COR Cortex Pharmaceuticals,

The following discussion and analysis should be read in conjunction with the Financial Statements and Notes relating thereto appearing elsewhere in this report and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” presented in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

Introductory Note

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

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

About Cortex Pharmaceuticals

We are engaged in the discovery and development of innovative pharmaceuticals for the treatment of neurodegenerative diseases and other neurological and psychiatric disorders. Our primary focus is to develop a novel pharmacology that positively modulates AMPA-type glutamate receptors, a complex of proteins that is involved in communication between nerve cells in the human brain. We are developing a family of proprietary pharmaceuticals, known as A MPAKINE ^® compounds, which enhance the activity of this receptor. We believe that A MPAKINE compounds hold promise for correcting neurological and psychiatric diseases and disorders that are known, or thought, to involve depressed functioning of pathways in the brain that use glutamate as a neurotransmitter.

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The A MPAKINE program addresses large potential markets. Our business plan involves partnering with larger pharmaceutical companies for research, development, clinical testing, manufacturing and global marketing of A MPAKINE products for those indications that require sizable, expensive Phase III clinical trials and very large sales forces to achieve significant market penetration. At the same time, we plan to develop internally a selected set of indications, eligible for orphan drug status. Medications for these indications typically require smaller clinical trials and as a result, smaller overall investment in the development stages then the typical chronic medication. Treatments for orphan indications frequently also have shorter review times at the U.S. Food and Drug Administration, or FDA, and if approved for marketing, involve a more concentrated and smaller sales force targeted at selected medical centers and a limited number of medical specialists in the United States. In our licensing discussions, we seek to reserve rights that may be viewed as a natural expansion beyond some of the orphan drug uses to selected larger areas of therapy to thereby allow us to potentially further develop our compounds for such larger non-orphan drug indications. If we are successful in the pursuit of this operating strategy, we may consequently be in a position to contain our costs over the next few years, to maintain our focus on the research and early development of novel pharmaceuticals (where we believe that we have the ability to compete) and eventually to participate more fully in the commercial development of A MPAKINE products in the United States.

Critical Accounting Policies and Management Estimates

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

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

Revenue Recognition

Our revenue recognition policies are in accordance with the SEC’s Staff Accounting Bulletin No. 104, “Revenue Recognition,” or SAB 104. SAB 104 provides guidance in applying accounting principles generally accepted in the United States to revenue recognition issues, and specifically addresses revenue recognition for up-front, nonrefundable fees received in connection with research collaboration arrangements.

In accordance with SAB 104, revenues from up-front fees from our collaborators are deferred and recorded over the term that we provide ongoing services. Similarly, research support payments are recorded as revenue as we perform the research under the related agreements. We record grant revenues as we incur expenses related to the grant projects. All amounts received under collaborative

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research agreements or research grants are nonrefundable, regardless of the success of the underlying research.

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

In November 2002, the Emerging Issues Task Force, or EITF, of the Financial Accounting Standards Board, or the FASB, reached consensus on Issue 00-21. EITF Issue 00-21 addresses the accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. As required, we apply the principles of Issue 00-21 to multiple element agreements that we enter into after July 1, 2003.

In accordance with SAB 104, amounts received for upfront technology license fees under multiple-element arrangements are deferred and recognized over the period of committed services or performance, if such arrangements require our on-going service or performance.

Employee Stock Options and Stock-Based Compensation

Effective January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123(R), “Share Based Payment,” or SFAS 123(R), using a modified prospective application. SFAS 123(R) is a revision of SFAS 123, and supersedes APB 25. SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values.

As of September 30, 2007, there was approximately $1,549,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements. These non-cash costs are expected to be recognized over a weighted-average period of one year.

Under the fair value recognition provisions of SFAS 123(R), share-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. Determining the fair value of share-based awards at the grant date requires judgment in estimating the amount of share-based awards that are expected to be forfeited. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially impacted.

In accordance with EITF Issue 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods and Services,” stock options and warrants issued to our consultants and other non-employees as compensation for services to be provided to us are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined. We recognize this expense over the period the services are provided.

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Registration Payment Arrangements

In connection with prior private placements of our common stock and warrants to purchase shares of our common stock, we entered into agreements that committed us to timely register the shares of common stock purchased as well as the shares underlying the issued warrants. Those registration agreements specified potential cash penalties if we did not timely register the related shares with the SEC.

In accordance with EITF 00-19, “Accounting for Derivative Financial Instruments Indexed To, and Potentially Settled In a Company’s Own Stock,” when the potential cash penalties were included in registration payment arrangements, we recorded the estimated fair value of the warrants as a liability, with an offsetting reduction to additional paid-in capital received from the private placement. The fair value of the warrants was estimated using the Black-Scholes option pricing model.

The estimated fair value of the warrants was re-measured at each reporting date and on the date of effectiveness of the related registration statement, with the increase in fair value recorded as other expense in our Statement of Operations. As of the date of effectiveness of the registration statement, the warrant liability was reclassified to additional paid-in capital, evidencing the non-impact of these adjustments on our financial position and business operations.

In December 2006, the FASB issued FASB Staff Position, or FSP, EITF No. 00-19-2, “Accounting for Registration Payment Arrangements.” This FSP specifies that companies that enter into agreements to register securities will be required to recognize a liability if a payment to investors for failing to fulfill the agreement is probable and can be reasonably estimated. This accounting differs from the guidance in EITF 00-19, which required a liability to be recognized and measured at fair value, regardless of probability.

EITF 00-19-2 is effective immediately for registration payment arrangements and the financial instruments subject to those arrangements that we enter into or modify after the date of issuance of this FSP. For our registration payment arrangements and financial instruments subject to those arrangements that were entered prior to the issuance of this FSP, the guidance was effective beginning January 1, 2007.

Transition to EITF 00-19-2 was to be achieved by reporting a change in accounting principle through a cumulative-effect adjustment to the opening balance of retained earnings. For purposes of measuring the cumulative-effect adjustment related to the recognition of a contingent liability, we evaluated whether the transfer of consideration under our registration payment arrangements was probable and could be reasonably estimated as of the January 1, 2007 adoption date. Given that we did not deem the transfer of consideration under our existing registration payment arrangements as probable as of the adoption date, we did not record a cumulative-effect adjustment in connection with the adoption of this FSP.

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

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Results of Operations

General

In January 1999, we entered into a research collaboration and exclusive worldwide license agreement with NV Organon, or Organon. The agreement will allow Organon to develop and commercialize our proprietary A MPAKINE technology for the treatment of schizophrenia and depression. In connection with the agreement, we received $2,000,000 up-front and research support payments of approximately $3,000,000 per year for two years. The agreement with Organon also includes milestone payments based upon clinical development, plus royalty payments on worldwide sales. To date, we have received milestone payments from Organon totaling $6,000,000. For each milestone payment, we recorded the related revenue upon achievement of the milestone.

In October 2000, we entered into a research collaboration agreement and a license agreement with Les Laboratoires Servier, or Servier. The agreements will allow Servier to develop and commercialize up to three select A MPAKINE compounds for the treatment of (i) declines in cognitive performance associated with aging, (ii) neurodegenerative diseases and (iii) anxiety disorders. The research collaboration agreement, as amended, included an up-front payment by Servier of $5,000,000 and research support payments of approximately $2,025,000 per year through early December 2006 (subject to us providing agreed-upon levels of research personnel). The amount of research support was subject to annual adjustment based upon the increase in the U.S. Department of Labor’s Consumer Price Index. For the year ended December 31, 2006, our research revenues from the Servier agreements were approximately $1,025,000. In early December 2006, we terminated the research collaboration with Servier and, as a result, the worldwide rights for the A MPAKINE compounds for the treatment of the above indications were returned to us, other than for up to three compounds that may be selected by Servier prior to early December 2007 for commercialization in its territory. Should any of these compounds be successfully commercialized by Servier, we would receive payments based upon key clinical development milestones and royalty payments on sales in licensed territories.

From inception (February 10, 1987) through September 30, 2007, we have sustained losses aggregating approximately $89,454,000. Continuing losses are anticipated over the next several years. During that time, our ongoing operating expenses will only be offset, if at all, by proceeds from Small Business Innovative Research grants and by possible milestone payments from Organon and Servier. Ongoing operating expenses may also be funded by payments under planned strategic alliances that we are seeking with other pharmaceutical companies for the clinical development, manufacturing and marketing of our products. The nature and timing of payments to us under the Organon and Servier agreements or other planned strategic alliances, if and when entered into, are likely to significantly affect our operations and financing activities and to produce substantial period-to-period fluctuations in reported financial results. Over the longer term, we will be dependent upon the successful introduction of a new product into the North American market from our internal development, as well as the successful commercial development of our products by Organon, Servier or our other prospective partners to attain profitable operations from royalties or other product-based revenues.

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Comparison of the Three Months and Nine Months ended September 30, 2007 and 2006

For the three months ended September 30, 2007, our net loss of approximately $2,962,000 compares with a net loss of approximately $3,635,000 for the corresponding prior year period, a decrease of 19%. For the nine months ended September 30, 2007, the net loss of approximately $9,696,000 compares with a net loss of approximately $12,592,000 for the corresponding prior year period, a decrease of 23%. The decreased losses primarily reflect decreased operating expenses, as explained more fully below.

Our revenues for the three months ended September 30, 2007 decreased to $0 from approximately $402,000 for the three months ended September 30, 2006. For the nine months ended September 30, 2007, our revenues decreased to $0 from approximately $864,000 for the corresponding prior year period. Results for both periods primarily reflect decreased research revenues from the agreement with Servier. As reported earlier, we terminated the research collaboration with Servier effective early December 2006.

Our research and development expenses for the three-month period ended September 30, 2007 decreased from approximately $3,192,000 to approximately $1,941,000, or by 39%, from the corresponding prior year period. The decrease in our non-cash stock compensation charges represents approximately $174,000, or 14%, of this decrease. Most of the remaining decrease reflects expenses incurred in the prior year period to address the earlier clinical hold on A MPAKINE CX717 by the FDA.

As reported earlier, the FDA placed a clinical hold on CX717 in late March 2006 due to concerns over some preclinical animal data and not as a result of data from any human clinical trials. After we provided additional toxicological data, the FDA released the clinical hold in October 2006, but imposed a limited dose range for further clinical testing of the compound.

While we could have continued with our Alzheimer’s disease study at low doses, we chose not to given that the original intent of the Alzheimer’s study was to look at a range of doses up to 1200mg. Without the ability to test several different doses, we felt the study could result in a clinical failure for the drug without ever having tested it at higher dose levels. The risks associated with proceeding on that basis were deemed unacceptable and instead we chose to delay the study until we could provide the FDA with sufficient information that would allow us to proceed at all dose levels originally desired for this study.

In April 2007, we submitted further data to the FDA that demonstrates that the cellular effects that originally concerned the Division of Neurology Products were postmortem, fixative induced effects. In July 2007, the FDA indicated that we may resume our previously approved clinical trials with CX717 in Alzheimer’s disease at all requested dose levels.

In September 2007, we filed an Investigational New Drug Application, or IND, for CX717 with the Division of Psychiatry Products of the FDA to potentially initiate a Phase IIb study evaluating CX717 for the treatment of Attention Deficit Hyperactivity Disorder, or ADHD. Prior to the FDA clinical hold, we announced positive statistical and clinical results with CX717 in a Phase IIa pilot clinical trial in adults with that indication.

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In October 2007, the FDA rejected our application to study CX717 in ADHD based upon the results of animal toxicology studies that we filed with the agency. At this time, we do not anticipate re-submitting further data to the FDA for CX717 for the ADHD indication. We are evaluating our options to have this decision reviewed further within the FDA, but at this point we do not believe that the decision by the Division of Psychiatry Products will be changed.

Also, we believe that by developing an acute use for CX717, such as treatment of respiratory depression, we may mitigate the risks perceived with higher chronic doses. The risk/benefit ratio for the treatment of patients with life-threatening disorders, such as respiratory depression, is significantly different than that for the treatment of ADHD. In addition, our preclinical data for improvement of memory and cognition in animals consistently indicates required dose levels of CX717 that represent a 5 to 10-fold level less than the dose required in animal models of ADHD. Either lower dosage levels for chronic administration and/or acute uses are thus possible options for the continued development of CX717.

For the nine-month period ended September 30, 2007, our research and development expenses decreased from approximately $10,363,000 to approximately $6,943,000, or by 33%, from the corresponding prior year period. Non-cash stock compensation charges accounted for approximately $535,000, or 16%, of the decrease due to a decrease in stock options granted during the current year period. Most of the remaining decreased expenses reflect prior year period clinical expenses incurred before the FDA clinical hold on CX717, and preclinical expenses to address the clinical hold.

Our general and administrative expenses for the three-month period ended September 30, 2007 increased from approximately $1,014,000 to approximately $1,182,000, or by 17%, compared to the corresponding prior year period. Non-cash stock compensation charges accounted for approximately $78,000, or nearly one-half of the increase, due to a decrease in the estimated forfeiture rate utilized to compute the related expense. Increased legal, consulting and audit fees also contributed to the current year period expense increase.

For the nine-month period ended September 30, 2007, our general and administrative expenses decreased from approximately $3,604,000 to approximately $3,179,000, or by 12% compared to the prior year period. Non-cash stock compensation charges accounted for approximately $367,000, or 86% of the decrease, with the decreased charges reflecting the vesting schedules of earlier issued stock options. Decreased legal fees also contributed to the current year period expense decrease.

Liquidity and Capital Resources

Sources and Uses of Cash

From inception (February 10, 1987) through September 30, 2007, we have funded our organizational and research and development activities primarily through the issuance of equity securities, funding related to collaborative agreements, various research grants and net interest income.

Under the agreements signed with Servier in October 2000, as amended to date, the collaborative research phase of the agreement ended in early December 2006, but Servier has the right through early December 2007 to select up to three compounds developed during the collaboration for further

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development. If they choose to select any of these compounds for commercialization, we may receive milestone payments based upon successful clinical development of the licensed compounds and royalties on sales in licensed territories. Under the terms of the agreement with Organon, we may receive additional milestone payments based on clinical development of the licensed technology and ultimately, royalties on worldwide sales.

In August 2003, we completed a private placement of an aggregate of 3,333,334 shares of our common stock at $1.50 per share and five-year warrants to purchase up to an additional aggregate of 3,333,334 shares at an exercise price of $2.55 per share. We received approximately $4,500,000 in net proceeds from the private placement. During the year ended December 31, 2006, we received approximately $2,830,000 of proceeds from the exercise of related warrants. During the nine months ended September 30, 2007, we received another $170,000 from the exercise of related warrants, leaving warrants to purchase up to 1,816,668 shares outstanding. If the remaining warrants are fully exercised, of which there can be no assurance, such exercise would provide us approximately $4,633,000 of additional capital. The warrants are subject to a call right in our favor to the extent that the closing price of our common stock exceeds $6.00 per share for any 13 consecutive trading days.

In January 2004, we completed a private placement of an aggregate of 6,909,091 shares of our common stock at $2.75 per share and five-year warrants to purchase up to an additional aggregate of 4,490,910 shares at an exercise price of $3.25 per share. We received approximately $17,500,000 in net proceeds from the private placement. During the year ended December 31, 2006, we received approximately $1,696,000 from the exercise of related warrants. As of September 30, 2007, warrants to purchase up to 3,969,137 shares remained outstanding. If the remaining warrants are fully exercised, of which there can be no assurance, these warrants would provide us approximately $12,900,000 of additional capital. The warrants are subject to a call right in our favor to the extent that the closing price of our common stock exceeds $7.50 per share for any 13 consecutive trading days.

In December 2004, we completed a private placement of an aggregate of 4,233,333 shares of our common stock at $2.66 per share and five-year warrants to purchase up to an additional aggregate of 2,116,666 shares at an exercise price of $3.00 per share. We received approximately $10,400,000 in net proceeds from the private placement. During the year ended December 31, 2006, we received approximately $1,023,000 from the exercise of related warrants. As of September 30, 2007, warrants to purchase up to 1,775,689 shares remained outstanding. If the remaining warrants are fully exercised, of which there can be no assurance, these warrants would provide us approximately $5,327,000 of additional capital. The warrants are subject to a call right in our favor to the extent that the closing price of our common stock exceeds $7.50 per share for any 13 consecutive trading days.

In January 2007, we completed a registered direct offering with several institutional investors for 5,021,427 shares of our common stock and warrants to purchase 3,263,927 shares of our common stock for an aggregate purchase price of approximately $5,624,000. Net proceeds from the offering were approximately $5,100,000. The warrants have an exercise price of $1.66 per share and, subject to the terms therein, are exercisable at any time on or before January 21, 2012. During the nine months ended September 30, 2007, we received approximately $443,000 from the exercise of related

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warrants, leaving warrants to purchase up to 2,996,927 shares outstanding. If the remaining warrants are fully exercised, of which there can be no assurance, these warrants would provide us approximately $4,975,000 of additional capital. The warrants are subject to a call right in our favor to the extent that the closing price of our common stock exceeds $3.35 per share for any 13 consecutive trading days.

In August 2007, we completed a registered direct offering with several institutional investors for 7,075,000 shares of our common stock and warrants to purchase 2,830,000 shares of our common stock for an aggregate purchase price of $14,150,000. Net proceeds from the offering were approximately $13,135,000. The investors’ warrants have an exercise price of $2.64 per share and, subject to the terms therein, are exercisable on or after February 29, 2008 and on or before August 28, 2012. In addition, we issued warrants to purchase up to an aggregate of 176,875 shares of our common stock to the placement agents in the offering. The placement agents’ warrants have an exercise price of $3.96 per share and, subject to the terms therein, are exercisable on or after February 29, 2008 and on or before August 28, 2012. If the related warrants are fully exercised, of which there can be no assurance, these warrants would provide us approximately $8,172,000 of additional capital.

As of September 30, 2007, we had cash, cash equivalents and marketable securities totaling approximately $20,233,000 and working capital of approximately $18,580,000. In comparison, as of December 31, 2006, we had cash, cash equivalents and marketable securities of approximately $9,449,000 and working capital of approximately $7,917,000. The increases in cash and working capital reflect the proceeds from the offerings of our common stock and warrants to purchase shares of our common stock in January 2007 and August 2007, partially offset by amounts required to fund our operations.

Net cash used in operating activities was approximately $7,815,000 during the nine months ended September 30, 2007, and included our net loss for the period of approximately $9,696,000, adjusted for non-cash expenses for depreciation and stock compensation approximating $1,794,000, and changes in operating assets and liabilities. Net cash used in operating activities was approximately $10,548,000 during the nine months ended September 30, 2006, and included our net loss for the period of approximately $12,592,000, adjusted for non-cash expenses for depreciation, amortization and stock compensation approximating $2,689,000, and changes in operating assets and liabilities.

Net cash used in investing activities approximated $5,451,000 during the nine months ended September 30, 2007, and primarily resulted from the purchases of marketable securities of approximately $12,820,000, partially offset by the sales and maturities of marketable securities of approximately $7,858,000. Fixed asset purchases for the current year period approximated $489,000. Net cash provided by investing activities approximated $5,006,000 during the nine months ended September 30, 2006, and primarily resulted from the sales and maturities of marketable securities of approximately $13,024,000, partially offset by the purchase of marketable securities of $7,926,000. Fixed asset purchases for the prior year period approximated $92,000.

Net cash provided by financing activities amounted to approximately $19,049,000 for the nine months ended September 30, 2007 and resulted primarily from the net proceeds from our offerings of our common stock and warrants to purchase shares of our common stock in January and August 2007.

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Net cash provided by financing activities amounted to approximately $5,951,000 for the nine months ended September 30, 2006, and resulted primarily from the exercise of warrants to purchase shares of our common stock issued to investors in connection with our prior financings as well as the exercise of other outstanding warrants and options to purchase shares of our common stock.

Commitments

We lease approximately 32,000 square feet of research laboratory, office and expansion space under an operating lease that expires May 31, 2009. The commitments under the lease agreement for the remaining three months of the year ending December 31, 2007, the year ending December 31, 2008 and the five months ending May 31, 2009 are approximately $135,000, $556,000 and $237,000, respectively.

Remaining commitments for preclinical and clinical studies amount to approximately $1,156,000. Separately, we are committed to approximately $633,000 for sponsored research at academic institutions, of which $490,000 is payable over the next twelve months.

In June 2000, we received approximately $247,000 from the Institute for the Study of Aging, or the Institute, a non-profit foundation supported by the Estee Lauder Trust. The advance partially offset our limited costs for our testing in patients with mild cognitive impairment that we conducted with our partner, Servier. Provided that we comply with the conditions of the funding agreement, including the restricted use of the amounts received, repayment of the advance will not be required unless we enter an A MPAKINE compound into Phase III clinical trials for Alzheimer’s disease. Upon such potential clinical trials, repayment would include interest computed at a rate equal to one-half of the prime lending rate. In lieu of cash, in the event of repayment the Institute may elect to receive the balance of outstanding principal and accrued interest as shares of our common stock. The conversion price for such form of repayment shall initially equal $4.50 per share, subject to adjustment under certain circumstances.

Staffing

As of September 30, 2007, we had a total of 26 full-time research and administrative employees. We anticipate modest increases in staffing and investments in equipment through the next twelve months.

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Outlook

We anticipate that our cash, cash equivalents and marketable securities will be sufficient to satisfy our capital requirements into 2009. Additional funds will be required to continue operations beyond that time. We may receive additional milestone payments from the Organon and Servier agreements. However, there is no assurance that we will receive such milestone payments from Organon or Servier. We may also receive funds from the exercise of warrants to purchase shares of our common stock. As of September 30, 2007, warrants to purchase approximately 14 million shares of our common stock were outstanding with a weighted average exercise price of $2.66 per share. If all remaining warrants are fully exercised, of which there can be no assurance, such exercise would provide approximately $37,000,000 of additional capital.

In order to provide for our longer-term capital requirements, we are presently seeking additional collaborative or other arrangements with larger pharmaceutical companies. Under these agreements, it is intended that such companies would provide capital to us in exchange for an exclusive or non-exclusive license or other rights to certain of the technologies and products that we are developing. Competition for such arrangements is intense with a large number of biopharmaceutical companies attempting to secure alliances with more established pharmaceutical companies. Although we have been engaged in discussions with candidate companies, there is no assurance that an agreement or agreements will arise from these discussions in a timely manner, or at all, or that revenues that may be generated thereby will offset operating expenses sufficiently to reduce our longer-term funding requirements.

Because there is no assurance that we will secure additional corporate partnerships, we may seek to raise additional capital through the sale of debt or equity securities. There is no assurance that funds will be available on favorable terms, or at all. If equity securities are issued to raise additional funds, dilution to existing stockholders is likely to result. Such additional capital would, more importantly, enhance the ability of us to achieve significant milestones in our efforts to develop the A MPAKINE technology.

Additional Risks and Uncertainties

Our proposed products are in the preclinical or early clinical stage of development and will require significant further research, development, clinical testing and regulatory clearances. They are subject to the risks of failure inherent in the development of products based on innovative technologies. These risks include, but are not limited to, the possibilities that any or all of the proposed products will be found to be ineffective or unsafe, or otherwise fail to receive necessary regulatory clearances; that the proposed products, although effective, will be uneconomical to market; that third parties may now or in the future hold proprietary rights that preclude us from marketing them; or that third parties will market superior or equivalent products. Accordingly, we are unable to predict whether our research and development activities will result in any commercially viable products or applications. Further, due to the extended testing and regulatory review process required before marketing clearance can be obtained, we do not expect to be able to commercialize any therapeutic drug for at least four years, either directly or through our current or prospective partners or licensees. There can

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be no assurance that our proposed products will prove to be safe or effective or receive regulatory approvals that are required for commercial sale.

Off-Balance Sheet Arrangements

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