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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2023

 

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

 

Commission file number: 1-16467

 

RESPIRERX PHARMACEUTICALS INC.

(Exact name of registrant as specified in its charter)

 

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

 

126 Valley Road, Suite C

Glen Rock, New Jersey 07452

(Address of principal executive offices)

 

(201) 444-4947

(Registrant’s telephone number, including area code)

 

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
N/A   N/A   N/A

 

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

 

Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Yes ☒ No ☐

 

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

 

Large accelerated filer ☐ Accelerated filer ☐
   
Non-accelerated filer Smaller reporting company
   
  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes ☐ No

 

As of August 18, 2023, the Company had 275,728,647 shares of common stock, $0.001 par value, issued and outstanding.

 

 

 

 

 

 

RESPIRERX PHARMACEUTICALS INC.

AND SUBSIDIARY

 

TABLE OF CONTENTS

 

  Page Number
PART I - FINANCIAL INFORMATION  
   
Item 1. Condensed Consolidated Financial Statements 4
   
Condensed Consolidated Balance Sheets (Unaudited) - June 30, 2023 and December 31, 2022 4
   
Condensed Consolidated Statements of Operations (Unaudited) – Three-months and Six-months Ended June 30, 2023 and 2022 5
   
Condensed Consolidated Statements of Stockholders’ Deficiency (Unaudited) - Three-months and Six-months Ended June 30, 2023 and 2022 6
   
Condensed Consolidated Statements of Cash Flows (Unaudited) - Six-months Ended June 30, 2023 and 2022 7
   
Notes to Condensed Consolidated Financial Statements (Unaudited) 9
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33
   
Item 3. Quantitative and Qualitative Disclosures about Market Risk 39
   
Item 4. Controls and Procedures 39
   
PART II - OTHER INFORMATION  
   
Item 1. Legal Proceedings 41
   
Item 1A. Risk Factors 41
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 41
   
Item 3. Defaults Upon Senior Securities 41
   
Item 4. Mine Safety Disclosures 42
   
Item 5. Other Information 42
   
Item 6. Exhibits 42
   
SIGNATURES 44

 

2

 

 

In this Quarterly Report on Form 10-Q, the terms the “Company,” “we,” “us” and “our” refer to RespireRx Pharmaceuticals Inc. a Delaware corporation (“RespireRx”), and, unless the context indicates otherwise, its consolidated subsidiaries, ResolutionRx Ltd (“ResolutionRx”) and Pier Pharmaceuticals, Inc. (“Pier”).

 

INTRODUCTORY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q of RespireRx Pharmaceuticals Inc., referred to herein as our “Q2 2023 Quarterly Report” (“RespireRx” and together with RespireRx’s wholly-owned subsidiaries, ResolutionRx Ltd (“ResolutionRx”) and Pier Pharmaceuticals, Inc. (“Pier”), the “Company,” “we,” or “our,” unless the context indicates otherwise) contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Company intends that such forward-looking statements be subject to the safe harbor created thereby. These might include statements regarding the Company’s future plans, targets, estimates, assumptions, financial position, business strategy and other plans and objectives for future operations, and assumptions and predictions about research and development efforts, including, but not limited to, preclinical and clinical research design, execution, timing, costs and results, future product demand, supply, manufacturing, costs, marketing and pricing factors.

 

In some cases, forward-looking statements may be identified by words including “assumes,” “could,” “ongoing,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” “anticipates,” “believes,” “intends,” “estimates,” “expects,” “plans,” “contemplates,” “targets,” “continues,” “budgets,” “may,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words, and such statements may 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 products candidates, (iv) reorganization plans, and (v) the need for, and availability of additional financing. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Q2 2023 Quarterly Report.

 

These factors include but are not limited to, regulatory policies or changes thereto, available cash, research and development results, issuance of patents, competition from other similar businesses, interest of third parties in collaborations with us, and market and general economic factors, and other risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 as filed with the SEC on April 17, 2023 (the “2022 Form 10-K”) and as may be included in this Q2 2023 Quarterly Report.

 

You should read these risk factors and the other cautionary statements made in the Company’s filings as being applicable to all related forward-looking statements wherever they appear in this Q2 2023 Quarterly Report. We cannot assure you that the forward-looking statements in this Q2 2023 Quarterly Report or in our 2022 Form 10-K will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements. You should read this Q2 2023 Quarterly Report completely. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.

 

We caution investors not to place undue reliance on any forward-looking statement that speaks only as of the date made and to recognize that forward-looking statements are predictions of future results, which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described in this Q2 2023 Quarterly Report and our 2022 Form 10-K, as well as others that we may consider immaterial or do not anticipate at this time. 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, regulatory and competitive conditions, collaborations with third parties, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the Company’s control. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. Our expectations reflected in our forward-looking statements can be affected by inaccurate assumptions that we might make or by known or unknown risks and uncertainties, including those described in this Q2 2023 Quarterly Report and 2022 Form 10-K. These risks and uncertainties are not exclusive and further information concerning us and our business, including factors that potentially could materially affect our financial results or condition, may emerge from time to time.

 

Forward-looking statements speak only as of the date they are made. The Company does not undertake and specifically declines any obligation to update any forward-looking statements or to publicly announce the results of any revisions to any statements to reflect new information or future events or developments.

 

3

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

RESPIRERX PHARMACEUTICALS INC.

AND SUBSIDIARY

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   June 30, 2023   December 31, 2022 
   (unaudited)     
Current assets:          
Cash and cash equivalents  $7,321   $88 
Deferred financing costs   6,661    - 
Prepaid research and development   50,105    - 
Prepaid expenses   77,189    22,693 
           
Total current assets   141,276    22,781 
           
Total assets  $141,276   $22,781 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY          
Current liabilities:          
Accounts payable and accrued expenses, including amounts owed to related parties (Note 5)  $5,889,542   $5,724,390 
Accrued compensation and related expenses   3,446,608    3,296,008 
Convertible notes payable, currently due and payable on demand, including accrued interest of $381,026 and $252,881 at June 30, 2023 and December 31, 2022 (Note 4)   1,289,854    1,258,315 
Note payable to SY Corporation, including accrued interest of $531,251 and $507,330 at June 30, 2023 and December 31, 2022, payment obligation currently in default (Note 4)   819,738    833,463 
Notes and advances payable to officers and affiliates, including accrued interest (Note 4)   466,465    375,334 
Notes payable to former officer, including accrued interest (Note 4)   236,938    225,744 
Other short-term notes payable   60,483    15,847 
           
Total current liabilities   12,209,628    11,729,101 
           
Long-term liabilities          
Long-term accounts payable associated with payment settlement agreements, net of current portion included in accounts payable at June 30, 2023 and December 31, 2022 (Note 5)   74,000    174,000 
           
Total long-term liabilities   74,000    174,000 
           
Total liabilities   12,283,628    11,903,101 
           
Commitments and contingencies (Note 8)          
           
Stockholders’ deficiency: (Note 6)          
Series B convertible preferred stock, $0.001 par value; $0.6667 per share liquidation preference; aggregate liquidation preference $25,001; shares authorized: 37,500; shares issued and outstanding: 37,500; common shares issuable upon conversion at 0.000030 common shares per Series B share: 1   21,703    21,703 
Series I 8% Redeemable Preferred Stock, par value $0.001, stated value $100.00, 3,500 shares authorized, 709 shares issued and outstanding at June 30, 2023   70,891    - 
Series J 8% Voting, Participating, Redeemable Preferred Stock, par value $0.001, stated value $100.00, 15,000 shares authorized, 5,799 shares issued and outstanding at June 30, 2023   579,870    - 
Common stock, $0.001 par value; shares authorized: 2,000,000,000; shares issued and outstanding: 220,728,647 outstanding at June 30, 2023 and 125,544,276 at December 31, 2022, respectively   220,729    125,544 
Additional paid-in capital   164,133,404    164,030,289 
Accumulated deficit   (177,168,949)   (176,057,856)
           
Total stockholders’ deficiency   (12,142,352)   (11,880,320)
           
Total liabilities and stockholders’ deficiency  $141,276   $22,781 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

 

4

 

 

RESPIRERX PHARMACEUTICALS INC.

AND SUBSIDIARY

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

   2023   2022   2023   2022 
   Three-Months Ended   Six-Months Ended 
   June 30,   June 30, 
   2023   2022   2023   2022 
Operating expenses:                    
General and administrative, including related parties  $367,644   $211,376   $659,562   $707,170 
Research and development, including related parties   98,215    141,099    196,640    262,257 
Total operating expenses   465,859    352,475    856,202    969,427 
Loss from operations   (465,859)   (352,475)   (856,202)   (969,427)
Interest expense, including related parties   (225,049)   (179,521)   (292,321)   (439,169)
Foreign currency transaction gain   9,878    51,708    37,430    68,145 
                     
Net loss  $(681,030)  $(480,288)  $(1,111,093)  $(1,340,451)
Dividends on preferred stock and deemed dividends associated with most-favored nation provisions of convertible notes  $(10,761)  $(351,738)  $(10,761)  $(351,738)
Net loss attributable to common stockholders  $(691,791)  $(832,026)  $(1,121,854)  $(1,692,189)
                     
Net loss per common share - basic and diluted  $(0.004)  $(0.008)  $(0.007)  $(0.017)
                     
Weighted average common shares outstanding - basic and diluted   168,213,521    106,081,803    158,402,599    102,010,657 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

 

5

 

 

RESPIRERX PHARMACEUTICALS INC.

AND SUBSIDIARY

 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY

(Unaudited)

 

Three-months and Six-months Ended June 30, 2023

 

   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Par Value   Capital   Deficit   Deficiency 
   Series B   Series I   Series J                 
   Convertible   8%   8%       Additional       Total 
   Preferred Stock   Preferred Stock   Preferred Stock   Common Stock   Paid-in   Accumulated   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Par Value   Capital   Deficit   Deficiency 
                                             
Balance, December 31, 2022   37,500   $21,703    -   $-    -   $-    125,544,276   $125,544   $164,030,289   $(176,057,856)  $(11,880,320)
Common Stock issued upon cashless warrant exercises   -    -    -    -    -    -    18,782,396        18,783    (18,783)        0 
Net loss   -    -    -    -    -    -    -    -    -    (430,063)   (430,063)
Balance, March 31, 2023   37,500   $21,703    -   $-    -   $-    144,326,672   $144,327   $164,011,506   $(176,487,919)   (12,310,383)
Issuance of Series I Preferred Stock   -    -    700    70,000    -    -    -    -    -    -    70,000 
Accrued dividends on Series I Preferred Stock   -    -    9    891    -    -    -    -    (891)   -    0 
Issuance of Series J Preferred Stock   -    -    -    -    5,700    570,000    -    -         -    570,000 
Accrued dividends on Series J Preferred Stock   -    -    -    -    99    9,870    -    -    (9,870)   -    0 
Issuance of common stock upon convertible notes conversions   -    -    -    -    -    -    56,039,999    56,040    28,021    -    84,061 
Issuance of common stock upon cashless exercise of warrants   -    -    -    -    -    -    20,361,976    20,362    (20,362)   -    0 
Warrant issuances with respect to Demand Promissory Notes   -    -    -    -    -    -    -    -    125,000    -    125,000 
Net loss   -    -    -    -    -    -    -    -    -    (681,030)   (681,030)
Balance, June 30, 2023   37,500   $21,703    709   $70,891    5,799   $579,870    220,728,647   $220,729   $164,133,404   $(177,168,949)  $(12,142,352)

 

Three-months and Six-months Ended June 30, 2022

 

   Series B   Series I   Series J                 
   Convertible   8%   8%       Additional       Total 
   Preferred Stock   Preferred Stock   Preferred Stock   Common Stock   Paid-in   Accumulated   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Par Value   Capital   Deficit   Deficiency 
Balance, December 31, 2021   37,500   $21,703    -   $-    -   $-    97,894,276   $97,894   $163,827,781   $(173,955,136)  $(10,007,758)
Net loss   -    -    -    -    -    -    -    -    -    (860,163)   (860,163)
Balance, March 31, 2022   37,500    21,703    -    -    -    -    97,894,276    97,894    163,827,781    (174,815,299)   (10,867,921)
Warrant value for issuance of convertible note   -    -    -    -    -    -    -    -    25,000    -    25,000 
Issuance of common stock upon convertible notes conversions   -    -    -    -    -    -    19,175,000    19,175    172,575    -    191,750 
Net loss   -    -    -    -    -    -                   (480,288)   (480,288)
Balance, June 30, 2022   37,500    21,703    -   $-    -         117,069,276   $117,069   $164,025,356   $(175,295,587)  $(11,131,459)

 

See accompanying notes to condensed consolidated financial statements (unaudited).

 

6

 

 

RESPIRERX PHARMACEUTICALS INC.

AND SUBSIDIARY

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   2023   2022 
  

Six-months

Ended June 30,

 
   2023   2022 
         
Cash flows from operating activities:          
Net loss  $(1,111,093)  $(1,340,451)
Adjustments to reconcile net loss to net cash used in operating activities:          
Amortization of original issue discount, capitalized note costs and debt discounts to interest expense   11,076    336,728 
Foreign currency transaction (gain) loss   (37,646)   (68,145)
Changes in operating assets and liabilities:          
Increase (decrease) in cash from          
Deferred financing costs   (6,661)   177,883 
Prepaid expenses   (104,601)   47,619 
Accounts payable and accrued expenses   205,970    304,382 
Accrued compensation and related expenses   360,600    360,100 
Officer and affiliate liabilities, including accrued interest   

340,312

      
Accrued interest payable and notes payable   

184,276

    96,762 
Net cash used in operating activities   (157,767)   (85,122)
           
Cash flows from financing activities:          
Proceeds from preferred stock financings   70,000    - 
Proceeds from convertible note financing   -    

25,000

 
Proceeds from demand promissory notes   

95,000

    - 
Payment of fees associated with conversions of convertible notes by issuance of stock   -    1,500 
Borrowings on or repayments of short-term notes payable   -   (37,752)
Proceeds from or repayment of officer advance   -    94,997
Net cash provided by financing activities   165,000    83,745 
           
Cash and cash equivalents:          
Net increase (decrease)   7,233   (1,377)
Balance at beginning of period   88    1,398 
Balance at end of period  $7,321   $21 

 

(Continued)

 

7

 

 

RESPIRERX PHARMACEUTICALS INC.

AND SUBSIDIARY

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

(Continued)

 

  

Six-months

Ended June 30,

 
   2023   2022 
         
Supplemental disclosures of cash flow information:          
Cash paid for -          
Interest  $4,728   $5,657 
Income taxes  $-   $- 
           
Non-cash financing activities:          
Amortization of deferred financing costs  $11,075   $- 
Insurance policies  $96,470    95,850 
Reclassification of long-term liabilities to short-term liabilities  $100,000   $60,000 
Debt discounts established for convertible debt  $-   $25,000 
Accrued compensation, accounts payable and other liabilities exchanged or settled for equity  $570,000   $- 
Debt and accrued interest and related fees converted to common stock  $84,060   $190,250 
Cashless warrant exercises  $39,145   $- 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

 

8

 

 

RESPIRERX PHARMACEUTICALS INC.

AND SUBSIDIARY

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. Organization and Basis of Presentation

 

Organization

 

RespireRx Pharmaceuticals Inc. (“RespireRx”) was formed in 1987 under the name Cortex Pharmaceuticals, Inc. to engage in the discovery, development and commercialization of innovative pharmaceuticals for the treatment of neurological and psychiatric disorders. On December 16, 2015, RespireRx filed a Certificate of Amendment to its Second Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) with the Secretary of State of the State of Delaware to amend its Second Restated Certificate of Incorporation to change its name from Cortex Pharmaceuticals, Inc. to RespireRx Pharmaceuticals Inc. In August 2012, RespireRx acquired Pier Pharmaceuticals, Inc. (“Pier”), which is now a wholly-owned subsidiary. Pier was a clinical stage biopharmaceutical company developing a pharmacologic treatment for obstructive sleep apnea (“OSA”) and had been engaged in research and clinical development activities which activities are now in RespireRx’s wholly-owned subsidiary ResolutionRx Ltd (“ResolutionRx”). On January 11, 2023, RespireRx formed as a wholly-owned subsidiary, ResolutionRx, an unlisted public company in Australia, into which RespireRx, as of August 3, 2023, has contributed its cannabinoid platform described below.

 

Basis of Presentation

 

The condensed consolidated financial statements are of RespireRx and its wholly-owned subsidiaries, Pier and ResolutionRx (collectively referred to herein as the “Company,” “we” or “our,” unless the context indicates otherwise).

 

The condensed consolidated financial statements and related notes are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles (“GAAP”) have been omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and other information included in the Company’s Annual Report in our Form 10-K for the fiscal year ended December 31, 2022 as filed with the SEC on April 17, 2023 (“2022 Form 10-K”).

 

2. Business

 

The mission of the Company is to develop innovative and revolutionary treatments to combat disorders caused by disruption of neuronal signaling. We are developing treatment options that address conditions affecting millions of people, but for which there are limited or poor treatment options, including OSA, attention deficit hyperactivity disorder (“ADHD”), epilepsy, acute and chronic pain, including inflammatory and neuropathic pain, recovery from spinal cord injury (“SCI”) and certain orphan disorders. We are also considering developing treatment options for other conditions based on results of preclinical and clinical studies to date. To achieve these goals, the Company has determined that some or all of these opportunities should be contributed to what could be, wholly-owned subsidiaries, joint ventures, licenses or sub-licenses, or even sold and has initiated efforts to do so.

 

In order to facilitate our business activities and product development and to set up our programs for development by subsidiaries, partnering or sale, we have implemented an internal restructuring plan based upon our two research platforms: pharmaceutical cannabinoids and neuromodulators. As of January 11, 2023, RespireRx had formed ResolutionRx, initially a wholly-owned subsidiary focused on pharmaceutical cannabinoids and previously, EndeavourRx, as a business unit focused on our neuromodulators. The Company will use, at least initially, its management personnel to provide management, research and development, operational and oversight services to these two lines of business.

 

  (i) ResolutionRx, our pharmaceutical cannabinoids subsidiary is developing compounds that target the body’s endocannabinoid system, and in particular, the re-purposing of dronabinol, an endocannabinoid CB1 and CB2 receptor agonist, for the treatment of OSA. Dronabinol is already approved by the FDA for other indications.

 

9

 

 

  (ii) EndeavourRx, our neuromodulators platform is made up of two programs: (a) our AMPAkines program, which is developing proprietary compounds that act as positive allosteric modulators (“PAMs”) of AMPA-type glutamate receptors to promote neuronal function and (b) our GABAkines program, which is developing proprietary compounds that act as PAMs of GABAA receptors, and which was established pursuant to our entry into a patent license agreement (the “UWMRF Patent License Agreement”) with the University of Wisconsin-Milwaukee Research Foundation, Inc., an affiliate of the University of Wisconsin-Milwaukee (“UWMRF”).

 

Like ResolutionRx, which as of January 11, 2023, was organized as a wholly-owned subsidiary, of RespireRx, management also intends to organize our EndeavourRx business unit, in part or in whole, into one or more subsidiaries that would conduct research and development of our neuromodulator platform, including either or both of the AMPAkine and GABAkine programs and their related tangible and intangible assets and certain of their liabilities.

 

The Company’s business development efforts (licensing, sub-licensing, joint venture and other commercial structures), if successful, would represent strategic and operational infrastructure additions, as well as cash and in-kind funding opportunities. These efforts have focused on, but have not been limited to, seeking transactions with brand and generic pharmaceutical and biopharmaceutical companies as well as companies with potentially useful clinical development, formulation or manufacturing capabilities, significant subject matter expertise and financial resources. No assurance can be given that any transaction will come to fruition and that, if it does, the terms will be favorable to the Company.

 

Financing our Platforms

 

Our major challenge has been to raise substantial equity or equity-linked financing to support research and development plans for our cannabinoid and neuromodulator platforms, while minimizing the dilutive effect to pre-existing stockholders. At present, we believe that we are hindered primarily by our public corporate structure, our OTC Pink Market listing and our low market capitalization as a result of our low stock price as well as the weakness of our balance sheet.

 

For this reason, the Company has affected an internal restructuring plan described above that we believe will further the aims of RespireRx, ResolutionRx and EndeavourRx, and may make it possible, through separate finance channels, to unlock the unrealized asset values of each and set up its programs for partnering or sale.

 

The Company is also engaged in business development efforts (licensing/sublicensing, joint venture and other commercial structures) with a view to securing strategic partnerships that represent strategic and operational infrastructure additions, as well as cash and in-kind funding opportunities. We believe that some or all of our assets should be licensed, sublicensed, joint ventured or even sold and have initiated efforts to do so. No assurance can be given that any transaction will come to fruition and that if it does, that the terms will be favorable to the Company.

 

On May 18, 2023, ResolutionRx entered into a Letter of Intent with Cantheon Capital (“Cantheon” and “Cantheon LOI”) that describes an intended investment of US$3,125,000 by Cantheon in Australian Series A Preference Shares to be issued by ResolutionRx to support clinical trial research and development over the R&D period equal to 25% of the clinical trial costs of the cannabinoid program that are the subject of the Australian CRO Agreement with iNGENu.

 

On May 11, 2023, RespireRx entered into a Letter Agreement (“Letter Agreement”) with Viridian Capital Advisors (“VCA”) pursuant to which, VCA would perform the following services (“Valuation Services”): (i) review the Company’s intellectual property assets and licensing agreements as they relate to Company’s cannabinoid program, net of any associated liabilities, (ii) review the Company’s financial models and forecasts as they relate to the Company’s cannabinoid program and (iii) prepare the data, analytics and Company valuation analysis (“Valuation Analysis”) specifically with respect to the Company’s cannabinoid program. The Letter Agreement became effective on May 22, 2023. The Company entered this Letter Agreement as part of the process that began with the establishment of ResolutionRx, into which the net assets of the Company’s cannabinoid program have been contributed via license and sublicense in exchange for 25,000,000 Ordinary Shares of ResolutionRx, all as of August 3, 2023. RespireRx received the final Valuation Analysis on August 7, 2023. See Note 9. Subsequent Events.

 

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On August 3, 2023, Respirerx entered into a License Agreement with ResolutionRx See Note 9. Subsequent Events - Entry into License Agreement with ResolutionRx Ltd

 

On August 3, 2023, RespireRx entered into a Sublicense Agreement with ResolutionRx - See Note 9. Subsequent Events - Entry into Sublicense Agreement with ResolutionRx Ltd

 

On August 3, 2023, RespireRx entered into a Stock Transfer Agreement with ResolutionRx - See Note 9. Subsequent Events – Entry into Stock Transfer Agreement with ResolutionRx Ltd

 

On August 3, 2023, RespireRx entered into a Master Intercompany Services Agreement with ResolutionRx - See Note 9. Subsequent Events – Entry into Master Intercompany Services Agreement with ResolutionRx Ltd

 

Going Concern

 

The Company’s condensed consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred net losses and net losses attributable to common stockholders of $681,030 and $691,791 for the three-months ended June 30, 2023, respectively, and net losses and net losses attributable to common stockholders of $1,111,093 and $1,121,854 for the and six-months ended June 30, 2023, respectively. The 2023 net losses attributable to common stockholders was after accounting for dividends on the Series I Preferred Stock and Series J Preferred Stock. The Company incurred a net a loss of $480,288 and $1,340,451 for the three-months and six-months ended June 30, 2022, respectively and a net loss attributable to common stockholders of $832,026 and $1,692,189 for the three-months and six-months ended June 30, 2022 after accounting for deemed dividends associated with most-favored nation provisions of convertible notes, and a total net loss of $3,972,993 for the fiscal year ended December 31, 2022, as well as negative operating cash flows of $157,767 for the six-months ended June 30, 2023 and $143,905 for the fiscal year ended December 31, 2022. The Company also had a stockholders’ deficiency of $12,142,352 at June 30, 2023 and expects to continue to incur net losses and negative operating cash flows for at least the next few years. Additionally, as of June 30, 2023, the Company has, with respect to fourteen similar convertible notes outstanding after eight partial conversions of principal or interest during the three-months and six-months ended June 30, 2023, $1,289,854 maturity amount inclusive of accrued interest which have matured, but for which no notices of default have been received, which must be paid or converted. See Note 4. Notes Payable. The Company will seek to have maturity dates extended in order to avoid a default on such convertible notes, which the Company has achieved in the past, but with respect to which, the Company can provide no assurance. The Company has also not met its payment obligations to the UWM Research Foundation (“UWMRF”) of the University of Wisconsin-Milwaukee but has not received a notice of default and is in regular communication with the UWMRF regarding the establishment of a payment schedule. As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern, and the Company’s independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2022, expressed substantial doubt about the Company’s ability to continue as a going concern.

 

The Company is currently, and has for some time, been in significant financial distress. It has extremely limited cash resources and current assets and has no ongoing source of sustainable revenue. Management is continuing to address various aspects of the Company’s operations and obligations, including, without limitation, debt obligations, financing requirements, intellectual property, licensing agreements, legal and patent matters and regulatory compliance, and has taken steps to continue to raise new debt and equity capital to fund the Company’s business activities from both related and unrelated parties.

 

The Company is continuing its efforts to raise additional capital in order to be able to pay its liabilities and fund its business activities on a going forward basis, including the pursuit of the Company’s planned research and development activities. The Company regularly evaluates various measures to satisfy the Company’s liquidity needs, including development and other agreements with collaborative partners and, when necessary, seeking to exchange or restructure the Company’s outstanding securities and liabilities. The Company is evaluating certain changes to its operations and structure to facilitate raising capital from sources that may be interested in financing only discrete aspects of the Company’s development programs and, in that regard, has formed an Australian subsidiary, ResolutionRx. In addition to the formation of ResolutionRx, such changes could include additional significant reorganizations, which may include the formation of one or more additional subsidiaries into which one or more programs may be contributed. As a result of the Company’s current financial situation, the Company has limited access to external sources of debt and equity financing. Accordingly, there can be no assurances that the Company will be able to secure additional financing in the amounts necessary to fully fund its operating and debt service requirements. If the Company is unable to access sufficient cash resources, the Company may be forced to discontinue its operations entirely and liquidate.

 

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3. Summary of Significant Accounting Policies

 

Principles of Consolidation

 

The accompanying condensed consolidated financial statements are prepared in accordance with GAAP and include the financial statements of RespireRx and its wholly-owned subsidiaries, Pier and ResolutionRx. Intercompany balances and transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of condensed consolidated financial statements in conformity with GAAP 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. Significant estimates include, among other things, accounting for potential liabilities, and the assumptions used in valuing stock-based compensation issued for services. Actual amounts may differ from those estimates.

 

Concentration 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 risk by investing its cash with high quality financial institutions. The Company’s cash balances may periodically exceed federally insured limits. The Company has not experienced a loss in such accounts to date.

 

Value of Financial Instruments

 

The authoritative guidance with respect to value of financial instruments established a value hierarchy that prioritizes the inputs to valuation techniques used to measure value into three levels and requires that assets and liabilities carried at value be classified and disclosed in one of three categories, as presented below. Disclosure as to transfers into and out of Levels 1 and 2, and activity in Level 3 value measurements, is also required.

 

Level 1. Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active-exchange traded securities and exchange-based derivatives.

 

Level 2. Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange based derivatives, mutual funds, and fair-value hedges.

 

Level 3. Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions. Financial assets and liabilities utilizing Level 3 inputs include infrequently traded, non-exchange based derivatives and commingled investment funds, and are measured using present value pricing models.

 

The Company determines the level in the value hierarchy within which each value measurement falls in its entirety, based on the lowest level input that is significant to the value measurement in its entirety. In determining the appropriate levels, the Company performs an analysis of the assets and liabilities at each reporting period end.

 

The carrying amounts of financial instruments (consisting of cash, cash equivalents, and accounts payable and accrued expenses) are considered by the Company to be representative of the respective values of these instruments due to the short-term nature of those instruments. With respect to the note payable to SY Corporation Co., Ltd. (“SY Corporation”) and the convertible notes payable, management does not believe that the credit markets have materially changed for these types of borrowings since the original borrowing date for companies like the Company. The Company considers the carrying amounts of the notes payable to officers, inclusive of accrued interest, to be representative of the respective values of such instruments due to the short-term nature of those instruments and their terms.

 

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Deferred Financing Costs

 

Costs incurred in connection with ongoing debt and equity financings, including legal fees, are deferred until the related financing is either completed or abandoned or is unlikely to be completed.

 

Costs related to abandoned debt or equity financings are charged to operations in the period of abandonment. Costs related to completed equity financings are netted against the proceeds.

 

Capitalized Financing Costs

 

The Company presents debt issuance costs related to debt obligations in its condensed consolidated balance sheet as a direct deduction from the carrying amount of that debt obligation, consistent with the presentation for debt discounts.

 

Convertible Notes Payable

 

Convertible notes are evaluated to determine if they should be recorded at amortized cost. To the extent that there are associated warrants or commitment shares of Common Stock, the convertible notes and equity or equity-linked securities are evaluated to determine if there are embedded derivatives to be identified, bifurcated and valued in connection with and at the time of such financing.

 

Debt and Other Liability Exchanges

 

In cases where debt or other liabilities are exchanged for equity, the Company compares the carrying value of debt, inclusive of accrued interest, if applicable, being exchanged, to the fair value of the equity issued and records any loss or gain as a result of such exchange. See Note 4. Notes Payable.

 

Extinguishment of Debt and Settlement of Liabilities

 

The Company accounts for the extinguishment of debt and settlement of liabilities by comparing the carrying value of the debt or liability to the value of consideration paid or assets given up and recognizing a loss or gain in the condensed consolidated statement of operations in the amount of the difference in the period in which such transaction occurs.

 

Prepaid Insurance

 

Prepaid insurance represents the premium that was due in March 2023 for directors and officers insurance. The amounts of prepaid insurance amortizable in the ensuing twelve-month period are recorded as prepaid insurance in the Company’s condensed consolidated balance sheet at each reporting date and amortized to the Company’s condensed consolidated statement of operations for each reporting period.

 

Stock-Based Awards

 

The Company periodically issues common stock and stock options and phantom stock (collectively, “Stock-Based Awards”) to officers, directors, Scientific Advisory Board members, consultants and other vendors for services rendered. Such issuances vest and expire according to terms established at the issuance date of each grant.

 

The Company accounts for stock-based payments to officers and directors, outside consultants and vendors by measuring the cost of services received in exchange for equity awards based on the grant date fair value of the awards, with the cost recognized as compensation expense on the straight-line basis in the Company’s consolidated or condensed consolidated financial statements, as appropriate, over the vesting period of the awards.

 

13

 

 

Stock grants, which are sometimes subject to time-based vesting, are measured at the grant date fair value of the common stock and charged to operations ratably over the vesting period.

 

Stock options granted to members of the Company’s outside consultants and other vendors are valued on the grant date. As the stock options vest, the Company recognizes this expense over the period in which the services are provided.

 

The value of stock options granted as stock-based compensation is determined utilizing the Black-Scholes option-pricing model, and is affected by several variables, the most significant of which are the life of the equity award, the exercise price of the stock option as compared to the fair value of the common stock on the grant date, and the estimated volatility of the common stock over the estimated life of the equity award. Estimated volatility is based on the historical volatility of the Company’s common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The fair value of common stock is determined by reference to the quoted market price of the Company’s common stock.

 

Stock options and warrants issued to non-employees as compensation for services to be provided to the Company or in settlement of debt are accounted for based upon the fair value of the services provided or the estimated fair value of the stock option or warrant, whichever can be more clearly determined. Management uses the Black-Scholes option-pricing model to determine the fair value of the stock options and warrants issued by the Company. The Company recognizes this expense over the period in which the services are provided.

 

Phantom stock awards, which are sometimes subject to time-based vesting, are measured at the award date fair value, if measurable. As the phantom stock awards vest, the Company recognizes the expense, if measurable, upon vesting. To the extent that the value of phantom stock awards is not measurable on the award date, measurement only being possible on the satisfaction of certain contingent events that may not be predictable and measurable at the time of the award, the Company recognizes the expense as a change in an estimate as of the date on which the contingent event becomes predictable and measurable.

 

The Company recognizes the value of stock-based payments in general and administrative costs and in research and development costs, as appropriate, in the Company’s consolidated or condensed consolidated statements of operations, as appropriate. The Company issues new shares of Common Stock to satisfy stock option and warrant exercises.

 

There were no stock or stock option grants during the three-months or six-months ended June 30, 2023.

 

There were no stock options exercised during the three-months or six months ended June 30, 2023 and 2022.

 

There were no warrants issued as compensation or for services during the three-months and six-months ended June 30, 2023 and 2022. There were warrants exercisable into 83,333,333 shares of the RespireRx’s Common Stock issued on May 22, 2023 with respect to the issuance of $250,000 of demand promissory notes to an affiliate of an officer and another affiliate. Warrants, if issued for services, are typically issued to placement agents or brokers for fund raising services, or to lenders, and are not issued from any of the Company’s stock and option plans, from which options issued to non-employees for services are typically issued.

 

Income Taxes

 

The Company accounts for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.

 

14

 

 

The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. In the event the Company was to determine that it would be able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made.

 

Pursuant to Internal Revenue Code Sections 382 and 383, use of the Company’s net operating loss and credit 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. The Company may have had a change in control under these Sections. However, the Company does not anticipate performing a complete analysis of the limitation on the annual use of the net operating loss and tax credit carryforwards until the time that it anticipates it will be able to utilize these tax attributes.

 

As of June 30, 2023, the Company did not have any unrecognized tax benefits related to various federal and state income tax matters and does not anticipate any material amount of unrecognized tax benefits within the next 12 months.

 

The Company is subject to U.S. federal income taxes and income taxes of various state tax jurisdictions. As the Company’s net operating losses have yet to be utilized, all previous tax years remain open to examination by Federal authorities and other jurisdictions in which the Company currently operates or has operated in the past.

 

The Company accounts for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by GAAP. The tax effects of a position are recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If the tax position is not considered “more-likely-than-not” to be sustained, then no benefits of the position are recognized. As of June 30, 2023, the Company had not recorded any liability for uncertain tax positions. In subsequent periods, any interest and penalties related to uncertain tax positions will be recognized as a component of income tax expense.

 

Foreign Currency Transactions

 

The note payable to SY Corporation, which is denominated in a foreign currency (the South Korean Won), is translated into the Company’s functional currency (the United States Dollar) at the exchange rate on the balance sheet date. The accounts for ResolutionRx are maintained in Australian dollars and are converted to U.S. dollars at the exchange rate on the balance sheet. In both cases, the foreign currency exchange gain or loss resulting from translation is recognized in the related condensed consolidated statements of operations.

 

Research and Development

 

Research and development costs include compensation paid to management directing RespireRx’s research and development activities, including but not limited to compensation paid to our Chief Scientific Officer who is also our Executive Chairman, our Interim President and our Interim Chief Executive Officer and who has similar roles at ResolutionRx, and fees paid to consultants and outside service providers and organizations (including research institutes at universities), and other expenses relating to the acquisition, design, development and clinical testing of the Company’s treatments and product candidates.

 

License Agreements

 

Obligations incurred with respect to mandatory payments provided for in license agreements are recognized ratably over the appropriate term, as specified in the underlying license agreement, and are recorded as liabilities in the Company’s condensed consolidated balance sheet, with a corresponding charge to research and development costs in the Company’s condensed consolidated statement of operations. Obligations incurred with respect to milestone payments provided for in license agreements are recognized when it is probable that such milestone will be reached and are recorded as liabilities in the Company’s condensed consolidated balance sheet, with a corresponding charge to research and development expenses in the Company’s condensed consolidated statement of operations.

 

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Patent Costs

 

Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the Company’s research efforts and any related patent applications, all patent costs, including patent-related legal and filing fees, are expensed as incurred and recorded as general and administrative expenses.

 

Earnings per Share

 

The Company’s computation of earnings per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income (loss) attributable to common stockholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., warrants and options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

 

Net loss attributable to common stockholders consists of net loss, as adjusted for actual and deemed preferred stock dividends declared, amortized or accumulated. 

 

Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective periods. Basic and diluted loss per common share is the same for all periods presented because all warrants and stock options outstanding are anti-dilutive.

 

At June 30, 2023 and 2022 the Company excluded the outstanding securities summarized below, which entitle the holders thereof to acquire shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive.

 

   2023   2022 
   June 30, 
   2023   2022 
Series B convertible preferred stock   1    1 
Convertible notes payable   660,982,775    83,699,516 
Common stock warrants   453,192,635    93,310,598 
Common stock options   9,168,317    9,221,445 
Total   1,123,343,728    186,231,560 

 

Reclassifications

 

Certain comparative figures in 2022 have been reclassified to conform to the current quarter’s presentation. These reclassifications were immaterial, both individually and in the aggregate.

 

Recent Accounting Pronouncements

 

In August 2020, the FASB issued Accounting Standards Update No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The subtitle is Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This Accounting Standard Update (“ASU”) addresses complex financial instruments that have characteristics of both debt and equity. The application of this ASU would reduce the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models would result in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The Company has historically issued complex financial instruments and has considered whether embedded conversion features have existed within those contracts or whether derivatives would appropriately be bifurcated. To date, no such bifurcation has been necessary. Management has evaluated the potential impact and has early adopted this ASU as of January 1, 2022. Management believes the adoption has simplified the accounting for convertible debt instruments and does not believe adoption has had a substantial impact on the financial statements, however, it is possible that this ASU may have a substantial impact on the Company’s financial statements from future convertible debt or preferred stock financings. 

 

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4. Notes Payable

 

Convertible Notes Payable

 

The table below summarizes all convertible notes outstanding as of June 30, 2023. Those with similar characteristics outstanding as of June 30, 2023 are grouped separately. The following abbreviations are used in the column headings: DIC is Debt Issuance Cost, OID is Original Issue Discount, Wts are warrants, CNC is Capitalized Note Cost and BCF is Beneficial Conversion Feature. Also included are repayments by conversion, exchange or otherwise during or prior to the three-month period ended June 30, 2023:

  

Inception Date  Maturity date  Original Principal Amount   Interest rate   Original aggregate DIC, OID, Wts, CNC and BCF   Cumulative amortization of DIC, OID, Wts, CNC and BCF   Accrued coupon interest   Repayment
by
conversion, increase in principal amount, net where appropriate
   Balance sheet
carrying amount
at June 30, 2023 inclusive
 
                                
November 5, 2014  September 15, 20161  $25,000    10%  $-   $-   $32,649   $-   $57,649 
November 5, 2014  September 15, 20161   25,000    10%   -    -    32,649    -    57,649 
November 5, 2014  September 15, 20161   25,000    12%   -    -    42,443    -    67,443 
                                       
Sub-total      75,000         -    -    107,741    -    182,741 
                                       
December 31, 2018  February 28, 20192   25,000    10%   -    -    14,068    -    39,068 
January 2, 2019  February 28, 20192   10,000    10%   -    -    5,627    -    15,627 
                                       
Sub-total      35,000         -    -    19,695    -    54,695 
                                       
May 17, 2019  May 17, 20203   50,000    10.00%   (50,000)   50,000    5,001    (52,253)   2,748 
July 28, 2020  June 30, 20223   53,000    8.00%   (13,000)   13,000    11,196    (16,247)   47,949 
February 17, 2021  June 17, 20223   112,000    10.00%   (112,000)   112,000    13,483    (80,000)   45,483 
April 1, 2021  July 31, 20223   112,500    24.00%   (112,500)   112,500    67,943    (42,400)   138,043 
May 3, 2021  July 31, 20223   150,000    10.00%   (150,000)   150,000    -    (150,000)   - 
May 10, 2021  August 10, 20223   150,000    10.00%   (150,000)   150,000    27,185    (13,213)   163,972 
June 30, 2021  June 29, 20223   115,000    24.00%   (115,000)   115,000    35,073    -    150,073 
August 31, 2021  August 31, 20223   115,000    10.00%   (109,675)   109,675    21,047    -    136,047 
October 7, 2021  October 7, 20223   115,000    10.00%   (96,705)   96,705    19,881    -    134,881 
December 23, 2021  June 21, 20223   87,000    10.00%   (36,301)   36,301    40,810    (23,160)   104,650 
April 14, 2022  April 14, 20233   27,778    10.00%   (15,936)   15,936    3,364    -    31,142 
August 22, 2022  May 31, 20233   66,667    10.00%   (6,667)   6,667    5,699    -    72,366 
August 22, 2022  May 31, 20233   22,222    10.00%   (2,222)   2,222    1,900    -    24,122 
August 22, 2022  May 31, 20233   16,667    10.00%   (1,667)   1,434    1,009    -    943 
                                       
Sub-total      1,192,834         (971,673)   971,440    253,590    (393,773)   1,052,418 
                                       
Total     $1,302,834        $(971,673)  $971,440   $381,026   $(393,773)  $1,289,854 

 

  1 These convertible notes were sold to investors in 2014 and 2015 (“Original Convertible Notes) and have a fixed interest rate of 10% per annum and in the case of the one note for which a notice of default has been received, 12%. The Original Convertible Notes have no reset rights or other protections based on subsequent equity transactions, equity-linked transactions or other events and are convertible into an aggregate of 1,560 shares of Common Stock as of June 30, 2023. As of June 30, 2023, principal and accrued interest on the Original Convertible Note that is subject to a default notice totaled $67,443, of which $42,443 was accrued interest.
   2 On December 31, 2018 and January 2, 2019, the Company issued convertible notes to a single investor totaling $35,000 of maturity amount with accrued interest of $19,695 as of June 30, 2023. The number of shares of common stock (or preferred stock) into which these notes may convert is not determinable.
  3 These fourteen convertible notes were issued between May 17, 2019 and August 22, 2022. They all currently have similar terms including conversion prices that generally are or are likely to be $0.0015 per share of Common Stock. All such notes matured prior to June 30, 2023. The Company has initiated discussions with all note holders regarding maturity date extensions. The Company has not received any notices of default with respect to these notes. Certain notes are accruing interest at the default interest rates even though no notices of default have been received. These notes contain, among other provisions, most favored nation provisions, reserve requirements and default interest rates.

 

17

 

 

Note Payable to SY Corporation Co., Ltd.

 

On June 25, 2012, the Company borrowed 465,000,000 Won (the currency of South Korea, equivalent to $399,774 United States Dollars as of that date) from and executed a secured note payable to SY Corporation Co., Ltd., (“SY Corporation”). The note accrues simple interest at the rate of 12% per annum and had a maturity date of June 25, 2013. The Company has not made any payments on the promissory note. At September 25, 2013 and subsequently, the promissory note was outstanding and in default, although SY Corporation has not issued a notice of default or a demand for repayment. Management believes that SY Corporation is in default of its obligations under its January 2012 license agreement, as amended, with the Company, but the Company has not yet issued a notice of default. The Company has in the past made several efforts towards a comprehensive resolution of the aforementioned matters involving SY Corporation. During the six-months ended June 30, 2023, there were no further communications between the Company and SY Corporation.

 

The promissory note is secured by collateral that represents a lien on certain patents owned by the Company, dating back to January, August and September 2007, including composition of matter patents for certain of the Company’s high impact ampakine compounds and the low impact ampakine compounds CX2007 and CX2076, and other related compounds that the Company is no longer developing and where patent rights date back to January, August and September 2007. The security interest does not extend to the Company’s patents for its AMPAkine compounds CX1739 and CX1942 or certain related method of use patents.

 

The note payable to SY Corporation consists of the following at June 30, 2023 and December 31, 2022:

  

   June 30, 2023   December 31, 2022 
Principal amount of note payable  $399,774   $399,774 
Accrued interest payable   531,251    507,330 
Foreign currency transaction adjustment   (111,287)   (73,641)
Total note payable  $819,738   $833,463 

 

Interest expense with respect to this promissory note was $12,092 and $11,960 for the three-months ended June 30, 2023 and 2022, respectively and $23,921 and $23,789 for the six-months ended June 30, 2023 and 2022, respectively.

 

Notes Payable to Officers and Affiliates

 

For the three-months ended June 30, 2023 and 2022, $3,712 and $3,375 was charged to interest expense with respect to Dr. Arnold S. Lippa’s notes, respectively. For the six-months ended June 30, 2023 and 2022, $7,383 and $6,712 was charged to interest expense with respect to Dr. Lippa’s notes, respectively. At June 30, 2023, an affiliate of Dr. Lippa provided $225,000 and was issued a demand promissory note of like amount and warrants as described in more detail below. At June 30, 2023, amounts owed to Dr. Lippa and his affiliates, including notes payable, a demand promissory note, advances and accrued interest were $431,693.

 

In addition, Dr. Lippa periodically makes advances to the Company which are re-payable upon demand, do not accrue interest and are included in the total of notes payable to Officers.

 

On May 22, 2023, RespireRx issued a demand promissory note in the principal amount of $225,000 which bears interest at 10% per year to an affiliate of Dr. Arnold Lippa. In connection with the issuance of the demand promissory note and on the same date, RespireRx issued a Warrant to purchase 75,000,000 shares of the Company’s Common Stock at an exercise price of $0.0015 per share of Common Stock, exercisable at any time until the date that is five years from the initial exercise date of May 22, 2023. The Warrant had a fair value of $112,500 calculated using the Black-Scholes option pricing model utilizing an estimated one-year volatility calculated based on RespireRx’s historical Common Stock prices, the risk free rate based on U.S Treasury yield curve in effect on the issue date, the exercise period which is this case is five years, the fair value of the stock which is considered the closing price on the issue date and the exercise price. The calculated value was charged to interest expense as it is required to be amortized over the life of the note and the note is payable on demand. The Warrant also has cashless exercise provisions. Coupon interest of $2,404 for the period from May 22, 2023 to June 30, 2023 was charged to interest expense for the three-month period and six-month period ended June 30, 2023. Since neither the demand promissory note nor the Warrant existed during the three-month and six-month periods ended June 30, 2022, no such coupon interest or Warrant value interest was charged to interest expense during those periods.

 

On May 22, 2023, RespireRx issued a demand promissory note in the principal amount of $25,000 which bears interest at 10% per year to an affiliate that is not an officer or director of the Company. In connection with the issuance of the demand promissory note and on the same date, RespireRx issued a Warrant to purchase 8,333,333 shares of the Company’s Common Stock at an exercise price of $0.0015 per share of Common Stock, exercisable at any time until the date that is five years from the initial exercise date of May 22, 2023. The Warrant had a fair value of $12,500 calculated using the Black-Scholes option pricing model utilizing an estimated one-year volatility calculated based on RespireRx’s historical Common Stock prices, the risk free rate based on the U.S Treasury yield curve in effect on the issue date, the exercise period which is this case is five years, the fair value of the stock which is considered the closing price on the issue date and the exercise price. The calculated value was charged to interest expense as it is required to be amortized over the life of the note and the note is payable on demand. The Warrant also has cashless exercise provisions. Coupon interest of $267 for the period from May 22, 2023 to June 30, 2023, was charged to interest expense for the three-month period and six-month period ended June 30, 2023. Since neither the demand promissory note nor the Warrant existed during the three-month and six-month periods ended June 30, 2022, no such coupon interest or Warrant value was charged to interest expense during those periods.

 

Notes Payable to Former Officer

 

For the three-months ended June 30, 2023 and 2022, $5,628 and $5,116, respectively, was charged to interest expense with respect to former executive officer, Dr. James S. Manuso’s notes. For the six-months ended June 30, 2023 and 2022, $11,194 and $10,177, respectively, was charged to interest expense with respect to Dr. Manuso’s notes. At June 30, 2023, amounts owed to Dr. Manuso, associated with two notes payable and accrued interest were $236,938. At December 31, 2022, amounts owed to Dr. Manuso with respect to the same two notes were $225,744.

 

18

 

 

Other Short-Term Notes Payable

 

Other short-term notes payable at June 30, 2023 and December 31, 2022 consisted primarily of premium financing agreements with respect to the Company’s directors and officers liability insurance policies. At June 30, 2023, a premium financing agreement was payable in the initial amount of $96,408 (prior to payment of a deposit of $19,228 which was paid in May 2023), with interest at 8.99% per annum, in nine monthly installments of $8,900. At June 30, 2023 and December 31, 2022, the aggregate amount of the short-term notes payable was $60,483 and $15,847 respectively.

 

5. Settlement and Payment Agreements

 

Effective December 15, 2022, the Company and the Board of Trustees of the University of Illinois (“UIL”) entered into the Second Amendment to RespireRx -University of Illinois Exclusive License Agreement. The parties entered into the Second Amendment in order to eliminate accrued financial obligations to UIL and reduce future obligations. Annual $100,000 payments by the Company to UIL were eliminated and the unpaid amounts totaling $200,000 for calendar years 2021 and 2022 are no longer due and payable. Among other changes, the $75,000 payment that was due after the dosing of the 1st patient in a Phase II study anywhere in the world is now reduced to $10,000 and UIL has been given an extension in the term of the License and a deferred compensation obligation of RespireRx including the 4% royalty on net sales due to UIL has been extended for up to 8 years after the original patent rights expire by including a royalty on the net sales protected by a patent application submitted by the Company describing a new formulation of dronabinol. On August 3, 2023, the 2014 License Agreement inclusive of both amendments was sublicenced to RespireRx’s wholly-owned subsidiary, ResolutionRx. See Note 8. Commitments and Contingencies-Significant Agreements and Contracts-University of Illinois Exclusive License Agreement for more details.

 

Effective August 1, 2022, the Company and the Company’s former legal counsel, entered into a payment settlement agreement and release pursuant to which the Company and its former legal counsel agreed that the Company owed $2,608,914 to such counsel and that under the terms of the agreement the amount owed and payable by wire transfer on or before December 30, 2022 was $250,000. If that amount was paid on or before December 30, 2022, certain mutual releases would become effective and no further amounts would be due. If the $250,000 amount was not paid by December 30, 2022, the section of the agreement related to mutual releases would be null and void ab initio and the amount immediately due and payable by the Company to its former counsel would be adjusted to $2,608,914 less any amounts paid on or after the date of the agreement. The amount due by December 30, 2022 was not paid and the payment settlement agreement was amended to call for a payment of $350,000 by February 15, 2023, which amount was also not paid. The Company and its former legal counsel are in discussions regarding further revised payment settlement terms. The amount due to the Company and its former legal counsel included in accounts payable as of June 30, 2023 is $2,608,914.

 

Effective January 31, 2022, the Company’s former President and Chief Executive Officer and Member of the Board of Directors, Timothy Jones, resigned his officer positions as well as from the Board of Directors pursuant to an Employment Agreement Termination and Separation Agreement (“SA”) dated February 8, 2022. Pursuant to the terms of the SA, the Company has agreed to pay Mr. Jones up to a maximum of $789,267 in accordance with a schedule set forth in the SA based on amounts of funding raised by the Company, all in payment for Mr. Jones’ service to the Company as President and Chief Executive Officer prior to January 31, 2022. All such amounts are included in accrued compensation as of June 30, 2023 and December 31, 2022. Mr. Jones did not resign because of any disagreement with the Company relating to the Company’s operations, policies or practices.

 

On April 29, 2021, RespireRx agreed to a payment and settlement agreement with the University of California Innovation and Entrepreneurship (“UIC”) with respect to accounts payable in an amount that was not in dispute and is reflected in accounts payable and accrued expenses in the Company’s condensed consolidated financial statements as of December 31, 2022 and June 30, 2023. The total amount due was $234,657. The agreed payment schedule is for the Company to pay $10,000 on each of July 1, 2021, September 1, 2021, November 1, 2021, January 1, 2022 and March 31, 2022. If RespireRx paid an aggregate of $175,000 on or before March 31, 2022, the amounts would have been considered paid in full with no further amounts due. RespireRx has not made any payments after the September, 2021 payment. According to the terms of the agreement, if an aggregate of $175,000 was not paid by March 31, 2022, the remaining unpaid amount up to an aggregate of the original amount of $234,657 less any payments previously made would be due and payable. Payment was not made and the original amount of $234,657 less the payments made up to September, 2021 have been recorded in accounts payable at June 30, 2023. The Company remains in discussions with an agent on behalf of UIC to establish a new payment settlement schedule.

 

19

 

 

On February 21, 2020, Sharp Clinical Services, Inc. (“Sharp”), a vendor of the Company, filed a complaint against the Company in the Superior Court of New Jersey Law Division, Bergen County related to a December 16, 2019 demand for payment of past due invoices inclusive of late fees totaling $103,890. On May 29, 2020, a default was entered against the Company, and on September 4, 2020, a final judgment was entered against the Company in the amount of $104,217. On March 3, 2021, we executed a settlement agreement with Sharp (the “Sharp Settlement Agreement”), and on March 9, 2021, Sharp requested of the Bergen (NJ) County Sheriff, the return of the Writ of Execution which resulted in a release of the lien in favor of Sharp. The Sharp Settlement Agreement calls for a payment schedule of ten $10,000 payments due on April 1, 2021 and every other month thereafter, and permitted early settlement at $75,000 if the Company had paid Sharp that lower total by August 1, 2021. The Company did not pay Sharp that lower amount by that date. The Company has recorded a liability to Sharp of $53,568 as of June 30, 2023 after payments totaling $30,000 pursuant to the Sharp Settlement Agreement in August, October and December 2021. The Company has not made the any of the payments due on or after October 1, 2021. On March 3, 2022, Company’s then counsel received a default notice from counsel to Sharp with respect to the Sharp Settlement Agreement, which stated that Sharp may exercise its remedies. Company’s then counsel communicated with counsel to Sharp. On March 28, 2022, one of the Company’s bank accounts was debited $415 inclusive of fees for the benefit of Sharp.

 

By letter dated February 5, 2016, the Company received a demand from a law firm representing Salamandra, LLC (“Salamandra”) alleging an amount due and owing for unpaid services rendered. On January 18, 2017, following an arbitration proceeding, an arbitrator awarded Salamandra the full amount sought in arbitration of $146,082. Additionally, the arbitrator granted Salamandra attorneys’ fees and costs of $47,937. All such amounts have been accrued as of June 30, 2023, including accrued interest at 4.5% annually from February 26, 2018, the date of the judgment, through June 30, 2023, totaling $43,376. The Company had previously entered into a settlement agreement with Salamandra that is no longer in effect. The Company believes that a lien with respect to the amounts owed is in effect.

 

On September 14, 2021, the Company and DNA Healthlink, Inc. (“DNA Healthlink”) entered into a settlement agreement (the “DNA Healthlink Settlement Agreement”) regarding $410,000 in unpaid accounts payable owed by the Company to DNA Healthlink (the “DNA Healthlink Settlement Amount”) for services provided by DNA Healthlink to the Company pursuant to an agreement by and between the Company and DNA Healthlink dated October 15, 2014. Under the terms of the DNA Healthlink Settlement Agreement, the Company is obligated to pay to DNA Healthlink the full DNA Healthlink Settlement Amount as follows: twelve monthly payments of $8,000 commenced on November 15, 2021, followed by twelve monthly payments of $10,000 which commenced on November 15, 2022, followed by twelve monthly payments of $15,000 commencing on November 15, 2023, followed by one final payment of $14,000 on November 15, 2024. If, prior to March 14, 2023, the Company had received one or more upfront license fee payments or any other similar fee or fees from one or more strategic partners that aggregate at least fifteen million dollars ($15,000,000.00) (“Upfront Fees”), then the full DNA Healthlink Settlement Amount, less any amounts previously paid, would have been accelerated and become due and payable in full within ninety (90) days of receipt of any Upfront Fees. The Company made payments of $8,000 in November 2021 and December 2021, but has not made payments thereafter. Of the $390,000 total amount due, $74,000 has been reflected as long-term liabilities and the remaining amount has been reflected in accounts payable and accrued expenses in the Company’s condensed consolidated balance sheet as of June 30, 2023.

 

By email dated July 21, 2016, the Company received a demand from an investment banking consulting firm that represented the Company in 2012 in conjunction with the Pier transaction alleging that $225,000 is due and payable for investment banking services rendered. Such amount has been included in accrued expenses at June 30, 2023 and December 31, 2022.

 

The Company is periodically the subject of various pending and threatened legal actions and claims. In the opinion of management of the Company, adequate provision has been made in the Company’s condensed consolidated financial statements as of June 30, 2023 and consolidated financial statements as of December 31, 2022 with respect to such matters, including, specifically, the matters noted above. The Company intends to vigorously defend itself if any of the matters described above results in the filing of a lawsuit or formal claim.

 

20

 

 

6. Stockholders’ Deficiency

 

Preferred Stock

 

RespireRx has authorized a total of 5,000,000 shares of preferred stock, par value $0.001 per share. As of June 30, 2023 and December 31, 2022, 37,500 shares were designated as Series B Convertible Preferred Stock (non-voting, “Series B Preferred Stock”).

 

Series B Preferred Stock outstanding as of June 30, 2023 and December 31, 2022 consisted of 37,500 shares issued in a May 1991 private placement. The shares of Series B Preferred Stock are convertible into 1 share of common stock. RespireRx may redeem the Series B Preferred Stock for $25,001 at any time upon 30 days prior notice.

 

As of June 30, 2023, there were 1,376 shares of Series H Preferred Stock designated and available for issuance.

 

On April 3, 2023, RespireRx authorized 3,500 shares of Series I 8% Redeemable Preferred Stock (“Series I Preferred Shares”), par value $0.001 and stated value $100.00. The Series I Preferred Shares pay an 8% dividend in-kind, are non-voting, redeemable and non-convertible. The Series I Preferred Stock is redeemable upon the occurrence of certain event(s). The redemption amount which is defined as the Eligible Payment is calculated as the Maximum Appreciated Price (unless a lesser price is agreed by RespireRx and the holder) which is $0.02 multiplied by the number of shares of Common Stock corresponding the number of Series I Preferred Shares divided by the Base Measurement Price of $0.0015 multiplied by the stated amount. An Eligible Payment becomes payable upon the occurrence of an Eligible Payment Event. An Eligible Payment Event is caused by (i) any license, sublicense, joint venture or similar transaction resulting in an upfront payment of at least $15,000,000, or (ii) any milestone payment with respect to research and development of at least $15,000,000, or (iii) receipt of royalties in any one year of at least $15,000,000 or (iv) any event resulting in RespireRx’s receipt of an amount deemed by RespireRx’s Board of Directors to establish an Eligible Payment Event. A Fundamental Event as defined in the Certificate of Designation, Preferences, Rights and Limitations of the Series I 8% Redeemable Preferred Stock may cause an Eligible Payment Event. Series I Preferred Shares have certain restrictions on transfer. Between April 5, 2023 and June 15, 2023, RespireRx sold and issued 700 Series I Preferred Shares for $70,000 which accrued $891 of dividends in-kind through June 30, 2023, resulting in the issuance of an additional 9 Series I Preference Shares. Therefore, as of June 30, 2023, there were 709 Series I Preferred Shares outstanding and 2,791 Series I Preferred Shares available for issuance.

 

On April 12, 2023, RespireRx authorized 15,000 shares of Series J 8%Voting, Participating, Redeemable Preferred Stock (“Series J Preferred Shares”), par value $0.001 and stated value $100.00. The Series J Preferred Shares pay an 8% dividend in-kind, are voting, participating, redeemable and non-convertible. The Series J Preferred Stock is redeemable upon the occurrence of certain event(s). The redemption amount which is defined as the Eligible Payment is calculated as the Maximum Appreciated Price (which is the closing price per share of RespireRx’s Common Stock or its equivalent on the date that is the Trading Day on which the Eligible Payment Event is publicly announced prior to the opening of the financial markets on such date, or the Trading Day following the public announcement of the Eligible Payment Event if announced after the opening of the financial markets on the date of the Eligible Payment Event) multiplied by the number of shares of Common Stock corresponding to the number of Series J Preferred Shares divided by the Base Measurement Price of $0.006 multiplied by the stated value. An Eligible Payment becomes payable upon the occurrence of an Eligible Payment Event. An Eligible Payment Event is caused by (i) any license, sublicense, joint venture or similar transaction resulting in an upfront payment of at least $20,000,000, or (ii) any milestone payment with respect to research and development of at least $20,000,000, or (iii) receipt of royalties in any one year of at least $20,000,000 or (iv) any event resulting in RespireRx’s receipt of an amount deemed by the Corporation’s Board of Directors to establish an Eligible Payment Event. A Fundamental Event as defined in the Certificate of Designation, Preferences, Rights and Limitations of the Series J 8% Redeemable Preferred Stock may cause an Eligible Payment Event. Series J Preferred Shares have certain restrictions on transfer. On April 12, 2023, in connection with the signing of one Exchange Agreement and two Exchange and Settlement Agreements with two executive officers of RespireRx who are also directors and one vendor who is an affiliate, (collectively the “Exchangers”), the Exchangers exchanged $570,000 of accrued compensation or other liabilities owed to them for 5,700 Series J Preferred Shares and immediately completed permitted transfers of such shares to family trusts or affiliates and which shares accrued dividends of $9,870 from April 12, 2023 to June 30, 2023 resulting in the issuance of an additional 99 shares of Series J Preferred Stock. Therefore, as of June 30, 2023, there were 5,799 Series J Preferred Shares issued and outstanding and 9,201 Series J Preferred Shares available for issuance. No gain or loss was recorded on the exchange and settlement of the accrued compensation or other liabilities for the Series J Preferred Shares issued.

 

21

 

 

Although other series of preferred stock have been designated, no other shares of preferred stock are outstanding. As of June 30, 2023, 3,485,924 shares of preferred stock were undesignated and may be issued with such rights and powers as the Board of Directors may designate. As of December 31, 2022, 3,504,424 shares of preferred stock were undesignated.

 

Common Stock

 

RespireRx has authorized 2,000,000,000 shares of Common Stock, par value $0.001 (“Common Stock”). There are 220,728,647 shares of RespireRx’s Common Stock outstanding as of June 30, 2023. The issued and outstanding shares of Common Stock as of June 30, 2023 included 56,039,999 shares of Common Stock issued upon conversion of convertible notes and 39,144,372 shares of Common Stock issued upon cashless exercise of warrants during the six-month period ended June 30, 2023. After reserving for conversions of convertible debt and convertible preferred stock, as well as exercises of common stock purchase options (granted and available for grant within the 2014 and 2015 stock and stock option plans) and warrants and the issuance of Pier contingent shares and before accounting for incremental contract excess reserves, there were 642,219,502 shares of RespireRx’s Common Stock available for future issuances as of June 30, 2023. No options were exercised during the six-month period ended June 30, 2023. Options exercisable into 31,019 shares of Common Stock expired during the six-month period ended June 30, 2023. During the three-month and six-month periods ended June 30, 2023, warrants exercisable into 25,500,000 and a total of 49,800,000 shares of Common Stock if exercised on a cash basis were exercised on a cashless basis resulting in the issuance of 20,361,976 shares of Common Stock during the three-month period ended June 30, 2023 and a total of 39,144,372 for the six-month period ended June 30, 2023. Warrants exercisable into 23,881 shares of Common Stock expired during the six-month period ended June 30, 2023. No options or warrants were exercised after June 30, 2023. After June 30, 2023, three convertible note holders of notes with substantially similar attributes converted $65,753 of principal, $747 of interest, $1,000 of conversion fees for a total of $67,500, into 45,000,000 shares of Common Stock at a conversion price, in each case of $0.0015 per share of Common Stock.

 

Common Stock Warrants

 

A summary of warrant activity for the six-months ended June 30, 2023 is presented below.

 

   

Number of

Shares

   

Weighted

Average

Exercise Price

   

Weighted

Average

Remaining

Contractual

Life (in Years)

 
Warrants outstanding and exercisable at December 31, 2022     419,683,183     $ 0.0074       3.28  
Exercised     (49,800,000 )     0.0015       -  
Issued     83,333,333       0.0015       4.90  
Expired     (23,881 )     -          
Warrants outstanding and exercisable at June 30, 2023     453,192,635     $ 0.0060       3.27  

 

22

 

 

The exercise prices of common stock warrants outstanding and exercisable are as follows at June 30, 2023:

 

Exercise Price     Warrants Outstanding and Exercisable (Shares)     Expiration Dates  
$ 0.0015       427,415,641       September 30, 2023-May 22, 2028  
$ 0.0389       208,227