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Replies to post #51765 on RespireRx Pharmaceuticals Inc (fka RSPI)
09/26/24 8:06 PM
Here is the reply I got , GLTA
The investor I (Paul Franklin – Primary Markets) mentioned on our call has the
following questions:-
“As a future investor why should I invest in the company after seeing them enter
the Expert market? The company was fully reporting for years and now that they
received DOD funding, appear to be moving forward, they now are behind in SEC
filing , non-audited as of now. As an investor this is a flaming red flag and a major
reason not to invest. Can this be a question that can be answered by them.
I would not like to hear that they have a conflict with the accounting firm over
payment, and this is the reason they could not produce SEC filings and were
downgraded to the EM. Again, this is not a good look to a future investor. I saw
that in one of their filings as a reason.
I do understand my statements are about RespireRx the parent company, but
this all is tied together, and when the parent company is trading at .002 and
you’re asking for an investment of 10k based on a 1.35 share conversion it seems
a little hard to understand what is going on with the two companies.”
-------------------------- by Jeff Margolis – Respirerx and Resolu7onRx - Sept 26, 2024---------------
Thank you for sending along this very savvy prospec7ve investor’s thoughts. While we have no
illusions about changing his/her/they(their) mind, answering them is important nonetheless.
We have always been very transparent, probably one of, if not the most transparent ultramicrocap company today.
I will divide this response into three sec7ons, RespireRx and Resolu7onRx and then the asset
classes.
RespireRx
This investor has stated that they would not like to hear that there is a conflict over payment
with the auditors. While there is no conflict or dispute involving the amount of any payment,
and there is no conflict involving accoun7ng issues, we did not have the funds to remit to the
accountants sufficient to keep them independent. The Annual Report on Form 10-K was
complete in draT form, the suppor7ng workpapers were complete and the audit work itself was
par7ally complete when we paused the process. As 7me goes by, there is a need to con7nue
upda7ng the draT 10-K, which we have done (things like the subsequent events note needs
upda7ng, the principal stockholders table needs upda7ng since it is to be completed as of the
nearest date possible to the audit opinion date and certain other informa7on is as of a current
date). We have done that so that when we are able to bring our account with our auditors
current, the process of comple7ng the audit work and filing the report will be efficient.
Internally, we have also prepared about 85% of the March 31, 2024 Quarterly Report on Form
10-Q which will be provided to our auditors at or near the 7me we provide the 10-K. Similarly,
the Quarterly Report on Form 10-Q as of June 330, 2024 will follow shortly aTer that and the
September 30, 2024 shortly aTer that.
When the current BOD and management became involved with RespireRx (at that 7me the
company was named Cortex Pharmaceu7cals) on March 22, 2013, it inherited a company about
three-hours from a Chapter 7 bankruptcy filing, an accoun7ng system without the password and
a company that was, at the 7me deficient in its SEC filings (beginning with the non-filing of the
September 30, 2012 Quarterly Report of Form 10-Q).
The con7nuing members of today’s BOD and management believed that the quality of the
assets warranted the effort to save the company and s7ll feels that way today.
Records needed to be recreated; SEC filings needed to be brought current; finance needed to be
raised; one core asset license agreement that had been cancelled days before (unbeknownst to
management un7l the end of the next weekend) needed to be renego7ated. All of those things
and more were accomplished.
One can see the beginning of the SEC reports to “catch up” with the filing on July 30, 2014, of
the September 30, 2012 Form 10-Q. That was following by 10-Q filings on November 24th, 2
filings on December 15th 2014 and one on January 6, 2015 (the December 31, 2013 Annual
Report on Form 10-K) and 10-Qs again on February 10th, 24th and March 9th, 2015. The filing of
the 10-K for December 31, 2014 on March 30, 2015, finally brought the company current again.
Financially, between then and now, raising capital, high quality, “s7cky” capital has been very
difficult. A supposedly well networked CEO with a track record was brought in. He didn’t work
out and eventually resigned, but not before bringing in an investment banker promising
investments not only by their own execu7ves but also those who would follow those execu7ves
if only we did a reverse split. We did the reverse split and then neither the execu7ves nor their
investors invested. That did not work out well. Then another reverse split was done merely to
maintain an OTC QB lis7ng and that did not work out well in the long term. Finding any
investment banker to sponsor a penny stock/OTC company, especially one that was OTC Pink
Market was impossible. The Company had to resort to “toxic” capital, conver7ble debt, which
upon conversion, crashed the stock. But the company stayed alive. And then needed to get
crea7ve. And we did.
Management and the BOD’s belief in the underlying assets in incontrover7ble, as can be seen in
the paragraph below.
Management has accrued, but not taken cash salary since day one for 11 and a half years (other
than a very short period of 7me at minimum wage to try to meet certain tests to apply for a NJ
program to sell tax NOLs, which we were unable to qualify for – which then caused us to stop
taking any cash compensa7on again – the total, if my memory is correct, was salary taken of less
than US$ 30,000 across all execu7ves and non-execu7ves and that was one 7me). Since day
one, management has, episodically and in very large amounts (in the aggregate, in the millions
of US dollars) exchanged accrued unpaid compensa7on for equity or equity-linked instruments,
including common stock, op7ons, warrants, Series H Preferred Stock (converted to common
stock) and Series J Preferred Stock (not conver7ble). Certain BOD members and execu7ves have
wrilen checks to purchase stock (Series G Preferred later converted to common stock and
Series I Preferred (not conver7ble) and made loans to the Company (all of the above disclosed
in detail in SEC filings). These amounts are well in excess of a million US dollars.
In short, what this management has done is to NOT use investor money to pay themselves.
We men7oned earlier that we needed to get crea7ve.
We brought in an addi7onal synergis7c asset (our GABAkines program).
We created a subsidiary in Australia (see Resolu7onRx below) to develop one of our three
assets.
We had an independent valua7on done of the asset(s) contributed by license and sublicence to
Resolu7onRx.
We were able to advance all three of our assets on very limited financial resources and con7nue
to do so today (Resolu7onRx’s dronabinol program, our AMPAkines program and our GABAkines
program).
We published voluminously in peer-reviewed scien7fic and medical journals establishing
ourselves as thought leaders, par7cularly in the AMAPkines and GABAkines space.
We created a Series I and a Series J Preferred Stock, neither of which are conver7ble to common
stock. We did so for a number of reasons. One of those reasons was to create a security that is
completely uncorrelated to our stock price and the biotech sector and the stock market in
general. Those securi7es are not even dependent on our stock trading at all. They are instead
7ed to the ability of the company to do one or more strategic deals (common in the biotech
industry) and behave more like a debt instrument than an equity instrument. The algorithm for
the Series I provides for a fixed 13x payout (12x profit) in the event of a strategic deal yielding
the company US$ 15 million, in the aggregate, in any consecu7ve 12 month period that need
not be a calendar year from any of its assets individually or in combina7ons. We also needed to
create instruments for which we did not need to reserve or issue our available authorized but
unissued common shares, keeping those for the future.
We applied for grants directly or indirectly through collaborators and advanced our programs
with non-dilu7ve finance.
Resolu7onRx
Resolu7onRx Ltd was created as a wholly-owned subsidiary in Australia. This was done for a
number of reasons:
1. By taking a lesson from an ins7tu7onal biotech specific investor – “Please don’t diversify
my porqolio for me; I can do it myself.” So, we isolated one asset (so far) in a separate
company to try to alract investment to that asset.
2. We nego7ated a second amendment to the license agreement with the University of
Illinois-Chicago with respect to our dronabinol OSA asset, later contributed to
Resolu7onRx, which amendment among other things pushed annual obliga7ons into the
future and pushed milestone obliga7ons outward toward later more relevant milestone
achievements.
3. Create a cleaner balance sheet.
4. Exist in a lower cost of capital environment
5. Exist in a friendly environment for the technology
6. Take advantage of the Australian government’s research and development tax credit,
which in our case is 43.5% of qualified R&D and is in the form of a cash rebate.
7. Obtain an independent valua7on report.
8. Contract with service providers/partners (contract research organiza7on (CRO) and
manufacturer)
9. Create an ability to repatriate to the US, funds raised in a lower cost of capital market
back to the US (through a master intercompany services agreement)
10. Take advantage of term sheets from lead investors
a. Binding term sheet (condi7ons precedent s7ll to be met) for a US private equity
firm to purchase Series A Preference Shares at the current offering price for 25%
of the clinical trial R&D costs up to US$3.125 million
i. This term sheet triggered the current offering terms. While nego7a7ng
this term sheet, which was prior to our receipt of the independent
valua7on report, we agreed to 90% of the lesser of the valua7on report
or US$ 25 million. The valua7on report came in at mul7ples of US$ 25
million so we priced at 90% x 25 million or US$ 22.5 mm
1. The $1.35 that the investor referred to is Australian dollars, not US
and equates to US$ 0.90/share.
b. Term sheet from an Australian debt lender to finance ahead of receipt from the
Australian government, 80% of the 43.5% rebate, collateralized only by the
rebate.
The Assets:
Dronabinol for obstruc7ve sleep apnea. Our most mature asset in a massive, very underserved market. It is the re-purposing of a drug approved in the US in 1985 and is well know to
the FDA. This makes for a risk reduced, reduced cost, efficient development program. Two
Phase 2 sta7s7cally significant successful human clinical trials completed. We have advanced
the program primarily by crea7ng new improved proprietary formula7ons to improve the
product profile, improve the pa7ent experience and provide for the ability to file new patents
which we did and which if issued will extend patent life through at least 2042.
AMPAkines are our next most mature asset and is being developed for spinal cord injury
ini7ally and later other indica7ons. CX1739 is the lead compound. As pointed out by the
investor, this is the subject of the ~1.8 million US dollar grant to conduct Phase clinical trial(s).
CX1739 and its sister compound CX717 have been in mul7ple successful human clinical trials in
opioid induced respiratory depression which we now consider to be trials showing proof of
target engagement. OIRD is on the back burner for now. ADHD is also on the list of targeted
indica7ons as we have a sta7s7cally significant Phase 2 study of CX717 for that. AMPAkines (and
GABAkines) are in a division we call EndeavourRx which is being considered for the possible
establishment of another subsidiary (for similar reasons as Resolu7onRx).
GABAkines for treatment resistant epilepsy and pain (and other indica7ons later) is our
earliest stage asset but very promising. Our lead drug candidate is KRM-II-81 and has been in
over 20 animal models of treatment resistant epilepsy and various models of pain. It has been
successful in every model. The NIH has been tes7ng it in its HEAL PSPP program. We press
released that and 8-K’d it on February 13, 2024. The epilepsy indica7on with KRM-II-81 is the
subject of a recent NIH grant applica7on filed with the assistance of our consultants Alien
Technology Transfer. We have not, and do not expect to hear back about the grant for several
months. Our GABAkines program is also in our EndeavourRx division.
09/27/24 7:04 AM
AI
