Edgar Filing: Neuralstem, Inc.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2013.

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

For the transition period from to .

Commission File Number 000-1357459

NEURALSTEM, INC.

(Exact name of registrant as specified in its charter)

Delaware		52-2007292
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)

9700 Great Seneca Highway Rockville, MD		20850
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (301)-366-4841

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

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

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

None

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨		Accelerated filer x

Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes x No

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the Company’s common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter based upon the closing price of the common stock as reported by the NYSE MKT on such date, was $99,509,641.

The number of shares outstanding of Registrant’s common stock, $0.01 par value at February 28, 2014 was 86,218,421.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement relating to its 2014 annual meeting of shareholders (the “2014 Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2014 Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

NEURALSTEM, INC

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2013

INDEX

		Page
PART I		3

Item 1.	Business	3
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	20
Item 2.	Properties	20
Item 3.	Legal Proceedings	20
Item 4.	Mine Safety Disclosure	21

PART II		21

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21
Item 6.	Selected Financial Data	24
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 8.	Financial Statements and Supplementary Data	31
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	49
Item 9A.	Controls and Procedures	49
Item 9B.	Other Information	50

PART III		50

Item 10.	Directors, Executive Officers and Corporate Governance	50
Item 11.	Executive Compensation	50
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	51
Item 13.	Certain Relationships and Related Transactions, and Director Independence	51
Item 14.	Principal Accounting Fees and Services	51

PART IV		51

Item 15.	Exhibits, Financial Statement Schedules	51

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PART I

We urge you to read this entire Annual Report on Form 10-K, including the” Risk Factors” section, the financial statements and related notes included herein. As used in this Annual Report, unless context otherwise requires, the words “we,” “us,”“our,” “the Company,” “Neuralstem” and “Registrant” refer to Neuralstem, Inc. and its subsidiary Also, any reference to “common share” or “common stock,” refers to our $.01 par value common stock.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements in this annual report that are not strictly historical are forward-looking statements and include statements about products in development, results and analyses of clinical trials and studies, research and development expenses, cash expenditures, regulatory applications and approvals, and third party relationships, among other matters. You can identify these forward-looking statements because they involve our expectations, intentions, beliefs, plans, projections, anticipations, or other characterizations of future events or circumstances. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that may cause actual results to differ materially from those in the forward-looking statements as a result of any number of factors. These factors include, but are not limited to, risks relating to our ability to conduct and obtain successful results from our clinical trials, our ability to commercialize our technology, our ability to obtain regulatory approval for our product candidates, our ability to contract with third parties to adequately manufacture our proposed products, our ability to protect our intellectual property rights and our ability to obtain additional financing to continue development efforts. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report, and in particular, the risks discussed under the caption “Risk Factors” in Item 1A and those discussed in other documents we file with the Securities and Exchange Commission (SEC). We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

The information contained herein is current as of the date of this Annual Report (December 31, 2013), unless another date is specified.

ITEM 1.

BUSINESS

Overview

We are focused on the development and commercialization of treatments based on our human neuronal stem cells and our small molecule compounds. We are headquartered in Rockville, Maryland and have a wholly-owned subsidiary in China.

We have developed and maintain a portfolio of patents and patent applications that form the proprietary base for our research and development efforts. We own or exclusively license forty-nine (49) U.S. and foreign issued patents and sixty (60) U.S. and foreign patent applications in the field of regenerative medicine, related to our stem cell technologies as well as our small molecule compounds. At times we have licensed the use of our intellectual property to third parties.

We believe our technology base, in combination with our know-how, and collaborative projects with major research institutions, will facilitate the development and commercialization of products for use in the treatment of a wide array of neurodegenerative conditions and in regenerative repair of acute disease.

Regenerative medicine is a young and emerging field. Regenerative medicine is the process of creating living, functional tissues to repair or replace tissue or organ function lost due to age, disease, damage, or congenital defects. There can be no assurances that our intellectual property portfolio will ultimately produce viable commercialized products and processes. Even if we are able to produce a commercially viable product, there are strong competitors in this field and our products may not be able to successfully compete against them.

All of our research efforts to date are at the pre-clinical or clinical stage of development. We are focused on leveraging our key assets, including our intellectual property, our scientific team and our facilities, to advance our technologies. In addition, we pursue strategic collaborations with members of academia and industry.

Clinical Programs

We have devoted substantially all our efforts to the development of our stem cell and small molecule compounds and their pre-clinical and clinical development. Below is a description of our four most advanced clinical programs, their intended indication, current stage of development and our expected future development plans:

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Program	Indication	Development Status	Future Development Plan
NSI – 566	Amyotrophic Lateral Sclerosis (ALS)	Commenced Phase II clinical trials.	Anticipated to complete dosing of the Phase II clinical trials during the second quarter of 2014.

NSI – 566	Chronic Spinal Cord Injury	Approved to commence Phase I clinical trials.	Phase I Trial expected to commence during the second quarter of 2014.

NSI – 566	Motor deficits due to ischemic stroke	Commenced combined Phase I/II clinical trials in China.	Dosing commenced during the fourth quarter of 2013.

NSI – 189	Major Depressive Disorder	Completed Phase Ia, Phase Ib dosing complete.	Actively looking to partner development after Phase Ib trial. Final Phase I data is being reviewed.

NSI - 566 (Stem Cells).

Amyotrophic Lateral Sclerosis (ALS)

Amyotrophic lateral sclerosis, or ALS, is a disease of the nerve cells in the brain and spinal cord that control voluntary muscle movement. In ALS, nerve cells (neurons) waste away or die, and can no longer send messages to muscles. This eventually leads to muscle weakening, twitching, and an inability to move the arms, legs, and body. The condition slowly gets worse. When the muscles in the chest area stop working, it becomes hard or impossible to breathe. We believe that NSI-566 may provide an effective treatment for ALS by providing cells which nurture and protect the patients’ remaining motor neurons; and possibly repair some motor neurons which were not dead, but diseased.

We commenced the Phase I trial for our proposed treatment of ALS at Emory University in Atlanta Georgia. The purpose of the Phase I trial was to evaluate the safety and transplantation technique of our proposed treatment and procedure. The dosing of patients in the Phase I trial, as designed, was completed in August of 2012. We commenced Phase II clinical trial in September of 2013. The Phase II dose escalation trial is designed to treat up to 15 ambulatory patients in five different dosing cohorts, under an accelerated dosing and treatment schedule. To date, we have treated the first three cohorts. We anticipate completing the Phase II dosing in the second quarter of 2014. Although initial data from the Phase I trial appears promising, the outcome of the trial is uncertain and this trial or future trials may ultimately be unsuccessful.

Chronic Spinal Cord Injury

A spinal cord injury or SCI generally refers to any injury to the spinal cord that is caused by trauma instead of disease although in some cases, it can be the result of diseases. Chronic Spinal Cord Injury refers to the time after the initial hospitalization. Spinal cord injuries are most often traumatic, caused by lateral bending, dislocation, rotation, axial loading, and hyperflexion or hyperextension of the cord or cauda equina. Motor vehicle accidents are the most common cause of SCIs, while other causes include falls, work-related accidents, sports injuries, and penetrations such as stab or gunshot wounds. In certain instances, SCIs can also be of a non-traumatic origin, as in the case of cancer, infection, intervertebral disc disease, vertebral injury and spinal cord vascular disease. We believe that NSI-566 may provide an effective treatment for Chronic Spinal Cord Injury by “bridging the gap” in the spinal cord created in traumatic spinal cord injury and providing new cells to help transmit the signal from the brain to points at or below the point of injury.

During the first quarter of 2013, we received approval from the United States food and drug Administration or FDA to commence our proposed Phase I clinical trial to treat chronic spinal cord injury. We anticipate the trial will commence during the second quarter of 2014.

Motor Deficits Due to Ischemic Stroke

Ischemic strokes, the most common type of stroke, occur as a result of an obstruction within a blood vessel supplying blood to the brain. Post-stroke motor deficits include paralysis in arms and legs and can be permanent. We believe that NSI-566 may provide an effective treatment for restoring motor deficits resulting from Ischemic Stroke by both creating new circuitry in the area of injury and through repairing and or nurturing diseased cells to improve function in patients.

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In September of 2012, we received approval to commence human clinical trials to treat motor deficits due to ischemic stroke. The trial will be conducted by our wholly owned subsidiary, Neuralstem China, at BaYi Brain Hospital in Beijing, China and will utilize our spinal cord stem cells. The trial approval includes a combined phase I/II/III design and will test direct injections of NSI-566 into the brain, the same cell product used in our recently-completed Phase I ALS trial in the United States. The trial commenced in the fourth quarter of 2013 and is designed to enroll up to 118 patients.

NSI - 189 (Small Molecule Pharmaceutical Compound).

Major Depressive Disorder

Major depressive disorder or MDD (also known as recurrent depressive disorder, clinical depression, major depression, unipolar depression, or unipolar disorder) is a mental disorder characterized by episodes of all-encompassing low mood accompanied by low self-esteem and loss of interest or pleasure in normally enjoyable activities. NSI-189 is being developed for the treatment of major depressive disorder and other psychiatric and/or cognitive impairment indications. NSI-189 is the lead compound in our neurogenerative small molecule drug platform. We believe that NSI-189 may provide an effective treatment for patients suffering from MDD by structurally rebuilding the hippocampus.

In February of 2011, we commenced the Phase I clinical trial (Phase Ia portion), NSI-189, at California Clinical Trials, LLC, in Glendale, California. The purpose of the Phase Ia portion of the trial was to evaluate the safety of the drug in healthy volunteers. The Phase Ia portion tested a single oral administration of NSI-189 in 24 healthy volunteers and was completed in October of 2011. In December of 2011, we received approval from the FDA to commence the Phase Ib portion of the trial. The purpose of the Phase Ib portion of the clinical trial is to determine the safety of the drug at several dosings in actual MDD patients. The Phase Ib portion consists of patients with MDD receiving daily doses for 28 consecutive days. In June of 2012, we dosed our first patient in the Phase Ib portion of the trial. To date, we have completed dosing all cohorts of patients in the Phase Ib portion of the trial and the data is being reviewed. It is still too early in the trial to make any determination as to its level of success, if any.

Collaborative Projects

Department of Defense — Loma Linda Subcontract Agreement

During 2011, we were selected as the primary subcontractor for a U.S. Department of Defense or DOD contract, awarded to Loma Linda University, to develop human neural stem cell technology for the treatment of cancerous brain tumors. The research contract, entitled "Research to Treat Cancerous Brain Tumors with Neural Stem Cells," was carried out in collaboration with Principal Investigator John Zhang, MD, PhD, Professor of Neurosurgery, Loma Linda University, in Loma Linda, CA. The DOD has three one-year options to continue the program after the first year, based upon milestones. The goal of the program is to develop a therapeutic product for the treatment of cancerous brain tumors and submit that product to the FDA by the end of the fourth year (2015). We began work on the project during August of 2011 and completed the first year in June of 2012. The DOD did not exercise any of their options and the contract ended in June 2012.

Potential Markets

The table below summarizes the potential United States patient populations by indication, for our proposed stem cell and small molecule products:

Medical Condition	Number of Patients in United States
Stem cells
ALS	30,000	⁽¹⁾
Huntington’s disease	30,000	⁽²⁾
Multiple Sclerosis	400,000	⁽³⁾
Parkinson's Disease	1.5 million	⁽⁴⁾
Spinal Cord Injury	840,000	⁽⁵⁾
Stroke	7.0 million	⁽⁶⁾
Small molecule compounds
Alzheimer’s disease	5.2 million	⁽⁷⁾
Depression	14.8 million	⁽⁸⁾
Stroke	7.0 million	⁽⁶⁾
Traumatic Brain Injury	5.3 million	⁽⁹⁾

(1) The ALS Association (ALSA)

(2) Huntington’s Disease Society of America (HDSA)

(3) Multiple Sclerosis Association of America (MSAA)

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(4) American Association of Neurological Surgeons (AANS)

(5) National Spinal Cord Injury Association (NSCIA)

(6) National Stroke Association (NSA)

(7) Alzheimer’s Association (AA)

(8) National Institute of Mental Health (NIMH)

(9) Brain Trauma Foundation (BTF)

Technology

Stem Cells.

Our technology enables the isolation and large-scale expansion of human neural stem cells from all areas of the developing human brain and spinal cord, thus enabling the generation of physiologically relevant human neurons of all types. We believe that our stem cell technology will assist the body in producing new cells to replace malfunctioning or dead cells as a way to treat disease and injury. Many significant and currently untreatable human diseases arise from the loss or malfunction of specific cell types in the body. Our focus is the development of effective methods to generate replacement cells from neural stem cells. We believe that replacing damaged, malfunctioning or dead neural cells with fully functional ones may be a useful therapeutic strategy in treating many diseases and conditions of the central nervous system or CNS, including: Alzheimer's disease, Parkinson's disease, Multiple Sclerosis, Lou Gehrig’s disease or ALS, depression, and injuries to the spinal cord. We own or exclusively license thirty-two (32) U.S. and foreign issued patents and thirty-eight (38) U.S. and foreign patent applications related to our stem cell technologies.

To date we have focused our research efforts on applications involving spinal cord stem cells. We believe we have established “proof of principle” in animal models for important spinal cord cell applications: ALS and Traumatic spinal cord injury. Of these applications, we have completed our first Phase I trial with regard to ALS and commenced initial Phase II trials in the third quarter of 2013. We have also received approval from the FDA to commence a Phase I trial in Chronic Spinal Cord Injury (patients one to two years out from their injury) in complete (no sensory of motor function from the site of the injury down) thoracic patients. We expect this trial to start in the first quarter of 2014. We believe that, if successfully developed, stem cell therapeutics have the potential to provide a broad therapeutic approach comparable to traditional pharmaceuticals and genetically engineered biologics. In the fourth quarter of 2013 we filed an IND to start a trial to treat acute spinal cord injury (within several weeks of the injury) in Seoul Korea. If approved as submitted, this trial will treat complete patients, who are those who have no sensory or motor function below the point of the injury and also progressively incomplete patients, who have varying degrees of each. Also, if approved as submitted, this trial will treat cervical area injuries. We expect this trial to start in the second half of 2014.

Small Molecule Pharmaceutical Compounds.

We have developed and patented a series of small molecule compounds (low molecular weight organic compounds which can efficiently cross the blood/brain barrier). We believe that these small molecule compounds will stimulate the growth of new neurons in the hippocampus and provide a treatment for depression, and possibly other cognitive impacting diseases. In mice, our research indicated that our small molecule compounds both stimulate neurogenesis of the hippocampus and increase its volume. Additionally, our research also indicates that our small molecule compounds stimulate neurogenesis of human hippocampus-derived neural stem cells in vitro. Based on this research, we believe that our small molecule compounds may assist in reversing atrophy in the human hippocampus. Such atrophy has been seen in major depression and other disorders.

Our small molecule compounds are covered by seventeen (17) exclusively owned U.S. and foreign issued patents and twenty-two (22) exclusively owned U.S. and foreign patent applications related to our small molecule compounds.

Research

We have devoted substantial resources to our research programs in order to isolate and develop a series of neural stem cell banks that we believe can serve as a basis for our therapeutic products. Our efforts are directed at developing therapies utilizing our stem cells and small molecule regenerative drugs. This research is conducted internally, through the use of third party laboratories and consulting companies under our direct supervision, and through collaboration with academic institutes.

Operating Strategy

We generally employ an outsourcing strategy where we outsource our Good Laboratory Practices or GLP preclinical development activities and Good Manufacturing Practices or GMP manufacturing and clinical development activities to contract research organizations or CROs and contract manufacturing organizations or CMOs as well as all non-critical corporate functions. Manufacturing is also outsourced to organizations with approved facilities and manufacturing practices. This outsource model allows us to better manage cash on hand and minimize non-vital expenditures. It also allows for us to operate with relatively fewer employees and lower fixed costs than that required by other companies conducting similar business.

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Manufacturing

We currently manufacture our cells both in-house and on an outsource basis. We outsource the manufacturing of our pharmaceutical compounds to third party manufacturers. We manufacture cells in-house which are not required to meet stringent FDA requirements. We use these cells in our research and collaborative programs. We outsource all the manufacturing and storage of our stem cells and pharmaceuticals compound to be used in clinical and pre-clinical works, and which are accordingly subject to higher FDA requirements, to Charles River Laboratories, Inc., of Wilmington, Massachusetts (stem cells) and Albany Molecular Resources, Inc. (“AMRI”) (small molecule). Both the Charles River and AMRI facilities have the capacity to be used for manufacturing under the FDA determined GMP standards in quantities sufficient for our current and anticipated pre-trial and clinical trial needs. We have no quantity or volume commitment with either Charles River Laboratories or AMRI and our cells and pharmaceutical compounds are ordered and manufactured on an as needed basis. Additionally, during the second quarter of 2014, we anticipate relocating our headquarters to a facility with GMP manufacturing capability. We anticipate the facility will be ready to commencing manufacturing of our stem cells for our clinical trials by the second quarter of 2015. Such increased manufacturing will supplement our current outsource supply of both stem cells and pharmaceutical compounds. We believe such additional manufacturing capacity will be beneficial as our clinical trials expand by indication, geographic region and to larger patient populations.

Our Intellectual Property

Our research and development is supported by our intellectual property. We own or exclusively license forty-nine (49) U.S. and foreign issued patents and sixty (60) U.S. and foreign patent applications in the field of regenerative medicine, related to our stem cell technologies as well as our small molecule compounds. Our issued patents have expiration dates ranging from 2016 through 2029.

Our success will likely depend upon our ability to preserve our technologies and operate without infringing the proprietary rights of other parties. However, we may rely on certain proprietary technologies and know-how that are not patentable. We protect our proprietary information, in part, by the use of confidentiality agreements with our employees, consultants and certain of our contractors.

When appropriate, we seek patent protection for inventions in our core technologies and in ancillary technologies that support our core technologies or which we otherwise believe will provide us with a competitive advantage. We accomplish this by filing patent applications for discoveries we make, either alone or in collaboration with scientific collaborators and strategic partners. Typically, although not always, we file patent applications both in the United States and in select international markets. In addition, we plan to obtain licenses or options to acquire licenses to patent filings from other individuals and organizations that we anticipate could be useful in advancing our research, development and commercialization initiatives and our strategic business interests.

In addition to patenting our technologies, we also rely upon trade-secret protection for our confidential and proprietary information and take active measures to control access to that information.

Our policy is to require our employees, consultants and significant scientific collaborators and sponsored researchers to execute confidentiality and assignment of invention agreements upon the commencement of an employment or consulting relationship with us. These agreements generally provide that all confidential information developed or made known to the individual by us during the course of the individual's relationship with us, is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees and consultants, the agreements generally provide that all inventions conceived by the individual in the course of rendering services to us shall be our exclusive property.

The patent positions of pharmaceutical and biotechnology companies, including ours, are uncertain and involve complex and evolving legal and factual questions. The coverage sought in a patent application can be denied or significantly reduced before or after the patent is issued. Consequently, we do not know whether any of our pending applications will result in the issuance of patents, or if any existing or future patents will provide significant protection or commercial advantage or will be circumvented by others. Since patent applications are secret until the applications are published (usually eighteen months after the earliest effective filing date), and since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain that we were the first to make the inventions covered by each of our pending patent applications or that we were the first to file patent applications for such inventions. There can be no assurance that patents will issue from our pending or future patent applications or, if issued, that such patents will be of commercial benefit to us, afford us adequate protection from competing products, or not be challenged or declared invalid.

In the event that a third party has also filed a patent application relating to inventions claimed in our patent applications, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office or USPTO, to determine priority of invention, which could result in substantial uncertainties and costs, even if the eventual outcome is favorable to us. There can be no assurance that our patents, if issued, would be held valid by a court of competent jurisdiction.

A number of pharmaceutical, biotechnology and other companies, universities and research institutions have filed patent applications or have been issued patents relating to cell therapy, stem cells and other technologies potentially relevant to or required by our proposed products. We cannot predict which, if any, of such applications will issue as patents or the claims that might be allowed.

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If third party patents or patent applications contain claims infringed by our technology and such claims are ultimately determined to be valid, there can be no assurance that we would be able to obtain licenses to these patents at a reasonable cost, if at all, or be able to develop or obtain alternative non-infringing technology. If we are unable to obtain such licenses or develop or obtain alternative non-infringing technology at a reasonable cost, we may not be able to develop certain products commercially. There can be no assurance that we will not be obliged to defend ourselves in court against allegations of infringement of third party patents. Patent litigation is very expensive and could consume substantial resources and create significant uncertainties. An adverse outcome in such a suit could subject us to significant liabilities to third parties, require us to seek licenses from third parties, or require us to cease using such technology.

Competition

The biotechnology industries are characterized by rapidly evolving technology and intense competition. Our competitors include major multinational pharmaceutical companies, specialty biotechnology companies and chemical and medical products companies. Many of these companies are well-established and possess technical, research and development, financial and sales and marketing resources significantly greater than ours. In addition, certain smaller biotech companies have formed strategic collaborations, partnerships and other types of joint ventures with larger, well established industry competitors that afford these companies potential research and development and commercialization advantages. Academic institutions, governmental agencies and other public and private research organizations are also conducting and financing research activities which may produce products directly competitive to those we are developing. Moreover, many of these competitors may be able to obtain patent protection, obtain FDA and other regulatory approvals and begin commercial sales of their products before we do.

The diseases and medical conditions we are targeting have no effective long-term therapies. Nevertheless, we expect that our technologies and products will compete with a variety of therapeutic products and procedures offered by major pharmaceutical and biotechnology companies. Many pharmaceutical and biotechnology companies are investigating new drugs and therapeutic approaches for the same purposes, which may achieve new efficacy profiles, extend the therapeutic window for such products, alter the prognosis of these diseases, or prevent their onset. We believe that our products, when and if successfully developed, will compete with these products principally on the basis of improved and extended efficacy and safety and their overall economic benefit to the health care system. Competition for our products may be in the form of existing and new drugs, other forms of cell transplantation, surgical procedures, and gene therapy. We believe that some of our competitors are also trying to develop similar stem cell-based technologies. We expect that all of these products will compete with our potential product candidates based on efficacy, safety, cost and intellectual property positions. We may also face competition from companies that have filed patent applications relating to the use of genetically modified cells to treat disease, disorder or injury. In the event our therapies should require the use of such genetically modified cells, we may be required to seek licenses from these competitors in order to commercialize certain of our proposed products, and such licenses may not be granted or be extremely expensive.

If we develop products that receive regulatory approval, they would then have to compete for market acceptance and market share. For our potential products, an important success factor will be the timing of market introduction of competitive products. This timing will be a function of the relative speed with which we and our competitors can develop products, complete the clinical testing and approval processes, and supply commercial quantities of a product to the market. These competitive products may also impact the timing of clinical testing and approval processes by limiting the number of clinical investigators and patients available to test our potential products.

Government Regulation

Regulation by governmental authorities in the United States and other countries is a significant factor in our research and development and will be a significant factor in the manufacture and marketing of our proposed products. The nature and extent to which such regulation applies to us will vary depending on the nature of any products we may develop. We anticipate that many, if not all, of our products will require regulatory approval by governmental agencies prior to commercialization. In particular, human therapeutic products are subject to rigorous preclinical and clinical testing and other approval procedures of the FDA and similar regulatory authorities in European and other countries. Various governmental statutes and regulations also govern or influence testing, manufacturing, safety, labeling, storage and recordkeeping related to such products and their marketing. The process of obtaining these approvals and the subsequent compliance with appropriate statutes and regulations require the expenditure of substantial time and money, and there can be no guarantee that approvals will be granted.

FDA Approval Process

Prior to commencement of clinical studies involving humans, preclinical testing of new pharmaceutical or biological products is generally conducted on animals in the laboratory to evaluate the potential efficacy and safety of the product candidate. The results of these studies are submitted to the FDA as part of an IND application, which must become effective before clinical testing in humans can begin. Typically, human clinical evaluation involves a time-consuming and costly three-phase process. In Phase I, clinical trials are conducted with a small number of people to assess safety and to evaluate the pattern of drug distribution and metabolism within the body. In Phase II, clinical trials are conducted with groups of patients afflicted with a specific disease in order to determine preliminary efficacy, optimal dosages and expanded evidence of safety. (In some cases, an initial trial is conducted in diseased patients to assess both preliminary efficacy and preliminary safety and patterns of drug metabolism and distribution, in which case it is referred to as a Phase I/II trial.) In Phase III, large-scale, multi-center, comparative trials are conducted with patients afflicted with a target disease in order to provide enough data to demonstrate the efficacy and safety required by the FDA. The FDA closely monitors the progress of each of the three phases of clinical testing and may, at its discretion, re-evaluate, alter, suspend, or terminate the testing based upon the data which have been accumulated to that point and its assessment of the risk/benefit ratio to the patient. All adverse events must be reported to the FDA. Monitoring of all aspects of the study to minimize risks is a continuing process.

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The results of the preclinical and clinical testing on non-biologic drugs and certain diagnostic drugs are submitted to the FDA in the form of a New Drug Application (“NDA”) for approval prior to commencement of commercial sales. In the case of vaccines or gene and cell therapies, the results of clinical trials are submitted as a Biologics License Application (“BLA”). In responding to an NDA/BLA submission, the FDA may grant marketing approval, may request additional information, may deny the application if it determines that the application does not provide an adequate basis for approval, and may also refuse to review an application that has been submitted if it determines that the application does not provide an adequate basis for filing and review. There can be no assurance that approvals will be granted on a timely basis, if at all, for any of our proposed products.

European, China and Other Regulatory Approval

Whether or not FDA approval has been obtained, approval of a product by comparable regulatory authorities in Europe, China and other countries will be necessary prior to commencement of marketing the product in such countries. The regulatory authorities in each country may impose their own requirements and may refuse to grant an approval, or may require additional data before granting it, even though the relevant product has been approved by the FDA or another authority. As with the FDA, the regulatory authorities in the European Union (EU), China and other developed countries have lengthy approval processes for biological and pharmaceutical products. The process for gaining approval in particular countries varies, but generally follows a similar sequence to that described for FDA approval.

Other Regulations

We are also subject to various U.S. federal, state, local and international laws, regulations and recommendations relating to safe working conditions, laboratory and manufacturing practices and the use and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our business. We cannot accurately predict the extent of government regulation which might result from future legislation or administrative action.

For additional information about governmental regulations as well as risk related to our business that could affect our planned and intended business operations, see the “Risk Factors” Section of this Annual Report.

Executive Officers

The following sets forth our current executive officers and information concerning their age and background:

Name	Position	Age	Position Since
I. Richard Garr	Chief Executive Officer, President, General Counsel, Chief Financial Officer	61	1996

Karl Johe, Ph.D.	Chief Scientific Officer	53	1996

Mr. I. Richard Garr, JD, age 61, has been a director and our Chief Executive Officer since 1996. Mr. Garr was previously an attorney with Beli, Weil & Jacobs, the B&G Companies, and Circle Management Companies. Mr. Garr is a graduate of Drew University (1976) and the Columbus School of Law, The Catholic University of America (1979). Additionally, he was a founder and current Board Trustee of the First Star Foundation, a children’s charity focused on abused children’s issues; a founder of The Starlight Foundation Mid Atlantic chapter, which focuses on helping seriously ill children; and is a past Honorary Chairman of the Brain Tumor Society. In evaluating Mr. Garr’s specific experience, qualifications, attributes and skills in connection with his appointment to our board, we took into account his broad experience in Neural Stem Cells. He is among the longest serving executives in the field.

Mr. Karl Johe, Ph.D., age 53, has been a director, Chairman of the Board and our Chief Scientific Officer since 1996. Dr. Johe has over 15 years of research and laboratory experience. Dr. Johe is the sole inventor of Neuralstem’s granted stem cell patents and is responsible for the strategic planning and development of our therapeutic products. Dr. Johe received his Bachelor of Arts Degree in Chemistry and a Master’s Degree from the University of Kansas. Dr. Johe received his doctorate from the Albert Einstein College of Medicine of Yeshiva University. From 1993 to January 1997, Dr. Johe served as a Staff Scientist at the Laboratory of Molecular Biology of the National Institute of Neurological Disease and Stroke in Bethesda, Maryland. While holding this position, Dr. Johe conducted research on the isolation of neural stem cells, the elucidation of mechanisms directing cell type specification of central nervous system stem cells and the establishment of an in vitro model of mammalian neurogenesis. In evaluating Dr. Johe’s specific experience, qualifications, attributes and skills in connection with his appointment to our board, we took into account his extensive experience in international science and business communities. Mr. Johe is also multilingual.

	9

Employees

As of February 28, 2014, we had 15 full-time employees and one (1) full-time independent contractor. Of these full-time employees and contractor, 11 work on research and development and five (5) in administration. We also use the services of numerous outside consultants in business and scientific matters.

Our Corporate Information

We were incorporated in Delaware in 2001. Our principal executive offices are located at 9700 Great Seneca Highway, Rockville, Maryland 20850, and our telephone number is (301) 366-4841. Our website is located at www.neuralstem.com.

In addition to announcing material financial information through our investor relations website, press releases, SEC filings and public conference calls and webcasts, we also intend to use the following social media channels as a means of disclosing information about the company, its services and other matters and for complying with our disclosure obligations under Regulation FD:

Neuralstem’s Twitter Account (https://twitter.com/Neuralstem_Inc)

Neuralstem’s Facebook Page (https://www.facebook.com/Neuralstem)

Neuralstem’s Company Blog (http://neuralstem.com/neuralstem-ceo-blog)

Neuralstem’s Google+ Page (https://plus.google.com/u/0/b/104875574397171789280/104875574397171789280/posts)

Neuralstem’s LinkedIn Company Page (http://www.linkedin.com/company/neuralstem-inc-)

Neuralstem Asia’s Weibo Account (http://www.weibo.com/u/3516708787)

Neuralstem Asia’s Tencent Weibo Account ( http://t.qq.com/neuralstem)

Neuralstem Asia’s Facebook Page (https://www.facebook.com/NeuralstemAsia)

Neuralstem Asia’s Twitter Account (https://twitter.com/Neuralste_Asia)

The information we post through these social media channels may be deemed material. Accordingly, investors should monitor these accounts and the blog, in addition to following the company’s press releases, SEC filings and public conference calls and webcasts. This list may be updated from time to time.

We have not incorporated by reference into this report the information in, or that can be accessed through, our website or social media channels, and you should not consider it to be a part of this report.

Where to Find More Information

We make our public filings with the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all exhibits and amendments to these reports. Also our executive officers, directors and holders of more than 10% of our common stock, file reports with the SEC on Forms 3, 4 and 5 regarding their ownership of our securities. These materials are available on the SEC’s web site, http://www.sec.gov. You may also read or copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Alternatively, you may obtain copies of these filings, including exhibits, by writing or telephoning us at:

NEURALSTEM, INC

9700 Great Seneca Highway,

Rockville, Maryland 20850

Attn: Chief Financial Officer

Tel: (301) 366-4841

ITEM 1A.

RISK FACTORS

Investing in our common stock involves a high degree of risk. We have described below a number of uncertainties and risks which, in addition to uncertainties and risks presented elsewhere in this Annual Report, may adversely affect our business, operating results and financial condition. The uncertainties and risks enumerated below as well as those presented elsewhere in this Annual Report should be considered carefully in evaluating our company and our business and the value of our securities.

	10

Risks Relating to Our Stage of Development and Capital Structure.

We have a history of losses.

Since inception in 1996 and through December 31, 2013, we have accumulated losses totaling approximately $128,426,000. On December 31, 2013, we had a working capital surplus of approximately $11,683,000 and stockholders’ equity of approximately $8,418,000. Our net losses for the three most recent fiscal years have been approximately $19,832,000, $10,122,000 and $12,519,000 for 2013, 2012 and 2011, respectively. In August of 2011, we were selected as the primary subcontractor under a DOD contract to develop its human neural stem cell technology for the treatment of cancerous brain tumors. We have recognized revenue related to this contract of approximately $0, $234,000 and $391,000 for years ended December 31, 2013, 2012 and 2011, respectively. We also recognized revenue of approximately $110,000, $173,000 and $0, during the years ended December 31, 2013, 2012 and 2011, respectively related to the licensing of certain intellectual property to third parties. We had no revenue from the sales of our products during 2013, 2012 or 2011.

Our ability to generate revenues and achieve profitability will depend upon our ability to complete the development of our proposed products, obtain the required regulatory approvals, manufacture, and market and sell our proposed products. To date, we have not generated any revenue from the commercial sale of our proposed products and do not anticipate recognizing any revenues from such source for the foreseeable future. No assurances can be given as to exactly when, if at all, we will be able to fully develop, commercialize, market, sell and/or derive any, let alone material, revenues from our proposed products.

We will need to raise additional capital to continue operations.

Since our inception, we have funded our operations through the sale of our securities, the exercise of investor warrants, and to a lesser degree, from grants and research contracts and other revenue generating activities such as licensing. As of December 31, 2013, we had cash and cash equivalents on hand of approximately $16,846,000. Additionally, in January 2014, we received approximately $20 million in gross proceeds from the sale of our common stock and common stock purchase warrants in a registered direct offering. Currently our monthly cash burn for operations is approximately $900,000. We anticipate that our available cash, expected income and expected proceeds from sales of our securities will be sufficient to finance our current activities at least through December 31, 2014, although certain activities and related personnel may need to be reduced. We cannot assure you that we will be able to secure additional capital through financing transactions, licensing agreements or grants. Our inability to either license our intellectual property, obtain grants or secure additional financing will materially impact our ability to fund our current activities which will result in our being required to substantially reduce our activities.

We have expended and expect to continue to expend substantial cash in the research, development, clinical and pre-clinical testing of our proposed products with the goal of ultimately obtaining FDA approval to market such products. We will require additional capital to conduct research and development, establish and conduct clinical and pre-clinical trials, enter into commercial-scale manufacturing arrangements and to provide for marketing and distribution of our products. We cannot assure you that financing will be available if needed. If additional financing is not available, we may not be able to fund operations and planned growth, develop or enhance our technologies, take advantage of business opportunities or respond to our competitive market pressures. If we exhaust our cash reserves and are unable to secure adequate additional financing, we may be unable to meet operating obligations which could result in us initiating bankruptcy proceedings or delaying, or eliminating some or all of our research and product development programs.

Our debt obligations expose us to risks that could adversely affect our business, operating results and financial condition. We will need to raise additional capital to pay our indebtedness as it comes due.

We have a substantial level of debt. As of December 31, 2013, we had approximately $8 million in aggregate principal amount of indebtedness outstanding. Commencing in January, 2014, we are required to begin making interest and principal payments on such indebtedness in the amount of approximately $300,000 per month. As security for such indebtedness, we have pledged substantially all of our assets, including our intellectual property. We will need to raise additional capital to pay our indebtedness as it comes due. If we are unable to obtain funds necessary to make required payments, or if we fail to comply with the various requirements and covenants of our indebtedness, we would be in default, which would permit the holders of our indebtedness to accelerate the maturity and require immediate repayment. Any default under our indebtedness would have a material adverse effect on our business, operating results and financial condition. Additionally, our loan and security agreement governing our $10 million credit facility contains a number of affirmative and restrictive covenants, including reporting requirements and other collateral limitations, certain limitations on liens and indebtedness, dispositions, mergers and acquisitions, restricted payments and investments, corporate changes and limitations on waivers and amendments to certain agreements, our organizational documents, and documents relating to debt that is subordinate to our obligations under the credit facility. Our failure to comply with the covenants in the loan and security agreement governing the credit facility could result in an event of default that, if not cured or waived, could result in the acceleration of all or a substantial portion of our debt and potential foreclosure on the assets pledged to secure the debt. If we are unable to refinance or repay our indebtedness as it becomes due or upon an event of default, we may become insolvent and be unable to continue operations.

	11

Risks Relating to Our Business.

Our business is dependent on the successful development of our product candidates.

Our business is significantly dependent on our two product candidates currently at different phases of clinical trials. Any clinical, regulatory or other development that significantly delays or prevents us from completing any of our trials, any material safety issue or adverse side effect to any study participant in these trials, or the failure of these trials to show the results expected, would likely depress our stock price significantly and could prevent us from raising the additional capital we will need to develop our technologies. Moreover, any adverse occurrence in our clinical trials could substantially impair our ability to initiate clinical trials to test our product candidates in other potential indications. This, in turn, could adversely impact our ability to raise additional capital and pursue our planned research and development efforts.

Our business relies on technologies that we may not be able to commercially develop.

We have concentrated the majority of our research on stem cell and small molecule technologies. Our ability to generate revenue and operate profitably will depend on being able to develop these technologies for human applications. These are emerging technologies that may have limited human application. We cannot guarantee that we will be able to develop our technologies or that such development will result in products with any commercial utility or value. We anticipate that the commercial sale of such products and/or royalty/licensing fees related to our technologies, will be our primary sources of revenue. We recognized revenue of approximately $110,000 and $173,000 for the years ended December 31, 2013 and December 31, 2012, respectively related to the licensing of certain intellectual property to third parties. If we are unable to develop our technologies, we may never realize any significant revenue.

Our product development programs are based on novel technologies and are inherently risky.

We are subject to the risks inherent in the development of products based on new technologies. The novel nature of therapies in the field of regenerative medicine creates significant challenges in regard to product development and optimization, manufacturing, government regulation, third party reimbursement, and market acceptance. For example, the pathway to regulatory approval for cell-based therapies, including our product candidates, may be more complex and lengthy than the pathway for conventional drugs. These challenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.

We are unable to predict when or if we will be able to earn revenues.

Given the uncertainty of our technologies and the need for government regulatory approval, we cannot predict when, or if ever, we will be able to realize revenues related to our products. As a result, we will be primarily dependent on our ability to raise capital through the sale of our securities for the foreseeable future.

Our inability to manufacture and store our stem cells in-house that are used in our products could adversely impact our business.

We currently outsource the manufacturing of our stem cells and small molecule pharmaceutical compounds to third party contractors and as such have limited ability to adequately control the manufacturing process and the safe storage thereof. Any manufacturing or storage irregularity, error, or failure to comply with applicable regulatory procedure would require us to find new third parties to outsource our manufacturing and storage responsibilities. Our business would suffer in the event that there are delays in locating suitable third parties or if no suitable third parties are found.

Our inability to complete pre-clinical and clinical testing and trials will impair our viability.

We are currently in clinical trials for NSI-566 and NSI-189, two of our proposed products, with regard to multiple indications. We commenced our first Phase II clinical trial of NSI-566 related to ALS, during the third quarter of 2013. Additionally, we commenced Phase I clinical trials of NSI-566 related to motor deficit due to ischemic stroke during the third quarter of 2013 and anticipate commencing the Phase I clinical trial of NSI-566 related to chronic spinal cord injury during the first quarter of 2014. Moreover, we have completed Phase I clinical trials of NSI-189, our small molecule compound, related to major depressive disorder and are actively looking to partner further development. Although we have commenced a number of trials, the ultimate outcome of the trials is uncertain. If we are unable to satisfactorily complete such trials, or if such trials yield unsatisfactory results, we will be unable to commercialize our proposed products. No assurances can be given that our clinical trials will be completed or result in successful outcome. If regulatory authorities do not approve our products or if we fail to maintain regulatory compliance, we would be unable to commercialize our proposed products, and our business and results of operations could be materially harmed.

Our proposed products may not have favorable results in clinical trials or receive regulatory approval.

Positive results from pre-clinical studies or our Phase I and Phase II trials should not be relied upon as evidence that our clinical trials will succeed. Even if our product candidates achieve positive results in pre-clinical studies or during our Phase I and Phase II studies, we will be required to demonstrate through further clinical trials that our product candidates are safe and effective for use in a diverse population before we can seek regulatory approvals for their commercial sale. There is typically an extremely high rate of attrition from the failure of product candidates as they proceed through clinical trials. If any product candidate fails to demonstrate sufficient safety and efficacy in any clinical trial, then we would experience potentially significant delays in, or be required to abandon, development of that product candidate. If we delay or abandon the development efforts of any of our product candidates, we may not be able to generate revenues.

	12

There are no assurances that we will be able to submit or obtain FDA approval in order to market and sell our products.

There can be no assurance that even if the clinical trial of any potential product candidate is successfully initiated and completed, that we will be able to submit a Biologics License Application (“BLA”) or New Drug Application (“NDA”) to the FDA, or that any BLA or NDA we submit will be approved in a timely manner, if at all. If we are unable to submit a BLA or NDA with respect to any future product, or if such application is not approved by the FDA, we will be unable to commercialize that product. The FDA can and does reject BLAs and NDAs and may require additional clinical trials, even when product candidates performed well or achieved favorable results during initial clinical trials. If we fail to commercialize our product candidates, we may be unable to generate sufficient revenues to attain profitability and our reputation in the industry and in the investment community would likely be damaged, each of which would have a materially adverse effect on our business.

The manufacturing of stem cell-based therapeutic products is novel and dependent upon specialized key materials.

The manufacturing of stem cell-based therapeutic products is a complicated and difficult process, dependent upon substantial know-how and subject to the need for continual process improvements. We depend almost exclusively on third party manufacturers to supply our cells. In addition, our suppliers’ ability to scale-up manufacturing to satisfy the various requirements of our planned clinical trials is uncertain. Manufacturing irregularities or lapses in quality control could have a material adverse effect on our reputation and business, which could cause a significant loss of stockholder value. Many of the materials that we use to prepare our cell-based products are highly specialized, complex and available from only a limited number of suppliers. At present, some of our material requirements are single sourced, and the loss of one or more of these sources may adversely affect our business.

Our business is subject to ethical and social concerns.

The use of stem cells for research and therapy has been the subject of debate regarding ethical, legal and social issues. Negative public attitudes toward stem cell therapy could result in greater governmental regulation of stem cell therapies, which could harm our business. For example, concerns regarding such possible regulation could impact our ability to attract collaborators and investors. Existing and potential U.S. government regulation of human tissue may lead researchers to leave the field of stem cell research. Similarly, these factors may induce graduate students to choose other fields less vulnerable to changes in regulatory oversight, thus exacerbating the risk that we may not be able to attract and retain the scientific personnel we need in the face of competition among pharmaceutical, biotechnology and health care companies, universities and research institutions for what may become a shrinking class of qualified individuals

We may be subject to litigation that will be costly to defend or pursue and uncertain in its outcome.

Our business may bring us into conflict with licensees, licensors, or others with whom we have contractual or other business relationships or with our competitors or others whose interests differs from ours. If we are unable to resolve these conflicts on terms that are satisfactory to all parties, we may become involved in litigation brought by or against such parties. Any litigation is likely to be expensive and may require a significant amount of management's time and attention, at the expense of other aspects of our business. The outcome of litigation is always uncertain, and in some cases could include judgments against us which could have a materially adverse effect on our business. By way of example, in May of 2008, we filed a complaint against StemCells Inc., alleging that U.S. Patent No. 7,361,505 (the ‘505 patent”), allegedly exclusively licensed to StemCells, Inc., is invalid, not infringed and unenforceable. On the same day, StemCells, Inc. filed a complaint alleging that we had infringed, contributed to the infringement of, and or induced the infringement of two patents allegedly exclusively licensed to StemCells. Please refer to the section of this Annual Report entitled “Legal Proceedings” for a further discussion of the status of such litigation.

We may not be able to obtain necessary licenses to third-party patents and other rights.

A number of companies, universities and research institutions have filed patent applications or have received patents relating to technologies in our field. We cannot predict which, if any, of these applications will issue as patents or how many of these issued patents will be found valid and enforceable. There may also be existing issued patents on which we would infringe by the commercialization of our product candidates. If so, we may be prevented from commercializing these products unless the third party is willing to grant a license to us. We may be unable to obtain licenses to the relevant patents at a reasonable cost, if at all, and may also be unable to develop or obtain alternative non-infringing technology. If we are unable to obtain such licenses or develop non-infringing technology at a reasonable cost, our business could be significantly harmed. Also, any infringement lawsuits commenced against us may result in significant costs, divert our management’s attention and result in an award against us for substantial damages, or potentially prevent us from continuing certain operations.

	13

We may not be able to obtain government or third-party patient reimbursement.

Our ability to successfully commercialize our proposed products, if developed, in the human therapeutic field depends to a significant degree on patient reimbursement of the costs of such products and related treatments. We cannot assure you that reimbursement in the U.S. or in foreign countries will be available for any products developed, or, if available, will not decrease in the future, or that reimbursement amounts will not reduce the demand for, or the price of, our products. There is considerable pressure to reduce the cost of therapeutic products. Government and other third party payors are increasingly attempting to contain health care costs by limiting both coverage and the level of reimbursement for new therapeutic products and by refusing, in some cases, to provide any coverage for uses of approved products for disease indications for which the FDA or other relevant authority has not granted marketing approval. Moreover, in some cases, government and other third party payors have refused to provide reimbursement for uses of approved products for disease indications for which the FDA or other relevant authority has granted marketing approval. Significant uncertainty exists as to the reimbursement status of newly approved health care products or novel therapies such as ours. We cannot predict what additional regulation or legislation relating to the health care industry or third-party coverage and reimbursement may be enacted in the future or what effect such regulation or legislation may have on our business. If additional regulations are overly onerous or expensive or if healthcare related legislation makes our business more expensive or burdensome than originally anticipated, we may be forced to significantly downsize our business plans or completely abandon the current business model.

Our products may not be profitable due to manufacturing costs and our inability to receive favorable pricing.

Our products may be significantly more expensive to manufacture than other drugs or therapies currently on the market today due to a fewer number of potential manufacturers, greater level of needed expertise and other general market conditions affecting manufacturers of stem cell based products. Even if we are able to receive approval for the reimbursement of our proposed products the amount of reimbursement may be significantly less than the manufacturing costs of our products. Additionally, other market factors including future completion may limit the price which we can charge for our proposed products while still being competitive. Accordingly, if developed, we may not be able to charge a high enough price for us to make a profit from the sale of our products.

We are dependent on the acceptance of our products by the healthcare community.

Our proposed products, if approved for marketing, may not achieve market acceptance since hospitals, physicians, patients or the medical community, in general, may decide not to accept and utilize these products. The products that we are attempting to develop represent substantial departures from established treatment methods and will compete with a number of more conventional drugs and therapies manufactured and marketed by major pharmaceutical companies. The degree of market acceptance will depend on a number of factors, including:

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.

If the healthcare community does not accept our products for any reason, our business would be materially harmed.

We depend on key employees and consultants for our continued operations and future success.

We are highly dependent on our chief executive officer, chief scientific officer and outside consultants. Although we have entered into employment and consulting agreements with these parties, these agreements can be terminated at any time. The loss of any of these key employees or consultants could adversely affect our opportunities and materially harm our future prospects. In addition, we anticipate growth and expansion into areas and activities requiring additional expertise, such as clinical testing, regulatory compliance, manufacturing and marketing. We anticipate the need for additional management personnel and the development of additional expertise by existing management personnel. There is intense competition for qualified personnel in the areas of our present and planned activities, and there can be no assurance that we will be able to continue to attract and retain the qualified personnel necessary for the development our business.

The employment contracts of certain key employees contain significant anti-termination provisions which could make changes in management difficult or expensive.

We have entered into employment agreements with Messrs. Garr and Johe which expire on October 31, 2017. In the event either individual is terminated prior to the full term of their respective contracts, for any reason other than a voluntary resignation, all compensation due to such employee under the terms of the respective agreement shall become due and payable immediately. These provisions will make the replacement of either of these employees very costly and could cause difficulty in effecting a change in control. Termination prior to the full term of these contracts would cost us as much as approximately $1,700,000 per contract and the immediate vesting of all outstanding options and/or warrants held by Messrs. Garr and Johe.

	14

Our competition has significantly greater experience and financial resources.

The biotechnology industry is characterized by intense competition. We will compete against numerous companies, many of which have substantially greater resources. Several such enterprises have initiated cell therapy research programs and/or efforts to treat the same diseases which we target. Given our current stage of development and resources, it may be extremely difficult for us to compete against more developed companies.

Our outsource model depends on third parties to assist in developing and testing our proposed products.

Our strategy for the development, clinical and preclinical testing and commercialization of our proposed products is based in large part on an outsource model. This model requires us to engage third parties in order to further develop our technology and products as well as for the day to day operations of our business. In the event we are not able to enter into such relationships in the future, our ability to operate and develop products may be seriously hindered or we would be required to expend considerable resources to bring such functions in-house. Either outcome could result in our inability to develop a commercially feasible product or in the need for substantially more working capital to complete the research in-house.

The commercialization of cell-based therapeutic products exposes us to product liability claims.

Product liability claims could result in substantial litigation costs and damage awards against us. We attempt to mitigate this risk by obtaining and maintaining appropriate insurance coverage. Historically, we have obtained liability insurance that covers our clinical trials. If we begin commercializing products, we will need to increase our insurance coverage. We may not be able to obtain insurance on acceptable terms, if at all, and the policy limits on our insurance policies may be insufficient to cover our liability.

We currently rely heavily upon third party FDA-regulated manufacturers and suppliers for our products

We currently manufacture our cells both in-house and on an outsource basis. We outsource the manufacturing of our pharmaceutical compound to third party manufacturers. We manufacture cells in-house which are not required to meet stringent FDA requirements. We use these cells in our research and collaborative programs. We outsource all the manufacturing and storage of our stem cells and pharmaceuticals compound to be used in pre-clinical and clinical works, and which are subject to higher FDA requirements, to Charles River Laboratories, Inc., of Wilmington, Massachusetts (stem cells) and Albany Molecular Resources, Inc. (small molecule). Because manufacturing facilities are subject to regulatory oversight and inspection, failure to comply with regulatory requirements could result in material manufacturing delays and product shortages, which could delay or otherwise negatively impact our clinical trials and product development. In the event we are required to seek alternative third party suppliers or manufacturers, they may require us to purchase a minimum amount of materials or could require other unfavorable terms. Any such event would materially impact our business prospects and could delay the development of our products. Moreover, there can be no assurance that any manufacturer or supplier that we select will be able to supply our products in a timely or cost effective manner or in accordance with applicable regulatory requirements or our specifications. In addition, due to the novelty of our products and product development, there can be no assurances that we would be able to find other suitable third party FDA-regulated manufacturers at terms reasonable to us. Failure to secure such third party manufacturers or suppliers would materially impact our business.

We rely on third parties to conduct our clinical trials and perform data collection and analysis, which may result in costs and delays that prevent us from successfully commercializing our product candidates.

We do not have the in-house capability to conduct clinical trials for our product candidates. We rely, and will rely in the future, on medical institutions, clinical investigators, contract research organizations, contract laboratories, and collaborators to perform data collection and analysis and other aspects of our clinical trials. Our preclinical activities or clinical trials conducted in reliance on third parties may be delayed, suspended, or terminated if:

the third parties do not successfully carry out their contractual duties;

fail to meet regulatory obligations or expected deadlines;

we replace a third party; or

the quality or accuracy of the data obtained by third parties is compromised due to their failure to adhere to clinical protocols, regulatory requirements, or for other reasons.

Third party performance failures may increase our development costs, delay our ability to obtain regulatory approval, and delay or prevent the commercialization of our product candidates. While we believe that there are numerous alternative sources to provide these services, in the event that we seek such alternative sources, we may not be able to enter into replacement arrangements without incurring delays or additional costs.

	15

Risks Relating to Intellectual Property.

We may not be able to withstand challenges to our intellectual property rights.

We rely on our intellectual property, including issued and applied-for patents, as the foundation of our business. Our intellectual property rights may come under challenge. No assurances can be given that, even though issued, our current and potential future patents will survive such challenges. For example, in 2005 one of our patents was challenged in the USPTO. Although we prevailed in this particular matter, these cases are complex, lengthy, expensive, and could potentially be adjudicated adversely to our interests, removing the protection afforded by an issued patent. The viability of our business would suffer if such patent protection were limited or eliminated. Moreover, the costs associated with defending or settling intellectual property claims would likely have a material adverse effect on our business and future prospects. At present, there is litigation with StemCells, Inc., which is further described in this Annual Report in the section entitled “Legal Proceedings.”

We may not be able to adequately protect against the piracy of the intellectual property in foreign jurisdictions.

We conduct research in countries outside of the U.S., including through our subsidiary in the People’s Republic of China. A number of our competitors are located in these countries and may be able to access our technology or test results. The laws protecting intellectual property in some of these countries may not adequately protect our trade secrets and intellectual property. The misappropriation of our intellectual property may materially impact our position in the market and any competitive advantages, if any, that we may have.

Risks Relating to Our Common Stock.

The market price for our common shares is particularly volatile.

The market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than those of a seasoned issuer. The volatility in our share price is attributable to a number of factors. Mainly however, we are a speculative or “risky” investment due to our limited operating history, lack of significant revenues to date and the uncertainty of future market acceptance for our products if successfully developed. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Additionally, in the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.

The following factors may add to the volatility in the price of our common shares: actual or anticipated variations in our quarterly or annual operating results; government regulations; announcements of significant acquisitions, strategic partnerships or joint ventures; our capital commitments; and additions or departures of our key personnel. Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether our common shares will sustain their current market prices, or as to what effect the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

As a public company, we incur significant legal, accounting and other expenses that we would not incur as a private company, including costs associated with public company reporting requirements. We also incur costs associated with the Sarbanes-Oxley Act of 2002, as amended, the Dodd-Frank Wall Street Reform and Consumer Protection Act and related rules implemented or to be implemented by the SEC and the NYSE MKT. The expenses incurred by public companies generally for reporting, insurance and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as our executive officers and may divert management’s attention. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation.

We have never paid a cash dividend and do not intend to pay cash dividends on our common stock in the foreseeable future.

We have never paid cash dividends nor do we anticipate paying cash dividends in the foreseeable future. Accordingly, any return on your investment will be as a result of stock appreciation if any. Additionally, we are prohibited from paying any cash dividends under the terms of our credit agreement.

	16

Our anti-takeover provisions may delay or prevent a change of control, which could adversely affect the price of our common stock.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make it difficult to remove our board of directors and management and may discourage or delay “change of control” transactions, which could adversely affect the price of our common stock. These provisions include, among others:

our board of directors is divided into three classes, with each class serving for a staggered three-year term, which prevents stockholders from electing an entirely new board of directors at an annual meeting;

advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors and propose matters to be brought before an annual meeting of our stockholders may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company; and

our board of directors may, without stockholder approval, issue series of preferred stock, or rights to acquire preferred stock, that could dilute the interest of, or impair the voting power of, holders of our common stock or could also be used as a method of discouraging, delaying or preventing a change of control.

If securities or industry analysts do not publish research reports, or publish unfavorable research about our business, the price and trading volume of our common stock could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us and our business. We currently have limited research coverage by securities and industry analysts. In the event an analyst downgrades our securities, the price of our securities would likely decline. If analysts cease to cover us or fails to publish regular reports on us, interest in our securities could decrease, which could cause the price of our common stock and other securities and their trading volume to decline.

Our corporate documents and Delaware law contain provisions that could make it difficult for us to be acquired in a transaction that might be beneficial to our stockholders.

Our board of directors has the authority to issue shares of preferred stock and to fix the rights, preferences, privileges, and restrictions of these shares without stockholder approval. Additionally, our Bylaws provide for a staggered board. These provisions in our corporate documents, along with certain provisions under Delaware law, may make it more difficult for a third party to acquire us or discourage a third party from attempting to acquire us, even if the acquisition might be beneficial to our stockholders.

Our board of directors has broad discretion to issue additional securities which might dilute the net tangible book value per share of our common stock for existing stockholders.

We are entitled under our certificate of incorporation to issue up to 150,000,000 shares of common stock and 7,000,000 “blank check” shares of preferred stock. Shares of our blank check preferred stock provide the board of directors broad authority to determine voting, dividend, conversion, and other rights. As of December 31, 2013 we have issued and outstanding 77,886,031 shares of common stock and we have 43,261,011 shares of common stock reserved for future grants under our equity compensation plans and for issuances upon the exercise or conversion of currently outstanding options, warrants and convertible securities. As of December 31, 2013, we had no shares of preferred stock issued and outstanding. Accordingly, we are entitled to issue up to 28,852,958 additional shares of common stock and 7,000,000 additional shares of “blank check” preferred stock. Our board may generally issue those common and preferred shares, or convertible securities to purchase those shares, without further approval by our shareholders. Any preferred shares we may issue will have such rights, preferences, privileges and restrictions as may be designated from time-to-time by our board, including preferential dividend rights, voting rights, conversion rights, redemption rights and liquidation provisions. It is likely that we will be required to issue a large amount of additional securities to raise capital in order to further our development and marketing plans. It is also likely that we will be required to issue a large amount of additional securities to directors, officers, employees and consultants as compensatory grants in connection with their services, both in the form of stand-alone grants or under our various stock plans. The issuance of additional securities may cause substantial dilution to our shareholders.

Risks Related to Government Regulation and Approval of our Product Candidates.

Our products may not receive regulatory approval.

The FDA and comparable government agencies in foreign countries impose substantial regulations on the manufacturing and marketing of pharmaceutical and biological products through lengthy and detailed laboratory, pre-clinical and clinical testing procedures, sampling activities and other costly and time-consuming procedures. Satisfaction of these regulations typically takes several years or more and vary substantially based upon the type, complexity and novelty of the proposed product. We are currently undertaking clinical trials for our lead products candidates NSI-566 and NSI-189. We cannot assure you that we will successfully complete any clinical trials in connection with such INDs. Further, we cannot predict when we might first submit any product license application (BLA or NDA) for FDA approval or whether any such product license application will be granted on a timely basis, if at all. Moreover, we cannot assure you that FDA approvals for any products developed by us will be granted on a timely basis, if at all. Any delay in obtaining, or failure to obtain, such approvals could have a material adverse effect on the marketing of our products and our ability to generate product revenue.

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Development of our technologies is subject to extensive government regulation.

Our research and development efforts, as well as any future clinical trials, and the manufacturing and marketing of any products we may develop, will be subject to, and restricted by, extensive regulation by governmental authorities in the U.S. and other countries. The process of obtaining FDA and other necessary regulatory approvals is lengthy, expensive and uncertain. FDA and other legal and regulatory requirements applicable to our proposed products could substantially delay or prevent us from initiating additional clinical trials. We may fail to obtain the necessary approvals to commence clinical testing or to manufacture or market our potential products in reasonable time frames, if at all. In addition, the U.S. Congress and other legislative bodies may enact regulatory reforms or restrictions on the development of new therapies that could adversely affect the regulatory environment in which we operate or the development of any products we may develop.

A substantial portion of our research and development entails the use of stem cells obtained from human tissue. The U.S. federal and state governments and other jurisdictions impose restrictions on the acquisition and use of human tissue, including those incorporated in federal Good Tissue Practice, or “GTP,” regulations. These regulatory and other constraints could prevent us from obtaining cells and other components of our products in the quantity or of the quality needed for their development or commercialization. These restrictions change from time to time and may become more onerous. Additionally, we may not be able to identify or develop reliable sources for the cells necessary for our potential products — that is, sources that follow all state and federal laws and guidelines for cell procurement. Certain components used to manufacture our stem and progenitor cell product candidates will need to be manufactured in compliance with the FDA’s GMP. Accordingly, we will need to enter into supply agreements with companies that manufacture these components to GMP standards. There is no assurance that we will be able to enter into any such agreements.

Noncompliance with applicable requirements both before and after approval, if any, can subject us, our third party suppliers and manufacturers and our other collaborators to administrative and judicial sanctions, such as, among other things, warning letters, fines and other monetary payments, recall or seizure of products, criminal proceedings, suspension or withdrawal of regulatory approvals, interruption or cessation of clinical trials, total or partial suspension of production or distribution, injunctions, limitations on or the elimination of claims we can make for our products, refusal of the government to enter into supply contracts or fund research, or government delay in approving or refusal to approve new drug applications.

We cannot predict if or when we will be permitted to commercialize our products due to regulatory constraints.

Federal, state and local governments and agencies in the U.S. (including the FDA) and governments in other countries have significant regulations in place that govern many of our activities. We are, or may become, subject to various federal, state and local laws, regulations and recommendations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances used in connection with its research and development work. The preclinical testing and clinical trials of our proposed products are subject to extensive government regulation that may prevent us from creating commercially viable products. In addition, our sale of any commercially viable product will be subject to government regulation from several standpoints, including manufacturing, advertising, marketing, promoting, selling, labeling and distributing. If, and to the extent that, we are unable to comply with these regulations, our ability to earn revenues, if any, will be materially and negatively impacted.

If our clinical trials fail to demonstrate to the FDA that any of our product candidates are safe and effective for the treatment of particular diseases, the FDA may require us to conduct additional clinical trials or may not grant us marketing approval for such product candidates for those diseases.

We are not permitted to market our product candidates in the United States until we receive approval of a BLA or NDA from the FDA. Before obtaining regulatory approvals for the commercial sale of any product candidate for a target indication, we must demonstrate with evidence gathered in preclinical and well-controlled clinical trials, and, with respect to approval in the United States, to the satisfaction of the FDA and, with respect to approval in other countries, similar regulatory authorities in those countries, that the product candidate is safe and effective for use for that target indication and that the manufacturing facilities, processes and controls used to produce the product are compliant with applicable statutory and regulatory requirements. Our failure to adequately demonstrate the safety and effectiveness of any of our product candidates for the treatment of particular diseases may delay or prevent our receipt of the FDA’s approval and, ultimately, may prevent commercialization of our product candidates for those diseases. The FDA has substantial discretion in deciding whether, based on the benefits and risks in a particular disease, any of our product candidates should be granted approval for the treatment of that particular disease. Even if we believe that a clinical trial or trials has demonstrated the safety and statistically significant efficacy of any of our product candidates for the treatment of a disease, the results may not be satisfactory to the FDA. Preclinical and clinical data can be interpreted by the FDA authorities in different ways, which could delay, limit or prevent regulatory approval. If regulatory delays are significant or regulatory approval is limited or denied altogether, our financial results and the commercial prospects for those of our product candidates involved will be harmed, and our prospects for profitability will be significantly impaired.

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In addition, in the course of its review of a BLA or NDA or other regulatory application, the FDA or other regulatory authorities may conduct audits of the practices and procedures of a company and its suppliers and contractors concerning manufacturing, clinical study conduct, non-clinical studies and several other areas. If the FDA and/or other regulatory authorities conducts an audit relating to a BLA, NDA or other regulatory application and finds a significant deficiency in any of these or other areas, the FDA or other regulatory authorities could delay or not approve such BLA, NDA or other regulatory application. If regulatory delays are significant or regulatory approval is limited or denied altogether, our financial results and the commercial prospects for those of our products or product candidates involved will be harmed, and our prospects for profitability will be significantly impaired.

We are subject to extensive and rigorous governmental regulation, including the requirement of FDA or other regulatory approval before our product candidates may be lawfully marketed.

Both before and after the approval of our product candidates, we, our product candidates, our operations, our facilities, our suppliers, and our contract manufacturers, contract research organizations, and contract testing laboratories are subject to extensive regulation by governmental authorities in the United States and other countries, with regulations differing from country to country. In the United States, the FDA regulates, among other things, the pre-clinical testing, clinical trials, manufacturing, safety, efficacy, potency, labeling, storage, record keeping, quality systems, advertising, promotion, sale and distribution of therapeutic products. Failure to comply with applicable requirements could result in, among other things, one or more of the following actions: notices of violation, untitled letters, warning letters, fines and other monetary penalties, unanticipated expenditures, delays in approval or refusal to approve a product candidate; product recall or seizure; interruption of manufacturing or clinical trials; operating restrictions; injunctions; and criminal prosecution. We or the FDA, or an institutional review board, may suspend or terminate human clinical trials at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk. Our product candidates cannot be lawfully marketed in the United States without FDA approval. Any failure to receive the marketing approvals necessary to commercialize our product candidates could harm our business.

The regulatory review and approval process of governmental authorities, which includes the need to conduct nonclinical studies and clinical trials of each product candidate, is lengthy, expensive and uncertain, and regulatory standards may change during the development of a particular product candidate. We are not permitted to market our product candidates in the United States or other countries until we have received requisite regulatory approvals. For example, securing FDA approval requires the submission of an NDA to the FDA. The approval application must include extensive nonclinical and clinical data and supporting information to establish the product candidate’s safety and effectiveness for each indication. The approval application must also include significant information regarding the chemistry, manufacturing and controls for the product. The FDA review process typically takes significant time to complete and approval is never guaranteed. If a product is approved, the FDA may limit the indications for which the product may be marketed, require extensive warnings on the product labeling, impose restricted distribution programs, require expedited reporting of certain adverse events, or require costly ongoing requirements for post-marketing clinical studies and surveillance or other risk management measures to monitor the safety or efficacy of the product. Markets outside of the United States also have requirements for approval of drug candidates with which we must comply prior to commencing marketing of our products in those markets. Obtaining regulatory approval for marketing of a product candidate in one country does not ensure we will be able to obtain regulatory approval in other countries, but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in other countries. Also, any regulatory approval of any of our product candidates, once obtained, may be withdrawn.

In addition, we, our suppliers, our operations, our facilities, and our contract manufacturers, our contract research organizations, and our contract testing laboratories are required to comply with extensive FDA requirements both before and after approval of our products. For example, we are required to report certain adverse reactions and production problems, if any, to the FDA, and to comply with certain requirements concerning advertising and promotion for our product candidates and our products. Also, quality control and manufacturing procedures must continue to conform to current Good Manufacturing Practices, or cGMP, regulations after approval, and the FDA periodically inspects manufacturing facilities to assess compliance with cGMP. Accordingly, we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control. In addition, discovery of safety issues may result in changes in labeling or restrictions on a product manufacturer or NDA holder, including removal of the product from the market.

The results of pre-clinical studies and early-stage clinical trials, may not be predictive of the results of later-stage clinical trials.

A number of companies in the pharmaceutical and biotechnology industries, including those with greater resources and experience than us, have suffered significant setbacks in Phase II and Phase III clinical trials, despite positive results from earlier-stage trials. The principal investigator of the Phase I safety trial of our human spinal cord stem cells (HSSC's) in amyotrophic lateral sclerosis (ALS or Lou Gehrig's disease), recently presented data on the patients in the study. The study was designed to assess the safety of intraspinal transplantation in ALS patients and was not intended to demonstrate efficacy. While no adverse events related to the surgical procedure or our neural stem cells were reported, the small sample size, limited time frame and preliminary nature of the study make it difficult to draw any conclusions from the results of the study. No assurance can be given that the surgical procedure or our neural stem cells will be deemed safe by the FDA or that efficacy in the treatment of ALS will be demonstrated in any future studies. Failure to demonstrate safety and efficacy results acceptable to the FDA in later stage trials could impair our development prospects and even prevent regulatory approval of our neuronal stem cells, NSI-189 or other future products.

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ITEM 1B.

UNRESOLVED STAFF COMMENTS

Not Applicable

ITEM 2.

PROPERTIES

We currently lease three facilities located in the United States. Our executive offices and primary research facilities are located at 9700 Great Seneca Highway, Rockville, Maryland. We lease these facilities consisting of approximately 3,200 square feet. In January 2014, we entered into a lease amendment with our existing landlord to move our executive offices and research facilities to occupy substantially the same amount of space in Germantown, Maryland. The amended lease provides for monthly lease payments of approximately $6,000 per month with the initial term expiring on December 31, 2014. The lease provides for two one-year extensions at the Company’s option.

In July 2011, we entered into a lease for research space in San Diego, California, for a base rent amount of approximately $5,000 per month plus certain additional monthly fees to be determined based on usage. This lease expired on August 31, 2013 and is currently on a month to month basis.

In October 2011, we entered into a lease, consisting of approximately 3,000 square feet of additional research space in San Diego, California for approximately $6,800 per month. The term of this lease expires on August 31, 2015.

We also lease a research facility in People’s Republic of China. This lease expired on September 30, 2013 and was subsequently renewed through September 30, 2014 for approximately, $2,000 per month.

The aforementioned properties are in good condition and we believe they will be suitable for our purposes for the next 12 months. There is no affiliation between us or any of our principals or agents and our landlords or any of their principals or agents.

ITEM 3.

LEGAL PROCEEDINGS

As of the date of this Annual Report, there are no material pending legal or governmental proceedings relating to our company or properties to which we are a party, and to our knowledge there are no material proceedings to which any of our directors, executive officers or affiliates are a party adverse to us or which have a material interest adverse to us, other than the following:

· On May 7, 2008, we filed suit against StemCells, Inc., StemCells California, Inc. (collectively "StemCells") and Neurospheres Holding Ltd. in U.S. District Court for the District of Maryland, alleging that U.S. Patent No. 7,361,505 (the "'505 patent") 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. 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 allegedly owned by or exclusively licensed to StemCells. 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 antitrust laws. On February 28, 2011, Neuralstem filed a Motion to Dismiss for lack of standing and concurrently filed a Motion for Leave to Amend its Answer and Counterclaim to allege that StemCells is not the exclusive licensee of the patents-in-suit and also that Neuralstem has obtained a non-exclusive license to the patents-in-suit. In addition, before the Court decided Neuralstem’s Motion to Dismiss for lack of standing, StemCells filed a motion for summary judgment on the issue standing. Neuralstem responded to that motion and cross-moved for summary judgment on the issue of standing. The Court further issued its Markman Order on August 12, 2011. On August 26, 2011, StemCells moved for reconsideration of two terms construed in the Markman Order and that motion remains pending. On April 6, 2012 the Court granted Neuralstem's Motion for Leave to Amend to assert lack of standing and denied Neuralstem's Motion to Dismiss and Motion for Summary Judgment without prejudice. The Court also denied StemCells' Motion for Summary Judgment with prejudice. The Court has stayed all other matters pending resolution of the question of standing and discovery on that issue is ongoing. It is not known when, nor on what basis, this matter will be concluded.

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ITEM 4.

MINE SAFETY DISCLOSURE

Not Applicable

PART II

ITEM 5.

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

Market Information

Our common stock is traded on the NYSE MKT under the symbol "CUR." The following table sets forth, for the periods indicated, the high and low sale prices for our common stock.

	High		Low
2013
First Quarter	$	1.40	$	1.03
Second Quarter	$	1.59	$	1.00
Third Quarter	$	3.02	$	1.30
Fourth Quarter	$	3.04	$	2.07
2012
First Quarter	$	1.30	$	0.91
Second Quarter	$	1.20	$	0.66
Third Quarter	$	1.96	$	0.42
Fourth Quarter	$	1.57	$	0.88

Holders

As of February 28, 2014 our common stock was held by approximately 414 record holders. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these holders.

Dividends

We have not paid any cash dividends to date and have no plans to do so in the immediate future. Additionally, we are prohibited from paying any cash dividends under the terms of our credit agreement.

Equity Compensation Plan Information

The following table sets forth information with respect to our equity compensation plans as of December 31, 2013.

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	Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights		Weighted- Average Exercise Price for Outstanding Options, Warrants and Rights	Number of Securities Remaining Available for Future Issuance under Equity compensation Plans (Excluding Securities Reflected in Column (a))
Plan Category	(a)		(b)	(c)
Equity compensation plans approved by security holders
2005 Stock Plan, as amended and restated	3,693,333	$	1.20	-
2007 Stock Plan	6,026,819	$	3.17	2,027
2010 Equity Compensation Plan	9,258,680	$	1.06	4,693,332
Equity compensation plans not approved by security holders	N/A		N/A	N/A
Total	18,978,832	$	1.76	4,695,359

Performance Graph

The following graph compares total stockholder returns of Neuralstem, Inc. for the period commencing on December 31, 2008 and ending on December 31, 2013, to two indices: (i) The NYSE MKT Composite Index and (ii) The AMEX Biotechnology Index. The total return for our stock and for each index assumes an initial investment of $100 and the reinvestment of dividends, although we have never declared dividends on Neuralstem stock, and is based on the returns of the component companies weighted according to their capitalizations as of the end of each quarterly period. The stock price performance included in this graph is not necessarily indicative of future stock price performance.

Recent Sales of Unregistered Securities

The following information is given with regard to unregistered securities sold during the period covered by this report. The unregistered securities were issued pursuant to section 4(2) of the Securities Act:

In January and February of 2013, we received and accepted a proposal from certain common stock purchase warrant holders. Pursuant to the proposal, the holders agreed to exercise certain warrants for cash in exchange for the Company: (i) reducing the current exercise price of their outstanding warrants from $3.17 to $1.25 (for 200,000 warrants) and from $2.14 to $1.25 (for 58,000 warrants), and (ii) issuing such holders replacement warrants, equal to the number of warrants exercised pursuant to the their proposal. Pursuant to the proposal, we issued an aggregate of 258,000 replacement warrants. The terms of the replacement warrants are to be substantially similar to the holders’ original warrants and have an exercise price of $1.25 and expire on March 31, 2020.

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In March 2013, we issued a common stock purchase warrant to purchase 10,000 shares of our common stock as compensation for business advisory services in connection with our wholly-owned subsidiary in the People’s Republic of China. The warrant has a term of 5 years and will expire on March 19, 2018, an exercise price of $1.4375 and provides for the adjustment of the purchase price and number of shares upon stock dividends and splits. The warrant does not contain any price protection provisions with regard to subsequent financings.

In March 2013, the Company entered into a Loan and Security agreement for an initial $8 million term loan with an additional $2 million of borrowing capacity if certain conditions involving new partnerships are met. The loan is collateralized by substantially all of the Company’s assets, including our intellectual property.

In connection with the Loan Agreement, we issued a five-year warrant to purchase 648,809 shares of our common stock at an exercise price of $1.0789 per share. The number of shares underlying the warrant and the exercise price are subject to adjustment upon the occurrence of a non-public offering occurring between December 22, 2012 and March 22, 2014, a merger event, reclassification of shares, subdivision or combination of shares, or dividends as described in the Warrant.

In connection with the loan origination, we paid an advisor: (i) cash in the amount of $290,000, including the reimbursement of legal fees, (ii) 259,740 common shares, and (iii) an advisor warrant, to purchase 648,798 common shares, having the same terms and conditions as the lender warrant except that there are no adjustments upon subsequent financing and the addition of cashless exercise after 6 months from the date of issuance if underlying shares are not subject to an effective registration statement.

Additionally, we also issued 90,910 shares of our common stock as consideration for the waiver of any potential preferential rights contained in the underwriting agreement between the Company and a previous advisor dated August 14, 2012.

Between May and July of 2013, we received and accepted proposals from certain common stock purchase warrant holders. Pursuant to the proposals, the holders agreed to exercise their warrants to purchase 1,911,680 shares of our common stock, for cash, in exchange for us agreeing to: (i) reduce the original exercise price of the outstanding warrants from $2.13 to $1.07 for 440,000 warrants, from $2.13 to $1.25 for 958,005 warrants and from $2.14 to $1.25 for 513,675 warrants, and (ii) issue such holders a replacement warrant, equal to the number of warrants exercised pursuant to their proposal. Pursuant to the proposal, we issued an aggregate of 1,911,680 replacement warrants. The terms of the replacement warrants are substantially similar to the holders’ original warrants, other than having an exercise price of $1.25 and expiration dates of May 1, 2016 for 440,000 warrants and March 31, 2020 for 1,471,680 warrants.

Between March and July of 2013, we received and accepted proposals from certain common stock purchase warrant holders. Pursuant to the proposals, the holders agreed to exercise their warrants for cash in exchange for us agreeing to issue such holders replacement warrants equal to the number of warrants exercised pursuant to the proposal. Pursuant to the proposal, we issued an aggregate of 539,324 replacement warrants. The replacement warrants have an exercise price of $1.25 and expire on March 31, 2020.

In June of 2013, we issued one of our legal firms a common stock purchase warrant to purchase 150,000 shares of our common stock at an exercise price of $1.52 per share in exchange for certain legal work. The warrant has a term of 5 years and will expire on June 1, 2018. The warrant can be exercised after 6 months from the issuance date on a cashless basis at any time that the shares underlying the warrant are not subject to a registration statement. The warrant provides for an adjustment to the purchase price and number of shares underlying the warrant upon stock dividends and splits. The warrant does not contain any price protection provisions with regard to subsequent financings.

In August 2013, we issued one of our advisors a common stock purchase warrant to purchase 2,000,000 shares of our common stock at an exercise price of $3.00 per share in exchange for strategic advisory services. The warrant has a term of 5 years as a result of the advisor reaching certain capital raising milestones. The warrant can be exercised after 6 months from the issuance date on a cashless basis at any time that the shares underlying the warrant are not subject to a registration statement. The warrant provides for an adjustment to the purchase price and number of shares underlying the warrant upon stock dividends and splits. The warrant does not contain any price protection provisions with regard to subsequent financings.

During September 2013, we issued an aggregate of 72,440 common shares to a broker-dealer as compensation for the cash exercise of 1,448,798 outstanding common stock purchase warrants. Pursuant to the exercise, we received an aggregate of approximately $1,700,000 in proceeds.

In January 2014, we issued 459,618 shares of common stock as a result of the cashless exercise of 663,800 warrants with an average price of $1.08.

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ITEM 6.

SELECTED FINANCIAL DATA

	Year Ended December 31,
Statement of Operations Data:	2013		2012		2011		2010		2009
Revenues	$	110,000	$	407,708	$	390,625	$	733,438	$	-
Total operating expenses	$	12,633,941	$	10,564,164	$	13,381,095	$	15,918,319	$	10,466,549
Operating loss	$	(12,523,941)	$	(10,156,456)	$	(12,990,470)	$	(15,184,881)	$	(10,466,549)
Interest expense	$	(1,394,274)	$	(2,699)	$	(821)	$	(2,662)	$	(776)
Warrant issuance and modification expense	$	(5,017,156)	$	-	$	-	$	(1,906,800)	$	-
Gain (loss) from change in fair value adjustment of warrant obligations	$	(965,329)	$	-	$	161,809	$	(1,352,234)	$	83,348
Net loss	$	(19,831,862)	$	(10,121,517)	$	(12,518,527)	$	(18,387,300)	$	(10,364,363)
Net loss per share - basic and diluted	$	(0.27)	$	(0.17)	$	(0.26)	$	(0.42)	$	(0.30)

	As of December 31,
Balance Sheet Data:	2013		2012		2011		2010		2009
Cash and equivalents	$	16,846,052	$	7,443,773	$	2,352,013	$	9,261,233	$	2,309,774
Working capital	$	11,682,987	$	5,896,454	$	590,385	$	7,093,237	$	892,552
Total assets	$	19,413,536	$	8,750,079	$	4,086,177	$	10,591,360	$	3,007,405
Long-term debt, net of discount	$	7,697,331	$	-	$	-	$	-	$	-
Fair value of derivative instruments	$	1,417,527	$	-	$	-	$	1,250,839	$	6,462,039
Total stockholders' equity (deficit)	$	8,418,199	$	6,972,633	$	1,659,818	$	7,854,350	$	(5,015,456)

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations or MD&A, is provided in addition to the accompanying financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flows. Our MD&A is organized as follows:

Executive Overview — Overview discussion of our business 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 2014.

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 the: (i) twelve month period ended December 31, 2013 to the comparable period of 2012 and (ii) twelve month period ended December 31, 2012 to the comparable period of 2011.

Liquidity and Capital Resources— An analysis of cash flows and discussion of our financial condition and future liquidity needs.

Executive Overview

We are focused on the development and commercialization of treatments based on human neuronal stem cells and the development and commercialization of treatments using small molecule compounds. We are headquartered in Rockville, Maryland and have a wholly-owned subsidiary in China.

We have developed and maintain a portfolio of patents and patent applications that form the proprietary base for our research and development efforts. We own or exclusively license forty-nine (49) U.S. or foreign issued patents and sixty (60) U.S. and foreign patent applications in the field of regenerative medicine, related to our stem cell technologies as well as our small molecule compounds. At times, including in the third quarter 2012 and the first quarter of 2013, we have licensed the use of our intellectual property to third parties.

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All of our research efforts to date are at the pre-clinical or clinical stage of development. We are focused on leveraging our key assets, including our intellectual property, our scientific team and our facilities, to advance our technologies. In addition, we are pursuing strategic collaborations with members of academia and industry.

We have not derived any revenue or cash flows from the sale or commercialization of our products. In the past, we have derived limited revenue from the licensing of certain intellectual property to third parties and from consulting fees. As a result, we have incurred annual operating losses since inception and expect to continue to incur substantial operating losses in the future. Therefore, we are dependent upon external financing and revenue from collaborative research arrangements with sponsors to finance our operations. We have no such collaborative research arrangements at this time and there can be no assurance that such financing or partnering revenue will be available when needed or on terms acceptable to us.

Before we can derive revenue or cash inflows from the commercialization of any of our proposed product candidates, we will need to: (i) conduct substantial testing of our proposed products, (ii) undertake preclinical and clinical testing for specific disease indications; and (iii), obtain required regulatory approvals. These steps are risky, expensive and time consuming.

Trends & Outlook

For the years ended December 31, 2013, 2012 and 2011, we generated no revenues from the sale of our proposed therapies. We are mainly focused on: (i) successfully managing our clinical trials, and (ii) preparing for the initiation of clinical trials relating to Chronic Spinal Cord injury. We are also pursuing pre-clinical studies on other central nervous system indications in preparation for additional clinical trials.

In August of 2011, we were selected as the primary subcontractor for a DOD contract awarded to Loma Linda University entitled "Research to Treat Cancerous Brain Tumors with Neural Stem Cells." We received $625,000 pursuant to this contract through its completion in the second quarter of 2012, and recognized revenue related to this contract of approximately $234,000 and $391,000 for the twelve months ended December 31, 2012 and 2011, respectively.

In the first quarter of 2013 and the third quarter of 2012, we licensed the use of certain of our intellectual property to third parties. During the years ended December 31, 2013 and 2012, we recognized approximately $110,000 and $173,000 of revenue, respectively related to up-front payments and ongoing fees under these licenses.

On a long-term basis, we anticipate that our revenue will be derived primarily from licensing fees and sales of our cell based therapy and small molecule compounds. Because we are at such an early stage in the clinical trials process, we are not yet able to accurately predict when we will have a product ready for commercialization, if ever.

Research and Development Expenses

Our research and development expenses consist primarily of contractor and personnel expenses associated with clinical trials and regulatory submissions; costs associated with preclinical activities such as proof of principle for new indications; toxicology studies; costs associated with cell processing and process development; facilities-related costs and supplies. Clinical trial expenses include payments to research organizations, contract manufacturers, clinical trial sites, consultants and laboratories for testing clinical samples.

We focus on the development of treatment candidates with potential uses in multiple indications, and use employee and infrastructure resources across several projects. Accordingly, many of our costs are not attributable to a specifically identified product and we do not account for internal research and development costs on a project-by-project basis.

For a further description of these clinical trials, see the section of this report entitled “Clinical Programs” contained in Item 1.

We expect that research and development expenses, which include expenses related to our ongoing clinical trials, will increase in the future, as funding allows and we proceed into our anticipated Phase II trials. To the extent that it is practical, we will continue to outsource much of our efforts, including product manufacture, proof of principle and pre-clinical testing, toxicology, tumorigenicity, dosing rationale, and development of clinical protocol and IND applications. This approach allows us to use the best expertise available for each task and permits staging new research projects to fit available cash resources.

We have formed a wholly owned subsidiary in the People’s Republic of China. We anticipate that this subsidiary will primarily: (i) conduct pre-clinical research with regard to proposed stem cells therapies, and (ii) oversee our approved future clinical trials in China, including the current trial to treat motor deficits due to ischemic stroke. Through December 31, 2013 this subsidiary has incurred expenses of approximately $300,000.

General and Administrative Expenses

General and administrative expenses are primarily comprised of salaries, benefits and other costs associated with, finance, legal, human resources, information technology, public relations, legal fees, facilities and other external general and administrative services.

Critical Accounting Policies

Our financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Note 2 of the Notes to Audited Financial Statements included elsewhere herein describes the significant accounting policies used in the preparation of the financial statements. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below.

A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: (1) we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and (2) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.

Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have been included in the financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statements are fairly stated in accordance with U.S. GAAP, and present a meaningful presentation of our financial condition and results of operations. We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our financial statements:

Use of Estimates- Our financial statements prepared in accordance with U.S. GAAP require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Specifically, we have estimated the expected economic life and value of our patent technology, our net operating loss carryforward for tax purposes and our share-based compensation expenses related to employees, directors, consultants and investment banks. Actual results could differ from those estimates.

Long Lived Intangible Assets - Our long lived intangible assets consist our intellectual property patents including primarily legal fees associated with the filings and in defense of our patents. The assets are amortized on a straight-line basis over the expected useful life which we define as ending on the expiration of the patent group. These assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. We assess this recoverability by comparing the carrying amount of the asset to the estimated undiscounted future cash flows to be generated by the asset. If an asset is deemed to be impaired, we estimate the impairment loss by determining the excess of the asset’s carrying amount over the estimated fair value. These determinations use assumptions that are highly subjective and include a high degree of uncertainty. During the twelve month periods ended December 31, 2013, 2012 and 2011, no significant impairment losses were recognized.

Fair Value Measurements - The fair value of our long-term indebtedness is estimated based on the quoted prices for the same or similar issues or on the current interest rates offered to the Company for debt of the same remaining maturities. The fair values of our derivative instruments and certain other accrued expenses are estimated using level 3 unobservable inputs.

Share-Based Compensation- We account for share-based compensation at fair value; accordingly we expense the estimated fair value of share-based awards over the requisite service period. Share-based compensation cost for stock options and warrants is determined at the grant date using an option pricing model. Option pricing models require us to make assumptions, including expected volatility and expected term of the options. If any of the assumptions we use in the model were to significantly change, stock based compensation expense may be materially different. Share-based compensation cost for restricted stock and restricted stock units is determined at the grant date based on the closing price of our common stock on that date. The value of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period.

	26

Comparison of Our Results of Operations for the Year Ended December 31, 2013 and 2012

Revenue

We did not generate any revenues from the sale of our proposed products in 2013 or 2012. During 2012, we recognized revenue of approximately $234,000, for our services as principal subcontractor under the DOD contract; this contract was completed in the second quarter of 2012. During 2013 and 2012, we recognized revenue of approximately $110,000 and $173,000, respectively related to the licensing of certain of our intellectual properties to third parties.

Operating Expenses

Operating expenses totaled approximately $12,634,000 and $10,564,000 for 2013 and 2012, respectively.

	Year Ended December 31,				Increase (Decrease)
	2013		2012		$		%
Operating Expenses
Research & development costs	$	7,134,301	$	6,105,984	$	1,028,317	17	%
General & administrative expenses		5,254,915		4,247,037		1,007,878	24	%
Depreciation and amortization		244,725		211,143		33,582	16	%
Total expense	$	12,633,941	$	10,564,164	$	2,069,777	20	%

Research and Development Expenses

Our research and development expenses consist primarily of contractors charges and personnel expenses associated with clinical trials and regulatory submissions; costs associated with preclinical activities such as proof of principle for new indications; toxicology studies; costs associated with cell processing and process development; facilities-related costs and supplies. Clinical trial expenses include payments to research organizations, contract manufacturers, clinical trial sites, laboratories for testing clinical samples and consultants.

The increase in research and development expenses was primarily attributable to an approximately $389,000 increase in project and lab expenses, a $136,000 increase in personnel related expenses due to the hiring of additional research and development personnel, a $147,000 increase in travel expenses all due to the ramping up of our clinical trial and research efforts coupled with a $277,000 increase in share-based compensation.

General and Administrative Expenses

General and administrative expenses are primarily comprised of salaries, benefits and other costs associated with finance, legal, human resources, information technology, public relations , facilities and other external general and administrative services.

The increase in general and administrative expenses was primarily attributable to an approximately $494,000 increase in professional services, a $444,000 increase in share-based compensation, a $77,000 increase in insurance premiums and a $57,000 increase in charitable donations, partially offset by a $92,000 decrease in bonus and personnel related expenses.

Depreciation and Amortization

The increase in depreciation and amortization expenses is primarily due to depreciation over fixed assets purchased in 2013 along with amortization of 2013 additions to our patent assets.

Other income (expense)

Other income (expense) totaled approximately ($7,308,000) and $35,000 in the years ended December 31, 2013 and 2012, respectively. Other expense in 2013 consisted primarily of a $5,017,000 expense related to the modification of certain common stock purchase warrants, $1,394,000 of interest expense primarily related to the Company’s March 2013 long term debt and a $965,000 expense related to the change in fair value of the Company’s warrant liabilities partially offset by approximately $68,000 in interest income. Other income in 2012 consisted primarily of interest income.

Comparison of Our Results of Operations for the Year Ended December 31, 2012 and 2011

Revenue

We did not generate any revenues from the sale of our proposed products in 2012 or 2011. During 2012 and 2011, we recognized revenue of approximately $234,000 and $391,000, respectively, for our services as principal subcontractor under the DOD contract; this contract was completed in the second quarter of 2012. During 2012, we recognized revenue of approximately $173,000 related to the licensing of certain of our intellectual properties to third parties; we did not recognize any licensing revenue in 2011.

Operating Expenses

Operating expenses totaled approximately $10,564,000 and $13,381,000 for 2012 and 2011, respectively.

	Year Ended December 31,				Increase (Decrease)
	2012		2011		$		%
Operating Expenses
Research & development costs	$	6,105,984	$	7,354,857	$	(1,248,873)	-17	%
General & administrative expenses		4,247,037		5,839,188		(1,592,151)	-27	%
Depreciation and amortization		211,143		187,050		24,093	13	%
Total expense	$	10,564,164	$	13,381,095	$	(2,816,931)	-21	%

Research and Development Expenses

The decrease in research and development was primarily attributable to an approximately $1,072,000 decrease in stock based compensation expense coupled with an approximately $450,000 decrease in project expenses related to studies that were completed in 2011 partially offset by increased salary and related expenses due to additional employees in 2012.

General and Administrative Expenses

General and administrative expenses are primarily comprised of salaries, benefits and other costs associated with finance, human resources, information technology, public relations, legal fees, facilities and other external general and administrative services.

The decrease in general and administrative expenses was primarily attributable to decreases of approximately $797,000 in legal expenses primarily related to patent litigation, $651,000 in stock based compensation expense and $347,000 in employee salary and bonus expenses due to the restructuring of our finance and accounting department in April 2012 partially offset by an increase of approximately $253,000 in consultant fees.

Depreciation and Amortization

The increase in depreciation and amortization expenses of approximately $24,000 is primarily due to increased amortization related to our patent portfolio.

Other income (expense)

Other income in 2012 consisted primarily of interest income. In 2011, other income consisted primarily of $250,000 in connection with the settlement of a lawsuit and approximately $162,000 related to gains from changes in the fair value of certain warrant obligations.

Settlement of Lawsuit

On February 2, 2011, we received $250,000 from a settlement with ReNeuron, Ltd., ending litigation between the parties. In addition to the settlement, ReNeuron agreed to make future milestone payments to Neuralstem based on ReNeuron's development of certain products which were at issue in the case. The success of Reneuron’s development of these products and our future receipt of any payment milestones, if any, is uncertain.

Warrant Obligations

The gain from the change in fair value of warrant obligations in 2011 represents the final mark to market adjustment prior to the expiration and exercise of all outstanding warrants that were classified as liabilities.

Liquidity and Capital Resources

Since our inception, we have financed our operations through the sales of our securities, the exercise of investor warrants, debt financing and to a lesser degree from grants and research contracts. During 2013 we raised approximately $20.7 million of net proceeds from the following: approximately $7.6 million from the March 2013 issuance of long term debt, $7.0 million from the sale of our common stock and warrants (including $2.9 million under our At The Market Offering Agreement) and $6.1 million from exercises of investor warrants. Additionally, subsequent to December 31, 2013, we raised approximately $20 million of gross proceeds from the sale of our securities pursuant to a registered direct offering.

Currently, our monthly cash burn for operations is approximately $900,000. We anticipate that our available cash, expected income and expected proceeds from the sales of our securities will be sufficient to finance our current activities at least through December 31, 2014, although certain activities and related personnel may need to be reduced. We cannot assure you that we will be able to secure such additional financing or that the expected income will materialize. Several factors will affect our ability to raise additional funding, including, but not limited to, the volatility of our common shares and general market conditions.

	28

Cash Flows – 2013 compared to 2012

	Year Ended December 31,				Increase (Decrease)
	2013		2012		$		%

Cash and cash equivalents	$	16,846,052	$	7,443,773	$	9,402,279	126	%

Net cash used in operating activities	$	(10,591,617)	$	(8,477,700)	$	(2,113,917)	25	%
Net cash used in investing activities	$	(537,050)	$	(254,858)	$	(282,192)	111	%
Net cash provided by financing activities	$	20,524,702	$	13,824,318	$	6,700,384	48	%

The increase in our cash and cash equivalents from 2012 to 2013 was primarily due to proceeds of approximately $20,708,000 from our debt and equity transactions partially offset by our cash used to fund our operations.

Net Cash Used in Operating Activities

The increase in cash used in operating activities during 2013 as compared to 2012 was primarily related to the ramping up of our clinical trial and other research and development efforts.

Net Cash Used in Investing Activities

The increase in our cash used in investing activities during 2013 as compared to 2012 was primarily attributable to an increased level of property and equipment purchases coupled with an increase in activity related to our patents.

Net Cash Provided by Financing Activities

In 2013 we raised approximately $7,551,000 from the issuance of long-term debt and $13,157,000 from the issuance and sale of our common stock and warrants while in 2012 we raised approximately $13,889,000 from the issuance and sale of our common stock and warrants.

Cash Flows – 2012 compared to 2011

	Year Ended December 31,				Increase (Decrease)
	2012		2011		$		%

Cash and cash equivalents	$	7,443,773	$	2,352,013	$	5,091,760	216	%

Net cash used in operating activities	$	(8,477,700)	$	(8,096,696)	$	(381,004)	5	%
Net cash used in investing activities	$	(254,858)	$	(480,850)	$	225,992	-47	%
Net cash provided by financing activities	$	13,824,318	$	1,668,326	$	12,155,992	729	%

The increase in our cash and cash equivalents from 2011 to 2012 was primarily due to proceeds from our capital market activities during 2012 partially offset by cash used to fund our operations.

Net Cash Used in Operating Activities

The increase in cash used in operating activities during 2012 as compared to 2011 was primarily due to an increase in vendor payments partially offset by cash receipts from our DOD and license agreements in 2012.

Net Cash Used in Investing Activities

The decrease in our cash used in investing activities during 2012 as compared to 2011 was primarily attributable to a decreased level of property and equipment purchases coupled with a decrease in activity related to our patents.

Net Cash Provided by Financing Activities

We raised approximately $13,889,000 and $1,668,000 in net proceeds from the issuance and sale of our securities during 2012 and 2011, respectively.

	29

Future Liquidity and Needs

We have incurred significant operating losses and negative cash flows since inception. We have not achieved profitability and may not be able to realize sufficient revenue to achieve or sustain profitability in the future. We do not expect to be profitable in the next several years, but rather expect to incur additional operating losses. We have limited liquidity and capital resources and must obtain significant additional capital resources in order to sustain our product development efforts, for acquisition of technologies and intellectual property rights, for preclinical and clinical testing of our anticipated products, pursuit of regulatory approvals, acquisition of capital equipment, laboratory and office facilities, establishment of production capabilities, for general and administrative expenses and other working capital requirements. We rely on cash balances and the proceeds from the offering of our securities, exercise of outstanding warrants and grants to fund our operations.

In January, 2014 we closed on a registered direct offering providing for $20 million of gross proceeds from the sale of 6,872,859 shares of our common stock and 3,436,435 common stock purchase warrants. This offering was pursuant to our $50 million shelf registration statement declared effective by the SEC on September 13, 2013 (Registration No. 333-169847).

In October 2013, we entered into an At the Market Offering Agreement with T.R. Winston & Company as our sales agent pursuant to which we can sell up to $25 million of our common stock. The At the Market Offering Agreement was entered into pursuant to a takedown from our shelf registration statement declared effective by the SEC on September 13, 2013 (Registration No. 333-169847) In 2013, we sold a total of 1,140,994 shares of our common stock under the sales agreement at an average price per share of $2.64 for gross proceeds of approximately $3.0 million. In connection with the sales, our sales agent was paid a fee of 4% of gross sales or approximately $121,000. Notwithstanding the foregoing as a result of other takedowns from our shelf registration statement, future sales under our At the Market Offering Agreement are limited to approximately $14 million which is the amount available under our shelf registration statement.

Subsequent to December 31, 2013 through February 28, 2014, we received approximately $800,000 from the exercise of certain common stock purchase warrants.

As of February 28, 2014 we have approximately $14.0 million remaining under our shelf registration statement. We anticipate conducting financing in the future based on our current and future shelf registration statements when and if financing opportunities arise.

The source, timing and availability of any future financing will depend principally upon market conditions, interest rates and, more specifically, on our progress in our exploratory, preclinical and future clinical development programs. Funding may not be available when needed, at all, or on terms acceptable to us. Lack of necessary funds may require us, among other things, to delay, scale back or eliminate some or all of our research and product development programs, planned clinical trials, and/or our capital expenditures or to license our potential products or technologies to third parties.

Contractual Obligations

As of December 31, 2013, our contractual obligations were as follows:

	Less than 1
Contractual Obligations	year		1 - 3 Years		3 - 5 Years		More than 5 Years		Total
Operating facility leases	$	114,331	$	57,856	$	-	$	-	$	172,187
Long-term debt		2,939,989		5,060,011		-		-		8,000,000
Total contractual obligations	$	3,054,320	$	5,117,867	$	-	$	-	$	8,172,187

Off-balance Sheet Arrangements

None.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Financial instruments that potentially subject us to concentrations of credit risk consist of cash and cash equivalents which are held at highly rated United States financial institutions and at times maintain the balances of our deposits in excess of federally insured limits. We invest our cash in instruments with short-term maturities with the objective of preserving capital. Because of the short-term maturities, we do not believe that a one-half percentage point increase or decrease in interest rates would have had a material effect on our interest income.

We are subject to interest rate risk for our long-term debt which contains a floating interest rate based on Wall Street Journal published prime rate. For the year ended December 31, 2013 a one percentage point increase in the prime rate would have increased our interest expense by approximately $60,000.

	30

Our foreign operations in China subject us to changes in foreign exchange rates. Changes in rates for the year ended December 31, 2013 would not have had a material effect as the operations were limited. Future changes to foreign exchange rates could have a material on us as our clinical trial activity increases.

Our derivative instruments are carried at fair value using an option pricing model; therefore, a 10% increase or decrease in the price of our common stock at December 31, 2013 would have resulted in a change in the fair value of our derivative instruments of approximately $175,000.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	32

Consolidated Balance Sheets	33

Consolidated Statements of Operations and Comprehensive Loss	34

Consolidated Statements of Changes in Stockholders’ Equity	35

Consolidated Statements of Cash Flows	36

Notes to Consolidated Financial Statements	38

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Neuralstem,
Inc. Rockville, Maryland

We have audited the accompanying consolidated balance sheets of Neuralstem, Inc. (the “Company”) as of December 31, 2013 and 2012, and the consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2013. We also have audited the Company’s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over consolidated financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) 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 (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Neuralstem, Inc. as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, Neuralstem, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

/s/ Stegman & Company

Baltimore, Maryland

March 10, 2014

Neuralstem, Inc.

Consolidated Balance Sheets

	December 31,
	2013		2012

ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	16,846,052	$	7,443,773
Billed and unbilled receivables		10,000		3,333
Deferred financing fees, current portion		507,334		-
Prepaid expenses		255,733		205,651
Total current assets		17,619,119		7,652,757

Property and equipment, net		230,971		230,397
Patents, net		1,137,701		807,357
Deferred financing fees, net of current portion		360,848		-
Other assets		64,897		59,568
Total assets	$	19,413,536	$	8,750,079

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	1,196,190	$	1,199,662
Accrued bonuses		465,868		465,865
Current portion of long term debt, net of discount		2,763,121		-
Derivative instruments		1,417,527		-
Other current liabilities		93,426		90,776
Total current liabilities		5,936,132		1,756,303

Long term debt, net of discount and current portion		4,934,210		-
Other long term liabilities		124,995		21,143
Total liabilities		10,995,337		1,777,446

Commitments and contingencies (Note 10)

STOCKHOLDERS' EQUITY
Preferred stock, 7,000,000 shares authorized, zero shares issued and outstanding		-		-
Common stock, $0.01 par value; 150 million shares authorized, 77,886,031 and 68,189,314 shares issued and outstanding in 2013 and 2012, respectively		778,860		681,893
Additional paid-in capital		136,058,135		114,884,915
Accumulated other comprehensive income		7,241		-
Accumulated deficit		(128,426,037)		(108,594,175)
Total stockholders' equity		8,418,199		6,972,633
Total liabilities and stockholders' equity	$	19,413,536	$	8,750,079

See accompanying notes to consolidated financial statements.

Neuralstem, Inc.

Consolidated Statements of Operations and Comprehensive Loss

	Year Ended December 31,
	2013		2012		2011

Revenues	$	110,000	$	407,708	$	390,625

Operating expenses:
Research and development costs		7,134,301		6,105,984		7,354,857
General and administrative expenses		5,254,915		4,247,037		5,839,188
Depreciation and amortization		244,725		211,143		187,050
Total operating expenses		12,633,941		10,564,164		13,381,095
Operating loss		(12,523,941)		(10,156,456)		(12,990,470)

Other income (expense):
Interest income		68,000		34,154		60,955
Interest expense		(1,394,274)		(2,699)		(821)
Warrant modification expense		(5,017,156)		-		-
Gain (loss) from change in fair value of derivative instruments		(965,329)		-		161,809
Litigation settlement		838		3,484		250,000
Total other income (expense)		(7,307,921)		34,939		471,943

Net loss	$	(19,831,862)	$	(10,121,517)	$	(12,518,527)

Net loss per share - basic and diluted	$	(0.27)	$	(0.17)	$	(0.26)

Weighted average common shares outstanding - basic and diluted		72,279,210		58,153,929		48,340,557

Comprehensive loss:
Net loss	$	(19,831,862)	$	(10,121,517)	$	(12,518,527)
Foreign currency translation adjustment		7,241		-		-
Comprehensive loss	$	(19,824,621)	$	(10,121,517)	$	(12,518,527)

See accompanying notes to consolidated financial statements.

Neuralstem, Inc.

Consolidated Statements of Changes In Stockholders' Equity

	Common Stock Shares	Common Stock Amount		Additional Paid- In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity

Balance at January 1, 2011	46,897,529	$	468,975	$	93,339,506	$	-	$	(85,954,131)	$	7,854,350
Share based payments	-		-		2,924,089		-		-		2,924,089
Issuance of common stock from warrants exercised, net of issuance costs of $158,020	1,468,775		14,688		1,653,638		-		-		1,668,326
Issuance of restricted common stock and restricted common stock units in payment for 2010 executive bonuses	-		-		77,500		-		-		77,500
Warrant issuances and modifications	-		-		1,089,030		-		-		1,089,030
Issuance of common stock for prepaid consulting services	315,814		3,158		561,892		-		-		565,050
Net loss	-		-		-		-		(12,518,527)		(12,518,527)
Balance at December 31, 2011	48,682,118		486,821		99,645,655		-		(98,472,658)		1,659,818
Share based payments	-		-		1,369,886		-		-		1,369,886
Issuance of common stock at $1.02 from warrants exercised	200,000		2,000		202,000		-		-		204,000
Issuance of common stock for professional services, net of returned shares for amended agreement	174,209		1,742		173,296		-		-		175,038
Issuance of common stock and warrants from capital raises, net of issuance costs of $1,274,592	19,100,000		191,000		13,494,408		-		-		13,685,408
Issuance of common stock from vested restricted stock units	32,987		330		(330)		-		-		-
Net loss	-		-		-		-		(10,121,517)		(10,121,517)
Balance at December 31, 2012	68,189,314		681,893		114,884,915		-		(108,594,175)		6,972,633
Share based payments	-		-		1,665,155		-		-		1,665,155
Issuance of common stock for warrant exercises, net of fees of $113,200	5,302,935		53,029		5,979,277						6,032,306
Issuance of common stock and replacement warrants as inducement for warrant exercises	72,440		724		5,016,432						5,017,156
Issuance of common stock and warrants for professional services, net of forfeited shares	332,848		3,329		1,503,419						1,506,748
Issuance of common stock and warrants from capital raises, net of issuance costs of $534,825	3,988,494		39,885		7,008,937						7,048,822
Foreign currency translation adjustments							7,241				7,241
Net loss	-		-		-		-		(19,831,862)		(19,831,862)
Balance at December 31, 2013	77,886,031	$	778,860	$	136,058,135	$	7,241	$	(128,426,037)	$	8,418,199

See accompanying notes to consolidated financial statements

	35

Neuralstem, Inc.

Consolidated Statements of Cash Flows

	For the Year Ended December 31,
	2013		2012		2011

Cash flows from operating activities:
Net loss	$	(19,831,862)	$	(10,121,517)	$	(12,518,527)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		244,725		211,143		187,050
Share based compensation expenses		2,331,401		1,610,845		3,333,099
Amortization of deferred financing fees and debt discount		694,175		-		-
Warrant modification expense		5,017,156		-		-
(Gain) loss from change in fair value of warrant obligations		965,329		-		(161,809)

Changes in operating assets and liabilities:
Billed and unbilled receivables		(6,667)		231,042		(234,375)
Prepaid expenses		125,470		164,117		(27,429)
Other current assets		-		-		322,127
Other assets		(5,183)		15,826		(14,519)
Accounts payable and accrued expenses		(116,750)		(644,022)		888,252
Accrued bonus expense		3		24,309		129,435
Other current liabilities		2,469		30,557		-
Other liabilities		(11,883)		-		-
Net cash used in operating activities		(10,591,617)		(8,477,700)		(8,096,696)

Cash flows from investing activities:
Patent costs		(411,688)		(215,638)		(284,438)
Purchase of property and equipment		(125,362)		(39,220)		(196,412)
Net cash used in investing activities		(537,050)		(254,858)		(480,850)

Cash flows from financing activities:
Proceeds from issuance of common stock from warrants exercised		6,107,842		204,000		1,668,326
Proceeds from sale of common stock and warrants, net of issuance costs		7,048,822		13,685,408		-
Proceeds from issaunce of long-term debt, net of issuance costs		7,551,329		-		-
Payments on Note Payable		(183,291)		(65,090)		-
Net cash provided by financing activities		20,524,702		13,824,318		1,668,326
Effects of exchange rates on cash		6,244		-		-
Net increase (decrease) in cash and cash equivalents		9,402,279		5,091,760		(6,909,220)

Cash and cash equivalents, beginning of period		7,443,773		2,352,013		9,261,233

Cash and cash equivalents, end of period	$	16,846,052	$	7,443,773	$	2,352,013

See accompanying notes to consolidated financial statements.

	36

Neuralstem, Inc.

Consolidated Statements of Cash Flows


	For the Year Ended December 31,
	2013		2012		2011

Supplemental cash flow information:
Cash paid for interest	$	624,321	$	2,699	$	821
Cash paid for income taxes	$	-	$	-	$	-

Supplemental schedule of non cash investing and financing activities:
Extinguishment of warrant obligations through exercise, expiration and modification	$	-	$	-	$	1,089,030
Issuance of common stock for services, net of returned shares for amended agreement	$	-	$	175,038	$	565,050
Issuance of common stock and options for executive bonuses	$	-	$	141,119	$	77,500
Financing of insurance premiums through note payable	$	183,472	$	146,452	$	-
Issuance of common stock for exercise of restricted stock units	$	-	$	330	$	-
Issuance of warrants for vendor services	$	658,326	$	-	$	-
Issuance of common stock for cashless exercise of warrants	$	587,500	$	-	$	-
Issuance of warrants for fees related to debt issaunce	$	452,187	$	-	$	-
Issuance of common stock for fees related to debt issuance	$	396,234	$	-	$	-

See accompanying notes to consolidated financial statements.

NEURALSTEM, INC.
NOTES TO FINANCIAL STATEMENTS

Note 1. Organization and Business

Nature of business

Neuralstem, Inc. and its subsidiary are referred to as “Neuralstem,” the “Company,” “us,” or “we” throughout this report. Beginning in 2013, our investment in, and the operations of, our wholly-owned and controlled subsidiary located in China are consolidated in our consolidated financial statements; previously, all investments in China were expensed as incurred. The impacts of this change were not material to any period presented.

Neuralstem is a biopharmaceutical company that is utilizing its proprietary human neural stem cell technology to create a comprehensive platform for the treatment of central nervous system diseases. The Company will commercialize this technology as a tool for use in the next generation of small-molecule drug discovery and to create cell therapy biotherapeutics to treat central nervous system diseases. The Company was founded in 1997 and currently has laboratory and office space in Rockville, Maryland and laboratory facilities in San Diego, California and in the People’s Republic of China.

Inherent in the Company’s business are various risks and uncertainties, including its limited operating history, the fact that Neuralstem’s technologies are new and may not allow the Company or its customers to develop commercial products, regulatory requirements associated with drug development efforts and the intense competition in the genomics industry. The Company’s success depends, in part, upon successfully raising additional capital, prospective product development efforts, the acceptance of the Company’s proposed products by the marketplace, and approval of the Company’s proposed products by various U.S. and foreign governmental agencies.

Note 2. Significant Accounting Policies and Basis of Presentation

Basis of Presentation and Liquidity

Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The financial statements include the accounts of the Company and our wholly owned subsidiary. All significant intercompany transactions and balances have been eliminated.

The Company's operations currently do not generate significant cash. The Company's management does not know when this will change. The Company has spent and will continue to spend substantial funds in the research, development, clinical and pre-clinical testing of the Company's stem cell and small molecule product candidates with the goal of ultimately obtaining approval from the United States Food and Drug Administration (the “FDA”), to market and sell our products. While we believe our long-term cash position is inadequate to fund all of the costs associated with the full range of testing and clinical trials required by the FDA for our core product candidates, we anticipate that our available cash and expected income will be sufficient to finance our current activities at least through December 31, 2014.

No assurance can be given that (i) we will be able to expand our operations prior to FDA approval of our products, or (ii) FDA approval will ever be granted for our product candidates.

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The financial statements include significant estimates for the value and expected economic life of our patent technology, our net operating loss carryforward for tax purposes, the fair value of our derivative instruments and our share-based compensation related to employees and directors, consultants and investment banks, among other things. Because of the use of estimates inherent in the financial reporting process, actual results could differ significantly from those estimates.

Fair Value Measurements

The carrying amounts of our short-term financial instruments, which primarily include cash and cash equivalents, accounts payable and certain accrued expenses, approximate their fair values due to their short maturities. The fair value of our long-term indebtedness is estimated based on the quoted prices for the same or similar issues or on the current interest rates offered to the Company for debt of the same remaining maturities. The fair values of our derivative instruments and certain other accrued expenses are estimated using level 3 unobservable inputs. See Note 3 for further details.

Foreign Currency Translation

The functional currency of our wholly owned foreign subsidiary is its local currency. Assets and liabilities of our foreign subsidiary are translated into United States dollars based on exchange rates at the end of the reporting period; income and expense items are translated at the weighted average exchange rates prevailing during the reporting period. Translation adjustments for subsidiaries that have not been sold, substantially liquidated or otherwise disposed of are accumulated in other comprehensive income or loss, a component of stockholders' equity. Transaction gains or losses are included in the determination of net loss.

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Cash, Cash Equivalents and Credit Risk

Cash deposited with banks and other financial institutions may exceed the amount of insurance provided on such deposits. If the amount of a deposit at any time exceeds the federally insured amount at a bank, the uninsured portion of the deposit could be lost, in whole or in part, if the bank were to fail.

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents. Cash equivalents consist of investments in low risk, highly liquid money market funds and certificates of deposit with original maturities of 90 days or less. Our investment policy, approved by our Board of Directors, limits the amount we may invest in any one type of investment thereby reducing credit risk concentrations. We limit our credit and liquidity risks through our investment policy and through regular reviews of our portfolio against our policy. To date, we have not experienced any loss or lack of access to cash in our operating accounts or to our cash equivalents.

Revenue Recognition

Historically, our revenue has been derived primarily from (i) selling treated samples for gene expression data from stem cell experiments, (ii) providing services under various contracts and grants and (iii) licensing the use of our intellectual property to third parties. Revenue is recognized when there is persuasive evidence that an arrangement exists, delivery of goods and services has occurred, the price is fixed and determinable, and collection is reasonably assured.

Research and Development

Research and development costs are expensed as they are incurred. Research and development expenses consist primarily of costs associated with pre-clinical development of treatments for central nervous system diseases, and with our clinical trials for both pharmaceutical and stem cell based treatments.

Income (Loss) per Common Share

Basic income (loss) per common share is computed by dividing total net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period.

For periods of net income when the effects of potential common shares are dilutive, diluted earnings per share is computed by dividing net income available to common shareholders by the weighted average number of shares outstanding and the dilutive impact of dilutive potential common shares. Dilutive potential common shares consist primarily of stock options, restricted share units and stock warrants. The dilutive impact of potential common shares resulting from common stock equivalents is determined by applying the treasury stock method. The Company’s unvested restricted shares contain non-forfeitable rights to dividends, and therefore are considered to be participating securities; the calculation of basic and diluted income per share excludes net income attributable to the unvested restricted shares from the numerator and excludes the impact of the shares from the denominator.

For all periods of net loss, diluted loss per share is calculated similarly to basic loss per share because the impact of all dilutive potential common shares is anti-dilutive due to the net losses; accordingly, diluted loss per share is the same as basic loss per share for the years ended December 31, 2013, 2012 and 2011. A total of approximately 38.2, 35.0 and 24.5 million potential dilutive shares have been excluded in the calculation of diluted net income per share for the years ended December 31, 2013, 2012 and 2011, respectively as their inclusion would be anti-dilutive.

Share-Based Compensation

We account for share-based compensation at fair value. Share-based compensation cost for stock options and warrants granted to employees, board members and service providers is determined at the grant date using an option pricing model that uses level 3 unobservable inputs; share-based compensation cost for restricted stock and restricted stock units granted to employees and board members is determined at the grant date based on the closing price of our common stock on that date. The value of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period.

Intangible and Long-Lived Assets

We assess impairment of our long-lived assets using a "primary asset" approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. No significant impairment losses were recognized during the years ended December 31, 2013, 2012 and 2011.

Income Taxes

We account for income taxes using the asset and liability approach, which requires the recognition of future tax benefits or liabilities on the temporary differences between the financial reporting and tax bases of our assets and liabilities. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized. We also recognize a tax benefit from uncertain tax positions only if it is “more likely than not” that the position is sustainable based on its technical merits. Our policy is to recognize interest and penalties on uncertain tax positions as a component of income tax expense.

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Significant New Accounting Pronouncements

We have evaluated all Accounting Standards Updates through the date the financial statements were issued and believe the adoption of any new accounting and disclosure requirements will not have a material impact to our results of operations or financial position.

Note 3. Fair Value Measurements

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value. These levels are:

Level 1 – inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g. the Black-Scholes model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and forward and spot prices for currencies and commodities.

Level 3 – inputs are generally unobservable and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company has segregated its financial assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

The inputs used in measuring the fair value of cash and cash equivalents are considered to be Level 1 in accordance with the three-tier fair value hierarchy. The fair market values are based on period-end statements supplied by the various banks and brokers that held the majority of the Company’s funds. The fair value of other short-term financial instruments (primarily accounts payable and certain accrued expenses) approximate their carrying values because of their short-term nature. The fair value of our long-term indebtedness approximates its carrying value.

The Company has common stock purchase warrants issued in conjunction with its March 2013 debt offering (see Notes 4 and 5) that are accounted for as derivative instruments whose fair market value is determined using Level 3 inputs. In 2013, the Company also issued certain stock options that were subject to shareholder approval (subsequently received) at issuance and were recorded as an accrued liability carried at fair market value using Level 3 inputs. These inputs include expected term, expected dividends and expected volatility.

The following table identifies the carrying amounts of such assets and liabilities:

	December 31, 2013
	Level 1		Level 2		Level 3		Total
Liabilities
Derivative instruments - stock purchase warrants	$	-	$	-	$	1,417,527	$	1,417,527

The Company did not have any Level 3 financial assets or liabilities measured at fair value at December 31, 2012 or 2011.

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The following table presents the activity for those items measured at fair value on a recurring basis using Level 3 inputs:

	Derivative Instruments - Stock Purchase Warrants		Stock Options
Balance at January 1, 2011	$	1,250,839	$	-
Extinguishment through warrant exercises and modifications		(1,089,030)		-
Change in fair value		(161,809)		-
Balance at December 31, 2011		-		-
Issuance		-		-
Change in fair value		-		-
Balance at December 31, 2012		-		-
Issuance		452,198		35,000
Satisfaction of contingency		-		(54,881)
Change in fair value		965,329		19,881
Balance at December 31, 2013	$	1,417,527	$	-

The losses resulting from the changes in the fair value of the derivative instruments are classified as the “change in the fair value of derivative instruments” in the accompanying statements of operations. The change in fair value of the contingent stock options is classified as share-based compensation. The fair values of both the common stock purchase warrants and the contingent stock options are determined based on the Black-Scholes option pricing model, and includes the use of unobservable inputs such as the expected term, anticipated volatility and expected dividends. Changes in any of the assumptions related to the unobservable inputs identified above may change the fair value; increases in expected term, anticipated volatility and expected dividends generally result in increased in fair value, while decreases in these unobservable inputs generally result in decreases in fair value.

Non-Financial Assets and Liabilities Measure at Fair Value on a Recurring Basis

The Company has no non-financial assets and liabilities that are measured at fair value on a recurring basis.

Non-Financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The Company measures its long-lived assets, including property and equipment and patent assets, at fair value on a nonrecurring basis. These assets are recognized at fair value when they are deemed to be other-than-temporarily impaired. No such fair value impairment was recognized in the years ended December 31, 2013, 2012 or 2011.

Note 4. Debt

The loan provides for interest at a variable rate based on prime with a floor of 11% and matures in June 2016. Our weighted average interest on outstanding borrowings was 11% for the year ended December 31, 2013. The loan calls for interest only payments through December 2013 at which time principal and interest payments of approximately $300,000 begin through maturity. The loan resulted in net proceeds of approximately $7,551,000 after origination and other cash fees and expenses related to the closing of the loan. Principal payments due under this loan are approximately $2,940,000, $3,280,000 and $1,780,000 in 2014, 2015 and 2016, respectively.

In conjunction with the loan agreement, the Company issued to the lender a five-year common stock purchase warrant to purchase 648,809 shares of common stock at an exercise price of $1.0789 per share. This warrant contains non-standard anti-dilution protection and, consequently, is being accounted for as a derivative instrument and is recorded at fair market value each period (see Note 3). The allocation of proceeds to this warrant resulted in a debt discount which is being amortized as interest expense over the term of the debt using the effective interest method.

The Company also incurred expenses with various third parties in connection with the debt issuance, consisting of approximately $449,000 in cash, 350,650 shares of common stock valued at approximately $396,000, and a five-year common stock purchase warrant to purchase 648,798 shares at an exercise price of $1.07892 per share. The warrant is classified as equity. Fees related to the debt offering are recorded as deferred financing fees and are being amortized as interest expense over the term of the debt using the effective interest method.

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Note 5. Stockholders’ Equity

We have granted share-based compensation awards to employees, board members and service providers. Awards may consist of common stock, restricted common stock, restricted common stock units, warrants, or stock options. Our stock options and warrants have lives of up to ten years from the grant date. The stock options or warrants vest either upon the grant date or over varying periods of time. The stock options we grant provide for option exercise prices equal to or greater than the fair market value of the common stock at the date of the grant. Restricted stock units grant the holder the right to receive fully paid common shares with various restrictions on the holder’s ability to transfer the shares. Vesting of the restricted stock units is similar to that of stock options. As of December 31, 2013, we have approximately 43.3 million shares of common stock reserved for issuance of such awards.

We record share-based compensation expense on a straight-line basis over the requisite service period and recognized approximately $2,331,000, $1,611,000 and $3,333,000 in total share-based compensation expense during the years ended December 31, 2013, 2012 and 2011, respectively.

No income tax benefit was recognized in the consolidated statements of operations for stock-based compensation for the years presented due to the Company’s net loss position.

Share-based compensation expense included in the statements of operations was as follows:

	Year Ended December 31,
	2013		2012		2011

Research and development costs	$	932,200	$	655,303	$	1,727,042
General and administrative expenses		1,399,201		955,542		1,606,057
Total	$	2,331,401	$	1,610,845	$	3,333,099

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Stock Options

A summary of stock option activity and related information for the year ended December 31, 2013 follows:

	Number of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value

Outstanding at January 1, 2013		14,787,287	$	1.98		6.1	$	1,926,000
Granted		3,840,962	$	1.11
Exercised		-	$	-
Forfeited/Expired		(51,042)	$	2.72
Outstanding at December 31, 2013		18,577,207	$	1.79		5.8	$	24,000,710

Exercisable at December 31, 2013		12,659,353	$	2.14		4.5	$	12,938,385

Vested and expected to vest at December 31, 2013		18,577,207	$	1.79		5.8	$	24,000,710

Range of Exercise Prices	Number of Options Outstanding		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
$0.50 - $1.00		7,400,000	$	0.78		6.3	$	15,734,000
$1.01 - $2.00		4,296,837	$	1.19		7.6		7,381,481
$2.01 - $3.00		2,077,037	$	2.48		5.4		885,229
$3.01 - $4.00		4,803,333	$	3.59		3.7		-
		18,577,207	$	1.79		5.8	$	24,000,710

The Company uses the Black-Scholes option pricing model to calculate the fair value of options. Significant assumptions used in this model include:

	Year Ended December 31,
	2013		2012		2011

Annual dividend		-		-		-
Expected life (in years)		3.0 - 6.5		2.0 - 4.0		2.0 - 3.5
Risk free interest rate		0.29% - 2.43%		0.24% - 0.65%		0.25% - 1.39%
Expected volatility		65.1% - 77.5%		55.5% - 77.4%		66.9% - 75.4%

The Company estimates the expected term using the "simplified-method" as it does not have sufficient historical exercise data to provide a reasonable estimate.

The options granted in the years ended December 31, 2013, 2012 and 2011 had weighted average grant date fair values of $1.01, $0.49 and $1.64, respectively. The total fair value of the options vested during the years ended December 31, 2013, 2012 and 2011 was approximately $1,170,000, $557,000 and $3,096,000, respectively.

Unrecognized compensation cost for unvested stock option awards outstanding at December 31, 2013 was approximately $4,498,000 to be recognized over approximately 2.9 years.

RSUs

We have granted restricted stock units (RSUs) to certain employees that entitle the holders to receive shares of our common stock upon vesting of the RSUs, and subject to certain restrictions regarding the exercise of the RSUs. The fair value of RSUs granted is based upon the market price of the underlying common stock as if they were vested and issued on the date of grant.

	43

A summary of our RSU activity for the years ended December 31, 2013 follows:

	Number of RSU's		Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2013		371,491	$	2.10
Granted		30,702	$	1.14
Vested and converted to common shares		-	$	-
Forfeited		(568)	$	1.19
Outstanding at December 31, 2013		401,625	$	2.03

Exercisable at December 31, 2013		389,465	$	2.06

The RSUs granted in the years ended December 31, 2013, 2012 and 2011 had weighted average grant date fair values of $1.14, $1.19 and $2.02, respectively. The total fair value of the shares vested during the years ended December 31, 2013, 2012 and 2011 was approximately $254,000, $248,000 and $256,000, respectively.

Unrecognized compensation cost for unvested RSUs outstanding at December 31, 2013 was approximately $14,000 to be recognized over approximately 1.1 years.

Stock Purchase Warrants

Warrants to purchase common stock were issued to certain officers, directors, stockholders and service providers. In 2013, warrants were issued in conjunction with the March 2013 debt transaction, the September 2013 registered direct offering and at various times replacement warrants were issued in conjunction with warrant exercises.

A summary of warrant activity for the year ended December 31, 2013 follows:

	Number of Warrants		Weighted- Average Exercised Price		Weighted- Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value

Outstanding at January 1, 2013		19,840,176	$	2.08		3.5	$	854,649

Granted		7,761,211	$	1.83		4.0
Exercised		(5,302,935)	$	1.30
Forfeited		(2,711,633)	$	3.10
Outstanding at December 31, 2013		19,586,819	$	1.96		3.4	$	21,146,495

Exercisable at December 31, 2013		17,992,219	$	1.80		3.0	$	19,695,409

The stock purchase warrants granted in the years ended December 31, 2013, 2012 and 2011 had a weighted average grant date fair value of $0.82, $0.47 and $0.80, respectively. All stock purchase warrants were classified as equity with the exception of the warrant issued to the lender in the March 2013 debt transaction (see Note 4).

Stock purchase warrants exercised in 2013, 2012 and 2011 had an intrinsic value of approximately $3,550,000, $30,000, and 1,150,000, respectively.

Common Stock

In the first quarter of 2011, we issued common stock as a result of several warrant holders exercising their common stock purchase warrants. We issued a total of 1,468,775 shares of common stock at prices ranging from $1.10 to $1.25 generating net proceeds of approximately $1,668,000.

	44

In April 2011, we issued 120,000 common shares to a consultant in lieu of cash compensation for services valued at approximately $240,000.

In September 2011, we issued 195,814 shares of common stock to a consultant in lieu of cash compensation for services valued at approximately $325,000.

In February 2012, the Company completed a registered direct offering of 5,200,000 shares of common stock at a price of $1.00 per share, and 5,200,000 common stock purchase warrants, each with an exercise price of $1.02 per share and exercisable starting six months from the issuance date for a term of five years. The Company received aggregate gross proceeds of $5,200,000, which will be used for general corporate purposes, including ongoing U.S. clinical trials. Net proceeds were approximately $4,877,000. The warrants are classified within equity.

In March 2012, pursuant to the terms of a consulting agreement entered into in January of 2010 and amended May 14, 2010 and February 7, 2011, we issued: (i) 180,000 common shares; and (ii) a common stock purchase warrant entitling the holder to purchase 510,821 shares of common stock at $0.99 per share as compensation for business advisory services. The warrant was exercisable immediately, expires on January 6, 2022, and is freely assignable in whole or in part. We also agreed to register the shares underlying the warrant with the SEC for resale. The warrant was valued at approximately $166,000 and is classified within equity.

In August 2012, the Company completed an underwritten public offering of 6,900,000 shares of common stock at a price of $0.40 per share. The Company received aggregate gross proceeds of $2,760,000, which will be used for general corporate purposes, including ongoing clinical trials. Net proceeds were approximately $2,441,000. In connection with the offering, the Company issued the underwriter a common stock purchase warrant to purchase 300,000 shares; the warrant has an exercise price of $0.50 per share and is exercisable for five years. The warrant is classified within equity.

In September 2012, the Company completed a registered direct offering of 7,000,000 shares of common stock at a price of $1.00 per share. The Company received aggregate gross proceeds of $7,000,000, which will be used for general corporate purposes, including ongoing clinical trials. Net proceeds were approximately $6,368,000. In connection with the offering, the Company issued the placement agent a common stock purchase warrant to purchase 350,000 shares; the warrant has an exercise price of $1.25 per share and is exercisable for five years. The warrant is classified within equity.

In October of 2012, we entered into a consulting agreement related to the marketing of NS-189, our small molecule compound to other pharmaceutical and drug development companies. As partial consideration for the services to be rendered, we issued an aggregate of 25,000 shares of our common stock which vests over the initial five month term of the agreement.

In December 2012, we issued 200,000 shares of common stock as a result of a warrant holder exercising their common stock purchase warrant. The stock was issued at $1.02 and generated approximately $204,000 in net proceeds.

In January and February 2013, we issued 258,000 shares of common stock as a result of certain warrant holders exercising their common stock purchase warrants. The shares were issued at $1.25 per share and generated approximately $323,000 in net proceeds. In conjunction with the exercises we modified the warrants to reduce the exercise price to $1.25 and issued 258,000 replacement warrants. The replacement warrants have an exercise price of $1.25 and expire in March 2020. We recognized an expense for the value of the replacement warrants and the reduction of the strike price on the original warrants. Such expense is classified as warrant modification expense. The warrants are classified within equity.

In March 2013, we issued 350,650 shares of common stock and 1,297,607 common stock purchase warrants to various parties in conjunction with our debt transaction (see Note 4).

In May 2013, we issued 440,000 shares of common stock as a result of a certain warrant holder exercising their common stock purchase warrants. The shares were issued at $1.07 per share and generated approximately $433,000 in net proceeds. In conjunction with the exercise we modified the warrants to reduce the exercise price to $1.07 and issued 440,000 replacement warrants. The replacement warrants have an exercise price of $1.25 and expire in May 2016. We recognized expense for the value of the replacement warrants and the reduction of the strike price on the original warrants; such expense is classified as warrant modification expense. The warrants are classified within equity.

In May 2013, we issued 689,675 shares of common stock as a result of certain warrant holders exercising their common stock purchase warrants. The shares were issued at $1.25 per share and generated approximately $844,000 in net proceeds. In conjunction with the exercises we modified the warrants to reduce the exercise price to $1.25 and issued 689,675 replacement warrants. The replacement warrants have an exercise price of $1.25 and expire in March 2020. We recognized an expense for the value of the replacement warrants and the reduction of the strike price on the original warrants; such expense is classified as warrant modification expense. The warrants are classified within equity.

	45

In May and June 2013, we issued 378,809 shares of common stock as a result of certain warrant holders exercising their common stock purchase warrants. The shares were issued at $1.25 per share and generated approximately $474,000 in net proceeds. In conjunction with the exercise we issued 378,809 replacement warrants. The replacement warrants have an exercise price of $1.25 and expire in March 2020. We recognized an expense for the value of the replacement warrants; such expense is classified as warrant modification expense. The warrants are classified within equity.

In May and June 2013, we issued 300,000 shares of our common stock to a warrant holder as a result of their exercising their common stock purchase warrants. The shares were issued at $1.02 and generated approximately $306,000 in net proceeds.

In July 2013, we issued 942,520 shares of our common stock to a warrant holder as a result of their exercising their common stock purchase warrants. The shares were issued at $1.25 per share and generated approximately $1,178,000 in net proceeds. In conjunction with the exercises we modified 782,005 of the warrants to reduce the exercise price to $1.25 and issued 942,520 replacement warrants. The replacement warrants have an exercise price of $1.25 and expire in March 2020. We recognized an expense for the value of the replacement warrants and the reduction of the strike price on the original warrants; such expense is classified as warrant modification expense. The warrants are classified within equity.

In July 2013, we issued 100,000 shares of common stock as a result of a warrant holder exercising their common stock purchase warrants. The shares were issued at $1.02 and generated approximately $102,000 in net proceeds.

In September 2013, we issued 1,448,798 shares of common stock as a result of certain warrant holders exercising their common stock purchase warrants. The shares were issued at $1.25 per share (800,000 shares) and $1.08 per share (648,798 shares) and generated approximately $1,700,000 in net proceeds. In conjunction with the exercise we issued an additional 72,440 shares of our common stock as a commission for exercise. We recognized an expense for the value of the additional common stock; such expense is classified as warrant modification expense.

In September and December 2013, we issued 344,000 shares of common stock as a result of certain warrant holders exercising their common stock purchase warrants. 340,000 shares of stock were issued at $2.13 while 4,000 shares of stock were issued at $1.56. The exercises generated approximately $730,000 net proceeds.

In September 2013, we issued 401,133 shares of our common stock as a result of certain warrant holders exercising the cashless exercise provision of their common stock purchase warrants with an average strike price of $0.90. Such exercises resulted in 248,867 warrants being forfeited and resulted in no net proceeds to the Company.

In September 2013, the Company completed a registered direct placement of 2,847,500 shares of common stock at a price of $1.60 per share. The Company received aggregate gross proceeds of $4,556,000; net proceeds were approximately $4,242,000. In connection with the offering, the Company issued common stock purchase warrants to purchase 1,423,750 shares of our common stock; the warrants have an exercise price of $2.00 and are exercisable for five years. Additionally, we issued a common stock purchase warrant to the placement agent for the purchase of up to 170,850 shares; the warrant has an exercise price of $2.00 per share and is exercisable for 19 months. The warrants are classified within equity.

In November and December 2013, we issued 1,140,994 shares of common stock as a result of sales under our At the Market Offering Agreement. The shares were sold at an average price of $2.64 per shares and generated approximately $2,895,000 in net proceeds.

Note 6. Property and Equipment

The major classes of property and equipment consist of the following at December 31:

	2013		2012
Furniture and fixtures	$	21,036	$	21,298
Computers and office equipment		58,741		89,492
Lab equipment		497,328		543,251
		577,105		654,041
Less accumulated depreciation		(346,134)		(423,644)
Property and equipment, net	$	230,971	$	230,397

The above includes approximately $78,000 of equipment located at our research facility in China. Property and equipment are recorded at cost and are depreciated using the straight-line method over the estimated useful lives of the respective assets. Depreciation expense for the years ended December 31, 2013, 2012 and 2011 was approximately $126,000, $101,000 and $104,000, respectively.

Note 7. Intangible Assets

The Company holds patents related to its stem cell and small molecule technologies. Patent costs are capitalized and are being amortized over the life of the patents. The weighted average remaining unamortized life of issued patents was approximately 10.9, years at December 31, 2013. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. During the years ended December 31, 2013, 2012 and 2011, no significant impairment losses were recognized. The Company’s intangible assets and accumulated amortization consisted of the following at December 31, 2013 and 2012:

	2013						2012
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Patent asset	$	1,539,349	$	(401,648)	$	1,137,701	$	1,121,839	$	(314,482)	$	807,357

Amortization expense for the years ended December 31, 2013, 2012 and 2011 was approximately $119,000, $110,000 and $83,000, respectively.

The expected future annual amortization expense is approximately $117,000 for each of the next five years based on current balances of our intangible assets.

Note 8. Income Taxes

Our provision for income taxes for 2013, 2012 and 2011 consists of the following:

	2013		2012		2011
Current provision:
Federal	$	-	$	-	$	-
State		-		-		-
Foreign		-		-		-
Total current provision		-		-		-

Deferred provision (benefit):
Federal		(4,436,239)		(3,537,536)		(4,121,162)
State		502,696		(505,362)		(588,737)
Foreign		-		-		-
Total deferred provision (benefit)		(3,933,543)		(4,042,898)		(4,709,899)
Change in valuation allowance		3,933,543		4,042,898		4,709,899
Consolidated income tax provision	$	-	$	-	$	-

We provide a full valuation allowance on our net deferred tax assets because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the asset reversal periods.

The difference between income taxes computed by applying the statutory federal income tax rate to consolidated losses before income taxes and the consolidated provision for income taxes is attributable to the following:

	2013		2012		2011
Federal statutory rate	(34.0)	%	(34.0)	%	(34.0)	%
State income taxes, net of Federal benefits	(5.3)	%	(5.0)	%	(5.0)	%
Warrant inducement expense	9.9	%	0.0	%	0.0	%
Other	9.5	%	(0.9)	%	1.4	%
Valuation allowance	19.9	%	39.9	%	37.6	%
Total	0.0	%	0.0	%	0.0	%

	46

The tax effects of significant temporary differences representing deferred tax assets as of December 31, 2013 and 2012:

	2013		2012
Net operating loss carryforwards	$	31,541,018	$	28,564,716
Stock based compensation expense		9,923,714		9,173,701
Tax credit carryforwards and other		1,241,115		1,033,887
		42,705,847		38,772,304

Valuation allowance		(42,705,847)		(38,772,304)
Net deferred tax assets	$	-	$	-

The Company had Federal net operating loss (“NOL”) carryforwards of approximately $82.0 million and $71.4 million, excluding stock-based compensation NOLs, at December 31, 2013 and 2012, respectively, which will expire beginning in 2016. The Company also has certain Federal tax credit carryforwards that will expire beginning in 2017. The timing and manner in which these net operating loss carryforwards and credits may be used in any year will be limited to the Company’s ability to generate future earnings and also may be limited by certain provisions in the U.S. tax code. The Company has not identified any uncertain tax positions and did not recognize any adjustments for unrecognized tax benefits. The Company remains subject to examination for income tax returns dating back to 1996 due to the taxing authority’s ability to adjust operating loss carryforwards.

Note 9. Selected Quarterly Data (Unaudited)

The following represents the Company’s unaudited quarterly results for the years ended December 31:

	Quarter Ended
	2013
	March 31		June 30		September 30		December 31

Revenues	$	102,500	$	2,500	$	2,500	$	2,500
Operating loss	$	(2,891,780)	$	(3,235,602)	$	(3,633,986)	$	(2,762,573)
Net loss	$	(3,590,087)	$	(6,251,630)	$	(6,686,957)	$	(3,303,188)
Net loss per share - basic and diluted	$	(0.05)	$	(0.09)	$	(0.09)	$	(0.04)

	Quarter Ended
	2012
	March 31		June 30		September 30		December 31

Revenues	$	156,250	$	78,125	$	170,833	$	2,500
Operating loss	$	(2,463,216)	$	(2,383,255)	$	(2,583,159)	$	(2,726,826)
Net loss	$	(2,452,781)	$	(2,376,381)	$	(2,577,391)	$	(2,714,964)
Net loss per share - basic and diluted	$	(0.05)	$	(0.04)	$	(0.04)	$	(0.04)

The sum of the quarterly per share amounts does not equal the annual amounts due to changes in the weighted average number of common shares outstanding during the year.

Note 10. Commitments and Contingencies

	47

Future minimum payments under all leases at December 31, 2013 are as follows:

Year	Amount
2014	$	114,331
2015		57,856
2016		-
2017		-
2018		-
2019 and thereafter		-
Total minimum payments	$	172,187

The above table reflects future minimum payments at December 31, 2013 and does not reflect the minimum payments under our lease amendment executed in January 2014. The minimum payments under this amended lease are approximately $81,000.

The Company recognized approximately $277,000, $240,000 and $226,000, in rent expense for the years ended December 31, 2013, 2012 and 2011, respectively.

The Company is currently obligated under two written employment agreements with our Chief Executive Officer (“CEO”) and Chief Scientific Officer (“CSO”). Both agreements terminate on October 31, 2017. Pursuant to the CEOs agreement, he receives a salary of $407,000 per annum and in the event of termination prior to the completion of the agreement the Company would pay the CEO the greater of his remaining compensation due under the agreement or one million dollars ($1,000,000). Pursuant to the CSO’s agreement, he receives $422,100 per annum and in the event of termination prior to the completion of the agreement the Company would pay the CSO the greater of the remaining compensation due under the agreement or one million dollars ($1,000,000). In addition, pursuant to both the agreements any and all stock options, warrants, restricted stock or restricted stock units granted would accelerate and vest immediately in the event the agreements are terminated early.

On May 7, 2008, we filed suit against StemCells, Inc., StemCells California, Inc. (collectively "StemCells") and Neurospheres Holding Ltd. in U.S. District Court for the District of Maryland, alleging that U.S. Patent No. 7,361,505 (the "'505 patent") 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. 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 allegedly owned by or exclusively licensed to StemCells. 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 antitrust laws. On February 28, 2011, Neuralstem filed a Motion to Dismiss for lack of standing and concurrently filed a Motion for Leave to Amend its Answer and Counterclaim to allege that StemCells is not the exclusive licensee of the patents-in-suit and also that Neuralstem has obtained a non-exclusive license to the patents-in-suit. In addition, before the Court decided Neuralstem’s Motion to Dismiss for lack of standing, StemCells filed a motion for summary judgment on the issue standing. Neuralstem responded to that motion and cross-moved for summary judgment on the issue of standing. The Court further issued its Markman Order on August 12, 2011. On August 26, 2011, StemCells moved for reconsideration of two terms construed in the Markman Order and that motion remains pending. On April 6, 2012 the Court granted Neuralstem's Motion for Leave to Amend to assert lack of standing and denied Neuralstem's Motion to Dismiss and Motion for Summary Judgment without prejudice. The Court also denied StemCells' Motion for Summary Judgment with prejudice. The Court has stayed all other matters pending resolution of the question of standing and discovery on that issue is ongoing. It is not known when, nor on what basis, this matter will be concluded.

Note 11. Subsequent Events

In January, 2014, we closed on a registered direct offering providing for $20 million of gross proceeds from the sale of 6,872,859 shares of our common stock and 3,436,435 common stock purchase warrants. This offering was pursuant to our $50 million shelf registration statement declared effective by the SEC on September 13, 2013. Additionally, as a result of this transaction an advisor to the Company met certain capital raising milestones and consequently, the term of their common stock purchase warrant was extended to 5 years.

	48

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s principal executive officer (who is also the Company’s acting principal financial officer) and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of December 31, 2013 to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer (who is also the Company’s acting principal financial officer) and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

	49

Inherent Limitations Over Internal Controls

The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company’s internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and

(iii) 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.

Management, including the Company’s principal executive officer (who is also the Company’s acting principal financial officer) and principal financial officer, does not expect that the Company’s internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management’s Annual Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the criteria set forth in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the Company’s assessment, management has concluded that its internal control over financial reporting was effective as of December 31, 2013 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.

The effectiveness of our internal control over financial reporting as of December 31, 2013 has been audited by Stegman & Company, an independent registered public accounting firm, and the Firm’s attestation report on this matter is included in Item 8 of this Annual Report on Form 10-k.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the fourth quarter of 2013, which were identified in connection with management’s evaluation required by paragraph (d) of rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B.

Other Information

None

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is set forth under the heading “Directors, Executive Officers and Corporate Governance” in our 2014 Proxy Statement to be filed with the SEC in connection with the solicitation of proxies for our 2014 Annual Meeting of Shareholders (“2014 Proxy Statement”) and is incorporated herein by reference. Such Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year to which this report relates. The information required by this item regarding delinquent filers pursuant to Item 405 of Regulation S-K will be included under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in the 2014 Proxy Statement and is incorporated herein by reference.

ITEM 11.

EXECUTIVE COMPENSATION

The information required by this Item is set forth under the headings “Director Compensation” and “Executive Compensation” of our 2014 Proxy Statement and is incorporated herein by reference.

	50

ITEM 12.

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

The information required by this Item is set forth under the headings “Beneficial Owners of Shares of Common Stock” and “Equity Compensation Plan Information” of our 2014 Proxy Statement and is incorporated herein by reference.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is set forth under the heading “Certain Relationships and Related Transactions” of our 2014 Proxy Statement and is incorporated herein by reference.

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is set forth under the heading “Independent Registered Public Accounting Firm” of our 2014 Proxy Statement and is incorporated herein by reference.

PART IV

ITEM 15.		EXHIBITS, FINANCIAL STATEMENT SCHEDULES

1.
		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.

Certain of the agreements filed as exhibits to this Form 10-K contain representations and warranties by the parties to the agreements that have been made solely for the benefit of the parties to the agreement. These representations and warranties:

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.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time, and investors should not rely on them as statements of fact.

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	NEURALSTEM, INC

Dated: March 10, 2014	By:	/S/ I Richard Garr
		I Richard Garr President and Chief Executive Officer

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

	52

Name	Title	Date

/s/ I. Richard Garr	President, Chief Executive Officer, General Counsel and Director	March 10, 2014
I. Richard Garr	(Principal executive officer)

/s/ I. Richard Garr	Chief Financial Officer (Principal financial and accounting officer)	March 10, 2014
I. Richard Garr

/s/ Karl Johe	Chairman of the Board and Director	March 10, 2014
Karl Johe

/s/ William Oldaker	Director	March 10, 2014
William Oldaker

/s/ Scott V. Ogilvie	Director	March 10, 2014
Scott V. Ogilvie

/s/ Stanley Westreich	Director	March 10, 2014
Stanley Westreich

	53

INDEX TO EXHIBITS

Incorporated by Reference

Filed/

Exhibit

Furnished

Exhibit

No.

Description

Herewith

Form

No.

File No.

Filing Date

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 7/16/07

10-QSB

3.2(i)

333-132923

8/14/07

4.01**

Amended and Restated 2005 Stock Plan adopted on 6/28/07

10-QSB

4.2(i)

333-132923

8/14/07

4.02**

Non-qualified Stock Option Agreement between Neuralstem, Inc. and Richard Garr dated 7/28/05

SB-2

4.4

333-132923

6/21/06

4.03**

Non-qualified Stock Option Agreement between Neuralstem, Inc. and Karl Johe dated 7/28/05

SB-2

4.5

333-132923

6/21/06

4.04**

Neuralstem, Inc. 2007 Stock Plan

10-QSB

4.21

333-132923

8/14/07

4.05

Form of Common Stock Purchase Warrant Issued to Karl Johe on 6/5/07

10-KSB

4.22

333-132923

3/27/08

4.06

Form of Placement Agent Warrant Issued to Midtown Partners & Company on 12/18/08

8-K

4.1

001-33672

12/18/08

4.07

Form of Consultant Common Stock Purchase Warrant issued on 1/5/09

S-3/A

10.1

333-157079

02/3/09

4.08

Form of Series D, E and F Warrants

8-K

4.01

001-33672

7/1/09

4.09

Form of Placement Agent Warrant

8-K

4.02

001-33672

7/1/09

4.10

Form of Consultant Warrant Issued 1/8/10

10-K

4.20

001-33672

3/31/10

4.11

Form of Replacement Warrant Issued 1/29/10

10-K

4.21

001-33672

3/31/10

4.12

Form of Series C Replacement Warrant Issued March of 2010 and May, June and July of 2013 (Original Ex. Price $2.13 and $1.25)

10-K

4.22

001-33672

3/31/10

4.13

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

4.14

Form of Warrants dated 6/29/10

8-K

4.01

001-33672

6/29/10

	54

4.15**	Amended Neuralstem 2010 Equity Compensation Plan adopted on June 21, 2013	DEF 14A	Appendix I	001-33672	4/30/13

4.16	Form of Consultant Warrant issued 10/1/09 and 10/1/10	S-3	4.07	333-169847	10/8/10

4.17**	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

4.18**	Form of Restricted Stock Unit Agreement	S-8	4.08	333-172563	3/1/11

4.19	Form of Common Stock Purchase Warrant issued pursuant to February 2012 registered offering	8-K	4.01	001-33672	2/8/12

4.20	Form of Common Stock Purchase Warrant issued to Consultants in June of 2012 and March 19, 2013	10-Q	4.20	001-33672	8/9/12

4.21	Form of Underwriter Warrant issued to Aegis Capital Corp. on 8/20/12	8-K	4.1	001-33672	8/17/12

4.22	Form of Placement Agent Warrant issued to Aegis Capital Corp. on 9/13/12	8-K	4.1	001-33672	9/19/12

4.23	Form of Consulting Warrant issued January 2011 and March 2012	S-3	4.01	333-188859	5/24/13

	Form of Replacement Warrant issued January, February and May of 2013 (Original Ex. Prices $3.17 and $2.14)

4.24	Form of Lender Warrant issued March 22, 2013	8-K	4.01	011-33672	3/27/13

4.25	Form of Advisor Warrant issued March 22, 2013	8-K	4.02	011-33672	3/27/13

4.26	Form of Warrant issued June of 2013 to Legal Counsel	10-Q	4.26	001-33672	8/8/13

4.27	Form of Warrant issued in September 2013 in connection with Issuer’s registered direct offering	8-K	4.01	011-33672	9/10/13

4.28	Form of Warrant issued to strategic advisor in August 2013	10-Q	4.28	001-33672	11/12/13

4.29	Form of Investor Warrant issued January 2014	8-K	4.01	001-33672	1/6/14

	55

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**

Employment Agreement with Thomas Hazel, Ph.D dated August 11, 2008

10-K/A

10.05

001-33672

10/5/10

10.06

Consulting Agreement dated January 2010 between Market Development Consulting Group and the Company and amendments No. 1 and 2.

10-K

10.07

001-33672

3/16/11

10.07**

Renewal of I. Richard Garr Employment Agreement dated 7/25/12

8-K

10.01

001-33672

7/27/12

10.08**

Renewal of Dr. Karl Johe Employment Agreement dated 7/25/12

8-K

10.02

001-33672

7/27/12

10.09**

Renewal of Dr. Tom Hazel Employment Agreement dated 7/25/12

8-K

10.03

001-33672

7/27/12

10.10

Loan and Security Agreement dated March 2013

8-K

10.01

011-33672

3/27/13

10.11

Intellectual Property and Security Agreement dated March 2013

8-K

10.02

011-33672

3/27/13

10.12

At the Market Offering Agreement entered into on October 25, 2013

8-K

10.01

011-33672

10/25/13

10.13

Form of Outside Director Agreement

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 Registrant

23.01

Consent of Stegman & Company

31.1

Certification of the Principal Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	56

32.1

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. § 1350

101.INS

XBRL Instance Document

***

101.SCH

XBRL Taxonomy Extension Schema

***

101.CAL

XBRL Taxonomy Extension Calculation Linkbase

***

101.DEF

XBRL Taxonomy Extension Definition Linkbase

***

101.LAB

XBRL Taxonomy Extension Label Linkbase

***

101.PRE

XBRL Taxonomy Extension Presentation Linkbase

***

* Filed herein

** Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.

*** Furnished herein