<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
* QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
---- ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED December 31, 1996
--------------------------
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
---- ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
------------- ------------
COMMISSION FILE NUMBER 0-17951
CORTEX PHARMACEUTICALS, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
Delaware 33-0303583
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
15241 Barranca Parkway, Irvine, California, 92618
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(714) 727-3157
(ISSUER'S TELEPHONE NUMBER)
NOT APPLICABLE
---------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST YEAR)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports); and (2) has been
subject to such filing requirements for the past 90 days.
YES * NO
---- ----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
8,803,734 shares of Common Stock as of February 12, 1997
Page 1 of 13
<PAGE>
CORTEX PHARMACEUTICALS, INC.
INDEX
PAGE NUMBER
-----------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets -- December 31, 1996 and June 30, 1996.... 3
Statements of Operations -- Three months ended
December 31, 1996 and 1995; six months ended
December 31, 1996 and 1995; and period from inception
(February 10, 1987) through December 31, 1996............ 4
Statements of Cash Flows -- Six months ended
December 31, 1996 and 1995; and period from inception
(February 10, 1987) through December 31, 1996............ 5
Notes to Financial Statements............................ 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Plan of Operation........................................ 8
PART II. OTHER INFORMATION
Item 2. Changes in Securities.................................... 11
Item 3. Defaults upon Senior Securities ......................... 11
Item 4. Submission of Matters to a Vote of Security Holders...... 11
Item 6. Exhibits and Reports on Form 8-K......................... 12
SIGNATURES ......................................................... 13
Page 2 of 13
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CORTEX PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
(UNAUDITED) (NOTE)
December 31, 1996 June 30, 1996
- ------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,777,882 $ 4,091,550
U.S. government securities --
available for sale 946,330 --
Other current assets 119,337 88,427
------------ ------------
Total current assets 2,843,549 4,179,977
Furniture, equipment and
leasehold improvements, net 709,694 807,601
Other 23,130 26,342
------------ ------------
$ 3,576,373 $ 5,013,920
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 256,705 $ 217,332
Accrued dividends 69,300 64,350
Accrued wages, salaries and
related expenses 60,585 40,145
Current obligations under capital
leases 5,852 8,501
------------ ------------
Total current liabilities 392,442 330,328
Obligations under capital leases -- 1,499
Note payable to Alkermes, Inc. 1,064,891 1,037,330
Stockholders' equity:
9% cumulative convertible preferred
stock, $0.001 par value; $1.00 per
share liquidation preference; shares
authorized: 1,250,000; shares issued
and outstanding: 110,000 110,000 110,000
Series B convertible preferred stock,
$0.001 par value; $0.6667 per share
liquidation preference; shares
authorized: 3,200,000; shares issued
and outstanding: 150,000 86,810 86,810
Series C convertible preferred stock,
$0.001 par value; $25,000 per share
liquidation preference; shares
authorized: 160; shares issued and
outstanding: 35 (June 30, 1996) -- 752,476
Series D convertible preferred stock,
$0.001 par value; $10,000 per share
liquidation preference, shares
authorized: 500; shares issued and
outstanding 100 (December 31, 1996) 923,130 --
Common stock, $0.001 par value; shares
authorized: 20,000,000; shares issued
and outstanding: 7,896,812 (December
31, 1996) and 7,495,576 (June 30, 1996) 7,897 7,496
Additional paid-in capital 28,854,468 28,048,414
Unrealized loss on available for
sale U.S. government securities (1,467) (1,135)
Deficit accumulated during the
development stage (27,861,798) (25,359,298)
------------ ------------
Total stockholders' equity 2,119,040 3,644,763
------------ ------------
$ 3,576,373 $ 5,013,920
------------ ------------
------------ ------------
SEE ACCOMPANYING NOTES.
NOTE: THE BALANCE SHEET AS OF JUNE 30, 1996 HAS BEEN DERIVED FROM THE AUDITED
FINANCIAL STATEMENTS AT THAT DATE.
Page 3 of 13
<PAGE>
CORTEX PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
inception
Three months ended Six months ended (February 10,
December 31, December 31, 1987) through
-------------------------- --------------------------- December 31,
1996 1995 1996 1995 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Research and license revenue
under an agreement with
Alkermes, Inc. $ -- $ -- $ -- $ -- $ 3,600,000
Grant revenue -- -- -- -- 94,717
----------- ----------- ----------- ----------- ------------
Total revenues -- -- -- -- 3,694,717
Operating expenses:
Research and development 868,926 607,438 1,662,473 1,272,916 20,631,585
General and administrative 471,731 487,731 904,105 811,175 10,954,664
Settlement with Alkermes, Inc. -- -- -- -- 1,227,977
----------- ----------- ----------- ----------- ------------
Total operating expenses 1,340,657 1,095,169 2,566,578 2,084,091 32,814,226
----------- ----------- ----------- ----------- ------------
Loss from operations (1,340,657) (1,095,169) (2,566,578) (2,084,091) (29,119,509)
Interest income, net 29,685 25,522 64,078 59,834 1,397,385
----------- ----------- ----------- ----------- ------------
Net loss $(1,310,972) $(1,069,647) $(2,502,500) $(2,024,257) $(27,722,124)
----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ------------
Weighted average common
shares outstanding 7,749,664 6,159,855 7,653,682 6,123,330
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net loss per share $ (0.17) $ (0.17) $ (0.33) $ (0.33)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
Page 4 of 13
SEE ACCOMPANYING NOTES.
<PAGE>
CORTEX PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
inception
Six months ended (February 10,
December 31, 1987) through
--------------------- December 31,
1996 1995 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
NET LOSS $(2,502,500) $(2,024,257) $(27,722,124)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 101,993 115,322 1,211,015
Settlement with Alkermes, Inc. -- -- 1,227,977
Changes in operating assets/
liabilities:
Accounts payable and accrued
expenses 59,813 (224,900) 317,290
Accrued interest on U.S.
government securities (9,335) (27,129) (159,191)
Other current assets (30,910) (5,038) (138,611)
Realized loss on sale of U.S.
government securities -- 958 54,317
Stock option compensation expense 42,109 555,809
Stock issued for services -- -- 28,750
Reduction in note receivable from
former officer--compensation
expense -- -- 22,600
Changes in other assets and other
long term liabilities 27,561 12,658 72,880
----------- ----------- ------------
NET CASH USED IN OPERATING ACTIVITIES (2,353,378) (2,110,277) (24,529,288)
----------- ----------- -------------
Cash flows from investing activities:
U.S. government securities--
available-for-sale--
Purchases (937,327) (6,351,193) (37,083,743)
Proceeds from sales -- 4,849,034 36,240,820
Purchase of fixed assets (4,086) (7,124) (1,891,433)
Sale of fixed assets -- 2,777 10,236
Decrease (increase) in--
Other assets 3,212 (529) (39,870)
Note receivable from former officer -- -- (100,000)
----------- ----------- ------------
NET CASH USED IN INVESTING ACTIVITIES (938,201) (1,507,035) (2,863,990)
----------- ----------- -------------
Cash flows from financing activities:
Proceeds from issuance of common stock 58,929 9,839 21,737,929
Proceeds from issuance of Series D
convertible preferred stock 923,130 -- 923,130
Proceeds from issuance of Series C
convertible preferred stock -- 3,584,385 3,576,543
Proceeds from issuance of Series B
convertible preferred stock -- -- 1,841,108
Proceeds from issuance of 9% preferred stock -- -- 1,076,588
Proceeds from subordinated convertible note -- -- 208,333
Payment of 9% preferred stock dividends -- -- (110,250)
Redemption of 9% preferred stock -- -- (63,750)
Redemption of common stock -- -- (350)
Principal payments on capitalized leases (4,148) (3,763) (18,121)
----------- ----------- ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 977,911 3,590,461 29,171,160
----------- ----------- ------------
Increase (decrease) in cash and cash
equivalents (2,313,668) (26,851) 1,777,882
Cash and cash equivalents, beginning
of period 4,091,550 149,880 --
----------- ----------- ------------
Cash and cash equivalents, end of period $ 1,777,882 $ 123,029 $ 1,777,882
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
SEE ACCOMPANYING NOTES. (CONTINUED...)
Page 5 of 13
<PAGE>
CORTEX PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(UNAUDITED, CONTINUED)
<TABLE>
<CAPTION>
Period from
inception
Six months ended (February 10,
December 31, 1987) through
--------------------- December 31,
1996 1995 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental schedule of non-cash investing
and financing activities:
Accretion of 9% preferred stock $ -- $ -- $ 139,674
Conversion of 9% preferred stock
to common stock -- 388,700 1,311,686
Conversion of Series B preferred stock
to common stock -- 217,027 1,754,273
Conversion of Series C preferred stock
to common stock 537,483 -- 3,439,890
Capital lease obligation incurred to
lease equipment -- -- 23,973
</TABLE>
SEE ACCOMPANYING NOTES.
Page 6 of 13
<PAGE>
CORTEX PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
Period from Inception (February 10, 1987) through December 31, 1996
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three-month
and six-month periods ended December 31, 1996 are not necessarily indicative
of the results that may be expected for the year ending June 30, 1997. For
further information, refer to the financial statements and notes thereto
included in the Company's 1996 Annual Report on Form 10-KSB. Certain
previously reported amounts have been reclassified to conform with the June
30, 1996 and December 31, 1996 presentation.
NOTE 2 -- DEVELOPMENT STAGE ENTERPRISE
From inception (February 10, 1987) through December 31, 1996, the Company has
generated only modest operating revenues and has incurred losses aggregating
$27,722,124. As of December 31, 1996, the Company had working capital of
$2,451,107. This amount, together with the proceeds from the second and third
tranches of the private placement of Series D Preferred Stock (see Note 3), will
enable the Company to maintain its planned operations into the first calendar
quarter of 1998. Over the longer term, successful completion of the Company's
development program and its transition, ultimately, to attaining profitable
operations is dependent upon obtaining additional financing adequate to fulfill
its research and development activities, and achieving a level of revenues
adequate to support the Company's cost structure.
NOTE 3 -- PRIVATE PLACEMENT
On October 15, 1996, the Company completed the first tranche of a three-tranche
Regulation D private placement of Series D Preferred Stock ("Series D
Preferred"). The Company sold 100 shares of Series D Preferred at a price of
$10,000 per share, for gross proceeds of $1,000,000. A second tranche of 150
shares of Series D Preferred was sold on January 9, 1997, and the third tranche
of 150 shares was sold on February 12, 1997. Gross proceeds of $1,500,000 were
received in each of the second and third tranches. The Series D Preferred is
convertible at an effective per share conversion price that is the lower of (i)
110% of the average closing bid price for the five trading days immediately
preceding the closing date ($2.9425, $4.52375 and $4.63375 for the first, second
and third tranches, respectively) or (ii) that price that is 18% below the
average closing bid price for the five trading days immediately preceding the
conversion date, in each case subject to adjustment at the rate of six percent
per annum based on the length of the period from issuance of the Series D
Preferred until its conversion.
Page 7 of 13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS; PLAN OF OPERATION
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS REPORT, AND
WITH "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" PRESENTED IN THE COMPANY'S 1996 ANNUAL REPORT ON FORM 10-KSB.
INTRODUCTORY NOTE
This Quarterly Report on Form 10-QSB contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934 and the Company intends that such
forward-looking statements be subject to the safe harbors created thereby. These
forward-looking statements relate to (i) future research plans and expenditures,
(ii) potential collaborative arrangements, and (iii) the need for, and
availability of, additional financing.
The forward-looking statements included herein are based on current expectations
that involve a number of risks and uncertainties. These forward-looking
statements are based on assumptions regarding the Company's business and
technology, which involve judgments with respect to, among other things, future
scientific, economic and competitive conditions, and future business decisions,
all of which are difficult or impossible to predict accurately and many of which
are beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could prove inaccurate and, therefore, there can be no assurance
that the results contemplated in forward-looking statements will be realized and
actual results may differ materially. In light of the significant uncertainties
inherent in the forward-looking information included herein, the inclusion of
such information should not be regarded as a representation by the Company or
any other person that the objectives or plans of the Company will be achieved.
RESULTS OF OPERATIONS
From inception (February 10, 1987) through December 31, 1996, the Company's
revenue has consisted of (i) $3,600,000 of license fees and research and
development funding from January 1992 through June 1993 under the Company's
earlier agreement with Alkermes, Inc., (ii) net interest income aggregating
$1,397,385, and (iii) $94,717 of grant revenue.
From inception (February 10, 1987) through December 31, 1996, the Company has
sustained losses aggregating $27,722,124. Continuing losses are anticipated over
the next several years, as the Company's ongoing operating expenses for
preclinical research and early clinical development will only be offset, if at
all, by licensing revenues under planned strategic alliances with larger
pharmaceutical companies that the Company is seeking for the later stages of
clinical development, manufacturing and marketing of its products. The nature
and timing of payments to Cortex under these planned strategic alliances, if and
as entered into, is likely to significantly affect the Company's operations, and
to produce substantial period-to-period fluctuation in reported financial
results. Over the longer term, the Company will be dependent upon successful
commercial development of its products by its prospective partners to attain
profitable operations from product royalties or other revenues based on product
sales.
Page 8 of 13
<PAGE>
The loss for the three-month period ended December 31, 1996 of $1,310,972
compares with a net loss of $1,069,647 for the corresponding prior year period.
The loss for the six-month period ended December 31, 1996 was $2,502,500,
compared to a loss of $2,024,257 for the corresponding prior year period. The
increased losses in the current year period are attributable to higher levels of
research and development spending.
Research and development expenses increased from $607,438 to $868,926, or by
$261,488 (43%), during the three-month period ended December 31, 1996 compared
to the corresponding prior year period. The same expenses increased from
$1,272,916 to $1,662,473, or by $389,557 (31%), during the six-month period
ended December 31, 1996. The increases were primarily due to additions to the
complement of scientific employees and a consequent increase in spending for
laboratory supplies. Higher outlays for sponsored research accounted for most of
the remaining increase.
General and administrative expenses decreased slightly from $487,731 to
$471,731, or by $16,000 (3%) during the three-month period ended December 31,
1996 compared to the corresponding prior year period. The same expenses
increased from $811,175 to $904,105, or by $92,930 (11%), during the six-month
period ended December 31, 1996, mostly due to hiring and relocating expenses and
increased travel expenses related to corporate partnering activities, partially
offset by lower spending for consulting and legal fees.
The Company believes that inflation and changing prices have not had a material
impact on its ongoing operations to date.
PLAN OF OPERATION; LIQUIDITY AND CAPITAL RESOURCES
Cortex has funded its organizational and research and development activities
primarily from the issuance of equity securities, with net proceeds from such
issuances from inception (February 10, 1987) through December 31, 1996
aggregating $29.2 million. An additional $3.6 million in research and license
payments was received from Alkermes, Inc. between January 1992 and June 1993 in
connection with a development and license agreement with that firm. Interest
income from inception through December 31, 1996, which approximates funds
received, was $1.4 million.
As of December 31, 1996, the Company had cash, cash equivalents and short-term
investments totaling $2.7 million and working capital of $2.5 million. In
comparison, as of December 31, 1995, the Company had cash, cash equivalents and
short-term investments of $5.4 million and working capital of $5.2 million. The
decreases resulted from amounts required to fund operating losses and to
purchase capital equipment, partially offset by proceeds of approximately
$1,000,000 received from the first tranche of a private placement of Series D
Preferred Stock. Subsequent to December 31, 1996, the Company received gross
proceeds totaling $3,000,000 from the second and third tranches of the private
placement. See Note 3 ("Private Placement") of the accompanying Financial
Statements. Cortex anticipates that its existing cash, cash equivalents and
short-term investments, combined with a modest amount of anticipated interest
income, will be sufficient to satisfy its capital requirements through at least
December 1997 under current spending plans.
The Company leases approximately 30,000 square feet of research laboratory,
office and expansion space under an operating lease that expires May 31, 1999,
with an additional five-year option at 95% of the then fair market rental rate.
The commitments under the lease agreement for the years ending
Page 9 of 13
<PAGE>
June 30, 1997, 1998 and 1999 are $229,000, $234,000 and $220,000,
respectively. From inception (February 10, 1987) through December 31, 1996,
net expenditures for furniture, equipment and leasehold improvements
aggregated $1.9 million.
As of December 31, 1996, Cortex had outstanding 110,000 shares of 9% cumulative
convertible preferred stock, which accrue cumulative dividends semi-annually at
an annual rate of $0.09 per share. To conserve capital for operations, the
Company has elected not to distribute the dividends that have accrued from
June 15, 1990. Accrued and unpaid dividends as of December 31, 1996 were
$69,300.
In connection with the settlement in October 1995 of a license dispute with
Alkermes, Inc. the Company issued to Alkermes a $1,000,000 three-year promissory
note accruing interest semi-annually at the then federal funds rate. The Company
also agreed to pay Alkermes, Inc. a graduated royalty on calpain inhibitor
development proceeds, as defined and subject to certain limitations.
Over the next twelve months, the Company plans to conduct additional preclinical
and Phase I clinical studies on its AMPAKINE-TM- compounds. This planned
research involves a twelve-month expenditure of approximately $2.6 million. This
amount includes approximately $900,000 of funding for sponsored research in
academic laboratories, to which the Company is committed under various license,
sponsored research and consulting agreements. Significant investments in plant
or equipment or substantial changes to staffing levels are not contemplated
under current spending plans for the next twelve months. As of December 31,
1996, Cortex had 20 full-time employees and one part-time employee.
Cortex will require substantial additional capital, which it intends to raise
through a combination of corporate partnering and financing activities, to
complete its development phase and, assuming that its proposed products can be
successfully developed and marketed, to make the transition to profitable
operations. There can be no assurance that the Company will be able to enter
into corporate partnering arrangements on favorable terms, or at all, or that
any such arrangements will reduce the Company's future funding requirements.
There can also be no assurance that any such arrangements that may be entered
into will continue. Additional equity or debt financings will be required, and
any equity financings are likely to cause dilution to then-existing
shareholders.
The Company's proposed products are in the preclinical or early clinical stage
of development and will require significant further research, development,
clinical testing and regulatory clearances. They are subject to the risks of
failure inherent in the development of products based on innovative
technologies. These risks include the possibilities that any or all of the
proposed products will be found to be ineffective or toxic, or otherwise fail to
receive necessary regulatory clearances, that the proposed products, although
effective, will be uneconomical to market, that third parties may now or in the
future hold proprietary rights that preclude the Company from marketing them, or
that third parties will market a superior or equivalent product. Accordingly,
the Company is unable to predict whether its research and development activities
will result in any commercially viable products or applications. Further, due to
the extended testing and regulatory review process required before marketing
clearance can be obtained, the Company does not expect to be able to
commercialize any therapeutic drug for at least five years, either directly or
through its corporate partners or licensees. There can be no assurance that the
Company's proposed products will prove to be safe or effective or receive
regulatory approvals that are required for commercial sale.
Page 10 of 13
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On October 15, 1996 the Company entered into an agreement to sell 400 shares of
Series D Preferred Stock to a single purchaser (the "Purchaser") for $10,000 per
share in reliance on the private placement exemption of Section 4(2) of the
Securities Act. The Purchaser represented that it was an accredited investor,
acquiring the shares of Series D Preferred Stock for its own account for
investment purposes as a principal and without a view towards immediate resale
on distribution. The shares were not offered to the Purchaser through any
general solicitation. The Company sold the first tranche of 100 shares of
Series D Preferred Stock on October 15, 1996, the second tranche of 150 shares
of Series D Preferred Stock on January 9, 1997, and the third tranche of 150
shares of Series D Preferred Stock on February 12, 1997. The shares of Common
Stock issuable upon conversion of the Series D Preferred Stock were registered
for resale under the Securities Act under a Registration Statement declared
effective on December 26, 1996. As of December 31, 1996, no shares of Series D
Preferred Stock had been converted into Common Stock, and as of February 12,
1997, 250 shares of Series D Preferred Stock had been converted into 842,922
shares of Common Stock. See Notes 2 and 3 to the Financial Statements in Item 1
of Part 1 of this Quarterly Report on Form 10-QSB.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Board of Directors of the Company elected not to distribute the semi-annual
dividends that have accrued subsequent to December 15, 1989 on the Company's 9%
cumulative convertible preferred stock, in order to conserve capital for
operations. As of December 31, 1996, accrued and unpaid dividends on the 9%
cumulative convertible preferred stock were $69,300.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 12, 1996, the Company held its Annual Meeting of Stockholders, with
stockholders holding 6,527,247 shares of common stock (representing 84% of the
total number of shares outstanding and entitled to vote) present in person or by
proxy at the meeting. Proxies for the meeting were solicited pursuant to
Regulation 14A of the Securities Exchanges Act of 1934. Robert F. Allnutt,
Jerome M. Arnold, Carl W. Cotman, Ph.D., Michael G. Grey, Harvey S. Sadow,
Ph.D., Vincent F. Simmon, Ph.D. and Davis L. Temple, Jr., Ph.D. were listed as
management's nominees in the Proxy Statement and were elected as directors at
the meeting. The votes for each nominee were as follows:
Number of Number of Votes
Name Affirmative Votes Negative Votes Withheld
---- ----------------- --------------- --------
Robert F. Allnutt 6,485,708 41,539 --
Jerome M. Arnold 6,485,748 41,499 --
Carl W. Cotman, Ph.D. 6,485,648 41,599 --
Michael G. Grey 6,485,748 41,499 --
Harvey S. Sadow, Ph.D. 6,485,748 41,499 --
Vincent F. Simmon, Ph.D. 6,485,808 41,439 --
Davis L. Temple, Jr., Ph.D. 6,485,748 41,499 --
Page 11 of 13
<PAGE>
At the meeting, the Company also sought the approval of the stockholders of the
1996 Stock Incentive Plan ("1996 Plan"), which provides for the grant by the
Company of options and/or rights to purchase up to an initial aggregate of
613,132 shares. There are an aggregate of 939,538 shares subject to issuance
under outstanding options granted under the Company's 1989 Incentive Stock
Option, Nonqualified Stock Option and Stock Purchase Plan, 1989 Special
Nonqualified Stock Option and Stock Purchase Plan and Executive Plan (the "Prior
Plans"). No further options will be granted under the Prior Plans. There shall
be added to the number of shares that may be issued under the 1996 Plan any
shares underlying lapsed or expired options granted under the Prior Plans plus,
on the last day of each fiscal year of the Company, a number of shares equal to
twenty (20%) of the increase in the number of shares of Common Stock outstanding
since the last day of the previous fiscal year. This 1996 Plan expires
October 25, 2006, unless terminated earlier by the Board of Directors. This
proposal was approved by 2,477,467 affirmative votes. There were 207,000
negative votes, 44,118 abstentions and 3,798,662 broker non-votes.
At the meeting, the Company also sought the ratification of the appointment of
Ernst & Young LLP as independent auditors of the Company for the fiscal year
ending June 30, 1997. This proposal was approved by 6,502,565 affirmative votes.
There were 9,089 negative votes and 15,593 abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
----------------------------------------------------------------------------
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended
December 31, 1996.
Page 12 of 13
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CORTEX PHARMACEUTICALS, INC.
February 14, 1997 By: /s/ D. Scott Hagen
-------------------------------------
D. Scott Hagen
Vice President and Chief Financial
Officer; Corporate Secretary
(Principal Financial and Accounting
Officer)
Page 13 of 13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF DECEMBER 31, 1996, AND THE RELATED STATEMENTS OF OPERATIONS AND CASH
FLOWS FOR THE SIX MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,777,882
<SECURITIES> 946,330
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,843,549
<PP&E> 1,897,126
<DEPRECIATION> 1,187,432
<TOTAL-ASSETS> 3,576,373
<CURRENT-LIABILITIES> 392,442
<BONDS> 1,064,891<F1>
0
1,119,940
<COMMON> 7,897
<OTHER-SE> 991,203
<TOTAL-LIABILITY-AND-EQUITY> 3,576,373
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,566,578
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,965
<INCOME-PRETAX> (2,502,500)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,502,500)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,502,500)
<EPS-PRIMARY> (0.33)
<EPS-DILUTED> (0.33)
<FN>
<F1>PROMISSORY NOTE PAYABLE TO ALKERMES, INC.
</FN>
</TABLE>
