----

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

|  ̈   | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------------------|-----------------------------------------------------------------------------------------------|

| Delaware                                                          |   | 52-2007292                                |
|-------------------------------------------------------------------|--------|-------------------------------------------|
| State or other jurisdiction of incorporation or organization |   | (I.R.S. Employer Identification No.) |
|                                                              |   |                                      |
| 9700 Great Seneca HighwayRockville, MD                            |   |  20850                               |
| (Address of principal executive offices)                          |   | (Zip Code)                                |

| Title of each class           |         | Name of each exchange on which registered |
|-------------------------------|--------------|-------------------------------------------|
| Common stock, $0.01 par value |    | NYSE Amex                                 |

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

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|          |   |                                                                                                               |   | Page |
|---------------|--------|--------------------------------------------------------------------------------------------------------------------|--------|------|
| PART I   |
|          |
| Item 1.       |   | Business                                                                                                           |   | 2    |
| Item 1A.      |   | Risk Factors                                                                                                       |   | 10   |
| Item 2.       |   | Properties                                                                                                         |   | 16   |
| Item 3.       |   | Legal Proceedings                                                                                                  |   | 17   |
| Item 4.       |   | Removed and Reserved                                                                                          |   | 17   |
|          |
| PART II  |
|          |
| Item 5.       |   | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |   | 17   |
| Item 6.       |   | Selected Financial Data                                                                                            |   | 19   |
| Item 7.       |   | Management’s Discussion and Analysis of Financial Condition and Results of Operations                        |   | 19   |
| Item 7A.      |   | Quantitative and Qualitative Disclosures About Market Risk                                                         |   | 26   |
| Item 8.       |   | Financial Statements and Supplementary Data                                                                        |   | 27   |
| Item 9.       |   | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                               |   | 28   |
| Item 9A.      |   | Controls and Procedures                                                                                            |   | 28   |
| Item 9B.      |   | Other Information                                                                                                  |   | 29   |
|          |
| PART III |
|          |
| Item 10.      |   | Directors, Executive Officers and Corporate Governance                                                             |   | 29   |
| Item 11.      |   | Executive Compensation                                                                                             |   | 33   |
| Item 12.      |   | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                     |   | 38   |
| Item 13.      |   | Certain Relationships and Related Transactions, and Director Independence                                          |   | 39   |
| Item 14.      |   | Principal Accounting Fees and Services                                                                             |   | 39   |
|          |
| PART IV  |
|          |
| Item 15.      |   | Exhibits, Financial Statement Schedules                                                                            |   | 40   |

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| · | the success of our research and development activities, the development of a viable commercial product, and the speed with which regulatory authorizations and product launches may be achieved; |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | whether or not a market for our product develops, and, if a market develops, the rate at which it develops; |
|--------|-------------------------------------------------------------------------------------------------------------|

| · | our ability to successfully sell or license our products if a market develops; |
|--------|--------------------------------------------------------------------------------|

| · | our ability to attract and retain qualified personnel to implement our business plan and corporate growth strategies; |
|--------|-----------------------------------------------------------------------------------------------------------------------|

| · | our ability to develop sales, marketing, and distribution capabilities; |
|--------|-------------------------------------------------------------------------|

| · | our ability to obtain reimbursement from third party payers for our proposed products if they are developed; |
|--------|--------------------------------------------------------------------------------------------------------------|

| · | the accuracy of our estimates and projections; |
|--------|------------------------------------------------|

| · | our ability to secure additional financing to fund our short-term and long-term financial needs; |
|--------|--------------------------------------------------------------------------------------------------|

| · | changes in our business plan and corporate strategies; and |
|--------|------------------------------------------------------------|

| · | other risks and uncertainties discussed in greater detail in the section captioned “Risk Factors.” |
|--------|----------------------------------------------------------------------------------------------------------------|

----

1

2

 

----

   

----

| Medical Condition          |   | Number of Patients |   |   |
|----------------------------|--------|--------------------|--------|--------|
| Stem cells                 |   |               |   |   |
| ALS                        |   | 30,000             |   | (1)    |
| Huntington’s disease |   | 15,000             |   | (2)    |
| Multiple Sclerosis         |   | 2.5 million        |   | (6)    |
| Parkinson's Disease        |   | 1.0 million        |   | (7)    |
| Spinal Cord Injury         |   | 250,000            |   | (4)    |
| Stroke                     |   |  6.5 million  |   | (3)    |
| Small molecule compound    |   |               |   |   |
| Alzheimer’s disease  |   | 4.5 million        |   | (5)    |
| Depression                 |   | 14.8 million       |   | (5)    |
| Schizophrenia              |   | 2.4 million        |   | (5)    |
| Stroke                     |   | 6.5 million        |   | (3)    |

| · | Isolation, Propagation, and Directed Differentiation of Stem Cell from Embryonic and Adult Central Nervous System of Mammal; and |
|--------|----------------------------------------------------------------------------------------------------------------------------------|

| · | In Vitro Generation of Differentiated Neurons from Cultures of Mammalian Multi-potential CNS Stem Cell |
|--------|--------------------------------------------------------------------------------------------------------|

|   | · |  Our cells are multipotent, so they give rise to the three critical cell types of the nervous system: neurons (cells that carry signals throughout the brain and spinal cord), astrocytes (cells that support and protect neurons), and oligodendrocytes (cells that provide insulation to neurons to make signaling efficient). |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The cells are lineage-restricted, so they only give rise to cells of the nervous system. For example, our spinal cord stem cells can only form cells found within the spinal column. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Our technology enables large-scale expansion of neural stem cells under controlled conditions without introducing mutations or other adverse events that would compromise their usefulness. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our spinal cord cells can be produced in commercial quantities. |
|--------|--------|-----------------------------------------------------------------|

|   | · | We have isolated and cultured cells from multiple regions of the brain, allowing application to a number of serious disorders. Cells have been isolated from spinal cord (ALS, spinal cord injury), hippocampus (stroke, Alzheimer’s disease), midbrain (Parkinson’s disease), and cortex (ischemia). |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Universal Compatibility.   The Company’s stem cell products are provided to patients as ‘allografts,’ As such, the recipient is not genetically identical to the donor, and may be treated with a course of immunosuppressant drugs to prevent rejection of the cells. This strategy allows for a single stem cell product to be provided to many thousands of patients, ensuring the highest degree of quality in manufacturing and predictability in outcome. Because the brain and spinal cord are considered ‘immune privileged’ by most experts in the field, it is expected that immune suppression of the patient will only be performed for a brief period, allowing for minimal disruption of their normal immune function. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our biologic drug candidates can be stored frozen at end-user medical facilities until they are needed. This is a key feature of our technology. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Number     |   | Country |   | FilingDate |   | Issue Date |   | ExpirationDate |   | Title                                                                                                                        |
|------------|--------|---------|--------|------------|--------|-----------------|--------|----------------|--------|------------------------------------------------------------------------------------------------------------------------------|
| 5,753,506  |   | US      |   | 9/25/1996  |   | 5/19/1998       |   | 9/25/2016      |   | ISOLATION PROPAGATION AND DIRECTED DIFFERENTIATION OF STEM CELLS FROM EMBRYONIC AND ADULT CENTRAL NERVOUS SYSTEM OF MAMMALS  |
|       |   |    |   |       |   |            |   |           |   |                                                                                                                         |
| 6,040,180  |   | US      |   | 5/7/1997   |   | 3/21/2000       |   | 5/7/2017       |   | IN VITRO GENERATION OF DIFFERENTIATED NEURONS FROM CULTURES OF MAMMALIAN MULTIPOTENTIAL CNS STEM CELLS                       |
|       |   |    |   |       |   |            |   |           |   |                                                                                                                         |
| 6,284,539  |   | US      |   | 10/9/1998  |   | 9/4/2001        |   | 10/9/2018      |   | METHOD FOR GENERATING DOPAMINERGIC CELLS DERIVED FROM NEURAL PRECURSORS                                                      |
|       |   |    |   |       |   |            |   |           |   |                                                                                                                         |
| 7,544,511  |   | US      |   | 1/14/2002  |   | 6/9/2009        |   | 4/13/2017      |   | STABLE NEURAL STEM CELL LINES                                                                                                |
|       |   |    |   |       |   |            |   |           |   |                                                                                                                         |
| 7,560,553  |   | US      |   | 3/17/2008  |   | 7/14/2009       |   | 8/9/2024       |   | USE OF FUSED NICOTINAMIDES TO PROMOTE NEUROGENESIS                                                                           |
|       |   |    |   |       |   |            |   |           |   |                                                                                                                         |
| 755849     |   | AU      |   | 9/20/1999  |   | 4/3/2003        |   | 9/20/2019      |   | STABLE NEURAL STEM CELL LINES                                                                                                |
|       |   |    |   |       |   |            |   |           |   |                                                                                                                         |
| 915968     |   | EP      |   | 5/7/1997   |   | 7/25/2007       |   | 5/7/2017       |   | ISOLATION, PROPAGATION AND DIRECTED DIFFERENTIATION OF STEM CELLS FROM EMBRYONIC AND ADULT CENTRAL NERVOUS SYSTEM OF MAMMALS |
|       |   |    |   |       |   |            |   |           |   |                                                                                                                         |
| 915968     |   | ES      |   | 5/7/1997   |   | 7/25/2007       |   | 5/7/2017       |   | ISOLATION, PROPAGATION AND DIRECTED DIFFERENTIATION OF STEM CELLS FROM EMBRYONIC AND ADULT CENTRAL NERVOUS SYSTEM OF MAMMALS |
|       |   |    |   |       |   |            |   |           |   |                                                                                                                         |
| 915968     |   | FR      |   | 5/7/1997   |   | 7/25/2007       |   | 5/7/2017       |   | ISOLATION, PROPAGATION AND DIRECTED DIFFERENTIATION OF STEM CELLS FROM EMBRYONIC AND ADULT CENTRAL NERVOUS SYSTEM OF MAMMALS |
|       |   |    |   |       |   |            |   |           |   |                                                                                                                         |
| 915968     |   | GB      |   | 5/7/1997   |   | 7/25/2007       |   | 5/7/2017       |   | ISOLATION, PROPAGATION AND DIRECTED DIFFERENTIATION OF STEM CELLS FROM EMBRYONIC AND ADULT CENTRAL NERVOUS SYSTEM OF MAMMALS |
|       |   |    |   |       |   |            |   |           |   |                                                                                                                         |
| 915968     |   | IE      |   | 5/7/1997   |   | 7/25/2007       |   | 5/7/2017       |   | ISOLATION, PROPAGATION AND DIRECTED DIFFERENTIATION OF STEM CELLS FROM EMBRYONIC AND ADULT CENTRAL NERVOUS SYSTEM OF MAMMALS |
|       |   |    |   |       |   |            |   |           |   |                                                                                                                         |
| 915968     |   | SE      |   | 5/7/1997   |   | 7/25/2007       |   | 5/7/2017       |   | ISOLATION, PROPAGATION AND DIRECTED DIFFERENTIATION OF STEM CELLS FROM EMBRYONIC AND ADULT CENTRAL NERVOUS SYSTEM OF MAMMALS |
|       |   |    |   |       |   |            |   |           |   |                                                                                                                         |
| 915968     |   | CH      |   | 5/7/1997   |   | 7/25/2007       |   | 5/7/2017       |   | ISOLATION, PROPAGATION AND DIRECTED DIFFERENTIATION OF STEM CELLS FROM EMBRYONIC AND ADULT CENTRAL NERVOUS SYSTEM OF MAMMALS |
|       |   |    |   |       |   |            |   |           |   |                                                                                                                         |
| 69737949.3 |   | DE      |   | 5/7/1997   |   | 7/25/2007       |   | 5/7/2017       |   | ISOLATION, PROPAGATION AND DIRECTED DIFFERENTIATION OF STEM CELLS FROM EMBRYONIC AND ADULT CENTRAL NERVOUS SYSTEM OF MAMMALS |
|       |   |    |   |       |   |            |   |           |   |                                                                                                                         |
| 132324     |   | SG      |   | 11/17/2005 |   | 11/30/2009      |   | 11/17/2025     |   | TRANSPLANTATION OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL DISORDERS                                                |
|       |   |    |   |       |   |            |   |           |   |                                                                                                                         |
| 7,858,628  |   | US      |   | 7/9/2009   |   | 12/29/2010      |   | 7/9/2029       |   | USE OF FUSED NICOTINAMIDES TO PROMOTE NEUROGENESIS                                                                           |

----

| Number            |   | Country |   | FilingDate |   | Issue Date |   | ExpirationDate |   | Title                                                                                                     |
|-------------------|--------|---------|--------|------------|--------|------------|--------|----------------|--------|-----------------------------------------------------------------------------------------------------------|
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 2257068           |   | CA      |   | 5/7/1997   |   | N/A        |   | N/A            |   | ISOLATION, PROPOGATION, AND DIRECTED DIFFERENTIATION OF STEM CELLS FROM CENTRAL NERVOUS SYSTEM OF MAMMALS |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 2343571           |   | CA      |   | 9/20/1999  |   | N/A        |   | N/A            |   | STABLE NEURAL STEM CELL LINES                                                                             |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 99948396.9        |   | EP      |   | 9/20/1999  |   | N/A        |   | N/A            |   | STABLE NEURAL STEM CELL LINES                                                                             |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 2000-574224       |   | JP      |   | 9/20/1999  |   | N/A        |   | N/A            |   | STABLE NEURAL STEM CELL LINES                                                                             |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 3790356.4         |   | EP      |   | 12/5/2003  |   | N/A        |   | N/A            |   | METHOD FOR DISCOVERING NEUROGENIC AGENTS                                                                  |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 11/281,640        |   | US      |   | 11/17/2005 |   | N/A        |   | N/A            |   | TRANSPLANTATION OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL DISORDERS                             |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 200580039450      |   | CN      |   | 11/17/2005 |   | N/A        |   | N/A            |   | TRANSPLANTATION OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL DISORDERS                             |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 5851748.3         |   | EP      |   | 11/17/2005 |   | N/A        |   | N/A            |   | TRANSPLANTATION OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL DISORDERS                             |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 2613/CHENP/2007   |   | IN      |   | 11/17/2005 |   | N/A        |   | N/A            |   | TRANSPLANTATION OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL DISORDERS                             |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 183092            |   | IL      |   | 11/17/2005 |   | N/A        |   | N/A            |   | TRANSPLANTATION OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL DISORDERS                             |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 2007-543219       |   | JP      |   | 11/17/2005 |   | N/A        |   | N/A            |   | TRANSPLANTATION OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL DISORDERS                             |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 10-2007-7012097   |   | KR      |   | 11/17/2005 |   | N/A        |   | N/A            |   | TRANSPLANTATION OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL DISORDERS                             |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 1-2007-501016     |   | PH      |   | 11/17/2005 |   | N/A        |   | N/A            |   | TRANSPLANTATION OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL DISORDERS                             |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 2007122507        |   | RU      |   | 11/17/2005 |   | N/A        |   | N/A            |   | TRANSPLANTATION OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL DISORDERS                             |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 1-2007-01216      |   | VN      |   | 11/17/2005 |   | N/A        |   | N/A            |   | TRANSPLANTATION OF HUMAN NEURAL CELLS FOR TREATMENT OF NEURODEGENERATIVE CONDITIONS                       |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 20073078          |   | NO      |   | 11/17/2005 |   | N/A        |   | N/A            |   | TRANSPLANTATION OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL DISORDERS                             |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 11/852,922        |   | US      |   | 9/10/2007  |   | N/A        |   | N/A            |   | METHOD FOR DISCOVERING NEUROGENIC AGENTS                                                                  |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 11/932,923        |   | US      |   | 10/31/2007 |   | N/A        |   | N/A            |   | TRANSPLANTATION OF HUMANNEURAL CELLS FOR TREATMENT OF NEUROLOGICAL DISORDERS                              |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 8106303.1         |   | HK      |   | 6/5/2008   |   | N/A        |   | N/A            |   | TRANSPLANTATION OF HUMAN NEURAL CELLS FOR TREATMENT OF NEURODEGENERATIVECONDITIONS                        |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 12/404,841        |   | US      |   | 3/16/2009  |   | N/A        |   | N/A            |   | METHODS OF TREATING ISCHEMIC SPASTITICY                                                                   |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 12/424,238        |   | US      |   | 4/15/2009  |   | N/A        |   | N/A            |   | STABLE NEURAL STEM CELL LINES                                                                             |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 12/500,073        |   | US      |   | 7/9/2009   |   | N/A        |   | N/A            |   | USE OF FUSED NICOTINAMIDES TO PROMOTE NEUROGENESIS                                                        |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 12/710,097        |   | US      |   | 2/22/2010  |   | N/A        |   | N/A            |   | TRANSPLANTATION OF HUMAN NEURAL CELLS FOR TREATMENT OF NEURODEGENERATIVE CONDITIONS                       |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 61/368,409        |   | US      |   | 7/28/2010  |   | N/A        |   | N/A            |   | METHODS FOR TREATING AND/OR REVERSING NEURODEGENERATIVE DISEASES AND/OR DISORDERS                         |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| PCT/US2010/046537 |   | PCT     |   | 8/24/2010  |   | N/A        |   | N/A            |   | SYNTHESIS OF A NEUROSTIMULATIVE PIPERAZINE                                                                |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 12010502167       |   | PH      |   | 9/23/2010  |   | N/A        |   | N/A            |   | TRANSPLANTATION OF HUMAN NEURAL CELLS FOR TREATMENT OF NEURODEGENERATIVE CONDITIONS                       |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 12/939,897        |   | US      |   | 11/04/2010 |   | N/A        |   | N/A            |   | COMPOSITIONS TO EFFECT NEURONAL GROWTH                                                                    |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 12/939,914        |   | US      |   | 11/04/2010 |   | N/A        |   | N/A            |   | COMPOSITIONS TO EFFECT NEURONAL GROWTH                                                                    |
|              |   |    |   |       |   |       |   |           |   |                                                                                                      |
| 2010-254952       |   | JP      |   | 11/15/2010 |   | N/A        |   | N/A            |   | STABLE NEURAL STEM CELL LINES                                                                             |

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|   | · | the clinical efficacy and safety of our proposed products; |
|--------|--------|------------------------------------------------------------|

|   | · | the superiority of our products to alternatives currently on the market; |
|--------|--------|--------------------------------------------------------------------------|

|   | · | the potential advantages of our products over alternative treatment methods; and |
|--------|--------|----------------------------------------------------------------------------------|

|   | · | the reimbursement policies of government and third-party payors. |
|--------|--------|------------------------------------------------------------------|

----

----

----

----

|   | · | On May 7, 2008, we filed suit against StemCells, Inc., StemCells California, Inc. (collectively “StemCells”) and Neurospheres Holding Ltd., (collectively StemCells and Neurospheres Holding Ltd are referred to as “Plaintiffs”) in U.S. District Court for the District of Maryland, alleging that U.S. Patent No. 7,361,505 (the “’505 patent”), alleging that the ‘505 patent was exclusively licensed to the Plaintiffs, is invalid, not infringed, and unenforceable.   See Civil Action No. 08-1173.   On May 13, we filed an Amended Complaint seeking declaratory judgment that U.S. Patent No. 7,155,418 (the “’418 patent”) is invalid and not infringed and that certain statements made by our CEO are not trade libel or do not constitute unfair competition as alleged by the Plaintiffs.  On July 15, 2008, the Plaintiffsfiled a Motion to Dismiss for Lack of Subject Matter Jurisdiction, Lack of Personal Jurisdiction, and Improper Venue or in the Alternative to Transfer to the Northern District of California.  On August 27, 2008, Judge Alexander Williams, Jr. of the District of Maryland denied StemCells’ Motion to Dismiss, but granted Neurospheres’ motion to dismiss. On September 11, 2008, StemCells filed its answer asserting counterclaims of infringement for the ‘505 patent, the 418 patent, and state law claims for trade libel and unfair competition. This case was consolidated with the 2006 litigation discussed below and it is not known when, nor on what basis, this matter will be concluded. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On July 28, 2006, StemCells, Inc., filed suit against Neuralstem, Inc. in the U.S. District Court in Maryland, alleging that Neuralstem has been infringing, contributing to the infringement of, and or inducing the infringement of four patents owned by or exclusively licensed to StemCells relating to stem cell culture compositions, genetically modified stem cell cultures, and methods of using such cultures.  See Civil Action No. 06-1877.  We answered the Complaint denying infringement, asserting that the patents are invalid, asserting that we have intervening rights based on amendments made to the patents during reexamination proceedings, and further asserting that some of the patents are unenforceable due to inequitable conduct.  Neuralstem has also asserted counterclaims that StemCells has engaged in anticompetitive conduct in violation of antitrustlaws.  Discovery has commenced and it is not known when, nor on what basis, this matter will be concluded. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|           |   | High   |   |   | Low    |   |
|----------------|--------|--------|--------|--------|--------|--------|
|           |   |   |   |   |   |   |
| 2009           |   |   |   |   |   |   |
| First Quarter  |   | $      | 1.90   |   |   | $      | 0.75 |   |
| Second Quarter |   | $      | 1.35   |   |   | $      | 0.98 |   |
| Third Quarter  |   | $      | 2.95   |   |   | $      | 1.02 |   |
| Fourth Quarter |   | $      | 2.29   |   |   | $      | 1.23 |   |
| 2010           |   |   |   |   |   |   |   |   |
| First Quarter  |   | $      | 2.50   |   |   | $      | 1.75 |   |
| Second Quarter |   | $      | 3.49   |   |   | $      | 1.92 |   |
| Third Quarter  |   | $      | 2.64   |   |   | $      | 1.71 |   |
| Fourth Quarter |   | $      | 2.71   |   |   | $      | 1.83 |   |

----

|                                                       |   | (a)                                                                                                                                                          |       |   | (b)                                                                                                                       |   |   | (c)                                                                                                                                                                                                                        |   |
|------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                       |   | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights |       |   | Weighted-Average Exercise Price of  Outstanding Options, Warrants and Rights |   |   | Number of Securities Remaining Available for Future Issuance underEquity Compensation Plans (Excluding Securities Reflected in Column (a)) |   |
| Equity compensation plans approved by security holders     |   |                                                                                                                                                         |       |   |                                                                                                                      |   |   |                                                                                                                                                                                                                       |   |
| 2005 Stock Plan, as amended                                |   |                                                                                                                                                         | 3,763,617  |   |                                                                                                                      | $      | 1.24   |                                                                                                                                                                                                                       |   |   | 236,383 |   |
| 2007 Stock Plan                                            |   |                                                                                                                                                         | 5,460,000  |   |                                                                                                                      |   | 3.37   |                                                                                                                                                                                                                       |   |   | 568,846 |   |
| 2010 Stock Plan                                            |   |                                                                                                                                                         | 947,988    |   |                                                                                                                      |   | 2.21   |                                                                                                                                                                                                                       |   |   | 6,052,012 |   |
| Equity compensation plans not approved by security holders |   |                                                                                                                                                         | N/A        |   |                                                                                                                      |   | N/A    |                                                                                                                                                                                                                       |   |   | N/A |   |
|                                                       |   |                                                                                                                                                         |       |   |                                                                                                                      |   |   |                                                                                                                                                                                                                       |   |   |   |   |
| Total                                                      |   |                                                                                                                                                         | 10,171,605 |   |                                                                                                                      | $      | 2.44   |                                                                                                                                                                                                                       |   |   | 6,857,241 |   |

|   | · | On January 8, 2010, pursuant to a consulting agreement for investor relations and business development services, we issued Market Development Consulting Group, Inc.: (i) 140,000 common shares; and (ii) a common stock purchase warrant entitling the holder to purchase 400,000 shares of common stock at $1.70 per share.  The warrant is exercisable immediately, shall expire on December 31, 2019, and is freely assignable in whole or in part.   We also agreed to register the shares underlying the warrant with the SEC for resale. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On January 15, 2010, we issued a consultant options to purchase an aggregate of 45,000 common shares at $2.40 per share.  The options vest as follows: (i) 25,000 upon grant; and (ii) 20,000 on December 31, 2010.  The options have a term of 5 years. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On January 15, 2010, we issued a consultant options to purchase an aggregate of 100,000 common shares at $2.40 per share.  The options are 100% vested upon grant and have a term of 7 years. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On January 29, 2010, as an inducement to exercise 800,000 Series D Warrants, we issued Vicis Capital Master Fund a replacement warrant.  As a result of the exercise, we received gross proceeds in the amount of $1,000,000.  The replacement warrant entitles the holder to purchase 400,000 common shares at price of $1.85 per share.  The warrant has a term of 1 year. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In March of 2010, in connection with the exercise of 2,699,400 Series C Warrants, we issued the prior warrant holders an aggregate of 2,699,400 replacement warrants.  As a result of the exercise, we received gross proceeds in the amount of $3,374,250.   The replacement warrant is substantially the same as the prior Series C warrants except that: (i) the exercise price is $2.13; (ii) the replacement warrants expire 5 years from the date they were issued; (iii) is callable by the company in the event our common stock trades above $5.00 and certain other conditions are met, and (iv) the replacement warrants do not provide for any anti-dilution rights. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In March of 2010, in connection with the exercise of 782,005 placement agent warrants, we issued T.R. Winston & Company, LLC, a replacement warrant to purchase 782,005.   As a result of the exercise, we received gross proceeds in the amount of $860,205.  The replacement warrant is substantially the same as the prior warrants issued to our Series C Warrant holders except that: (i) the exercise price is $2.13; (ii) the replacement warrants expire 5 years from the date they were issued; and (iii) the replacement warrants do not provide for any anti-dilution rights. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | In March of 2010, we amended 706,752 placement agent warrants held by TR Winston & Company, LLC.  Pursuant to the amendment, we agreed to extend the expiration date of the placement agent warrants from March 15, 2012 to March 15, 2014 in exchange for the removal of the anti-dilution provisions from said warrants.  We did not receive any additional consideration in connection with the amendment. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On May 14, 2010, as consideration for amending a consulting agreement for investor relations and business development services, we issued Market Development Consulting Group, Inc. a common stock purchase warrant entitling the holder to purchase 200,000 shares of common stock at $3.17 per share.  The warrant is exercisable immediately, shall expire on May 14, 2020, and is freely assignable in whole or in part.  The warrant is substantially similar to the consultant warrant issued on January 8, 2010. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In June of 2010, we issued Noble International Investment, Inc., D/B/A Noble Financial Capital Markets a warrant to purchase 250,001 common shares.  The warrant was issued as compensation for placement agent services which Noble International Investments, Inc., performed in connection with our $10 million registered direct offering of units.  The warrant is substantially the same as the investor warrant issued in the offering and has: (i) an exercise price of $3.25, and (ii) a term of three years. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On January 6, 2011, pursuant to the terms of the consulting agreement entered into with Market Development Consulting Group, Inc. in January of 2010 and amended May 14, 2010 and February 7, 2011, we issued: (i) 120,000 common shares; and (ii) a common stock purchase warrant entitling the holder to purchase 596,675 shares of common stock at $2.14 per share.  The common stock is deliverable on April 1, 2011.  The warrant is exercisable immediately, shall expire on January 6, 2021, and is freely assignable in whole or in part.   We also agreed to register the shares underlying the warrant with the SEC for resale. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | •  | Overview — Discussion of our business and overall analysis of financial and other highlights affecting the Company in order to provide context for the remainder of MD&A. |
|--------|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | •  | Trends & Outlook — Discussion of what we view as the overall trends affecting our business and the strategy for 2011. |
|--------|---------------|--------------------------------------------------------------------------------------------------------------------------------------|

|   | •  | Critical Accounting Policies— Accounting policies that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts. |
|--------|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | •  | Results of Operations— Analysis of our financial results comparing 2010 to 2009. |
|--------|---------------|---------------------------------------------------------------------------------------------|

|   | •  | Liquidity and Capital Resources— An analysis of changes in our balance sheet and cash flows and discussion of our financial condition and future liquidity needs. |
|--------|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

|                                 |   |                                             |       |   |             |   |       | Change in |   |
|--------------------------------------|--------|--------------------------------------------------|------------|--------|------------------|--------|------------|----------------|--------|
|                                 |   |                                             |       |   |             |   |       | 2010           |   |
|                                 |   | Twelve Months Ended Dec. 31, |       |   | Versus 2009 |   |
|                                 |   | 2010                                             |       |   | 2009             |   |       |  $        |   |   |   | % |   |
| Operating Expenses                   |   |                                             |       |   |             |   |       |           |   |   |   |   |   |
| Research & development           |   | $                                                | 9,163,810  |   |             | $      | 5,346,904  |           |   | $ | 3,816,906 |   |   |   | 71 | % |
| General & administrative expense |   |                                             | 6,623,758  |   |             |   | 5,030,981  |           |   |   | 1,592,777 |   |   |   | 32 | % |
| Depreciation and amortization        |   |                                             | 130,751    |   |             |   | 88,664     |           |   |   | 42,087 |   |   |   | 47 | % |
|                                 |   |                                             |       |   |             |   |       |           |   |   |   |   |   |   |   |   |
| Total expense                        |   | $                                                | 15,918,319 |   |             | $      | 10,466,549 |           |   | $ | 5,451,770 |   |   |   | 52 | % |

|                                                                  |   | Twelve Months Ended December 31, |       |
|-----------------------------------------------------------------------|--------|------------------------------------------------------|------------|
|                                                                  |   | 2010                                                 |       |   | 2009 |   |
|                                                                  |   |                                                 |       |   |   |   |
| Nonoperating income:                                                  |   |                                                 |       |   |   |   |
|                                                                  |   |                                                 |       |   |   |   |
| Interest income                                                       |   | $                                                    | 59,277     |   |   | $ | 19,614 |   |
| Interest expense                                                      |   |                                                 | (2,662     | ) |   |   | (776 | ) |
| Warrant issuance and modification expense                             |   |                                                 | (1,906,800 | ) |   |   | - |   |
| (Loss) Gain on change in fair value adjustment of warrant obligations |   |                                                 | (1,352,234 | ) |   |   | 83,348 |   |
|                                                                  |   |                                                 |       |   |   |   |   |   |
| Total nonoperating (expense) income                                   |   | $                                                    | (3,202,419 | ) |   | $ | 102,186 |   |

----

|                                      |   |                                                 |       |   |             |   |       | Change in 2010 |   |
|-------------------------------------------|--------|------------------------------------------------------|------------|--------|------------------|--------|------------|--------------------------|--------|
|                                      |   | Twelve Months Ended December 31, |       |   | Versus 2009 |   |
|                                      |   | 2010                                                 |       |   | 2009             |   |       | $                        |   |   | % |   |
| Cash and cash equivalents            |   | $                                                    | 9,261,233  |   |             | $      | 2,309,774  |                     |   |   | 6,951,459 |   |   |   | 301 | % |
|                                      |   |                                                 |       |   |             |   |       |                     |   |   |   |   |   |   |   |   |
| Net cash used in operating activities     |   | $                                                    | (9,981,244 | )      |             | $      | (5,144,820 | )                        |   |   | 4,836,424 |   |   |   | 94 | % |
| Net cash used in investing activities     |   | $                                                    | (332,675   | )      |             | $      | (210,784   | )                        |   |   | 121,891 |   |   |   | 58 | % |
| Net cash provided by financing activities |   | $                                                    | 17,265,378 |   |             | $      | 2,762,099  |                     |   |   | 14,503,279 |   |   |   | 525 | % |

----

|   | · | On January 29, 2010, we received gross proceeds of $1,000,000 as a result of the exercise of 800,000 $1.25 Series D warrant exercises. We issued the holder of the D warrants 400,000 additional warrants with an exercise price of $1.85 in conjunction with the exercise. The new warrants have a life of one year. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In February of 2010, we called our $1.25 Series B Warrants. Gross exercise proceeds totaled $2,492,345. |
|--------|--------|---------------------------------------------------------------------------------------------------------|

|   | · | In March of 2010, holders of 2,699,400 Series C warrants exercised their option to purchase our common stock for 1.25 per share.  Gross proceeds totaled $3,374,250.  We issued the holders of the exercised C Warrants 2,699,400 additional warrants with an exercise price of $2.13 and a life of 5 years in conjunction with the exercise. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The holder of 782,005 $1.10 placement agent warrants exercised them in March of 2010.  Gross consideration totaled $860,205. We issued the holder of the exercised placement agent warrants 782,005 additional warrants with an exercise price of $2.13 and a life of 5 years in conjunction with the exercise. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In June of 2010, we sold approximately 3,571,436 units, through a registered direct offering.  Each unit consists of one common share and 0.75 common share purchase warrant.   Each unit was sold for $2.80.  Each warrant has an exercise price of $3.25 per share, and is exercisable for a period of three years.  As a result of the offering, we received gross proceeds of approximately $10 million, and net proceeds of $9,271,519. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In the period January through December 2010, Series A warrant holders exercised an aggregate of 583,005 warrants.  The exercise price of the Series A warrants is $1.25 per share.  As a result of the exercises, we received gross proceeds of $728,756. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In November 2010, we filed a prospectus supplement that relates to the issuance and sale of up to $20,000,000 of our common stock, from time to time through a sales agreement with our sales agent Stifel, Nicolaus & Company, Incorporated.  The prospectus is a part of a registration statement that we filed with the SEC on October 14, 2010, using a “shelf” registration process. Under this shelf registration process, we may offer to sell in one or more offerings up to a total dollar amount of $50,000,000.  In 2010, we had no sales of our common stock under this sales agreement with Stifel, Nicolaus & Company, Incorporated. Stifel, Nicolaus & Company, Incorporated will be paid compensation equal to 3.5% of the gross proceeds pursuant to the terms of the agreement. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In the fourth quarter of 2010, holders of 402,822 “stand alone” warrants, with strike prices between $0.50 and $1.49, exercised them for total net proceeds of $209,396. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Company incurred placement agent commissions for the exercise of Series A, B, and C warrants, which total $671,094 |
|--------|--------|------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                    |   | Page       |
|---------------------------------------------------------|--------|------------|
| Report of Independent Registered Public Accounting Firm |   | F-1        |
|                                                    |   |       |
| Balance Sheets                                          |   | F-2        |
|                                                    |   |       |
| Statements of Operations                                |   | F-3        |
|                                                    |   |       |
| Statements of Cash Flows                                |   | F-4        |
|                                                    |   |       |
| Statements of Stockholders’ Equity (Deficit) |   | F-5        |
|                                                    |   |       |
| Notes to Financial Statements                           |   | F-6 - F-17 |

----

----

|                                                                                                                                     |   | December 31, |         |   | December 31, |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------------|--------|-------------------|--------|
|                                                                                                                                     |   | 2010              |         |   | 2009              |   |
|                                                                                                                                     |   |              |         |   |              |   |
| ASSETS                                                                                                                                   |   |              |         |   |              |   |
| CURRENT ASSETS                                                                                                                           |   |              |         |   |              |   |
| Cash and cash equivalents                                                                                                                |   | $                 | 9,261,233    |   |              | $      | 2,309,774 |   |
| Prepaid expenses                                                                                                                         |   |              | 246,887      |   |              |   | 143,600 |   |
| Other current assets                                                                                                                     |   |              | 322,127      |   |              |   | - |   |
|                                                                                                                                     |   |              |    |   |              |   |    |   |
| Total current assets                                                                                                                     |   |              | 9,830,247    |   |              |   | 2,453,374 |   |
|                                                                                                                                     |   |              |         |   |              |   |   |   |
| Property and equipment, net                                                                                                              |   |              | 200,084      |   |              |   | 196,755 |   |
| Intangible assets, net                                                                                                                   |   |              | 500,154      |   |              |   | 301,560 |   |
| Other assets                                                                                                                             |   |              | 60,875       |   |              |   | 55,716 |   |
|                                                                                                                                     |   |              |    |   |              |   |    |   |
| Total assets                                                                                                                             |   | $                 | 10,591,360   |   |              | $      | 3,007,405 |   |
|                                                                                                                                     |   |              |         |   |              |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                                                                           |   |              |         |   |              |   |   |   |
|                                                                                                                                     |   |              |         |   |              |   |   |   |
| CURRENT LIABILITIES                                                                                                                      |   |              |         |   |              |   |   |   |
|                                                                                                                                     |   |              |         |   |              |   |   |   |
| Accounts payable and accrued expenses                                                                                                    |   | $                 | 1,032,931    |   |              | $      | 791,607 |   |
| Accrued bonus expense                                                                                                                    |   |              | 453,240      |   |              |   | 769,215 |   |
| Fair value of warrant obligations                                                                                                        |   |              | 1,250,839    |   |              |   | - |   |
|                                                                                                                                     |   |              |         |   |              |   |   |   |
| Total current liabilities                                                                                                                |   |              | 2,737,010    |   |              |   | 1,560,822 |   |
|                                                                                                                                     |   |              |         |   |              |   |   |   |
| LONG-TERM LIABILITIES                                                                                                                    |   |              |         |   |              |   |   |   |
|                                                                                                                                     |   |              |         |   |              |   |   |   |
| Fair value of warrant obligations                                                                                                        |   |              | -            |   |              |   | 6,462,039 |   |
|                                                                                                                                     |   |              |         |   |              |   |   |   |
| STOCKHOLDERS' EQUITY (DEFICIT)                                                                                                           |   |              |         |   |              |   |   |   |
|                                                                                                                                     |   |              |         |   |              |   |   |   |
| Preferred stock, 7,000,000 shares authorized, zero shares issued and outstanding                                                         |   |              | -            |   |              |   | - |   |
|                                                                                                                                     |   |              |         |   |              |   |   |   |
| Common stock, $0.01 par value; 150 million shares authorized, 46,897,529 and 35,743,831 shares outstanding in 2010 and 2009 respectively |   |              | 468,975      |   |              |   | 357,438 |   |
| Additional paid-in capital                                                                                                               |   |              | 93,339,506   |   |              |   | 62,193,937 |   |
| Accumulated deficit                                                                                                                      |   |              | (85,954,131  | )      |              |   | (67,566,831 | ) |
| Total stockholders' equity (deficit)                                                                                                     |   |              | 7,854,350    |   |              |   | (5,015,456 | ) |
|                                                                                                                                     |   |              |         |   |              |   |   |   |
| Total liabilities and stockholders' equity (deficit)                                                                                     |   | $                 | 10,591,360   |   |              | $      | 3,007,405 |   |

----

|                                                               |         | Twelve Months           |        |
|-------------------------------------------------------------------------|--------------|------------------------------|-------------|
|                                                               |         | Ended December 30, |        |
|                                                                    |         | 2010                         |        |   | 2009 |   |
|                                                               |         |                         |        |   |   |   |
| Grant revenues                                                     |    | $                            | 733,438     |   |   | $ | - |   |
| Operating expenses:                                                     |         |                         |        |   |   |   |   |   |
| Research and development costs                                          |         |                         | 9,163,810   |   |   |   | 5,346,904 |   |
| General and administrative expenses                                     |         |                         | 6,623,758   |   |   |   | 5,030,981 |   |
| Depreciation and amortization                                           |         |                         | 130,751     |   |   |   | 88,664 |   |
|                                                                    |         |                         | 15,918,319  |   |   |   | 10,466,549 |   |
| Operating loss                                                          |         |                         | (15,184,881 | ) |   |   | (10,466,549 | ) |
|                                                                    |         |                         |        |   |   |   |   |   |
| Nonoperating (expense)income:                                           |         |                         |        |   |   |   |   |   |
| Interest income                                                         |         |                         | 59,277      |   |   |   | 19,614 |   |
| Interest expense                                                        |         |                         | (2,662      | ) |   |   | (776 | ) |
| Warrant issuance and modification expense                               |         |                         | (1,906,800  | ) |   |   | - |   |
| (Loss) gain from change in fair value adjustment of warrant obligations |         |                         | (1,352,234  | ) |   |   | 83,348 |   |
| Total nonoperating (expense) income                                     |         |                         | (3,202,419  | ) |   |   | 102,186 |   |
|                                                                    |         |                         |        |   |   |   |   |   |
| Net loss attributable to common shareholders                       |    | $                            | (18,387,300 | ) |   | $ | (10,364,363 | ) |
|                                                                    |         |                         |        |   |   |   |   |   |
| Net loss per share - basic and diluted                                  |    | $                            | (0.42       | ) |   | $ | (0.30 | ) |
|                                                                    |         |                         |        |   |   |   |   |   |
| Weighted average common shares outstanding - basic and diluted          |    |                         | 43,466,074  |   |   |   | 34,280,882 |   |

----

|                                                                                                         |   | Twelve Months           |        |
|--------------------------------------------------------------------------------------------------------------|--------|------------------------------|-------------|
|                                                                                                    |   | Ended December 31, |        |
|                                                                                                         |   | 2010                         |        |   | 2009 |   |
|                                                                                                         |   |                         |        |   |   |   |
| Cash flows from operating activities:                                                                        |   |                         |        |   |   |   |
| Net loss                                                                                                     |   | $                            | (18,387,300 | ) |   | $ | (10,364,363 | ) |
| Adjustments to reconcile net loss to cash used in operating activities:                                      |   |                         |        |   |   |   |   |   |
| Depreciation and amortization                                                                                |   |                         | 130,752     |   |   |   | 88,664 |   |
| Share based compensation expenses                                                                            |   |                         | 5,240,882   |   |   |   | 4,556,916 |   |
| Warrant issuance and modification expense                                                                    |   |                         | 1,906,800   |   |   |   | - |   |
| Loss/(gain) from change in fair value adjustment of warrant obligations                                      |   |                         | 1,352,234   |   |   |   | (83,348 | ) |
|                                                                                                         |   |                         |        |   |   |   |   |   |
| Changes in operating assets and liabilities:                                                                 |   |                         |        |   |   |   |   |   |
| Prepaid expenses                                                                                             |   |                         | (43,287     | ) |   |   | (7,313 | ) |
| Other assets                                                                                                 |   |                         | (327,286    | ) |   |   | (2,744 | ) |
| Accounts payable and accrued expenses                                                                        |   |                         | 213,570     |   |   |   | 243,657 |   |
| Accrued bonus expenses                                                                                       |   |                         | (67,609     | ) |   |   | 423,711 |   |
| Net cash used in operating activities                                                                        |   |                         | (9,981,244  | ) |   |   | (5,144,820 | ) |
|                                                                                                         |   |                         |        |   |   |   |   |   |
| Cash flows from investing activities:                                                                        |   |                         |        |   |   |   |   |   |
| Acquisition of intangible assets                                                                             |   |                         | (256,353    | ) |   |   | (122,406 | ) |
| Purchase of property and equipment                                                                           |   |                         | (76,322     | ) |   |   | (88,378 | ) |
| Net cash used in investing activities                                                                        |   |                         | (332,675    | ) |   |   | (210,784 | ) |
|                                                                                                         |   |                         |        |   |   |   |   |   |
| Cash flows From financing activities:                                                                        |   |                         |        |   |   |   |   |   |
| Proceeds from issuance of common stock from warrants exercised                                               |   |                         | 7,993,859   |   |   |   | - |   |
| Proceeds from issuance of common stock from private placement                                                |   |                         | 9,271,519   |   |   |   | 2,762,099 |   |
| Net cash provided by financing activities                                                                    |   |                         | 17,265,378  |   |   |   | 2,762,099 |   |
|                                                                                                         |   |                         |        |   |   |   |   |   |
| Net increase (decrease)in cash and cash equivalents                                                          |   |                         | 6,951,459   |   |   |   | (2,593,505 | ) |
|                                                                                                         |   |                         |        |   |   |   |   |   |
| Cash and cash equivalents, beginning of period                                                               |   |                         | 2,309,774   |   |   |   | 4,903,279 |   |
|                                                                                                         |   |                         |        |   |   |   |   |   |
| Cash and cash equivalents, end of period                                                                     |   | $                            | 9,261,233   |   |   | $ | 2,309,774 |   |
|                                                                                                         |   |                         |        |   |   |   |   |   |
| Supplemental disclosure of cash flows information:                                                           |   |                         |        |   |   |   |   |   |
|     Cash paid for interest                                                               |   | $                            | 2,662       |   |   | $ | 776 |   |
|     Cash paid for income taxes                                                           |   |                         | -           |   |   |   | - |   |
|                                                                                                         |   |                         |        |   |   |   |   |   |
| Supplemental schedule of non cash investing and financing activities:                                        |   |                         |        |   |   |   |   |   |
| Extinguishment of warrant obligations through exercise, expiration and modification of common stock warrants |   |                         | (6,563,180  | ) |   |   | - |   |
| Prepayment of services through common stock issuance                                                         |   |                         | (240,000    | ) |   |   | - |   |
| Payment of contract services through common stock issuance                                                   |   |                         | (50,000     | ) |   |   | - |   |
| Issuance of common stock from executive bonuses                                                              |   |                         | (248,367    | ) |   |   | (372,033 | ) |

----

|                                                                                                                |   | Common |       |   | Common |   |    | Additional |   |   |        |   |   | Total                 |        |
|--------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|---------|------------|--------|--------|-------------|--------|--------|-----------------------|-------------|
|                                                                                                                |   | Stock  |       |   | Stock  |   |    | Paid-In    |   |   | Accumulated |   |   | Stockholders'         |        |
|                                                                                                                |   | Shares |       |   | Amount |   |    | Capital    |   |   | Deficit     |   |   | Equity (Deficit) |        |
|                                                                                                                     |   |   |       |   |   |   |    |       |   |   |        |   |   |                  |        |
| Balance at January 1, 2009                                                                                               |   |   | 33,751,300 |   |   | $      | 337,513 |       |   | $      | 61,352,527  |   |   | $                     | (57,486,795 | ) |   | $ | 4,203,245 |   |
| Cumulative effect of reclassification of warrants to liabilities                                                         |   |   |       |   |   |   |    |       |   |   | (7,044,118  | )      |   |                  | 284,327     |   |   |   | (6,759,791 | ) |
| Balance, January 1, 2009, as adjusted                                                                               |   |   | 33,751,300 |   |   |   | 337,513 |       |   |   | 54,308,409  |   |   |                  | (57,202,468 | ) |   |   | (2,556,546 | ) |
|                                                                                                                     |   |   |       |   |   |   |    |       |   |   |        |   |   |                  |        |   |   |   |   |   |
| Share based payment - employee compensation                                                                              |   |   |       |   |   |   |    |       |   |   | 4,556,916   |   |   |                  |        |   |   |   | 4,556,916 |   |
|                                                                                                                     |   |   |       |   |   |   |    |       |   |   |        |   |   |                  |        |   |   |   |   |   |
| Issuance of common stock through Private Placement ($1.25 per share), net of financing costs of $96,608.                 |   |   | 800,000    |   |   |   | 8,000   |       |   |   | 895,392     |   |   |                  |        |   |   |   | 903,392 |   |
| Issuance of common stock from warrants exercised ($1.25 per share), net of financing costs of $31,300.                   |   |   | 320,505    |   |   |   | 3,205   |       |   |   | 575,741     |   |   |                  |        |   |   |   | 578,946 |   |
| Issuance of common stock in settlement of outstanding 2008 bonus due to officers (225,475 shares at $1.65 per share)     |   |   | 225,475    |   |   |   | 2,255   |       |   |   | 369,778     |   |   |                  |        |   |   |   | 372,033 |   |
| Issuance of common stock through Private Placement ($2.32 per share), net of financing costs of $5,833                   |   |   | 646,551    |   |   |   | 6,465   |       |   |   | 1,487,701   |   |   |                  |        |   |   |   | 1,494,166 |   |
| Net loss                                                                                                                 |   |   |       |   |   |   |    |       |   |   |        |   |   |                  | (10,364,363 | ) |   |   | (10,364,363 | ) |
| Balance at December 31, 2009                                                                                             |   |   | 35,743,831 |   |   |   | 357,438 |       |   |   | 62,193,937  |   |   |                  | (67,566,831 | ) |   |   | (5,015,456 | ) |
|                                                                                                                     |   |   |       |   |   |   |    |       |   |   |        |   |   |                  |        |   |   |   |   |   |
| Share based payments                                                                                                     |   |   |       |   |   |   |    |       |   |   | 4,918,282   |   |   |                  |        |   |   |   | 4,918,282 |   |
| Issuance of common stock through Private Placement ($2.80 per share), net of financing costs of $728,501.                |   |   | 3,571,436  |   |   |   | 35,714  |       |   |   | 9,235,805   |   |   |                  |        |   |   |   | 9,271,519 |   |
| Issuance of common stock for prepaid consulting services.                                                                |   |   | 140,000    |   |   |   | 1,400   |       |   |   | 238,600     |   |   |                  |        |   |   |   | 240,000 |   |
| Issuance of common stock for  consulting services.                                                             |   |   | 45,000     |   |   |   | 450     |       |   |   | 49,550      |   |   |                  |        |   |   |   | 50,000 |   |
| Issuance of common stock from warrants exercised (between $0.50 and $1.49 per share), net of issuance costs of $671,094. |   |   | 7,261,108  |   |   |   | 72,612  |       |   |   | 7,921,246   |   |   |                  |        |   |   |   | 7,993,858 |   |
| Warrant issuances and modifications                                                                                      |   |   |       |   |   |   |    |       |   |   | 8,445,309   |   |   |                  |        |   |   |   | 8,445,309 |   |
| Extinguishment of fair value of warrant obligations from warrant expiration                                              |   |   |       |   |   |   |    |       |   |   | 24,671      |   |   |                  |        |   |   |   | 24,671 |   |
| Issuance of restricted common stock in payment for Director's compensation ($2.17 per share)                             |   |   | 15,000     |   |   |   | 150     |       |   |   | 64,950      |   |   |                  |        |   |   |   | 65,100 |   |
| Issuance of restricted common stock in payment for 2009 executive bonuses ($2.05 per share)                              |   |   | 121,154    |   |   |   | 1,211   |       |   |   | 247,156     |   |   |                  |        |   |   |   | 248,367 |   |
| Net loss                                                                                                                 |   |   |       |   |   |   |    |       |   |   |        |   |   |                  | (18,387,300 | ) |   |   | (18,387,300 | ) |
| Balance at December 31, 2010                                                                                             |   |   | 46,897,529 |   |   | $      | 468,975 |       |   | $      | 93,339,506  |   |   | $                     | (85,954,131 | ) |   | $ | 7,854,350 |   |

----

----

----

|   | · | The Company completed a registered offering of 800,000 common shares at $1.25 per share increasing equity by approximately $1,000,000 in June 2009, less approximately $97,000 in related placement and closing costs. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In September 2009 and December 2009, several warrant holders exercised 320,505 warrants at $1.25 per warrant increasing equity by approximately $401,000 less $31,300 in related financing costs. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In December 2009, the Company completed a private placement of 646,551 common shares at $2.32 per share increasing equity by approximately $1,500,000 less approximately $6,000 in related costs. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In June of 2010, we sold approximately 3,571,436 units, through a registered direct offering.  Each unit consists of one common share and 0.75 common share purchase warrant.   Each unit was sold for $2.80.  Each warrant has an exercise price of $3.25 per share, and is exercisable for a period of three years.  As a result of the offering, we received gross proceeds of approximately $10 million. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On July 8, 2010, the Company awarded 121,154 restricted shares of common stock to executives in payment of 2009 bonus awards.  The shares were immediately vested, but may not be exercised for 5 years from the date of the award.  The share price on the date of the award was $2.57. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In November 2010, we filed a prospectus supplement that relates to the issuance and sale of up to $20,000,000 of our common stock, from time to time through a sales agreement with our sales agent Stifel, Nicolaus & Company, Incorporated.  The prospectus is a part of a registration statement that we filed with the SEC on October 14, 2010, using a “shelf” registration process. Under this shelf registration process, we may offer to sell in one or more offerings up to a total dollar amount of $50,000,000.  In 2010, we did not sell any of our common stock under this sales agreement with Stifel, Nicolaus & Company, Incorporated. Stifel, Nicolaus & Company, Incorporated will be paid compensation equal to 3.5% of the gross proceeds pursuant to the terms of the agreement. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | On January 5, 2009 we granted a consultant 100,000 options to purchase common shares at a price of $1.64.  The options were issued as compensation for services rendered. The grant was made pursuant to our 2005 Stock Plan.  The options are fully vested and have a cashless exercise provision.  The options expire on January 5, 2016. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | On June 3, 2009 we granted a consultant 100,000 options to purchase common shares at a price of $1.13.  The options were issued as compensation for services rendered.  The grant was made pursuant to our 2005 Stock Plan.  The options vest as follows:  25,000 vested immediately; 25,000 vest at the six month anniversary; 25,000 vest at the twelve month anniversary; 25,000 vest at the eighteen month anniversary.  The options expire on June 3, 2019. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | On July 2, 2009 we granted independent directors options to purchase an aggregate of 70,000 common shares at an exercise price of $1.17.  The grant was made pursuant to our 2007 Stock Plan and in compliance with our non-executive compensation arrangement.  The grant consists of: (i) options to purchase 40,000 common shares as compensation for serving on the Board of Directors; (ii) options to purchase 10,000 common shares as compensation for serving on the Audit Committee; (iii) options to purchase 10,000 common shares as compensation for serving on the Compensation Committee; and (iv) options to purchase 10,000 common shares as compensation for serving on the Governance and Nominating Committee.  These options vest quarterly over the grant year and expire 7 years from the date of grant. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On January 15, 2010, we issued a consultant options to purchase an aggregate of 45,000 common shares at $2.40 per share.  The options vest as follows: (i) 25,000 upon grant; and (ii) 20,000 on December 31, 2010.  The options have a term of 5 years |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On January 15, 2010, we issued a consultant options to purchase an aggregate of 100,000 common shares at $2.40 per share.  The options are 100% vested upon grant and have a term of 7 years. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On November 11, 2010, we issued 602,004 options to company executives in payment of 2009 Long Term Incentive Awards.  The grant was made pursuant to our 2010 Stock Plan. The options will have an exercise price of $2.21 per share, vest quarterly over three years, and have a term of 10 years.  The options cannot be sold for a period of five years after award. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On November 15, 2010, we granted independent directors options to purchase an aggregate of 70,000 common shares at an exercise price of $2.17 per share.  The grant was made pursuant to our 2007 Stock Plan and in compliance with our non-executive compensation arrangement.  The grant consists of: (i) options to purchase 40,000 common shares as compensation for serving on the Board of Directors; (ii) options to purchase 10,000 common shares as compensation for serving on the Audit Committee; (iii) options to purchase 10,000 common shares as compensation for serving on the Compensation Committee; and (iv) options to purchase 10,000 common shares as compensation for serving on the Governance and Nominating Committee.  These options vest quarterly over the grant year and expire 7 years from the date of grant. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                             |   | Number ofOptions |      |   | Weighted-AverageExercisePrice |   |   | Weighted-AverageRemainingContractualLife (inyears) |   |   | AggregateIntrinsicValue |   |
|----------------------------------|--------|-----------------------|-----------|--------|-------------------------------|--------|--------|---------------------------------------------------------|--------|--------|-------------------------|--------|
|                             |   |                  |      |   |                          |   |   |                                                    |   |   |                    |   |   |   |   |   |
| Outstanding at January 1, 2009   |   |                  | 8,800,659 |   |                          | $      | 2.55   |                                                    |   |   | 8.2                     |   |   | $ | - |   |
|                             |   |                  |      |   |                          |   |   |                                                    |   |   |                    |   |   |   |   |   |
| Granted                          |   |                  | 270,000   |   |                          |   | 1.33   |                                                    |   |   | 8.2                     |   |   | $ | - |   |
| Exercised                        |   |                  | -         |   |                          |   | -      |                                                    |   |   | -                       |   |   |   | - |   |
| Forfeited                        |   |                  | -         |   |                          |   | -      |                                                    |   |   | -                       |   |   |   | - |   |
|                             |   |                  |      |   |                          |   |   |                                                    |   |   |                    |   |   |   |   |   |
| Outstanding at January 1, 2010   |   |                  | 9,070,659 |   |                          | $      | 2.52   |                                                    |   |   | 7.2                     |   |   | $ | - |   |
|                             |   |                  |      |   |                          |   |   |                                                    |   |   |                    |   |   |   |   |   |
| Granted                          |   |                  | 817,004   |   |                          |   | 2.27   |                                                    |   |   | -                       |   |   | $ | - |   |
| Exercised                        |   |                  | -         |   |                          |   | -      |                                                    |   |   | -                       |   |   |   | - |   |
| Forfeited                        |   |                  | (62,042   | )      |                          |   | 4.98   |                                                    |   |   | -                       |   |   |   | - |   |
|                             |   |                  |      |   |                          |   |   |                                                    |   |   |                    |   |   |   |   |   |
| Outstanding at December 31, 2010 |   |                  | 9,825,621 |   |                          | $      | 2.48   |                                                    |   |   | 6.4                     |   |   | $ | 4,256,700 |   |
|                             |   |                  |      |   |                          |   |   |                                                    |   |   |                    |   |   |   |   |   |
| Exercisable at December 31, 2010 |   |                  | 7,332,783 |   |                          | $      | 2.29   |                                                    |   |   | 6.0                     |   |   | $ | 4,213,550 |   |

| Range of  |   |         |               |   |                  |   |
|----------------|--------|--------------|--------------------|--------|-----------------------|--------|
| Exercise       |   | Outstanding  |               |   |                  |   |
| Price          |   | Options      |               |   | Expiration Dates |   |
|      |   |         |               |   |                  |   |
| $0.50 - 2.00   |   |         | 3,070,000          |   |                  |   | 2015 - 2019 |   |
| $ 2.01 - 3.00  |   |         | 1,932,004          |   |                  |   | 2013 - 2020 |   |
| $3.01 - 4.00   |   |         | 4,818,275          |   |                  |   | 2012 - 2018 |   |
| $4.01 - 8.00   |   |         | 2,042              |   |                  |   | 2011 |   |
| $8.01 - higher |   |         | 3,300              |   |                  |   | 2011 |   |
|           |   |    |     |   |                  |   |   |   |
|           |   |         | 9,825,621          |   |                  |   |   |   |

|                                |   | Twelve Months Ended December 31, |      |
|-------------------------------------|--------|------------------------------------------------------|-----------|
|                           |   | 2010                                                 |      |   | 2009 |   |
|                                |   |                                                 |      |   |   |   |
| Research and development costs      |   | $                                                    | 2,840,465 |   |   | $ | 2,887,001 |   |
| General and administrative expenses |   |                                                 | 2,400,417 |   |   |   | 1,669,915 |   |
| Total                               |   | $                                                    | 5,240,882 |   |   | $ | 4,556,916 |   |

|                                  |   |                     |    |   | Weighted-average grant |   |
|---------------------------------------|--------|--------------------------|---------|--------|-----------------------------|--------|
|                             |   | Number of RSUs |    |   | date fair value   |   |
|                                  |   |                     |    |   |                        |   |
| Balance at January 1, 2010            |   |                     | -       |   |                        | $      | - |   |
| Granted                               |   |                     | 296,369 |   |                        |   | 2.21 |   |
| Vested and converted to common shares |   |                     | -       |   |                        |   | - |   |
| Cancelled                             |   |                     | -       |   |                        |   | - |   |
| Balance at December 31, 2010          |   |                     | 296,369 |   |                        | $      | 2.21 |   |

----

|   | · | On November 11, 2010, we granted 281,369 restricted stock units (RSUs) to company executives in payment of 2009 Long Term Incentive Awards.  The RSUs vest quarterly over three years.  Subject to certain exceptions, the stock cannot be sold for a period of five years after award. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On November 15, 2010, we granted 15,000 RSUs to an independent director for compensation related to a change in the provisions of the independent director’s amended remuneration plan.  The RSUs vest immediately, but cannot be sold for a period of five years after the award. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On March 30, 2009 we granted a consultant warrants to purchase 96,000 shares at a price of $1.25.  The warrants shall be fully vested on 3/20/2010 and expire on 3/30/2015. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On June 30, 2009 we completed a registered offering of 800,000 units at a price per share of $1.25.  As a result of this transaction we issued: |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | 800,000 fully paid common shares. |
|--------|---|-----------------------------------|

|   | o | 800,000 Series D Warrants to purchase common stock at a price of $1.25.  The warrants expire on June 30, 2010. |
|--------|---|--------------------------------------------------------------------------------------------------------------------------|

|   | o | 800,000 Series E Warrants to purchase common stock at a price of $1.25.  The warrants expire on June 30, 2012. |
|--------|---|--------------------------------------------------------------------------------------------------------------------------|

|   | o | 800,000 Series F Warrants to purchase common stock at a price of $1.25.  The warrants expire on June 30, 2014. |
|--------|---|--------------------------------------------------------------------------------------------------------------------------|

|   | o | 40,000 placement agent warrants to purchase common stock at a price of $1.5625.  The warrants expire on June 30, 2014. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------|

|   | · | On October 1, 2009 we granted a consultant warrants to purchase 100,000 shares at a price of $1.49.  The warrants are fully vested and have a cashless exercise provision.  The warrants expire on 10/1/2016. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On January 8, 2010, pursuant to a consulting agreement for investor relations and business development services, we issued Market Development Consulting Group, Inc.: (i) 140,000 common shares; and (ii) a common stock purchase warrant entitling the holder to purchase 400,000 shares of common stock at $1.70 per share.  The warrant is exercisable immediately, shall expire on December 31, 2019, and is freely assignable in whole or in part.   We also agreed to register the shares underlying the warrant for resale.   |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On January 29, 2010, as an inducement to exercise 800,000 Series D Warrants, we issued Vicis Capital Master Fund a replacement warrant.  As a result of the exercise, we received gross proceeds in the amount of $1,000,000.  The replacement warrant entitles the holder to purchase 400,000 common shares at price of $1.85 per share.  The warrant has a term of 1 year. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In March of 2010, in connection with the exercise of 2,699,400 Series C Warrants, we issued the prior warrant holders an aggregate of 2,699,400 replacement warrants.  As a result of the exercise, we received gross proceeds in the amount of $3,374,250.   The replacement warrant is substantially the same as the prior Series C warrants except that: (i) the exercise price is $2.13; (ii) the replacement warrants expire 5 years from the date they were issued; (iii) is callable by the company in the event our common stock trades above $5.00 and certain other conditions are met, and (iv) the replacement warrants do not provide for any anti-dilution rights. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In March of 2010, in connection with the exercise of 782,005 placement agent warrants, we issued T.R. Winston & Company, LLC, a replacement warrant to purchase 782,005.   As a result of the exercise, we received gross proceeds in the amount of $860,205.  The replacement warrant is substantially the same as the prior warrants issued to our Series C Warrant holders except that: (i) the exercise price is $2.13; (ii) the replacement warrants expire 5 years from the date they were issued; and (iii) the replacement warrants do not provide for any anti-dilution rights. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In March of 2010, we amended 706,752 placement agent warrants held by TR Winston & Company, LLC.  Pursuant to the amendment, we agreed to extend the expiration date of the placement agent warrants from March 15, 2012 to March 15, 2014 in exchange for the removal of the anti-dilution provisions from said warrants.  We did not receive any additional consideration in connection with the amendment. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On May 14, 2010, as consideration for amending a consulting agreement for investor relations and business development services, we issued Market Development Consulting Group, Inc. a common stock purchase warrant entitling the holder to purchase 200,000 shares of common stock at $3.17 per share.  The warrant is exercisable immediately, shall expire on May 14, 2020, and is freely assignable in whole or in part.  The warrant is substantially similar to the consultant warrant issued on January 8, 2010.  |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | In June of 2010, we issued an aggregate 2,678,577 warrants in connection with a registered direct offering.  Each warrant has an exercise price of $3.25 per share, and is exercisable for a period of three years.  |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In June of 2010, we issued Noble International Investment, Inc., D/B/A Noble Financial Capital Markets a warrant to purchase 250,001 common shares.  The warrant was issued as compensation for placement agent services which Noble International Investments, Inc., performed in connection with our $10 million registered direct offering of units.  The warrant is substantially the same as the investor warrant issued in the offering and has: (i) an exercise price of $3.25, and (ii) a term of three years. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                             |   |             |       |   |      |   |   | Weighted-                 |   |   |      |   |
|----------------------------------|--------|------------------|------------|--------|-----------|--------|--------|---------------------------|--------|--------|-----------|--------|
|                        |   |             |       |   | Weighted- |   |   | Average                   |   |   |      |   |
|                        |   |             |       |   | Average   |   |   | Remaining                 |   |   | Aggregate |   |
|                        |   | Number           |       |   | Exercise  |   |   | Contractual               |   |   | Intrinsic |   |
|                        |   | of Warrants |       |   | Price     |   |   | Life (in years) |   |   | Value     |   |
|                             |   |             |       |   |      |   |   |                      |   |   |      |   |
| Outstanding at January 1, 2009   |   |             | 13,079,762 |   |      | $      | 2.27   |                      |   |   | 2.0       |   |   |   | - |   |
|                             |   |             |       |   |      |   |   |                      |   |   |      |   |   |   |   |   |
| Granted                          |   |             | 2,536,000  |   |      |   | 1.25   |                      |   |   |      |   |   |   |   |   |
| Exercised                        |   |             | (320,505   | )      |      |   | 1.25   |                      |   |   |      |   |   |   |   |   |
| Forfeited                        |   |             | -          |   |      |   | -      |                      |   |   |      |   |   |   |   |   |
|                             |   |             |       |   |      |   |   |                      |   |   |      |   |   |   |   |   |
| Outstanding at December 31, 2009 |   |             | 15,295,257 |   |      |   | 1.82   |                      |   |   | 2.0       |   |   |   | - |   |
|                             |   |             |       |   |      |   |   |                      |   |   |      |   |   |   |   |   |
| Granted                          |   |             | 7,509,983  |   |      |   | 2.55   |                      |   |   | 3.9       |   |   |   | - |   |
| Exercised                        |   |             | (7,323,191 | )      |      |   | 1.20   |                      |   |   | -         |   |   |   | - |   |
| Forfeited                        |   |             | (25,355    | )      |      |   | 1.25   |                      |   |   | -         |   |   |   | - |   |
|                             |   |             |       |   |      |   |   |                      |   |   |      |   |   |   |   |   |
| Outstanding at December 31, 2010 |   |             | 15,456,694 |   |      | $      | 2.47   |                      |   |   | 3.4       |   |   | $ | 2,190,458 |   |
|                             |   |             |       |   |      |   |   |                      |   |   |      |   |   |   |   |   |
| Exercisable at December 31, 2010 |   |             | 13,456,694 |   |      | $      | 2.24   |                      |   |   | 2.6       |   |   | $ | 2,190,458 |   |

|                                                |   | Strike |   | Date          | Date               |        | Warrants    |   |
|----------------------------------------------------------|--------|--------|--------|---------------|--------------------|-------------|-------------|--------|
|                                                |   | Price  |   | of Issue | of Expiration |        | Outstanding |   |
| Series A & B Warrants                 |   | $      | 1.25   |          | February-06        | February-11 |        |   | 4,359,605 |   |
| Series A & B Warrants, Placement Agent               |   | $      | 1.10   |          | February-06        | February-11 |        |   | 782,005 |   |
| Series C Warrants                                        |   | $      | 1.25   |          | October-07         | October-12  |        |   | 1,227,000 |   |
| Series C Warrants, Placement Agent                       |   | $      | 1.25   |          | March-07           | March-12    |        |   | 294,480 |   |
| Series C Warrants, anti-dilution awards                  |   | $      | 1.25   |          | December-08        | October-12  |        |   | 1,472,400 |   |
| Series C Warrants, Placement Agent, anti-dilution awards |   | $      | 1.25   |          | December-08        | March-12    |        |   | 412,272 |   |
|                                                     |   |   |   |          |               |        |        |   |   |   |
| Total warrants no longer accounted for as equity         |   |   |   |          |               |        |        |   | 8,547,762 |   |

----

|                    |   | December 31, |   |   | December 31, |   |
|-------------------------|--------|-------------------|--------|--------|-------------------|--------|
|               |   | 2010              |   |   | 2009              |   |
|                    |   |              |   |   |              |   |
| Annual dividend yield   |   |              | 0      |   |              |   | 0 |   |
| Expected life (months)  |   |              | 1.75   |   |              |   | 7.2-24 |   |
| Risk free interest rate |   |              | 0.14   | %      |              |   | .20%-1.14 | % |
| Expected volatility     |   |              | 68.80  | %      |              |   | 62%-98 | % |

|                                |   | Twelve Months Ended December 31, |      |
|-------------------------------------|--------|------------------------------------------------------|-----------|
|                           |   | 2010                                                 |      |   | 2009 |   |
|                                |   |                                                 |      |   |   |   |
| Research and development costs      |   | $                                                    | 2,840,465 |   |   | $ | 2,887,001 |   |
| General and administrative expenses |   |                                                 | 2,400,417 |   |   |   | 1,669,915 |   |
| Total                               |   | $                                                    | 5,240,882 |   |   | $ | 4,556,916 |   |

|                                               |   | 2010                          |   |   | 2009                          |   |
|----------------------------------------------------|--------|-------------------------------|--------|--------|-------------------------------|--------|
| Dividend yield                           |   | 0                             | %      |   | 0                             | %      |
| Expected volatility range           |   | 46% to 87 %    |   |   | 46% to 85 %    |   |
| Risk-free interest rate range  |   | 0.61 to 4.96 % |   |   | 0.74 to 4.96 % |   |
| Expected life                            |   | 2 to 6.5 yrs   |   |   | 2 to 6.5 yrs   |   |

----

|                                         |   | For The Twelve Months |        |
|----------------------------------------------|--------|--------------------------------------|-------------|
|                                    |   | Ended December 31,         |        |
|                                    |   | 2010                                 |        |   | 2009 |   |
|                                         |   |                                 |        |   |   |   |
| Basic:                                       |   |                                 |        |   |   |   |
| Net loss attributable to common shareholders |   | $                                    | (18,387,300 | ) |   | $ | (10,364,363 | ) |
| Weighted average common shares outstanding   |   |                                 | 43,466,074  |   |   |   | 34,280,882 |   |
| Basic and diluted loss per common share      |   | $                                    | (0.42       | ) |   | $ | (0.30 | ) |

|                           |   | 2010   |     |   | 2009   |   |
|--------------------------------|--------|--------|----------|--------|--------|--------|
| Furniture and Fixtures         |   | $      | 15,990   |   |   | $      | 14,400 |   |
| Computers and office equipment |   |   | 54,008   |   |   |   | 47,109 |   |
| Lab equipment                  |   |   | 348,411  |   |   |   | 280,579 |   |
|                           |   |   |     |   |   |   |   |   |
|                           |   | $      | 418,409  |   |   | $      | 342,088 |   |
| Less accumulated depreciation  |   |   | (218,325 | )      |   |   | (145,333 | ) |
| Property and equipment, net    |   | $      | 200,084  |   |   | $      | 196,755 |   |

----

|               |   | 2010   |    |   | 2009         |   |
|--------------------|--------|--------|---------|--------|--------------|--------|
|          |   |   |    |   | Accumulated  |   |   |   |   |   | Accumulated |   |
|          |   | Gross  |    |   | Amortization |   |   | Gross |   |   | Amortization |   |
|               |   |   |    |   |         |   |   |   |   |   |   |   |
| Patent filing fees |   | $      | 621,762 |   |         | $      | (121,608 | ) |   | $ | 365,409 |   |   | $ | (63,849 | ) |

|                              |   | 2010   |        |   | 2009   |   |
|-----------------------------------|--------|--------|-------------|--------|--------|--------|
| Net operating loss carry-forwards |   | $      | 21,789,496  |   |   | $      | 17,842,957 |   |
| Valuation allowance               |   |   | (21,789,496 | )      |   |   | (17,842,957 | ) |
| Net deferred tax asset            |   | $      | -           |   |   | $      | - |   |

----

| Level 1 — |   | Inputs are unadjusted, quoted prices in active markets for identical assets at the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.                                                                                                                                                                                                       |
|---------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                      |   | The fair valued assets we hold that are generally included in this category are money market securities where fair value is based on publicly quoted prices and included in cash equivalents.                                                                                                                                                                                                                                                                                   |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Level 2 — |   | Inputs are other than quoted prices included in Level 1, which are either directly or indirectly observable for the asset or liability through correlation with market data at the reporting date and for the duration of the instrument's anticipated life.                                                                                                                                                                                                               |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                      |   | We carry no investments classified as Level 2.                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Level 3 — |   | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities and which reflect management's best estimate of what market participants would use in pricing the asset or liability at the reporting date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.  Our warranty obligations are considered Level 3. |

|         |   |                              |   | Fair value measurements at December 31, 2010 using |      |
|--------------|--------|-----------------------------------|--------|---------------------------------------------------------------------------------------|-----------|
|    |   |                         |   | Dec. 31, 2010                                                               |      |   | Quoted prices inactive markets foridentical assets(Level 1) |   |   | Significantotherobservableinputs (Level2) |   |   | SignificantUnobservableinputs (Level3) |   |
|    |   |                              |   |                                                                                  |      |   |   |   |   |   |   |   |   |   |
| Assets:      |   |                              |   |                                                                                  |      |   |   |   |   |   |   |   |   |   |
|         |   | Cash and cash equivalents         |   | $                                                                                     | 9,261,233 |   |   | $ | 9,261,233 |   |   | $ | - |   |   | $ | - |   |
|         |   |                              |   |                                                                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities: |   |                              |   |                                                                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         |   | Fair value of warrant obligations |   |                                                                                  | 1,250,839 |   |   |   | - |   |   |   | - |   |   |   | 1,250,839 |   |

|         |   |                              |   | Fair value measurements at December 31, 2009 using |      |
|--------------|--------|-----------------------------------|--------|---------------------------------------------------------------------------------------|-----------|
|    |   |                         |   | Dec. 31, 2009                                                               |      |   | Quoted prices inactive markets foridentical assets(Level 1) |   |   | SignificantOtherObservableinputs (Level2) |   |   | SignificantUnobservableinputs (Level3) |   |
|    |   |                              |   |                                                                                  |      |   |   |   |   |   |   |   |   |   |
| Assets:      |   |                              |   |                                                                                  |      |   |   |   |   |   |   |   |   |   |
|         |   | Cash and cash equivalents         |   | $                                                                                     | 2,309,774 |   |   | $ | 2,309,774 |   |   | $ | - |   |   | $ | - |   |
|         |   |                              |   |                                                                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities: |   |                              |   |                                                                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         |   | Fair value of warrant obligations |   |                                                                                  | 6,462,039 |   |   |   | - |   |   |   | - |   |   |   | 6,462,039 |   |

----

|                                                                                        |   | Twelve months endedDecember 31, 2010 |       |   | Twelve months endedDecember 31, 2009 |   |
|---------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|------------|--------|----------------------------------------------------------|--------|
|                                                                                   |   |                                                     |       |   |                                                     |   |
| Fair value of warrant obligations at beginning of period                                    |   | $                                                        | 6,462,039  |   |                                                     | $      | - |   |
|                                                                                        |   |                                                     |       |   |                                                     |   |   |   |
| Cumulative effect of reclassification of warrants to liabilities at beginning of period     |   |                                                     | -          |   |                                                     |   | 6,759,791 |   |
|                                                                                        |   |                                                     |       |   |                                                     |   |   |   |
| Extinguishment through warrant exercises and modifications                                  |   |                                                     | (6,563,180 | )      |                                                     |   | (214,404 | ) |
|                                                                                        |   |                                                     |       |   |                                                     |   |   |   |
| Extinguishment through warrant expirations                                                  |   |                                                     | (254       | )      |                                                     |   | - |   |
|                                                                                        |   |                                                     |       |   |                                                     |   |   |   |
| Net loss (gain) for change in fair value included in the statement of operations for period |   |                                                     | 1,352,234  |   |                                                     |   | (83,348 | ) |
|                                                                                        |   |                                                     |       |   |                                                     |   |   |   |
| Fair value of warrant obligations at end of period                                          |   | $                                                        | 1,250,839  |   |                                                     | $      | 6,462,039 |   |

----

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

| ITEM 9A. | CONTROLS AND PROCEDURES |
|----------|-------------------------|

|   | · | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | · | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Item 9B. | Other Information |
|----------|-------------------|

| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
|----------|--------------------------------------------------------|

| Name                  |    | Principal Occupation                                                             |    | Age |    | DirectorSince |
|-----------------------|--------------|---------------------------------------------------------------------------------------|--------------|-----|--------------|---------------|
| Scott Ogilvie(1) |         | CEO and President of Gulf Enterprises International, Ltd.Director of Neuralstem, Inc. |         | 56  |         | 2007          |

| Name                          |    | Principal Occupation    |    | Age    |    | DirectorSince |
|-------------------------------|--------------|------------------------------|--------------|--------|--------------|---------------|
| William  Oldaker(1) |         | Partner at Oldaker Group LLC |         | 69     |         | 2007          |
|                          |         | Director of Neuralstem, Inc. |         |   |         |          |
|                          |         |                         |         |   |         |          |
| Stanley Westreich(1)          |         | Investor                     |         | 74     |         | 2/2011        |

----

| Name                      |    | Principal Occupation                                                            |    | Age    |    | DirectorSince |
|---------------------------|--------------|--------------------------------------------------------------------------------------|--------------|--------|--------------|---------------|
| I. Richard Garr |         | Chief Executive Officer, President, General Counsel and Director of Neuralstem, Inc. |         | 58     |         | 1996          |
|                      |         |                                                                                 |         |   |         |          |
| Karl Johe, Ph.D           |         | Chief Scientific Officer, Chairman of the Board and Director of Neuralstem, Inc.     |         | 50     |         | 1996          |

----

| Name                      |    | Position                                            |    | Age    |    | Position Since |
|---------------------------|--------------|-----------------------------------------------------|--------------|--------|--------------|---------------------|
| I. Richard Garr |         | Chief Executive Officer, President, General Counsel |         | 58     |         | 1996                |
|                      |         |                                                |         |   |         |                |
| Karl Johe, Ph.D.          |         | Chief Scientific Officer                            |         | 50     |         | 1996                |
|                      |         |                                                |         |   |         |                |
| John Conron               |         | Chief Financial Officer                             |         | 60     |         | 4/1/2007            |

|                                    |         |                                                                                             |         | No. of Transactions |
|-----------------------------------------|--------------|--------------------------------------------------------------------------------------------------|--------------|-------------------------------|
| Name of Reporting Person |    | Type of Report and Number Filed Late                               |    | Reported Late            |
| William Oldaker                         |         | Form 5 – Annual Statement of Changes in Beneficial Ownership of Securities (1 Report) |         | 5                             |
| William Oldaker                         |         | Form 4– Statement of Change in Beneficial Ownership (1Report)                              |         | 2                             |
| Scott Ogilvie                           |         | Form 4– Statement of Change in Beneficial Ownership (1 Report)                             |         | 2                             |
| John Conron                             |         | Form 4– Statement of Change in Beneficial Ownership (1Report)                              |         | 2                             |
| Richard Garr                            |         | Form 4– Statement of Change in Beneficial Ownership (1Report)                              |         | 2                             |
| Karl Johe                               |         | Form 4– Statement of Change in Beneficial Ownership (1Report)                              |         | 2                             |

----

| Director             |         | Audit Committee |         | Nominationand CorporateGovernanceCommittee |    | CompensationCommittee |
|----------------------|--------------|----------------------|--------------|-------------------------------------------------|--------------|-----------------------|
| William Oldaker |    | Chair                |    | Member                                          |    | Member                |
| Scott Ogilvie   |    | Member               |    | Chair                                           |    | Chair                 |
| Stanley Westreich    |         | Member               |         | —                                         |         | Member                |

----

|                                           |   |         |   |   |    |   |         |    |   |   |    | Nonequity    |   | Non-qualified |   |           |   |         |   |
|------------------------------------------------|--------|--------------|--------|--------|---------|--------|--------------|---------|--------|--------|---------|--------------|--------|---------------|--------|----------------|--------|--------------|--------|
|                                           |   |         |   |   |    |   |         | Stock   |   |   |    | Incentive    |   | deferred      |   |           |   |         |   |
| Name and                                  |   |    |   |   |    | Bonus  |         | Awards  |   | Option |    | Plan         |   | compensation  |   | All other |   |         |   |
| principal                                      |   |    |   | Salary |    | ($)    |    | ($)     |   | Award  |    | Compensation |   | earning       |   | Compensation   |   | Total        |   |
| position                                       |   | Year         |   | ($)    |    | (d)    |         | (e)     |   | ($)    |    | ($)          |   | ($)           |   | ($)            |   | ($)          |   |
| (a)                                            |   | (b)          |   | (c)    |    | (3)    |         | (3)     |   | (f)(2) |    | (g)          |   | (h)           |   | (i)(1)         |   | (j)          |   |
|                                           |   |         |   |   |    |   |         |    |   |   |    |         |   |          |   |           |   |         |   |   |   |
| I. Richard Garr                                |   | 2010         |   | $      | 407,000 |   |         | 204,200 |   |   | 345,250 |         |   | 305,250       |   |      |   |    |   |   | 121,137 |   | $ | 1,382,837 |   |
| Chief Executive                                |   | 2009         |   | $      | 407,000 |   |         | 52,584  |   |   | 157,754 |         |   | -             |   |           |   |         |   |   | 48,688 |   | $ | 666,026 |   |
| President, General Counsel (“PEO”) |   |         |   |   |    |   |         |    |   |   |    |         |   |          |   |           |   |         |   |   |   |   |   |   |   |
|                                           |   |         |   |   |    |   |         |    |   |   |    |         |   |          |   |           |   |         |   |   |   |   |   |   |   |
| Karl Johe                                      |   | 2010         |   | $      | 422,100 |   |         | 253,260 |   |   | 316,575 |         |   | 316,575       |   |           |   |         |   |   | 6,000 |   | $ | 1,314,510 |   |
| Chief Scientific Officer                       |   | 2009         |   | $      | 422,100 |   |         | 204,508 |   |   | 68,169  |         |   | -             |   |           |   |         |   |   | 6,000 |   | $ | 700,777 |   |
|                                           |   |         |   |   |    |   |         |    |   |   |    |         |   |          |   |           |   |         |   |   |   |   |   |   |   |
| John Conron                                    |   | 2010         |   | $      | 225,000 |   |         | 18,750  |   |   | 114,000 |         |   | 76,500        |   |           |   |         |   |   | 6,000 |   | $ | 440,250 |   |
| Chief Financial Officer                        |   | 2009         |   | $      | 225,000 |   |         | 7,481   |   |   | 22,444  |         |   | -             |   |           |   |         |   |   | 6,000 |   | $ | 260,925 |   |
|                                           |   |         |   |   |    |   |         |    |   |   |    |         |   |          |   |           |   |         |   |   |   |   |   |   |   |
| Thomas Hazel                                   |   | 2010         |   |   | 180,000 |   |         | 15,000  |   |   | -       |         |   | -             |   |           |   |         |   |   | - |   | $ | 195,000 |   |
| Senior Vice President of Research              |   | 2009         |   | $      | 180,000 |   |         | 15,000  |   |   | -       |         |   | -             |   |           |   |         |   |   | - |   | $ | 195,000 |   |

|   | (1) | Includes automobile allowance, perquisites and other personal benefits. |
|--------|-----|-------------------------------------------------------------------------|

|   | (2) | For additional information regarding the valuation of Option Awards, refer to Note 2 of our financial statements in the section captioned "Stock Options." |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

|   | (3) | For additional information regarding the valuation of Stock Awards, refer to Note 2 of our financial statements in the section captioned “Preferred and Common Stock.” |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Officer             |    | Severance |    | Accelerated Vestingof Awards(1) |   | Total  |
|--------------------------|--------------|-----------|--------------|-------------------------------------------|--------|-------------|
| I Richard Garr |    | $         | 1,000,000    |                                      | $      | 1,944,000   |     | $  | 2,944,000 |

|   | (1) | Derived from the intrinsic value of the stock options as of 12/31/10 using a market value of $2.12 for the Company’s common stock. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------|

| Officer    |    | Severance |    | Accelerated Vesting of Awards(1) |    | Total                                   |    |
|-----------------|--------------|-----------|--------------|-------------------------------------------------|--------------|-----------------------------------------|--------------|
| Karl Johe, Ph.D |         | $         | 1,000,000    |                                            | $            |      1,944,000 |         | $ | 2,944,000 |   |

|   | (1) | Derived from the intrinsic value of the stock options as of 12/31/10 using a market value of $2.12 for the Company’s common stock. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------|

----

| Name(a)              |   |    |   |   | Number ofsecuritiesunderlyingunexercisedoptions(#)exercisable(b) |      |   | Number ofsecuritiesunderlyingunexercisedoptions(#)unexercisable(c) |   | Equityincentiveplanawards:Number ofsecuritiesunderlyingunexercisedunearnedoptions(#)(d) |   | Optionexerciseprice($)(e) |   | Optionexpirationdate(f) |   | Numberof sharesor unitsof stockthat havenotvested(#)(g) |     |   | Marketvalue ofshares ofunits ofstock thathave notvested($)(h) |    | Equityincentiveplanaward:Numberof un-earnedshares,units orotherrights thathave notvested(#)(i) |               | Equityincentiveplanawards:Market orpayoutvalue ofunearnedshares,units orotherrights thathave notvested($)(j) |          |
|----------------------|--------|--------------|--------|--------|-----------------------------------------------------------------------|-----------|--------|-------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------|--------|---------------------------|--------|-------------------------|--------|-----------------------------------------------------------------------------|----------|--------|----------------------------------------------------------------------------------------|---------|--------------------------------------------------------------------------------------------------------------------|--------------------|---------------------------------------------------------------------------------------------------------------------------------------|---------------|
|       |   |         |   |   |                                                                  |      |   |                                                                    |   |                                                                               |   |                      |   |               |   |                                                                        |     |   |                                                                                   |    |                                                                                                               |               |                                                                                                                                  |          |
| I. Richard Garr      |   | (1           | )      |   |                                                                  | 1,200,000 |   |                                                                    |   | 0                                                                                            |   |                      |   | $                       | 0.50   |                                                                        | 7/28/15  |   |                                                                                   |    |                                                                                                               |     |                                                                                                                                  |     |   |   |   |
|       |   | (2           | )      |   |                                                                  | 1,400,000 |   |                                                                    |   | 700,000                                                                                      |   |                      |   | $                       | 3.66   |                                                                        | 1/1/18   |   |                                                                              |    |                                                                                                               |     |                                                                                                                                  |     |   |     |   |
|                 |   | (3           | )      |   |                                                                  | -         |   |                                                                    |   | 263,147                                                                                      |   |                      |   | $                       | 2.21   |                                                                        | 11/15/20 |   |                                                                                   | 138,122 |                                                                                                               |               |                                                                                                                                  | 292,819       |   |   |   |   |   |
| Karl Johe (4)   |   | (5           | )      |   |                                                                  | 1,200,000 |   |                                                                    |   | 0                                                                                            |   |                      |   | $                       | 0.50   |                                                                        | 7/28/15  |   |                                                                                   |    |                                                                                                               |               |                                                                                                                                  |          |   |     |   |     |   |
|                 |   | (6           | )      |   |                                                                  | 333,333   |   |                                                                    |   |                                                                                         |   |                      |   | $                       | 3.01   |                                                                        | 10/31/15 |   |                                                                                   |    |                                                                                                               |               |                                                                                                                                  |          |   |   |   |   |   |
|       |   | (7           | )      |   |                                                                  | 1,400,000 |   |                                                                    |   | 700,000                                                                                      |   |                      |   | $                       | 3.66   |                                                                        | 1/1/18   |   |                                                                                   |    |                                                                                                               |               |                                                                                                                                  |          |   |     |   |     |   |
|                 |   | (8           | )      |   |                                                                  | -         |   |                                                                    |   | 272,909                                                                                      |   |                      |   | $                       | 2.21   |                                                                        | 11/15/20 |   |                                                                                   | 143,247 |                                                                                                               |               |                                                                                                                                  | 303,684       |   |   |   |   |   |
| John Conron          |   | (9           | )      |   |                                                                  | 100,000   |   |                                                                    |   |                                                                                         |   |                      |   | $                       | 3.15   |                                                                        | 4/1/15   |   |                                                                                   |    |                                                                                                               |               |                                                                                                                                  |          |   |   |   |   |   |
|                 |   | (10          | )      |   |                                                                  | 50,000    |   |                                                                    |   |                                                                                         |   |                      |   | $                       | 2.60   |                                                                        | 4/1/18   |   |                                                                                   |    |                                                                                                               |               |                                                                                                                                  |          |   |   |   |   |   |
|                 |   | (11          | )      |   |                                                                  | 1,000,000 |   |                                                                    |   | -                                                                                            |   |                      |   | $                       | 2.60   |                                                                        | 4/1/18   |   |                                                                                   |    |                                                                                                               |               |                                                                                                                                  |          |   |   |   |   |   |
|                 |   | (12          | )      |   |                                                                  | -         |   |                                                                    |   | 65,948                                                                                       |   |                      |   | $                       | 2.21   |                                                                        | 11/15/20 |   |                                                                                   | 34,615  |                                                                                                               |               |                                                                                                                                  | 73,384        |   |   |   |   |   |
| Thomas Hazel         |   | (13          | )      |   |                                                                  | 120,000   |   |                                                                    |   | 80,000                                                                                       |   |                      |   | $                       | 1.89   |                                                                        | 8/11/18  |   |                                                                                   |    |                                                                                                               |               |                                                                                                                                  |          |   |   |   |   |   |

----

| (1) | On July 28, 2005, we granted our CEO an option to purchase 1,200,000 common shares.  The option was granted under our 2005 Stock Plan.  The option vests annually over 4 years at a rate of 300,000 per year.  The applicable vesting dates are July 28, 2006, 2007, 2008 and 2009.  The only vesting condition is Mr. Garr’s continued employment. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | On January 21, 2008, we granted our CEO an option to purchase 2,100,000 common shares.  The grant has an effective date of January 1, 2008.  The option was granted under our 2007 Stock Plan.  The option vests at a rate of 700,000 per 14 month period.  The applicable vesting dates are February 28, 2009, April 30, 2010, and June 30, 2011.  The only vesting condition is Mr. Garr’s continued employment. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | On November 11, 2010, we granted our CEO an option to purchase 263,147 common shares and 138,122 restricted stock units.  The award was granted under our 2010 Stock Plan.  The awards vest quarterly over three years effective November 11, 2010.  The only vesting condition is Mr. Garr’s continued employment. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (4) | Outstanding equity awards for Mr. Johe do not include warrants to purchase an aggregate of 3,000,000 common shares that were issued on June 5, 2007. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | On July 28, 2005, we granted our CSO an option to purchase 1,200,000 common shares.  The option was granted under our 2005 Stock Plan.  The option vests annually over 4 years at a rate of 300,000 per year.  The applicable vesting dates are July 28, 2006, 2007, 2008 and 2009.  The only vesting condition is Mr. Johe’s continued employment. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | On September 20, 2007, we granted our Chairman and Chief Scientific Officer, an option to purchase an aggregate of 333,333 shares of our common stock at a price per share of $3.01 pursuant to our 2005 Stock Plan. The option expires 5 years from the date when they become exercisable.   The option vests on October 31, 2010.  The option is immediately exercisable upon an event which would result in an acceleration of Mr. Johe’s stock option grants under his employment agreement. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | On January 21, 2008, we granted our CSO an option to purchase 2,100,000 common shares.  The grant has an effective date of January 1, 2008.  The option was granted under our 2007 Stock Plan.  The option vests at a rate of 700,000 per 14 month period.  The applicable vesting dates are February 28, 2009, April 30, 2010, and June 30, 2011.  The only vesting condition is Mr. Johe’s continued employment. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | On November 11, 2010, we granted our CSO an option to purchase 272,909 common shares and 143,247 shares of restricted stock units.  The award was granted under our 2010 Stock Plan.  The awards vest quarterly over three years effective November 11, 2010.  The only vesting condition is Mr. Johe’s continued employment. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | In April of 2007, we granted our CFO an option to purchase 100,000 common shares pursuant to his employment contract.  The option is fully vested as of December 31, 2008. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | On April 1, 2008, we granted our CFO an option to purchase 50,000 common shares.  The grant was made pursuant to Mr. Conron’s employment agreement.  The option was fully vested at the grant date. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (11) | On April 1, 2008, we granted our CFO an option to purchase 1,000,000 common shares.  The option vests at an annual rate of 333,333 per year.  The vesting dates are April 1, 2009, 2010 and 2011.  The only vesting condition is Mr. Conron’s continued employment. |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (12) | On November 11, 2010, we granted our CFO an option to purchase 65,948 common shares and 34,615 shares of restricted stock.  The award was granted under our 2010 Stock Plan.  The awards vest quarterly over three years effective November 11, 2010.  The only vesting condition is Mr. Conron’s continued employment. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (13) | On August 8, 2008, we granted the Sr. Vice President of Operations an option to purchase 200,000 common shares.  The grant was made pursuant to Mr. Hazel’s employment agreement.  The option vests at 40,000 immediately on award and the remainder annually over 4 years at a rate of 40,000 per year. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                       |   |                 |   |   |   |   |   |          |   |                |   | Nonqualified |   |           |   |   |   |   |
|----------------------------|--------|----------------------|--------|--------|--------|--------|--------|---------------|--------|---------------------|--------|--------------|--------|----------------|--------|--------|--------|--------|
|                       |   | Fees Earned     |   |   |   |   |   |          |   | Non-Equity          |   | Deferred     |   |           |   |   |   |   |
|                  |   | or Paid in |   |   | Stock  |   |   |   Option |   | Incentive Plan |   | Compensation |   | All Other |   |   |   |   |
|                  |   | Cash                 |   |   | Awards |   |   | Awards        |   | Compensation        |   | Earnings     |   | Compensation   |   |   | Total  |   |
| Name                       |   | ($)                  |   |   | ($)    |   |   | ($)           |   | ($)                 |   | ($)          |   | ($)            |   |   | ($)    |   |
| (a)                        |   | (b)                  |   |   | (c)    |   |   | (d)           |   | (e)                 |   | (f)          |   | (g)            |   |   | (h)    |   |
| William Oldaker       |   |                 |   |   |   |   |   |          |   |                |   |         |   |           |   |   |   |   |
| Independent Director(1)(3) |   | $                    | 43,750 |   |   |   | 32,550 |          |   |                | 21,363 |         |   |           |   |   |   |   |   | $ | 97,663 |   |
| Audit Committee(2)         |   | $                    | 5,000  |   |   |   |   |          |   |                | 5,341  |         |   |           |   |   |   |   |   | $ | 10,341 |   |
| Compensation Committee(2)  |   | $                    | 3,500  |   |   |   |   |          |   |                | 5,341  |         |   |           |   |   |   |   |   | $ | 8,841 |   |
| Nomination Committee(2)    |   | $                    | 5,000  |   |   |   |   |          |   |                | 5,341  |         |   |           |   |   |   |   |   | $ | 10,341 |   |
|                       |   |                 |   |   |   |   |   |          |   |                |   |         |   |           |   |   |   |   |   |   |   |   |
| Scott Ogilvie              |   |                 |   |   |   |   |   |          |   |                |   |         |   |           |   |   |   |   |   |   |   |   |
| Independent Director(1)(3) |   | $                    | 43,750 |   |   |   | 32,550 |          |   |                | 21,363 |         |   |           |   |   |   | 4,237  |   |   | $ | 101,900 |   |
| Audit Committee(2)         |   | $                    | 5,000  |   |   |   |   |          |   |                | 5,341  |         |   |           |   |   |   |   |   |   | $ | 10,341 |   |
| Compensation Committee(2)  |   | $                    | 2,000  |   |   |   |   |          |   |                | 5,341  |         |   |           |   |   |   |   |   |   | $ | 7,341 |   |
| Nomination Committee(2)    |   | $                    | 5,000  |   |   |   |   |          |   |                | 5,341  |         |   |           |   |   |   |   |   |   | $ | 10,341 |   |

----

| (1) | On July 12, 2010, pursuant to our adopted director compensation plan, we issued to each of Messrs. Ogilvie and Oldaker options to purchase 20,000 shares of our common stock.  The options were issued pursuant to our 2007 Stock Plan. The exercise price per share is $2.51 and will expire 10 years from the date of grant.  The individual grants vest on July 12, 2011. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | On July 12, 2010, pursuant to our adopted director compensation plan, we issued to each of Messrs. Ogilvie and Oldaker, options to purchase 15,000 shares of our common stock (5,000 shares per each committee on which they serve). The options were issued pursuant to our 2007 Stock Plan.  The exercise price per share is $2.51 and the options vest on July 12, 2011. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | On November 15, 2010, pursuant to a meeting of the Compensation Committee, the Company awarded existing independent directors an additional 15,000 restricted fully paid and vested common shares to compensate for changes to the new director compensation structure.  Mr. Oldaker received restricted stock units (RSUs) and Mr. Ogilvie received restricted stock. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

| · | each person, or group of affiliated persons, known by us to be the beneficial owner of 5% or more of any class of our voting securities; |
|--------|------------------------------------------------------------------------------------------------------------------------------------------|

| · | each of our current directors and nominees; |
|--------|---------------------------------------------|

| · | each of our current named executive officers; and |
|--------|---------------------------------------------------|

| · | all current directors and named executive officers as a group. |
|--------|----------------------------------------------------------------|

|                                                             |   | Common Stock |      |
|------------------------------------------------------------------|--------|-------------------|-----------|
| Name and Address of Beneficial Owner(1) |   | Shares (3)   |      |   | SharesUnderlyingConvertibleSecurities(2) |   |   | Total |   |   | Percent ofClass(2) |   |
|                                                             |   |              |      |   |   |   |   |   |   |   |   |   |
| Directors and named executive officers       |   |              |      |   |   |   |   |   |   |   |   |   |
| Karl Johe, Ph.D                                                  |   |              | 1,740,674 |   |   |   | 3,956,075 |   |   |   | 5,696,749 |   |   |   | 11.78 | % |
| I. Richard Garr                                                  |   |              | 1,443,308 |   |   |   | 2,621,929 |   |   |   | 4,065,237 |   |   |   | 8.41 | % |
| Stanley Westreich                                                |   |              | 1,470,402 |   |   |   |   |   |   |   | 1,470,402 |   |   |   | 3.04 | % |
| John Conron                                                      |   |              | 66,743    |   |   |   | 1,155,495 |   |   |   | 1,222,238 |   |   |   | 2.53 | % |
| William Oldaker                                                  |   |              | 104,300   |   |   |   | 156,250 |   |   |   | 260,550 |   |   |   | * | % |
| Scott Ogilvie                                                    |   |              | 15,000    |   |   |   | 156,250 |   |   |   | 171,250 |   |   |   | * | % |
| Thomas Hazel, Ph.D                                               |   |              | 0         |   |   |   | 120,000 |   |   |   | 120,000 |   |   |   | * | % |
| All directors and executive officers as a group (7 persons) |   |              |      |   |   |   |   |   |   |   | 13,006,426 |   |   |   | 26.89 | % |

----

| * | Less than one percent. |
|---|------------------------|

| (1) | Except as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and to the information contained in the footnotes to this table. Unless otherwise indicated, the address of the beneficial owner is c/o Neuralstem, Inc. 9700 Great Seneca Highway, Rockville, MD. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Pursuant to Rules 13d-3 and 13d-5 of the Exchange Act, beneficial ownership includes any shares as to which a shareholder has sole or shared voting power or investment power, and also any shares which the shareholder has the right to acquire within 60 days, including upon exercise of common shares purchase options or warrant. There are 48,366,304 shares of common stock issued and outstanding as of March 1, 2011. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Shares include fully paid issued and outstanding shares, restricted shares and restricted share units. |
|-----|--------------------------------------------------------------------------------------------------------|

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

| ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
|----------|----------------------------------------|

----

| Type of Fees |   | 2010   |    |   | 2009   |   |
|------------------------|--------|--------|---------|--------|--------|--------|
|                   |   |   |    |   |   |   |
| Audit Fees             |   | $      | 94,367  |   |   | $      | 69,256 |   |
|                   |   |   |    |   |   |   |   |   |
| Audit Related Fees (1) |   |   | 23,000  |   |   |   | - |   |
|                   |   |   |    |   |   |   |   |   |
| Tax Fees               |   |   | 6,500   |   |   |   | 6,000 |   |
|                   |   |   |    |   |   |   |   |   |
| All Other Fees         |   |   |    |   |   |   |   |   |
| Total Fees             |   | $      | 123,867 |   |   | $      | 75,256 |   |

|   | (1) | Fees associated with issuance of comfort letter. |
|--------|-----|--------------------------------------------------|

| ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
|----------|-----------------------------------------|

|   | I. | Financial Statements: See “Index to Financial Statements” in Part II, Item 8 of this Form 10-K. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------|

|   | 2. | Exhibits: The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Form 10-K. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | may have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements, which disclosures are not necessarily reflected in the agreements; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | may apply standards of materiality that differ from those of a reasonable investor; and |
|--------|--------|-----------------------------------------------------------------------------------------|

|   | · | were made only as of specified dates contained in the agreements and are subject to later developments. |
|--------|--------|---------------------------------------------------------------------------------------------------------|

|        |     | NEURALSTEM, INC |
|-----------------------|---------------|-----------------|
|                  |          |            |   |
| Dated: March 16, 2011 |          | By:             | /S/ I Richard Garr |
|        |          |       | I Richard Garr |
|                  |          |            | President and Chief Executive Officer |

----

| Name                    |    | Title                                                                |   | Date           |
|-------------------------|--------------|----------------------------------------------------------------------|--------|----------------|
|                    |         |                                                                 |   |           |
| /s/ I. Richard Garr     |    | President, Chief Executive Officer, General Counsel and Director     |   | March 16, 2011 |
|  I. Richard Garr   |         | (Principal executive officer)                                        |   |           |
|                    |         |                                                                 |   |           |
| /s/ John Conron         |    | Chief Financial Officer (Principal financial and accounting officer) |   | March 16, 2011 |
|  John Conron       |         |                                                                 |   |           |
|                    |         |                                                                 |   |           |
| /s/ Karl Johe           |    | Chairman of the Board and Director                                   |   | March 16, 2011 |
|  Karl Johe         |         |                                                                 |   |           |
|                    |         |                                                                 |   |           |
| /s/ William Oldaker     |    | Director                                                             |   | March 16, 2011 |
|  William Oldaker   |         |                                                                 |   |           |
|                    |         |                                                                 |   |           |
| /s/ Scott Ogilvie       |    | Director                                                             |   | March 16, 2011 |
|  Scott Ogilvie     |         |                                                                 |   |           |
|                    |         |                                                                 |   |           |
| /s/ Stanley Westreich   |         | Director                                                             |   | March 16, 2011 |
|  Stanley Westreich |         |                                                                 |   |           |

----

|       |   |                                                                                                                                    |   |           |   | Incorporated by Reference |
|------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|---------------------------|
| ExhibitNo. |   |   Description                                                                                                                 |   |  FiledHerewith |   | Form                      |   | ExhibitNo.  |   | File No. |   | Filing Date |
| 1.01       |   | Form of Placement Agent Agreement dated June 28, 2010                                                                                   |   |                |   | 8-K                       |   | 1.01 |   | 001-33672 |   | 6/29/10 |
|       |   |                                                                                                                                    |   |                |   |                      |   |   |   |   |   |   |
| 1.02       |   | Form of Amendment to Placement Agent Agreement dated June 28, 2010                                                                      |   |                |   | 8-K                       |   | 1.02 |   | 001-33672 |   | 6/29/10 |
|       |   |                                                                                                                                    |   |                |   |                      |   |   |   |   |   |   |
| 1.03       |   | ATM Equity Offering Sales Agreement dated November 22, 2010, between Neuralstem, Inc. and Stifel, Nicolaus & Company , Incorporated |   |                |   | 8-K                       |   | 1.1 |   | 001-33672 |   | 11/22/10 |
|       |   |                                                                                                                                    |   |                |   |                      |   |   |   |   |   |   |
| 3.01(i)    |   |  Amended and Restated Certificate of Incorporation of Neuralstem, Inc. filed on 9/29/05                                            |   |                |   | 10-K                      |   | 3.01(i) |   | 001-33672 |   | 3/31/09 |
|       |   |                                                                                                                                    |   |                |   |                      |   |   |   |   |   |   |
| 3.02(i)    |   |  Certificate of Amendment to Certificate of Incorporation of Neuralstem, Inc. filed on 5/29/08                                     |   |                |   | DEF 14A                   |   | Appendix I |   |  001-33672 |   | 4/24/08 |
|       |   |                                                                                                                                    |   |                |   |                      |   |   |   |   |   |   |
| 3.03(ii)   |   |  Amended and Restated Bylaws of Neuralstem, Inc. adopted on July 16, 2007                                                          |   |                |   | 10-QSB                    |   | 3.2(i) |   | 333-132923 |   | 8/14/07 |
|       |   |                                                                                                                                    |   |                |   |                      |   |   |   |   |   |   |
| 4.01**     |   |  Amended and Restated 2005 Stock Plan adopted on June 28, 2007                                                                     |   |                |   | 10-QSB                    |   | 4.2(i) |   | 333-132923 |   | 8/14/07 |
|       |   |                                                                                                                                    |   |                |   |                      |   |   |   |   |   |   |
| 4.02**     |   |  Non-qualified Stock Option Agreement between Neuralstem, Inc. and Richard Garr dated July 28, 2005                                |   |                |   | SB-2                      |   | 4.4 |   | 333-132923 |   | 6/21/06 |
|       |   |                                                                                                                                    |   |                |   |                      |   |   |   |   |   |   |
| 4.03**     |   |  Non-qualified Stock Option Agreement between Neuralstem, Inc. and Karl Johe dated July 28, 2005                                   |   |                |   | SB-2                      |   | 4.5 |   | 333-132923 |   | 6/21/06 |
|       |   |                                                                                                                                    |   |                |   |                      |   |   |   |   |   |   |
| 4.04       |   |  Form of Placement Agent Warrant issued in connection with the March 2006 offering                                                 |   |                |   | SB-2                      |   | 4.13 |   | 333-132923 |   | 6/21/06 |
|       |   |                                                                                                                                    |   |                |   |                      |   |   |   |   |   |   |
| 4.05       |   |  Form of Securities Purchase Agreement dated March 15, 2007                                                                        |   |                |   | 8-K                       |   | 4.1 |   | 333-132923 |   | 3/16/07 |
|       |   |                                                                                                                                    |   |                |   |                      |   |   |   |   |   |   |
| 4.06       |   |  Form of Common Stock Purchase Warrant dated March 15, 2007 (Series C)                                                             |   |                |   | 8-K                       |   | 4.2 |   | 333-132923 |   | 3/16/07 |
|       |   |                                                                                                                                    |   |                |   |                      |   |   |   |   |   |   |
| 4.07       |   |  Form of Registration Rights Agreement dated March 15, 2007                                                                        |   |                |   | 8-K                       |   | 4.3 |   | 333-132923 |   | 3/16/07 |
|       |   |                                                                                                                                    |   |                |   |                      |   |   |   |   |   |   |
| 4.08**     |   | Neuralstem, Inc. 2007 Stock Plan                                                                                                        |   |                |   | 10-QSB                    |   | 4.21 |   | 333-132923 |   | 8/14/07 |
|       |   |                                                                                                                                    |   |                |   |                      |   |   |   |   |   |   |
| 4.09       |   |  Form of Common Stock Purchase Warrant Issued to Karl Johe on June 5, 2007                                                         |   |                |   | 10-KSB                    |   | 4.22 |   | 333-132923 |   | 3/27/08 |
|       |   |                                                                                                                                    |   |                |   |                      |   |   |   |   |   |   |

----

| 4.10         |   |  Form of Placement Agent Warrant Issued to Midtown Partners & Company on December 18, 2008               |   |   |   | 8-K       |   | 4.1        |   | 001-33672        |   | 12/18/08     |
|--------------|--------|-------------------------------------------------------------------------------------------------------------------|--------|--------|--------|-----------|--------|------------|--------|------------------|--------|--------------|
|         |   |                                                                                                              |   |   |   |      |   |       |   |             |   |         |
| 4.11         |   |  Form of Consultant Common Stock Purchase Warrant issued on January 5, 2009                                  |   |   |   | S-3/A     |   | 10.1       |   | 333-157079       |   | 02/3/09      |
|         |   |                                                                                                              |   |   |   |      |   |       |   |             |   |         |
| 4.12         |   | Form of Series D, E and F Warrants                                                                                |   |   |   | 8-K       |   | 4.01       |   | 001-33672        |   | 7/1/09       |
|         |   |                                                                                                              |   |   |   |      |   |       |   |             |   |         |
| 4.13         |   | Form of Placement Agent Warrant                                                                                   |   |   |   | 8-K       |   | 4.02       |   | 001-33672        |   | 7/1/09       |
|         |   |                                                                                                              |   |   |   |      |   |       |   |             |   |         |
| 4.14         |   | Form of Consultant Warrant Issued January 8, 2010                                                                 |   |   |   | 10-K      |   | 4.20       |   | 001-33672        |   | 3/31/10      |
|         |   |                                                                                                              |   |   |   |      |   |       |   |             |   |         |
| 4.15         |   | Form of Replacement Warrant Issued January 29, 2010                                                               |   |   |   | 10-K      |   | 4.21       |   | 001-33672        |   | 3/31/10      |
|         |   |                                                                                                              |   |   |   |      |   |       |   |             |   |         |
| 4.16         |   | Form of Replacement Warrant Issued March of 2010                                                                  |   |   |   | 10-K      |   | 4.22       |   | 001-33672        |   | 3/31/10      |
|         |   |                                                                                                              |   |   |   |      |   |       |   |             |   |         |
| 4.17         |   | Form of employee and consultant option grant pursuant to our 2007 Stock Plan and 2010 Equity Compensation Plan    |   |   |   | 10-K      |   | 4.23       |   | 001-33672        |   | 3/31/10      |
|         |   |                                                                                                              |   |   |   |      |   |       |   |             |   |         |
| 4.18         |   | Form of Warrants dated June 29, 2010                                                                              |   |   |   | 8-K       |   | 4.01       |   | 001-33672        |   | 6/29/10      |
|         |   |                                                                                                              |   |   |   |      |   |       |   |             |   |         |
| 4.19**       |   | Neuralstem 2010 Equity Compensation Plan                                                                          |   |   |   | 8-K       |   | 10.01      |   | 001-33672        |   | 7/14/10      |
|         |   |                                                                                                              |   |   |   |      |   |       |   |             |   |         |
| 4.20         |   | Form of Consultant Warrant issued October 1, 2009 and 2010                                                        |   |   |   | S-3       |   | 4.07       |   | 333-169847       |   | 10/8/10      |
|         |   |                                                                                                              |   |   |   |      |   |       |   |             |   |         |
|  4.21** |   |  Form of Restricted Stock Award Agreement pursuant to our 2007 Stock Plan and 2010 Equity Compensation Plan. |   |   |   |  S-8 |   |  4.06 |   |  333-172563 |   |  3/1/11 |
|         |   |                                                                                                              |   |   |   |      |   |       |   |             |   |         |
| 4.22**       |   | Form of Restricted Stock Unit Agreement                                                                           |   |   |   |  S-8 |   |  4.08 |   |  333-172563 |   |  3/1/11 |
|         |   |                                                                                                              |   |   |   |      |   |       |   |             |   |         |
| 10.01**      |   |  Employment Agreement with I. Richard Garr dated January 1, 2007 and amended as of November 1, 2005          |   |   |   | SB-2      |   | 10.1       |   | 333-132923       |   | 6/21/06      |
|         |   |                                                                                                              |   |   |   |      |   |       |   |             |   |         |
| 10.02**      |   | Amended terms to the Employment Agreement of I Richard Garr dated January 1, 2008                                 |   |   |   | 10-K      |   | 10.02      |   | 001-33672        |   | 3/31/09      |
|         |   |                                                                                                              |   |   |   |      |   |       |   |             |   |         |
| 10.03**      |   |  Employment Agreement with Karl Johe dated January 1, 2007 and amended as of November 1, 2005                |   |   |   | SB-2      |   | 10.2       |   | 333-132923       |   | 6/21/06      |
|         |   |                                                                                                              |   |   |   |      |   |       |   |             |   |         |
| 10.04**      |   | Amended terms to the Employment Agreement of Karl Johe dated January 1, 2009                                      |   |   |   | 10-K      |   | 10.04      |   | 001-33672        |   | 3/31/09      |
|         |   |                                                                                                              |   |   |   |      |   |       |   |             |   |         |
| 10.05        |   | Form of Securities Purchase Agreement dated June 29, 2010                                                         |   |   |   | 8-K       |   | 10.01      |   | 001-33672        |   | 6/29/10      |
|         |   |                                                                                                              |   |   |   |      |   |       |   |             |   |         |

----

| 10.06  |   | Employment Agreement with Thomas Hazel, Ph.D dated August 11, 2008                                                              |   |   |   | 10-K/A |   | 10.05  |   | 001-33672  |   | 10/5/10 |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|------------|--------|---------|
|   |   |                                                                                                                            |   |   |   |   |   |   |   |       |   |    |
| 10.07  |   | Consulting Agreement dated January 2010 between Market Development Consulting Group and the Company and amendments No. 1 and 2. |   | *      |   |   |   |   |   |       |   |    |
|   |   |                                                                                                                            |   |   |   |   |   |   |   |       |   |    |
| 14.01  |   | Neuralstem Code of Ethics                                                                                                       |   |   |   | SB-2   |   | 14.1   |   | 333-132923 |   | 6/21/06 |
|   |   |                                                                                                                            |   |   |   |   |   |   |   |       |   |    |
| 14.02  |   |  Neuralstem Financial Code of Profession Conduct adopted on May 16, 2007                                                   |   |   |   | 8-K    |   | 14.2   |   | 333-132923 |   | 6/6/07  |
|   |   |                                                                                                                            |   |   |   |   |   |   |   |       |   |    |
| 21.01  |   | Subsidiaries of the Registrant                                                                                                  |   | *      |   |   |   |   |   |       |   |    |
|   |   |                                                                                                                            |   |   |   |   |   |   |   |       |   |    |
| 23.01  |   | Consent of Stegman & Company                                                                                                |   | *      |   |   |   |   |   |       |   |    |
|   |   |                                                                                                                            |   |   |   |   |   |   |   |       |   |    |
| 31.1   |   |  Certification of the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                |   | *      |   |   |   |   |   |       |   |    |
|   |   |                                                                                                                            |   |   |   |   |   |   |   |       |   |    |
| 31.2   |   |  Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                |   | *      |   |   |   |   |   |       |   |    |
|   |   |                                                                                                                            |   |   |   |   |   |   |   |       |   |    |
| 32.1   |   | Certification of Principal Executive Officer Pursuant to 18 U.S.C. § 1350                                                  |   | *      |   |   |   |   |   |       |   |    |
|   |   |                                                                                                                            |   |   |   |   |   |   |   |       |   |    |
| 32.2   |   | Certification of Principal Financial Officer Pursuant to 18 U.S.C. § 1350                                                  |   | *      |   |   |   |   |   |       |   |    |

----