| Stockholders' Deficiency | 6. Stockholders’ Deficiency Preferred Stock The Company has
authorized a total of 5,000,000 shares of preferred stock, par value $0.001 per share. As of June 30, 2017 and December 31, 2016,
1,250,000 shares were designated as 9% Cumulative Convertible Preferred Stock (non-voting, “9% Preferred Stock”); 37,500
shares were designated as Series B Convertible Preferred Stock (non-voting, “Series B Preferred Stock”); 205,000 shares
were designated as Series A Junior Participating Preferred Stock (non-voting, “Series A Junior Participating Preferred Stock”);
and 1,700 shares were designated as Series G 1.5% Convertible Preferred Stock. Accordingly, as of June 30, 2017 and December 31,
2016, 3,505,800 shares of preferred stock were undesignated and may be issued with such rights and powers as the Board of Directors
may designate. There were no shares
of 9% Preferred Stock, Series A Junior Participating Preferred Stock, or Series G 1.5% Convertible Preferred Stock outstanding
as of June 30, 2017 and December 31, 2016. Series B Preferred
Stock outstanding as of June 30, 2017 and December 31, 2016 consisted of 37,500 shares issued in a May 1991 private placement.
Each share of Series B Preferred Stock is convertible into approximately 0.00030 shares of common stock at an effective conversion
price of $2,208.375 per share of common stock, which is subject to adjustment under certain circumstances. As of June 30, 2017
and December 31, 2016, the shares of Series B Preferred Stock outstanding are convertible into 11 shares of common stock. The Company
may redeem the Series B Preferred Stock for $25,001, equivalent to $0.6667 per share of Series B Preferred Stock, an amount equal
to its liquidation preference, at any time upon 30 days prior notice. Series G 1.5% Convertible Preferred
Stock On March 18, 2014
and April 17, 2014, the Company entered into Securities Purchase Agreements with various accredited investors (the “Initial
Purchasers”), pursuant to which the Company sold an aggregate of 928.50 shares of its Series G 1.5% Convertible Preferred
Stock for a purchase price of $1,000 per share, or an aggregate purchase price of $928,500. On April 17, 2016,
the remaining unconverted 259.7 shares of Series G 1.5% Convertible Preferred Stock outstanding (including accrued but unpaid dividends)
were automatically and mandatorily redeemed by conversion into 242,173 newly issued shares of common stock at a conversion price
of $1.0725 per share. Common Stock On August 16, 2016,
at a special meeting of the stockholders of the Company, the stockholders approved an amendment to the Company’s Second Restated
Certificate of Incorporation (i) to effect, at the discretion of the Company’s Board of Directors, a three hundred twenty
five-to-one (325-to-1) reverse stock split of all of the outstanding shares of the Company’s common stock, par value $0.001
per share, and (ii) to set the number of the Company’s authorized shares of stock at 70,000,000 shares, consisting of 65,000,000
shares designated as common stock, par value $0.001 per share, and 5,000,000 shares designated as preferred stock, par value $0.001
per share. On September 1, 2016, the Company filed a Certificate of Amendment to the Company’s Second Restated Certificate
of Incorporation with the Secretary of State of the State of Delaware to effect the approved amendment. Pursuant to the
amendment, an aggregate of 191.068 fractional shares resulting from the reverse stock split were not issued, but were to be paid
out in cash (without interest or deduction) in an amount equal to the number of shares exchanged into such fractional share multiplied
by the average closing trading price of the Company’s common stock on the OTCQB for the five trading days immediately before
the Certificate of Amendment effecting the reverse stock split was filed with the Delaware Secretary of State ($6.7899 per share,
on a post reverse stock split basis) for an aggregate of $1,298. Unit Exchange
Agreements During April and
May 2016, the Company entered into Unit Exchange Agreements with certain warrant holders who had acquired units in connection with
the Second Amended and Restated Common Stock and Warrant Purchase Agreement on August 28, 2015, September 28, 2015 or November
2, 2015. The Unit Exchange Agreements provided for the warrant holders to exchange (i) existing warrants to purchase an aggregate
of 217,187 shares of the Company’s common stock, plus (ii) an aggregate of $529,394 in cash, in return for (i) an aggregate
of 108,594 shares of the Company’s common stock with a total market price of $728,859 (average $6.7275 per share), and (ii)
new warrants to purchase an aggregate of 108,594 shares of the Company’s common stock with an exercise price of $4.8750 per
share, exercisable for cash or on a cashless basis through the original expiration date of September 30, 2020. For accounting purposes,
for those unit warrant holders accepting the Company’s exchange offer, the Company evaluated the fair value of the incremental
consideration paid to induce the unit warrant holders to exchange their original warrants for exchanged warrants and determined
that the Company did not incur any cost with respect to the exchange transactions. Information with respect to the Black-Scholes
variables used in connection with the evaluation of the fair value of the exchange consideration is provided at Note 3. 1st 2016 Unit
Offering On January 8, 2016,
the Company initiated a new equity private placement, consisting of units of common stock and warrants, up to an aggregate of $2,500,000,
with each unit consisting of (i) one share of common stock, and (ii) one warrant to purchase two additional shares of common stock
(the “1 st Included in the
gross proceeds of $309,985 received was $25,350 received on June 30, 2016 from the sale of 3,517 shares of common stock and an
aggregate of 7,034 warrants to an unrelated entity with which the Company simultaneously entered into a one-year agreement for
investor relations services. The unit price in
the 1 st In the case of an
acquisition in which the Company is not the surviving entity, the holder of the warrant would receive from any surviving entity
or successor to the Company, in exchange for the warrant, a new warrant from the surviving entity or successor to the Company,
substantially in the form of the existing warrant and with an exercise price adjusted to reflect the nearest equivalent exercise
price of common stock (or other applicable equity interest) of the surviving entity that would reflect the economic value of the
warrant, but in the surviving entity. No registration
rights were granted to the purchasers in the private placement with respect to (i) the shares of common stock issued as part of
the units, (ii) the warrants, or (iii) the shares of common stock issuable upon exercise of the warrants. No placement agent
fees, brokerage commissions, finder’s fees or similar payments were made in the form of cash or warrants to qualified referral
sources in connection with the sale of the shares of common stock and warrants. The Company paid $3,429 in cash to other professionals
for services related to the seven closings. 2nd 2016 Unit
Offering On December 29,
2016, the Company entered into purchase agreements with certain accredited investors, pursuant to which, the Company sold units
in a private placement for aggregate cash consideration of $125,000, with each unit consisting of (i) one share of common stock,
and (ii) one warrant to purchase an additional share of common stock. On December 30, 2016, the Company sold additional units to
additional investors for aggregate cash consideration of $60,000 in a second and final closing, bringing the total aggregate consideration
paid in the private placement to $185,000 through December 31, 2016. On December 31, 2016, the private placement terminated pursuant
to its terms. Collectively, this unit offering is referred to herein as the “2 nd nd In addition, as
set forth in the agreements, each purchaser has the option, but not the obligation, to exchange the entire amount invested in the
private placement (but not less than the entire amount), in such purchaser’s sole discretion, into any subsequent offering
of the Company until the earlier of (i) the completion of subsequent offerings by the Company aggregating at least $15 million
of gross proceeds to the Company, or (ii) December 31, 2017. If exchanged, the amount to be invested in a subsequent offering will
be 1.2 times the amount of the initial investment in the private placement, or 1.4 times the amount of the initial investment if
the Company has entered into financing transactions pursuant to Sections 3(a)(9) or 3(a)(10) of the Securities Act of 1933, as
amended, or other financing arrangements that have full-ratchet anti-dilution provisions (i) without a floor, or (ii) with an indeterminate
and potentially infinite number of shares issuable pursuant to such provisions. If neither termination condition has been reached,
and the Company has more than one subsequent offering, the purchaser may elect to exchange into any subsequent offering, regardless
of whether such purchaser has already exchanged into a subsequent offering; provided, however, that the amount invested in such
subsequent offering will only and always be 1.2 (or 1.4, as applicable) times the amount of the initial investment. In the case of an
acquisition, as defined in the agreement, a) in which the Company is not the surviving entity, the holder of each warrant would
receive from any surviving entity or successor to the Company, in exchange for such warrant, a new warrant from the surviving entity
or successor to the Company, substantially in the form of the existing warrant and with an exercise price adjusted to reflect the
nearest equivalent exercise price of common stock (or other applicable equity interest) of the surviving entity that would reflect
the economic value of the warrant, but in the surviving entity. Unlimited piggy-back
registration rights have been granted with respect to the common stock, and the common stock underlying the warrants, unless such
common stock is eligible to be sold without volume limits under an exemption from registration under any rule or regulation of
the SEC that permits the holder to sell securities of the Company to the public without registration. The Company is obligated
to pay placement agent fees, brokerage commissions, finder’s fees or similar payments totaling up to $13,875 to an unaffiliated
qualified referral source as well as warrants up to 7.5% of number of units sold in the private placement. The Company paid $4,000
in cash to other professionals for services related to the closings. The shares of common
stock and warrants were offered and sold without registration under the Securities Act in reliance on the exemptions provided by
Section 4(a)(2) of the Securities Act as provided in Rule 506(b) of Regulation D promulgated thereunder. None of the shares of
common stock issued as part of the units, the warrants, the common stock issuable upon exercise of the warrants or any warrants
issued to a qualified referral source have been registered under the Securities Act or any other applicable securities laws, and
unless so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements
of the Securities Act. The Company evaluated
whether the warrants or the exchange rights met criteria to be accounted for as a derivative in accordance with Accounting Standard
Codification (ASC) 815, and determined that the derivative criteria were not met. Therefore, the Company determined no bifurcation
and separate valuation was necessary and the warrants and exchange right should be accounted for with the host instrument. At each
reporting period, the Company analyzed how the host instrument should be classified and determined, at December 31, 2016 and March
31, 2017, that it could not be classified as permanent equity due to the possibility that the Unit investment amount could be exchanged
for debt (convertible or otherwise) or for redeemable preferred stock. Because the exchange right expires within one year, the
Company concluded that the Unit investment, at that time, would be appropriately classified as a current liability. Subsequent to June
30, 2017, the Company’s Board has approved an offering of securities via private placement that, because of the terms of
the new offering as compared to the terms of the 2 nd 2017 Unit Offering On March 10, 2017
and March 28, 2017, the Company sold units to investors for aggregate gross proceeds of $350,000, with each unit consisting of
one share of the Company’s common stock and one common stock purchase warrant to purchase one share of the Company’s
common stock (the “2017 Unit Offering”). Units were sold for $2.50 per unit and the warrants issued in connection with
the units are exercisable at a fixed price $2.75 per share of the Company’s common stock. The warrants contain a cashless
exercise provision and certain blocker provisions preventing exercise during periods of time when the investor would beneficially
own more than 4.99% of the Company’s outstanding shares of common stock if such exercise were to occur. The warrants are
also subject to redemption by the Company at $0.001 per share upon ten (10) days written notice if the Company’s common stock
closes at 200% or more of the unit purchase price for any five (5) consecutive trading days. Investors were non-affiliated purchasers.
Investors received an unlimited number of piggy-back registration rights. Investors received an unlimited number of exchange rights,
which are options and not obligations, to exchange such investor’s entire investment (and not less than the entire investment)
into one or more subsequent equity financings (consisting solely of convertible preferred stock or common stock or units containing
preferred stock or common stock and warrants exercisable only into preferred stock or common stock) that would be considered as
“permanent equity” under United States Generally Accepted Accounting Principles and the rules and regulations of the
United States Securities and Exchange Commission, and therefore classified as stockholders’ equity, and excluding any form
of debt or convertible debt (each such financing a “Subsequent Equity Financing”). These exchange rights are effective
until the earlier of: (i) the completion of any number of subsequent financings aggregating at least $15 million gross proceeds
to the Company, or (ii) December 30, 2017. The dollar amount used to determine the amount invested or exchanged into the subsequent
financing will be 1.2 times the amount of the original investment. Under certain circumstances, the ratio may be 1.4 instead of
1.2. The exchange right does not permit the investors to exchange into a debt offering or redeemable preferred stock, therefore,
unlike the 2 nd Subsequent to June
30, 2017, the Company’s Board has approved an offering of securities via private placement that, because of the terms of
the new offering as compared to the terms of the 2017 Unit Offering, is likely to result in an exchange of units from the 2017
Unit Offering for new Units in this new post-June 30, 2017 offering by the Company. There is a very high probability of an exchange
of these units into the new equity transaction, however, because the 2017 Unit Offering was originally accounted for as equity,
a reclassification similar to the 2 nd The closing market
prices of the Company’s common stock on March 10, 2017 and March 28, 2017 were $4.05 and $3.80 respectively. Information with
respect to the issuance of common stock in connection with the settlement of debt obligations is provided at Note 5. Common Stock Warrants Information with
respect to the issuance and exercise of common stock purchase warrants in connection with the 10% Convertible Note Payable and
Warrant Purchase Agreement is provided at Note 4. A summary of warrant
activity for the six months ended June 30, 2017 is presented below.
Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in Years)
Warrants outstanding at December 31, 2016 540,198 $ 4.84842
Issued 148,000 2,75000
Warrants outstanding at June 30, 2017 688,198 $ 4.39715 3.67
Warrants exercisable at December 31, 2016 540,198 $ 4.84842
Warrants exercisable at June 30, 2017 688,198 $ 4.39715 3.67 The exercise prices
of common stock warrants outstanding and exercisable are as follows at June 30, 2017:
Exercise Price Warrants Outstanding (Shares) Warrants Exercisable (Shares) Expiration Date
$ 1.2870 41,002 41,002 April 17, 2019
$ 1.5620 130,284 130,284 December 31, 2021
$ 4.8500 5,155 5,155 September 23, 2019
$ 4.8750 108,594 108,594 September 30, 2020
$ 5.0000 5,000 5,000 September 22, 2019
$ 5.1025 10,309 10,309 January 29, 2019
$ 6.5000 8,092 8,092 February 4, 2019
$ 6.8348 145,758 145,758 September 30, 2020
$ 7.9300 86,004 86,004 February 28, 2021
$ 2.7500 148,000 148,000 December 31, 2021
688,198 688,198 Based on a fair
market value of $2.00 per share on June 30, 2017, the intrinsic value of exercisable in-the-money common stock warrants was $86,299
as of June 30, 2017. A summary of warrant
activity for the six months ended June 30, 2016 is presented below.
Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in Years)
Warrants outstanding at December 31, 2015 482,288 $ 7.10125
Issued, net of exercises and expirations (45,127 ) 6.1017
Warrants outstanding at June 30, 2016 437,161 $ 6.3830 3.93
Warrants exercisable at December 31, 2015 482,288 $ 7.10125
Warrants exercisable at June 30, 2016 437,161 $ 7.13604 3.93 Based on a fair
market value of $5,8175 per share on June 30, 2016, the intrinsic value of exercisable in-the-money common stock warrants was $295,478
as of June 30, 2016. The exercise prices
of common stock warrants outstanding and exercisable are as follows at June 30, 2016:
Exercise Price Warrants Outstanding (Shares) Warrants Exercisable (Shares) Expiration Date
$ 1,2870 41,002 41,002 April 17, 2019
$ 4.8750 108,594 108,594 September 30, 2020
$ 5.1025 10,309 10,309 January 29, 2019
$ 6.5000 8,092 8,092 February 4, 2019
$ 6.8348 145,758 145,758 September 30, 2020
$ 7.9300 86,004 86,004 February 28, 2021
$ 2.7500 37,401 37,401 September 15, 2016
437,160 437,160 Stock Options In connection with
the initial closing of the Series G Private Placement completed on March 18, 2014, the stockholders of the Company holding a majority
of the votes to be cast on the issue approved the adoption of the Company’s 2014 Equity, Equity-Linked and Equity Derivative
Incentive Plan (the “2014 Plan”), which had been previously adopted by the Board of Directors of the Company, subject
to stockholder approval. The Plan permits the grant of options and restricted stock with respect to up to 325,025 shares of common
stock, in addition to stock appreciation rights and phantom stock, to directors, officers, employees, consultants and other service
providers of the Company. On June 30, 2015,
the Board of Directors adopted the 2015 Stock and Stock Option Plan (the “2015 Plan”). The 2015 Plan initially provided
for, among other things, the issuance of either or any combination of restricted shares of common stock and non-qualified stock
options to purchase up to 461,538 shares of the Company’s common stock for periods up to ten years to management, members
of the Board of Directors, consultants and advisors. The Company has not and does not intend to present the 2015 Plan to stockholders
for approval. On August 18, 2015, the Board of Directors increased the number of shares that may be issued under the 2015 Plan
to 769,231 shares of the Company’s common stock. On March 31, 2016, the Board of Directors further increased the number of
shares that may be issued under the 2015 Plan to 1,538,461 shares of the Company’s common stock. On January 17, 2017, the
Board of Directors further increased the number of shares that may be issued under the 2015 Plan to 3,038,461 shares of the Company’s
common stock. On March 31, 2016,
the Board of Directors of the Company awarded stock options for a total of 523,075 shares of common stock in various quantities
to twelve individuals who are members of management, the Company’s Scientific Advisory Board, independent members of the
Board of Directors, or outside service providers pursuant to the Company’s 2015 Plan. The stock options vested 25% on each
of March 31, 2016, June 30, 2016, September 30, 2016 and 25% on December 31, 2016, and will expire on March 31, 2021. The exercise
price of the stock options was established on the grant date at $7.3775 per share, which was the closing market price of the Company’s
common stock on such date. The aggregate grant date fair value of these stock options, as calculated pursuant to the Black-Scholes
option-pricing model, was $3,774,000. During the three months ended March 31, 2016 and six months ended June 30, 2016, the Company
recorded charges to operations of $390,325 and $1,842,150, respectively, with respect to these stock options. On September 12,
2016, the Company entered into an agreement for consulting services, which provided for the payment of a fee through the granting
of a non-qualified stock option to purchase a total of 2,608 shares of common stock pursuant to the Company’s 2015 Plan.
The stock option was fully vested on the date of grant and will expire on September 12, 2021. The exercise price of the stock option
was established on the grant date at $5.7500 per share, which was the closing market price of the Company’s common stock
on the date of grant. The aggregate grant date fair value of the stock option, calculated pursuant to the Black-Scholes option-pricing
model, was $14,384, which was charged to operations on the date of grant. On January 17, 2017,
the Board of Directors of the Company awarded stock options for a total of 395,000 shares of common stock in various quantities
to seventeen individuals and entities who are members of management, the Company’s Scientific Advisory Board, independent
members of the Board of Directors, or outside service providers pursuant to the Company’s 2015 Plan. The stock options vested
25% upon grant, 25% on March 31, 2017, and an additional 50% on June 30, 2017, and will expire on January 17, 2022. The exercise
price of the stock options was established on the grant date at $3.90 per share, which was the closing market price of the Company’s
common stock on such date. The aggregate grant date fair value of these stock options, as calculated pursuant to the Black-Scholes
option-pricing model, was $1,464,305. During the six months ended June 30, 2017, the Company recorded a charge to operations of
$1,216,378 with respect to these stock options. On June 30, 2017,
the Board of Directors of the Company awarded stock options for a total of 285,000 shares of common stock in various quantities
to nine individuals who are members of management, independent members of the Board of Directors, or outside service providers
pursuant to the Company’s 2015 Plan. The stock options vested immediately upon grant. The exercise price of the stock options
was established on the grant date at $2.00 per share, which was the closing market price of the Company’s common stock on
the date of the grant. The aggregate grant date fair value of these stock options, as calculated pursuant to the Black-Scholes
option-pricing model, was $505,875. During the six months ended June 30, 2017, the Company recorded a charge to operations of $505,875
with respect to these stock options. Information with
respect to the Black-Scholes variables used in connection with the evaluation of the fair value of stock-based compensation is
provided at Note 3. A summary of stock
option activity for the six months ended June 30, 2017 is presented below.
Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in Years)
Options outstanding at December 31, 2016 1,307,749 $ 7.6515
Granted 680,000 3.1037
Options outstanding at June 30, 2017 1,987,749 $ 6.0957 5.00
Options exercisable at December 31, 2016 1,307,749 $ 7.6515
Options exercisable at June 30, 2017 1,987,749 $ 6.0957 5.00 There was no deferred
compensation expense for outstanding and unvested stock options at either June 30, 2017 or December 31, 2016, respectively. The exercise prices
of common stock options outstanding and exercisable were as follows at June 30, 2017:
Exercise Price Options Outstanding (Shares) Options Exercisable (Shares) Expiration Date
$ 2.0000 285,000 285,000 June 30, 2022
$ 3.9000 395,000 395,000 January 17, 2022
$ 4.5000 7,222 7,222 September 2, 2021
$ 5.6875 89,686 89,686 June 30, 2020
$ 5.7500 2,608 2,608 September 12, 2021
$ 6.4025 27,692 27,692 August 18, 2020
$ 6.4025 129,231 129,231 August 18, 2022
$ 6.4025 261,789 261,789 August 18, 2025
$ 6.8250 8,791 8,791 December 11, 2020
$ 7.3775 523,077 523,077 March 31, 2021
$ 8.1250 169,231 169,231 June 30, 2022
$ 13.0000 7,385 7,385 March 13, 2019
$ 13.0000 3,846 3,846 April 14, 2019
$ 13.9750 3,385 3,385 March 14, 2024
$ 15.4700 7,755 7,755 April 8, 2020
$ 15.9250 2,462 2,462 February 28, 2024
$ 16.0500 46,154 46,154 July 17, 2019
$ 16.6400 1,538 1,538 January 29, 2020
$ 19.5000 9,487 9,487 July 17, 2022
$ 19.5000 6,410 6,410 August 10, 2022
1,987,749 1,987,749 Based on a fair
market value of $2.00 per share on June 30, 2017, there were no exercisable in-the-money common stock options as of March 31, 2017. A summary of stock
option activity for the six months ended June 30, 2016 is presented below.
Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in Years)
Options outstanding at December 31, 2015 774,842 $ 7.8325
Granted 523,077 7.3775
Options outstanding at June 30, 2016 1,297,919 $ 7.6375 5.82
Options exercisable at December 31, 2015 519,662 $ 8.515
Options exercisable at June 30, 2016 932,471 $ 7.865 5.88 The exercise prices
of common stock options outstanding and exercisable were as follows at June 30, 2016:
Exercise Price Options Outstanding (Shares) Options Exercisable (Shares) Expiration Date
$ 5.6875 89,686 89,686 June 30, 2020
$ 6.4025 27,692 20,769 August 18, 2020
$ 6.4025 129,231 96,923 August 18, 2022
$ 6.4025 261,789 196,341 August 18, 2025
$ 6.8250 8,791 8,791 December 11, 2020
$ 7.3775 523,077 262,308 March 31, 2021
$ 8.1250 169,231 169,231 June 30, 2022
$ 13.0000 7,385 7,385 March 13, 2019
$ 13.0000 3,846 3,846 April 14, 2019
$ 13.9750 3,385 3,385 March 14, 2024
$ 15.4700 7,755 7,755 April 8, 2020
$ 15.9250 2,462 2,462 February 28, 2024
$ 16.2500 46,154 46,154 July 17, 2019
$ 16.6400 1,538 1,538 January 29, 2020
$ 19.5000 9,487 9,487 July 17, 2022
$ 19.500 6,410 6,410 August 10, 2022
1,297,919 932,471 Based on a fair
market value of $5.8175 per share on June 30, 2016, the intrinsic value of exercisable in-the-money common stock options was $11,659
as of June 30, 2016. For the three months
ended June 30, 2017 and 2016, stock-based compensation costs included in the condensed consolidated statements of operations consisted
of general and administrative expenses of $644,657 and $953,827, respectively, and research and development expenses of $326,570
and $360,521, respectively. For the six months ended June 30, 2017 and 2016, stock-based compensation costs included in the condensed
consolidated statements of operations consisted of general and administrative expenses of $1,127,052 and $1,984,118, respectively,
and research and development expenses of $595,201 and $801,064, respectively. Pier Contingent Stock Consideration In connection with
the merger transaction with Pier effective August 10, 2012, RespireRx issued 179,747 newly issued shares of its common stock with
an aggregate fair value of $3,271,402 ($18.2000 per share), based upon the closing price of RespireRx’s common stock on August
10, 2012. The shares of common stock were distributed to stockholders, convertible note holders, warrant holders, option holders,
and certain employees and vendors of Pier in satisfaction of their interests and claims. The common stock issued by RespireRx represented
approximately 41% of the 443,205 common shares outstanding immediately following the closing of the transaction. Pursuant to the
terms of the transaction, RespireRx agreed to issue additional contingent consideration, consisting of up to 56,351 shares of common
stock, to Pier’s former security holders and certain other creditors and service providers (the “Pier Stock Recipients”)
that received RespireRx’s common stock as part of the Pier transaction if certain of RespireRx’s stock options and
warrants outstanding immediately prior to the closing of the merger were subsequently exercised. In the event that such contingent
shares were issued, the ownership percentage of the Pier Stock Recipients, following their receipt of such additional shares, could
not exceed their ownership percentage as of the initial transaction date. The stock options
and warrants outstanding at June 30, 2012 were all out-of-the-money on August 10, 2012. During late July and early August 2012,
shortly before completion of the merger, the Company issued options to officers and directors at that time to purchase a total
of 22,651 shares of common stock exercisable for ten years at $19.5000 per share. By October 1, 2012, these options, as well as
the options and warrants outstanding at June 30, 2012, were also out-of-the-money and continued to be out-of-the-money through
June 30, 2017. There were no stock
options or warrants exercised subsequent to August 10, 2012 that triggered additional contingent consideration, and the only remaining
stock options outstanding that could still trigger the additional contingent consideration remained out-of-the-money through June
30, 2017. As of June 30, 2017, due to the expirations and forfeitures of RespireRx stock options and warrants occurring since August
10, 2012, 6,497 contingent shares of common stock remained issuable under the Pier merger agreement. The Company concluded
that the issuance of any of the contingent shares to the Pier Stock Recipients was remote, as a result of the large spread between
the exercise prices of these stock options and warrants as compared to the common stock trading range, the subsequent expiration
or forfeiture of most of the options and warrants, the Company’s distressed financial condition and capital requirements,
and that these stock options and warrants have remained significantly out-of-the-money through June 30, 2017. Accordingly, the
Company considered the fair value of the contingent consideration to be immaterial and therefore did not ascribe any value to such
contingent consideration. If any such shares are ultimately issued to the former Pier stockholders, the Company will recognize
the fair value of such shares as a charge to operations at that time. Reserved and Unreserved Shares
of Common Stock On January 17, 2017,
the Board of Directors of the Company approved the adoption of the Amendment of the Amended and Restated RespireRx Pharmaceuticals,
Inc. 2015 Stock and Stock Option Plan (the “2015 Plan”). The Amendment increases the shares issuable under the plan
by 1,500,000, from 1,538,461 to 3,038,461. Other than the change in the number of shares available under the 2015 Plan, no other
changes were made to the 2015 Plan by the Amendment. At June 30, 2017,
the Company had 65,000,000 shares of common stock authorized and 2,289,045 shares of common stock issued and outstanding. Furthermore,
as of June 30, 2017, the Company had reserved an aggregate of 11 shares for issuance upon conversion of the Series B Preferred
Stock; 688,199 shares for issuance upon exercise of warrants; 1,987,749 shares for issuance upon exercise of outstanding stock
options; 63,236 shares to cover equity grants available for future issuance pursuant to the 2014 Plan; 1,397,201 shares to cover
equity grants available for future issuance pursuant to the 2015 Plan; 31,398 shares for issuance upon conversion of the Convertible
Notes; and 6,497 shares issuable as contingent shares pursuant to the Pier merger. Accordingly, as of June 30, 2017, the Company
had an aggregate of 4,174,280 shares of common stock reserved for issuance and 58,536,675 shares of common stock unreserved and
available for future issuance. The Company expects to satisfy its future common stock commitments through the issuance of authorized
but unissued shares of common stock. |
