10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 2005

¨ 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 1-16467

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 No.)

15241 Barranca Parkway, Irvine, California 92618

(Address of principal executive offices, including zip code)

(949) 727-3157

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name, former address and former fiscal year,

if changed since last report)

Indicate by mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

YES x    NO ¨

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

32,763,122 shares of Common Stock as of August 9, 2005

CORTEX PHARMACEUTICALS, INC.

INDEX

		Page Number
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements and Notes (Unaudited)
	Condensed Balance Sheets — June 30, 2005 and December 31, 2004	3
	Condensed Statements of Operations — Three months ended June 30, 2005 and 2004 and six months ended June 30, 2005 and 2004	4
	Condensed Statements of Cash Flows — Six months ended June 30, 2005 and 2004	5
	Notes to Condensed Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	21
PART II. OTHER INFORMATION
Item 6.	Exhibits	22
SIGNATURES		22

Items 1-5 of Part II have been omitted because they are not applicable with respect to the current reporting period.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Cortex Pharmaceuticals, Inc.

Condensed Balance Sheets

	(Unaudited) June 30, 2005			(Note) December 31, 2004
Assets
Current assets:
Cash and cash equivalents	$	879,567		$	9,157,315
Marketable securities		21,677,507			18,838,601
Accounts receivable		9,440			41,738
Other current assets		229,930			317,850
Total current assets		22,796,444			28,355,504
Furniture, equipment and leasehold improvements, net		472,125			387,818
Capitalized financing costs		—			1,135,724
Other		33,407			33,407
	$	23,301,976		$	29,912,453
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,154,446		$	1,365,604
Accrued wages, salaries and related expenses		354,240			263,959
Unearned licensing revenue		137,281			377,524
Advance for MCI project		281,490			277,978
Total current liabilities		1,927,457			2,285,065
Unearned licensing revenue, net of current, and other long-term liabilities		97,515			22,576
Common stock warrants		—			3,958,165
Total liabilities		2,024,972			6,265,806
Stockholders’ equity:
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: 50,000,000; shares issued and outstanding: 32,763,122 (June 30, 2005) and 32,688,636 (December 31, 2004)		32,763			32,688
Additional paid-in capital		80,908,527			77,964,857
Deferred compensation		(168,625	)		(195,250	)
Unrealized loss, available for sale marketable securities		(51,451	)		(48,116	)
Accumulated deficit		(59,465,913	)		(54,129,235	)
Total stockholders’ equity		21,277,004			23,646,647
	$	23,301,976		$	29,912,453

See accompanying notes.

Note: The balance sheet as of December 31, 2004 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

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Cortex Pharmaceuticals, Inc.

Condensed Statements of Operations

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2005			2004			2005			2004
Revenues:
Research and license revenue	$	635,596		$	1,143,873		$	1,294,074		$	2,287,745
Grant revenue		11,427			69,624			52,107			91,761
Total revenues		647,023			1,213,497			1,346,181			2,379,506
Operating expenses:
Research and development		2,737,764			2,083,447			5,374,230			3,247,202
General and administrative		695,933			513,480			1,478,719			1,135,761
Non-cash stock compensation charges (A)		55,680			34,729			61,217			216,274
Total operating expenses		3,489,377			2,631,656			6,914,166			4,599,237
Loss from operations		(2,842,354	)		(1,418,159	)		(5,567,985	)		(2,219,731	)
Interest income, net		153,538			103,967			314,298			135,965
Increase in fair value of common stock warrants		—			—			(63,500	)		—
Amortization of capitalized financing costs		—			—			(19,491	)		(103,930	)
Net loss	$	(2,688,816	)	$	(1,314,192	)	$	(5,336,678	)	$	(2,187,696	)
Net loss per share:
Basic and diluted	$	(0.08	)	$	(0.05	)	$	(0.16	)	$	(0.08	)
Shares used in calculating per share amounts:
Basic and diluted		32,659,829			28,296,985			32,643,107			26,295,034
(A) Non-cash stock compensation charges include the following related expenses:
Research and development	$	55,680		$	14,639		$	76,167		$	128,794
General and administrative		—			20,090			(14,950	)		87,480
	$	55,680		$	34,729		$	61,217		$	216,274

See accompanying notes.

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Cortex Pharmaceuticals, Inc.

Condensed Statements of Cash Flows

(Unaudited)

	Six months ended June 30,
	2005			2004
Cash flows from operating activities:
Net loss	$	(5,336,678	)	$	(2,187,696	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		50,996			60,324
Stock option compensation expense		61,217			216,274
Amortization of capitalized financing costs		19,491			103,930
Increase in fair value of common stock warrants		63,500			—
Changes in operating assets/liabilities:
Restricted cash		—			2,713
Accrued interest on marketable securities		93,494			21,511
Accounts receivable		32,298			545,313
Other current assets		87,920			50,226
Accounts payable and accrued expenses		(120,877	)		(73,985	)
Unearned revenue		(165,304	)		(202,696	)
Advance for MCI project and other		4,597			1,919
Net cash used in operating activities		(5,209,346	)		(1,462,167	)
Cash flows from investing activities:
Purchase of marketable securities		(13,150,710	)		(14,867,735	)
Proceeds from sales and maturities of marketable securities		10,215,000			3,000,000
Purchase of fixed assets		(136,413	)		(80,784	)
Net cash used in investing activities		(3,072,123	)		(11,948,519	)
Cash flows from financing activities:
Adjustment to net proceeds from issuance of common stock in December 2004 private placement		(24,211	)		—
Proceeds from issuance of common stock in January 2004 private placement, net		—			17,462,007
Adjustment to net proceeds from issuance of common stock in August 2003 private placement		—			(38,419	)
Proceeds from issuance of common stock upon exercise of warrants		—			984,194
Proceeds from issuance of common stock upon exercise of stock options		27,932			132,586
Net cash provided by financing activities		3,721			18,540,368
(Decrease) increase in cash and cash equivalents		(8,277,748	)		5,129,682
Cash and cash equivalents, beginning of period		9,157,315			4,847,275
Cash and cash equivalents, end of period	$	879,567		$	9,976,957

See accompanying notes.

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Cortex Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(Unaudited)

Note 1 — Basis of Presentation

The accompanying unaudited interim condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 2005 are not necessarily indicative of the results that may be expected for the full fiscal year. For further information, refer to the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2004 and the Company’s Transition Report on Form 10-K for the six-month period ended December 31, 2004.

In January 1999, Cortex Pharmaceuticals, Inc. (“Cortex” or the “Company”) entered into a research collaboration and exclusive worldwide license agreement with NV Organon (“Organon”). 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”), in defined territories. The agreement will enable Servier to develop and commercialize the Company’s AMPAKINE technology for the treatment of memory impairment associated with aging and neurodegenerative diseases such as Alzheimer’s disease. In October 2002, the Servier agreement was amended to also include rights to the AMPAKINE technology for the treatment of anxiety disorders (Note 2).

The Company is seeking collaborative arrangements with other pharmaceutical companies for other applications of the AMPAKINE compounds, under which such companies would provide additional capital to the Company in exchange for exclusive or non-exclusive license or other rights to the technologies and products that the Company is developing. Competition for corporate partnering with major pharmaceutical companies is intense, with a large number of biopharmaceutical companies attempting to arrive at such arrangements. Accordingly, although the Company is in discussions with candidate companies, there is no assurance that an agreement will arise from these discussions in a timely manner, or at all, or that an agreement that may arise from these discussions will successfully reduce the Company’s short or longer-term funding requirements.

To supplement its existing resources, in addition to seeking licensing arrangements with other pharmaceutical companies, the Company may seek 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.

Revenue Recognition

The Company recognizes revenue when all four of the following criteria are met: (i) pervasive 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 collaboration with Servier (Note 2) as services are performed under the agreement. 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.

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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 after the milestone achievement will continue to be funded by the 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 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 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. As required, the Company will apply the principles of Issue 00-21 to multiple element research and licensing agreements that it may enter into after July 1, 2003.

In accordance with the Securities and Exchange Commission’s Staff Accounting Bulletin No. 104 (“SAB 104”), amounts received for upfront technology license fees under multiple-element arrangements are deferred and recognized over the period of committed services or performance, if such arrangements require the Company’s on-going services or performance.

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 in which the services are provided.

Pro forma information regarding net loss and net loss per share has been determined as if the Company had accounted for its employee stock plans under the fair value method. There were no options granted during the three-month period ended June 30, 2005. For the three-month period ended June 30, 2004, the fair value was estimated at the date of grant using the Black-Scholes option pricing model and the

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following assumptions: weighted average risk-free interest rate of 3.0%; dividend yield of 0%; volatility factor of the expected market price of the Company’s common stock of 79%; and a weighted average life of 4.7 years.

For the six-month periods ended June 30, 2005 and 2004, respectively, the fair value was estimated at the date of grant using the Black-Scholes option pricing model and the following assumptions: weighted average risk-free interest rates of 4.2% and 3.0%; dividend yields of 0%; volatility factors of the expected market price of the Company’s common stock of 92% and 79%; and a weighted average life of 5.0 years and 4.7 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.

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 three-month and six-month periods ended June 30, 2005 and 2004, respectively:

	Three months ended June 30,						Six months ended June 30,
	2005			2004			2005			2004
Net loss, as reported	$	(2,688,816	)	$	(1,314,192	)	$	(5,336,678	)	$	(2,187,696	)
Stock-based employee compensation included in net loss		—			(40,201	)		(40,035	)		6,347
Fair value of stock-based employee compensation		(440,407	)		(239,450	)		(881,961	)		(741,071	)
Pro forma net loss	$	(3,129,223	)	$	(1,593,843	)	$	(6,258,674	)	$	(2,922,420	)
Net loss per share:
Basic and diluted — as reported	$	(0.08	)	$	(0.05	)	$	(0.16	)	$	(0.08	)
Basic and diluted — pro forma	$	(0.10	)	$	(0.06	)	$	(0.19	)	$	(0.11	)

Stock-based employee compensation included in net loss, as detailed above, primarily represents recorded charges for previously re-priced stock options held by employees and directors and excludes related charges for stock options held by consultants. The accounting for these re-priced stock options is described more fully immediately below.

In March 2000, the Financial Accounting Standards Board issued FASB Interpretation No. 44 (“FIN 44” or the “Interpretation”), “Accounting for Certain Transactions Involving Stock Compensation, an interpretation of APB 25.” As required, the Company adopted FIN 44 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. Of the options re-priced in December 1998, as of June 30, 2005 options to purchase approximately 170,000 shares of the Company’s common stock remained outstanding.

By adopting the Interpretation, the Company now applies variable accounting for these options until such options are exercised or forfeited. 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.

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For the three months ended June 30, 2005, applying FIN 44 had no impact on the Company’s net loss or net loss per share. For the three months ended June 30, 2004, the effect of applying FIN 44 was a decrease in the Company’s net loss of approximately $46,700, with no impact on net loss per share.

For the six months ended June 30, 2005, the effect of applying FIN 44 was a decrease in the Company’s net loss of approximately $47,200, with no impact on net loss per share. For the six months ended June 30, 2004, the effect of applying FIN 44 was an increase in the Company’s net loss of approximately $8,900, with no impact on net loss per share. These amounts include charges for previously re-priced options held by employees, as well as directors and consultants.

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.

In December 2004, the Financial Accounting Standards Board issued Statement No. 123(R), “Share Based Payment,” which is a revision of SFAS 123 and supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” Statement No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values.

As required, the Company will adopt Statement No. 123(R) beginning January 1, 2006. Under Statement No. 123(R), the Company may either recognize compensation cost for share-based payments to employees based on the grant-date fair value from the beginning of the period in which the provisions are first applied, without restating periods prior to adoption, or the Company may elect to restate prior periods by recognizing compensation costs in the amounts previously reported in the pro-forma footnote disclosures under the provisions of Statement No. 123, as included above. Cortex anticipates that it will adopt Statement No. 123(R) prospectively, without restating prior periods.

The Company currently cannot estimate the impact of adopting Statement 123(R), but based solely upon the pro-forma disclosures for prior periods believes that the impact may be material to its results of operations. The Company does not anticipate that adoption of Statement No. 123(R) will materially impact its financial condition.

Comprehensive Income (Loss)

The Company presents unrealized gains and losses on its marketable securities, classified as “available for sale,” in its statement of stockholders’ equity and comprehensive income (loss) on an annual basis and in a footnote in its quarterly reports. During the three months ended June 30, 2005 and 2004, total comprehensive loss was $2,658,034 and $1,349,862, respectively. During the six months ended June 30, 2005 and 2004, total comprehensive loss was $5,388,129 and $2,223,366, respectively. Other comprehensive income or loss consists of unrealized gains or losses on the Company’s marketable securities, which are comprised of securities of the U.S. government or its agencies, preferred securities and other asset and mortgage backed securities. Unrealized gains on the Company’s marketable securities for the three months ended June 30, 2005 amounted to $30,782 and unrealized losses on the Company’s marketable securities for the three months ended June 30, 2004 amounted to $35,670. For the six months ended June 30, 2005 and 2004, unrealized losses on the Company’s marketable securities amounted to $51,451 and $35,670, respectively.

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Note 2 — Research and License Agreement with Les Laboratoires Servier

In October 2000, the Company entered into a research collaboration and exclusive license agreement with 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 (“MCI”), sexual dysfunction, and the dementia associated with 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. The agreement, as amended to date, includes an up-front payment by Servier of $5,000,000 and research support payments of approximately $2,220,000 per year through early December 2006 (subject to Cortex providing agreed-upon levels of research personnel and subject to annual adjustment based upon the increase in the U.S. Department of Labor’s Consumer Price Index). Cortex is eligible to receive milestone payments, based upon successful clinical development, plus royalty payments on sales in licensed territories.

Under the October 2002 amendment, Servier provided Cortex with $4,000,000 of additional research support, in exchange for rights to the Company’s AMPAKINE compounds as a potential treatment for anxiety disorders in Servier’s licensed territories. The $4,000,000 was paid in quarterly installments of $500,000 over a two-year period, ending in September 2004.

Cortex had been recording revenue from Servier’s earlier $5,000,000 up-front payment over the three-year collaborative research phase included in the October 2000 agreement. With the subsequent amendments to the agreement, Cortex adjusted the period that the Company records the Servier licensing revenue to include the extended research term that ends in early December 2006.

Note 3 — Private Placement of Common Stock and Warrants

On December 14, 2004, the Company issued 4,233,333 shares of common stock to accredited investors in a private placement transaction for $2.66 per share, raising gross proceeds of approximately $11,260,000. Net proceeds from the transaction, after issuance costs and placement fees, were approximately $10,400,000. In connection with the transaction, the Company also issued five-year warrants to the investors to purchase up to an additional 2,116,666 shares of the Company’s common stock at an exercise price of $3.00 per share. The Company also issued three-year warrants to a placement agent to purchase 164,289 shares of the Company’s common stock at an exercise price of $3.43 per share. All of the warrants issued in the transaction provide a call right in favor of 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 January 26, 2006.

Pursuant to the terms of the registration rights agreement entered into in connection with the above transaction, 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 agent’s warrants.

The registration rights agreement 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 placement for the common stock and warrants then held, prorated daily. The registration statement was filed within the

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allowed time, and was declared effective by the SEC on January 26, 2005. As a result, the Company was not required to pay any liquidated damages in connection with the initial registration.

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, December 14, 2004, the estimated fair value of the warrants based on the Black-Scholes option pricing model was accounted for as a liability, with an offsetting reduction to additional paid-in capital received in the private placement.

The estimated fair value of the warrants was re-measured at December 31, 2004, and again at January 26, 2005 — the date of effectiveness of the registration statement. The increase in estimated fair value from December 31, 2004 to January 26, 2005 has been recorded as other expense in the Statement of Operations for the six-month period ended June 30, 2005. As of the effectiveness of the registration statement, the warrant liability was reclassified to additional paid-in capital, evidencing the non-impact of these adjustments on the Company’s financial position and business operations.

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

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the Financial Statements and Notes relating thereto appearing elsewhere in this report and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” presented in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2004 and the Company’s Transition Report on Form 10-K for the six-month period ended December 31, 2004.

Introductory Note

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Company intends that such forward looking statements be subject to the safe harbors created thereby. These forward-looking statements relate to, among other things, (i) future research plans, expenditures and results, (ii) potential collaborative arrangements, (iii) the potential utility of the Company’s proposed products and (iv) the need for, and availability of, additional financing.

The forward-looking statements included herein are based on current expectations, which involve a number of risks and uncertainties and assumptions regarding the Company’s business and technology. These assumptions involve judgments with respect to, among other things, future scientific, economic and competitive conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in forward-looking statements will be realized and actual results may differ materially. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events. Readers should carefully review the risk factors described in this and other documents that the Company files from time to time with the Securities and Exchange Commission, including, without limitation, Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and subsequent Current Reports on Form 8-K.

About Cortex Pharmaceuticals

Cortex is engaged in the discovery and development of innovative pharmaceuticals for the treatment of neurodegenerative diseases and other neurological and psychiatric disorders. Since 1993, the Company’s primary efforts have been to develop products that affect the AMPA-type glutamate receptor, a complex of proteins that is involved in communication between nerve cells in the human brain. The Company is developing a family of chemical compounds, known as AMPAKINE^® compounds, which enhance the activity of this receptor. The Company believes that AMPAKINE compounds hold promise for correcting deficits brought on by a variety of diseases and disorders that are known, or thought, to involve depressed functioning of pathways in the brain that use glutamate as a neurotransmitter.

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The AMPAKINE program addresses large potential markets. The Company’s commercial development plan involves partnering with larger pharmaceutical companies for research, development, clinical testing, manufacturing and global marketing of AMPAKINE products for those indications that require sizable, expensive clinical trials and very large sales forces to achieve significant market penetration. At the same time, the Company plans to develop internally a selected set of indications, eligible for orphan drug status. These indications typically require more modest investment in the development stages, and involve a more concentrated sales force to reach selected medical centers and a limited number of medical specialists in the United States. If the Company is successful in the pursuit of this operating strategy, the Company may be in a position to contain its costs over the next few years, to maintain its focus on the research and early development of novel pharmaceuticals (where the Company believes that it has the ability to compete) and eventually to participate more fully in the commercial development of AMPAKINE products in the United States.

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 its judgment. The Company’s discussion and analysis of its financial condition and results of operations are based upon its financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities.

The Company bases its 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

The Company’s revenue recognition policies are in accordance with the Securities and Exchange Commission’s Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”). SAB 104 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 104, revenues from up-front fees from the Company’s collaborators are deferred and recorded over the term that it provides ongoing services. Similarly, research support payments are recorded as revenue as it performs the research under the related agreements. The Company records grant revenues as it incurs 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 the Company’s 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 after the milestone achievement will continue to be funded by its collaborator at a comparable level to that before the milestone achievement. If both of

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these criteria are not met, the milestone payment is recognized over the remaining minimum period of the Company’s 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. As required, the Company will apply the principles of Issue 00-21 to multiple element agreements that it may enter into after July 1, 2003.

In accordance with the Securities and Exchange Commission’s Staff Accounting Bulletin No. 104 (“SAB 104”), amounts received for upfront technology license fees under multiple-element arrangements are deferred and recognized over the period of committed services or performance, if such arrangements require the Company’s on-going service or performance.

Employee Stock Options and Stock-Based Compensation

As permitted under Statement of Financial Accounting Standards No. 123 (“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.

In December 2004, the Financial Accounting Standards Board issued Statement No. 123(R), “Share Based Payment,” which is a revision of SFAS 123 and supersedes APB 25. Statement No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values.

As required, the Company will adopt Statement No. 123(R) effective January 1, 2006. Under Statement No. 123(R), the Company may either recognize compensation cost for share-based payments to employees based on the grant-date fair value from the beginning of the period in which the provisions are first applied, without restating periods prior to adoption, or it may elect to restate prior periods by recognizing compensation costs in the amounts previously reported in the Company’s pro-forma footnote disclosures under the provisions of SFAS 123. The Company anticipates that it will adopt Statement No. 123(R) prospectively, without restating prior periods.

Cortex currently cannot estimate the impact of adopting Statement 123(R), but based solely upon the pro-forma disclosures for prior periods, the Company believes that the impact may be material to its results of operations. The Company does not anticipate that adoption of Statement No. 123(R) will materially impact its financial condition.

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The above listing is not intended to be a comprehensive list of all of the Company’s 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 produce a materially different result.

Results of Operations

General

In January 1999, the Company entered into a research collaboration and exclusive worldwide license agreement with NV Organon (“Organon”). 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 approximately $7,880,000 in up-front and research support payments. The agreement with Organon also includes milestone payments based upon clinical development, plus royalty payments on worldwide sales. To date, Cortex has received milestone payments from Organon totaling $6,000,000. For each milestone payment, Cortex recorded the related revenue upon achievement of the milestone.

In October 2000, the Company entered into a research collaboration and 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 agreement, as amended, includes an up-front payment by Servier of $5,000,000 and research support payments of approximately $2,220,000 per year through early December 2006 (subject to Cortex providing agreed-upon levels of research personnel). The agreement also includes milestone payments based upon successful clinical development and royalty payments on sales in licensed territories.

In October 2002, in exchange for an additional $4,000,000 of research support, Servier expanded its rights to the AMPAKINE compounds to include the field of anxiety disorders, in its licensed territories. The $4,000,000 was paid in quarterly installments of $500,000 over a two-year period that ended in September 2004. See Note 2 to the Financial Statements.

From inception (February 10, 1987) through June 30, 2005, the Company has sustained losses aggregating $57,434,000. Continuing losses are anticipated over the next several years. During that time, the Company’s ongoing operating expenses will only be offset, if at all, by proceeds from Small Business Innovative Research (“SBIR”) grants, research support payments from the collaboration with Servier and by possible milestone payments from Organon and Servier. Ongoing operating expenses may also be funded by payments under planned strategic alliances that the Company is seeking with other pharmaceutical companies for the clinical development, manufacturing and marketing of its products. The nature and timing of payments to Cortex under the Organon and Servier 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 be dependent upon the successful introduction of a new product into the North American market from its internal development, as well as the successful commercial development of its products by Organon, Servier or its other prospective partners to attain profitable operations from royalties or other product-based revenues.

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Comparison of the Three Months and Six Months ended June 30, 2005 and 2004

For the three months ended June 30, 2005, the net loss of approximately $2,689,000 compared with a net loss of approximately $1,314,000 for the corresponding prior year period. For the six months ended June 30, 2005, the net loss of approximately $5,337,000 compared to a net loss of approximately $2,188,000 for the corresponding prior year period. For both periods, the increased losses primarily resulted from research and development expenses that include costs related to the development of AMPAKINE CX717.

Revenues for the three months ended June 30, 2005 decreased from approximately $1,213,000 to approximately $647,000, or by 47% compared to the three months ended June 30, 2004. For the six months ended June 30, 2005, revenues decreased from approximately $2,380,000 to approximately $1,346,000, or by 43% compared to the six months ended June 30, 2004. Revenues for the current year periods decreased following the end of scheduled research support payments under the October 2002 amendment to the Servier agreement. The final quarterly payment of $500,000 from that amendment was received during the quarter ended September 30, 2004.

Research and development expenses for the three-month period ended June 30, 2005 increased from approximately $2,083,000 to approximately $2,738,000, or by 31% from the corresponding prior year period. For the six-month period ended June 30, 2005, research and development expenses increased from approximately $3,247,000 to approximately $5,374,000, or by 66% from the corresponding prior year period. For both the three-month and six-month periods ended June 30, 2005, most of the increase reflected expenses related to advancing the second generation AMPAKINE CX717 in Phase I and early Phase II human clinical trials, along with increased sponsored research supporting the AMPAKINE program and costs related to expanding the Company’s research staff.

General and administrative expenses for the three-month period ended June 30, 2005 increased from approximately $513,000 to approximately $696,000, or by 36% compared to the corresponding prior year period. For the six-month period ended June 30, 2005, general and administrative expenses increased from approximately $1,136,000 to approximately $1,479,000, or by 30% compared to the corresponding prior year period. Expenses for the prior year periods reflect the reclassification of recruiting fees for additions to the Company’s research staff, specifically the Company’s Chief Medical Officer. The expenses had been recorded in general and administrative expenses prior to the quarter ended June 30, 2004 and were reclassified to research and development expenses during the quarter ended June 30, 2004. As a result, general and administrative expenses for the prior year periods appear atypically low when compared to the current year periods.

Increased general and administrative expenses for the current year periods also reflect the timing of fees and expenses for the Company’s Board of Directors; costs related to the change in the Company’s fiscal year end from June 30 to December 31 and for filing the resultant transition report on Form 10-K for the six months ended December 31, 2004 in March 2005; and expenses related to preparing for the Company’s assessment of its internal control system as of December 31, 2005, as required by The Sarbanes-Oxley Act of 2002.

Net interest income increased in the current year periods due to an increase in cash available for investing following the Company’s net proceeds of approximately $10,400,000 from the private placement of its common stock and warrants to purchase shares of common stock in December 2004.

Other expenses for the six months ended June 30, 2005 and 2004 represent non-cash charges for the change in estimated value of warrants issued in connection with the Company’s private equity

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financings in December and January 2004, respectively, as explained more fully in Note 3 to the Condensed Financial Statements.

Liquidity and Capital Resources

Sources and Uses of Cash

From inception (February 10, 1987) through June 30, 2005, Cortex has funded its organizational and research and development activities primarily through the issuance of equity securities, funding related to collaborative agreements and net interest income.

Under the agreement with Servier signed in October 2000 and amended, Cortex has received research and licensing payments of approximately $18,605,000 through June 30, 2005, including approximately $1,110,000 during the six months ended June 30, 2005. The October 2000 agreement, as amended, currently provides research support of approximately $2,220,000 per year through early December 2006, as adjusted based on the U.S. Department of Labor’s Consumer Price Index. 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 January 1999 agreement with Organon totaled approximately $13,880,000 as of June 30, 2005, including $6,000,000 for milestone payments. Under the terms of the agreement, the Company may receive additional milestone payments based on further clinical development of the licensed technology and, ultimately, royalties on worldwide sales.

In August 2003, the Company completed a private placement 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. As of June 30, 2005, warrants to purchase up to 2,993,337 shares remained outstanding. If these warrants are fully exercised, of which there can be no assurance, such exercise would provide approximately $7,630,000 of additional capital to the Company. 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 13 consecutive trading day period following December 8, 2005.

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. If the warrants are fully exercised, of which there can be no assurance, these warrants would provide approximately $14,600,000 of additional capital to the Company. 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 days.

In December 2004, the Company completed a private placement of an aggregate of 4,233,333 shares of its common stock at $2.66 per share and five-year warrants to purchase up to an additional aggregate of 2,116,666 shares at an exercise price of $3.00 per share. The Company received approximately $10,400,000 in net proceeds from the private placement. If the warrants are fully

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exercised, of which there can be no assurance, these warrants would provide approximately $6,350,000 of additional capital to the Company. 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 January 26, 2006.

As of June 30, 2005, the Company had cash, cash equivalents and marketable securities totaling approximately $22,557,000 and working capital of approximately $20,869,000. In comparison, as of December 31, 2004, the Company had cash, cash equivalents and marketable securities of approximately $27,996,000 and working capital of approximately $26,070,000. The decreases in cash and working capital reflect amounts required to fund the Company’s operations, including the clinical development of AMPAKINE CX717.

Net cash used in operating activities was approximately $5,209,000 during the six months ended June 30, 2005, and included the Company’s net loss for the period of approximately $5,337,000, adjusted for non-cash expenses for depreciation, amortization and stock compensation (including the change in fair value of common stock warrants) approximating $195,000, and changes in operating assets and liabilities. For the six months ended June 30, 2004, net cash used in operating activities approximated $1,462,000, reflecting the Company’s net loss of approximately $2,188,000 for the period, adjusted for non-cash expenses for depreciation, amortization and stock compensation of approximately $381,000 and changes in operating assets and liabilities.

Net cash used in investing activities approximated $3,072,000 during the six months ended June 30, 2005, and primarily resulted from the purchase of marketable securities of approximately $13,151,000, partially offset by the sale and maturity of marketable securities of $10,215,000. Fixed asset purchases for the current year period approximated $136,000. For the six months ended June 30, 2004, net cash used in investing activities approximated $11,949,000, and mostly included approximately $14,868,000 for the purchase of short-term investments, offset by the maturity of investments of $3,000,000. Fixed asset purchases for the prior year six-month period approximated $81,000.

Net cash provided by financing activities were minimal for the six months ended June 30, 2005 and resulted from the exercise of options to purchase shares of the Company’s common stock. For the six months ended June 30, 2004, net cash provided by financing activities approximated $18,540,000, representing net proceeds of approximately $17,420,000 from the private placements of the Company’s common stock, along with proceeds of approximately $1,120,000 from the exercise of warrants and options to purchase shares of the Company’s common stock.

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 December 31, 2005, 2006, 2007, 2008 and 2009 are $226,000, $462,000, $482,000, $501,000 and $212,000, respectively.

Remaining commitments for clinical studies of CX717 and other preclinical expenses amount to approximately $3,820,000. Separately, the Company is committed to approximately $675,000 for sponsored research at academic institutions, all of which is payable over the next twelve months.

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In June 2000, the Company received approximately $247,000 from the Institute for the Study of Aging (the “Institute”), a non-profit foundation supported by the Estee Lauder Trust. The advance partially offset the Company’s limited costs for its testing in patients with mild cognitive impairment and conducted with its partner, Servier. Provided that Cortex complies with the conditions of the funding agreement, including the restricted use of the amounts received, 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.

Staffing

As of June 30, 2005, Cortex had a total of 24 full-time research and administrative employees. The Company anticipates modest increases in staffing and investments in plant or equipment through the next twelve months.

Outlook

Cortex anticipates that its cash, cash equivalents and marketable securities, and the scheduled research support payments from its agreements with Servier will be sufficient to satisfy its capital requirements through 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. However, there is no assurance that the Company will receive such milestone payments from Organon or Servier within the desired timeframe, or at all.

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

Because there is no assurance that the Company will secure additional corporate partnerships, the Company may seek to 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 is likely to result. Such additional capital would, more importantly, enhance the ability of Cortex to achieve significant milestones in its efforts to develop the AMPAKINE technology.

Additional Risks and Uncertainties

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.

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They are subject to the risks of failure inherent in the development of products based on innovative technologies. These risks include, but are not limited to, 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 current or prospective 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.

Off-Balance Sheet Arrangements

The Company has not engaged in any “off-balance sheet arrangements” within the meaning of Item 303(a)(4)(ii) of Regulation S-K.

Item 3. 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 significant 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. 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, 2005, the Company’s investment portfolio had a fair value and carrying amount of approximately $21,678,000. If market interest rates were to increase immediately and uniformly by 10% from levels as of June 30, 2005, 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 of its advance from the Institute for the Study of Aging, 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 rate equal to one-half of 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, 2005, the principal and accrued interest of the advance amounted to approximately $281,000.

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Item 4. 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 Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), as appropriate, to allow timely decisions regarding required disclosure.

The Company performed an evaluation, under the supervision and with the participation of the Company’s management, including the CEO and CFO, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report, pursuant to Rules 13a-15(b) and 15d-15(b) under the Exchange Act. Based upon that evaluation, the CEO and CFO 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 required to be included in the Company’s periodic filings under the Exchange Act.

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.

Section 404 Sarbanes-Oxley Act of 2002

The requirements of Section 404 of the Sarbanes-Oxley Act of 2002 will be effective for the Company’s fiscal year ending December 31, 2005. In order to comply with the act, the Company has undertaken a comprehensive effort, which includes the documentation and testing of its internal controls. As a result, the Company expects to incur substantial additional expenses and diversion of management’s time. During the course of these activities, the Company may identify certain internal control issues that management believes should be improved. These improvements, if necessary, will likely include further formalization of policies and procedures, improved segregation of duties, additional information technology system controls and additional monitoring controls. Although management does not believe that any of these matters will result in material weaknesses being identified in the Company’s internal controls as defined by the Public Company Accounting Oversight Board, no assurances can be given regarding the outcome of these efforts. Additionally, control weaknesses may not be identified in a timely enough matter to allow remediation prior to the issuance of the auditor’s report on internal controls. Any failure to adequately comply could result in sanctions or investigations by regulatory authorities, which could harm the Company’s business or investors’ confidence in the Company.

Limitations on the Effectiveness of Controls

The Company’s management, including its CEO and CFO, does not expect that the Company’s disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that

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the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II. OTHER INFORMATION

Item 6. Exhibits

Exhibits

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.

SIGNATURES

Pursuant to the requirements 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.
August 15, 2005	By:	/s/ Maria S. Messinger
		Maria S. Messinger
		Vice President and Chief Financial Officer;
		Corporate Secretary
		(Chief Accounting Officer)

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EX-31.1

EXHIBIT 31.1

CEO CERTIFICATION

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

1. I have reviewed this quarterly report on Form 10-Q 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 quarterly report; and

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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: August 15, 2005

/s/ Roger G. Stoll, Ph.D.

Roger G. Stoll, Ph.D.

Chairman, President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CFO CERTIFICATION

I, Maria S. Messinger, certify that:

1. I have reviewed this quarterly report on Form 10-Q 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 quarterly report; and

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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: August 15, 2005

/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 Quarterly Report on Form 10-Q of the Company for the three months ended June 30, 2005 (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: August 15, 2005	/s/ Roger G. Stoll, Ph.D.
	Roger G. Stoll, Ph.D.
	Chairman, President and Chief Executive Officer
Dated: August 15, 2005	/s/ Maria S. Messinger
	Maria S. Messinger
	Vice President, Chief Financial Officer and Secretary