10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended June 30, 2004

OR

¨ 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 0-17951

Cortex Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

Delaware	33-0303583
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

15241 Barranca Parkway, Irvine, California, 92618

(Address of principal executive offices, including zip code)

(949) 727-3157

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Act:

Common Stock, $0.001 par value	The American Stock Exchange
(Title of Class)	(Name of Exchange on which Registered)

Securities registered under Section 12(g) of the Act:

Common Stock, $0.001 par value

(Title of Class)

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 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. YES x 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 the 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. x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). YES ¨ NO x

The aggregate market value of the voting stock held by non-affiliates as of December 31, 2003 was $53,084,500 (based on the closing sale price of the common stock as reported by The American Stock Exchange on such date). As of September 22, 2004, there were 28,455,303 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for the Annual Meeting of Stockholders to be held on December 16, 2004 (to be filed with the Commission on or before October 28, 2004) are incorporated by reference into Part III.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	3
Item 2.	Properties	26
Item 3.	Legal Proceedings	26
Item 4.	Submission of Matters to a Vote of Security Holders	26
PART II
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters	26
Item 6.	Selected Financial Data	28
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 8.	Financial Statements and Supplementary Data	36
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	36
Item 9A.	Controls and Procedures	36
Item 9B.	Other Information	36
PART III
Item 10.	Directors and Executive Officers of the Registrant	37
Item 11.	Executive Compensation	37
Item 12.	Security Ownership of Certain Beneficial Owners and Management	37
Item 13.	Certain Relationships and Related Transactions	38
Item 14.	Principal Accountant Fees and Services	38
PART IV
Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	39
Signatures		S-1
Financial Statements		F-1
Exhibit Index and Exhibits		EXH-1

(Attached to this Report on Form 10-K)

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INTRODUCTORY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K 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, which may be identified by words including “anticipates,” “believes,” “intends,” “estimates,” “expects,” and similar expressions include, but are not limited to, statements regarding (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 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, actual results may differ materially from those set forth in the forward-looking statements. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as representation by the Company or any other person that the objectives or plans of the Company will be achieved.

PART I

Item 1. Business

Since 1993, the primary effort at Cortex has been to develop a novel pharmacology that positively modulates AMPA-type glutamate receptors, a complex of proteins that is involved in communication between nerve cells in the human brain. Cortex is developing a family of chemical compounds known as AMPAKINE^®compounds that enhance the activity of this receptor. Cortex believes that AMPAKINE compounds hold promise for correcting neurological and psychiatric diseases and disorders that are known, or thought, to involve depressed functioning of pathways in the brain that use glutamate as a neurotransmitter.

AMPAKINE compounds, which act on chemical pathways that impact at least 85% of all the neurotransmission occurring in the brain, have been demonstrated to enhance memory and cognition in both animals and humans. The compounds can be taken orally or intravenously, and rapidly pass through the brain membrane.

The AMPAKINE program addresses large potential markets. According to research data from IMS Health, in 2003 worldwide sales for central nervous system products to treat brain-related disorders and diseases exceeded $57 billion, with growth at more than 19% on an annualized basis. The Company’s business plan involves partnering with larger pharmaceutical companies for research, development, clinical testing, manufacturing and global marketing of specific AMPAKINE compounds for those indications that require sizable, expensive Phase III clinical trials — and very large sales forces to achieve significant market penetration. At the same time, Cortex plans to develop internally a selected set of indications, many of which will allow it to apply for “Orphan Drug” status. Such designation by the Food and Drug Administration is usually applied to products where the number of patients in the given disease category is less than 200,000 per year. These Orphan Drug indications typically require more modest investment in the development stages, follow a quicker regulatory path to approval, and involve a more concentrated sales reach to a few, selected medical centers in the United States (“U.S.”). The key indications that Cortex plans to pursue internally include (a) restoration of memory and diminution of loss of memory due to electroconvulsive therapy, (b) narcolepsy and (c) Fragile X syndrome.

Cortex may also pursue other Orphan Drug indications and upon any related approval, may expand its clinical potential into non-Orphan Drug indications. As an example, if the Company obtains approval for an indication related to Fragile X syndrome, further expansion into treatment of autism may follow. While the market potential in the U.S. for most of the listed Orphan Drug indications varies between $200 million and $400 million per indication, Cortex estimates that the consolidated potential for all indications, including expansion into non-Orphan Drug indications, provides the Company a market potential of over $3 billion. This amount does not include any revenues from any potential license of the Company’s intellectual property. Cortex will

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continue to seek at least one more significant license agreement with a larger pharmaceutical company, while the Company prepares itself for potential entrance into the pharmaceutical market with its own product.

In January 1999, the Company entered into a research collaboration and exclusive worldwide license agreement with NV Organon (“Organon”), a subsidiary of Akzo Nobel. The agreement grants Organon worldwide rights to develop and commercialize the Company’s AMPAKINE technology for the treatment of schizophrenia and depression. In October 2000, the Company entered into a research collaboration and license agreement with Les Laboratoires Servier (“Servier”). The agreement, as amended in October 2002, will allow Servier to develop and commercialize the Company’s AMPAKINE technology in defined territories of Europe, Asia, the Middle East and certain South American countries as a treatment for memory impairment associated with aging and neurodegenerative diseases. The indications covered include, but are not limited to, Alzheimer’s disease, mild cognitive impairment, sexual dysfunction, anxiety disorders and the dementia associated with Parkinson’s disease, multiple sclerosis and Amyotrophic Lateral Sclerosis.

Cortex continues to actively pursue collaborative or licensing arrangements with other pharmaceutical companies. These arrangements may permit other applications of the AMPAKINE compounds to be advanced into later stages of clinical development and may provide access to the extensive clinical trials management, manufacturing and marketing expertise of such companies.

In the fiscal years ended June 30, 2004, 2003 and 2002, the Company’s total operating expenses were approximately $9,513,000, $6,421,000 and $7,487,000, respectively, with amounts for the fiscal year ended June 30, 2004 including $1,106,000 of non-cash charges related to warrants and stock options and increased research and development expenses for initiating toxicology and Phase I clinical testing of the AMPAKINE CX717.

Cortex faces a number of risks in moving its technology through research, development and commercialization. Since its inception in 1987, the Company has never had revenues from commercial sales, has never been profitable on an annual basis and has incurred net losses approximating $48,051,000. Cortex does not anticipate profitability in the short term and will continue to require external funding, either from the private or public equity markets or from corporate partners and licenses of the Company’s technology. As of yet, Cortex has not obtained FDA approval to market any of its products. All of these risks, and others, are described in “Risk Factors” starting on page 20.

In this annual report, the terms the “Company,” “Cortex,” “we,” “our,” and “us” refer to Cortex Pharmaceuticals, Inc., a Delaware corporation. Cortex was organized in 1987. The Company’s executive offices are located at 15231 Barranca Parkway, Irvine, California 92618, and its telephone number is (949) 727-3157. The Company’s website is www.cortexpharm.com.

AMPA Receptor Modulator Program

In June 1993, Cortex licensed a new class of molecules and technology — the AMPAKINE technology — from the University of California. Cortex has subsequently been working to develop and patent new AMPAKINE molecules and to demonstrate efficacy and safety in a number of potential indications.

AMPAKINE compounds facilitate the activity of the AMPA receptor, which binds the neurotransmitter glutamate. The AMPAKINE compounds interact in a highly specific manner with the AMPA receptor in the brain, lowering the amount of neurotransmitter required to generate a response, and increasing the magnitude of the response to any given amount of glutamate. Cortex hopes that this selective amplification of the normal glutamate signal will eventually find utility in the treatment of

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neurological and psychological diseases and disorders characterized by depressed functioning of brain pathways that utilize glutamate as a neurotransmitter.

It is well known that the majority of excitatory synaptic connections in the brain utilize glutamate, and such synaptic connections decline with age. Thus, brain disorders associated with aging may be amenable to treatment with AMPAKINE compounds. Such disorders include mild cognitive impairment, Alzheimer’s disease and Parkinson’s disease. Schizophrenia, depression and other psychiatric disorders may involve imbalances of neurotransmitters in the brain, such as dopamine, serotonin, acetylcholine and norepinephrine. Given that glutamate commonly is found in the same synapses with these other neurotransmitters, it may play a role in the rebalancing of neurotransmission. AMPAKINE compounds may provide a new approach to treat both neurological and psychiatric disorders by directly modulating the AMPA receptor to enhance the release of glutamate, thereby rebalancing deleterious effects from other neurotransmitters. A study with AMPAKINE compounds in patients with schizophrenia indicated improvement in a number of symptoms also common to patients with Attention Deficit Hyperactivity Disorder (“ADHD”). The Company and its collaborators have obtained other encouraging preliminary results in animal models of sleep deprivation, Fragile X syndrome, depression, libido and stroke.

See “Risk Factors — We are at an early stage of development and we may not be able to successfully develop and commercialize our products and technologies” on page 21 for a discussion of certain risks related to the development and commercialization of the Company’s products, including, without limitation, risks related to its clinical trials.

Lead Development Candidate — AMPAKINE CX717

One of the most compelling animal studies conducted with the AMPAKINE CX717 involves a model that examines the effects of sleep deprivation on cognitive performance in non-human primates. As reported by Wake Forest University School of Medicine scientists at the 2003 Annual Meeting of Society for Neurosciences, the model utilizes a colony of rhesus macaque monkeys. The monkeys are trained to use a cursor to respond to computer images projected onto a white screen.

A monkey initiates the task by placing a cursor on the start circle. Shortly thereafter, the computer screen displays a specific image. The screen then goes blank for between 1 and 60 seconds, after which the computer screen displays from two to six randomly selected images. From these images, the monkey must select the image that matches the one displayed at the start of the exercise. This technique is called a delayed-match-to-sample task.

The monkeys are trained to respond at a high overall level of performance. Under carefully controlled conditions and constant monitoring, the monkeys were then individually sleep deprived for between 30 and 36 hours, and then re-tested in the task. When the monkeys were sleep deprived, their performance accuracy on the task was reduced by 15% to 25%, and their reaction times slowed by at least 50%.

A single dose of 0.8 mg/kg of CX717 completely reversed the performance deficits associated with sleep deprivation. Additionally, in those monkeys given CX717, specific brain electroencephalogram changes that occur after sleep deprivation were returned to the non sleep deprived state.

Based upon these results, and extensive required safety testing in rats and dogs, as well as monkeys, Cortex has initiated Phase I studies of CX717 in the United Kingdom (“U.K.”). The studies are being conducted with the assistance of Quintiles – Guy’s Drug Research Unit, a large and well-respected clinical research organization.

The first of these studies was a randomized, double-blind single rising dose study to explore the safety, tolerability and pharmacokinetics (the time course of absorption, distribution, metabolism and excretion of the drug from the body) of CX717 in healthy young men between the ages of 18 and 45.

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Eight men per dose group randomly received CX717 (n = six) or placebo (n = two). To date, the Company has dosed patients with up to 1600 mg of CX717 in this protocol and has not yet reached a maximum tolerated single dose. Cortex has decided that further single dose increases are not warranted in this study and instead will be giving multiple doses over a period of ten days to help define the maximum tolerated dose. On a single dose basis, the 54 volunteers who have received CX717 tolerated the drug very well.

A second study explored the effect of food taken immediately before administration in a single dose group of eight young, healthy men in an open label, two-way crossover design. Of the eight male subjects, four are fed and four are fasted during each arm of the crossover. The results of this study demonstrated that there was no statistical difference between the rate and amount of drug absorption when given with food as compared to the fasting state. These results are encouraging in the Company’s consideration of potential future clinical trials of longer duration. If the compound is successful in additional clinical trials, the eventual dosage regimens for patients may be greatly simplified.

The third study is a randomized, double-blind multiple rising dose study to examine the safety and tolerability of CX717 in young, healthy men. Three groups of eight volunteers (CX717 = six; placebo = 2) will receive daily doses of CX717 for ten (10) days. Safety and pharmacokinetics were fully assessed on days one and ten, with single samples taken at pre-dosing during intervening days. The doses utilized were based upon the results from the first study. So far, single daily doses of 100 mg and 300 mg have been administered to these subjects for ten days with excellent safety results. In order to increase the exposure of the drug to volunteers, Cortex has decided to increase the dose to twice per day in future tolerance studies to help define a maximum tolerated dose for CX717. Cortex anticipates that these studies will be completed in October 2004.

The fourth of the studies is a randomized, double-blind, multiple dose study in healthy, elderly men and women to examine the safety, tolerability and pharmacokinetics of CX717 when administered daily for at least 10 days. This study has not been initiated yet, although Cortex anticipates that it will be completed during the fourth quarter of calendar year 2004. Additional pharmacodynamic parameters will be measured in this group of elderly subjects.

The pharmacokinetic results to date from the 64 volunteers who have taken CX717 show that the half life of the drug averages 9 hours and the amount of drug absorbed over the range of 25 mg to 1600 mg was linear. Very high unchanged drug levels and area under the curve values were found and indicated an excellent absorption profile for the drug. Additionally, using the single dose kinetic parameters, Cortex has been able to accurately predict the results of the multi-dosing trials. The simulations and the actual data overlapped as would be expected if the kinetic data was accurate. In summary, to date Cortex has found the drug to have an excellent safety profile, seemingly well absorbed and linear kinetics over a large range of doses in normal volunteers. The doses administered to the normal volunteers were up to 16 times greater than those needed to produce efficacy results in the primates. If the clinical efficacy in humans can be demonstrated over the same dosage ranges as has been found in primates, the potential for once a day dosing seems feasible.

In addition to the tolerance studies that continue and involve twice daily dosing over a ten-day period, Cortex has also initiated a kinetic study to evaluate the absorption of an oral solution as compared to oral capsules filled with drug of two different particle sizes. The results from this study are as expected: the oral solution was most rapidly absorbed, followed by the capsule containing the smaller particles. The capsule with the larger drug particles had the slowest absorption. This dissolution rate controlled absorption process is quite common and will allow the Company to improve the dosage forms to be used in the planned Phase II efficacy trials during calender year 2005. No Significant differences were found in the amount of drug absorbed by the subjects or in the elimination half-life for the drug among the various dosage forms tested.

The Company is currently in the planning stages to initiate a Phase I/II pilot efficacy in sleep deprivation in the U.K. Cortex hopes to have results from such a trial by early calendar year 2005, which may provide it with a dose range for future efficacy studies. Cortex plans to conduct several small pilot efficacy trials with CX717 during the first half of calendar 2005, the Company also plans to immediately initiate a three-month toxicology study for CX717 so that by mid-calendar 2005, it potentially may begin longer Phase IIb efficacy studies for this drug. Cortex plans to have a Notice of Claimed Investigational Exemption for a New Drug (“IND”) filed with the Food and Drug Administration for CX717 before the end of calendar year 2004.

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Based on the pharmacokinetic and safety profile of CX717 in the Phase I studies and the compound’s behavioral characteristics, Cortex may conduct small Phase II pilot efficacy studies in the indications that are listed below.

Potential Applications for CX717 and Follow-Up AMPAKINE Compounds

Alzheimer’s Disease

Impairment of memory and cognition is a significant health care problem that is growing as the elderly population continues to increase. Dementia can be diagnosed in those individuals who develop persistent memory and cognitive deficits as well as in those who suffer from difficulties in their social, occupational and other activities of daily living. With advanced dementia, many elderly individuals become confined to nursing homes because of psychological disorientation and profound functional difficulties. Pharmaceuticals to alleviate deficits in memory and cognition could potentially enable elderly individuals with dementia to regain some functional abilities that may help them remain independent longer, resulting in improved quality of life and substantial savings in health care costs.

Alzheimer’s disease is the most common form of dementia, currently afflicting some 4 million people in the U.S. and 12 million people worldwide. With the aging of our population, unless a treatment is found, the number of people in the U.S. with the disease is expected to reach 14 million by the middle of this century. According to the Alzheimer’s Association, the U.S. society spends at least $100 billion a year on Alzheimer’s disease at an average lifetime cost per patient of $174,000. Neither Medicare nor most private health insurance covers the long-term care more patients need. The impact of an effective treatment, even a symptomatic one, would be enormous.

It is in the early and middle stages of Alzheimer’s disease that Cortex believes AMPAKINE molecules may play a valuable role, enhancing the effectiveness of the brain cells that have not yet succumbed to the disease. This enhancement may help to alleviate the memory and cognitive deficits that constitute the major symptoms of Alzheimer’s disease.

There is also a possibility that treatment with AMPAKINE compounds may slow the progression of Alzheimer’s disease. Brain cells, or neurons, require continued input from other brain cells to remain alive. As neurons die, other neurons begin to lose their inputs, hastening their own death. AMPAKINE compounds may slow the rate at which functional levels of input from other neurons are lost. In animal models, selected AMPAKINE compounds have been shown to increase the production of BDNF, which is a protein associated with the formation of synapses by neurons. This possible mode of action also may prove beneficial to patients with Alzheimer’s disease, although it has not been demonstrated whether the same mechanism may produce similar results in humans.

Attention Deficit Hyperactivity Disorder

ADHD is the most commonly diagnosed psychological disorder of children. The National Institute of Mental Health (“NIMH”) estimates that ADHD affects three to five percent of school-age children, with about one child in every classroom in the U.S. in need of help for this disorder. According to the NIMH, national public school spending on behalf of students with ADHD may have exceeded $3 billion in 1995.

Symptoms of ADHD include an inability to sustain attention and concentration, along with developmentally inappropriate levels of activity, distractability and impulsivity. Children with the disorder may have functional impairment across multiple settings including home, school and peer relationships. ADHD has also been linked to long-term adverse effects on academic performance, vocational success and social and emotional development. These effects not only impact the individual patients, but also their families, schools and communities. For many, the symptoms and impact of the disorder continue into adulthood.

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Psychostimulants, including amphetamine, methylphenidate and pemoline, represent the most widely researched and commonly prescribed treatments for the disorder. One theory suggests that ADHD results from difficulties in inhibiting responses to internal and external stimuli. Evidence suggests that those areas of the brain thought to be involved in planning, foresight, and consideration of alternative responses may be under-stimulated in patients with ADHD. Stimulant medication may work on these areas of the brain to increase neural activity to more normal levels.

Because of the availability and frequent prescribing of psychostimulants, concerns over their potential overuse and abuse have intensified. Along with the abuse potential, treatments with psychostimulants may result in side effects. According to the National Institutes of Health, some children on these medications may lose weight, have less appetite and temporarily grow more slowly. Others may experience problems falling asleep. Given the lack of consistent improvement beyond the disorder’s core symptoms and the deficit of long-term studies, the need remains for additional testing with medications and behavioral treatments.

Cortex believes that AMPAKINE compounds may represent a novel, non-scheduled (not regulated by the Drug Enforcement Agency) approach for treating ADHD patients, but until the development of CX717 has lacked an AMPAKINE compound with the appropriate potency and duration of activity to treat ADHD on a once a day basis. Given the impressive behavioral improvement in attention and performance in primate studies with CX717 and of the longer acting AMPAKINE compounds, Cortex’s consultants have recommended that it considers a pilot trial in an ADHD population. Given the unmet medical need for a safe and non-scheduled (drugs with low potential for addiction) treatment for ADHD, Cortex may decide to pursue such a pilot trial. Cortex retains worldwide rights for this indication.

Narcolepsy and Other Day-Time Sleepiness Disorders

Narcolepsy represents a disabling neurological disorder involving excessive daytime sleepiness and periodic irresistible sleep attacks of sudden onset and brief duration. The number and severity of symptoms vary widely among individuals with the disorder, with symptoms generally beginning between the ages of 15 and 30. Prevalence of narcolepsy in the U.S. is under 200,000. The disorder is known to occur in equal frequency in both sexes and to affect all ethnic populations.

According to the National Institute of Neurological Disorders and Stroke, patients with narcolepsy experience sleep attacks that can last for up to 30 minutes, regardless of the amount or quality of the prior night’s sleep. The sleep attacks may occur at work, social events, while eating, talking and driving, and in other similarly inappropriate circumstances.

There is currently no cure for the disorder, although the symptoms may be controlled with behavioral and medical therapy. The therapeutic focus is to promote and enhance wakefulness and counteract excessive daytime sleepiness. The Company believes that AMPAKINE compounds may be useful in treating day time sleepiness, which is a key need for individuals with narcolepsy.

Sleep disorders represent a broad range of illnesses arising from many causes, including abnormalities in physiological functions during sleep, abnormalities of the biological clock and sleep disturbances that are induced by factors outside of the sleep process.

According to the National Sleep Foundation, over the past century, society has reduced its average asleep time by 20 percent and, in the past 25 years, added a month to its average annual work/commute time. When the body is deprived of the sleep that it needs, the ability to concentrate or perform even simple tasks declines, and productivity suffers.

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An internal biological clock in the brain regulates our sleep needs and patterns. Almost everyone’s clock is set for sleep at night, especially in the early morning hours between midnight and dawn. When our lives force us to work against our biological clocks, sleep problems are unavoidable.

The National Sleep Foundation estimates that 20 percent of American employees work non-traditional schedules. For these workers, getting enough sleep is a common problem.

Dr. Sam Deadwyler, Professor and Vice Chairman, Department of Physiology and Pharmacology at Wake Forest University School of Medicine, as part of a grant received from the Defense Advanced Research Projects Agency (“DARPA”) has studied the effects of sleep deprivation on cognitive performance and associated brain imaging changes in primates (to be published). Primates were trained to a high level of successful performance in a visual delayed-match-to-sample task. The animals were then individually sleep-deprived for 30-36 hours before being re-tested. Performance accuracy on the task was significantly reduced by 15-25%, and reaction times slowed by at least 50% in all monkeys as a result of the sleep deprivation.

In November 2003, at the Annual Society of Neuroscience Meeting, Dr. Deadwyler reported the results from a new sleep deprivation study in primates with the more potent AMPAKINE CX717. The results suggested that with CX717, a single dose of 0.5 to 1.5 mg/Kg produced an optimal response on short term memory, which would be the equivalent of approximately 75-100 mg per day in an average human patient.

Expansion of the use of AMPAKINE compounds to the treatment of narcolepsy may be possible. Narcolepsy represents an Orphan Drug indication that would reduce both the cost and time to market for a potential therapeutic agent from Cortex. The decision on whether CX717 will be evaluated in narcoleptic patients or any other Orphan Drug indication will be made by Cortex after the data from the Phase I/II sleep deprivation study becomes available.

In June 2004, Cortex announced that Dr. Deadwyler has received a grant of approximately $5,100,000 from DARPA to continue his research at Wake Forest University on the effects of sleep deprivation in primates, including the effects of CX717 and other AMPAKINE compounds.

Electroconvulsive Therapy

Electroconvulsive therapy is the most effective treatment of major depression, with approximately 100,000 patients receiving ECT in the U.S. ECT works by the intentional induction of a controlled generalized seizure by administration of electrical impulses to the anesthetized patient. The number of treatments in a course of therapy varies. Six to twelve treatments are usually effective. In the U.S., the usual frequency is three times weekly; in the United Kingdom, the standard practice is two treatments weekly.

Despite its effectiveness, patient and clinician acceptance is limited due to significant memory loss that has been associated with this therapy. ECT–induced memory impairment takes three forms. The first is post-treatment confusion. Typically, it takes a few minutes to half an hour for a patient to become fully alert and oriented after treatment. In elderly patients receiving ECT treatment with bi-temporal electrode placement, the period of post-treatment confusion may persist for several hours or even days. The second type of memory impairment with ECT is anterograde amnesia. This refers to the inability to recall information learned after the treatments have begun. The anterograde amnesia produced by ECT is short lived and, in group data, is rarely apparent more than 10 days after ECT. The third and most bothersome type of ECT-induced memory impairment is retrograde amnesia, forgetting things that happened before the course of treatments. With retrograde amnesia, events of several months before treatment are most likely forgotten.

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Efficacy of ECT is strongly influenced by the anatomical positioning of stimulating electrodes, which determine current paths, and by electrical dosages, which determine current density within the current path. These factors determine the magnitude and persistence of cognitive side effects.

In addition, the effects of chronic ECT have been discussed in recent studies demonstrating that the pathophysiology of depression involves atrophy or death of hippocampal neurons. This work has led to the hypothesis that ECT and antidepressant drugs, via regulation of neurotrophic factors, reverse the atrophy of stress-vulnerable neurons or protect these neurons from further damage. It is possible that AMPAKINE compounds may enhance the recovery of memory post-ECT therapy.

The effect of ECT on memory is based upon the assumption that sequence of memory formation corresponds to sequence of synaptic modification that is altered by ECT. To the degree that initial encoding and later consolidation of memory depend upon the induction and stabilization of long term potentiation (“LTP”), or the formation of memory, medications that enhance these cellular effects are expected to potentially preclude memory loss or at least minimize it.

It has been shown that the repetitive release of a transmitter over a period of 30–50 milliseconds allows AMPA receptors to generate sufficient depolarization to unblock NMDA receptors and thereby induce LTP. Both the AMPA and NMDA receptors must be triggered in order to induce LTP. Increasing the amount of glutamate released during stimulation or enhancing the effects of the transmitter on AMPA receptors can reduce this requirement and enhance memory capabilities. High impact AMPAKINE compounds have been demonstrated to facilitate the release of Brain Derived Neurotrophic Factor (“BDNF”), or brain growth factor, and theoretically may provide a neuroprotective effect against current induced by ECT, thereby potentially reducing retrograde amnesia effects.

This is a testable hypothesis given that there are non-human primate models available to test intervention with CX717 and other AMPAKINE compounds. This in-vivo model measures acute, anterograde and retrograde amnesia effects after the administration of precise doses of ECT. If AMPAKINE drugs, like CX717 or a high impact AMPAKINE compound can protect the primate from the acute insult of ECT, this will provide a unique niche for AMPAKINE drugs in the hospitals where ECT is currently used.

Fragile X and Autism

Fragile X is an inherited disorder that represents the most common cause of inherited mental retardation. The disorder affects approximately 60,000 to 80,000 patients in the U.S. alone. Symptoms of Fragile X syndrome include mental impairment ranging from learning disabilities to mental retardation, attention deficit and hyperactivity, anxiety and unstable mood and autistic-like behaviors.

Males are typically more severely affected by Fragile X syndrome than females. Although most males with Fragile X syndrome have mental retardation, only one-third to one-half of females with the disorder has significant intellectual impairment; the rest have either normal intelligence or learning disabilities. Emotional and behavioral problems are common in both sexes. There are no current therapeutic treatments for the disorder, although medications are used to treat some symptoms.

Autism is a complex developmental disability that typically appears during the first three years of life. The result of a neurological disorder that affects the functioning of the brain, autism and its associated behaviors have been estimated to occur in as many as 2 to 6 in 1,000 individuals. The disability is four times more prevalent in males than in females.

Autism impacts the normal development of the brain in the areas of social interaction and communication skills. Children and adults with autism typically have difficulties in verbal and nonverbal communication, social interactions, and leisure or play activities. Persons with autism may exhibit repeated body movements, unusual responses to people or attachments to objects, and resistance to

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changes in routines. Individuals also may experience heightened sensitivities of sight, hearing, touch, smell and taste. There are currently no approved therapeutic treatments for autism, although early behavioral intervention dramatically improves outcome.

Recent scientific research has led to an improved understanding of Fragile X syndrome and autism. A number of scientists have suggested that the use of a drug to enhance glutamate transmission may be beneficial. AMPAKINE compounds, which have demonstrated enhanced glutamate transmission, may therefore serve as potential new therapeutics.

Imaging studies demonstrate that areas of the brain that are extremely rich in glutamate transmission are less active in autistic patients. Molecular studies suggest that although genes involved in the AMPA-type glutamate receptor are more active in autistic patients, the density of AMPA-type glutamate receptors is decreased. Taken together, these facts suggest that enhancing AMPA receptor activity may be beneficial in autistic patients.

The scientific logic for using an AMPA receptor modulator in Fragile X is more complex but equally compelling. The Fragile X genetic defect results in the reduction or absence of an important protein, FMRP. FMRP is thought to play an important role in allowing normal levels of AMPA receptor proteins to be made. Increasing the activity of AMPA receptors with an AMPAKINE may overcome the reduced number of AMPA receptors produced by the reduced level of FMRP protein.

Some Fragile X clinicians believe that AMPAKINE compounds with the potential to raise neurotrophic levels may improve Fragile X patients, especially if administered at a young age. AMPAKINE compounds such as CX717 may have sufficient potency and safety to restore some cognitive function to patients afflicted with the disorder. Cortex will assess whether to conduct a study with CX717 in this population after an evaluation of efficacy is derived from early Phase I/IIa studies with the compound.

Other Indications

Cortex may conduct studies in various other indications that have not been discussed above. In addition to the AMPAKINE CX717, Cortex plans to advance other AMPAKINE compounds that have shown promise in animal models. The Company hopes to initiate toxicology testing for one of these compounds before the end of calendar year 2004. If those tests are successful, Cortex plans to prepare this drug candidate for clinical trials during mid-calendar year 2005.

Proof of Principal Compound — CX516

Cortex’s development of the AMPAKINE technology began with its exclusive license of the technology from the University of California in 1993. CX516 was among a number of AMPAKINE compounds that were rapidly synthesized and evaluated by Cortex’s scientists during the early discovery and preclinical development processes. Given concerns about potential brain-related side effects caused by excess glutamate, many believed that AMPAKINE compounds (through their potentiation of glutamate) would cause serious side effects in humans. While this concern has since been alleviated, it initially created a serious impediment for Cortex in raising funds for its research in the private equity markets. At the same time, Cortex was able to accumulate an impressive patent portfolio.

Three human clinical safety studies have been completed with the AMPAKINE CX516 in healthy volunteers. In all three studies, CX516 was safe and well-tolerated on acute oral administration, and importantly, indicated statistically positive effects on memory performance.

Phase II studies in mild cognitive impairment (MCI), Alzheimer’s disease, ADHD, schizophrenia and Fragile X syndrome subsequently were initiated and/or completed with CX516. The current status of these trails is described more fully under the respective headings below.

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Mild Cognitive Impairment

In the aging population there is a continuum of cognitive decline. This continuum ranges from normal (for the general age group) to MCI to probable Alzheimer’s disease or other types of dementia.

Patients with MCI currently represent the earliest clinically-defined group with memory impairment beyond that expected for normal individuals of the same age and education, but do not meet clinical criteria for Alzheimer’s disease. It is estimated that there are between 3 and 4 million people with MCI. The memory deficits in the MCI population are clinically discernible and can interfere with daily functioning. MCI patients also appear to have a greatly increased risk of developing Alzheimer’s disease. Whereas approximately 1-2% of the normal elderly population will be diagnosed with Alzheimer’s disease every year, 10-15% or more of MCI patients will progress to Alzheimer’s disease per year.

Together with its partner, Servier, Cortex conducted a cross-national study of the AMPAKINE technology as a potential treatment for MCI. This study was designed and conducted by a joint Cortex and Servier clinical team, in consultation with the International Scientific Advisory Committee (“ISAC”). The majority of the study costs were funded by Servier, with initial funding provided by the Institute for the Study of Aging, a non-profit foundation supported by the Estee Lauder Trust.

The Phase II study began enrollment in March 2002 in the U.S. and several months later in five European countries. The last patient completed the study in mid-August 2003. Given the size of the data base and the expense incurred for the trial by Servier, Servier required that the ISAC review the data before the results were disclosed publicly. The ISAC met with Cortex and Servier to review the analysis in February 2004.

CX516 failed to meet the study’s primary endpoint, improvements in the 15-item word list delayed recall. However, a subset review of the patients with the worst baseline memory impairment (the worst 25% of the patient population), showed a modest improvement with CX516 versus placebo on the 15- item word list delayed recall test. A review of the safety data showed a significant difference in patient withdrawals in the active treatment group, primarily due to gastrointestinal side effects, when compared to the placebo group. While there were a substantial number of adverse events in the active treatment group, only the gastrointestinal side effects were significantly different from those side effects attributed to the placebo group. There were no treatment-related serious adverse events in either the placebo or CX516 groups.

CX516 has a half-life of less than one hour and very low potency, which may require the administration of several grams of drug per dosing period, making improvement in the primary endpoint for this study a difficult objective to achieve. Neither Cortex nor Servier views the results from this MCI study as an indication that the AMPAKINE technology is flawed. Both companies have a large number of compounds with much greater potency and longer pharmacokinetic half-lives, which will be more appropriate for clinical development than the “proof of concept” compound, CX516. Both companies are proceeding diligently with the clinical development of other AMPAKINE compounds, CX717 from Cortex, S-18986 and related compounds from Servier and a large number of compounds resulting from the collaborative efforts of the two companies.

Based on the Company’s animal and clinical studies, Cortex believes that CX516 is a short acting drug that requires multiple administrations of extremely high doses per day to achieve and maintain the desired therapeutic effect. Therefore, Cortex does not intend to commercialize this compound. However, there are currently other studies underway with CX516 in Fragile X syndrome, Alzheimer’s disease and schizophrenia (as a combination with anti-psychotics). Cortex advised the investigators from these studies of the results from the MCI trial with CX516. All of the investigators elected to continue their clinical trials with the compound. Because the studies are funded by sources external to Cortex, Cortex agreed to allow the investigators to continue these trials, but does not intend to perform further research or development with CX516.

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Schizophrenia

The worldwide incidence of schizophrenia is approximately one percent of the population, regardless of ethnic, cultural or socioeconomic status. On any given day, approximately 100,000 of the estimated 2 million U.S. patients with schizophrenia are in public mental hospitals.

Schizophrenia typically develops in late adolescence or early adulthood and involves a collection of symptoms. These are generally characterized as positive symptoms (delusions and hallucinations), negative symptoms (social withdrawal and loss of emotional responsiveness) and cognitive symptoms (disordered thought and attention deficits).

The first conventional anti-psychotics for schizophrenia were developed in the 1950s and 1960s. These drugs helped to reduce the positive symptoms of the disease and greatly reduced the need for chronic hospitalization. However, some of these drugs are characterized by troublesome and occasionally life-threatening side effects. One of the most common side effects of conventional anti-psychotics is EPS or “extrapyramidal signs,” which include restlessness and tremors. EPS side effects have a strong negative impact on quality of life and tend to lead to poor patient compliance with medication.

Since then, a new type of anti-psychotic agent, referred to as atypical due to the virtual lack of EPS side effects, has been developed. Clozapine was the first such drug. It was initially studied in the 1970s, but clinical trials were halted due to the risk of a fatal blood disorder known as agranulocytosis and a dose-dependent risk of seizures. Clozapine was reintroduced in the 1980s, with approval by the FDA for use in patients who cannot be adequately treated with conventional anti-psychotics, either because of lack of efficacy or side effects. Risperidone and olanzapine are other recent atypical anti-psychotics without agranulocytosis side effects.

The newer atypical agents achieve good control of positive symptoms, partial control of negative symptoms and better patient compliance with medication due to lower levels of EPS side effects. However, clinicians agree that there are still substantial side effects and that the cognitive symptoms of schizophrenia are not greatly improved by any available agent. The persistence of cognitive symptoms prevents many patients from successfully reintegrating into society.

Schizophrenia has long been thought to have its biochemical basis in an over-activity of dopamine pathways projecting into an area of the brain known as the striatum. More recently, a developing body of evidence suggests that schizophrenia also involves reduced activity of glutamate pathways projecting into the same area. Cortex began studying whether AMPAKINE compounds, which increase current flow through the AMPA subtype of glutamate receptor, might have relevance to the treatment of schizophrenia.

In January 1999, Cortex entered into an exclusive worldwide license agreement with Organon. The agreement will enable Organon to develop and commercialize Cortex’s proprietary AMPAKINE technology for the treatment of schizophrenia. Under the agreement, Organon has rights to intellectual property that includes broad medical use patents covering the use of any AMPA receptor modulating compound to treat schizophrenia as a mono-therapy, or in combination with other anti-psychotic medications.

Shortly after signing the agreement with Organon, in April 1999 Cortex reported preliminary results from a study with CX516 in patients with schizophrenia being treated with clozapine. This Phase I/IIa clinical trial, conducted at Massachusetts General Hospital, was designed primarily as a safety study. Extensive testing also was included in an attempt to obtain a preliminary indication that CX516 may effect the psychological parameters that likely contribute to symptoms of the disease, particularly the cognitive symptoms that have thus far been resistant to treatment. The results indicate that CX516 is reasonably safe in combination with clozapine and improves performance on a number of tests of verbal

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learning, memory, problem solving and distractability. Interestingly, the improvements noted in CX516-treated patients appeared to persist for a period after cessation of treatment.

Further clinical testing of the AMPAKINE compound, ORG24448, a successor compound to CX516, in patients with schizophrenia is being conducted by the Company’s corporate partner, Organon. In May 2000, Cortex achieved its first milestone under the related agreement when Organon selected a licensed compound to pursue in Phase I clinical testing, triggering a $2,000,000 payment to Cortex. In September 2001, Organon informed Cortex of its intent to continue development of the selected compound by entering Phase II clinical testing, triggering a second $2,000,000 milestone payment. Additional payments from the Organon agreement for schizophrenia will depend upon the results of the Phase II study.

In September 2001, Cortex received notice of a Phase II Small Business Innovative Research (“SBIR”) award for approximately $770,000 from the National Institutes of Health to investigate the therapeutic potential of the AMPAKINE technology in schizophrenia. The goals of the related research plan include determining whether the AMPAKINE CX516 will improve negative symptoms, attention and memory. The research plan also hopes to assess the effects of an AMPAKINE compound on positive systems, anxiety and depressive symptoms. As of June 30, 2004, Cortex had received approximately $575,000 from this four-year grant award, as extended. Also as of June 30, 2004, approximately two-thirds of the planned enrollment for this study had been completed. It is currently projected that enrollment will be completed during the first calendar quarter of 2005, with results potentially available during the third calendar quarter of 2005.

Attention Deficit Hyperactivity Disorder

In April 1999, the Company reported preliminary results from a study with the AMPAKINE CX516 in patients with schizophrenia being treated with clozapine. The results noted in CX516-treated patients included improved performance on several tests of memory, problem solving and distractability, as well as a clinical improvement in attention — symptoms that are also common to patients with ADHD. Based upon these results, the Company believes that AMPAKINE compounds may represent a novel, non-scheduled (not regulated by the Drug Enforcement Agency) approach for treating ADHD patients.

In April 2000, the Company entered an option agreement with Shire Pharmaceuticals Group, plc (“Shire”), under which Shire initiated a Phase II double-blind, placebo-controlled study of Cortex’s AMPAKINE CX516 for the treatment of ADHD. Enrollment in the study began in the summer of 2001, with Shire responsible for all of the costs of the trial. In exchange for the option, Cortex received $130,000; Shire also purchased 254,353 shares of Cortex common stock for $870,000.

Shire had the right to convert its option into an exclusive worldwide license for the AMPAKINE technology for ADHD. Upon exercise, Cortex would have received a license fee, milestone payments based on successful clinical and commercial development, research support for additional AMPAKINE compounds and royalties on sales.

In May 2002, Shire made a business decision to abruptly terminate the Phase II study of CX516 in adult patients with ADHD. At the time of the decision to immediately stop all treatments, 72 patients out of a planned 110 patient study target had been enrolled. Only 45 patients had completed the 28-day course of treatment required by the study design. While the data from these 45 patients suggest that treatment differences might exist, because the study design was broken by the sudden cessation of all treatments and only 40% of the patients completed the full treatment plan, the data from the study could not be properly analyzed. In June 2002, Shire elected not to exercise its option for use of the AMPAKINE technology in ADHD. Cortex still believes that the potential for the use of AMPAKINE compounds as a treatment for ADHD exists and is seeking other partners to pursue this possibility.

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Fragile X and Autism

Fragile X is an inherited disorder that represents the most common cause of inherited mental retardation. Autism is a complex developmental disability that typically appears during the first three years of life. Autism impacts the normal development of the brain in the areas of social interaction and communication skills. Children and adults with autism typically have difficulties in verbal and nonverbal communication, social interactions, and leisure or play activities.

Recent scientific research has led to an improved understanding of Fragile X syndrome and autism. A number of scientists have suggested that the use of a drug to enhance glutamate transmission may be beneficial. AMPAKINE compounds, which have demonstrated enhanced glutamate transmission, may therefore serve as potential new therapeutics.

In April 2002, Cortex announced that it is collaborating with several research organizations to conduct a Phase II clinical study to evaluate the AMPAKINE CX516 as a potential treatment for Fragile X syndrome and autism. The study design is a randomized double-blind, placebo controlled trial with four weeks of treatment. Outcome measures will include testing in attention and executive function, spatial and verbal/auditory memory, language and behavior. Planned enrollment for this study currently is approximately 60% completed.

Stroke

A stroke occurs when a blood clot blocks a blood vessel or artery, or when a blood vessel breaks and interrupts blood flow to the brain. When a stroke occurs, brain cells within the immediate area of damage usually die within minutes to a few hours. When brain cells die, control of functions such as speech, movement and memory may be lost.

A stroke can happen to anyone, although the risk increases significantly with age. According to the National Stroke Association, two-thirds of all strokes happen to people over the age of 65, with the risk doubling each decade past age 55.

Treatment of stroke victims represents a critical unmet need. The National Stroke Association estimates that there are nearly 4 million people in the U.S. who have survived a stroke and are living with the after-effects.

Preclinical experiments conducted by Kevin Lee, Ph.D. at the University of Virginia and by two pharmaceutical companies have demonstrated that the AMPAKINE CX516 can be safely administered to animals under mimicked stroke-like conditions. Additionally, research at Cortex suggests that AMPAKINE compounds may be neuroprotective — AMPAKINE treatment may provide protection to at-risk neurons adjacent to the area of damage following a stroke.

AMPAKINE compounds also may improve post-stroke recovery. Nerve cells depend upon active stimulation or communication to maintain function. After a stroke, many neurons lose connections with other cells. Patients must try to recover function by engaging new pathways of nerve cell communication. AMPAKINE compounds, which enhance communication between nerve cells, may be ideal for the stroke recovery process.

In May 1999, Cortex received notice of a Phase I SBIR award of $100,000 from the National Institutes of Health to investigate the AMPAKINE technology as a potential new stroke therapy. Subsequently, in October 2000 Cortex received notice of a Phase II SBIR award of up to $1,074,000 to continue its research.

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The goals of the research plan include determining if an AMPAKINE compound administered in advance can reduce damage to neurons in an animal model of stroke; and to determine if the compound reduces damage to the memory of the animals. An AMPAKINE compound will also be administered after the stroke to determine if there is an improved recovery of memory function. As of June 30, 2004, Cortex had received approximately $755,000 from this grant award, with the term of the project extended through August 2005. Research of the AMPAKINE technology as a treatment for stroke, beyond that funded by the SBIR grant, will depend upon the Company’s financial resources.

Manufacturing

Cortex has no experience or capability to either manufacture bulk quantities of the new compounds that it develops, or to produce finished dosage forms of the compounds, such as tablets or capsules. Cortex relies, and presently intends to rely, on the manufacturing and quality control expertise of contract manufacturing organizations or current and prospective corporate partners. There is no assurance that the Company will be able to enter into manufacturing arrangements to produce bulk quantities of its compounds on favorable financial terms. There is however, substantial availability of dosage form manufacturing capability in the U.S. pharmaceutical industry that the Company believes that it can readily access. See “Risk Factors — We are at an early stage of development and we may not be able to successfully develop and commercialize our products and technologies” on page 21 for a discussion of certain risks related to the development and commercialization of the Company’s products.

Marketing

The Company has no experience in the marketing of pharmaceutical products and does not anticipate having the resources to distribute and broadly market any products that it may develop for indications such as Alzheimer’s disease and schizophrenia. The Company will therefore continue to seek commercial development arrangements with other pharmaceutical companies for its proposed products for those indications that require significant sales forces to effectively market. In entering into such arrangements, the Company may seek to retain the right to promote or co-promote products for certain of the Orphan Drug indications in North America. The Company’s worldwide licensing agreement with Organon (see Note 5 of Notes to Financial Statements) does not provide Cortex with co-promotional rights. With respect to Orphan Drugs, the Company may distribute and market such products directly. See “Risk Factors — We are at an early stage of development and we may not be able to successfully develop and commercialize our products and technologies” on page 21 for a discussion of certain risks related to the development and commercialization of the Company’s products.

Technology Rights

In 1993, Cortex entered an agreement with the Regents of the University of California, under which Cortex secured exclusive commercial rights to AMPA-receptor modulating technology and compounds (the AMPAKINE technology) for the treatment of deficits of memory and cognition. The relationship later was expanded to include additional agreements for other indications. The Company paid an initial license fee and is obligated to make additional payments, including license maintenance fees and patent expense reimbursements creditable against future royalties, over the course of initiating and conducting human clinical testing and obtaining regulatory approvals. When and if sales of licensed products commence, the Company will pay royalties on net sales. During the fiscal year ended June 30, 2003, Cortex amended the agreement with the Regents of the University of California to exclude the treatment of disease areas outside of the central nervous system that the Company would not have the resources nor the capability to develop in a timely manner.

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Patents and Proprietary Rights

The Company is aggressively pursuing patent protection of its technologies. Cortex owns or has exclusive rights (within its areas of product development) to approximately 50 issued or allowed U.S. and foreign patents and has a number of additional U.S. patent applications and their international counterparts pending.

Cortex has rights to over 36 composition of matter patents that cover hundreds of its compounds. These patents form the foundation of the Company’s business and the pharmaceutical industry in general. Additionally, Cortex is consistently filing new disclosures and patents for new structures and new uses.

In 1998, the Regents of the University of California (the “University”) received a U.S. patent that contained a broad claim for any AMPA-modulating compound to treat schizophrenia. Under the Company’s agreements with the University, Cortex has exclusive rights to AMPAKINE compounds for all applications covered by the University’s patent rights, other than endocrine modulation, and the treatment of sexual dysfunction in North and South America. Cortex’s rights are contingent upon it making certain minimum annual payments to the University, meeting certain milestones, and diligently seeking to commercialize the underlying technology.

In April 1999, a method of use patent issued in the U.S. that covers the Company’s AMPAKINE compounds — as well as compounds made by others — and describes the mechanism by which AMPAKINE compounds may effect the treatment of memory and cognition. The Company believes that the coverage from this patent extends to both neurological disorders such as Alzheimer’s disease as well as psychiatric conditions with cognitive disturbances including depression, obsessive compulsive disorder, attention deficit disorder, and phobic disorders. Similar method of use patents have issued to Cortex in Mexico, Australia and New Zealand. In November 2003, a similar patent was issued by the European Patent Office. These patents have issued to the University of California and rights to the patents are licensed exclusively to Cortex.

Under the rules of the European Patent Office, the patent that issued in November 2003 entered into a nine-month period during which oppositions to the issuance could be filed. Upon issuance of the patent, an opposition was filed by Eli Lilly and Company. During August 2004, GlaxoSmithKline also filed an opposition. Cortex, in cooperation with the University of California, plans to respond to these oppositions promptly. There is no timeframe available for a decision from the European Patent Office and such decision may be appealed by either Cortex or the party filing the opposition. As a result, the process to determine whether the oppositions filed for this patent will or will not prevail in Europe may take anywhere from six months to several years to resolve.

There is no assurance that patents, whether already issued or issuing in the future in connection with current or future patent applications, will afford effective protection against competitors with similar technology. There is also no assurance that any patents issued or licensed to Cortex will not be infringed upon or designed around by others. Further, since issuance of a patent does not guarantee the right to practice the claimed invention, there is no assurance that others will not obtain patents that the Company would then need to license or design around in order to practice its patented technologies, or that Cortex would be able to obtain licenses that might be required to practice these technologies due to patents of others on reasonable terms. Additionally, any unpatented manufacture, use or sale of the Company’s technology, processes or products may infringe on patents or proprietary rights of others, and the Company may be unable to obtain licenses or other rights to these other technologies that may be required for commercialization of the Company’s proposed products or processes.

Cortex relies to a certain extent upon unpatented proprietary technology and may determine in some cases that its interests would be better served by reliance on trade secrets or confidentiality agreements rather than patents. No assurance is made that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to or disclose such technology. In addition, there is no assurance that Cortex can meaningfully protect its rights in such unpatented proprietary technology or that others will not wrongfully obtain such technology.

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If Cortex is unable to obtain strong protection of its proprietary rights in its products or processes prior to or after obtaining regulatory clearance, whether through patents, trade secrets or otherwise, competitors may be able to market competing products by obtaining regulatory clearance through demonstration of equivalency to the Company’s products, without being required to conduct the same lengthy clinical tests conducted by the Company.

Government Regulation

In order to test, produce and market human therapeutic products in the U.S., mandatory procedures and safety standards established by the FDA must be satisfied. Obtaining FDA approval is a costly and time-consuming process. Cortex has initiated Phase I and early Phase II testing in the U.S. and Europe, primarily with the assistance of clinical collaborators and its corporate partners, Organon and Servier. Some clinical trials were and are performed in the U.S. under Notices of Claimed Investigational Exemption for a New Drug (“IND”) filed with the FDA by the Company’s clinical collaborators. Cortex filed an IND for the AMPAKINE CX516 in the name of the Company in the fall of 2000. Cortex intends to submit an IND for the AMPAKINE CX717 as soon as the data from the Phase I studies underway in the U.K. are available to add to the filing. It is Cortex’s intent that Organon, Servier or another pharmaceutical company partner or partners that the Company is seeking, will pursue other required regulatory approvals to conduct further clinical testing with AMPAKINE compounds that result from the respective collaborative research programs with Cortex. However, Cortex intends to file other IND’s for additional AMPAKINE compounds to facilitate the development of its Orphan Drug strategy.

Clinical trials are normally conducted in three phases. Phase I trials are concerned primarily with safety of the drug, involve fewer than 100 subjects, and may take from six months to over a year. Phase II trials normally involve a few hundred patients. Phase II trials are designed to demonstrate effectiveness and to determine optimal dosing in treating or diagnosing the disease or condition for which the drug is intended. Short-term side effects and risks in people whose health is impaired also may be examined. Phase III trials may involve up to several thousand patients who have the disease or condition for which the drug is intended, to approximate more closely the conditions of ordinary medical practice. Phase III trials also are designed to clarify the drug’s benefit-risk relationship, to uncover less common side effects and adverse reactions, and to generate information for proper labeling of the drug. The FDA receives reports on the progress of each phase of clinical testing, and may require the modification, suspension, or termination of clinical trials if an unwarranted risk is presented to patients. The FDA estimates that the clinical trial period of drug development can take up to ten years, and averages five years. With certain exceptions, once clinical testing is completed, the sponsor can submit a New Drug Application (“NDA”) for approval to market a drug. The FDA’s review of an NDA can also be lengthy.

Therapeutic products that may be developed and sold by the Company outside the U.S. will be subject to regulation by the various countries in which they are to be distributed. In addition, products manufactured in the U.S. that have not yet been cleared for domestic distribution will require FDA approval in order to be exported to foreign countries for distribution there.

There is no assurance that any required FDA or other governmental approval will be granted or, if granted, will not be withdrawn. Governmental regulation may substantially delay or prevent the marketing of the Company’s proposed products, or cause the Company to undertake additional procedures, which may be both costly and lengthy, and thereby furnish a competitive advantage to the competitors of the Company or its licensees.

Cortex plans to seek additional financing to support its development of selected AMPAKINE compounds for Orphan Drug indications. Without such financing, Cortex may be severely restricted in its overall development. The Company would be dependent upon its sub-licensees and would be unable to maintain its current core technical and management capabilities. Under such circumstances, the Company would be dependent upon entering into partnerships or other collaborative arrangements with third parties with the required resources to obtain the needed approvals. Along with its licensing agreements with

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Organon and Servier, Cortex intends to enter into license or other arrangements with other pharmaceutical companies under which those companies would conduct the required clinical trials and seek FDA approval for most or all of its proposed products. There is no assurance that Cortex will be able to enter into such arrangements on favorable terms, or at all, or that such arrangements will ultimately result in obtaining the necessary governmental approvals.

Competition

The pharmaceutical industry is characterized by rapidly evolving technology and intense competition. Many companies of all sizes, including both major pharmaceutical companies and specialized biotechnology companies, are engaged in activities similar to those of Cortex. A large number of drugs intended for the treatment of Alzheimer’s disease, MCI, schizophrenia, depression, ADHD and other neurological and psychiatric diseases and disorders are on the market or in the later stages of clinical testing. For example, approximately 15 drugs are in development in the U.S. for schizophrenia and over 25 drugs are under clinical investigation in the U.S. for the treatment of Alzheimer’s disease. Some of the Company’s competitors have substantially greater financial and other resources and larger research and development staffs. Larger pharmaceutical company competitors also have significant experience in preclinical testing, human clinical trials and regulatory approval procedures.

In addition, colleges, universities, governmental agencies and other public and private research organizations will continue to conduct research. These institutions are becoming more active in seeking patent protection and licensing arrangements to collect license fees, milestone payments and royalties in exchange for license rights to technology that they have developed, some of which may be directly competitive with that of the Company.

The Company expects technological developments in the neuropharmacology field to continue to occur at a rapid rate and expects that competition will remain intense as those advances continue. Based on the technical qualifications, expertise and reputations of its Scientific Directors, consultants and other key scientists, the Company believes that its operating strategy to develop AMPAKINE compounds for the treatment of selected Orphan Drug indications and to out-license the technology to larger pharmaceutical companies for major chronic indications is appropriate.

Product Liability Insurance

The clinical testing, manufacturing and marketing of the Company’s products may expose the Company to product liability claims, against which the Company maintains liability insurance. Although the Company has never been subject to a product liability claim, there is no assurance that such claims will not be brought in the future, that the coverage limits of the Company’s insurance policies will be adequate or that one or more successful claims brought against the Company would not have a material adverse effect upon the Company’s business, financial condition and results of operations.

Employees

As of June 30, 2004, Cortex had 18 full-time employees and two part-time employees and had engaged one part-time DVM-level and three part-time Ph.D.-level scientific consultants. One of the Ph.D.-level consultants to the Company is also an M.D. Of the 18 full-time employees, 13 were engaged in research and development, of which 7 were Ph.D.-level or equivalent, and 5 were engaged in management and administrative support. Shortly after June 30, 2004, Cortex added an M.D. to its staff as its Vice President of Clinical Development and Chief Medical Officer.

Cortex anticipates that it may make modest increases in its employee levels based upon the further development of the AMPAKINE CX717. However, the Company will continue to outsource a substantial amount of its research and development to qualified vendors. The Company also sponsors a

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substantial amount of research in academic laboratories, primarily at the University of California, Irvine and at Wake Forest University in North Carolina.

Risk Factors

In addition to the other matters set forth in this Annual Report on Form 10-K, our continuing operations and the price of our common stock are subject to the following risks:

Risks related to our business

We have a history of net losses; we expect to continue to incur net losses and we may never achieve or maintain profitability.

Since our formation on February 10, 1987 through June 30, 2004, we have generated only modest operating revenues and we have incurred net losses approximating $48,051,000. For the fiscal years ended June 30, 2004, 2003 and 2002, our net losses amounted to $5,994,000, $1,175,000 and $983,000, respectively. As of June 30, 2004, we had an accumulated deficit of approximately $50,083,000. We have not generated any revenue from product sales to date, and it is possible that we will never generate revenues from product sales in the future. Even if we do achieve significant revenues from product sales, we expect to incur significant operating losses over the next several years. As with other companies in the biotechnology industry, it is possible that we will never achieve profitable operations.

We will need additional capital in the future and, if it is not available on terms acceptable to us, or at all, we may need to scale back our research and development efforts and may be unable to continue our business operations.

We will require substantial additional funds to advance our research and development programs and to continue our operations, particularly if we decide to independently conduct later-stage clinical testing and apply for regulatory approval of any of our proposed products. Based on our current operating plan, including planned clinical trials and other product research and development costs, we estimate that our existing cash resources, including committed sources of funding from Servier, will be sufficient to meet our requirements through at least mid-calendar year 2006. However, we believe that we will require additional capital to fund on-going operations beyond that time. Additional funds may result from milestone payments related to our agreements with Organon and Servier, although there is no assurance that we will receive milestone payments from Organon or Servier within the desired timeframe, or at all.

Our cash requirements in the future may be significantly different from our current estimates and depend on many factors, including:

• the results of our clinical trials;

• the time and costs involved in obtaining regulatory approvals;

• the ability to obtain funding under contractual and licensing agreements;

• the costs involved in obtaining and enforcing patents or any litigation by third parties regarding intellectual property; and

• our success in entering into collaborative relationships with other parties.

To finance our future activities, we may seek funds through additional rounds of financing, including private or public equity or debt offerings and collaborative arrangements with corporate partners. We cannot say with any certainty that we will be able to obtain the additional needed funds on

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reasonable terms, or at all. The sale of additional equity or convertible debt securities could result in additional dilution to our stockholders. If we issued preferred equity or debt securities, these securities could have rights superior to holders of our common stock, and could contain covenants that will restrict our operations. We might have to obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to our technologies, product candidates or products that we otherwise would not relinquish. If adequate funds are not available, we could lose our key employees and might have to delay, scale back or eliminate one or more of our research and development programs, which would impair our future prospects. In addition, we may be unable to meet our research spending obligations under our existing licensing agreements and may be unable to continue our business operations.

Our products rely on licenses from the Regents of the University of California, and if we lose access to these technologies, our business would be substantially impaired.

Under our agreements with the Regents of the University of California, we have exclusive rights to AMPAKINE compounds for all applications for which the University has patent rights, other than endocrine modulation, and the treatment of sexual dysfunction in North and South America.

Our rights to the AMPAKINE compounds are secured by patents or patent applications owned wholly by the University or by the University as a co-owner with us. Our existing agreements with the University require the University to prepare, file, prosecute and maintain patent applications related to our licensed rights at our expense. Such agreements also require us to make certain minimum annual payments, meet certain milestones or diligently seek to commercialize the underlying technology.

Under our agreements, we are required to make minimum annual royalty payments approximating $70,000. Separately, we are required to spend a minimum of $750,000 per year to advance the AMPAKINE compounds during the three years ending in May 2006. At the end of May 2006, our spending requirements will decrease to $250,000 per year, and will continue at that level until we begin marketing an AMPAKINE compound.

The commercialization efforts in the agreements require us to initiate human clinical testing of an AMPAKINE compound, other than CX516, by July 2005, and to file for regulatory approval of an AMPAKINE compound during October 2007. Although we currently are in compliance with our obligations under the agreements, including minimum annual payments and diligence milestones, our failure to meet any of these requirements could allow the University to terminate that particular agreement. Management believes that it maintains a strong relationship with the University.

We are at an early stage of development and we may not be able to successfully develop and commercialize our products and technologies.

The development of AMPAKINE products is subject to the risks of failure commonly experienced in the development of products based upon innovative technologies and the expense and difficulty of obtaining approvals from regulatory agencies. Drug discovery and development is time consuming, expensive and unpredictable. On average, only one out of many thousands of chemical compounds discovered by researchers proves to be both medically effective and safe enough to become an approved medicine. In the fields that we target, approximately one in five compounds placed in clinical trials generally reaches the market. All of our proposed products are in the preclinical or early clinical stage of development and will require significant additional funding for research, development and clinical testing before we are able to submit them to any of the regulatory agencies for clearances for commercial use. Our AMPAKINE compound, CX516, has undergone considerable clinical trials, some of which are continuing. This compound has a short half-life and is weaker than our newer AMPAKINE compounds. We therefore have concluded that we will not further develop CX516, although we may be required to complete and report on some of the ongoing clinical trials on that compound. Such trials are being funded by third parties and do not involve financial commitments from Cortex.

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The process from discovery to development to regulatory approval can take several years and drug candidates can fail at any stage of the process. Late stage clinical trials often fail to replicate results achieved in earlier studies. Historically, in our industry more than half of all compounds in development failed during Phase II trials and 30% failed during Phase III trials. We cannot assure you that we will be able to complete successfully any of our research and development activities. Even if we do complete them, we may not be able to market successfully any of the products or be able to obtain the necessary regulatory approvals or assure that healthcare providers and payors will accept our products. We also face the risk that any or all of our products will not work as intended or that they will be unsafe, or that, even if they do work and are safe, that our products will be uneconomical to manufacture and market on a large scale. Due to the extended testing and regulatory review process required before we can obtain marketing clearance, we do not expect to be able to commercialize any therapeutic drug for several years, either directly or through our corporate partners or licensees.

A significant percentage of our revenues come from our agreements with Organon and Servier, and if either or both agreements were terminated, such revenues could be impaired.

Under the agreement with Organon that we entered in January 1999, the collaborative research phase ended in January 2001. Organon has primary responsibility for developing and commercializing AMPAKINE compounds for use in the treatment of schizophrenia and depression. Through June 30, 2004 we have received $8,000,000 in up-front and milestone payments and approximately $6,000,000 in research support payments. The agreement includes additional milestone payments, plus royalty payments on products sold, if any, on a worldwide basis. We do not anticipate that we will receive any milestone payments from Organon during the fiscal year ending June 30, 2005. Under the terms of the agreement, Organon has the right to terminate the agreement upon four-months’ prior notice. Such termination may have negative effects on our stock price and could impact our ability to achieve other licensing arrangements on acceptable terms, or at all.

Under the agreement with Servier that we entered into in October 2000, as amended to date, we share the research efforts. Servier has primary responsibility for developing and commercializing AMPAKINE compounds for use in the treatment of memory impairment associated with aging, and of neurodegenerative diseases such as Alzheimer’s disease. Through June 30, 2004, we have received an up-front payment of $5,000,000 and research support payments of approximately $10,900,000. Under the October 2000 agreement, as amended to date, we currently receive approximately $2,165,000 per year (subject to us providing agreed-upon levels of research) and Servier is obligated to continue this level of support until early December 2005. Under the October 2002 amendment, we currently receive an additional $2,000,000 per year, which Servier is obligated to continue until October 2004. The agreement includes milestone payments, plus royalty payments on product sales, if any, in licensed territories. We do not anticipate that we will receive any milestone payments from Servier during the fiscal year ending June 30, 2005. Under the terms of the agreement, Servier has the right to terminate the agreement in the case of a merger or acquisition involving us and a third party. Servier also has the right to terminate the agreement upon six-months’ prior notice at any time after the research phase of the collaboration. In addition, Servier has the right to terminate the related research and development in the event that we materially breach the agreement.

As described above, each of our agreements with Organon and Servier provides us with the opportunity to receive future milestone payments upon the achievement of certain milestones. In the event that all of the milestones set forth in such agreements are met, we estimate that we could collectively receive up to an additional aggregate of $30,000,000 in future milestone payments. However, we cannot assure you that we will be able to meet all or any of the specified milestones, in which case we would not receive the corresponding future milestone payments.

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We may not be able to enter into the strategic alliances necessary to fully develop and commercialize our products and technologies, and we will be dependent on our corporate partners if we do.

In addition to our agreements with Organon and Servier, we are seeking other pharmaceutical company partners to develop other major indications for the AMPAKINE compounds. These agreements would potentially provide us with additional funds in exchange for exclusive or non-exclusive license or other rights to the technologies and products that we are currently developing. Competition between biopharmaceutical companies for these types of arrangements is intense. Although we have been engaged in discussions with candidate companies for some time, we cannot give any assurance that these discussions will result in an agreement or agreements in a timely manner, or at all. Additionally, we cannot assure you that any resulting agreement will generate sufficient revenues to offset our operating expenses and longer-term funding requirements.

In connection with our efforts to secure corporate partners, we will seek to retain certain co-promotional rights to our proposed products. These co-promotional rights will allow us to market our products to selected medical specialists while our corporate partner markets our products to the general medical market. We cannot assure you that we will be able to enter into any partnering arrangements on this or any other basis. In addition, we cannot assure you that we, Organon, Servier or our prospective corporate partners, can successfully introduce our proposed products. We also face the risks that our products will be rejected by patients, health care providers or insurance companies, or that our products cannot be manufactured and marketed at prices that would permit us to operate profitably. Additionally, we plan to develop certain compounds for selected smaller indications referred to previously as Orphan Drugs. We may or may not be successful in getting the appropriate clinical results and obtaining approval to market our compounds for these indications in the U.S.

If we are unable to maintain our relationships with academic consultants and the University of California, Irvine, our business could suffer.

We depend upon our relationships with academic consultants, particularly Dr. Gary S. Lynch of the University of California, Irvine. Dr. Lynch plays a key role in guiding our research. In addition, we sponsor preclinical research in Dr. Lynch’s laboratories at the University of California, Irvine that is part of our product development and corporate partnering profile. If our relationship with Dr. Lynch or the University of California, Irvine, is disrupted, our AMPA- receptor research program could be adversely affected. The term of our consulting agreement with Dr. Lynch commenced in November 1987 and will continue until terminated by either party to the agreement upon at least 60 days’ prior written notice to the other party. Our agreements with our other consultants are generally also terminable by the consultant on short notice. We maintain a positive relationship with Dr. Lynch and continue to fund research related to understanding the molecular actions of the AMPAKINE compounds and the AMPA receptor in his laboratory.

Risks related to our industry

If we fail to secure adequate intellectual property protection, it could significantly harm our financial results and ability to compete.

Our success will depend, in part, on our ability to get patent protection for our products and processes in the U.S. and elsewhere. We have filed and intend to continue to file patent applications as we need them. However, additional patents that may issue from any of these applications may not be sufficiently broad to protect our technology. Also, any patents issued to us or licensed by us may be challenged by others, and if successful, such challenges may diminish our rights.

If we are unable to obtain sufficient protection of our proprietary rights in our products or processes prior to or after obtaining regulatory clearances, our competitors may be able to obtain regulatory clearance and market competing products by demonstrating the equivalency of their products

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to our products. If they are successful at demonstrating the equivalency between the products, our competitors would not have to conduct the same lengthy clinical tests that we have conducted.

We also rely on trade secrets and confidential information that we try to protect by entering into confidentiality agreements with other parties. Those confidentiality agreements may be breached, and our remedies may be insufficient to protect the confidential information. Further, our competitors may independently learn our trade secrets or develop similar or superior technologies. To the extent that our consultants, key employees or others apply technological information independently developed by them or by others to our projects, disputes may arise regarding the proprietary rights to such information. We cannot assure you that such disputes will be resolved in our favor.

We may be subject to potential product liability claims. One or more successful claims brought against us could materially impact our business and financial condition.

The clinical testing, manufacturing and marketing of our products may expose us to product liability claims. We maintain liability insurance with coverage limits of $10 million per occurrence and $10 million in the annual aggregate. We have never been subject to a product liability claim, and we require each patient in our clinical trials to sign an informed consent agreement that describes the risks related to the trials, but we cannot assure you that the coverage limits of our insurance policies will be adequate or that one or more successful claims brought against us would not have a material adverse effect on our business, financial condition and result of operations. Further, if one of our AMPAKINE compounds is approved by the FDA for marketing, we cannot assure you that adequate product liability insurance will be available, or if available, that it will be available at a reasonable cost. Any adverse outcome resulting from a product liability claim could have a material adverse effect on our business, financial condition and results of operations.

We face intense competition that could result in products that are superior to the products that we are developing.

Our business is characterized by intensive research efforts. Our competitors include many companies, research institutes and universities that are working in a number of pharmaceutical or biotechnology disciplines to develop therapeutic products similar to those we are currently investigating. For example, the Pharmaceutical Research and Manufacturers of America estimates that more than 100 pharmaceutical and biotechnology companies are conducting research in the field of neurological disorders, with over 25 drugs under clinical investigation in the U.S. for the treatment of Alzheimer’s disease. Virtually all of the major multinational pharmaceutical companies have active projects in these areas. Most of these competitors have substantially greater financial, technical, manufacturing, marketing, distribution and/or other resources than we do. In addition, many of our competitors have experience in performing human clinical trials of new or improved therapeutic products and obtaining approvals from the FDA and other regulatory agencies. We have no experience in conducting and managing later-stage clinical testing or in preparing applications necessary to obtain regulatory approvals. Accordingly, it is possible that our competitors may succeed in developing products that are safer or more effective than those that we are developing and may obtain FDA approvals for their products faster than we can. We expect that competition in this field will continue to intensify.

We may be unable to recruit and retain our senior management and other key technical personnel on whom we are dependent.

We are highly dependent upon key management and technical personnel and currently do not carry any insurance policies on such persons. In particular, we are highly dependent on our Chairman, President and Chief Executive Officer, Roger G. Stoll, Ph.D., and our Senior Vice President, Pharmaceutical Research, Gary A. Rogers, Ph.D., both of whom have entered into employment agreements with us. Competition for qualified employees among pharmaceutical and biotechnology companies is intense. The loss of any of our key management or technical personnel, or our inability to attract, retain and motivate the additional highly-skilled employees and consultants that our business

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requires, could substantially hurt our business and prospects. We cannot assure you that we will be able to retain our existing personnel or attract additional qualified employees when we need them.

The regulatory approval process is expensive, time consuming, uncertain and may prevent us from obtaining required approvals for the commercialization of some of our products.

The FDA and other similar agencies in foreign countries have substantial requirements for therapeutic products. Such requirements often involve lengthy and detailed laboratory, clinical and post-clinical testing procedures and are expensive to complete. It often takes companies many years to satisfy these requirements, depending on the complexity and novelty of the product. The review process is also extensive, which may delay the approval process even more. According to the Pharmaceutical Research and Manufacturers of America, historically the cost of developing a new pharmaceutical from discovery to approval was approximately $800 million, and this amount is expected to increase annually.

As of yet, we have not obtained any approvals to market our products. Further, we cannot assure you that the FDA or other regulatory agency will grant us approval for any of our products on a timely basis, if at all. Even if regulatory clearances are obtained, a marketed product is subject to continual review, and later discovery of previously unknown problems may result in restrictions on marketing or withdrawal of the product from the market.

Other risks

Our stock price may be volatile and our common stock could decline in value.

The market price of securities of life sciences companies in general has been very unpredictable. The range of sales prices of our common stock for fiscal years ended June 30, 2004 and June 30, 2003, as quoted on The American Stock Exchange, was $1.62 to $4.99 and $0.51 to $2.49, respectively. The following factors, in addition to factors that affect that market generally, could significantly impact our business, and the market price of our common stock could decline:

• competitors announcing technological innovations or new commercial products;

• competitors’ publicity regarding actual or potential products under development;

• regulatory developments in the U.S. and foreign countries;

• developments concerning proprietary rights, including patent litigation;

• public concern over the safety of therapeutic products and

• changes in healthcare reimbursement policies and healthcare regulations.

There is a large number of shares of common stock that may be sold, which may depress the market price of our stock.

If all outstanding warrants and options are exercised prior to their expiration, approximately 12.9 million additional shares of common stock could become freely tradable without restriction. Sales of substantial amounts of common stock in the public market could adversely affect the prevailing market price of our common stock.

Our charter document and shareholder rights plan may prevent or delay an attempt by our stockholders to replace or remove management.

Certain provisions of our restated certificate of incorporation, as amended, could make it more difficult for a third party to acquire control of our business, even if such change in control would be beneficial to our stockholders. Our restated certificate of incorporation, as amended, allows our Board of Directors to issue up to 549,500 shares of preferred stock without stockholder approval. Pursuant to this authority, in February 2002 our Board of Directors adopted a shareholder rights plan and declared a dividend of a right to purchase one one-thousandth of a share of preferred stock for each outstanding share of our common stock. The ability of our Board of Directors to issue additional preferred stock and

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our shareholder rights plan may have the effect of delaying or preventing an attempt by our stockholders to replace or remove existing directors and management.

Item 2. Properties

The Company leases approximately 32,000 square feet of office, research laboratory and expansion space in Irvine, California, under an operating lease that expires May 31, 2009. Current monthly rent on these facilities is approximately $32,000. The Company believes that this facility will be adequate for its research and development activities for at least the remainder of the lease term.

Item 3. Legal Proceedings

The Company is not a party to any material legal proceedings, nor has any material proceeding been terminated during the fourth quarter of the fiscal year ended June 30, 2004.

Item 4. Submission of Matters to a Vote of Security Holders

The Company did not submit any matter to a vote of security holders during the fourth quarter of the fiscal year ended June 30, 2004, through the solicitation of proxies or otherwise.

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

The Company’s common stock trades on The American Stock Exchange under the symbol, “COR.” The following table presents quarterly information on the high and low sales prices of the common stock for the fiscal years ended June 30, 2004 and 2003, as furnished by The American Stock Exchange.

	High		Low
Fiscal Year ended June 30, 2004
Fourth Quarter	$	2.92	$	2.15
Third Quarter		4.17		2.48
Second Quarter		4.34		2.50
First Quarter		4.99		1.62
Fiscal Year ended June 30, 2003
Fourth Quarter	$	2.49	$	0.70
Third Quarter		1.04		0.60
Second Quarter		0.95		0.56
First Quarter		1.50		0.51

As of June 30, 2004, there were 519 stockholders of record of the Company’s common stock, and approximately 10,200 beneficial owners. The high and low sales prices for the Company’s common stock on September 24, 2004, as reported by The American Stock Exchange, were $2.60 and $2.45, respectively.

The Company has never paid cash dividends on its common stock and does not anticipate paying such dividends in the foreseeable future. The payment of dividends, if any, will be determined by the Board of Directors in light of conditions then existing, including the Company’s financial condition and

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requirements, future prospects, restrictions in financing agreements, business conditions and other factors deemed relevant by the Board of Directors.

During the fiscal year ended June 30, 2004, in connection with the engagement of a consultant for investor relations purposes, the Company issued warrants to purchase an aggregate of 48,000 shares of the Company’s common stock to two investors. The warrants have a weighted average exercise price of $2.95 per share and a five-year term.

The sales and issuances of each of the foregoing were made in reliance upon the exemption from the registration provisions of the Securities Act of 1933, as amended, set forth in Section 4(2) thereof as transactions by an issuer not involving any public offering. The agreements executed in connection with the issuance of the warrants contain representations to support the Company’s reasonable belief that the purchasers are familiar with or have access to information concerning the operations and financial condition of the Company, and the purchasers are acquiring the securities for investment and not with a view to the distribution thereof. At the time of their issuance, the warrants were deemed to be restricted securities for purposes of the Securities Act of 1933, as amended, and the warrants bear legends to that effect.

During the fourth quarter of the fiscal year ended June 30, 2004, the Company did not repurchase any of its securities.

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Item 6. Selected Financial Data

We have derived the selected financial data presented below from our audited financial statements and notes related thereto. The information set forth below is not necessarily indicative of the results of future operations. You should read the selected financial data together with the audited financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report on Form 10-K.

	Years ended June 30,
	2004			2003			2002			2001			2000
	(In thousands, except per share data)
INCOME STATEMENT DATA
Revenues:
Research and license revenue	$	6,792		$	4,765		$	5,777		$	4,264		$	5,369
Grant revenue		181			467			655			179			139
Total revenues		6,973			5,232			6,432			4,443			5,508
Operating expenses:
Research and development		6,116			3,724			4,918			4,254			3,896
General and administrative		2,291			2,480			2,389			2,183			1,782
Non-cash stock compensation charges		1,106			217			180			404			33
Total costs and expenses		9,513			6,421			7,487			6,841			5,711
Loss from operations		(2,540	)		(1,189	)		(1,055	)		(2,398	)		(203	)
Change in fair value of common stock warrants		(3,603	)		—			—			—			—
Loss before cumulative effect of change in accounting principle		(5,994	)		(1,175	)		(983	)		(2,143	)		(197	)
Cumulative effect of change in accounting principle(1)		—			—			—			(530	)		—
Net loss before preferred stock dividends		(5,994	)		(1,175	)		(983	)		(2,673	)		(197	)
Net loss applicable to common stock		(5,994	)		(1,175	)		(983	)		(2,663	)		(200	)
Basic and diluted net loss per share		(0.26	)		(0.07	)		(0.06	)		(0.16	)		(0.01	)
Shares used in basic and diluted calculation		23,182			16,868			16,712			16,603			15,796
BALANCE SHEET DATA
Cash and equivalents	$	9,977		$	1,125		$	1,849		$	4,558		$	2,705
Marketable securities		12,211			—			—			—			—
Working capital		20,567			(1,505	)		(349	)		1,984			1,921
Total assets		22,891			2,179			2,981			5,540			3,488
Unearned revenue, net of current portion, and other long-term		381			247			727			2,394			—
Total stockholders’ (deficit) equity		20,489			(1,420	)		(592	)		120			2,353

⁽¹⁾ During the fourth quarter of the fiscal year ended June 30, 2001, we adopted, as required, the SEC’s Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements,” effective July 1, 2000 (see Note 1 in the notes to the financial statements).

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the audited financial statements and notes related thereto appearing elsewhere herein.

Critical Accounting Policies and Management Estimates

The Securities and Exchange Commission defines critical accounting policies as those that are, in management’s view, most important to the portrayal of the company’s financial condition and results of operations and most demanding of their judgment. Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities.

We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. This process forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition

Our revenue recognition policies are in accordance with the Securities and Exchange Commission’s Staff Accounting Bulletin No. 101, “Revenue Recognition” (“SAB 101”). SAB 101 provides guidance in applying accounting principles generally accepted in the United States to revenue recognition issues, and specifically addresses revenue recognition for up-front, nonrefundable fees received in connection with research collaboration arrangements.

In accordance with SAB 101, revenues from up-front fees from our collaborators are deferred and recorded over the term that we provide ongoing services. Similarly, research support payments are recorded as revenue as we perform the research under the related agreements. We record grant revenues as we incur expenses related to the grant projects. All amounts received under collaborative research agreements or research grants are nonrefundable, regardless of the success of the underlying research.

Revenues from milestone payments are recognized when earned, as evidenced by written acknowledgment from our collaborator, provided that (i) the milestone event is substantive and its achievement was not reasonably assured at the inception of the agreement, and (ii) our performance obligations after the milestone achievement will continue to be funded by our collaborator at a comparable level to that before the milestone achievement. If both of these criteria are not met, the milestone payment is recognized over the remaining minimum period of our performance obligations under the agreement.

In November 2002, the Emerging Issues Task Force (“EITF”) of the Financial Accounting Standards Board reached consensus on Issue 00-21. EITF Issue 00-21 addresses the accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. Specifically, Issue 00-21 requires the recognition of revenue from milestone payments over the remaining minimum period of performance obligations. As required, we will apply the principles of Issue 00-21 to multiple element agreements that we may enter into after July 1, 2003.

The above listing is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management’s judgment in their application. There are also areas in which management’s judgment in selecting any available alternative would not

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produce a materially different result. See our audited financial statements and notes thereto which begin on page F-1 of this Annual Report on Form 10-K, which contain accounting policies and other disclosures required by accounting principles generally accepted in the United States.

Results of Operations

General

In October 2000, the Company entered into a research collaboration and an exclusive license agreement with Les Laboratoires Servier (“Servier”). The agreement will allow Servier to develop and commercialize the Company’s AMPAKINE^® technology for the treatment of declines in cognitive performance associated with aging and neurodegenerative diseases. The indications covered include, but are not limited to, Alzheimer’s disease, mild cognitive impairment, sexual dysfunction, and the dementia associated with multiple sclerosis and Amyotrophic Lateral Sclerosis.

The agreement with Servier, as amended in December 2003, includes a nonrefundable up-front fee of $5,000,000 and research support payments of $2,025,000 per year through early December 2005 (subject to Cortex providing agreed-upon levels of research personnel). The amount of research support is subject to annual adjustment based upon the increase in the U.S. Department of Labor’s Consumer Price Index. Currently, Cortex receives research support of approximately $2,165,000 per year. The agreement also includes potential milestone payments, plus royalty payments on sales in licensed territories.

In October 2002, Servier agreed to provide Cortex with $4,000,000 of additional research support, in exchange for rights to our AMPAKINE compounds for the potential treatment of anxiety disorders, in Servier’s licensed territories. The $4,000,000 will be paid in quarterly installments of $500,000 over a two-year period, beginning in October 2002.

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 agreement will allow Organon to develop and commercialize the Company’s proprietary AMPAKINE technology for the treatment of schizophrenia and depression. In connection with the agreement, the Company received a $2,000,000 up-front licensing payment and research support payments of approximately $3,000,000 per year for two years.

The agreement with Organon also includes milestone payments based upon clinical development, plus royalty payments on worldwide sales. Cortex achieved its first milestone under the agreement in May 2000, when Organon selected a candidate compound to pursue in Phase I clinical testing as a treatment for schizophrenia. Achieving this milestone triggered a $2,000,000 payment from Organon, which Cortex recorded as revenue upon achievement.

Cortex achieved its second milestone under the agreement in September 2001, when Organon elected to continue development of the selected compound in Phase II clinical testing. Achieving the second milestone triggered another $2,000,000 payment from Organon, with the related revenue recorded upon achievement of the milestone.

In December 2003, Organon paid Cortex an additional $2,000,000 in order to retain its rights to the AMPAKINE technology in the field of depression. Cortex recorded the revenue related to this milestone upon its achievement.

From inception (February 10, 1987) through June 30, 2004, the Company sustained losses aggregating $48,051,000. Due to projected fluctuations in funding, continuing losses are likely 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 collaborations with Servier and Organon, or

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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 Servier and Organon agreements 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 Servier, Organon, or its other prospective partners to attain sustained profitable operations from royalties or other product-based revenues.

The Company believes that inflation and changing prices have not had a material impact on its ongoing operations to date.

Fiscal Years ended June 30, 2004 and 2003

For the year ended June 30, 2004, the Company’s net loss of $5,994,000 compared to a net loss of $1,175,000 for the prior year, with the increase primarily attributable to non-cash charges of $3,603,000 recorded for warrants issued in the Company’s private placements of its common stock, as discussed more fully below.

Revenues for the year ended June 30, 2004 increased from $5,232,000 to $6,973,000, or by 33% compared to the prior year, primarily due to a $2,000,000 milestone payment received from Organon. The related agreement required this payment in order for Organon to retain its rights to the Company’s AMPAKINE technology in the field of depression.

Research and development expenses for the year ended June 30, 2004 increased from $3,724,000 to $6,116,000, or by 64% compared to the prior fiscal year. The increase mostly resulted from charges incurred to develop the second generation AMPAKINE compound, CX717, which entered Phase I human clinical trials in May 2004. The increase for the current year also reflected increased personnel-related expenses, including recruiting fees to expand the Company’s clinical staff. Additionally, increased research and development expenses included technology access payments related to the Organon milestone. Cortex licenses the AMPAKINE technology from the University of California. Under the related agreement, Cortex is required to remit a portion of certain remuneration received in connection with sublicensing agreements. In late December 2003, when Cortex achieved its milestone under its agreement with Organon, a technology access payment to the University of California became due and was paid by the Company shortly thereafter.

General and administrative expenses for the year ended June 30, 2004 decreased from $2,480,000 to $2,291,000, or by 8% compared to the corresponding prior year period. The decrease resulted from reduced salary-related expenses due to severance costs in the prior year period to the Company’s former President and Chief Executive Officer.

Increased non-cash stock compensation charges primarily included the estimated fair value for the vesting of warrants issued earlier with a professional services agreement.

Other expenses for the year ended June 30, 2004 represent non-cash charges for the change in the estimated value of warrants issued in connection with the private equity financing in August 2003, as explained more fully in Note 3 to the Financial Statements.

Net interest income for the year ended June 30, 2004 increased from $15,000 to $149,000, or by 893% compared to the prior year, due to the cash available for investing from the Company’s two private placements during the year.

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Fiscal Years ended June 30, 2003 and 2002

For the year ended June 30, 2003, the Company’s net loss of $1,175,000 compared to a net loss of $983,000 for the prior year, with the increased net loss primarily attributable to the timing of revenues from the Company’s collaborative agreements.

Revenues for the year ended June 30, 2003 decreased from $6,433,000 to $5,232,000, or by 19% compared to the prior year, with a net increase in research and licensing revenue from the agreement with Servier of $1,036,000, but a decrease in revenues from the agreement with Organon of $2,000,000. For the year ended June 30, 2003, revenues included $1,500,000 related to the amendment to the Servier agreement signed in October 2002. That amendment granted Servier rights to the Company’s AMPAKINE technology in the field of anxiety disorders, in Servier’s licensed territories. In exchange for those rights, Cortex will receive $4,000,000 of research funding from Servier, paid as $500,000 per quarter over a two-year period.

With the amendment to the agreement, Cortex extended the period that it amortizes revenues from Servier’s earlier up-front fee. Under the original October 2000 agreement, Cortex received a $5,000,000 licensing fee from Servier, which Cortex was recording as revenue over that agreement’s three-year collaborative research phase. After amending the agreement in October 2002, Cortex began amortizing the remaining unearned licensing revenues over the two-year period of the extended research support. Compared to the prior year, licensing revenues for the year ended June 30, 2003 decreased by approximately $500,000 as a result of this change.

Revenues for fiscal year 2002 included a $2,000,000 milestone payment from the agreement with Organon, the Company’s other collaborative partner. Organon triggered this milestone in September 2001 when it elected to continue its development of an AMPAKINE compound by entering Phase II studies for schizophrenia. Cortex recorded the revenue from this milestone upon achievement as the Company has no ongoing obligations under the related agreement.

Research and development expenses for the year ended June 30, 2003 decreased to $3,724,000, or by 24% compared to the prior fiscal year. The decrease resulted from charges incurred in the prior year for the Phase II clinical study in MCI being conducted with Servier. In connection with the MCI study, in January 2002 the Company sponsored a meeting of the clinical investigators participating in the trial. Nearly all other costs for this study were borne by Servier. The decrease for the current year also reflected decreased personnel-related expenses of $407,000 from comparatively lower staffing levels and a resultant decrease of $100,000 in spending for animals and laboratory supplies. In addition, prior year research and development expenses included technology access payments related to the Organon milestone. In September 2001, when Cortex achieved its milestone under its agreement with Organon, a technology access payment to the University of California became due.

General and administrative expenses for the year ended June 30, 2003 of $2,480,000 were materially consistent with the prior year.

Net interest income for the year ended June 30, 2003 decreased to $15,000, or by 80% compared to the prior year, due to a decrease in cash available for investing.

Liquidity and Capital Resources

Under the agreement signed with Servier in October 2000 and amended, as of June 30, 2004 Cortex has received research and licensing payments approximating $15,913,000. Of this amount, Cortex received $2,957,000 during the year ended June 30, 2004. The October 2000 agreement, as amended, provides research support of approximately $2,165,000 per year through early December 2005, subject to annual adjustment based on the U.S. Department of Labor’s Consumer Price Index. Beginning in October 2002,

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Servier has agreed to provide an additional $4,000,000 of research support to Cortex, to be paid in quarterly installments of $500,000 over a two-year period. The agreement also includes milestone payments based upon successful clinical development and royalties on sales in licensed territories.

Research and licensing payments received in connection with the agreement with Organon totaled $13,880,000 through June 30, 2004. Of this amount, Cortex received $2,000,000 during the year ended June 30, 2004, representing the third milestone from Organon. The related agreement required the milestone payment in order for Organon to retain its rights to the Company’s AMPAKINE technology in the field of depression. Under the terms of the agreement, Cortex may receive additional milestone payments based on clinical development of the licensed technology and ultimately, royalties on worldwide sales.

In August 2003, the Company completed a private placement to 22 accredited investors of an aggregate of 3,333,334 shares of its common stock at $1.50 per share and five-year warrants to purchase up to an additional aggregate of 3,333,334 shares at an exercise price of $2.55 per share. The Company received approximately $4,500,000 in net proceeds from the private placement. The warrants are subject to a call right in favor of the Company to the extent that the closing price of the Company’s common stock exceeds $6.00 per share for any thirteen consecutive trading day period following December 8, 2005. In January 2004, the Company received proceeds of approximately $870,000 from the exercise of warrants issued in connection with this private placement. If the remaining warrants are fully exercised, of which there can be no assurance, these warrants would provide approximately $7,630,000 of additional capital.

In January 2004, the Company completed a private placement of an aggregate of 6,909,091 shares of its common stock at $2.75 per share and five-year warrants to purchase up to an additional aggregate of 4,490,910 shares at an exercise price of $3.25 per share. The Company received approximately $17,500,000 in net proceeds from the private placement. The warrants are subject to a call right in favor of the Company to the extent that the closing price of the Company’s common stock exceeds $7.50 per share for any 13 consecutive trading day period following March 18, 2005. If the warrants are fully exercised, of which there can be no assurance, these warrants would provide approximately $14,600,000 of additional capital.

Cash Proceeds

As of June 30, 2004 the Company had cash, cash equivalents and marketable securities totaling $22,188,000 and working capital of $20,567,000. As of June 30, 2003, the Company had cash and cash equivalents of $1,125,000 and a working capital deficit of $1,505,000. The increases in cash and working capital reflect approximately $22,000,000 of net proceeds from the private placements of the Company’s common stock and warrants in August 2003 and January 2004.

Commitments

The Company leases approximately 32,000 square feet of research laboratory, office and expansion space under an operating lease that expires May 31, 2009. The commitments under the lease agreement for the years ending June 30, 2005, 2006, 2007, 2008 and 2009 are $435,000, $459,000, $478,000, $498,000 and $472,000, respectively. From inception (February 10, 1987) through June 30, 2004, expenditures for furniture, equipment and leasehold improvements aggregated $2,698,000.

The Company is committed to nearly $1,350,000 for sponsored research to academic institutions, of which $787,000 is payable over the next 12 months. Remaining Cortex commitments for the Phase I clinical study for CX717 approximate $2,300,000, all of which is payable within the next 12 months.

In June 2000, the Company received $247,300 from the Institute, which will partially offset the Company’s costs for the testing in patients with MCI. Given that Cortex committed to use the funding

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from the Institute solely for clinical trials, the Company recorded the amounts received as restricted cash in its balance sheet. Provided that Cortex complies with the conditions of the funding agreement, repayment of the advance shall not be required unless Cortex enters an AMPAKINE compound into Phase III clinical trials for Alzheimer’s disease. Upon such potential clinical trials, repayment would include interest computed at a rate equal to one-half of the prime lending rate. In lieu of cash, in the event of repayment the Institute may elect to receive the balance of outstanding principal and accrued interest as shares of Cortex common stock. The conversion price for such form of repayment shall initially equal $4.50 per share, subject to adjustment under certain circumstances.

The following table sets forth the Company’s contractual obligations as of June 30, 2004:

Contractual Obligations	Payments Due by Period
	Total		Less then 1 Year		1-3 Years		3-5 Years		More than 5 Years
Operating Lease Obligations	$	2,342,000	$	435,000	$	937,000	$	970,000	$	—
Other Long-Term Liabilities Reflected on the Company’s Balance Sheet under GAAP1		—		—		—		—		—
Other Contractual Obligations		4,627,000		3,204,000		703,000		140,000		580,000
Total	$	6,969,000	$	3,639,000	$	1,640,000	$	1,110,000	$	580,000

¹ These liabilities represent the Company’s unearned licensing revenues from its $5,000,000 non-refundable, upfront payment that it received from Servier in October 2000. These unearned revenues are amortized as revenue ratably over the research phase of the related agreement, which began in December 2000 and ends in December 2005 (when the related revenue will be fully earned). The liabilities do not represent a payment obligation of Cortex, but rather an obligation to provide committed services.

Staffing

As of June 30, 2004, Cortex had 20 employees. Cortex anticipates a modest increase in the number of its full-time employees within the coming year. The Company expects that it will require modest investments in plant and equipment within the same timeframe.

Outlook

Cortex anticipates that its cash and cash equivalents, marketable securities and scheduled research support payments from its agreements with Servier will be sufficient to satisfy the Company’s capital requirements through at least mid-calendar year 2006. Additional funds will be required to continue operations beyond that time. Cortex may receive additional milestone payments from the Organon and Servier agreements, but there is no assurance that the Company will receive such milestone payments within the desired timeframe, or at all. See “Risk Factors — We will need additional capital in the future and, if it is not available on terms acceptable to us, or at all, we may need to scale back our research and development efforts and may be unable to continue our business operations.”

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In order to provide for both its longer-term spending requirements, the Company is presently seeking collaborative or other arrangements with larger pharmaceutical companies. Under these agreements, it is intended that such companies would provide additional capital to the Company in exchange for exclusive or non-exclusive license or other rights to certain of the technologies and products 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.

Because there is no assurance that the Company will secure additional corporate partnerships, the Company may raise additional capital through the sale of debt or equity securities. 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 stockholders may result.

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 unsafe, 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 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. See “Business — Risk Factors.”

Off-Balance Sheet Arrangements

The Company does not currently have any off-balance sheet arrangements within the meaning of Item 303(a)(4) of Regulation S-K.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to certain market risks associated with interest rate fluctuations on its marketable securities and borrowing arrangement. All investments in marketable securities are entered into for purposes other than trading. The Company is not subject to risks from currency rate fluctuations as it does not typically conduct transactions in foreign currencies. In addition, the Company does not utilize hedging contracts or similar instruments.

The Company’s exposure to interest rate risk arises from financial instruments entered into in the normal course of business. Certain of the Company’s financial instruments are fixed rate, short-term investments in government and corporate notes and bonds, which are available for sale (and have been marked to market in the accompanying financial statements). Changes in interest rates generally affect the fair value of the investments, however, because these financial instruments are considered “available for sale,” all such changes are reflected in the financial statements in the period affected. The Company manages interest rate risk on its investment portfolio by matching scheduled investment maturities with its cash requirements. As of June 30, 2004, the Company’s investment portfolio had a carrying amount of approximately $12,320,000. If market interest rates were to increase immediately and uniformly by 10%

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from levels as of June 30, 2004, the resulting decline in the fair value of fixed rate bonds held within the portfolio would not be material to the Company’s financial position, results of operations and cash flows.

The Company’s borrowing consists solely of its advance from the Institute, which is subject to potential repayment in the event that Cortex enters an AMPAKINE compound into Phase III clinical testing as a potential treatment for Alzheimer’s disease. Potential repayment would include interest accruing at a discount to the prime lending rate. Changes in interest rates generally affect the fair value of such debt, but, based upon historical activity, such changes are not expected to have a material impact on earnings or cash flows. As of June 30, 2004, the principal and accrued interest of the advance amounted to $275,112.

Item 8. Financial Statements and Supplementary Data

The financial statements of the Company and other information required by this item are set forth herein in a separate section beginning with the Index to Financial Statements on page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s “disclosure controls and procedures” as of the end of the period covered by report, pursuant to Rules 13a-15(b) and 15d-15(b) under the Exchange Act. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures, as of the end of the period covered by this report, were effective in timely alerting them to material information relating to the Company required to be included in the Company’s periodic SEC filings.

There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13(a)-15(f) and 15(d)-15(f) under the Exchange Act) during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information

Not Applicable.

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PART III

Item 10. Directors and Executive Officers of the Registrant

The sections entitled “Nominees for Director,” “Executive Officers,” “Scientific Directors and Consultants,” “Audit Committee” and “Compliance with Section 16(a) of the Securities Exchange Act of 1934” included in the Company’s Proxy Statement for its 2004 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission on or before October 28, 2004, are incorporated herein by reference.

The Company has adopted a Code of Business Conduct and Ethics, which covers all directors and employees, including its principal executive and financial officers. Any amendment or waiver to its Code of Business Conduct and Ethics that applies to its directors or executive officers will be posted on its website at www.cortexpharm.com or in a report filed with the Securities and Exchange Commission on Form 8-K. A copy of its Code of Business Conduct and Ethics is available free of charge upon written request to its Corporate Secretary at 15241 Barranca Parkway, Irvine, California 92618.

Item 11. Executive Compensation

The sections entitled “Executive Compensation,” “Option Matters,” “Employment and Consulting Agreements,” “Compensation Committee Interlocks and Insider Participation” and “Director Compensation” included in the Company’s Proxy Statement for its 2004 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission on or before October 28, 2004, are incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The section entitled “Principal Stockholders” included in the Company’s Proxy Statement for its 2004 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission on or before October 28, 2004, is incorporated herein by reference.

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EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth information regarding outstanding options, warrants and rights and shares reserved for future issuance under the Company’s existing equity compensation plans as of June 30, 2004. The Company’s only stockholder approved equity compensation plan consists of the 1996 Stock Incentive Plan. The Company does not have any non-stockholder approved equity compensation plans.

Plan Category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights	(b) Weighted-average exercise price of outstanding options, warrants and rights		(c) Number of securities remaining available for issuance under equity compensation plans (excluding securities reflected in column (a)) (1)
Equity compensation plans approved by security holders	4,789,082	$	1.77	3,428,096
Equity compensation plans not approved by security holders	—		—	—
Total	4,789,082	$	1.77	3,428,096

⁽¹⁾ The Company’s only equity compensation plan, the 1996 Stock Incentive Plan, provides that on the last day of each fiscal year of the Company, a number of shares equal to twenty percent (20%) of the increase in the number of shares of Common Stock outstanding since the last day of the previous fiscal year (except in the case of fiscal year ending June 30, 1997, in which case the added shares of Common Stock shall equal twenty percent (20%) of the increase in the number of shares of Common Stock outstanding since October 25, 1996) shall be added to the aggregate number of shares authorized for issuance under the 1996 Stock Incentive Plan. The foregoing table takes into account all adjustments through June 30, 2004.

Item 13. Certain Relationships and Related Transactions

The section entitled “Certain Transactions” included in the Company’s Proxy Statement for its 2004 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission on or before October 28, 2004, is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The section entitled “Ratification of Appointment of Independent Auditors” included in the Company’s Proxy Statement for its 2004 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission on or before October 28, 2004, is incorporated herein by reference.

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PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) List of documents filed as part of this report:

(1) Financial Statements

Reference is made to the Index to Financial Statements on page F-1, where these documents are listed.

(2) Financial Statement Schedules

The financial statement schedules have been omitted because the required information is not applicable, or not present in amounts sufficient to require submission of the schedules, or because the information is included in the financial statements or notes thereto.

(3) Exhibits

See (c) below.

(b) Reports on Form 8-K during the fourth quarter:

The Company furnished the press release announcing its financial results for the fiscal quarter ended March 31, 2004 to the Securities and Exchange Commission in a Report on Form 8-K dated May 10, 2004.

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(c) Exhibits

Exhibit Number	Description
3.1	Restated Certificate of Incorporation dated April 11, 1989, as amended by Certificate of Amendment on June 27, 1989, by Certificate of Designation filed April 29, 1991, by Certificate of Correction filed May 1, 1991, by Certificate of Amendment of Certificate of Designation filed June 13, 1991, by Certificate of Amendment of Certificate of Incorporation filed November 12, 1992, by Certificate of Amendment of Restated Certificate of Incorporation filed January 11, 1995, by Certificate of Designation filed December 8, 1995, by Certificate of Designation filed October 15, 1996, and by Certificate of Designation filed June 4, 1997, by Certificate of Amendment of Restated Certificate of Incorporation filed December 21, 1998, by Certificate of Designation filed February 11, 2002, incorporated by reference to Exhibit 3.1 of the Amendment No. 1 to Registration Statement on Form 8-A, No.001-16467, filed February 15, 2002, as further amended by Certificate of Amendment of Restated Certificate of Incorporation filed December 15, 2003, incorporated by reference to Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q filed February 12, 2004.
3.2	By-Laws of the Company, as adopted March 4, 1987, and amended on October 8, 1996, incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-KSB filed October 15, 1996.
4.1	Rights Agreement, dated as of February 8, 2002, between the Company and American Stock Transfer & Trust Company, which includes as Exhibit A thereto a form of Certificate of Designation for the Series A Junior Participating Preferred Stock, as Exhibit B thereto the Form of Rights Certificate and as Exhibit C thereto a Summary of Terms of Stockholder Rights Plan, incorporated by reference to Exhibit 4.2 to the Company’s Amendment No. 1 to Registration Statement on Form 8-A, No. 001-16467, filed February 15, 2002.
10.2	Consulting Agreement, dated October 30, 1987, between the Company and Carl W. Cotman, Ph.D. *
10.3	Consulting Agreement, dated as October 30, 1987, between the Company and Gary S. Lynch, Ph.D. *
10.19	License Agreement dated March 27, 1991 between the Company and the Regents of the University of California, incorporated by reference to Exhibit 10.19 of the Company’s Amendment on Form 8 filed November 27, 1991 to the Company’s Annual Report on Form 10-KSB filed September 30, 1991. (Portions of this Exhibit are omitted and were filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 under the Securities Exchange Act of 1934).
10.31	License Agreement dated June 25, 1993, as amended May 28, 2003, between the Company and the Regents of the University of California, incorporated by reference to the same numbered exhibit to the Company’s Quarterly Report on Form 10-Q filed February 12, 2004. (Portions of this Exhibit are omitted and were filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934).
10.44	Lease Agreement, dated January 31, 1994, for the Company’s facilities in Irvine, California, incorporated by reference to Exhibit 10.44 of the Company’s Quarterly Report on Form 10-QSB filed May 16, 1994.
10.49	Settlement Agreement between the Company and Alkermes, Inc., dated October 5, 1995, incorporated by reference to the same numbered Exhibit to the Company’s Annual Report on Form 10-KSB filed October 13, 1995. (Portions of this Exhibit are omitted and were filed separately with the Secretary of the Commission pursuant to the Company’s Application requesting confidential treatment under Rule 406 of the Securities Act of 1933).
10.60	Amended and Restated 1996 Stock Incentive Plan, incorporated by reference to the same numbered exhibit to the Company’s Quarterly Report on Form 10-Q as filed on November 14, 2002.
10.64	Research and Collaboration and License Agreement between the Company and N.V. Organon, dated January 13, 1999, incorporated by reference to Exhibit 10.64 of the Company’s Quarterly Report on Form 10-QSB as filed on February 16, 1999. (Portions of this Exhibit were omitted and filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.)
10.65	Amendment No. 1 to the Lease Agreement for the Company’s facilities in Irvine, California, dated February 1, 1999, incorporated by reference to the same number Exhibit to the Company’s Annual Report on Form 10-KSB filed September 28, 1999.

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Exhibit Number	Description
10.67	Collaborative Research, Joint Clinical Research and Licensing Agreements with Les Laboratoires Servier dated October 13, 2000, incorporated by reference to the same numbered Exhibit to the Company’s Quarterly Report on Form 10-QSB filed November 14, 2000. (Portions of this Exhibit were omitted and filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Act of 1934).
10.69	Employment agreement dated May 17, 2000, between the Company and James H. Coleman, incorporated by reference to the same numbered Exhibit to the Company’s Quarterly Report on Form 10-QSB filed February 12, 2001.
10.70	Severance agreement dated October 26, 2000, between the Company and Maria S. Messinger, incorporated by reference to the same numbered Exhibit to the Company’s Quarterly Report on Form 10-QSB filed February 12, 2001.
10.71	Employment agreement dated June 5, 1995, between the Company and Gary A. Rogers, Ph.D., incorporated by reference to the same numbered exhibit to the Company’s Annual Report on Form 10-K filed October 15, 2002.
10.73	Amendment dated October 3, 2002 to the Collaboration Research Agreement with Les Laboratoires Servier dated October 13, 2000, incorporated by reference to the same numbered exhibit to the Company’s Annual Report on Form 10-K filed October 15, 2002.
10.74	Employment agreement dated October 29, 2002 between the Company and Roger G. Stoll, Ph.D., incorporated by reference to the same numbered exhibit to the Company’s Quarterly Report on Form 10-Q as filed on November 14, 2002.
10.75	Securities Purchase Agreement dated August 21, 2003, by and among Cortex Pharmaceuticals, Inc. and the investors named therein, including the Registration Rights Agreement attached as Exhibit A thereto and a form of Common Stock Purchase Warrant attached as Exhibit C thereto, incorporated by reference to the same numbered exhibit to the Company’s Report on Form 8-K filed August 22, 2003.
10.76	Amendment dated April 8, 2003 to the employment agreement dated October 29, 2002 between the Company and Roger G. Stoll, Ph.D., incorporated by reference to the same numbered exhibit to the Company’s Annual Report on Form 10-K filed September 19, 2003.
10.77	Amendment dated December 16, 2003 to the Collaboration Research Agreement with Les Laboratoires Servier dated October 13, 2000, incorporated by reference to the same numbered exhibit to the Company’s Quarterly Report on Form 10-Q filed February 12, 2004. (Portions of this Exhibit are omitted and were filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934).
10.78	Securities Purchase Agreement dated January 7, 2004, by and among Cortex Pharmaceuticals, Inc. and the investors named therein, including the Registration Rights Agreement attached as Exhibit A thereto and a form of Common Stock Purchase Warrant attached as Exhibit C thereto, incorporated by reference to Exhibit 10.75 to the Company’s Report on Form 8-K filed January 9, 2004.
10.79	Amendment No. 2 to the Lease Agreement for the Company’s facilities in Irvine, California, dated March 9, 2004.
10.80	Form of Incentive/Non-qualified Stock Option Agreement under the Company’s Amended and Restated 1996 Stock Incentive Plan.
10.81	Form of Restricted Stock Award Agreement under the Company’s Amended and Restated 1996 Stock Incentive Plan.
10.82	Amendment dated January 1, 2004 to the employment agreement dated May 17, 2000 between the Company and James H. Coleman.
10.83	Amendment dated January 1, 2004 to the employment agreement dated June 5, 1995 between the Company and Gary A. Rogers, Ph.D.
21	Subsidiaries of the Registrant, incorporated by reference to the same numbered Exhibit to the Company’s Annual Report on Form 10-KSB filed October 13, 2000.
23.1	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
24	Power of Attorney (see page S-1).
31.1	Certification by Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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Exhibit Number	Description
32	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Incorporated by reference to the same numbered exhibit of the Company’s Registration Statement on Form S-1, No. 33-28284, effective on July 18, 1989.

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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.

	CORTEX PHARMACEUTICALS, INC.
Date: September 27, 2004	By:	/s/ Roger G. Stoll, Ph.D.
		Roger G. Stoll, Ph.D.
		Chairman, President and Chief Executive Officer

We, the undersigned directors and officers of Cortex Pharmaceuticals, Inc., do hereby constitute and appoint each of Roger G. Stoll, Ph.D. and Maria S. Messinger as our true and lawful attorneys-in-fact and agents with power of substitution, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys-in-fact and agents, or either of them, may deem necessary or advisable to enable said corporation to comply with the Securities and Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Annual Report on Form 10-K, including specifically but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorney-in-fact and agent, shall do or cause to be done by virtue hereof.

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Roger G. Stoll, Ph.D. Roger G. Stoll, Ph.D. (Principal Executive Officer)	Chairman of the Board, President and Chief Executive Officer	September 27, 2004
/s/ Maria S. Messinger Maria S. Messinger (Principal Financial and Accounting Officer)	Vice President, Chief Financial Officer and Secretary	September 27, 2004
/s/ Robert F. Allnutt Robert F. Allnutt	Director	September 27, 2004
/s/ Charles J. Casamento Charles J. Casamento	Director	September 27, 2004
/s/ Carl W. Cotman, Ph.D. Carl W. Cotman, Ph.D.	Director	September 27, 2004
/s/ Peter F. Drake, Ph.D. Peter F. Drake, Ph.D.	Director	September 27, 2004
/s/ M. Ross Johnson, Ph.D. M. Ross Johnson, Ph.D.	Director	September 27, 2004
/s/ Gary D. Tollefson, M.D., Ph.D. Gary D. Tollefson, M.D., Ph.D.	Director	September 27, 2004

S - 1

Index to Financial Statements

	Page
Report of Independent Registered Public Accounting Firm	F-2
Balance Sheets — As of June 30, 2004 and 2003	F-3
Statements of Operations — For the years ended June 30, 2004, 2003 and 2002	F-4
Statements of Stockholders’ Equity (Deficit) — For the period from June 30, 2001 through June 30, 2004	F-5
Statements of Cash Flows — For the years ended June 30, 2004, 2003 and 2002	F-6
Notes to Financial Statements	F-7

F-1

Report of Independent Registered Public Accounting Firm

The Stockholders and Board of Directors

Cortex Pharmaceuticals, Inc.

We have audited the accompanying balance sheets of Cortex Pharmaceuticals, Inc. (the “Company”) as of June 30, 2004 and 2003, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years ended June 30, 2004, 2003 and 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cortex Pharmaceuticals, Inc. at June 30, 2004 and 2003, and the results of its operations and its cash flows for the three years then ended, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

San Diego, California

July 27, 2004

F-2

Cortex Pharmaceuticals, Inc.

BALANCE SHEETS

	June 30, 2004			June 30, 2003
Assets
Current assets:
Cash and cash equivalents	$	9,976,957		$	1,125,054
Marketable securities		12,210,554			—
Restricted cash		—			83,411
Accounts receivable		132,527			428,451
Other current assets		268,265			210,539
Total current assets		22,588,303			1,847,455
Furniture, equipment and leasehold improvements, net		269,192			298,268
Other		33,407			33,407
	$	22,890,902		$	2,179,130
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	1,306,292		$	852,016
Accrued wages, salaries and related expenses		233,859			213,037
Unearned licensing revenue		205,922			988,426
Unearned research revenue		—			1,028,752
Advance for MCI project		275,112			270,140
Total current liabilities		2,021,185			3,352,371
Unearned licensing revenue, net of current, and other long-term liabilities		380,749			247,107
Stockholders’ equity (deficit):
Series B convertible preferred stock, $0.001 par value; $0.6667 per share liquidation preference; shares authorized: 3,200,000; shares issued and outstanding: 37,500; common shares issuable upon conversion: 3,679		21,703			21,703
Common stock, $0.001 par value; shares authorized: 30,000,000; shares issued and outstanding: 28,354,995 (2004) and 17,153,659 (2003)		28,354			17,153
Additional paid-in capital		70,557,574			42,629,899
Unrealized loss, available for sale marketable securities		(35,670	)		—
Accumulated deficit		(50,082,993	)		(44,089,103	)
Total stockholders’ equity (deficit)		20,488,968			(1,420,348	)
	$	22,890,902		$	2,179,130

See accompanying notes.

F-3

Cortex Pharmaceuticals, Inc.

STATEMENTS OF OPERATIONS

	Years ended June 30,
	2004			2003			2002
Revenues:
Research and license revenue	$	6,791,412		$	4,765,048		$	5,777,217
Grant revenue		181,469			466,902			655,286
Total revenues		6,972,881			5,231,950			6,432,503
Operating expenses:
Research and development		6,116,275			3,724,459			4,917,608
General and administrative		2,290,985			2,479,528			2,388,906
Non-cash stock compensation charges (A)		1,105,643			217,347			180,768
Total operating expenses		9,512,903			6,421,334			7,487,282
Loss from operations		(2,540,022	)		(1,189,384	)		(1,054,779	)
Interest income, net		148,971			14,511			72,143
Increase in fair value of common stock warrants		(3,602,839	)		—			—
Net loss before preferred stock dividends		(5,993,890	)		(1,174,873	)		(982,636	)
Dividends on 9% cumulative convertible preferred stock		—			—			675
Net loss applicable to common stock	$	(5,993,890	)	$	(1,174,873	)	$	(983,311	)
Net loss per share, basic and diluted	$	(0.26	)	$	(0.07	)	$	(0.06	)
Shares used in basic and diluted calculation		23,182,179			16,868,310			16,712,115
(A) Non-cash stock compensation charges include the following related expenses:
Research and development	$	188,958		$	76,842		$	125,241
General and administrative		916,685			140,505			55,527
	$	1,105,643		$	217,347		$	180,768

See accompanying notes.

F-4

Cortex Pharmaceuticals, Inc.

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

	9% cumulative convertible preferred stock			Series B convertible preferred stock		Common stock		Additional paid-in capital			Accumulated Other Comprehensive Loss			Accumulated deficit			Total
Balance, June 30, 2001	$	15,000		$	21,703	$	16,629	$	41,998,545		$	—		$	(41,931,594	)	$	120,283
Issuance of 217,500 shares of common stock upon exercise of stock options		—			—		217		90,449			—			—			90,666
Conversion of 15,000 shares of 9% preferred stock into 1,999 shares of common stock		(15,000	)		—		2		14,998			—			—			—
Issuance and vesting of stock options for consultants		—			—		—		139,542			—			—			139,542
Non-cash compensation charges for stock options re-priced in 1998		—			—		—		41,226			—			—			41,226
9% preferred stock dividends		—			—		—		(675	)		—			—			(675	)
Net loss and comprehensive loss		—			—		—		—			—			(982,636	)		(982,636	)
Balance, June 30, 2002		—			21,703		16,848		42,284,085			—			(42,914,230	)		(591,594	)
Issuance of 304,276 shares of common stock upon exercise of stock options		—			—		305		128,467			—			—			128,772
Issuance and vesting of stock options for consultants		—			—		—		103,167			—			—			103,167
Issuance of warrants to purchase 116,000 shares of common stock for services		—			—		—		62,280			—			—			62,280
Compensation expense relating to extension of stock options previously granted to former President and Chief Executive Officer		—			—		—		51,900			—			—			51,900
Net loss and comprehensive loss		—			—		—		—			—			(1,174,873	)		(1,174,873	)
Balance, June 30, 2003		—			21,703		17,153		42,629,899			—			(44,089,103	)		(1,420,348	)
Sale of 3,333,334 shares of common stock, $1.50 per share, net of expenses		—			—		3,333		4,453,977			—			—			4,457,310
Sale of 6,909,091 shares of common stock, $2.75 per share, net of expenses		—			—		6,909		17,455,098			—			—			17,462,007
Issuance of 280,678 shares of common stock upon exercise of stock options		—			—		281		251,422			—			—			251,703
Issuance of 678,229 shares of common stock upon exercise of warrants		—			—		678		1,058,696			—			—			1,059,374
Issuance and vesting of stock options and warrants for consultants		—			—		—		1,061,644			—			—			1,061,644
Non-cash compensation charges for stock options re-priced in 1998		—			—		—		43,999			—			—			43,999
Change in value of warrants issued with sales of common stock		—			—		—		3,466,668			—			—			3,466,668
Amortization of capitalized financing costs		—			—		—		136,171			—			—			136,171
Comprehensive loss
Net loss		—			—		—		—			—			(5,993,890	)		(5,993,890	)
Unrealized loss on available for sale U.S. Government and other marketable securities		—			—		—		—			(35,670	)		—			(35,670	)
Comprehensive loss		—			—		—		—			—			—			(6,029,560	)
Balance, June 30, 2004	$	—		$	21,703	$	28,354	$	70,557,574		$	(35,670	)	$	(50,082,993	)	$	20,488,968

See accompanying notes.

F-5

Cortex Pharmaceuticals, Inc.

STATEMENTS OF CASH FLOWS

	Years ended June 30,
	2004			2003			2002
Cash flows from operating activities:
Net loss before preferred stock dividends	$	(5,993,890	)	$	(1,174,873	)	$	(982,636	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		119,748			155,846			153,176
Stock option compensation expense		1,105,643			155,067			180,768
Amortization of capitalized financing costs		136,171			—			—
Change in fair value of common stock warrants		3,466,668			—			—
Warrants issued for services		—			62,280			—
Changes in operating assets/liabilities:
Restricted cash		83,411			97,475			11,414
Accounts receivable		295,924			(312,979	)		(115,472	)
Other current assets		(57,726	)		140,333			(90,193	)
Accounts payable and accrued expenses		475,098			671,149			(144,556	)
Unearned revenue		(1,677,614	)		(649,659	)		(1,709,691	)
Changes in other assets and other liabilities		26,483			5,468			6,562
Net cash used in operating activities		(2,020,084	)		(849,893	)		(2,690,628	)
Cash flows from investing activities:
Purchase of marketable securities		(15,467,735	)		—			(1,000,000	)
Proceeds from maturities of marketable securities		3,200,000			—			1,000,000
Purchase of fixed assets		(90,672	)		(2,834	)		(107,870	)
Net cash used in investing activities		(12,358,407	)		(2,834	)		(107,870	)
Cash flows from financing activities:
Proceeds from issuance of common stock in January 2004 private placement, net		17,462,007			—			—
Proceeds from issuance of common stock in August 2003 private placement, net		4,457,310			—			—
Proceed from issuance of common stock upon exercise of warrants		1,059,374			—			—
Proceeds from issuance of common stock upon exercise of stock options		251,703			128,772			90,666
Payment of 9% preferred stock dividends		—			—			(675	)
Net cash provided by financing activities		23,230,394			128,772			89,991
Increase (decrease) in cash and cash equivalents		8,851,903			(723,955	)		(2,708,507	)
Cash and cash equivalents, beginning of year		1,125,054			1,849,009			4,557,516
Cash and cash equivalents, end of year	$	9,976,957		$	1,125,054		$	1,849,009
Supplemental schedule of non-cash investing and financing activities:
Conversion of preferred stock to common stock	$	—		$	—		$	15,000

See accompanying notes.

F-6

Cortex Pharmaceuticals, Inc.

NOTES TO FINANCIAL STATEMENTS

Note 1 — Business and Summary of Significant Accounting Policies

Business — Cortex Pharmaceuticals, Inc. (the “Company”) was formed to engage in the discovery, development and commercialization of innovative pharmaceuticals for the treatment of neurological and psychiatric disorders. Since its formation in 1987, the Company has been engaged in research and early clinical development activities.

In January 1999, the Company entered into a research collaboration and exclusive worldwide license agreement with NV Organon (“Organon”), a subsidiary of Akzo Nobel (Note 5). The agreement will enable Organon to develop and commercialize the Company’s AMPAKINE^® technology for the treatment of schizophrenia and depression. In October 2000, the Company entered into a research collaboration and exclusive license agreement with Les Laboratoires Servier (“Servier”). The agreement, as amended in October 2002, will enable Servier to develop and commercialize the Company’s AMPAKINE technology for the treatment of anxiety disorders and memory impairment associated with aging and neurodegenerative diseases, such as Alzheimer’s disease (Note 4).

Basis of Presentation — From inception through June 30, 2004, the Company has generated only modest operating revenues, the majority of which it derived from its agreements with Servier and Organon, as further described in Notes 4 and 5, respectively. These agreements contributed 97%, 91% and 89% of total revenues for the years ended June 30, 2004, 2003 and 2002, respectively.

Under the agreement with Servier, during the years ended June 30, 2004, 2003 and 2002 the Company recorded research and licensing revenues of $4,791,000, $4,756,000 and $3,720,000, respectively. During the same periods, the Company incurred direct and indirect expenses for the Servier research collaboration totaling $2,139,000, $2,098,000 and $2,053,000, respectively.

Under the agreement with Organon, the Company recorded research and licensing revenues of $2,000,000, $0 and $2,000,000 for the years ended June 30, 2004, 2003 and 2002, respectively. During the same periods the Company incurred no direct or indirect expenses for the Organon research collaboration.

With the proceeds from the Company’s private placements of its common stock in August 2003 and January 2004, Cortex anticipates that it has sufficient capital and committed funding to maintain its operations through mid-calendar year 2006; however, 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 revenue adequate to support the Company’s cost structure. There can be no assurance that the Company will be successful in these areas. To supplement its existing resources, the Company likely will need to 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.

The Company is seeking collaborative or other arrangements with additional pharmaceutical companies, under which 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 corporate partnering arrangements with major pharmaceutical companies is intense, with a large number of biopharmaceutical companies attempting to arrive at such arrangements. Accordingly, although the Company is presently engaged in discussions with a number of candidate companies, there can be no assurance that an agreement will arise from these discussions in a timely manner, or at all, or that any agreement that may arise from these discussions will successfully reduce the Company’s short-term or long-term funding requirements.

Cash Equivalents — The Company considers all highly liquid short-term investments with maturities of less than three months when acquired to be cash equivalents.

Marketable Securities — Marketable securities are carried at fair value, with unrealized gains and losses, net of any tax, reported as a separate component of stockholders’ equity. The amortized cost of debt securities is

F-7

adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest income. Realized gains and losses and declines in value judged to be other-than-temporary on short-term investments are included in interest income. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income.

Concentrations of Credit Risk — Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company limits its exposure to credit loss by investing its cash with high credit quality financial institutions.

Furniture, Equipment and Leasehold Improvements — Furniture, equipment and leasehold improvements are recorded at cost and depreciated on a straight-line basis over the lesser of their estimated useful lives, ranging from five to ten years, or the life of the lease, as appropriate.

Long-Lived Assets — The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the total amount of an asset may not be recoverable. An impairment loss is recognized when estimated future cash flows expected to result from the use of the asset and the eventual disposition are less than its carrying amount. The Company has not recognized any impairment losses through June 30, 2004.

Revenue Recognition — The Company recognizes revenue when all four of the following criteria are met: (i) persuasive evidence that an arrangement exists; (ii) delivery of the products and/or services has occurred; (iii) the fees earned can be readily determined; and (iv) collectibility of the fees is reasonably assured.

The Company recognizes research revenue from its collaborations with Servier (Note 4) and Organon (Note 5) as services are performed under the agreements. These agreements include compensation to the Company based upon an annual rate for each full-time equivalent employee that dedicates research to the project. The agreements provide scheduled quarterly payments to the Company in advance of the period during which the services are to be performed. The Company records the resultant revenue from the agreements as it performs the contracted research services.

The Company records grant revenues as the expenses related to the grant projects are incurred. All amounts received under collaborative research agreements or research grants are nonrefundable, regardless of the success of the underlying research.

Revenues from milestone payments are recognized when earned, as evidenced by written acknowledgement from the collaborator, provided that (i) the milestone event is substantive and its achievement was not reasonably assured at the inception of the agreement, and (ii) the Company’s performance obligations, if any, after the milestone achievement will continue to be funded by the collaborator at a comparable level to that before the milestone was achieved. If both of these criteria are not met, the milestone payment would be recognized over the remaining minimum period of the Company’s performance obligations under the arrangement.

If a collaborator develops and markets a product that utilizes the Company’s technology, the Company will be eligible to receive royalties based on net sales of the product, as defined by the relative agreement. The Company will recognize such royalties, if any, at the time that the royalties become payable to the Company from the collaborator.

In November 2002, the Emerging Issues Task Force (“EITF”) of the Financial Accounting Standards Board reached consensus on Issue 00-21. EITF Issue 00-21 addresses the accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. Specifically, Issue 00-21 requires the recognition of revenue from milestone payments over the remaining minimum period of performance obligations under such multiple element arrangements. As required, we will apply the principles of Issue 00-21 to multiple element research and licensing agreements that we may enter into or modify after July 1, 2003.

F-8

In accordance with the Securities and Exchange Commission’s Staff Accounting Bulletin No. 101, “Revenue Recognition” (“SAB 101”), amounts received for upfront technology license fees under multiple-element arrangements are deferred and recognized on a straight-line basis over the period of committed services or performance, which approximates the level of efforts provided, if such arrangements require the Company’s on-going services or performance.

Cortex amortizes the revenues from Servier’s $5,000,000 nonrefundable upfront fee ratably over the research phase of the agreement, as amended, which began in December 2000 and ends in early December 2005.

Employee Stock Options and Stock-Based Compensation — In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure” (“SFAS 148”), which is effective for fiscal years ending after December 15, 2002. SFAS 148 provides alternative methods of transition to the fair value method of accounting for stock-based employee compensation under Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). SFAS 148 also requires disclosure of the effects of stock-based employee compensation on reported net income or loss and earnings or loss per share in annual and interim financial statements.

As permitted under SFAS 123, the Company has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), in accounting for its employee stock options, given that the alternative fair value accounting provided for under SFAS 123 requires use of option valuation models that were not developed for use in valuing employee stock options. According to APB 25, no compensation expense is recognized since the exercise price of the Company’s stock options generally equals the market price of the underlying stock on the date of grant. Adoption of SFAS 123 for options issued to employees would require recognition of employee compensation expense based on the computed “fair value” of the options on the date of grant. In accordance with SFAS 123 and EITF Issue 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods and Services,” stock options and warrants issued to consultants and other non-employees as compensation for services to be provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined. The Company recognizes this expense over the period the services are provided.

Pro forma information regarding net loss and net loss per share is required by SFAS 123, and has been determined as if the Company had accounted for its employee stock plans under the fair value method. The fair value was estimated at the date of grant using the Black-Scholes option pricing model and the following assumptions for the years ended June 30, 2004, 2003 and 2002, respectively: weighted average risk-free interest rates of 2.1%, 2.7% and 3.4%; dividend yields of 0%; volatility factors of the expected market price of the Company’s common stock of 1.06%, 99% and 68%; and a weighted average life of 3.7 years, 4.1 years and 4.5 years.

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

F-9

For purposes of pro forma disclosures, the estimated fair value of the options is amortized as expense over the vesting period of the options, resulting in the following pro forma information for the years ended June 30, 2004, 2003 and 2002:

	Year ended June 30,
	2004			2003			2002
Net loss applicable to common stockholders, as reported	$	(5,993,890	)	$	(1,174,873	)	$	(983,311	)
Stock-based employee compensation expense included in reported net loss		12,100			—			41,226
Total stock-based employee compensation expense determined under fair value based method for all options		(1,671,471	)		(537,314	)		(617,889	)
Pro forma net loss applicable to common stockholders	$	(7,653,261	)	$	(1,712,187	)	$	(1,559,974	)
Basic and diluted net loss per share available to common stockholders, as reported	$	(0.26	)	$	(0.07	)	$	(0.06	)
Basic and diluted net loss per share available to common stockholders, pro forma	$	(0.33	)	$	(0.10	)	$	(0.09	)

The pro forma effect on net loss shown above is not necessarily indicative of potential pro forma effects on results for future years. The estimated weighted average fair value of options granted during the years ended June 30, 2004, 2003 and 2002 was $1.92, $0.54 and $1.36, respectively.

In March 2000, the Financial Accounting Standards Board issued FASB Interpretation No. 44, “Accounting for Certain Transactions Involving Stock Compensation, an interpretation of APB 25” (“FIN 44” or “the Interpretation”). As required, the Company adopted the Interpretation on July 1, 2000. The Interpretation requires that stock options that have been modified to reduce the exercise price be accounted for as variable. Prior to release of FIN 44, in December 1998 the Company re-priced previously issued stock options to purchase approximately 970,000 shares of common stock to a price of $0.375 per share, which represented the fair market value of the common stock on the date of the re-pricing. By adopting the Interpretation, the Company now applies variable accounting for these options until such options are exercised or forfeited. Of the options re-priced in December 1998, as of June 30, 2004 options to purchase 245,919 remained outstanding. Consequently, if the market price of the Company’s stock increases above $2.50 per share, the fair market value of the Company’s common stock on the date that it adopted FIN 44, the Company will recognize additional compensation expense that it otherwise would not have incurred. For the fiscal year ended June 30, 2004, applying the Interpretation increased the net loss by $43,999, with no impact on the net loss per share. For the fiscal year ended June 30, 2003, applying the Interpretation had no impact on the net loss or the net loss per share. For the fiscal year ended June 30, 2002, the effect of applying the Interpretation was an increase in the net loss of $41,226, with no impact on the net loss per share.

Research and Development Costs — All costs related to research and development activities are treated as expenses in the period incurred.

Comprehensive Income — In accordance with Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income,” all components of comprehensive loss, including net loss, are reported in the financial statements in the period in which they are recognized. Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Net loss and other comprehensive loss, including unrealized gains and losses on investments, are reported net of any related tax effect to arrive at comprehensive loss.

F-10

Net Loss per Share — In accordance with Statement of Financial Accounting Standards No. 128, “Earnings per Share” (“SFAS 128”), net loss per share is computed based on the weighted average number of common shares outstanding and includes dividends accrued on the Company’s 9% Cumulative Convertible Preferred Stock. As of June 30, 2004, 2003 and 2002, there were no shares of the 9% Cumulative Convertible Preferred Stock outstanding.

The Company has reserved 12.9 million shares of common stock for issuance upon exercise of outstanding stock options and stock purchase warrants, as well as for conversion of the Company’s Series B preferred stock, as further described in Note 3. The effect of the potentially issuable shares of common stock was not included in the calculation of diluted loss per share given that the effect would be anti-dilutive.

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, 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. Actual amounts may differ from those estimates.

Reclassifications — Certain reclassifications have been made to the fiscal year 2003 and 2002 financial statements to conform with the fiscal year 2004 presentation.

Note 2 — Detail of Selected Balance Sheet Accounts

The following is a summary of marketable securities as of June 30, 2004:

	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Corporate obligations	$	3,382,905	$	—	$	(17,685	)	$	3,365,220
Mortgage backed government securities		8,863,319		—		(17,985	)		8,845,334
Total marketable securities	$	12,246,224	$	—	$	(35,670	)	$	12,210,554

The amortized cost and estimated fair value of available-for-sale marketable securities as of June 30, 2004, by contractual maturity, are as follows:

	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Maturities
Within one year	$	5,420,632	$	—	$	(10,680	)	$	5,409,952
After one year through 5 years		6,825,592		—		(24,990	)		6,800,602
Total marketable securities	$	12,246,224	$	—	$	(35,670	)	$	12,210,554

Gross realized gains and losses on sales of marketable securities were not significant in the fiscal years ended June 30, 2004, 2003 or 2002.

F-11

Accounts receivable consist of the following:

	June 30,
	2004		2003
Receivables from Servier	$	111,715	$	368,349
Receivables for grant projects		20,812		13,775
Other receivables		—		46,327
	$	132,527	$	428,451

Together with Servier, Cortex conducted a cross-national Phase II clinical study in patients with mild cognitive impairment (“MCI”). Servier agreed to incur the bulk of the related costs for this study. While Cortex pays many of the associated expenses directly, it receives reimbursement for these amounts from Servier.

Other current assets consist of the following:

	June 30,
	2004		2003
Prepaid license fees	$	93,351	$	—
Prepaid sponsored research		8,000		12,458
Prepaid insurance fees		118,187		62,457
Prepaid financing costs		—		72,344
Prepaid consulting fees		10,000		25,000
Other		38,727		38,280
	$	268,265	$	210,539

Furniture, equipment and leasehold improvements consist of the following:

	June 30,
	2004			2003
Laboratory equipment	$	1,447,007		$	1,400,804
Leasehold improvements		718,874			716,724
Furniture and equipment		179,329			175,431
Computers and software		356,368			317,947
		2,701,578			2,610,906
Accumulated depreciation		(2,432,386	)		(2,312,638	)
	$	269,192		$	298,268

Note 3 — Stockholders’ Equity

Preferred Stock

The Company has authorized a total of 5,000,000 shares of preferred stock, par value $0.001 per share, of which 1,250,000 shares have been designated as 9% Cumulative Convertible Preferred Stock (non-voting, “9% Preferred”); 3,200,000 shares have been designated as Series B Convertible Preferred Stock (non-voting, “Series B Preferred”); 500 shares have been designated as Series D Convertible Preferred Stock (non-voting, “Series D Preferred”); 35,000 have been designated as Series A Junior Participating Preferred Stock (non-voting, “Series A Junior Participating”) and 514,500 shares are presently undesignated and may be issued with such rights and powers as the Board of Directors may designate.

Series B Convertible Preferred Stock outstanding as of June 30, 2004 and June 30, 2003 consisted of 37,500 shares of Series B Preferred issued in a May 1991 private placement. Each share of Series B Preferred is convertible into approximately 0.09812 shares of common stock at an effective conversion price of $6.795 per share of common stock, subject to adjustment under certain circumstances. As of June 30, 2004, the remaining shares of Series B Preferred outstanding are convertible into 3,679 shares of common stock. The Company may redeem the Series B Preferred at a price of $0.6667 per share, an amount equal to its liquidation preference, at any time upon 30 days’ prior notice.

F-12

Common Stock and Common Stock Purchase Warrants

On August 21, 2003, the Company issued 3,333,334 shares of common stock to accredited investors in a private placement transaction for $1.50 per share, providing gross proceeds of $5,000,000. Net proceeds from the transaction, after issuance costs and placement fees, were approximately $4,500,000. In connection with the transaction, the Company also issued five-year warrants to the investors to purchase up to an additional 3,333,334 shares of the Company’s common stock at an exercise price of $2.55 per share. In January 2004, warrants to purchase 339,997 common shares were exercised, resulting in proceeds of approximately $870,000.

In connection with the August private placement, the Company also issued warrants to two placement agents to purchase 30,000 and 83,061 shares of the Company’s common stock, respectively. The warrant to purchase 30,000 shares of the Company’s common stock has an exercise price of $1.50 per share and a five-year term. The warrant to purchase 83,061 shares of the Company’s common stock has an exercise price of $2.71 per share and a three-year term. Of the warrants issued to the placement agents, during the year ended June 30, 2004 warrants to purchase 27,000 common shares were exercised, providing proceeds of approximately $40,000. All of the warrants issued in the August transaction provide a call right in favor to the Company to the extent that the price per share of the Company’s common stock exceeds $6.00 per share for 13 consecutive trading days, subject to certain circumstances. The Company cannot exercise this call right prior to December 8, 2005.

On January 7, 2004, the Company issued 6,909,091 shares of common stock to accredited investors in a private placement transaction for $2.75 per share, resulting in gross proceeds of $19,000,000. Net proceeds from the transaction, after issuance costs and placement fees, were approximately $17,500,000. In connection with the January transaction, the Company also issued five-year warrants to the investors to purchase up to 4,490,910 shares of the Company’s common stock at an exercise price of $3.25 per share. The Company also issued two additional warrants to purchase 54,750 and 272,959 shares of the Company’s common stock, respectively, to two placement agents. The warrant to purchase 54,750 shares of the Company’s common stock has an exercise price of $2.75 per share and a five-year term. The warrant to purchase 272,959 shares of the Company’s common stock has an exercise price of $3.48 per share and a three-year term. All of the warrants issued in the January transaction provide a call right in favor to the Company to the extent that the price per share of the Company’s common stock exceeds $7.50 per share for 13 consecutive trading days, subject to certain circumstances. The Company cannot exercise this call right prior to March 18, 2005.

Pursuant to the terms of the registration rights agreements entered into in connection with each of the above transactions, within defined timelines the Company was required to file, and did file, with the Securities and Exchange Commission (the “SEC”) a registration statement under the Securities Act of 1933, as amended, covering the resale of all of the common stock purchased and the common stock underlying the issued warrants, including the common stock underlying the placement agents’ warrants.

The registration rights agreement for each transaction further provides that if a registration statement is not filed or does not become effective within the defined time period, then in addition to any other rights the holders may have, the Company would be required to pay each holder an amount in cash, as liquidated damages, equal to 2% per month of the aggregate purchase price paid by such holder in the private placements for the common stock and warrants then held, prorated daily.

The registration statement for each transaction was filed and declared effective by the SEC within the allowed timeframe. As a result, the Company was not required to pay any liquidated damages in connection with the initial registration for either transaction.

In accordance with EITF 00-19, “Accounting for Derivative Financial Instruments Indexed To, and Potentially Settled In a Company’s Own Stock,” (EITF 00-19) and the terms of the warrants and the transaction documents, at the closing date for the first transaction, August 21, 2003, the fair value of the warrants was

F-13

recorded as a liability, with an offsetting reduction to additional paid-in capital received from the private placement.

The fair value of the warrants was estimated using the Black-Scholes option pricing model with the following assumptions: no dividends; risk-free interest rate of 3.4%; the contractual life of 5 years and volatility of 100%. The fair value of the warrants was estimated to be $5,000,000 on the closing date of the transaction. The fair value of the warrants was then re-measured at the September 30, 2003 reporting date and at December 8, 2003, the date of effectiveness of the registration statement. The increase in fair value of the warrants of $3,467,000 from the closing date of the transaction to the effective date of the registration statement has been recorded as a charge to other expense in the Statement of Operations for the year ended June 30, 2004. The warrant liability was reclassified to additional paid-in capital as of the date of effectiveness of the registration statement, or December 8, 2003.

In accordance with EITF 00-19, and the terms of the warrants and the transaction documents, at the closing date for the second transaction, January 7, 2004, the fair value of the warrants was recorded as a liability, with an offsetting reduction to additional paid-in capital received in the January private placement.

The fair value of the warrants was estimated using the Black-Scholes option pricing model with the following assumptions: no dividends; risk-free interest rate of 3.0%; the contractual life of 5 years and volatility of 96%. The fair value of the warrants was estimated to be $9,521,000 on the closing date of the transaction. The fair value of the warrants was re-measured at March 18, 2004, the date of effectiveness of the applicable registration statement, with no resulting increase in fair value. The warrant liability was reclassified to additional paid-in capital as of the date of effectiveness for the registration statement, or March 18, 2004.

For both transactions, the Company amortized related offering costs until the respective registration statements were declared effective by the SEC. This amortization has been recorded as other expense in the accompanying Statement of Operations. Once the registration statements were declared effective, the Company reclassified any unamortized capitalized financing costs to additional paid-in capital.

As stated above, the accounting required by EITF 00-19 was triggered by the terms of the Company’s agreements for the private placements it completed in August 2003 and January 2004, specifically the potential penalties if the Company did not timely register the common stock underlying the warrants issued in either transaction. The related registration statements were declared effective by the SEC within the contractual deadlines and the Company incurred no penalties. The application of EITF 00-19 had no impact on the Company’s working capital, liquidity, or business operations.

In connection with the restructuring of a note payable, in July 1999 the Company issued to the note holder five-year warrants to purchase 200,000 shares of common stock at a weighted-average exercise price of $1.48 per share. The exercise prices for these warrants were derived from the fair market value of the Company’s common stock on the date of issuance. During the year ended June 30, 2004, 94,232 shares of the Company’s common stock were issued as a result of the net exercise of 150,000 of these warrants. The Company fully repaid the principal and accrued interest on the restructured note during the fiscal year ended June 30, 2000.

In connection with the engagement of a consultant for capital raising purposes, in December 2002 the Company issued a five-year warrant to purchase 200,000 shares of common stock at an exercise price of $0.67 per share. This warrant became exercisable during the fiscal year ended June 30, 2004 and the Company recorded non-cash expense of approximately $660,000. Warrants to purchase a total of 162,000 shares of the Company’s common stock were exercised during the fiscal year ended June 30, 2004, resulting in proceeds of approximately $109,000.

In connection with the engagement of a consultant for investor relations purposes, from February 2003 through June 2003 the Company issued five-year warrants to purchase up to an aggregate of 116,000 shares of common stock at a weighted-average exercise price of $0.88 per share. In connection with the same agreement, from July 2003 through June 2004 the Company issued 48,000 shares of common stock at a weighted-average exercise price of $2.95. The above warrants are fully exercisable and resulted in expense of approximately $107,000 and $62,000 for the fiscal years ended June 30, 2004 and 2003, respectively. The exercise prices for

F-14

the above warrants were derived from the fair market value of the Company’s common stock on the date of issuance. During the year ended June 30, 2004, related warrants to purchase a total of 55,000 shares of the Company’s common stock were exercised, resulting in proceeds of approximately $43,000.

As of June 30, 2004, the Company had reserved an aggregate of 3,679 shares for issuance upon conversion of the Series B Preferred Stock; 8,095,017 shares for issuance upon exercise of warrants; 4,789,082 shares for issuance upon exercise of outstanding stock options; and 3,428,096 shares for issuance upon exercise of stock options available for future grant.

Stock Option and Stock Purchase Plan

1996 Stock Incentive Plan— The 1996 Plan provides for the granting of options and rights to purchase up to an aggregate of 9,375,481 shares of the Company’s authorized but unissued common stock (subject to adjustment under certain circumstances, such as stock splits, recapitalizations and reorganizations) to qualified employees, officers, directors, consultants and other service providers. The exercise price of nonqualified stock options and the purchase price of stock offered under the 1996 Plan, which terminates October 25, 2006, must be at least 85% of the fair market value of the common stock on the date of grant. The exercise price of incentive stock options must be at least equal to the fair market value of the common stock on the date of grant.

Subject to any restrictions under federal or state securities laws, each non-officer employee is eligible to receive incentive stock options, beginning three months following the date of hire. An option to purchase that number of shares equal to 2.5% of the then current annual salary of the non-officer employee is awarded three months from the date of hire. A subsequent option to purchase that number of shares equal to 2.5% of then-current annual salary of the non-officer employee is awarded on the date six months from the date of hire. Additionally, all non-officer employees are eligible to receive a stock option for that number of shares equal to 100% of any salary increase, as of the date of approval of the increase. These options have a maximum ten-year term and vest annually over a three-year period from the dates of grant.

Each non-employee director (other than those who serve on the Board of Directors to oversee an investment in the Company) is automatically granted options to purchase 30,000 shares of common stock upon commencement of service as a director and additional options to purchase 25,000 shares of common stock on the date of each Annual Meeting of Stockholders. Stock option issuances to non-employee directors who serve on the Board of Directors to oversee an investment in the Company are determined separately. The nonqualified options to non-employee directors have an exercise price equal to 100% of the fair market value of the common stock on the date of grant, have a ten-year term and vest in equal increments of 33% on the anniversary dates of the dates of grant.

As of June 30, 2004, options to purchase an aggregate of 3,269,245 shares of common stock were exercisable under the Company’s stock option plan. During the years ended June 30, 2004 and 2003, the Company did not issue options to purchase shares of common stock with exercise prices below the fair market value of the common stock on the dates of grant.

F-15

Stock option transactions under the Company’s stock option plan for each of the three years in the period ended June 30, 2004 are summarized below:

	Number of shares		Weighted average exercise price per share
Outstanding as of June 30, 2001	2,430,606		$	1.32
Granted	455,157			2.48
Exercised	(217,500	)		0.42
Forfeited	(39,848	)		2.78
Outstanding as of June 30, 2002	2,628,415		$	1.58
Granted	1,563,195			0.78
Exercised	(304,276	)		0.42
Expired	(3,000	)		0.38
Forfeited	(226,610	)		2.20
Outstanding as of June 30, 2003	3,657,724		$	1.29
Granted	1,536,527			2.76
Exercised	(280,678	)		0.90
Expired	(4,000	)		0.38
Forfeited	(120,491	)		1.96
Outstanding as of June 30, 2004	4,789,082		$	1.77
Available for future grant	3,428,096

Information regarding stock options outstanding at June 30, 2004 is as follows:

	Options Outstanding				Options Exercisable
Range of exercise prices	Number outstanding at June 30, 2004	Weighted average remaining contractual life	Weighted average exercise price		Number exercisable at June 30, 2004	Weighted average exercise price
$  0.38 - 0.75	1,272,083	6.4 years	$	0.63	948,758	$	0.58
0.76 - 2.20	1,315,274	7.6 years		1.14	952,244		1.02
2.27 - 2.76	1,587,589	8.9 years		2.71	937,439		2.69
2.78 - 4.44	614,136	7.3 years		3.08	430,804		3.05
	4,789,082				3,269,245

Stockholder Rights Plan

On February 5, 2002, the Company’s Board of Directors approved the adoption of a Stockholder Rights Plan to protect stockholder interests against takeover strategies that may not provide maximum stockholder value. A dividend of one Right for each outstanding share of the Company’s common stock was distributed to stockholders of record on February 15, 2002. Each share of common stock presently outstanding and issued since February 15, 2002 also includes one Right. Each share of common stock that may be issued after the date hereof but prior to the Distribution Date (as defined below) will also include one Right. The Rights automatically attach to outstanding shares of common stock detailed above and no separate certificates are issued. The Rights trade only together with the Company’s common stock.

Each Right allows its holder to purchase one one-thousandth of a share (a “Unit”) of Series A Junior Participating Preferred Stock at a purchase price of $75.00 per Unit. The Rights are not currently exercisable, but will become exercisable on the 10^th business day following the occurrence of certain events relating to a person or group (“Acquiring Person”) acquiring or attempting to acquire fifteen percent (15%) or more of the outstanding shares of the Company’s common stock (the “Distribution Date”). If the Rights become

F-16

exercisable, then any Rights held by the Acquiring Person are void. In such event, each other holder of a Right that has not been exercised will have the right upon exercise to purchase shares of the Company’s common stock (or common stock of the Acquiring Person in certain situations) having a value equal to two times the exercise price of the Right. Unless redeemed or exchanged earlier by the Company, the Rights expire on February 15, 2012.

The Company has 35,000 shares of Series A Junior Participating Preferred Stock authorized (35,000,000 Units), of which no shares or Units are issued or outstanding at June 30, 2004. Each Unit would entitle the holder to (A) one vote, voting together with the shares of common stock; (B) in the event that the Company’s assets are liquidated, a payment of $1.00 or an amount equal to the payment to be distributed per share of common stock, whichever is greater; and (C) in the event of any merger, consolidation or other transaction in which shares of common stock are exchanged, a payment in the amount equal to the payment received per share of common stock. The number of Rights per share of common stock, and the purchase price, are subject to adjustment in the event of each and any stock split, stock dividend or similar event.

Note 4 — Research and License Agreement with Les Laboratoires Servier

In October 2000, the Company entered into a research collaboration and exclusive license agreement with Les Laboratoires Servier. The agreement will enable Servier to develop and commercialize Cortex’s proprietary AMPAKINE technology for the treatment of declines in cognitive performance associated with aging and neurodegenerative diseases. The indications covered include, but are not limited to, Alzheimer’s disease, mild cognitive impairment, sexual dysfunction, multiple sclerosis and Amyotrophic Lateral Sclerosis. The territory covered by the exclusive license excludes North America, allowing Cortex to retain commercialization rights in its domestic market. The territory covered by the agreement also excludes South America (except Argentina, Brazil and Venezuela), Australia and New Zealand.

In connection with the agreement, Servier paid Cortex a nonrefundable, up-front payment of $5,000,000. The upfront payment is being amortized as revenue over the research support period, as extended by the amendments entered into in October 2002 and December 2003. The October 2000 agreement includes research support of approximately $2,000,000 per year for three years, subject to Cortex providing agreed-upon levels of research. The amount of support is subject to annual adjustment based upon the increase in the U.S. Department of Labor’s Consumer Price Index. Under the October 2000 agreement, Cortex currently receives annual support of approximately $2,165,000. The agreement also includes milestone payments based upon clinical development and royalty payments on sales in licensed territories.

In October 2002, Servier agreed to provide Cortex with $4,000,000 of additional research support, in exchange for rights to the Company’s AMPAKINE compounds for the potential treatment of anxiety disorders, in Servier’s licensed territories. The $4,000,000 will be paid in quarterly installments of $500,000 over a two-year period, beginning in October 2002.

Note 5 — 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, a pharmaceutical business unit of Akzo Nobel of the Netherlands. The agreement will enable Organon to develop and commercialize the Company’s proprietary AMPAKINE technology for the treatment of schizophrenia and depression.

In connection with the Organon agreement, the Company received an up-front payment of $2,000,000. The agreement also included support of approximately $3,000,000 per year for the period from January 1999 through January 2001, during which time the Company provided research services to Organon.

F-17

During the fiscal year ended June 30, 2000, the Company received its first milestone under the agreement, triggered when Organon selected an AMPAKINE compound to pursue in Phase I clinical testing as a potential treatment for schizophrenia. During the fiscal year ended June 30, 2002, Organon notified Cortex of its intent to continue developing the selected compound by entering Phase II clinical testing, triggering a second milestone payment of $2,000,000, which the Company received in September 2001. During the fiscal year ended June 30, 2004, Organon paid Cortex another $2,000,000 milestone in order to retain its rights to Cortex’s AMPAKINE technology in the field of depression. Cortex remains eligible for additional milestone payments based upon further clinical development of the licensed technology by Organon, and ultimately, royalties on worldwide product sales, if any. Unless terminated earlier, the agreement continues until the expiration of all of Organon’s royalty obligations, which continue until the expiration of patents covering the AMPAKINE technology or compounds licensed under the agreement.

Note 6 — Advance from the Institute for the Study of Aging

In June 2000, the Company received $247,300 from the Institute for the Study of Aging (the “Institute”) to fund testing of the Company’s AMPAKINE CX516 in patients with mild cognitive impairment (“MCI”). Patients with MCI represent the earliest clinically-defined group with memory impairment beyond that expected for normal individuals of the same age and education, but such patients do not meet the clinical criteria for Alzheimer’s disease. The Institute is a non-profit foundation based in New York City and dedicated to the improvement in quality of life for the elderly.

As the funding from the Institute must be used solely for the planned clinical trials in MCI patients, Cortex recorded the amounts received as restricted cash in the Company’s balance sheet. Provided that Cortex complies with the conditions of the funding agreement, repayment of the advance shall be forgiven unless Cortex enters one of its AMPAKINE compounds into Phase III clinical trials for Alzheimer’s disease. Upon such potential clinical trials, repayment would include the principal amount plus accrued interest computed at a rate equal to one-half of the prime lending rate. In lieu of cash, in the event of repayment the Institute may elect to receive the outstanding principal balance and any accrued interest thereon as shares of Cortex common stock. The conversion price for such form of repayment shall initially equal $4.50 per share, subject to adjustment under certain circumstances. Included in the balance sheet is accrued principle and interest of $275,112 and $270,140 at June 30, 2004 and 2003, respectively.

Note 7 — Commitments

The Company leases its offices and research laboratories under an operating lease that expires May 31, 2009. Rent expense under this lease for the years ended June 30, 2004, 2003 and 2002 was approximately $329,000, $295,000 and $279,000, respectively. Commitments under the lease for the years ending June 30, 2005, 2006, 2007, 2008 and 2009 are approximately $435,000, $459,000, $478,000, $498,000 and $472,000, respectively.

As of June 30, 2004, the Company has employment agreements with two of its executive officers, which agreements expire in May 2005 and August 2005. The agreements involve annual salary payments aggregating $430,000 and provide for bonuses under certain circumstances.

The Company has entered into severance agreements with each of its executive officers. In the event of a termination of employment, under certain circumstances, these severance agreements provide defined benefits to the executive officers, including compensation equal to 12 to 18 months of the executive officer’s then current salary.

Additionally, in the event that the Company commercializes a compound developed by or under the supervision of one of its senior scientific employees, the Company may be obligated to pay the employee a royalty based on net sales, as defined and subject to adjustment, of products containing the compound.

Commitments for the Phase I clinical study of CX717 initiated in May 2004 amount to approximately $2,300,000. Separately, commitments under sponsored research agreements for services to be rendered for the years ending June 30, 2005 and 2006 approximated $787,000 and $562,000, respectively. Commitments under scientific consulting agreements for services to be rendered for the year ending June 30, 2005 approximated $129,000. Thereafter, such commitments for consulting agreements approximate $93,000 annually.

F-18

The Company has entered agreements with an academic institution that provide the Company exclusive rights to certain of the technologies that the Company is developing. Under the terms of the agreements, the Company is committed to royalty payments. These payments include minimum annual royalties of approximately $70,000 for the year ending June 30, 2004 and for each year thereafter for the remaining life of the patents covering the subject technologies, with the most recently issued patent expiring in April 2021. The agreements commit the Company to spend a minimum of $750,000 per year to advance the AMPAKINE compounds during the three years ending in May 2006. Thereafter, the Company’s spending requirements will decrease to $250,000 per year and will continue at that level until the Company begins marketing an AMPAKINE compound. The agreements also commit the Company to pay up to an additional $875,000 upon achievement of certain clinical testing and regulatory approval milestones, and to remit a portion of certain remuneration received in connection with sublicensing agreements.

Note 8 — Related Party Transactions

During the years ended June 30, 2004, 2003 and 2002, the Company paid scientific and other consulting fees to stockholders aggregating $58,800, $53,000 and $70,500, respectively. Under certain circumstances, the Company is obligated to make royalty payments to certain of its scientific consultants, some of whom are stockholders, and to one employee, upon successful commercialization of certain of its products by the Company or its licensees.

Note 9 — Income Taxes

The Company uses the liability method of accounting for income taxes as set forth in Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). Under the liability method, deferred taxes are determined based on differences between the financial statement and tax bases of assets and liabilities using enacted tax rates. As of June 30, 2004, the Company had federal and California tax net operating loss carryforwards of approximately $41,000,000 and $27,000,000, respectively. The difference between the federal and California tax loss carryforwards is primarily attributable to the capitalization of research and development expenses for California franchise tax purposes. The federal net operating loss carryforward will begin to expire in 2005 and the California net operating loss carryforward will begin to expire in 2008. The Company also has federal and California research and development tax credit carryforwards totaling approximately $1,000,000 and $400,000, respectively. The federal research and development tax credit carryforwards will begin to expire in 2005. The California research and development tax credit carryforward does not expire and will carryforward indefinitely until utilized.

The Company’s effective tax rate is different from the federal statutory rate of 35% due primarily to operating losses that receive no tax benefit as a result of a valuation allowance recorded for such losses.

Pursuant to Internal Revenue Code Sections 382 and 383, use of the Company’s net operating loss carryforwards may be limited if a cumulative change in ownership of more than 50% occurs within any three-year period since the last ownership change. Utilization of the net operating loss and tax credit carryforwards from the tax years ended on or before June 30, 1992 is subject to an annual limitation of approximately $1,500,000, due to ownership change limitations provided by the Internal Revenue Code of 1986 and similar state provisions. If there should be future changes of ownership, these annual limitations for utilization of net operating loss and tax carryforwards may become more restrictive.

Significant components of the Company’s deferred tax assets as of June 30, 2004 and June 30, 2003 are shown below. A valuation allowance of $18,705,000 as of June 30, 2004 has been established against the Company’s deferred tax assets as realization of such assets is uncertain. The increase in the valuation allowance of $971,000 from June 30, 2003 to June 30, 2004 relates primarily to continuing net operating losses.

F-19

Deferred tax assets consist of the following:

	June 30,
	2004			2003
Net operating loss carryforwards	$	15,881,000		$	14,272,000
Research and development credits		1,331,000			1,505,000
Capitalized research and development costs		341,000			690,000
Unearned revenue		238,000			923,000
Depreciation		126,000			105,000
Other, net		788,000			239,000
Net deferred tax assets		18,705,000			17,734,000
Valuation allowance for deferred tax assets		(18,705,000	)		(17,734,000	)
Total deferred tax assets	$	—		$	—

Note 10 — Quarterly Financial Information (Unaudited)

Summarized quarterly financial data for the years ended June 30, 2004 and 2003, respectively is as follows:

	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
2004 Quarters
Total revenues	$	1,337,247		$	3,256,128		$	1,166,009		$	1,213,497
Total costs and expenses		1,815,891			3,097,775			1,967,581			2,631,656
Income (loss) from operations		(478,644	)		158,353			(801,572	)		(1,418,159	)
Change in fair value of common stock warrants		(3,844,082	)		345,173			(103,930	)		—
Net income (loss)	$	(4,318,662	)	$	512,468		$	(873,504	)	$	(1,314,192	)
Basic and diluted loss per share	$	(0.24	)	$	0.02		$	(0.03	)	$	(0.05	)
	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
2003 Quarters
Total revenues	$	1,122,443		$	1,381,099		$	1,378,984		$	1,349,424
Total costs and expenses		1,804,484			1,660,664			1,520,846			1,435,340
Loss from operations		(682,041	)		(279,565	)		(141,862	)		(85,916	)
Net loss	$	(674,405	)	$	(275,727	)	$	(139,598	)	$	(85,143	)
Basic and diluted loss per share	$	(0.04	)	$	(0.02	)	$	(0.01	)	$	(0.01	)

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Cortex Pharmaceuticals, Inc.

Annual Report on Form 10-K

Year ended June 30, 2004

Exhibit Index

Exhibit Number	Description	Sequentially Numbered Page
3.1	Restated Certificate of Incorporation dated April 11, 1989, as amended by Certificate of Amendment of June 27, 1989, by Certificate of Designation filed April 29, 1991, by Certificate of Correction filed May 1, 1991, by Certificate of Amendment of Certificate of Designation filed June 13, 1991, by Certificate of Amendment of Certificate of Incorporation filed November 12, 1992, by Certificate of Amendment of Restated Certificate of Incorporation filed January 11, 1995, by Certificate of Designation filed December 8, 1995, by Certificate of Designation filed October 15, 1996, by Certificate of Designation filed June 4, 1997, by Certificate of Amendment of Restated Certificate of Incorporation filed December 21, 1998, by Certificate of Designation filed February 11, 2002, incorporated by reference to Exhibit 3.1 of the Amendment No. 1 to Registration Statement on Form 8-A, No. 001-16467, filed February 15, 2002, as further amended by Certificate of Amendment of Restated Certificate of Incorporation filed December 15, 2003, incorporated by reference to Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q filed February 12, 2004.	—
3.2	By-Laws of the Company, as adopted March 4, 1987, and amended on October 8, 1996, incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-KSB filed October 15, 1996.	—
4.1	Rights Agreement, dated as of February 8, 2002, between the Company and American Stock Transfer & Trust Company, which includes as Exhibit A thereto a form of Certificate of Designation for the Series A Junior Participating Preferred Stock, as Exhibit B thereto the Form of Rights Certificate and as Exhibit C thereto a Summary of Terms of Stockholder Rights Plan, incorporated by reference to Exhibit 4.2 to the Company’s Amendment No. 1 to Registration Statement on Form 8-A, No. 001-16467, filed February 15, 2002.
10.2	Consulting Agreement, dated October 30, 1987, between the Company and Carl W. Cotman, Ph.D. *	—
10.3	Consulting Agreement, dated as October 30, 1987, between the Company and Gary S. Lynch, Ph.D. *	—
10.19	License Agreement dated March 27, 1991 between the Company and the Regents of the University of California, incorporated by reference to Exhibit 10.19 of the Company’s Amendment on Form 8 filed November 27, 1991 to the Company’s Annual Report on Form 10-K filed September 30, 1991. (Portions of this Exhibit are omitted and were filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 under the Securities Exchange Act of 1934).	—
10.31	License Agreement dated June 25, 1993, as amended, between the Company and the Regents of the University of California, incorporated by reference to the same numbered exhibit to the Company’s Quarterly Report on Form 10-Q filed February 12, 2004. (Portions of this exhibit are omitted and were filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934).	—
10.44	Lease Agreement, dated January 31, 1994, for the Company’s facilities in Irvine, California, incorporated by reference to Exhibit 10.44 of the Company’s Quarterly Report on Form 10-QSB filed May 16, 1994.	—
10.49	Settlement Agreement between the Company and Alkermes, Inc., dated October 5, 1995, incorporated by reference to the same numbered Exhibit to the Company’s Annual Report on Form 10-KSB filed October 13, 1995. (Portions of this Exhibit are omitted and were filed separately with the Secretary of the Commission pursuant to the Company’s Application requesting confidential treatment under Rule 406 of the Securities Act of 1933).	—

EXH-1

Exhibit Number	Description	Sequentially Numbered Page
10.60	Amended and Restated 1996 Stock Incentive Plan, incorporated by reference to the same numbered exhibit to the Company’s Quarterly Report on Form 10-Q as filed on November 14, 2002.	—
10.64	Research and Collaboration and License Agreement between the Company and N.V. Organon, dated January 13, 1999, incorporated by reference to Exhibit 10.64 of the Company’s quarterly report on Form 10-QSB as filed on February 16, 1999. (Portions of this Exhibit were omitted and filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24-b2 of the Securities Exchange Act of 1934.)	—
10.65	Amendment No. 1 to the Lease Agreement for the Company’s facilities in Irvine, California, dated February 1, 1999, incorporated by reference to the same numbered Exhibit to the Company’s Annual Report on Form 10-KSB filed September 28, 1999.	—
10.67	Collaborative Research, Joint Clinical Research and Licensing Agreements with Les Laboratoires Servier dated October 13, 2000, incorporated by reference to the same numbered Exhibit to the Company’s Quarterly Report on Form 10-QSB filed November 14, 2000. (Portions of this Exhibit were omitted and filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Ruled 24b-2 of the Securities Act of 1934).	—
10.69	Employment agreement dated May 17, 2000, between the Company and James H. Coleman, incorporated by reference to the same numbered Exhibit to the Company’s Report on Form 10-QSB filed February 12, 2001.	—
10.70	Severance agreement dated October 26, 2000, between the Company and Maria S. Messinger, incorporated by reference to the same numbered Exhibit to the Company’s Quarterly Report on Form 10-QSB filed February 12, 2001.	—
10.71	Employment agreement dated June 5, 1995 between the Company and Gary A. Rogers, Ph.D., incorporated by reference to the same numbered Exhibit to the Company’s Annual Report on Form 10-K filed October 15, 2002.	—
10.73	Amendment dated October 3, 2002 to the Collaboration Research Agreement with Les Laboratoires Servier dated October 13, 2000, incorporated by reference to the same numbered Exhibit to the Company’s Annual Report on Form 10-K filed October 15, 2002.	—
10.74	Employment agreement dated October 29, 2002 between the Company and Roger G. Stoll, Ph.D., incorporated by reference to the same numbered exhibit to the Company’s Quarterly Report on Form 10-Q, as filed on November 14, 2002.	—
10.75	Securities Purchase Agreement dated August 21, 2003, by and among Cortex Pharmaceuticals, Inc. and the investors named therein, including the Registration Rights Agreement attached as Exhibit A thereto and a form of Common Stock Purchase Warrant attached as Exhibit C thereto, incorporated by reference to the same numbered exhibit to the Company’s Report on Form 8-K filed August 22, 2003.	—
10.76	Amendment dated August 8, 2003 to the employment agreement between the Company and Roger G. Stoll, Ph.D., incorporated by reference to the same numbered exhibit to the Company’s Annual Report on Form 10-K filed September 19, 2003.	—
10.77	Amendment dated Decemer 16, 2003 to the Collaboration Research Agreement with Les Laboratoires Servier dated October 13, 2000, incorporated by reference to the same numbered exhibit to the Company’s Quarterly Report on Form 10-Q filed February 12, 2004. (Portions of this Exhibit are omitted and were filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934).	—
10.78	Securities Purchase Agreement dated January 7, 2004, by and among Cortex Pharmaceuticals, Inc. and the investors named therein, including the Registration Rights Agreement attached as Exhibit A thereto and a form of Common Stock Purchase Warrant attached as Exhibit C thereto, incorporated by reference to the same numbered exhibit to the Company’s Report on Form 8-K filed January 9, 2004.	—
10.79	Amendment No. 2 to the Lease Agreement for the Company’s facilities in Irvine, California, dated March 9, 2004.	—
10.80	Form of Incentive/Nonqualified Stock Option Agreement under the Company’s Amended and Restated 1996 Stock Incentive Plan	—

EXH-2

Exhibit Number	Description	Sequentially Numbered Page
10.81	Form of Restricted Stock Award under the Company’s Amended and Restated 1996 Stock Incentive Plan.	—
10.82	Amendment dated January 1, 2004 to the employment agreement dated May 17, 2000 between the Company and James H. Coleman.	—
10.83	Amendment dated January 1, 2004 to the employment agreement dated June 5, 1995 between the Company and Gary A. Rogers, Ph.D.	—
21	Subsidiaries of the Registrant, incorporated by reference to the same numbered Exhibit to the Company’s Annual Report on Form 10-KSB filed October 13, 2000.	—
23.1	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.	—
24	Power of Attorney (included as part of the signature page of this Annual Report on Form 10-KSB.	—
31.1	Certification by Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	—
31.2	Certification by Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	—
32	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	—

* Incorporated by reference to the same numbered exhibit of the Company’s Registration Statement on Form S-1, No. 33-28284, effective on July 18, 1989.

EXH-3

EX-10.79

Exhibit 10.79

SECOND AMENDMENT

TO THAT LEASE

BY AND BETWEEN

THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, as Landlord

and

CORTEX PHARMACEUTICALS, INC., as Tenant

DATED JANUARY 31, 1994

THIS SECOND AMENDMENT is made and entered into as of March 9, 2004, and hereby deletes, alters, changes supplements or amends the following Articles and/or Sections of the above-referenced Lease.

ARTICLE 1. BASIC LEASE PROVISIONS

Section 1.05	Lease Term: Effective June 1, 2004, the Lease Term shall be extended five (5) years, from ten (10) years to fifteen (15) years.
Section 1.06	Termination: Effective June 1, 2004, the Lease Termination Date shall be extended five (5) years, from May 31, 2004, to May 31, 2009.
Section 1.08	Section 1.08 is amended as follows:
	Tenants Expense Percentage: 11.44% (i.e., 32,251 square feet/281,999 square feet)
	Tenant’s Property Tax Apportionment Percentage: 23.1% of the applicable Real Property Tax statement (subject to change annually in accordance with Section 5 of this Second Amendment)

Section 1.09	Minimum Monthly Rent: The Minimum Monthly Rent for the five (5) year extended Lease Term shall be as follows:
	June. 1, 2004 – May 31, 2005      $32,251.00
	June. 1, 2005 – May 31, 2006      $33,864.00
	June. 1, 2006 – May 31, 2007      $35,476.00
	June. 1, 2007 – May 31, 2008      $37,089.00
	June. 1, 2008 – May 31, 2009      $38,701.00
Section 1.10	Section 1.10 is hereby deleted from the Lease
	Exhibit “C”: Effective as of June 1, 2004, Exhibit “C” is added to the Lease and shall provide in full as follows:
	“Tenant shall accept the Premises in its “AS-IS” condition, and Landlord shall have no obligation whatsoever to construct or provide an tenant improvements to or on behalf of Tenant; provided, however, that Landlord shall provide Tenant with an improvement allowance (the “Allowance”) in the aggregate sum of $322,510.00. Tenant may use the Allowance for soft and hard costs of tenant improvements, space planning and design, construction fees, upgrade of building systems, paint, carpet and tile, emergency power generators, and signage. Subject to Landlord’s prior approval, which approval shall not be unreasonably withheld, Tenant shall have the right to use contractors, subcontractors and engineers of Tenant’s choice for the construction and design of its tenant improvements. All tenant improvements shall be constructed in accordance with the requirements of applicable building codes, and shall remain subject to the requirements of Article 13 of the

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	Lease. Notwithstanding anything to the contrary set forth herein, Landlord agrees to repair or replace, if necessary, the exteriors doors to the Premises and one (1) truck door if required by Tenant by written notice delivered to Landlord on or before December 31, 2004.”
Exhibit F, Section 4.04	Option to Extend the Term of Lease shall be modified to provide in full as follows:
	“Landlord hereby grants to Tenant an Option to Extend the term of this Lease for three (3) one (1)-year periods commencing upon the expiration of the initial term and any extended term hereof, as the case may be, and subject to and contingent upon each and every one of the following terms and conditions:
	(i)Tenant shall give Landlord written notice of its intent to exercise this Option not earlier than twelve (12) months, nor later than nine (9) months, prior to the termination of the initial term or any applicable extended term of this Lease, as the case may be.
	(ii)Both at the time of giving notice of its intent to exercise its Option and at the time any Lease pursuant to such notice is entered into, Tenant shall not be in default under any of the terms and conditions of this Lease.
	(iii)In the event Tenant elects to exercise this Option to Extend its Lease, then any such Lease shall be under the same lease terms and at the prevailing market rental rate in the area as set forth in (vi) herein at the time any extension hereunder is set to commence.
	(iv) In the event that Tenant notifies Landlord in writing of its intent to exercise the Option granted hereunder, Landlord shall provide Tenant within five (5) days the information set forth in subparagraph (iii) hereof. Tenant shall then have thirty (30) days from the date that

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notice of its intent to exercise its Option is given within which to consummate, execute and deliver to Landlord a written lease extension. In the event that such lease extension is not consummated, executed and delivered to Landlord within such 30-day period, then all rights granted to Tenant hereunder shall terminate and will be of no further force or effect.

(v) It is hereby understood and agreed that in the event Tenant elects to exercise its Option to Extend hereunder, the Premises will be accepted by Tenant on an “as-is” basis and Landlord shall have no obligation to perform any work therein unless mutually agreed upon by Landlord and Tenant.

(vi)Base Rent for each 1-year option period shall be at one hundred percent (100%) of the prevailing market rental rate in the area determined in the manner described below.

The parties shall have thirty (30) days after Landlord receives the option notice in which to agree on monthly Base Rent for the applicable extended term. If the parties are unable to agree on the minimum monthly Base Rent within that period, then within ten (10) days after the expiration of that period, then either (i) Landlord and Tenant shall appoint a mutually acceptable appraiser or broker to establish the new market rental rate and terms (“MRRT”) in the area within the next thirty (30) days (all costs associated with said appraisal shall be split equally between Landlord and Tenant), or (ii) each of Landlord and Tenant shall select and pay the appraiser or broker of their choosing to establish a MRRT within the next 30 days. If for any reason either one of the appraisals is not completed within the next 30 days as stipulated, then the appraisal that is completed at that time shall automatically become the new MRRT. If both appraisals are completed and the two appraisers/brokers cannot agree on a reasonable

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	average MRRT then they shall immediately select a mutually acceptable appraiser, broker to establish which of the two appraisals is closest to the MRRT. Whichever appraisal is determined by the third broker/appraiser to be closest to the MRRT shall be the new MRRT. The new Base Rent shall be the MRRT as determined by said broker/appraiser.
	After the new monthly Base Rent has been set for the extended term, the appraisers shall immediately notify the parties. If the Tenant objects to the new monthly Base Rent, Tenant shall have the option to have this Lease expire at the end of the existing term. Tenant’s election to allow this Lease to terminate at the end of the existing term must be exercised within fifteen (15) days after receipt of notice from the appraisers of the new monthly Base Rent. If Tenant does not exercise this election within said 15-day period, the term of this Lease shall be extended as provided in this paragraph.”
Sections 11.03 and 11.04	Sections 11.03 and 11.04 of the Lease are deleted in their entirety and the following is added to the Lease in place thereof:
	“Environmental Questionnaire; Disclosure. Prior to the execution of this Amendment, Tenant shall complete, execute and deliver to Landlord an Environmental Questionnaire and Disclosure Statement (the “Environmental Questionnaire”) in the form of Exhibit “A” attached hereto, and Tenant shall certify to Landlord all information contained in the Environmental Questionnaire as true and correct to the best of Tenant’s knowledge and belief. The completed Environmental Questionnaire shall be deemed incorporated into this Lease for all purposes, and Landlord shall be entitled to rely fully on the information contained therein. On each

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anniversary of the Commencement Date (each such date is hereinafter referred to as a “Disclosure Date”), until and including the first Disclosure Date occurring after the expiration or sooner termination of this Lease, Tenant shall disclose to Landlord upon request, in writing the names and amounts of all Hazardous Substances, or any combination thereof, which were stored, generated, used or disposed of on, under or about the Premises for the 12-month period prior to and after each Disclosure Date, or which Tenant intends to store, generate, use or dispose of on, under or about the Premises (provided, however, a copy of the list of Hazardous Substances provided by Tenant to the applicable fire department as required by law shall be sufficient for purposes of this paragraph). At Landlord’s option, Tenant’s disclosure obligations under this paragraph shall include a requirement that Tenant annually update, execute and deliver to Landlord the Environmental Questionnaire, as the same may be modified by Landlord from time to time.

Hazardous Substances.

(a) The term “Hazardous Substance(s)” as used in the Lease, is defined as follows: Any element, compound, mixture, solution, particle or substance, which presents danger or potential danger for damage or injury to health, welfare or to the environment including but not limited to:

(i) Those substances which are inherently or potentially radioactive, explosive, ignitable, corrosive, reactive, carcinogenic or toxic and

(ii) those substances which have been recognized as dangerous or potentially dangerous to health, welfare or to the environment by any federal, municipal, state, county or other governmental or quasi-governmental authority and/or any department or agency thereof.

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(b) Tenant represents and warrants to Landlord that at all times during the term of this Lease and any extensions or renewals thereof, Tenant shall:

(i) Except for the Allowed Substances, obtain Landlord’s prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned, to the manufacturing, processing, distributing, using, producing, treating, storing (above or below ground level), disposing of, or allowing to be present (the “Presence”) of any Hazardous Substance in or about the Premises. In connection with each such consent requested by Tenant, Tenant shall submit to Landlord a description, including the composition, quantity and all other information requested by Landlord concerning the proposed Presence of any Hazardous Substance. Landlord’s consent to the Presence of any Hazardous Substance may be deemed given by inclusion of a description of the composition and quantity of the proposed Hazardous Substance on the Environmental Questionnaire and Disclosure Statement attached as Exhibit “A” hereto. Notwithstanding anything to the contrary set forth herein, Landlord shall be deemed to have approved the Presence of such Hazardous Substances as are maintained by Tenant at the Premises as part of Tenant’s normal course of business operations, provided that Tenant is at all times in compliance with all regulatory requirements for the storage and disposal thereof and has provided Landlord with a copy of each list, and all amendments or updates thereto, of all such Hazardous Substances provided by Tenant to the applicable fire department(s) as required by law. Any Hazardous Substance which Landlord has agreed to the Presence thereof shall be deemed to be an Allowed Substance for purposes of this Article. All Hazardous Substances described on the Environment Questionnaire and

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Disclosure Statement attached hereto as Exhibit “A” (as set forth on the list provided to the fire department) are deemed to be Allowed Substances. Landlord’s consent to the Presence of any Hazardous Substance at any time during the Lease term or any renewal thereof shall not waive the requirement of obtaining Landlord’s consent to the subsequent Presence of any other, or increased quantities of any Hazardous Substance;

(ii) refrain from (and prohibit others from) allowing, on and after the Commencement Date, the Presence of any Hazardous Substance in or about the Premises which is not an Allowed Substance;

(iii) promptly comply at Tenant’s own cost and expense with all laws, orders, rules, regulations, certificates of occupancy, or other requirements, as the same now exist or hereafter may be enacted, amended, or promulgated, of any federal, state, county, municipal, or other governmental or quasi-governmental authorities and/or any department or agency thereof relating to the Presence of Hazardous Substances in or about the Premises, whether or not such substances are Allowed Substances, which Presence of Hazardous Substances arose on or after the Commencement Date.

(iv) at all times conduct, or caused to be conducted, maintenance on the HVAC system equipment at the Premises in accordance with the requirements of all applicable federal, state, and local laws and regulations. In the event of a leak or other contamination of any Hazardous Substance from the HVAC system, Tenant shall promptly repair such leak or other source of contamination from the HVAC system in accordance with the requirements of such federal, state and local laws and regulations, and in the time period required thereby.

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(v) indemnify and hold Landlord, its agents and employees, harmless from any and all demands, claims, causes of action, penalties, liabilities, judgments, damages (including consequential damages) and expenses including without limitation, court costs and reasonable attorney’s fees incurred by Landlord as a result of (a) Tenant’s failure or delay in complying, to Landlord’s satisfaction, with the provisions of sections (b) (i) and (ii), above; Tenant’s failure or delay in complying with such law, order, rule, regulation, certificate of occupancy or other requirement referred to in subsections (b) (iii) and (iv), above, or (c) any adverse effect which results from the Presence of any Hazardous Substance in or about the Premises, whether or not such Hazardous Substance is an Allowed Substance to the extent caused by Tenant, its agents, employees, or invitees.. If any action or proceeding is brought against Landlord, Landlord’s agents or employees by reason of any such claim, Tenant, upon notice from Landlord, will defend such claim at Tenant’s expense with counsel reasonably satisfactory to Landlord. This indemnification by Tenant of Landlord shall survive the termination of the Lease;

(vi) promptly disclose to Landlord by delivering, in the manner prescribed for delivery of notice in the Lease, a copy of any forms, submissions, notices, reports or other written documentation (Communications) relating to the Presence of any Hazardous Substance in or about the Premises, whether such Communications are delivered to Tenant or are requested of Tenant by any federal, municipal, state, county or other governmental or quasi-governmental authority and/or any department or agency thereof;

(vii) notwithstanding any other provisions of this Lease, (a) allow Landlord, and Landlord’s Agents, access and the right to enter and inspect the Premises for the Presence of any

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Hazardous Substance, whether or not such Hazardous Substance is an Allowed Substance, at any time deemed reasonable by Landlord, upon reasonable prior written notice to Tenant, and (b) in the event a release of Hazardous Substances occurs on or affects the Premises, Tenant shall permit Landlord or Landlord’s Agents to enter the Premises at any time, without prior notice, to inspect, monitor, take emergency or long term remedial action, discharge Tenant’s obligations hereunder if Tenant has failed to do so after 30 days prior written notice (except in an emergency in which no prior notice shall be required), or take any other action to restore the Premises to its original condition; and

(viii) compliance by Tenant with any provision of this provision shall not be deemed a waiver of any other provision hereof. Without limiting the foregoing, Landlord’s consent to the Presence of any Hazardous Substance shall not relieve Tenant of its indemnity obligations under the terms of this Paragraph.

(c) Legal Actions. If the Presence of any Hazardous Substances on, under or about the Premises caused or permitted by Tenant, its agents, employees, contractors or invitees, results in (i) injury to any person, or (ii) injury to or any contamination of the Premises, Tenant, at its sole cost and expense, shall promptly take all actions necessary to return the Premises to the condition existing prior to the introduction by Tenant, its agents or invitees, of such Hazardous Substances to the Premises and to remedy or repair any such injury of contamination. Notwithstanding the foregoing, Tenant shall not, without Landlord’s prior written consent, take any remedial action in response to the Presence of any Hazardous Substances on, under or about the Premises, or enter into any settlement agreement, consent decree or other compromise with any governmental agency with respect to

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	any Hazardous Substances claims concerning the Premises; provided, however, Landlord’s prior written consent shall not be necessary in the event that the Presence of Hazardous Substances on, under or about the Premises (i) poses an immediate threat to the health, safety or welfare of any individual or (ii) is of such a nature that an immediate remedial response is necessary and it is not practicable to obtain Landlord’s consent before taking such action.
Section 13.01	Notwithstanding any contrary provisions of Section 13.01, (i) Tenant shall only be obligated to remove such Alterations if Landlord, at the time Landlord grants its consent therefor, states in writing that such Alterations must be removed upon expiration or earlier termination of the Term, and (ii) Tenant shall be free at anytime to remove any improvements made by Tenant to its laboratory.
Article 14	Notwithstanding any contrary provisions of Article 14, Tenant has full rights to all of its Personal Property and Landlord waives any rights thereto.
Section 17.01:	Section 17.01 of the Lease is deleted in its entirety and the following is added to the Lease in place thereof:
	Tenant shall at all times during the Lease Term of this Lease or any extension thereof, and at Tenant’s sole cost and expense, clean, keep, maintain, repair and make necessary improvements to the Premises, and every portion thereof and improvement therein including, but not limited to, all plumbing and sewage facilities within the Premises, fixtures, interior walls, floors, ceilings, roof membrane, windows, store front doors, entrances, plate glass, showcases, skylights, HVAC system, all electrical facilities and equipment, including, without limitation,

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lighting fixtures, lamps, fans and any exhaust equipment and systems, electrical motors and all other appliances and equipment of every kind and nature located in, upon or about the Premises or Building in good and sanitary order and condition (usual wear and tear excepted). Landlord shall maintain, repair and make necessary improvements to the structural portions of the Building and to that portion of the Parcel as is not part of the Common Area, including, without limitation, the foundation, exterior walls and roof of the Building (excluding the roof membrane), landscaping and any automatic fire extinguisher equipment within the Building. Maintenance and repair by Landlord of the structural portions of the Premises shall be at Landlord’s cost and expense. Landlord shall paint the exterior of the Building as and when reasonably determined by Landlord to maintain the clean and sanitary appearance of the Building. All glass, both interior and exterior within the Premises, is at the sole risk of Tenant, and any broken glass shall promptly be replaced by Tenant at Tenant’s expense with glass of the same kind, size and quality. Landlord shall obtain an HVAC systems preventative maintenance contract for such systems serving the Premises, which contract shall be paid for by Tenant, and shall provide for and include replacement of filters, oiling and lubricating of machinery, parts replacement, adjustment of drive belts, oil changes and other preventative maintenance. Tenant shall cause the HVAC filters to be replaced every sixty (60) days with respect to the fresh air units and every one hundred twenty (120) days with respect to all other filters. In the event Tenant fails or refuses to perform its maintenance and restoration obligations under this Article 17, Tenant shall pay, as Additional Rent, the costs incurred by Landlord for all maintenance and repairs made or undertaken by Landlord pursuant to this Article 17 if Tenant fails to do so after 30 days’

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	prior written notice. Tenant shall at all times conduct, or caused to be conducted, maintenance on the HVAC system equipment at the Premises in accordance with the requirements of all applicable federal, state, and local laws and regulations. In the event of a leak or other contamination of any Hazardous Substance from the HVAC system, Tenant shall promptly repair such leak or other source of contamination from the HVAC system in accordance with the requirements of such federal, state and local laws and regulations, and in the time period required thereby. Tenant agrees to indemnify, defend, and hold harmless Landlord from and against any and all damages, liabilities, losses, costs and expenses, including reasonable attorneys’ fees, incurred by Landlord as a result of any such leakage or other contamination of Hazardous Substances from said HVAC system, and the repair or failure to repair thereof by Tenant.
Sections 23.01 -06:	Sections 23.01 through 23.06 of the Lease are deleted in their entirety and the following is added to the Lease in place thereof:
	“23.01. Landlord’s Insurance. At all times during the Lease Term, Landlord shall procure and keep in full force and effect the following insurance:
	(a) Special Form property insurance (including earthquake if coverage is available and commercially reasonable) insuring the Building and Improvements, its equipment and Common Area furnishings, all in such amounts and with such deductibles as Landlord considers appropriate.
	(b) Commercial General Liability insuring its interest in the Building and Improvements.

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	(c) Rental Value insurance, in the name of Landlord, with loss payable to Landlord, insuring the full rental and other charges payable by Tenant to Landlord under this Lease for one (1) year (including all real estate taxes, insurance costs, and any scheduled rental increases. Said insurance shall provide that in the event the Lease is terminated by reason of an insured loss, the period of indemnity for such coverage shall be extended beyond the date of the completion of the repairs or replacement of the Premises, to provide one full year’s loss of rental revenues from the date of any such loss. Said insurance shall contain the agreed valuation provision in lieu of any coinsurance clause, and the amount of any coverage shall be adjusted annually to reflect the projected rental income, property taxes, insurance premium costs and other expenses, if any, otherwise payable by Tenant, for the next twelve (12) month period. Tenant shall be liable for any deductible amount in the event of such loss.
	(d) Such other insurance as Landlord reasonably determines from time to time.
Section 23.02	Tenant’s Insurance. Tenant shall, at its sole cost and expense, keep in full force and effect the following insurance:
	(a) Special Form property insurance on “Tenant’s Property” for the full replacement value. Such policy shall contain an agreed amount endorsement in lieu of a coinsurance clause. “Tenant’s Property” is defined to be all improvements, betterments and personal property of Tenant located in or on the Premises, Common Areas or Building, excluding that which may be insured by Landlord’s Special Form property insurance as set forth in paragraph 23.01, above.

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	(b) Commercial General Liability insurance insuring Tenant against any liability arising out of its use, occupancy or maintenance of the Premises or the business operated by Tenant pursuant to this Lease. Such insurance shall be in the amount of at least $3,000,000 per occurrence. Such policy shall name Landlord, Landlord’s wholly owned subsidiaries and agents, and any mortgagees, as additional insureds.
	(c) Worker’s Compensation insurance as required by state law.
	(d) Any other form or forms of insurance or increased amounts of insurance as Landlord or any mortgagees of Landlord may reasonably require from time to time.
	All such policies shall be written in a form and with an insurance company satisfactory to Landlord and any mortgagees of Landlord, and shall provide that Landlord, and any mortgagees of Landlord, shall receive not less than thirty (30) days’ prior written notice of any cancellation. Tenant shall, within thirty (30) days prior to the expiration of such policies, furnish Landlord with renewals or “binders” thereof, or Landlord may order such insurance and charge the cost thereof to Tenant as additional rent.
Section 23.03	Forms of Policies. All policies maintained by Tenant will provide that they may not be terminated nor may coverage be reduced except after thirty (30) days’ prior written notice to Landlord. All Commercial General Liability and Special Form property policies maintained by Tenant shall be written as primary policies, not contributing with and not supplemental to the coverage that Landlord may carry.
Section 23.04	Waiver of Subrogation. Notwithstanding that any loss or damage may be due to or result from the negligence of either Landlord or Tenant,

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	Landlord and Tenant, for themselves and their respective insurers, each waive, to the fullest extent permitted by law, any and all rights to recover against the other, against any subsidiary or joint venture of such other party, against any other tenant or occupant of the project of which the Premises are a part, or against the officers, directors, shareholders, partners, employees, agents, customers, invitees, or business visitors of such other party, of such other tenant or occupant of the project, or any subsidiary or joint venture of such other party, for any loss or damage to the property of such waiving party arising from any cause covered or required to be covered under any of the insurance policies required to be maintained by either Landlord or Tenant pursuant to this Lease.
Section 23.05	Adequacy of Coverage. Landlord, its subsidiaries, agents and employees make no representation that the limits of liability specified to be carried by Tenant pursuant to this Lease are adequate to protect Tenant. If Tenant believes that any of such insurance coverage is inadequate, Tenant will obtain such additional insurance coverage as Tenant deems adequate, at Tenant’s sole cost and expense.
Section 23.06	Certain Insurance Risks. Tenant shall not do or permit to be done any act or thing upon the Premises or the project of which the Premises area part which would (i) jeopardize or be in conflict with fire insurance policies covering the project or fixtures and property in the project, (ii) increase the rate of fire insurance applicable to the project to an amount higher than it otherwise would be for the Permitted Use et forth at paragraph 1.14 of the Lease, or (iii) subject Landlord to any liability or responsibility for the injury to any person or persons or to property by reason of any business or operation being carried on upon the Premises.”

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New Provisions: The Lease is hereby further amended to add the provisions set forth below as items 1 through 10. To the extent such new provisions are inconsistent with any other provisions of the Lease, said new Lease provisions shall prevail.

1. Battery Chargers. Battery charging units not equipped with an automatic shut-off feature can cause substantial and expensive damage to warehouse floors resulting from battery acid spills from over-charged batteries. Tenant acknowledges and agrees that Tenant shall be solely and fully liable for the expense of repair or replacement of floors within the Premises, including concrete slab floors, required as a result of damage caused by battery charging units. In order to reduce the risk that any such damage shall occur, all battery charging units operated or maintained by Tenant at the Premises shall be equipped with an original equipment automatic shut-off feature, or shall have an after-market automatic shut-off device added thereto.

2. Department of Treasury Restrictions. Tenant warrants and represents to Landlord that Tenant is not, and shall not become, a person or entity with whom Landlord is restricted from doing business with under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of Treasury (including, but not limited to, those named on OFAC’s Specifically Designated and Blocked Persons list) or under any statute, executive order (including, but not limited to, the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and shall not engage in any dealings or transaction or be otherwise associated with such persons or entities.

3. Mold and Mildew Control. Tenant shall not use the Premises in any manner that will cause toxic mold, mildew or similar conditions to arise at the Premises. Tenant shall provide appropriate climate control in the Premises, and shall not block or cover any of the heating, ventilation or air-conditioning vents. Tenant shall immediately report to Landlord (i) any evidence of a water leak or excessive moisture in the Premises, (ii) any evidence of mold or mildew in the Premises, and (iii) any failure or malfunction in the heating, ventilation and air-conditioning system serving the Premises. Tenant shall indemnify and hold Landlord harmless from any cost or expense incurred by Landlord in order to remove or eradicate any toxic mold, mildew or similar condition the presence of which at the Premises was caused by Tenant’s specific use of the Premises or breach of its obligations under this Paragraph 3.

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4. Tenant ADA Obligations. Landlord represents and warrants that upon commencement of the Lease Term the Premises comply with the requirements of Title III of the Americans with Disabilities Act of 1990 (42 U.S.C. 12181, et seq., the Provisions Governing Public Accommodations and Services Operated by Private Entities), and all regulations promulgated thereunder (the “ADA”). At all times during the term of this Lease, to the extent triggered by Tenant’s specific use of the Premises, Tenant, at Tenant’s sole cost and expense, shall cause the Premises, and all alterations and improvements in the Premises, and Tenant’s use and occupancy of the Premises, and Tenant’s performance of its obligations under this Lease, to comply with the ADA, and all amendments, revisions or modifications thereto now or hereafter adopted or in effect in connection therewith and to take such actions and make such alternations and improvements as are necessary for such compliance; provided, however, that Tenant shall not make any such alterations or improvements except upon Landlord’s prior written consent pursuant to the terms and conditions of this Lease. If Tenant fails to diligently take such actions or make such alterations or improvements as are necessary for such compliance, Landlord may, but shall not be obligated to, take such actions and make such alterations and improvements and may recover all of the costs and expenses of such actions, alterations and improvements from Tenant as additional rent. Notwithstanding anything in this Lease to the contrary, no act or omission of Landlord, including any approval, consent or acceptance by Landlord or Landlord’s agents, employees or other representatives, shall be deemed an agreement, acknowledgment, warranty or other representation by Landlord that Tenant has complied with the ADA or that any action, alteration or improvement by Tenant complies or will comply with the ADA or constitutes a waiver by Landlord of Tenant’s obligations to comply with the ADA under this Lease or otherwise.

5. Real Property Tax Apportionment. If the Premises and the Parcel are not assessed as a separate tax parcel, then Tenant’s share of the Real Property Taxes assessed to the tax parcel of which the Premises are a part shall be that certain “Tenant’s Property Tax Apportionment Percentage” as defined and determined in the manner described below. Said Tenant’s Property Tax Apportionment Percentage shall be determined by in the following manner: (i) first, the portion of the assessed Land Value set forth in Real Property Tax statement attributable to the Common Area land shall be determined by multiplying said Land

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Value by the quotient arrived at by dividing the square footage of the Common Area land by the square footage of all of the land which is the subject of the Real Property Tax statement (the “Common Area Assessed Value”), (ii) second, the Common Area Assessed Value shall be deducted from the total assessed Land Value shown on the Real Property Tax Statement (the resulting assessed Land Value is referred to herein as the “Allocable Land Value”); (iii) third, the Allocable Land Value is added to assessed Improvements Value as reflected to the Real Property Tax statement, the resulting assessed value being referred to herein as the “Allocable Assessed Value”; (iv) fourth, the total Real Property Tax for the tax parcel of which the Premises are a part as reflected on the Real Property Tax statement shall be reduced by a percentage amount equal to the quotient of the Common Area Assessed Value divided by the sum of the assessed Land Value and assessed Improvements Value as shown on the Real Property Tax statement (the resulting Real Property Tax amount is referred to herein as the “Allocable Property Tax”); (v) fifth, the Allocable Property Tax is divided by the Allocable Assessed Value, the quotient of which is referred to herein as the “Effective Tax Rate”); (vi) sixth, the square footage of the land on which the Premises are located is divided by the square footage of the entire parcel on which the Premises are located less the square footage of the Common Area included therein, and the quotient is then multiplied by the Allocable Land Value, the result of which is the “Premises Land Value”); (vii) seventh, the Premises Land Value is added to the Improvements Value of the Premises (as said term is defined hereinbelow), and the resulting value is referred to herein as the “Assessed Value Allocable to the Premises”), and (viii) eighth, the Assessed Value Allocable to the Premises is multiplied by the Effective Tax Rate to determine Tenant’s allocable share of Real Property Taxes in respect of the tax parcel of which the Premises are a part. Tenant’s Property Tax Apportionment Percentage is then determined by dividing Tenant’s Property Tax by the total Real Property Tax payable with respect to the tax parcel of which the Premises are a part. An example of this apportionment is attached hereto as Exhibit “B.” The “Improvements Value of the Premises” means that portion of the Real Property Taxes assessed in respect of the assessed value of all improvements on the land within the tax parcel based upon the relative value of the improvements comprising the Premises to the value of the improvements comprising all other premises within the tax parcel (such value is referred to herein for each of such premises as the “Improvements Value”). Landlord shall determine said Improvements Value for the Premises (and all other premises within the tax parcel) by allocating to each Premises its pro rata share (based upon relative square footage) of the original shell costs of the improvements, and the costs of all tenant improvements, installations, and other additions and

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alterations which relate solely to or solely benefit each such premises. Tenant’s Property Tax Apportionment Percentage is subject to change each year based upon changes in the assessed valuation of the improvements located in the tax parcel of which the Premises are a part by either (i) increasing such Percentage if the assessed value of improvements increases as a result of improvements to the Premises, or additional assessments or impositions which constitute Real Property Taxes are levied on the subject tax parcel, or (ii) decreasing such percentage if the assessed value of improvements increases as a result of improvements to premises of other tenants within the tax parcel, or assessments or impositions which constitute Real Property Taxes on the subject tax parcel are removed or have been paid in full. Landlord shall furnish Tenant with the actual Real Property Taxes bill.

6. Audit Rights. Notwithstanding any sections of the Lease to the contrary, in the event of any dispute regarding the amount due as Common Area Expense, Tenant shall have the right, after reasonable notice and at reasonable times, to inspect and photocopy Landlord’s accounting records at such location as Landlord may designate in Orange County, California. If, after such inspection and photocopying, Tenant continues to dispute the amount of Common Area Expense, Tenant shall be entitled to retain an independent company to audit and/or review Landlord’s records to determine the proper amount of Common Area Operating Expense due from Tenant. Such inspection and audit rights shall lapse with respect to the period covered by Landlord’s statement given under Paragraph 18.07 (“Statement”) unless exercised by Tenant within eighteen (18) months after receipt of the Statement. Such audit company shall be compensated only on a flat fee or hourly basis. No such audit company shall be compensated in whole or in part on a contingency fee basis. If such audit or review reveals that Landlord has overcharged Tenant, then within thirty (30) days after the results of such audit are made available to Landlord, Landlord shall reimburse Tenant the amount of such overcharge. If the audit reveals that Tenant was undercharged, then within thirty (30) days after the results of the audit are made available to Tenant, Tenant shall reimburse Landlord the amount of such undercharge. If Landlord desires to contest such audit results, Landlord may do so by submitting the results of the audit to arbitration to the American Arbitration Association in Orange, California, under its Commercial Rules within ten (10) business days of receipt of the result of the audit, and the arbitration shall be final and binding upon Landlord and Tenant. Judgment on the award can be entered in a court of competent jurisdiction. Landlord’s obligation, if any, to pay such overage shall be abated during such arbitration proceeding. Tenant agrees to pay

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the cost of such audit, provided that, if the audit reveals that Landlord’s determination of Common Area Operating Expense due from Tenant as set forth in any Statement sent to Tenant was in error in Landlord’s favor by three percent (3%) or more, Landlord shall pay the cost of such audit.

7. Permitted Assignment. Notwithstanding any contrary provisions contained in the Lease, Tenant may, upon written notice to Landlord, but without obtaining Landlord’s prior consent, without constituting a default under the Lease, and without triggering any recapture or termination rights in favor of Landlord, assign the Lease or sublet all or any portion of the Premises to (a) any entity formed by Tenant, provided Tenant owns or beneficially controls a majority of the outstanding ownership interest in such entity, (b) any parent or subsidiary entity of Tenant, (c) any person or entity that acquires all or substantially all of Tenant’s assets, or (d) any entity with which Tenant merges, regardless of whether Tenant is the surviving entity. In addition, an assignment or sublet shall not include, and Landlord’s consent shall not be required for, any sale or other transfer of any shares of Tenant’s capital stock, including, but not limited to, (i) any initial or subsequent public offering by Tenant, or (ii) if Tenant is a public company, the sale or transfer of Tenant’s stock to take Tenant private. In addition to the foregoing, Tenant may, upon written notice to Landlord, but without obtaining Landlord’s consent, without constituting a default under the Lease, and without triggering any termination or recapture right, sublease up to fifty percent (50%) of the rentable square feet in the Premises, provided that such sublease is in accordance with all requirements of the Lease, including without limitation the permitted use, and with Tenant retaining 100% of the net subleasing proceeds.

8. Roof Access. Tenant shall have the right, without rental or other charge, to use a portion of the roof to install, operate and maintain telecommunications antennas, microwave dishes and other communications equipment. Such use shall be subject to receipt of all required governmental approvals, compliance with the CC&Rs, the Irvine CC&Rs, and all other applicable restrictions affecting the Premises, and shall not interfere with the Building Systems. Tenant will pay for any damage to or abnormal wear and tear to the roof area to which said equipment is installed or utilized as access to the area of installation. The location of such equipment shall be mutually acceptable to both Landlord and Tenant.

9. Back-Up Power Generation. Tenant shall have the right, at its sole cost and expense, to install, maintain and operate a back-up power generation system (the “Power Generator”) to

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service the Premises in the event of a power failure. Such installation and use shall be subject to compliance with the CC&Rs, the Irvine CC&Rs, and all other applicable restrictions affecting the Premises, and to receipt of all required governmental approvals and shall not interfere with the Building Systems. The Power Generator shall remain the personal property of Tenant and may be removed by Tenant at any time, provided Tenant repairs any damage to the Premises caused by such removal. Landlord’s approval rights as to the Power Generator shall be limited to reasonable and material reasons (which specifically affect the following): (a) adverse affect on the Building Systems; (b) non-compliance with applicable codes, the CC&Rs, the Irvine CC&Rs, and all other applicable restrictions affecting the Premises, and (iii) unreasonable interference with the business operations of other tenants.

10. Additional Build-Out; Parking Allocation. Notwithstanding any contrary provisions of the Lease, the parties hereby acknowledge and agree that Tenant may, without obtaining Landlord’s prior consent, but subject to obtaining all governmental permits and approvals, convert any existing warehouse space into additional single-story laboratory and/or office space. Landlord hereby represents and warrants to Tenant that Landlord has sufficient parking within the Project allocated for such contemplated conversion by Tenant, and that Landlord shall not grant any other party rights to such parking if such grant would prohibit Tenant’s planned conversion of warehouse space to laboratory and/or office space.

Landlord and Tenant acknowledge and accept the specific terms of this Fifth Amendment to the Lease.

LANDLORD:		TENANT:
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a Wisconsin corporation, By Northwestern Investment Management Company, LLC, A		CORTEX PHARMACEUTICALS, INC.
Delaware limited liability company, its wholly-owned affiliate and authorized representative		By:	/s/ Maria S. Messinger
		Printed Name:	Maria S. Messinger
		Its:	VP and CFO
By:	/s/ Don Morton
Printed Name:	Donald L. Morton Jr.
Its:	Director-Field Asset Management

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EX-10.80

Exhibit 10.80

CORTEX PHARMACEUTICALS, INC.

(Incentive or Non-qualified) Stock Option Agreement

Agreement No.             

This Stock Option Agreement (“Agreement”) is entered into as of                      by and between Cortex Pharmaceuticals, Inc., a Delaware corporation (the “Company”) and                      (the “Optionee”) pursuant to the Company’s 1996 Stock Incentive Plan (the “Plan”).

1. Grant of Option. The Company hereby grants to Optionee an option (the “Option”) to purchase all or any portion of a total of              shares (the “Shares”) of the Common Stock of the Company at a purchase price of $             per share (the “Exercise Price”), subject to the terms and conditions set forth herein and the provisions of the Plan.

If the Notice of Grant of Stock Options (the “Notice of Grant”) dated                      and accompanying this Agreement indicates that this is an “Incentive” option, then this Option is intended to qualify as an “incentive stock option” as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). If this Option fails in whole or in part to qualify as an incentive stock option, or if the Notice of Grant indicates the Option is a “Nonqualified” option, then this Option shall to that extent be a nonqualified stock option.

2. Vesting of Option. The right to exercise this Option shall vest in installments, and this Option shall be exercisable from time to time in whole or in part as to any vested installment, in accordance with the vesting schedule as provided in the Notice of Grant.

No additional shares shall vest after, and the portion of the Option related to such additional shares shall terminate upon the date of, termination of Optionee’s “Continuous Service” (as defined in Section 3 below), but this Option shall continue to be exercisable in accordance with Section 3 hereof with respect to that number of shares that have vested as of the date of termination of Optionee’s Continuous Service.

3. Term of Option. Optionee’s right to exercise this Option shall terminate upon the first to occur of the following:

(a) the expiration of              years from the date of this Agreement;

(b) the expiration of three months from the date of termination of Optionee’s Continuous Service if such termination occurs for any reason other than permanent disability or death; provided, however, that if Optionee dies during such three-month period the provisions of Section 3(d) below shall apply;

(c) the expiration of one year from the date of termination of Optionee’s Continuous Service if such termination is due to permanent disability of the Optionee (as defined in Section 22(e)(3) of the Code); or

(d) the expiration of one year from the date of termination of Optionee’s Continuous Service if such termination is due to Optionee’s death or if death occurs during the period following termination of Optionee’s Continuous Service pursuant to Section 3(b) above;

(e) the consummation of a Change in Control unless otherwise provided pursuant to Section 8 hereof.

As used herein, the term “Continuous Service” means (i) employment by either the Company or any parent or subsidiary corporation of the Company, or by a corporation or a parent or subsidiary of a corporation issuing or assuming a stock option in a transaction to which Section 424(a) of the Code applies, which is uninterrupted except for vacations, illness (except for permanent disability, as defined in Section 22(e)(3) of the Code), or leaves of absence which are approved in writing by the Company or any of such other employer corporations, if applicable, (ii) service as a member of the Board of Directors of the Company until Optionee resigns, is removed from office, or Optionee’s term of office expires and he or she is not reelected, or (iii) so long as Optionee is engaged as a consultant or service provider to the Company or other corporation referred to in clause (i) above.

4. Exercise of Option. Prior to termination of this Option in accordance with Section 3 above, this Option may be exercised in whole or in part by the Optionee (or, after his or her death, by the person designated in Section 5 below) upon delivery of the following to the Company at its principal executive offices:

(a) a written notice of exercise that identifies this Agreement and states the number of Shares then being purchased (but no fractional Shares may be purchased);

(b) a check or cash in the amount of the Exercise Price (or payment of the Exercise Price in such other form of lawful consideration as the Administrator may approve from time to time under the provisions of Section 5.3 of the Plan); and

(c) a check or cash in the amount reasonably requested by the Company to satisfy the Company’s withholding obligations under federal, state or other applicable tax laws with respect to the taxable income, if any, recognized by the Optionee in connection with the exercise of this Option (unless the Company and Optionee shall have made other arrangements for deductions or withholding from Optionee’s wages, bonus or other compensation payable to Optionee, provided such arrangements satisfy the requirements of applicable tax laws in the opinion of the Company’s tax advisors).

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5. Death of Optionee; No Assignment. The rights of the Optionee under this Agreement may not be assigned or transferred except by will or by the laws of descent and distribution, and may be exercised during the lifetime of the Optionee only by such Optionee. Any attempt to sell, pledge, assign, hypothecate, transfer or dispose of this Option in contravention of this Agreement or the Plan shall be void and shall have no effect. If the Optionee’s Continuous Service terminates as a result of his or her death, and provided Optionee’s rights hereunder shall have vested pursuant to Section 2 hereof, Optionee’s legal representative, his or her legatee, or the person who acquired the right to exercise this Option by reason of the death of the Optionee (individually, a “Successor”) shall succeed to the Optionee’s rights and obligations under this Agreement. After the death of the Optionee, only a Successor may exercise this Option.

6. Limitation of Company’s Liability for Nonissuance. The Company agrees to use its reasonable best efforts to obtain from any applicable regulatory agency such authority or approval as may be required in order to issue and sell the Shares to the Optionee pursuant to this Option. Inability of the Company to obtain, from any such regulatory agency, authority or approval deemed by the Company’s counsel to be necessary for the lawful issuance and sale of the Shares hereunder and under the Plan shall relieve the Company of any liability in respect of the nonissuance or sale of such shares as to which such requisite authority or approval shall not have been obtained.

7. Adjustments Upon Changes in Capital Structure. In the event that the outstanding shares of Common Stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of a recapitalization, stock split, combination of shares, reclassification, stock dividend or other change in the capital structure of the Company, then appropriate adjustments shall be made by the Administrator to the number of Shares subject to the unexercised portion of this Option and to the Exercise Price per share, in order to preserve, as nearly as practical, but not to increase, the benefits of the Optionee under this Option, in accordance with the provisions of Section 4.2 of the Plan.

8. Change in Control. In the event of a Change in Control (as defined below) of the Company, the Administrator in its discretion may take one or more of the following actions: (a) provide for the purchase of this Option for an amount of cash or other property that could have been received upon the exercise of this Option had this Option been currently exercisable, (b) adjust the terms of this Option in a manner determined by the Administrator to reflect the Change in Control, (c) cause the Option to be continued or assumed, or new rights substituted therefor, by the surviving or another entity, through the continuance of the Plan and the continuation or assumption of this Option, or the substitution for this Option of a new option of comparable value covering shares of a successor corporation, with appropriate adjustments as to the number and kind of shares and Exercise Price, in which event the Plan and this Option, or the new option

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shall continue in the manner and under terms so provided or (d) make such other provision as the Administrator may consider equitable. If the Administrator does not take any of the forgoing actions, this Option shall terminate upon the consummation of the Change in Control and the Administrator shall cause written notice of the proposed transaction to be given to the Optionee not less than fifteen (15) days prior to the anticipated effective date of the proposed transaction, provided however that whether or not provision is made for continuance of the Plan and the continuance, assumption or substitution of outstanding Options, then concurrent with the effective date of the Change of Control, all Options not previously terminated shall be accelerated and concurrent with such date, the holders of such Options shall have the right to exercise such Options in respect to any or all shares subject thereto.

For purposes of this Agreement, the term “Change in Control” shall mean (i) the acquisition, directly or indirectly, by any person or group (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) of the beneficial ownership of more than fifty percent (50%) of the outstanding securities of the Company; (ii) a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated; (iii) the sale, transfer or other disposition of all or substantially all of the assets of the Company; (iv) a complete liquidation or dissolution of the Company; or (v) any reverse merger in which the Company is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such merger.

9. No Employment Contract Created. Neither the granting of this Option nor the exercise hereof shall be construed as granting to the Optionee any right with respect to continuance of employment by the Company or any of its subsidiaries. The right of the Company or any of its subsidiaries to terminate at will the Optionee’s employment at any time (whether by dismissal, discharge or otherwise), with or without cause, is specifically reserved.

10. Rights as Shareholder. The Optionee (or transferee of this option by will or by the laws of descent and distribution) shall have no rights as a shareholder with respect to any Shares covered by this Option until such Option has been duly exercised and certificates representing shares purchased upon such exercise have been issued to such person.

11. “Market Stand-Off” Agreement. Optionee agrees that, if requested by the Company or the managing underwriter of any proposed public offering of the Company’s securities, Optionee will not sell or otherwise transfer or dispose of any Shares held by Optionee without the prior written consent of the Company or such underwriter, as the case may be, during such period of time, not to exceed 180 days following the effective date of the registration statement filed by the Company with respect to such offering, as the Company or the underwriter may specify.

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12. Interpretation. This Option is granted pursuant to the terms of the Plan, and shall in all respects be interpreted in accordance therewith. The Administrator shall interpret and construe this Option and the Plan, and any action, decision, interpretation or determination made in good faith by the Administrator shall be final and binding on the Company and the Optionee. As used in this Agreement, the term “Administrator” shall refer to the committee of the Board of Directors of the Company appointed to administer the Plan, and if no such committee has been appointed, the term Administrator shall mean the Board of Directors.

13. Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed given when delivered personally or three days after being deposited in the United States mail, as certified or registered mail, with postage prepaid and addressed, if to the Company, at its principal place of business, Attention: Chief Financial Officer, and if to the Optionee, at his or her most recent address as shown in the employment or stock records of the Company.

14. Annual and Other Periodic Reports. During the term of this Agreement, the Company will furnish to the Optionee copies of all annual and other periodic financial and informational reports that the Company distributes generally to its shareholders.

15. Governing Law. The validity, construction, interpretation and effect of this Option shall be governed by and determined in accordance with the laws of the State of Delaware.

16. Severability. Should any provision or portion of this Agreement be held to be unenforceable or invalid for any reason, the remaining provisions and portions of this Agreement shall be unaffected by such holding.

17. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall be deemed one instrument.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

CORTEX PHARMACEUTICALS, INC.,	“OPTIONEE”
a Delaware corporation
By:
	Signature
Its:

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EX-10.81

Exhibit 10.81

CORTEX PHARMACEUTICALS, INC.

RESTRICTED STOCK AWARD AGREEMENT

UNDER

1996 STOCK INCENTIVE PLAN

THIS RESTRICTED STOCK AWARD AGREEMENT (the “Agreement”) is entered into as of                              by and between                              (hereinafter referred to as “Grantee”), and Cortex Pharmaceuticals, Inc., a Delaware corporation (hereinafter referred to as the “Company”), pursuant to the Company’s 1996 Stock Incentive Plan (the “Plan”). Any capitalized term not defined herein shall have the same meaning ascribed to it in the Plan.

R E C I T A L S:

A. Grantee is an employee, director, consultant or other Service Provider, and in connection therewith has rendered services for and on behalf of the Company.

B. The Company desires to issue shares of common stock to Grantee to encourage the continued service of Grantee as an employee of the Company and to exert added effort towards its growth and success, which service is of benefit to the Company.

C. The Company desires to impose certain restrictions on the shares of Common Stock granted hereunder for the benefit of the Company.

D. Such grant is being made to Grantee in addition to, and not in lieu of, any other form of compensation otherwise payable or to be paid to Grantee.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, and for other good and valuable consideration, the parties agree as follows:

1. Issuance of Shares. The Company hereby offers to issue to Grantee an aggregate of                              shares of Common Stock of the Company (the “Shares”) on the terms and conditions herein set forth. Unless this offer is earlier revoked in writing by the Company, Grantee shall have ten (10) days from the date of the delivery of this Agreement to Grantee to accept the offer of the Company by executing and delivering to the Company two copies of this Agreement, without condition or reservation of any kind whatsoever.

2. Vesting of Shares.

(a) Subject to Sections 2(b)-(c) below, the Shares acquired hereunder shall vest and become “Vested Shares” as to                          Percent (    %) of the Shares on the first anniversary of the effective date of this Agreement, and thereafter, the balance of the Shares shall become Vested Shares in a series of                              (    ) successive equal annual installments for each year of Continuous Service provided by the Grantee, such that 100% of the Shares shall be Vested Shares on the                              anniversary of this Agreement. Shares which have not yet become vested are herein called “Unvested Shares.” No additional shares shall vest after the date of termination of Grantee’s Continuous Service.

As used herein, the term “Continuous Service” means (i) employment by either the Company or any parent or subsidiary corporation of the Company, or by any successor entity

following a Change in Control, which is uninterrupted except for vacations, illness (except for permanent disability, as defined in Section 22(e)(3) of the Code), or leaves of absence which are approved in writing by the Company or any of such other employer corporations, if applicable, (ii) service as a member of the Board of Directors of the Company until Grantee resigns, is removed from office, or Grantee’s term of office expires and he or she is not reelected, or (iii) so long as Grantee is engaged as a consultant or Service Provider to the Company or other corporation referred to in clause (i) above.

(b) Notwithstanding Section 2(a), if Grantee holds Shares at the time a Change in Control occurs, all Forefeiture Rights shall automatically terminate immediately prior to the consummation of such Change in Control, and the Shares subject to those terminated Forefeiture Rights shall immediately vest in full, except to the extent that this Agreement is continued, assumed, or substituted for by the acquiring or successor entity (or parent thereof) in connection with such Change in Control. If the Forefeiture Rights automatically terminate in accordance with the provisions of this subsection (b), then the Administrator shall cause written notice of the Change in Control transaction to be given to Grantee not less than fifteen (15) days prior to the anticipated effective date of the proposed transaction.

(c) However, if in the event of a Change in Control the acquiring or successor entity (or parent thereof) provides for the continuance or assumption of this Agreement or the substitution for this Agreement of a new agreement of comparable value covering shares of a successor corporation (with appropriate adjustments as to the number and kind of shares and the purchase price), then the Forefeiture Rights shall not terminate, and vesting of the Shares shall continue in accordance with Section 2(a) above.

(d) IF, WITH RESPECT TO ANY UNVESTED SHARES, THE GRANTEE WISHES TO MAKE THE ELECTION SET FORTH IN SECTION 83(B) OF THE CODE, HE OR SHE MUST DELIVER TO THE COMPANY A COPY OF THE SIGNED AND COMPLETED NOTICE OF ELECTION THAT GRANTEE FILED WITH THE INTERNAL REVENUE SERVICE WITHIN THIRTY (30) DAYS OF THE DATE SPECIFIED IN THE FIRST PARAGRAPH OF THIS AGREEMENT. A FORM OF ELECTION IS ATTACHED HERETO AND LABELED EXHIBIT A.

3. Forfeiture Rights Upon Termination of Service.

(a) Deposit of Unvested Shares. Grantee shall deposit with the Company certificates representing the Unvested Shares, together with a duly executed stock assignment separate from certificate in blank (a form of which is attached hereto as Exhibit B), which shall be held by the Secretary of the Company. Grantee shall be entitled to vote and to receive dividends and distributions on all such deposited Unvested Shares.

(b) Forfeiture and Cancellation of Unvested Shares upon Termination. In the event that the Grantee’s Continuous Service terminates for any reason, all Unvested Shares as of the Termination Date shall be immediately forfeited, cancelled and shall become null and void (the “Forfeiture Rights”). The Company shall cancel the certificates then deposited with the Company evidencing the Unvested Shares and reissue a new certificate to Grantee evidencing only the Vested Shares, if any, as of the Termination Date.

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(c) Termination. The provisions of this Section 3 shall automatically terminate in accordance with Section 2(b) above.

(d) Assignment. The Company may assign its right under this Section 3 without the consent of the Grantee.

4. Restrictions on Unvested Shares. Unvested Shares may not be sold, transferred, pledged, or otherwise disposed of, except that such Unvested Shares may be transferred to a trust established for the sole benefit of the Grantee and/or his or her spouse, children or grandchildren. Any Unvested Shares that are transferred as provided herein remain subject to the terms and conditions of this Agreement.

5. Adjustments Upon Changes in Capital Structure. In the event that the outstanding Shares of Common Stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of a recapitalization, stock split, combination of shares, reclassification, stock dividend, or other change in the capital structure of the Company, then Grantee shall be entitled to new or additional or different shares of stock or securities, in order to preserve, as nearly as practical, but not to increase, the benefits of Grantee under this Agreement, in accordance with the provisions of Section 4.2 of the Plan. Such new, additional or different shares shall be deemed “Shares” for purposes of this Agreement and subject to all of the terms and conditions hereof.

6. Shares Free and Clear. All Shares returned to the Company pursuant to this Agreement shall be delivered by Grantee free and clear of all claims, liens and encumbrances of every nature (except the provisions of this Agreement and any conditions concerning the Shares relating to compliance with applicable federal or state securities laws), and the Company shall acquire full and complete title and right to all of such Shares, free and clear of any claims, liens and encumbrances of every nature (again, except for the provisions of this Agreement and such securities laws).

7. Limitation of Company’s Liability for Nonissuance; Unpermitted Transfers.

(a) The Company agrees to use its reasonable best efforts to obtain from any applicable regulatory agency such authority or approval as may be required in order to issue and sell the Shares to Grantee pursuant to this Agreement. The inability of the Company to obtain, from any such regulatory agency, authority or approval deemed by the Company’s counsel to be necessary for the lawful issuance and sale of the Shares hereunder and under the Plan shall relieve the Company of any liability in respect of the nonissuance or sale of such Shares as to which such requisite authority or approval shall not have been obtained.

(b) The Company shall not be required to: (i) transfer on its books any Shares of the Company which shall have been sold or transferred in violation of any of the provisions set forth in this Agreement, or (ii) treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so transferred.

8. Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed given when delivered personally or three (3) days after being deposited in the United States mail, as certified or registered mail, with postage prepaid, (or by such other method as the Administrator may from time to time deem appropriate), and

3

addressed, if to the Company, at its principal place of business, Attention: Chief Financial Officer, and if to the Grantee, at his or her most recent address as shown in the employment or stock records of the Company.

9. Binding Obligations. All covenants and agreements herein contained by or on behalf of any of the parties hereto shall bind and inure to the benefit of the parties hereto and their permitted successors and assigns.

10. Captions and Section Headings. Captions and section headings used herein are for convenience only, and are not part of this Agreement and shall not be used in construing it.

11. Amendment. This Agreement may not be amended, waived, discharged, or terminated other than by written agreement of the parties.

12. Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior or contemporaneous written or oral agreements and understandings of the parties, either express or implied.

13. Assignment. Grantee shall have no right, without the prior written consent of the Company, to (i) sell, assign, mortgage, pledge or otherwise transfer any interest or right created hereby, or (ii) delegate his or her duties or obligations under this Agreement. This Agreement is made solely for the benefit of the parties hereto, and no other person, partnership, association or corporation shall acquire or have any right under or by virtue of this Agreement.

14. Severability. Should any provision or portion of this Agreement be held to be unenforceable or invalid for any reason, the remaining provisions and portions of this Agreement shall be unaffected by such holding.

15. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one agreement and any party hereto may execute this Agreement by signing any such counterpart. This Agreement shall be binding upon Grantee and the Company at such time as the Agreement, in counterpart or otherwise, is executed by Grantee and the Company.

16. Governing Law. This Agreement shall be construed in accordance with the laws of the State of Delaware without reference to choice of law principles, as to all matters, including, but not limited to, matters of validity, construction, effect or performance.

17. No Agreement to Employ. Nothing in this Agreement shall affect any right with respect to continuance of employment by the Company or any of its subsidiaries. The right of the Company or any of its subsidiaries to terminate at will the Grantee’s employment at any time (whether by dismissal, discharge or otherwise), with or without cause, is specifically reserved, subject to any other written employment agreement to which the Company and Grantee may be a party.

18. “Market Stand-Off” Agreement. Grantee agrees that, if requested by the Company or the managing underwriter of any proposed public offering of the Company’s securities, Grantee will not sell or otherwise transfer or dispose of any Shares held by Grantee without the prior written

4

consent of the Company or such underwriter, as the case may be, during such period of time, not to exceed 180 days following the effective date of the registration statement filed by the Company with respect to such offering, as the Company or the underwriter may specify.

19. Withholding. Grantee agrees to promptly pay the Company an aggregate amount sufficient to satisfy all Federal, state, local and foreign income and employment withholding tax requirements applicable to the issuance and vesting of the Shares as contemplated by this Agreement. In particular, and without limitation, in the event that Grantee declines to make an election under Section 83(b) of the Code, Grantee agrees to promptly pay the Company an amount sufficient to satisfy the aforementioned tax requirements on each date during the term of the Agreement when a portion of the Shares acquired hereunder become Vested Shares.

20. Tax Elections. GRANTEE UNDERSTANDS THAT GRANTEE (AND NOT THE COMPANY) SHALL BE RESPONSIBLE FOR THE GRANTEE’S OWN TAX LIABILITY THAT MAY ARISE AS A RESULT OF THE ACQUISITION OF THE SHARES. GRANTEE ACKNOWLEDGES THAT GRANTEE HAS CONSIDERED THE ADVISABILITY OF ALL TAX ELECTIONS IN CONNECTION WITH THE ISSUANCE OF THE SHARES, INCLUDING THE MAKING OF AN ELECTION UNDER SECTION 83(b) UNDER THE CODE; GRANTEE FURTHER ACKNOWLEDGES THAT THE COMPANY HAS NO RESPONSIBILITY FOR THE MAKING OF SUCH SECTION 83(b) ELECTION. IN THE EVENT GRANTEE DETERMINES TO MAKE A SECTION 83(b) ELECTION, GRANTEE AGREES TO TIMELY PROVIDE A COPY OF THE ELECTION TO THE COMPANY AS REQUIRED UNDER THE CODE.

21. Attorneys’ Fees. If any party shall bring an action in law or equity against another to enforce or interpret any of the terms, covenants and provisions of this Agreement, the prevailing party in such action shall be entitled to recover from the other party reasonable attorneys’ fees and costs.

[Signature Page Follows]

5

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

THE COMPANY:	GRANTEE:
CORTEX PHARMACEUTICALS, INC.
By:
Name:
Title:
	Address:

6

CONSENT AND RATIFICATION OF SPOUSE

The undersigned, the spouse of                             , a party to the attached Restricted Stock Award Agreement (the “Agreement”), dated as of                             , hereby consents to the execution of said Agreement by such party; and ratifies, approves, confirms and adopts said Agreement, and agrees to be bound by each and every term and condition thereof as if the undersigned had been a signatory to said Agreement, with respect to the Shares (as defined in the Agreement) made the subject of said Agreement in which the undersigned has an interest, including any community property interest therein.

I also acknowledge that I have been advised to obtain independent counsel to represent my interests with respect to this Agreement but that I have declined to do so and I hereby expressly waive my right to such independent counsel.

Date:
	(Signature)
	(Print Name)

EXHIBIT A

ELECTION TO INCLUDE IN GROSS INCOME IN YEAR OF GRANT OF RESTRICTED SHARES

PURSUANT TO SECTION 83(b) OF THE INTERNAL REVENUE CODE OF 1986 (AS AMENDED)

The undersigned hereby elects pursuant to Section 83(b) of the Internal Revenue Code of 1986 (as amended) with respect to the property described below and supplies the following information in accordance with the regulations promulgated thereunder:

1. The Name, Address and Taxpayer Identification Number of the person making this election and such person’s spouse, if any:

Name :

Address:

Taxpayer Identification Number:

2. Description of the property with respect to which the election is being made:

             (number of shares) of Common Stock, par value $             per share, of Cortex Pharmaceuticals, Inc.

3. The date on which property was transferred is                              (date specified in first paragraph of the Agreement).

4. The taxable year to which this election relates is calendar year             .

5. The Fair Market Value.

The fair market value on the date specified in Item 3 above (determined without regard to any restrictions other than restrictions which by their terms never lapse) of the property with respect to which this election is being made is $             per share.

6. Amount paid for the property transferred.

The amount paid by the taxpayer for the property specified in Item 2 above is $             per share.

7. Furnishing statement to the Company.

A copy of this statement has been furnished to Cortex Pharmaceuticals, Inc.

Dated:
	(name of taxpayer)

A-1

EXHIBIT B

STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE

FOR VALUE RECEIVED, the undersigned,                             , hereby assigns and transfers unto Cortex Pharmaceuticals, Inc., a Delaware corporation (“Cortex”), a total of              shares of the Common Stock of Cortex, standing in its name on the books of said Corporation represented by Certificate No.             , and does hereby irrevocably constitute and appoint                              as its attorney, to transfer said shares on the share register of the within named Corporation, with full power of substitution.

Dated:             , 200	By:
		[Name Printed]

B-1

EX-10.82

Exhibit 10.82

AMENDMENT TO EMPLOYMENT AGREEMENT DATED MAY 17, 2000 BETWEEN CORTEX PHARMACEUTICALS AND JAMES H. COLEMAN

This Amendment, effective as of January 1, 2004, hereby amends Section 6(a) and 6(d) as follows:

“6 Compensation. As compensation for the services to rendered hereunder, the Company agrees as follows:

(a) Effective January 1, 2004, to pay the Executive an annual salary of $210,000 per annum, subject to increase based on annual review by the Compensation Committee of the Board of Directors.

(b) Executive will also be eligible to receive an incentive bonus of between 0% and 50% of his annual base salary based upon review of Executive’s performance and achievements by his immediate supervisor, and Company performance, in the year under consideration. Whether such bonus shall be paid in any given year and the amount of such bonus shall be determined by your immediate supervisor, subject to review and approval by the Compensation Committee of the Board of Directors. Such bonus shall accrue and be paid only if the Board of Directors in its sole discretion determines that the Company has sufficient financial resources to do so.

IN WITNESS HEREOF, the parties hereto have executed this Amendment to Employment Agreement to be effective as of the day and year first above written.

CORTEX PHARMACEUTICALS, INC.

/s/ Roger G. Stoll

Roger G. Stoll, Ph.D.

President and Chief Executive Officer

EXECUTIVE

/s/ James H. Coleman

James H. Coleman

EX-10.83

Exhibit 10.83

AMENDMENT TO EMPLOYMENT AGREEMENT DATED JUNE 5, 1995, BETWEEN CORTEX PHARMACEUTICALS AND GARY A. ROGERS, Ph.D.

This Amendment, effective as of January [1], 2004, hereby amends Section 2 as follows:

“Effective January [1] 2004, you will receive a base annual salary of $210,000, paid in accordance with the Company’s normal payroll practices. You will also be entitled to vacation, coverage under the Company’s Group Health Plan and other benefits that the Company provides to comparable employees. You will also be eligible to receive an incentive bonus of between 0% and 50% of your annual base salary based upon review of your performance and achievements by your immediate supervisor, and Company performance, in the year under consideration. Whether such bonus shall be paid in any year and the amount of such bonus shall be the sole determination by your immediate supervisor, subject to review and approval by the Compensation Committee of the Board of Directors. Such bonus shall accrue and be paid only if the Board of Directors in its sole discretion determines that the Company has sufficient financial resources to do so.

IN WITNESS HEREOF, the parties hereto have executed this Amendment to Employment Agreement to be effective as of the day and year first above written.

CORTEX PHARMACEUTICALS, INC.

/s/ Roger G. Stoll

Roger G. Stoll, Ph.D.

President and Chief Executive Officer

EXECUTIVE

/s/ Gary A. Rogers

Gary A. Rogers, Ph.D.

EX-23.1

EXHIBIT 23.1

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-3 No. 333-108948 and No. 333-112043) of Cortex Pharmaceuticals, Inc. and in the related Prospectus and in the Registration Statements (Form S-8 No. 333-102042, No. 333-82477 and No. 333-20777) pertaining to the 1996 Stock Incentive Plan, the 1989 Incentive Stock Option, Nonqualified Stock Option and Stock Purchase Plan, the 1989 Special Nonqualified Stock Option and Stock Purchase Plan, and the Executive Stock Plan, of Cortex Pharmaceuticals, Inc. of our report dated July 27, 2004, with respect to the financial statements of Cortex Pharmaceuticals, Inc. included in its Annual Report (Form 10-K) for the year ended June 30, 2004.

/s/ Ernst & Young LLP

San Diego, California

September 22, 2004

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Roger G. Stoll, Ph.D., certify that:

1. I have reviewed this annual report on Form 10-K of Cortex Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; and

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986]

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely

affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 27, 2004

/s/ Roger G. Stoll

Roger G. Stoll, Ph.D.

Chairman, President and

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Maria S. Messinger, certify that:

1. I have reviewed this annual report on Form 10-K of Cortex Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986]

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 27, 2004

/s/ Maria S. Messinger

Maria S. Messinger

Vice President, Chief Financial Officer and Secretary

EX-32

EXHIBIT 32

Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of

the Sarbanes-Oxley Act of 2002

Roger G. Stoll, Ph.D., President and Chief Executive Officer of Cortex Pharmaceuticals, Inc. (the “Company”), and Maria S. Messinger, Chief Financial Officer of the Company, each certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1) the Annual Report on Form 10-K of the Company for the fiscal year ended June 30, 2004 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 780(d)); and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: September 27, 2004	/s/ Roger G. Stoll
	Roger G. Stoll, Ph.D.
	Chairman, President and Chief Executive Officer
Dated: September 27, 2004	/s/ Maria S. Messinger
	Maria S. Messinger
	Vice President, Chief Financial Officer and Secretary