<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 September 30, 1999
---------------------------
_____ 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)
(949) 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.
15,528,182 shares of Common Stock as of November 12, 1999
Page 1 of 14
<PAGE>
CORTEX PHARMACEUTICALS, INC.
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets -- September 30, 1999 and June 30, 1999..................... 3
Statements of Operations -- Three months ended
September 30, 1999 and 1998; and period from
inception (February 10, 1987) through September 30, 1999................... 4
Statements of Cash Flows -- Three months ended
September 30, 1999 and 1998; and period from
inception (February 10, 1987) through September 30, 1999................... 5
Notes to Financial Statements.............................................. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Plan of Operation.......................................................... 9
PART II. OTHER INFORMATION
Item 3. Defaults on Senior Securities.............................................. 13
Item 6. Exhibits and Reports on Form 8-K........................................... 14
SIGNATURES........................................................................... 14
</TABLE>
Page 2 of 14
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Cortex Pharmaceuticals, Inc.
(A development stage enterprise)
Balance Sheets
<TABLE>
<CAPTION>
(Unaudited) (Note)
September 30, 1999 June 30, 1999
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 289,271 $ 909,337
Other current assets 31,501 60,977
------------ ------------
Total current assets 320,772 970,314
Furniture, equipment and leasehold improvements, net 489,378 531,970
Other 46,737 46,737
------------ ------------
$856,887 $ 1,549,021
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 463,892 $ 523,474
Accrued dividends 23,513 23,513
Accrued wages, salaries and related expenses 63,027 67,497
Unearned revenue 93,194 98,584
Current portion of note payable to Alkermes, Inc. 664,472 999,282
------------ ------------
Total current liabilities 1,308,098 1,712,350
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: 27,500 27,500 27,500
Series B convertible preferred stock, $0.001 par value;
$0.6667 per share liquidation preference; shares
authorized: 3,200,000; shares issued and
outstanding: 75,000 43,405 43,405
Common stock, $0.001 par value; shares authorized:
30,000,000; shares issued and outstanding:
15,528,182 (September 30) and 15,519,382 (June 30) 15,528 15,519
Additional paid-in capital 38,814,392 38,811,100
Deficit accumulated during the development stage (39,352,036) (39,060,853)
------------ ------------
Total stockholders' equity (451,211) (163,329)
------------ ------------
$ 856,887 $ 1,549,021
============ ============
</TABLE>
See accompanying notes.
Note: The balance sheet as of June 30, 1999 has been derived from the audited
financial statements at that date, but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
Page 3 of 14
<PAGE>
Cortex Pharmaceuticals, Inc.
(A development stage enterprise)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Period from
inception
(February 10,
Three months ended 1987) through
September 30, September 30,
1999 1998 1999
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Research and license revenue $ 767,889 $ -- $ 7,549,295
Grant revenue 66,667 -- 261,385
----------- ----------- ------------
Total revenues 834,556 -- 7,810,680
Operating expenses:
Research and development expenses 751,800 839,281 30,484,394
General and administrative expenses 367,380 354,693 15,113,230
Settlement with Alkermes, Inc. -- -- 1,227,977
----------- ----------- ------------
Total operating expenses 1,119,180 1,193,974 46,825,601
----------- ----------- ------------
Loss from operations (284,624) (1,193,974) (39,014,921)
Interest income, net (6,559) 7,616 1,694,724
----------- ----------- ------------
Net loss $ (291,183) $(1,186,358) $(37,320,197)
=========== =========== ============
Weighted average common shares outstanding 15,522,252 10,237,126
=========== ===========
Net loss per share $ (0.02) $ (0.12)
=========== ===========
</TABLE>
See accompanying notes.
Page 4 of 14
<PAGE>
Cortex Pharmaceuticals, Inc.
(A development stage enterprise)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Period from
inception
(February 10,
Three months ended 1987) through
September 30, September 30,
-------------------------------
1999 1998 1999
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (291,183) $(1,186,358) $(37,320,197)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 46,835 52,607 1,753,238
Settlement with Alkermes, Inc. -- -- 1,227,977
Changes in operating assets/liabilities:
Accounts payable and accrued expenses (69,442) 56,273 620,113
Accrued interest on U.S. government securities -- -- (171,238)
Other current assets 29,476 42,564 (31,501)
Interest receivable from former officer -- -- (19,274)
Realized loss on sale of U.S. government securities -- -- 54,317
Stock option compensation expense -- -- 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 liabilities (196,922) 12,906 45,220
--------- ----------- ------------
Net cash used in operating activities (481,236) (1,022,008) (33,234,186)
--------- ----------- ------------
Cash flows from investing activities:
U.S. government securities-available-for-sale-
Purchases -- -- (38,823,738)
Proceeds from sales -- -- 38,940,820
Purchase of fixed assets (4,243) (2,580) (2,214,092)
Sale of fixed assets -- -- 10,988
Decrease (increase) in-
Other assets -- -- (39,870)
Note receivable from former officer -- -- (100,000)
--------- ----------- ------------
Net cash used in investing activities (4,243) (2,580) (2,225,892)
--------- ----------- ------------
Cash flows from financing activities:
Proceeds from issuance of 9% preferred stock -- -- 1,076,588
Redemption of 9% preferred stock -- -- (63,750)
Payment of 9% preferred stock dividends -- -- (110,250)
Proceeds from issuance of convertible
preferred stock -- -- 13,074,007
Proceeds from issuance of common stock 3,301 -- 21,926,282
Proceeds from subordinated convertible note -- -- 208,333
Principal payments on note payable to Alkermes, Inc. (137,888) -- (337,888)
Principal payments on capitalized leases -- -- (23,973)
--------- ----------- ------------
Net cash provided by (used in) financing activities (134,587) -- 35,749,349
--------- ----------- ------------
Increase (decrease) in cash and cash equivalents (620,066) (1,024,588) 289,271
Cash and cash equivalents, beginning of period 909,337 2,124,008 --
--------- ----------- ------------
Cash and cash equivalents, end of period $ 289,271 $ 1,099,420 $ 289,271
========= =========== ============
</TABLE>
See accompanying notes.
(Continued ...)
Page 5 of 14
<PAGE>
Cortex Pharmaceuticals, Inc.
(A development stage enterprise)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Period from
inception
(February 10,
Three months ended 1987) through
September 30, September 30,
------------------------
1999 1998 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental schedule of non-cash investing
and financing activities:
Accretion of preferred stock $ -- $ -- $ 139,674
Conversion of 9% preferred stock to common stock -- -- 1,437,311
Conversion of Series B preferred stock to common stock -- -- 1,754,273
Conversion of Series C preferred stock to common stock -- -- 3,439,890
Conversion of Series D preferred stock to common stock -- -- 3,719,636
Conversion of Series A preferred stock to common stock -- -- 3,936,720
Capital lease obligation incurred to lease equipment -- -- 23,973
</TABLE>
See accompanying notes.
Page 6 of 14
<PAGE>
Cortex Pharmaceuticals, Inc.
(A development stage enterprise)
Notes to Financial Statements
Period from inception (February 10, 1987) through September 30, 1999
(Unaudited)
Note 1 - Basis of Presentation
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. This basis of accounting contemplates
the recovery of the Company's assets and the satisfaction of its liabilities in
the normal course of business. As of September 30, 1999, the Company had an
accumulated deficit of $39,352,000, net capital deficiency of $451,000 and
negative working capital of $987,000. Due to the Company's recurring losses and
net capital deficiency, there can no be assurance that the Company will be able
to obtain additional operating capital, which may impact the Company's ability
to continue as a going concern. The accompanying financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the possible inability of the Company to
continue as a going concern.
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 period ended September 30,
1999 are not necessarily indicative of the results that may be expected for the
year ending June 30, 2000. For further information, refer to the financial
statements and notes thereto included in the Company's 1999 Annual Report on
Form 10-KSB.
Note 2 - Development Stage Enterprise
From inception (February 10, 1987) through September 30, 1999, the Company has
generated only modest operating revenues and has incurred losses aggregating
$37,320,000. 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. There can be no assurance that the Company will be successful in
these areas.
In January 1999, the Company entered into a research collaboration and exclusive
worldwide license agreement with NV Organon, a subsidiary of Akzo Nobel (Note
3). The agreement will enable Organon to develop or commercialize the Company's
Ampakine(R) technology for the treatment of schizophrenia and, upon Organon's
election, for the treatment of depression. The Company is seeking collaborative
arrangements with other pharmaceutical companies for other applications of the
Ampakines compounds, under which such companies would provide additional capital
to the Company in exchange for exclusive or non-exclusive license or other
rights to the technologies and products that the Company is developing.
Competition for corporate partnering with major pharmaceutical companies is
intense, with a large number of biopharmaceutical companies attempting to arrive
at such arrangements. Accordingly, although the Company is in discussions with a
number of candidate companies, there is no assurance that an agreement will
arise from these discussions in a timely manner, or at all, or that an agreement
that may arise from these discussions will successfully reduce the Company's
short or longer-term funding requirements.
To supplement its existing resources, the Company may raise additional capital
through the sale of debt or equity. There can be no assurance that such capital
will be available on favorable terms, or at all. If additional funds are raised
by issuing equity securities, dilution to existing stockholders is likely to
result.
Page 7 of 14
<PAGE>
Note 3 - Research and License Agreement with NV Organon
In January 1999, the Company entered into a research collaboration and exclusive
worldwide license agreement with NV Organon ("Organon"), a pharmaceutical
business unit of Akzo Nobel (The Netherlands). The agreement will enable Organon
to develop and commercialize the Company's proprietary Ampakine(R) technology
for the treatment of schizophrenia and, upon Organon's election, for the
treatment of depression.
In connection with the agreement, the Company received an up-front license
payment of $2,000,000. The agreement includes research support payments of up to
$3,000,000 per year for two years (subject to Cortex providing agreed-upon
levels of research), milestone payments, plus royalty payments on worldwide
sales.
Subsequent to September 30, 1999, the Company received a quarterly research
support payment of $893,000. This amount is higher than the research support
received for prior quarters, reflecting the increase in the Company's staff
dedicated to the collaboration. The increased research staff includes both full-
time and temporary employees. Future quarterly research support payments are
expected to average $750,000.
Note 4 - Note Payable to Alkermes, Inc.
In connection with the settlement of a license dispute, in October 1995 the
Company issued to Alkermes, Inc. a $1,000,000 three-year promissory note
accruing interest semi-annually at the federal funds rate. In February 1998, the
terms of the note were restructured to include a principal payment of $200,000
upon signing of the new agreement. The balance of the note and accrued interest
was payable in October 1999 or upon consummation of a corporate partnership
between Cortex and a larger pharmaceutical company, whichever was earlier. With
the signing of the license agreement with Organon (Note 3), the note and accrued
interest became due and payable.
In July 1999, Alkermes agreed to restructure the terms of the note to include a
principal and interest payment of $250,000 and monthly payments of $50,000 from
August 1999 through January 2000. The balance of the note and accrued interest
are payable on or before February 28, 2000. Interest on the unpaid balance
accrues at a 1% to 3% premium to the prime lending rate, based upon the date of
payment. In connection with this restructuring agreement, the Company agreed to
issue to Alkermes a five-year warrant to purchase 100,000 shares of common stock
at an exercise price derived from the fair market value of the Company's common
stock. If the balance of principal and accrued interest is not paid by December
31, 1999, Cortex has agreed to issue to Alkermes another five-year warrant to
purchase 50,000 shares of common stock at a price per share of $0.875 or the
then fair market value of Cortex common stock, whichever is lower.
Page 8 of 14
<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; Plan of Operation" presented in the Company's 1999 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, expenditures and
results, (ii) potential collaborative arrangements, (iii) the potential utility
of the Company's proposed products and (iv) the need for, and availability of,
additional financing.
The forward-looking statements included herein are based on current
expectations, which involve a number of risks and uncertainties and assumptions
regarding the Company's business and technology. These assumptions 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 September 30, 1999, the Company's
revenue has consisted of (i) $7,549,000 of license fees and research and
development funding, (ii) net interest income aggregating $1,695,000, and (iii)
$261,000 of grant revenue.
In January 1999, the Company entered into a research collaboration and exclusive
worldwide license agreement with NV Organon ("Organon"), a pharmaceutical
business unit of Akzo Nobel (The Netherlands). The agreement will allow Organon
to develop and commercialize the Company's proprietary Ampakine(R) technology
for the treatment of schizophrenia and, upon Organon's election, for the
treatment of depression. In connection with the agreement, the Company received
a $2,000,000 up-front licensing payment. The agreement includes research support
payments of up to $3,000,000 per year for two years (subject to Cortex providing
agreed-upon levels of research) and milestone payments, plus royalty payments on
worldwide sales.
Page 9 of 14
<PAGE>
Subsequent to September 30, 1999, the Company received a quarterly research
support payment of $893,000. This amount exceeds the payments received for prior
quarters, reflecting the increase in the Company's staff dedicated to the
alliance. Future quarterly research support is expected to average $750,000.
From inception (February 10, 1987) through September 30, 1999, the Company has
sustained losses aggregating $37,320,000. Continuing losses are anticipated over
the next several years, as the Company's ongoing operating expenses will only be
offset, if at all, by research support payments and possible milestone payments
from its research collaboration with Organon, or under planned strategic
alliances that the Company is seeking with other pharmaceutical companies for
the clinical development, manufacturing and marketing of its products. The
nature and timing of payments to Cortex under the Organon agreement or other
planned strategic alliances, if and when entered into, are likely to
significantly affect the Company's operations and financing activities and to
produce substantial period-to-period fluctuations in reported financial results.
Over the longer term, the Company will require successful commercial development
of its products by Organon or its other prospective partners to attain
profitable operations from royalties or other product-based revenues.
The net loss for the three-month period ended September 30, 1999 of $291,000
compares with a net loss of $1,186,000 for the corresponding prior year period.
Revenues from the license and research collaboration with Organon were
responsible for the improvements in the current year period (Note 3).
Research and development expenses decreased from $839,000 to $752,000, or by
10%, during the three-month period ended September 30, 1999 compared to the
corresponding prior year period. The decrease reflects lower spending for
sponsored research and the timing of both technology access payments and Phase
I/IIa human clinical testing of Ampalex(R). Future costs for the clinical
testing of Ampakines in patients with schizophrenia will be borne by Organon.
For the three-month period ended September 30, 1999, general and administrative
expenses of $367,000 were materially consistent with expenses of $355,000 for
the corresponding prior year period.
The Company believes that inflation and changing prices have not had a material
impact on its ongoing operations to date.
Liquidity and Capital Resources; Plan of Operation
From inception (February 10, 1987) through September 30, 1999, Cortex has funded
its organizational and research and development activities primarily from the
issuance of equity securities, with net proceeds aggregating $35,749,000. An
additional $3,600,000 in research and license payments was received from
Alkermes, Inc. ("Alkermes") in 1992 and 1993 in connection with a development
and license agreement with that firm. Net interest income from inception through
September 30, 1999 was $1,695,000.
Research and licensing payments received in connection with the agreement with
Organon (Note 3) totaled $3,819,000 through September 30, 1999. The agreement
includes research support payments of up to $3,000,000 per year for two years
(subject to Cortex providing agreed-upon levels of
Page 10 of 14
<PAGE>
research), milestone payments based on clinical development of the licensed
technology and royalties on worldwide sales.
As of September 30, 1999, the Company had cash and cash equivalents totaling
$289,000 and a working capital deficit of $987,000. In comparison, as of June
30, 1999, the Company had cash and cash equivalents of $909,000 and a working
capital deficit of $742,000. The decreases represent amounts required to fund
operating losses. Subsequent to September 30, 1999, the Company received
quarterly research support of $893,000 related to its agreement with Organon.
The Company leases approximately 30,000 square feet of research laboratory,
office and expansion space under an operating lease that expires May 31, 2004.
The commitments under the lease agreement for the years ending June 30, 1999,
2000, 2001, 2002 and 2003 total $266,000, $325,000, $339,000, $353,000 and
$368,000, respectively. From inception (February 10, 1987) through September 30,
1999, expenditures for furniture, equipment and leasehold improvements
aggregated $2,214,000.
In connection with the settlement in October 1995 of a license dispute with
Alkermes, the Company issued to Alkermes a $1,000,000 three-year promissory note
accruing interest semi-annually at the then federal funds rate. In February
1998, the terms of the note were restructured to include a principal payment of
$200,000 upon signing of the restructuring agreement. The balance of the note
and accrued interest were payable in October 1999 or upon the consummation of a
corporate partnership between Cortex and a larger pharmaceutical company,
whichever was earlier. With the signing of the license agreement with Organon,
the note and accrued interest became due and payable. In July 1999, the terms of
the note were restructured to include a principal and interest payment of
$250,000 and monthly payments of $50,000 from August 1999 through January 2000.
The balance of the note and accrued interest are payable on or before February
28, 2000.
As of September 30, 1999, Cortex had 27,500 outstanding shares of 9% cumulative
convertible preferred stock, which accrue cumulative semi-annual dividends 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 1990.
Accrued and unpaid dividends as of September 30, 1999 were $23,513.
Over the next twelve months the Company is committed to $603,000 of funding for
sponsored research in academic laboratories. Remaining commitments for current
Phase I/IIa clinical studies on the Company's Ampakine compounds are not
significant.
As of September 30, 1999, Cortex had a total of 22 full-time research and
administrative employees. Neither significant increases to staffing nor
significant investments in plant or equipment are planned for the upcoming year.
Assuming timely payment of the note payable to Alkermes, Cortex anticipates that
its existing cash and cash equivalents and the expected research support
payments from Organon will be sufficient to satisfy its capital requirements
into February 2000. Without any milestone payments from the Organon agreement,
additional funds will be required to continue operations beyond that time.
The Company anticipates receiving its first milestone payment from the Organon
agreement in early 2000. With receipt of the projected Organon quarterly
research support
Page 11 of 14
<PAGE>
and the milestone payment during the estimated time frame, the Company expects
to have sufficient cash to fund operations through calendar 2000. Because there
is no assurance that the milestone will be received as estimated, or at all, the
Company may raise additional capital through the sale of debt or equity
securities. Given the current adverse market conditions for biopharmaceutical
companies, there is no assurance that funds will be available on favorable
terms, or at all. If equity securities are issued to raise additional funds,
dilution to existing shareholders is likely to result.
In order to provide for both its immediate and longer-term spending
requirements, the Company is presently seeking additional collaborative or other
arrangements with larger pharmaceutical companies. Under these agreements, it is
intended that such companies would provide capital to the Company in exchange
for exclusive or non-exclusive license or other rights to certain of the
technologies and products that the Company is developing. Competition for such
arrangements is intense, however, with a large number of biopharmaceutical
companies attempting to secure alliances with more established pharmaceutical
companies. Although the Company has been engaged in discussions with candidate
companies, there is no assurance that an agreement or agreements will arise from
these discussions in a timely manner, or at all, or that revenues that may be
generated thereby will offset operating expenses sufficiently to reduce the
Company's short and longer-term funding requirements.
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 superior or equivalent products. 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 current or prospective 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 12 of 14
<PAGE>
Year 2000 Compliance
Some of the Company's computer programs were written using two digits rather
than four to define the applicable year. As a result, those computer programs
recognize a date using "00" as the year as 1900 rather than as the year 2000.
This may cause a system failure or otherwise disrupt operations.
The Company has completed an assessment of the impact of the Year 2000 as it
relates to its computers, operating systems and laboratory equipment. This
process included contacting manufacturers and vendors of such equipment
regarding their Year 2000 compliance. Based on these assessments, the Company
has updated some of its software and equipment so that its operating systems and
laboratories may continue to function properly. The associated cost was
approximately $30,000.
The Company is unable to control whether its suppliers and service providers
will be Year 2000 compliant. The Company has initiated communications with its
significant vendors to determine the extent to which the Company's operations
may be vulnerable to a failure by those third parties to properly address Year
2000 issues. The Company's operations may be affected to the extent that its
vendors are unable to provide services or ship products. The Company has
received responses from most of its significant vendors, which indicate that
such vendors have addressed or are addressing the impact of the Year 2000.
Although the Company expects its internal systems to be Year 2000 compliant as
described above, the Company has prepared a contingency plan specifying what it
plans to do if it or its significant vendors are not Year 2000 compliant in a
timely manner. The contingency plan involves, among other actions, manual
workarounds and an increase in its laboratory supplies inventory. Management
does not believe that the Year 2000 changes affecting it and its significant
vendors will have a material impact on its business, financial condition or
results of operations.
Notwithstanding the foregoing, there can be no assurances (a) that the
representations provided by its third party vendors with respect to Year 2000
compliance will be accurate, or (b) that the Company will have any recourse
against such vendors if the representations prove to be inaccurate. Furthermore,
there can be no assurance that Year 2000-related failure caused by third
parties, such as utility providers, transportation companies or others, will not
have a material adverse effect on the Company.
PART II. OTHER INFORMATION
Item 3. Defaults upon Senior Securities
In order to conserve capital for operations, the Board of Directors of the
Company elected not to distribute the semi-annual dividends that have accrued
from June 15, 1990 on the Company's 9% cumulative convertible preferred stock.
As of September 30, 1999, accrued and unpaid dividends on the 9% cumulative
convertible preferred stock were $23,513.
Page 13 of 14
<PAGE>
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
September 30, 1999.
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.
November 15, 1999 By: /s/ Vincent F. Simmon, Ph.D.
----------------------------
Vincent F. Simmon, Ph.D.
President and Chief Executive Officer;
Acting Chief Financial Officer,
Corporate Secretary
(Principal Financial Officer)
Page 14 of 14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF SEPTEMBER 30, 1999, AND THE RELATED STATEMENTS OF OPERATIONS AND
CASH FLOWS FOR THE THREE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 289,271
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 320,772
<PP&E> 2,217,587
<DEPRECIATION> (1,728,209)
<TOTAL-ASSETS> 856,887
<CURRENT-LIABILITIES> 1,308,098
<BONDS> 664,472<F1>
0
70,905
<COMMON> 15,528
<OTHER-SE> (537,644)
<TOTAL-LIABILITY-AND-EQUITY> 856,887
<SALES> 0
<TOTAL-REVENUES> 834,556
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,119,180
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,190
<INCOME-PRETAX> (291,183)
<INCOME-TAX> 0
<INCOME-CONTINUING> (291,183)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (291,183)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
<FN>
<F1>PROMISSORY NOTE PAYABLE TO ALKERMES, INC. THIS AMOUNT IS INCLUDED IN CURRENT
LIABILITIES.
</FN>
</TABLE>