Memantine to relieve  chronic
pain due to painful  diabetic  neuropathy.  The 8-week trial compared two dosage
levels of Memantine,  20mg and 40mg, with placebo.  Enrollment was closed at 421
patients in September 1999. In the 40mg group, 44% of the patients experienced a
50%  pain  reduction,  compared  to 29%  in  the  placebo  group.  There  was no
significant difference between the 20mg dose and the placebo. The results of the
study were presented at the annual meeting of the American  Academy of Neurology
in May 2000.

         The ability of Memantine to reduce symptoms of dementia and neuropathic
pain in AIDS patients is currently  being evaluated in a Phase II human clinical
trial  sponsored by the AIDS Clinical  Trials

                                       14

<PAGE>

Group of the NIH.  NTI is  supplying  Memantine  for the trial and will have the
right  to use the  resulting  data to  further  the  commercial  development  of
Memantine for that indication.

         NTI is also  developing  a second  product,  XERECEPT(TM),  a synthetic
preparation of the natural human peptide  (hCRF).  NTI sponsored and completed a
Phase II human  clinical trial to evaluate the efficacy of XERECEPT to stabilize
or improve  neurological  symptoms caused by peritumoral  brain edema (PBE). The
results of this trial were presented at the annual American Academy of Neurology
in May 2000. In a randomized,  double-blind,  positive controlled, triple dummy,
dose-ranging  study in which  two  different  doses of hCRF and a  dexamethasone
control group were compared,  responders were found in the higher dose, 1mg hCRF
group,  compared to the  dexamethasone  control.  No major safety  concerns were
identified in either of the hCRF groups.  Since the number of patients  enrolled
was small (a total of 33 patients),  no rigorous  statistical  analysis could be
performed. However, rigorous statistical analysis of the data was not meaningful
due to the small  numbers  enrolled.  The  clinical  study should be regarded as
confirmatory but not definitive with regard to neurologic  improvements that may
be attained with XERECEPT in symptomatic brain tumor patients.  We are currently
having a new batch of XERECEPT made to initiate a Phase II trial.

         Since 1987 when NTI was founded,  the Company has applied a majority of
its  resources  to its  research  and  development  programs.  The  Company is a
development  stage  company,  has not  received  any  revenue  from  the sale of
products,  and does not  anticipate  receiving  any  revenue  from the  sales of
products in the near future. The Company has incurred losses since its inception
and expects to incur  substantial,  increasing losses due to ongoing and planned
research and development efforts.

RESULTS OF OPERATIONS

         NTI's  research and  development  expenses  decreased to  $1,896,000 in
fiscal 2000 from  $2,780,000  in fiscal  1999.  The  decrease in fiscal 2000 was
primarily  due to the  completion  of our  Phase  IIB  human  clinical  trial to
evaluate Memantine as a treatment for peripheral diabetic neuropathy.

         General and  administrative  expenses increased to $1,380,000 in fiscal
2000 from  $1,058,000 in fiscal 1999.  The increase in fiscal 2000 was primarily
due to increased  expenditure  in activities  relating to seeking  financing and
corporate  partnerships  and relisting  our common stock on the Nasdaq  SmallCap
Market.

         In fiscal  2000 NTI had no  revenue.  In fiscal  1999 we had revenue of
$99,544 from a Small Business  Innovative  Research grant awarded by the NIH.

         Interest  income  increased  from $47,000 in fiscal 1999 to $161,000 in
fiscal 2000, primarily due to changes in average cash balances.

LIQUIDITY AND CAPITAL RESOURCES

                                       15

<PAGE>

         Since 1987 when NTI was  founded,  we have  applied a  majority  of our
resources to our research and development  programs.  We are a development stage
company and have not received  any revenue  from the sale of  products.  We have
incurred losses since our inception and expect to incur substantial,  increasing
losses due to ongoing and planned research and development efforts.

         In January  1999,  NTI received a loan of $200,000 from Merz. In August
1999,  we entered into an agreement  with Merz pursuant to which we could borrow
up to $1.5 million to support our Phase IIB trial of Memantine  for  neuropathic
pain. In November 1999, we repaid the outstanding principal and interest on both
loans.

         We believe that our available  cash and cash  equivalents of $7,387,000
as of June 30,  2000 are  adequate to fund our  operations  through at least the
next  twelve  months.  In the  course  of our  development  activities,  we have
incurred significant losses and expect additional losses in the year ending June
30,  2001.  We  expect  to incur  costs in fiscal  2001  primarily  for Phase II
clinical  trials of XERECEPT  and  related  administrative  support.  All future
development costs of Memantine will be paid by Merz's marketing partners.

         We may  seek to  raise  additional  funds  whenever  market  conditions
permit.  Our future  capital  requirements  will  depend on a number of factors,
including:

         o     the amount of front-end  and  milestone  payments  received  from
               marketing agreements for Memantine;

         o     the amount of  royalties  received  from Merz for future sales of
               Memantine;

         o     the progress of our clinical development programs;

         o     the time and cost involved in obtaining regulatory approvals;

         o     the cost of filing, prosecuting,  defending, and enforcing patent
               claims and other intellectual property rights;

         o     competing technological and market developments;

         o     our ability to establish collaborative relationships; and

         o     the development of commercialization activities and arrangements.

RISKS ASSOCIATED WITH OUR BUSINESS

         You should  consider  carefully the following risk factors,  along with
the other  information  contained  or  incorporated  by reference in this Annual
Report on Form 10-KSB.  These factors,  among others,  may cause actual results,
events  or  performance  to  differ  materially  from  those  expressed  in  any
forward-looking  statements  we make in this Annual  Report or our other reports
and prospectuses filed with the Securities and Exchange Commission.

Because  all our  potential  products  are in clinical  development,  we may not
develop a candidate product that will receive required regulatory approval or be
successfully commercialized.

         We are still in the development stage and have no marketable  products.
As a result,  we have no revenues from product sales,  and most of our resources
are dedicated to the development of selected

                                       16

<PAGE>

candidate  pharmaceutical  products.  The results of our preclinical studies and
early stage clinical trials are not necessarily indicative of those that will be
obtained upon further  clinical  testing in later stage clinical  trials.  It is
possible that none of our candidate products will receive regulatory approval or
be successfully commercialized.

Our  potential  products  are  subject to the risks of failure  inherent  in the
development of products based on new technologies.

         Our potential  products are subject to the risks of failure inherent in
the development of products based on new  technologies.  These risks include the
possibility that the potential products may:

         o     be found to be unsafe, ineffective or toxic;

         o     fail to receive necessary regulatory clearances;

         o     if  approved,  be difficult  to  manufacture  on a large scale or
               uneconomical to market;

         o     be precluded from marketing by us due to the  proprietary  rights
               of third parties; and

         o     not be  successful  because  third  parties  market or may market
               superior or equivalent products.

         Further, our development  activities may not result in any commercially
viable products. We do not expect to be able to commercialize any products for a
number of years, if at all.

We are dependent on Merz and its marketing  partners,  Forest and Lundbeck,  for
the successful commercialization of Memantine.

         The only  revenues that we will receive in the future for Memantine are
royalties on product  sales by Merz or its  marketing  partners and our share of
front-end  and  milestone  payments  received by Merz from its  partners.  Under
certain circumstances,  Merz can terminate its agreement with us upon six months
notice. The termination of our agreement with Merz or any failure by Merz or its
partners to successfully  commercialize  Memantine  after its development  would
have a material adverse effect on our business, financial conditions and results
of operations.

We have relied and will  continue to rely on others for  research,  development,
manufacture and commercialization of our potential products.

         We have entered into various  contractual  arrangements  (many of which
are  non-exclusive)  with  consultants,   academic   collaborators,   licensors,
licensees  and others,  and we are dependent  upon the level of  commitment  and
subsequent    success   of   these   outside   parties   in   performing   their
responsibilities.  Certain of these agreements place significant  responsibility
for  preclinical  testing  and  human  clinical  trials  and for  preparing  and
submitting  submissions  for regulatory  approval for potential  products on the
collaborator,   licensor  or  contractor.  If  the  collaborator,   licensor  or
contractor fails to perform, our business,  financial conditions and results may
be adversely affected.

         We have also relied on scientific, mechanical, clinical, commercial and
other data supplied and  disclosed by others in entering into these  agreements.
We have relied on this data in support of applications for human clinical trials
for our  potential  products.  Although  we have no reason to believe  that this
information  contains errors or omissions of fact, it is possible that there are
errors or  omissions  of fact that would  change  materially  to our view of the
future  likelihood  of FDA approval or commercial  viability of these  potential
products.

         We have  agreements  and licenses with third parties that require us to
pay royalties and make other payments to such parties.  Our failure to make such
payments  could  cause us to lose  rights  to  technology  or data  under  these
agreements.


                                       17

<PAGE>


Clinical  trials or marketing of any of our potential  products may expose us to
liability  claims  from the use of such  products  which our  insurance  may not
cover.

         We currently have a limited amount of product liability  insurance only
to cover  liabilities  arising  from  clinical  trials.  Our  product  liability
insurance  may not be adequate to cover  liabilities  arising  from our clinical
trials.

         Our current product liability insurance does not cover commercial sales
of products. We can not be sure that we will be able to obtain product liability
insurance  covering  commercial  sales or, if such  insurance is obtained,  that
sufficient coverage can be acquired at a reasonable cost. An inability to obtain
insurance at acceptable  cost or otherwise  protect  against  potential  product
liability claims could prevent or inhibit  commercialization  of any products we
develop.

Further  reductions  in  our  staff  might  delay  the  achievement  of  planned
development objectives.

         Each person currently employed by us serves an essential  function.  We
currently employ five persons full-time and five persons part-time.  Any further
reduction in force could impair our ability to manage  ongoing  clinical  trials
and may have a material adverse effect on our operations.

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

         The average daily trading volume of our common stock during fiscal 2000
has been low compared to that of other biopharmaceutical  companies.  Our common
stock was  delisted  from The Nasdaq  Stock  Market in February  1998 because we
failed to meet the financial conditions necessary to remain listed. In July 2000
we were approved for listing on The Nasdaq SmallCap Market.  However,  there can
be no assurance that we will continue to qualify for listing on that market.

         Factors that may cause volatility in our stock price include:

         o     the results of  preclinical  studies and  clinical  trials by the
               Company, Merz or its marketing partners or our competitors;

         o     other  evidence  of the safety or  efficacy  of  products  of the
               Company, Merz or its marketing partners or our competitors;

         o     announcements  of  technological  innovations or new  therapeutic
               products by the Company or our competitors;

         o     developments in patent or other proprietary rights of the Company
               or our competitors, including litigation;

         o     fluctuations in our operating results;

         o     government regulation and health care legislation; and

                                       18

<PAGE>

         o     market conditions for life science companies' stocks in general.


ITEM 7. FINANCIAL STATEMENTS

Report of Ernst & Young LLP, Independent Auditors


The Board of Directors and Stockholders
Neurobiological Technologies, Inc.

     We  have  audited  the  accompanying   balance  sheets  of  Neurobiological
Technologies,  Inc. (a development  stage company) as of June 30, 2000 and 1999,
and the related  statements of operations,  stockholders'  equity  (deficit) and
cash flows for each of the two years in the period ended June 30, 2000,  and for
the period  from  August 27,  1987  (inception)  through  June 30,  2000.  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  auditing  standards  generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in  all  material   respects,   the   financial   position  of   Neurobiological
Technologies,  Inc. at June 30, 2000 and 1999, and the results of its operations
and its cash flows for each of the two years in the period  ended June 30, 2000,
and for the period from August 27, 1987  (inception)  through June 30, 2000,  in
conformity with accounting principles generally accepted in the United States.


                                              /s/ ERNST & YOUNG LLP

                                                  ERNST & YOUNG LLP

Palo Alto, California
August 18, 2000


                                       19

<PAGE>


<TABLE>
                       Neurobiological Technologies, Inc.
                          (A development stage company)

                                 BALANCE SHEETS

<CAPTION>
                                                                            June 30,
                                                                  ----------------------------
                                                                       2000           1999
                                                                       ----           ----
<S>                                                               <C>             <C>
ASSETS
Current assets:
     Cash and cash equivalents                                    $  7,387,076    $    201,202
     Short-term investments                                          1,225,592            --
     Prepaid expenses and other current assets                          42,297          43,833
                                                                  ------------    ------------
Total current assets                                                 8,654,965         245,035
Property and equipment, net                                             27,778           3,796
                                                                  ------------    ------------
                                                                  $  8,682,743    $    248,831
                                                                  ============    ============

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
     Accounts payable                                             $    243,541    $    447,124
     Accrued expenses                                                  525,852         487,715
     Note payable to shareholder                                          --           200,000
                                                                  ------------    ------------
Total current liabilities                                              769,393       1,134,839

Commitments:

Stockholders' equity (deficit):
     Convertible preferred stock, $.001 par value,
     5,000,000 shares authorized, 2,332,000 issued in
     series, 2,282,000 outstanding at June 30, 2000 and
     2,332,000 at June 30, 1999 (aggregate liquidation
     preference of $1,141,000 at June 30, 2000)                      1,141,000       1,166,000
     Common stock, $.001 par value, 25,000,000 shares
     authorized, 15,647,397 outstanding at June 30, 2000
     and 7,563,575 at June 30, 1999                                 42,170,818      29,985,352
     Deferred compensation                                            (246,376)           --
     Deficit accumulated during development stage                  (35,152,092)    (32,037,360)
                                                                  ------------    ------------
Total stockholders' equity (deficit)                                 7,913,350        (886,008)
                                                                  ------------    ------------
                                                                  $  8,682,743    $    248,831
                                                                  ============    ============

<FN>
                             See accompanying notes.
</FN>
</TABLE>
                                       20

<PAGE>


<TABLE>
                       Neurobiological Technologies, Inc.
                          (A development stage company)

                            STATEMENTS OF OPERATIONS

<CAPTION>
                                                                       Period from
                                                                      August 27, 1987
                                            Year ended June 30,        (inception)
                                       ----------------------------   through June 30,
                                           2000            1999            2000
                                       ------------    ------------    ------------
<S>                                    <C>             <C>             <C>
REVENUES
License                                $       --      $       --      $  2,100,000
Grant                                          --            99,544         149,444
                                       ------------    ------------    ------------
         Total revenue                         --            99,544       2,249,444

EXPENSES
Research and development                  1,896,023       2,780,305      26,964,709
General and administrative                1,379,708       1,058,421      12,776,280
                                       ------------    ------------    ------------
         Total expenses                   3,275,731       3,838,726      39,740,989
                                       ------------    ------------    ------------
Operating loss                           (3,275,731)     (3,739,182)    (37,491,545)
Interest income                             160,999          46,949       2,339,453
                                       ------------    ------------    ------------
NET LOSS                               $ (3,114,732)   $ (3,692,233)   $(35,152,092)
                                       ============    ============    ============
BASIC AND DILUTED NET
LOSS PER SHARE                         $      (0.27)   $      (0.49)
                                       ============    ============
Shares used in basic and diluted net
loss per share calculation               11,460,599       7,554,522
                                       ============    ============

<FN>
                             See accompanying notes.
</FN>
</TABLE>
                                       21

<PAGE>


<TABLE>
                                                 Neurobiological Technologies, Inc.
                                                    (A development stage company)

                                                 STATEMENTS OF STOCKHOLDERS' EQUITY

<CAPTION>
                                                                                                         Deficit
                                                                 Common Stock              Deferred    Accumulated        Total
                                           Preferred         ----------------------          Stock    in Development   Stockholders'
                                            Stock            Shares          Amount      Compensation     Stage          Equity
                                       ---------------------------------------------------------------------------------------------

<S>                                       <C>                 <C>         <C>              <C>          <C>             <C>
Period from August 27, 1987
   (inception) through June 30, 1997

   Issuance of common stock               $       --          740,863     $ 1,616,706      $     --     $        --     $ 1,616,706
   Issuance of common stock for services          --           77,428         108,250            --              --         108,250
   Issuance of common stock for
      license rights                              --           10,820          12,625            --              --          12,625
   Issuance of warrants to purchase
      179,786 shares of common stock              --               --           2,790            --              --           2,790
   Exercise of warrants                           --          142,500          70,252            --              --          70,252
   Exercise of options                            --           89,619         226,169            --              --         226,169

   Issuance of common stock under
       employee stock purchase plan               --           62,172         158,318            --              --         158,318
   Issuance of 5,691,000 shares of
      Series A preferred stock, net
      of issuance costs                    5,573,194               --              --            --              --       5,573,194
   Issuance of 2,657,881 shares of
      Series B preferred stock, net
      of issuance costs                    1,653,888               --              --            --              --       1,653,888
   Conversion of preferred stock in
      connection with the initial
      public offering                     (7,227,082)       1,046,912       7,227,082            --              --              --
   Issuance of common stock at $8.00
      per share in connection with
      initial public offering net of
      issuance costs                              --        1,840,000      12,817,000            --              --      12,817,000
   Issuance of common stock at $3.25
      per share in connection with
      public offering net of
      issuance costs                              --        2,530,000       7,143,279            --              --       7,143,279
   Net loss and comprehensive loss                --               --              --            --     (26,171,923)    (26,171,923)
                                       ---------------------------------------------------------------------------------------------
         Balances at June 30, 1997                --        6,540,314      29,382,471            --     (26,171,923)      3,210,548

   Issuance of warrants to purchase
      125,000 shares of common stock              --               --          40,500            --              --          40,500
   Issuance of common stock and
      warrants at $0.55 per unit                  --        1,010,410         555,725            --              --         555,725
   Issuance of common stock under
      employee stock purchase plan                --            2,975           2,202            --              --           2,202
   Net loss and comprehensive loss                --               --              --            --      (2,173,204)     (2,173,204)
                                       ---------------------------------------------------------------------------------------------
         Balances at June 30, 1998                --        7,553,699      29,980,898            --     (28,345,127)      1,635,771

   Issuance of common stock under
      employee stock purchase plan                --            9,876           4,454            --              --           4,454
   Issuance of 2,332,000 shares of
      Series A preferred stock and
      warrants at $2.50 per unit,
      net of issuance costs                1,166,000               --              --            --              --       1,166,000
   Net loss and comprehensive loss                --               --              --            --      (3,692,233)     (3,692,233)
                                       ---------------------------------------------------------------------------------------------
         Balances at June 30, 1999         1,166,000        7,563,575      29,985,352            --     (32,037,360)       (886,008)


                                                                   22

<PAGE>


   Issuance of common stock and
      warrants at $4.00 per unit,
      net of issuance costs                       --        5,434,700       4,051,898            --              --       4,051,898

   Issuance of common stock at
      $5.30 per unit, net of
      issuance costs                              --        1,200,000       5,727,400            --              --       5,727,400
   Exercise of warrants                           --          752,321         499,750            --              --         499,750
   Exercise of options                            --          604,957       1,517,885            --              --       1,517,885
   Issuance of options to non
      employees for services
      rendered                                    --               --          70,200            --              --          70,200
   Deferred stock compensation                    --               --         273,750      (273,750)             --              --
   Amortization of deferred stock
      compensation                                --               --              --        27,374              --          27,374
   Conversion of preferred stock             (25,000)          50,000          25,000            --              --              --
   Issuance of common stock under
      employee stock purchase plan                --           41,844          19,583            --              --          19,583
   Net loss and comprehensive loss                --               --              --            --      (3,114,732)     (3,114,732)
                                       ---------------------------------------------------------------------------------------------

         Balances at June 30, 2000        $1,141,000       15,647,397     $42,170,818     $(246,376)   $(35,152,092)    $ 7,913,350
                                       =============================================================================================

<FN>
                                                       See accompanying notes.
</FN>
</TABLE>
                                                                 23

<PAGE>


<TABLE>
                                    NEUROBIOLOGICAL TECHNOLOGIES, INC.
                                      (A development stage company)

                                         STATEMENTS OF CASH FLOWS

<CAPTION>
                                                                                           Period from
                                                                                         August 27, 1987
                                                              Year ended June 30,         (inception)
                                                             ---------------------          through
                                                             2000             1999       June 30, 2000
                                                         -----------------------------------------------
<S>                                                      <C>             <C>               <C>
OPERATING ACTIVITIES
Net loss                                                 $ (3,114,732)   $ (3,692,233)     $(35,152,092)
Adjustments to reconcile net loss to
net cash used in operating activities:
   Depreciation and amortization                                6,018          41,792           644,224
   Amortization of deferred stock
      compensation                                             27,374            --              27,374
   Issuance of common stock, options and
      warrants for license rights and services                 70,200            --             209,975
   Changes in assets and liabilities:
      Prepaid expenses and other                                1,536          15,183           (42,297)
      Accounts payable and accrued expenses                  (165,446)        437,261           769,393
                                                         ----------------------------------------------
Net cash used in operating activities                      (3,175,050)     (3,197,997)      (33,543,423)

INVESTING ACTIVITIES
Purchase of investments                                    (1,225,592)           --         (35,065,270)
Maturity of investments                                          --              --          33,839,678
Purchases of property and equipment                           (30,000)          7,859          (388,940)
Additions to patents and licenses                                --              --            (283,062)
                                                         ----------------------------------------------
      Net cash provided by (used in)
         investing activities                              (1,255,592)          7,859        (1,897,594)

FINANCING ACTIVITIES
Payment of note payable                                      (200,000)           --            (200,000)
Proceeds of short-term borrowings                                --           200,000           435,000
Issuance of common stock, net                              11,816,516           4,454        34,435,011
Issuance of preferred stock, net                                 --         1,166,000         8,158,082
                                                         ----------------------------------------------
   Net cash provided by financing activities               11,616,516       1,370,454        42,828,093

Increase (decrease) in cash and
   cash equivalents                                         7,185,874      (1,819,684)        7,387,076

Cash and equivalents at beginning of period                   201,202       2,020,886              --
                                                         ----------------------------------------------

Cash and equivalents at end of period                    $  7,387,076    $    201,202      $  7,387,076
                                                         ==============================================

SUPPLEMENTAL DISCLOSURES:
Conversion of short-term-borrowings to
   Series A preferred stock                              $       --      $       --        $    235,000
                                                         ==============================================
Conversion of preferred stock to
   common stock                                          $     25,000    $       --        $  7,252,082
                                                         ==============================================
Deferred stock compensation related to
   options granted                                       $    273,750    $       --        $    273,750
                                                         ==============================================

<FN>
                                                  See accompanying notes
</FN>
</TABLE>


                                                   24

<PAGE>


                         NOTES TO FINANCIAL STATEMENTS

                       Neurobiological Technologies, Inc.
                          (a development stage company)

Note 1. Organization And Significant Accounting Policies

Organization

         Neurobiological  Technologies,  Inc.  ("NTI(R)" or the "Company") is an
emerging  drug  development  company  focused  on the  clinical  evaluation  and
regulatory  approval  of  neuroscience  drugs.  The  Company's  strategy  is  to
in-license and develop  early-stage  drug  candidates  that target major medical
needs  and  which  can be  rapidly  commercialized.  The  Company's  experienced
management  team  oversees  the human  clinical  trials  necessary  to establish
preliminary  evidence of efficacy and seeks partnerships with pharmaceutical and
biotechnology  companies to complete  development  and  marketing of its product
candidates.

Basis of Presentation

         The  Company's  principal  activities  to date  involved  research  and
development of drug delivery systems using proprietary technology,  in-licensing
of a product candidate,  recruiting key personnel,  establishing a manufacturing
process and raising capital to finance its development  operations.  The Company
is classified as a development stage company.

         In the course of its development  activities,  the Company has incurred
significant  losses and  expects  additional  losses in the year ending June 30,
2001. The Company may seek to raise additional funds whenever market  conditions
permit.  However,  there can be no assurance that funding will be available from
any of these sources, or, if available,  that it will be available on acceptable
terms.  If the Company is not able to raise adquate funds, it may be required to
delay,  scale back, or terminate its clinical  trials or to obtain funds through
entering into arrangements with collaborative partners or others.

Use of Estimates

         The  preparation of financial  statements in conformity with accounting
principles  generally accepted in the United States requires  management to make
estimates and assumptions that affect reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported  amount of revenues and expenses during the reported
period. Actual results could differ from those estimates.

Grant Revenue

         The Company received a grant for research  related  activities from the
National  Institutes  of Health.  The  Company  recorded  revenue as the grantor
reimbursed expenditures.

Key Supplier

         The Company is dependent on one party for the  manufacturing and supply
of one of its  drugs  for the  human  clinical  trials  and  for the  successful
commercialization  of the  related  product.  Any  failure  on the  part  of the
Company's sole supplier in this regard could  adversely  affect its business and
results of operations.

Cash and Investments

         Cash and cash  equivalents,  which  consist of cash and  highly  liquid
short-term  investments  with  insignificant  interest  rate  risk and  original
maturities  of three  months or less at date of  purchase,  are  stated at cost,
which approximates fair value.

         Short-term  investments consist of investments with original maturities
of  greater  than 90 days.  The  Company  has not  realized  any  losses  on its
investments,  which are highly  liquid and subject to little risk.  Furthermore,
the Company reduces its credit risk by limiting the amount of credit exposure to
any one  financial  institution.  By  policy,  the  Company  does not  invest in
securities that mature in more than 18 months.

         The Company  accounts for its  investments in accordance with Statement
of Financial  Accounting  Standards  ("SFAS") No. 115,  "Accounting  for Certain
Investments  in Debt and Equity  Securities."  All of the  Company's  investment
securities  are classified as available for sale and are stated at amounts which
approximate fair market value. The Company did not have any material realized or
unrealized  gains or  losses  on its  investments.  Realized  gains  or  losses,
amortization  of  premiums,  accretion  of  discounts  and


                                       25


<PAGE>


earned interest are included in investment income. The following is a summary of
available for sale securities at June 30, 2000:

         Corporate Obligations                  $  931,000
         Commercial Paper                          295,000
                                                ----------
                                                $1,226,000
                                                ==========

Property and Equipment

         Property and  equipment is stated at cost.  Depreciation  is calculated
using the straight-line  method based on estimated useful lives of 2 to 7 years.
The balances at June 30, 2000 and 1999 consisted of the following:

                                                     2000               1999
                                                 -----------        -----------
         Machinery and equipment                    $176,756           $176,756
         Furniture and fixtures                      145,426            115,426
                                                 -----------        -----------
                                                     322,182            292,182
         Less accumulated depreciation              (294,404)          (288,386)
                                                 -----------        -----------
                                                    $ 27,778           $  3,796
                                                 ===========        ===========


                                       26


<PAGE>

Net Loss per Share

         Net loss per share is presented under the  requirements of FAS No. 128,
"Earnings per Share" ("FAS 128").  Basic earnings per share computed is based on
the average shares of common stock outstanding and excludes any dilutive effects
of  options,   warrants,  and  convertible   securities.   Potentially  dilutive
securities such as options, warrants, and convertible preferred stock, have also
been excluded from the computation of diluted net loss per share as their effect
is antidilutive.

Stock-Based Compensation

         The Company  has adopted  SFAS No.  123,  "Accounting  for  Stock-Based
Compensation"  which  establishes  the fair value method of accounting for stock
based  compensation  plans.  The Company  accounts for employee stock options in
accordance  with  Accounting  Principles  Board Opinion No. 25,  "Accounting for
Stock  Issued to  Employees"  ("APB 25") and has adopted the  "disclosure  only"
alternative described in SFAS 123.

Comprehensive Income (Loss)

         The  Company  has  no  items  of  other   comprehensive   income,  and,
accordingly, its net loss is equal to its comprehensive loss.

Enterprise Segments

         The Company  operates in a single  operating  segment and  therefore no
additional segment disclosures have been provided.

Recent Accounting Pronouncements

         In June 1998, the Financial Accounting Standards Board issued Statement
of Financial  Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities" ("SFAS 133"), as amended by SFAS 137 and
SFAS  138, which  provides  a  comprehensive  and  consistent  standard  for the
recognition and measurement of derivatives and hedging  activities.  SFAS 133 is
effective for fiscal years  beginning after June 15, 2000 and is not anticipated
to have an impact on the Company's results of operations or financial  condition
when adopted as the Company holds no derivative  financial  instruments and does
not currently engage in hedging activities.

         In December 1999, the Securities and Exchange  Commission  issued Staff
Accounting  Bulletin No. 101 ("SAB 101").  SAB 101 summarizes the SEC's views in
applying generally accepted accounting  principles to revenue  recognition.  The
adoption  of SAB  101  had  no  significant  impact  on  the  Company's  revenue
recognition policy or results of operations.

         In March  2000,  the FASB  issued  Interpretation  No. 44,  ("FIN 44").
"Accounting   for  Certain   Transactions   Involving   Stock   compensation--an
Interpretation of APB 25." This  Interpretation  clarifies (a) the definition of
employee for purposes of applying  Opinion 25, (b) the criteria for  determining
whether  a  plan  qualifies  as  a  noncompensatory  plan,  (c)  the  accounting
consequence of various  modifications  to the terms of a previously  fixed stock
option or award and (d) the  accounting  for an exchange  of stock  compensation
awards in a business combination. This Interpretation is effective July 1, 2000,
but certain conclusions in this Interpretation  cover specific events that occur
after either  December 15,  1998,  or January 12, 2000.  To the extent that this
Interpretation  covers  events  occurring  during the period after  December 15,
1998, or January 12, 2000,  but before the effective  date of July 1, 2000,  the
effects of applying this  Interpretation  are recognized on a prospective  basis
from July 1, 2000. The Adoption of FIN 44 does not have a material impact on the
Company's financial statements.

Note 2. Operating Lease Commitments

         The  Company's  lease  for its  former  premises  expired  April  2000.
Effective May 1, 2000, the Company  entered into a sublease of its new executive
offices.  The  sublease  will  expire in July 2002.  Rent  expense for the years
ending  June 30, 2000 and 1999 was  $52,000  and  $47,000, respectively.  Future
minimum annual  payments are  approximately  $91,000 for the periods ending June
30, 2001 and 2002 and $7,600 for the period  ending June 30,  2003.  The Company
received  sublease  income on its former  premises of $26,000 and $8,000 for the
years ending June 30, 2000 and 1999, respectively.

Note 3. Stockholders' Equity

Preferred Stock

         At June  30,  2000,  the  Company  has  2,282,000  shares  of  Series A
convertible preferred stock outstanding. The holders of the Series A convertible
preferred stock are entitled to receive annual



                                       27

<PAGE>


noncumulative  dividends of 8% per share per annum,  when and if declared by the
Board of Directors.  These  dividends are in  preference to any  declaration  or
payment of any dividend on the common stock of the Company. As of June 30, 2000,
no dividends had been declared.

         Each share of Series A preferred stock is convertible,  at the holder's
option,  subject to  antidilution  provisions,  into one share of common  stock.
Additionally,  each share of the preferred stock will be automatically converted
into one share of common  stock upon the election of more than 50% of the Series
A preferred  stock to convert into common stock.  The holders of preferred stock
are  entitled  to the  number of votes  equal to the  number of shares of common
stock into which their preferred stock is convertible.

         In the event of any  liquidation,  dissolution,  or  winding  up of the
Company,  the  holders  of the  Series  A  preferred  stock  have a  liquidation
preference  of $0.50 per share,  over  holders of common stock plus any declared
but unpaid  dividends.  After  payment  has been made to the holders of Series A
preferred  stock,  the entire  remaining assets and funds of the Company legally
available  for  distribution,  if any,  would be  distributed  ratably among the
holders of common stock.

Warrants to Purchase Common Stock

         At June 30, 2000, warrants to purchase an aggregate of 3,360,259 shares
of common stock were  outstanding at a weighted  average exercise price of $1.74
per share. In connection with a private equity  financing  completed in November
1999, the Company issued  warrants to purchase common stock at a price per share
of $1.75, of which warrants to purchase  2,036,280 shares remain  outstanding at
June 30, 2000.  These  warrants  expire in November  2004. In connection  with a
private equity financing completed in April 1999, the Company issued warrants to
purchase  common  stock at a price  per  share of $1.00,  of which  warrants  to
purchase  691,200  shares remain  outstanding  at June 30, 2000.  These warrants
expire in April 2004. In connection with a private financing  completed in March
1998, the Company issued warrants to purchase common stock, of which warrants to
purchase  125,000  and  140,000  shares at a price per share of $0.75 and $1.50,
respectively,  remain  outstanding at June 30, 2000.  These  warrants  expire in
March 2001.  In April 1998, in connection  with the  termination  of a licensing
agreement,  the  Company  issued  warrants to purchase  common  stock,  of which
warrants to purchase 100,000 and 25,000 shares at a price per share of $1.25 and
$3.00, respectively,  remain outstanding at June 30, 2000. These warrants expire
in April 2001.  The Company issued  warrants to purchase  common stock price per
share  of $3.90  to the  underwriters  of its  1996  public  offering,  of which
warrants to purchase  220,000 shares remain  outstanding at June 30, 2000. These
warrants  expire on February 15, 2001. The Company  issued  warrants to purchase
common  stock  between June 1990 and July 1991 at a price per share of $5.60 for
licensing rights and consulting  services,  of which warrants to purchase 22,779
shares remain outstanding at June 30, 2000. These warrants have expiration dates
through June 30, 2001.

Stock Option Plan

         The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock option awards because, as discussed below, the
alternative fair value accounting provided under SFAS 123 requires use of option
valuation  models  that were not  developed  for use in valuing  employee  stock
options.  Under APB 25, when the exercise price of the Company's  employee stock
option equals the market price of the underlying  stock on the date of grant, no
compensation expense is recognized.

         The Board of Directors  adopted the Company's  first stock option plans
in 1989.  In November  1993,  the Board  combined the plans and adopted the 1993
Stock Plan, as amended and restated.  The Company  reserved  2,500,000 shares of
common stock for  issuance  under the 1993 Stock Plan.  In general,  options are
granted at fair market  value on the date of the grant,  have a term of 10 years
and become exercisable over a period of up to 48 months.



                                       28

<PAGE>


         A  summary  of  the  Company's  stock  option  activity,   and  related
information  for the two  years  ended  June 30,  2000  follows  (all  repricing
activity is reflected as cancellations and subsequent grants):

                                      Number of Shares         Weighted Average
                                     Subject to Options         Exercise Price
                                    --------------------      ------------------
Balance at June 30, 1998                     1,575,081                    2.42
   Options granted                             488,500                    0.65
   Options canceled                           (259,783)                   2.51
                                    ------------------
Balance at June 30, 1999                     1,803,798                    1.93
   Options granted                             553,500                    3.96
   Options canceled                            (36,349)                   2.66
   Options exercised                          (604,957)                   2.51
                                    ------------------
Balance at June 30, 2000                     1,715,992                    2.38

         At June 30, 2000,  options to purchase  123,241  shares of common stock
remained  available for grant,  and options to purchase 762,160 shares of common
stock  were  exercisable.   The  weighted  average  exercise  price  of  options
exercisable  at June 30,  2000 was $1.95.  The  weighted  average  fair value of
options granted during 2000 and 1999 were $3.23 and $0.37, respectively.

<TABLE>
         The  following  table  summarizes   information   concerning  currently
outstanding and exercisable options:

<CAPTION>
                             Options Outstanding                                         Options Exercisable
  -------------------------------------------------------------------------       --------------------------------
                                          Weighted Average
                                             Remaining
 Range of Exercise         Shares         Contractual Life   Weighted Average                       Weighted Average
       Prices            Outstanding          (years)         Exercise Price    Shares Exercisable   Exercise Price
  ----------------    ----------------    ----------------   ----------------   ------------------  ----------------
<S>                          <C>                      <C>               <C>               <C>                  <C>
 $0.01 - 1.99                  972,080                8.21              $0.83             422,175              $0.97
  2.00 - 3.99                  411,444                6.13               2.94             298,817               2.78
  4.00 - 5.99                    7,768                3.79               4.21               6,468               4.16
  6.00 - 8.00                  324,700                9.84               6.20              34,700               6.30
                          ------------                                                -----------
                             1,715,992                                                    762,160
                          ============                                                ===========
</TABLE>

         Pro  forma  information  regarding  net loss and net loss per  share is
required by SFAS 123,  which  requires that the  information be determined as if
the Company had accounted for its employee stock options  granted  subsequent to
June 30, 1995 under the fair value  method.  The fair value of each option grant
has been  estimated as of the date of the grant using the  Black-Scholes  option
pricing model with the


                                       29


<PAGE>


following  weighted  average  assumptions  used  for  1999  and  2000:  Expected
volatility  calculations  based on  historical  data (.846),  risk free interest
rates  based on U.S.  government  bonds with  maturities  equal to the  expected
option  lives  of 6.5  percent,  expected  option  lives of five  years,  and no
dividend yield.

         The  Black-Scholes  option  valuation  model was  developed  for use in
estimating the fair value of traded  options which have no vesting  restrictions
and are fully transferable. In addition, option pricing models require the input
of highly subjective  assumptions  including the expected stock price volatility
and expected life of the option.  Because the Company's  employee  stock options
have characteristics  significantly  different from those of traded options, and
because changes in the subjective  input  assumptions can materially  affect the
fair  value  estimate,  in  management's  opinion,  the  existing  models do not
necessarily  provide a reliable  single  measure of the fair value of employee's
options.

         For purposes of pro forma disclosures,  the estimated fair value of the
options is amortized over the options'  vesting period.  The Company's pro forma
information follows (in thousands, except per share amounts):

                                                          Year ended June 30,
                                                        -----------------------
                                                          2000           1999
                                                        ---------      --------
Net loss - as reported                                   $(3,115)      $(3,692)
Net loss - pro forma                                      (3,363)       (3,940)
Basic and diluted net loss per share - as reported         (0.27)        (0.49)
Basic and diluted net loss per share - pro forma           (0.29)        (0.52)

         The  effects  on pro forma  disclosures  of  applying  SFAS 123 are not
likely to be  representative  of the effects on pro forma  disclosures in future
years.

Stock Purchase Plan

         Effective  February  1994,  the Company  established  an employee stock
purchase plan under which the employees may purchase  common stock at 85% of the
lower of the share price at the  beginning  or end of a  designated  period.  In
November  1996,  the amount of shares  reserved for issuance  under the plan was
increased  by 50,000 to  100,000.  In  November  1999 the amount of shares  were
increased an additional 50,000 to 150,000.  Under the plan, 33,133 shares remain
available for issuance at June 30, 2000.

Note 4.  Income Taxes

         The Company  uses the  liability  method to account for income taxes as
required by FASB  Statement No. 109,  "Accounting  for Income Taxes." Under this
method,  deferred  tax  assets  and  liabilities  are  determined  based  on the
differences  between financial reporting and tax bases of assets and liabilities
and are  measured  using  enacted tax rules and laws that will be in effect when
the differences are expected to reverse.


                                       30

<PAGE>



         Significant  components  of  the  Company's  deferred  tax  assets  (in
thousands) are as follows:

                                                                  June 30,
                                                          ----------------------
                                                            2000         1999
                                                          --------     --------
Net operating loss carryforward                           $ 12,229     $ 11,500
Research and development carryforward                        2,275        1,130
Capitalized research and development                           233          290
                                                          --------     --------
Gross deferred tax assets                                   14,737       12,920
Valuation allowance                                        (14,737)     (12,920)
                                                          --------     --------
Net deferred tax assets                                   $   --       $   --
                                                          --------     --------

         The  valuation  allowance  increased by  $1,817,000  and  $1,320,000 in
fiscal years 2000 and 1999, respectively.

         At June 30, 2000, the Company has net operating loss  carryforwards for
federal income tax purposes of  approximately  $34,000,000,  which expire in tax
years 2001 through  2020.  The Company has federal tax credit  carryforwards  of
approximately $1,200,000 which expire in tax years 2006 through 2015.

         Because of the "change in  ownership"  provisions of the Tax Reform Act
of 1986, a portion of the  Company's net operating  loss  carryforwards  and tax
credit  carryforwards  may be subject to an annual  limitation  regarding  their
utilization against taxable income in future periods.

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

         None.


                                       31


<PAGE>


                                    PART III.

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The  directors and  executive  officers of the Company,  their ages and
positions as of September 12, 2000 are as follows:

Name                         Age          Position
----                         ---          --------
Paul E. Freiman              66           President and Chief Executive Officer
                                          and Director
Lisa U. Carr, M.D., Ph.D.    45           Vice President, Medical Affairs
Abraham E. Cohen             64           Chairman of the Board of Directors
Enoch Callaway, M.D.         76           Director
Theodore L. Eliot, Jr.       72           Director
Abraham D. Sofaer            62           Director
John B. Stuppin              67           Director

         Paul E. Freiman  joined the Company as a director in April 1997 and was
elected  President  and Chief  Executive  Officer in May 1997.  He is the former
chairman and chief executive officer of Syntex Corporation ("Syntex"),  where he
had a long and successful  career and was  instrumental in the sale of Syntex to
Roche  Holdings  for $5.3  billion.  He is credited  with much of the  marketing
success of Syntex's lead product  Naprosyn- and was  responsible  for moving the
product to over-the-counter  status,  marketed by Proctor & Gamble as Aleve. Mr.
Freiman currently serves as chairman of the boards of Digital  GeneTechnologies,
Inc., a private  genomics  company,  and SciGen Pte. Ltd. Mr. Freiman  currently
serves  on  the  boards  of  Penwest   Pharmaceutical  Co.,  Calypte  Biomedical
Corporation, Omware, Inc., PHYTOS Inc., and Otsuka America Pharmaceuticals, Inc.
He has been chairman of the Pharmaceutical  Manufacturers Association of America
(PhARMA) and has also chaired a number of key PhARMA committees.  Mr. Freiman is
also an advisor to Burrill & Co., a San Francisco  merchant  bank.  Mr.  Freiman
holds a B.S. degree from Fordham  University and an honorary  doctorate from the
Arnold & Marie Schwartz College of Pharmacy.

         Lisa U. Carr,  M.D.,  Ph.D.  was  appointed  Vice  President of Medical
Affairs in September 1998. Prior to joining the Company in June 1998 as Director
of Medical Affairs,  Dr. Carr was Associate Medical Director at the Institute of
Clinical  Immunology and Infectious  Diseases at Syntex Development  Research in
Palo Alto, California.  Dr. Carr has more than 8 years of international industry
experience in conducting clinical drug trials in immunosuppression,  nephrology,
neurology,  gastroenterology and cardiovascular disorders. She was Lead Clinical
Research   Physician  at  Syntex,   directing  a  pivotal   clinical   trial  of
mycophenolate  mofetil (IND and NDA  approved for solid organ  transplantation).
Dr.  Carr holds a medical  degree and a Ph.D.  magna cum laude  degree  from the
University of Munich in Germany.

         Abraham E. Cohen has been a director  of the  Company  since March 1993
and has been Chairman of the Board of Directors  since August 1993. From 1982 to
1992,  Mr. Cohen served as Senior Vice  President of Merck & Co.  ("Merck")  and
from 1977 to 1988 as President of the Merck Sharp & Dohme International Division
("MSDI").  While at Merck,  he played a key role in the  development  of Merck's
international business, initially in Asia, then in Europe and, subsequently,  as
President of MSDI, which  manufactures and markets human health products outside
the United States. Since his retirement from Merck and MSDI in January 1992, Mr.
Cohen has been active as an international business consultant. He was a director
of Agouron  Pharmaceuticals,  Inc. until its merger with Warner-Lambert Company.
He is  currently a director of seven other  public  companies:  Akzo Nobel N.V.,
Axonyx,  Inc., Chugai  Pharmaceutical Co.,  Pharmaceutical  Product Development,
Inc.,  Smith Barney  Mutual  Funds,


                                       32

<PAGE>


Teva Pharmaceutical  Industries,  Ltd. and Vasomedical,  Inc.  Additionally,  he
serves as a Trustee on The Population Council.

         Enoch  Callaway,  M.D. is a founder and former  employee of the Company
and has served as a director of the Company since  September  1987. Dr. Callaway
previously  served as Chairman  of the Board of  Directors  of the Company  from
September 1987 to November 1990, as Co-Chairman of the Board of the Company from
November 1990 until August 1993, as Vice President of the Company from September
1988 until August 1993 and as Secretary of the Company from September 1988 until
September  1991. Dr.  Callaway has been Emeritus  Professor of Psychiatry at the
University  of  California,  San Francisco  since 1986,  where he also served as
Director of Research at the Langley  Porter  Psychiatric  Institute from 1959 to
1986. Dr. Callaway was Staff Psychiatrist,  SFVAMC, 1996-1997. He is a member of
the IRB for SAM Technologies,  Inc. and Abratek, Inc. Dr. Callaway is a Director
of Phytos, Inc. He holds A.B. and M.D. degrees from Columbia University.

         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 of the Company  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  director  of  Fiberstars,  Inc.  and of  several
non-profit  organizations.  Mr. Eliot holds B.A. and M.P.A. degrees from Harvard
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 since 1997.
From 1990 to 1994, Mr. Sofaer was a partner at the legal firm of Hughes, Hubbard
and 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  American  Arbitration  Association  and is a member of the
National Panel of the Center for Public  Resolution of Disputes (CPR), a leading
organization in the area of resolution of disputes  outside  litigation.  He has
mediated  major  commercial  cases.  Additionally,   he  acts  regularly  as  an
arbitrator in merger-acquisition disputes,  commercial cases involving valuation
of  technology,  and  securities  class  action  suits.  Mr.  Sofaer  is on  the
International Advisory Board of Chugai  Biopharmaceuticals,  Inc., a director of
Koret Israel Economic  Development  Fund and a Trustee of the National Museum of
Jazz. Mr. Sofaer holds a B.A. degree from Yeshiva College and a L.L.B.  from New
York University.

         John B. Stuppin is a founder and employee 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 acting Chief  Financial  Officer of the Company
from the Company's inception through December 1993. Mr. Stuppin is an investment
banker and a venture capitalist. He has over 25 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 Fiberstars,
Inc. Mr. Stuppin holds an A.B. degree from Columbia College.

Section 16(a) Beneficial Ownership Reporting Compliance


                                       33

<PAGE>


         The  information  required  by Item  405 of  Regulation  S-B is  hereby
incorporated  by reference to the Section  entitled  "Section  16(a)  Beneficial
Ownership  Reporting  Compliance of the  Securities and Exchange Act of 1934" in
the Proxy Statement.

ITEM 10. EXECUTIVE COMPENSATION

         The  information  required  by this  item  is  hereby  incorporated  by
reference  to  the  section  entitled  "Executive  Compensation"  in  the  Proxy
Statement.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The  information  required  by this  item  is  hereby  incorporated  by
reference to the section  entitled  "Security  Ownership  of Certain  Beneficial
Owners and Management" in the Proxy Statement.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         None.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)      Financial Statements

         The following are included in Item 7 under Part II:

         Report of Ernst & Young, LLP Independent Auditors

         Balance Sheets at June 30, 2000 and 1999

         Statements  of  Operations  for  each of  the two  years in the  period
         ended June 30, 2000 and for the period from August 27, 1987 (inception)
         through June 30, 2000

         Statements  of  Stockholders'  Equity  (Deficit)  for  each of  the two
         years in the period  ended June 30, 2000 and for the period from August
         27, 1987 (inception) through June 30, 2000

         Statements  of Cash  Flows  for each of  the  two  years in the  period
         ended June 30, 2000 and for the period for August 27, 1987  (inception)
         through June 30, 2000

         Notes to Financial Statements

(b) Reports on Form 8-K: On January 19, 2000, we filed a Current  Report on Form
8-K announcing preliminary results of our Phase IIB Memantine trials.

(c)      Exhibits

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

Exhibit
Number              Description
-------             ----------------
3.1                 Restated Certificate of Incorporation of Registrant. (1)

3.2                 Bylaws of Registrant. (1)


                                       34

<PAGE>


3.3                 Certificate  of  Designations,  Preferences  and  Rights  of
                    Series A Preferred Stock of Registrant. (5)

4.1                 Form of Common Stock Certificate. (1)

4.2                 Form of Warrant issued to Van Kasper & Co. (1)

4.3                 Form of Warrant issued to Van Kasper & Co. and Gerard Klauer
                    Mattison & Co., LLC. (1)

4.4                 Form of Class A Warrant to Purchase Common Stock. (4)

4.5                 Form of Class B Warrant to Purchase Common Stock. (4)

4.6                 Form of Warrant to Purchase  25,000  Shares of Common Stock.
                    (4)

4.7                 Form of Warrant to Purchase  100,000 Shares of Common Stock.
                    (4)

4.8                 Form of Warrant to Purchase Common Stock. (5)

10.2                1993 Stock Plan of Neurobiological Technologies, Inc. (6)*

10.4                Form of  Indemnity  Agreement  between  the  Company and its
                    directors and officers. (1)*

10.5                Series B Preferred  Stock  Purchase and  Exchange  Agreement
                    dated as of December 6, 1993. (1)

10.6                License   Agreement   between  the   Company  and   Research
                    Corporation Technologies, Inc. dated May 30, 1990. (1)+

10.7                License Agreement among the Company,  Dynorphin Partnership,
                    Nancy M. Lee and  Horace  C. Loh  dated  April 1,  1989,  as
                    amended. (1)+

10.8                License Agreement  between the Company and  Immuno-Dynorphin
                    Partnership dated October 1, 1990. (1)+

10.9                License  Agreement between the Company and des-Tyr Dynorphin
                    Partnership dated December 20, 1992. (1)+

10.10               License  Agreement  between the Company and DUZ  Partnership
                    dated December 20, 1992. (1)+

10.11               License Agreement between the Company and The Salk Institute
                    for  Biological  Studies  dated March 31, 1989,  as amended.
                    (1)+

10.12               License Agreement between the Company and the Regents of the
                    University  of  California  dated June 13, 1990, as amended.
                    (1)+

10.13               Option Agreement  between the Company and the Regents of the
                    University of California dated December 1, 1992. (1)+

10.16               Amended  and  Restated  Neurobiological  Technologies,  Inc.
                    Employee Stock Purchase Plan. (6)+

10.18               Cooperative  Agreement among Company,  Merz + Co. GmbH & Co.
                    and Children's  Medical Center Corp.,  effective as of April
                    16, 1998. (4)+

10.19               Payment Agreement between the Company and Children's Medical
                    Center Corp., effective as of April 16, 1998. (4)+

10.21               Retention  Agreement  between  the Company and Dr. Lisa Carr
                    dated February 1, 1999. (5)*

10.22               Sublease  Agreement  between the Company and Ladbroke Racing
                    Corp. dated May 1, 2000.


                                       35

<PAGE>


23.1                Consent of Ernst & Young LLP, Independent Auditors.

24.1                Power of Attorney. (See signature page)

27                  Financial Data Schedule.

------------

(1)      This exhibit is filed as an exhibit to Issuer's Registration  Statement
         on Form SB-2 (Registration No.  33-74118-LA) and is incorporated herein
         by reference.

(2)      This exhibit is filed as an exhibit to the  Registrant's  Annual Report
         on Form  10-KSB for the year ended  June 30,  1995 and is  incorporated
         herein by reference.

(3)      This exhibit is filed as an exhibit to the  Registrant's  Annual Report
         on Form  10-KSB for the year ended  June 30,  1996 and is  incorporated
         herein by reference.

(4)      This exhibit is filed as an exhibit to the  Registrant's  Annual Report
         on Form  10-KSB for the year ended  June 30,  1998 and is  incorporated
         herein by reference.

(5)      This exhibit is filed as an exhibit to the  Registrant's  Annual Report
         on Form  10-KSB for the year ended  June 30,  1999 and is  incorporated
         herein by reference.

(6)      This  exhibit  is  filed as an  exhibit  to  Registrant's  Registration
         Statement on Form S-8 (Registration Number 333-92425) filed December 9,
         1999 and is incorporated herein by reference.

+        Confidential  treatment  has  been  granted  with  respect  to  certain
         portions of these agreements.

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



                                       36


<PAGE>


         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.

Dated September 28, 2000                    Neurobiological Technologies, Inc.


                                            /s/ Paul E. Freiman
                                            ----------------------------------
                                            Paul E. Freiman
                                            President, Chief Executive Officer



<TABLE>
                                POWER OF ATTORNEY

                                 (Exhibit 24.1)

         KNOW  ALL MEN BY THESE  PRESENTS,  that  each  person  whose  signature
appears  below  constitutes  and  appoints  Paul E.  Freiman 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  Exchange
Commission,  granting  unto  said  attorney-in-fact  and  agent  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 attorney-in-fact and agent
or his substitute may lawfully do or cause to be done by virtue hereof.

<CAPTION>
               Signature                                 Title                                 Date
               ---------                                 -----                                 ----

<S>                                       <C>                                           <C>
          /s/ Paul E. Freiman             President, Chief Executive Officer            September 28, 2000
      ---------------------------         (Principal Executive Officer and Principal
            Paul E. Freiman               Financial Officer and Principal Accounting
                                          Officer) and Director

          /s/ Abraham E. Cohen            Chairman of the Board                         September 28, 2000
      ---------------------------
            Abraham E. Cohen

           /s/ Enoch Callaway             Director                                      September 28, 2000
      ---------------------------
             Enoch Callaway

                                          Director                                      September __, 2000
      ---------------------------
         Theodore L. Eliot, Jr.


                                       37


<PAGE>


                                          Director                                      September __, 2000
      ---------------------------
           Abraham D. Sofaer

          /s/ John B. Stuppin             Director                                      September 28, 2000
      ---------------------------
            John B. Stuppin
</TABLE>




                                       38


<PAGE>
                                 EXHIBIT INDEX
Exhibit
Number              Description
-------             ----------------
3.1                 Restated Certificate of Incorporation of Registrant. (1)

3.2                 Bylaws of Registrant. (1)

3.3                 Certificate  of  Designations,  Preferences  and  Rights  of
                    Series A Preferred Stock of Registrant. (5)

4.1                 Form of Common Stock Certificate. (1)

4.2                 Form of Warrant issued to Van Kasper & Co. (1)

4.3                 Form of Warrant issued to Van Kasper & Co. and Gerard Klauer
                    Mattison & Co., LLC. (1)

4.4                 Form of Class A Warrant to Purchase Common Stock. (4)

4.5                 Form of Class B Warrant to Purchase Common Stock. (4)

4.6                 Form of Warrant to Purchase  25,000  Shares of Common Stock.
                    (4)

4.7                 Form of Warrant to Purchase  100,000 Shares of Common Stock.
                    (4)

4.8                 Form of Warrant to Purchase Common Stock. (5)

10.2                1993 Stock Plan of Neurobiological Technologies, Inc. (6)*

10.4                Form of  Indemnity  Agreement  between  the  Company and its
                    directors and officers. (1)*

10.5                Series B Preferred  Stock  Purchase and  Exchange  Agreement
                    dated as of December 6, 1993. (1)

10.6                License   Agreement   between  the   Company  and   Research
                    Corporation Technologies, Inc. dated May 30, 1990. (1)+

10.7                License Agreement among the Company,  Dynorphin Partnership,
                    Nancy M. Lee and  Horace  C. Loh  dated  April 1,  1989,  as
                    amended. (1)+

10.8                License Agreement  between the Company and  Immuno-Dynorphin
                    Partnership dated October 1, 1990. (1)+

10.9                License  Agreement between the Company and des-Tyr Dynorphin
                    Partnership dated December 20, 1992. (1)+

10.10               License  Agreement  between the Company and DUZ  Partnership
                    dated December 20, 1992. (1)+

10.11               License Agreement between the Company and The Salk Institute
                    for  Biological  Studies  dated March 31, 1989,  as amended.
                    (1)+

10.12               License Agreement between the Company and the Regents of the
                    University  of  California  dated June 13, 1990, as amended.
                    (1)+

10.13               Option Agreement  between the Company and the Regents of the
                    University of California dated December 1, 1992. (1)+

10.16               Amended  and  Restated  Neurobiological  Technologies,  Inc.
                    Employee Stock Purchase Plan. (6)+

10.18               Cooperative  Agreement among Company,  Merz + Co. GmbH & Co.
                    and Children's  Medical Center Corp.,  effective as of April
                    16, 1998. (4)+

10.19               Payment Agreement between the Company and Children's Medical
                    Center Corp., effective as of April 16, 1998. (4)+

10.21               Retention  Agreement  between  the Company and Dr. Lisa Carr
                    dated February 1, 1999. (5)*

10.22               Sublease  Agreement  between the Company and Ladbroke Racing
                    Corp. dated May 1, 2000.

23.1                Consent of Ernst & Young LLP, Independent Auditors.

24.1                Power of Attorney. (See signature page)

27                  Financial Data Schedule.

------------

(1)      This exhibit is filed as an exhibit to Issuer's Registration  Statement
         on Form SB-2 (Registration No.  33-74118-LA) and is incorporated herein
         by reference.

(2)      This exhibit is filed as an exhibit to the  Registrant's  Annual Report
         on Form  10-KSB for the year ended  June 30,  1995 and is  incorporated
         herein by reference.

(3)      This exhibit is filed as an exhibit to the  Registrant's  Annual Report
         on Form  10-KSB for the year ended  June 30,  1996 and is  incorporated
         herein by reference.

(4)      This exhibit is filed as an exhibit to the  Registrant's  Annual Report
         on Form  10-KSB for the year ended  June 30,  1998 and is  incorporated
         herein by reference.

(5)      This exhibit is filed as an exhibit to the  Registrant's  Annual Report
         on Form  10-KSB for the year ended  June 30,  1999 and is  incorporated
         herein by reference.

(6)      This  exhibit  is  filed as an  exhibit  to  Registrant's  Registration
         Statement on Form S-8 (Registration Number 333-92425) filed December 9,
         1999 and is incorporated herein by reference.

+        Confidential  treatment  has  been  granted  with  respect  to  certain
         portions of these agreements.

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