UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 2005
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
COMMISSION FILE NUMBER: 000-13347
NEUROLOGIX, INC.
(Name of Small Business Issuer in its charter)
DELAWARE 06-1582875
-------------------------------- ----------------------
(State or other jurisdiction of I.R.S. Employer
Incorporation or organization) Identification No.)
ONE BRIDGE PLAZA, FORT LEE, NEW JERSEY 07024
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(Address of principal executive offices) (Zip Code)
(201) 592-6451
---------------------------------------------------------
(Issuer's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes |X| No |_|.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
At August 8, 2005 there were outstanding 26,532,924 shares of the
Registrant's Common Stock, $.001 par value.
Transitional Small Business Disclosure Format: Yes |_| No |X|.
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheet (Unaudited) 1
Condensed Consolidated Statements of Operations (Unaudited) 2
Condensed Consolidated Statements of Changes in Stockholders'
Equity (Deficiency) (Unaudited) 3
Condensed Consolidated Statements of Cash Flows (Unaudited) 4
Notes to Condensed Consolidated Financial Statements (Unaudited) 5
Item 2 - Management's Discussion and Analysis or Plan of Operation 13
Item 3 - Controls and Procedures 18
PART II. OTHER INFORMATION 19
Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds 19
Item 4. - Submission of Matters to a Vote of Security Holders 19
Item 6. - Exhibits 19
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
-----------------------------
NEUROLOGIX, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(Amounts in thousands, except share and per share data)
June 30,
2005
---------------
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents $1,769
Investments being held to maturity 3,997
Prepaid expenses and other current assets 58
-----------------
Total current assets 5,824
Equipment, less accumulated depreciation of $221 170
Intangible assets, less accumulated amortization of $68 406
Investments in unconsolidated affiliates 8
Other assets 6
-----------------
Total Assets $6,414
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $226
Current portion of capital lease obligations 15
-----------------
Total current liabilities 241
Capital lease obligations, net of current portion 5
-----------------
Total Liabilities 246
-----------------
Commitments and contingencies
Stockholders' equity:
Preferred stock:
Series A - $.06 per share cumulative, convertible 1-for-25 into common stock; $.10 par
value; 500,000 shares authorized, 645 shares issued and outstanding with an aggregate
liquidation preference of $1 per share -
Common stock:
$.001 par value; 60,000,000 shares authorized, 26,532,924 issued and outstanding 27
Additional paid-in capital 17,968
Unearned compensation (834)
Deficit accumulated during the development stage (10,993)
-----------------
Total stockholders' equity 6,168
-----------------
Total Liabilities and Stockholders' Equity $6,414
=================
See accompanying notes to the unaudited condensed consolidated financial statements.
NEUROLOGIX, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Amounts in thousands, except share and per share data)
For the period
February 12, 1999
Six Months Three Months (inception) through
Ended June 30, Ended June 30, June 30, 2005
--------------------------------------------------------------------------------------
2005 2004 2005 2004
--------------------------------------------------------------------------------------
Operating expenses:
Research and development $1,313 $767 $811 $433 $6,296
General and administrative expenses 997 801 568 458 4,517
---------------------------------------------------------------------------------------
Loss from operations (2,310) (1,568) (1,379) (891) (10,813)
---------------------------------------------------------------------------------------
Other income (expense):
Dividend, interest and other income 93 25 58 25 227
Interest expense-related parties (2) (19) (1) - (407)
---------------------------------------------------------------------------------------
Other income (expense), net 91 6 57 25 (180)
---------------------------------------------------------------------------------------
Net loss $(2,219) $(1,562) $(1,322) $(866) $(10,993)
=======================================================================================
Basic and diluted net loss per share $ (0.09) $(0.08) $(0.05) $(0.04)
=================================================================
Weighted average common shares
outstanding, basic and diluted 24,839,303 18,992,874 25,980,353 22,519,214
=================================================================
See accompanying notes to the unaudited condensed consolidated financial statements.
NEUROLOGIX, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD FROM FEBRUARY 12, 1999 (DATE OF INCEPTION) THROUGH JUNE 30, 2005
(UNAUDITED)
(Amounts in thousands, except share data)
Deficit
Accumulated
Common Stock Additional During the
-------------------------- Paid-in Unearned Development
Shares Amount Capital Compensation Stage Total
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Sale of common stock to founders 6,004,146 $0 $4 $- $- $4
Net loss - - - - (328) (328)
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Balance, December 31, 1999 6,004,146 0 4 - (328) (324)
Net loss - - - - (1,055) (1,055)
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Balance, December 31, 2000 6,004,146 0 4 - (1,383) (1,379)
Stock options granted for services - - 9 - - 9
Common stock issued for intangible assets at
$0.09 per share 259,491 - 24 - - 24
Net loss - - - - (870) (870)
------------------------------------------------------------------------------
Balance, December 31, 2001 6,263,637 0 37 - (2,253) (2,216)
Retirement of founder shares (33,126) - - - - -
Common stock issued pursuant to license
agreement at $1.56 per share 368,761 - 577 (577) - -
Private placement of Series B preferred stock - - 2,613 - - 2,613
Amortization of unearned compensation - - - 24 - 24
Net loss - - - - (1,310) (1,310)
-------------------------------------------------------------------------------
Balance, December 31, 2002 6,599,272 0 3,227 (553) (3,563) (889)
Sale of common stock 276,054 0 90 (89) - 1
Amortization of unearned compensation - - - 164 - 164
Net loss - - - - (2,274) (2,274)
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Balance, December 31, 2003 6,875,326 0 3,317 (478) (5,837) (2,998)
Conversion of note payable to common stock 1,091,321 1 2,371 - - 2,372
Conversion of mandatory redeemable preferred
stock to common stock 6,086,991 6 494 - - 500
Conversion of Series B convertible stock to
common stock 1,354,746 1 (1) - - -
Effects of reverse acquisition 7,103,020 14 5,886 - - 5,900
Amortization of unearned compensation - - - 202 - 202
Stock options granted for services - - 42 (42) - -
Exercise of stock options 10,000 - 15 - - 15
Net loss - - - - (2,937) (2,937)
------------------------------------------------------------------------------
Balance, December 31, 2004 22,521,404 22 12,124 (318) (8,774) 3,054
Amortization of unearned compensation - - - 155 - 155
Stock options granted for services - - 671 (671) - -
Private placement of common stock, net of
expense 3,615,466 5 5,061 - - 5,066
Exercise of stock options 396,054 - 112 - - 112
Net loss - - - - (2,219) (2,219)
------------------------------------------------------------------------------
Balance, June 30, 2005 26,532,924 $27 $17,968 $(834) $(10,993) $6,168
==============================================================================
See accompanying notes to the unaudited condensed consolidated financial statements.
NEUROLOGIX, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands)
Six Months For the period
Ended June 30, February 12, 1999
------------------------------------- (inception) through
2005 2004 June 30, 2005
------------------ -----------------------------------------
Operating activities:
Net loss $(2,219) $(1,562) $(10,993)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 39 36 229
Amortization 13 12 82
Stock options granted for services - - 9
Impairment of intangible assets 89 - 140
Amortization of unearned compensation 155 105 545
Non-cash interest expense 2 19 378
Changes in operating assets and liabilities (42) (260) (94)
------------------ ------------------ -----------------------
Net cash used in operating activities (1,963) (1,650) (9,704)
------------------ ------------------ -----------------------
Investing activities:
Security deposits paid - - (7)
Purchases of equipment (32) (59) (285)
Development of intangible assets (123) (43) (603)
Purchases of marketable securities (3,597) (2,787) (11,070)
Proceeds from sale of marketable securities 1,200 - 7,073
------------------ ------------------ -----------------------
Net cash used in investing activities (2,552) (2,889) (4,892)
------------------ ------------------ -----------------------
Financing activities:
Proceeds from note payable - - 1,100
Borrowings from related party - - 2,000
Cash acquired in Merger - 5,413 5,413
Merger-related costs - (375) (375)
Payments of capital lease obligations (16) (8) (85)
Stock issuance costs (150) - (150)
Proceeds from exercise of stock options 112 15 132
Proceeds from issuance of common stock 5,216 - 5,216
Proceeds from issuance of preferred stock - - 3,114
------------------ ------------------ -----------------------
Net cash provided by financing activities 5,162 5,045 16,365
------------------ ------------------ -----------------------
Net increase in cash and cash equivalents 647 506 1,769
Cash and cash equivalents, beginning of period 1,122 755
------------------ ------------------ -----------------------
Cash and cash equivalents, end of period $1,769 $1,261 $1,769
================== ================== =======================
Supplemental disclosure of non-cash investing and financing
activities:
Issuance of common stock to pay debt - $2,372 $2,372
================== ================== =======================
Reverse acquisition - net liabilities assumed, excluding cash - $(214) $(214)
================== ================== =======================
Mandatory redeemable convertible preferred stock
converted to common stock - $500 $500
================== ================== =======================
Common stock issued to acquire intangible assets - - $24
================== ================== =======================
Stock options granted for services $671 $42 $722
================== ================== =======================
Common stock issued pursuant to license agreement - - $577
================== ================== =======================
Acquisition of equipment through capital leases - - $106
================== ================== =======================
See accompanying notes to the unaudited condensed consolidated financial statements.
NEUROLOGIX, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except for share and per share amounts)
(1) The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial information.
Accordingly, the consolidated financial statements do not include all
information and notes required by accounting principles generally accepted in
the United States for complete annual financial statements. In the opinion of
management, the accompanying unaudited condensed consolidated financial
statements reflect all adjustments, consisting of only normal recurring
adjustments, considered necessary for a fair presentation. These unaudited
condensed consolidated financial statements should be read in conjunction with
the Annual Report on Form 10-KSB of Neurologix, Inc. and its subsidiaries (the
"Company") as of and for the year ended December 31, 2004.
The accompanying unaudited condensed consolidated financial
statements have been prepared assuming that the Company will continue as a
going concern. The Company is in the development stage and has not generated
any operating revenues as of June 30, 2005. As a result, the Company has
incurred net losses of $2,219, $1,562 and $10,993 and negative cash flows from
operating activities of $1,963, $1,650 and $9,704 for the six months ended
June 30, 2005 and 2004 and for the period from February 12, 1999 (inception)
to June 30, 2005, respectively. In addition, management believes that the
Company will continue to incur net losses and cash flow deficiencies from
operating activities for the foreseeable future.
As of June 30, 2005, the Company had cash and cash equivalents of
$1,769 and investments being held to maturity of $3,997. Management believes
that the Company's current resources will enable it to continue as a going
concern through at least June 30, 2006. Although the Company believes that its
resources are sufficient to complete a Phase I clinical trial for Parkinson's
disease and to initiate a Phase I clinical trial for epilepsy, the Company's
resources are not sufficient to allow it to perform all of the clinical trials
required for drug approval and marketing. Accordingly, it will continue to
seek additional funds through public or private equity offerings, debt
financings or corporate collaboration and licensing arrangements. The Company
does not know whether additional financing will be available when needed, or
if available, will be on acceptable or favorable terms to it or its
stockholders.
On February 10, 2004, pursuant to a Merger Agreement (the "Merger
Agreement"), Neurologix Research, Inc. (formerly known as Neurologix, Inc. and
referred to herein as "NRI") merged (the "Merger") with and into a
wholly-owned subsidiary of Neurologix, Inc. (formerly known as Change
Technology Partners, Inc. and referred to herein individually as "Neurologix"
and, together with its subsidiary, as the "Company") with NRI being the
surviving corporation and becoming a wholly-owned subsidiary of the Company.
As a result of the Merger, stockholders of NRI received an aggregate number of
shares of Neurologix common stock representing approximately 68% of the total
number of shares of Neurologix common stock outstanding after the Merger.
Accordingly, the business combination has been accounted for as a reverse
acquisition with NRI being the accounting parent and Neurologix being the
accounting subsidiary. The Company's condensed consolidated financial
statements include the operations of Neurologix, being the accounting
subsidiary, from the date of acquisition.
NEUROLOGIX, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except for share and per share amounts)
On September 10, 2004, pursuant to the written consent of
stockholders owning approximately 59% of the Company's common stock, $.001 par
value (the "Common Stock"), the Company amended and restated its Certificate
of Incorporation, as a result of which it effected a reverse stock split of
the shares of Common Stock at a ratio of 1 for 25 and reduced the Company's
number of authorized shares of Common Stock from 750,000,000 to 60,000,000.
All information related to Common Stock, preferred stock, options and warrants
to purchase Common Stock and earnings per share included in the accompanying
consolidated financial statements has been retroactively adjusted to give
effect to the Company's 1 for 25 reverse stock split, which became effective
on September 10, 2004.
(2) The accounting policies followed by the Company are set forth in
Note 2 to the Company's consolidated financial statements included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2004,
which are incorporated herein by reference.
(3) The results of operations for the three and six month periods
ended June 30, 2005 are not necessarily indicative of the results to be
expected for the full year.
(4) Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123"), provides for the use of a fair
value based method of accounting for employee stock compensation. However,
SFAS 123 also allows an entity to continue to measure compensation cost for
stock options granted to employees using the intrinsic value method of
accounting prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), which only requires
charges to compensation expense for the excess, if any, of the fair value of
the underlying stock at the date a stock option is granted (or at an
appropriate subsequent measurement date) over the amount the employee must pay
to acquire the stock, if such amounts differ materially from the historical
amounts. The Company has elected to continue to account for employee stock
options using the intrinsic value method under Opinion 25. By making that
election, the Company is required by SFAS 123 and SFAS 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure" to provide pro forma
disclosures of net income (loss) and earnings (loss) per share as if a fair
value based method of accounting had been applied. The Company has used the
Black-Scholes option pricing model, as permitted by SFAS 123, to estimate the
fair value of options granted to employees for such pro forma disclosures and
amortized such value over the vesting period, as follows:
Six Months Ended Three Months Ended
June 30, June 30,
---------------------------- --------------------------
2005 2004 2005 2004
------------ --------------- ------------- ------------
Net loss - as reported (2,219) $(1,562) (1,322) $(866)
Deduct total stock-based employee compensation
expense determined under fair value-based method
for all awards (701) (84) (625) (22)
------------ --------------- ------------- ------------
Net loss - pro forma $(2,920) $(1,646) $(1,947) $(888)
============ =============== ============= ============
Basic/diluted loss per share - as reported $(0.09) $ (0.08) $(0.05) $(0.04)
============ =============== ============= ============
Basic/diluted loss per share - pro forma $(0.12) $ (0.09) $(0.07) $(0.04)
============ =============== ============= ============
The following are the weighted-average assumptions used with the
Black-Scholes pricing model:
Six months ended
June 30,
-----------------------------
2005 2004
--------------- -------------
Expected option term (years) 5 5
Risk-free interest rate (%) 3.70 - 3.78 3.15 - 3.79
Expected volatility (%) 102 - 103 147 - 152
Dividend yield (%) 0 0
As a result of amendments to SFAS 123, the Company will be required
to expense the fair value of options over the service period beginning in the
first quarter of the year ending December 31, 2006.
In accordance with SFAS 123, all other issuances of common stock,
stock options or other equity instruments issued to employees and
non-employees as consideration for goods or services received by the Company
are accounted for based on the fair value of the consideration received or the
fair value of the equity instrument, whichever is more readily measurable.
Such fair value is measured at an appropriate date pursuant to the guidance in
EITF Issue No. 96-18 and capitalized or expensed as appropriate.
(5) Basic net loss per common share excludes the effect of
potentially dilutive securities and is computed by dividing net income or loss
available to common stockholders by the weighted average number of common
shares outstanding for the period. The Company's dividend requirements on its
Series A preferred stock are not material, and, accordingly, loss applicable
to the Common Stock equaled net loss in each period presented in the
accompanying condensed consolidated statements of operations. Diluted net
income or loss per share is adjusted for the effect of convertible securities,
warrants and other potentially dilutive financial instruments only in the
periods in which such effect would have been dilutive.
The following securities were not included in the computation of
diluted net loss per share because to do so would have had an anti-dilutive
effect for the periods presented:
June 30,
--------------------------
2005 2004
--------------------------
Stock Options 2,235,220 1,423,831
Warrants 1,519,056 828,000
Series A Convertible Preferred Stock 645 645
(6) Related Party Transactions:
Since the Merger, Refac, which is 90% owned by Palisade Concentrated
Equity Partnership, L.P., a private equity partnership managed by Palisade
Capital Management, L.L.C. ("PCM"), has provided consulting services to the
Company at a basic monthly retainer of $5 subject to a quarterly adjustment,
by mutual agreement, at the end of each calendar quarter to reflect the
services rendered during such quarter. Either party has the right to terminate
this agreement at any time without any prior notice. Under this arrangement,
the Company has paid $39 and $56 with respect to services rendered during the
six-month periods ended June 30, 2005 and 2004, respectively.
Effective with the closing of the Merger, the Company relocated its
corporate offices to One Bridge Plaza, Fort Lee, New Jersey 07024. The Company
used these premises on a month-to-month basis under a verbal agreement with
Palisade Capital Securities, LLC ("PCS"), an affiliate of PCM, that did not
require the payment of rent. On August 10, 2004, the Company entered into a
sublease with PCS for the lease of space at One Bridge Plaza, Fort Lee, New
Jersey through January 31, 2008 at a base annual rent of approximately $35.
The rent that the Company pays to PCS is the same rental amount that PCS pays
under its master lease for this space.
Effective April 1, 2005, the Company entered into an agreement with
PCM for administrative support services at a rate of $3 per month. Either
party has the right to terminate this agreement at any time upon 30 days prior
notice.
Additionally, the Company maintains brokerage accounts with PCS for
the Company's marketable securities.
(7) Employment Agreement with Dr. Michael Sorell
Effective September 21, 2004, the Board of Directors entered into an
employment agreement with Michael Sorell, M.D. to serve as the President and
Chief Executive Officer of the Company and NRI for an initial term of
employment of 18 months, which will automatically be extended for an
additional 18 months absent notice to the contrary from either party. Dr.
Sorell's initial annual base salary was $150, which was increased to $181 in
March 2005 and to $200 in May 2005 based upon the achievement of specified
financing objectives of the Company (see Note 10). In addition to cash
compensation, Dr. Sorell's employment agreement also provides for the grant of
options as described in Note 9.
(8) Consulting Agreements
On April 25, 2005 NRI entered into an Amended and Restated Consulting
Agreement (the "Kaplitt Agreement") with Dr. Michael G. Kaplitt, one of NRI's
scientific co-founders. NRI and Dr. Kaplitt had been parties to a Consulting
Agreement, dated October 1, 1999, as amended on October 8, 2003. Pursuant to
the terms of the Kaplitt Agreement, Dr. Kaplitt will continue to provide
advice and consulting services on an exclusive basis in scientific research on
human gene therapy in the nervous system. Dr. Kaplitt will also continue to
serve as a member of NRI's Scientific Advisory Board. Dr. Kaplitt will be paid
an annual retainer of $100 at such time as he determines that his receipt of
compensation from NRI would not be considered to compromise any clinical trial
sponsored by NRI. In connection with the execution of the Kaplitt Agreement,
the Company granted Dr. Kaplitt nonqualified stock options to purchase 160,000
shares of Common Stock (see Note 9).
On June 20, 2005, the Company executed a Consulting Agreement (the
"Hertzog Agreement") with David B. Hertzog. The Hertzog Agreement is effective
as of May 16, 2005. The Hertzog Agreement provides that Mr. Hertzog will
provide to the Company on a part-time basis independent consulting services
with respect to legal and financial regulatory matters. The term of the
Hertzog Agreement is one year, although the Hertzog Agreement may be earlier
terminated under certain circumstances. The Hertzog Agreement provides that
Mr. Hertzog will receive compensation of $100, payable in equal monthly
installments. Mr. Hertzog received stock options to acquire up to 250,000
shares of Common Stock (see Note 9). The Company will also reimburse Mr.
Hertzog for his reasonable expenses and indemnify him for certain losses
incurred in connection with the services performed under the Hertzog
Agreement. Mr. Hertzog is required to keep confidential certain information
received from the Company.
(9) Stock Options:
During 2000, the Company approved a stock option plan (the "Plan")
which provides for the granting of stock options and restricted stock to
employees, independent contractors, consultants, directors and other
individuals. A maximum of 800,000 shares of Common Stock were originally
approved for issuance under the Plan by the Board. The Plan was amended by the
Board and the Company's stockholders to increase the number of shares
available for issuance by 500,000 shares. As of June 30, 2005, the Company had
42,108 shares available for issuance under the Plan.
In connection with Dr. Sorell's employment, the Company entered into
a Stock Option Agreement with him pursuant to which it granted Dr. Sorell
options to purchase up to 1,150,000 shares of Common Stock at an exercise
price of $0.75 per share. These options include a base grant and an incentive
grant.
Base Stock Option Grant - The base grant consists of an option to
purchase 250,000 shares of Common Stock, 125,000 of which are vested. The
remaining 125,000 shares vest as follows: 100,000 shares on December 31, 2005
and 25,000 shares on March 31, 2006.
Incentive Stock Option Grant - The incentive grant consists of
options to purchase 537,815 shares of Common Stock at an exercise price of
$0.75 per share (the "Incentive Grant"). The number of shares issuable under
the Incentive Grant was determined by reference to the amount of gross
proceeds raised in equity financings by the Company on or before June 30,
2005, taking into account the price per share paid for Common Stock issued in
such financings. Through June 30, 2005, the Company raised gross proceeds of
approximately $5,216 at an average price of $1.44 per share.
One-third (1/3) of the shares covered by the Incentive Grant became
exercisable on April 27, 2005, with the balance of the shares vesting ratably
over a twenty-four (24) month period commencing April 27, 2005. The options
have a maximum ten-year term and are subject to accelerated vesting in the
event that Dr. Sorell's employment is terminated by the Company without cause,
due to his death or disability or upon a change in control. If Dr. Sorell's
employment is terminated by the Company for cause or by Dr. Sorrell
voluntarily, then the unvested portion of his options will immediately
terminate as of the date of such termination of employment. Of the total
options granted to Dr. Sorell, 273,892 were granted pursuant to the Plan in
order to qualify as incentive stock options, and the remaining 513,923 options
were not granted under the Plan or any other shareholder-approved plan, but
are governed by terms identical to the provisions of the Plan.
In connection with the execution of the Kaplitt Agreement, the
Company granted Dr. Kaplitt nonqualified stock options to purchase 160,000
shares of Common Stock. Although the options were not granted under the Plan,
the options will be governed under the same terms as options granted under the
Plan. The exercise price of the options is $2.05 per share. Twenty percent of
the options became exercisable on the date of the grant, and twenty percent
will vest on each anniversary following the date of the grant through 2009.
The fair value of the options of approximately $270 is being expensed over the
term of the Kaplitt Agreement.
In connection with the execution of a Scientific Advisory Board
Agreement, dated January 26, 2005 (the "Lowenstein Agreement"), with Daniel
Lowenstein, Mr. Lowenstein received stock options to acquire up to 30,000
shares of Common Stock pursuant to the Plan, which options will expire on
January 26, 2010. The exercise price of the options is $2.10 per share.
One-third of the options vested on January 26, 2005, and one-third will vest
on each of January 26, 2006 and January 26, 2007. The fair value of the
options of approximately $51 is being expensed ratably over the term of the
Lowenstein Agreement, which is 3 years.
Under the terms of the Hertzog Agreement, Mr. Hertzog received stock
options to acquire up to 250,000 shares of Common Stock pursuant to the Plan,
which options will expire on May 16, 2010. The exercise price of the options
is $1.825 per share. One half of such options vested on May 16, 2005 and one
quarter will vest on each of November 16, 2005 and the termination date of the
Hertzog Agreement. The fair value of the options of approximately $350 is
being expensed over the term of the Hertzog Agreement.
The following table summarizes information about stock options
outstanding at June 30, 2005:
Weighted Average
Number of Shares Exercise Price
---------------------- -------------------
January 1, 2005 2,613,459 $0.84
Granted 30,000 2.10
Exercised (120,000) 0.75
Expired (240,000) 0.75
----------------------
March 31, 2005 2,283,459 $0.86
Granted 590,000 1.92
Exercised (276,054) 0.08
Expired (362,185)* 0.75
----------------------
June 30, 2005 2,235,220 $1.25
======================
*Represents the number of options expiring under the terms of
Dr. Sorell's Incentive Grant. See above.
(10) Private Placements
During the period from February 4, 2005 to April 4, 2005, pursuant to
a Stock Purchase Agreement, as amended, (the "Stock Purchase Agreement") the
Company sold and issued 2,473,914 shares of Common Stock to investors led by
Merlin Biomed Group (the "Purchasers"), for an aggregate purchase price of
$3,216, or $1.30 per share, resulting in net proceeds after expenses of
approximately $3,066. The Purchasers also received five-year warrants to
purchase a total of 618,478 shares of Common Stock at an exercise price of
$1.625 per share. Beginning in August 2007, if the share price of the Common
Stock exceeds $3.25 per share for any ten consecutive trading day period and
certain other conditions are met, the Company may call any or all of the
unexercised warrants by purchasing the warrants at a price of $0.01 each.
On April 27, 2005, Medtronic International, Ltd. (a wholly-owned
subsidiary of Medtronic, Inc. ("Medtronic") and referred to herein as
"Medtronic International"), in conjunction with a development and
manufacturing agreement (the "Development Agreement"), increased its equity
investment in the Company by $2,000, purchasing 1,141,522 shares of Common
Stock at a price of $1.752 per share, plus a warrant to purchase 285,388
shares of Common Stock at an exercise price of $2.19 per share (the
"Warrant"). The Company has the option to call the Warrant following the
thirtieth month after the date of issuance, provided that at such time there
is a shelf registration statement effective for at least six months covering
the shares of Common Stock underlying the Warrant. If the holder does not
exercise the Warrant once the call option requirements have been met, the
Company may redeem the Warrant at a price of $0.01 per share. Medtronic
International owns approximately 8.7% of the outstanding Common Stock as of
June 30, 2005. See note 11 for a discussion of the Development Agreement.
(11) Other Agreements
The Company entered into a License Agreement (the "KEIO License
Agreement"), effective as of April 1, 2005, with KEIO University ("KEIO"),
whereby KEIO granted to the Company the sole and exclusive right and license
to certain patent rights and technical information throughout the world with
the exception of Japan. Pursuant to the KEIO License Agreement, the Company
paid KEIO an up front payment of $75 and will pay annual license maintenance
fees of $50 payable on or before January 31 of each calendar year from 2006 to
2011 or until such time as the Company is actually commercially selling
Products (as such term is defined in the KEIO License Agreement).
Additionally, the Company will make milestone payments and pay royalties as
provided for in the KEIO License Agreement. The KEIO License Agreement is
terminable at any time by the Company upon 90 days' notice.
On April 15, 2005, the Company entered into a Research Agreement with
Auckland Uniservices, Ltd. for a total of $282 to be paid in three equal
installments of $94 over an 18-month period with the first payment due on
April 30, 2005. The research activities to be performed will include, but are
not necessarily restricted to, gene therapy research studies on Parkinson's
disease. In addition, the research may include work on gene delivery systems,
new viral and non-viral vectors, animal models of neurological and metabolic
diseases and pre-clinical gene therapy studies on epilepsy and other
neurological disorders.
On April 27, 2005, the Company and NRI (the "NRI Entities") entered
into the Development Agreement with Medtronic (see note 10 above). The
Development Agreement provides that the NRI Entities will use their experience
in technology relating to biologics for the treatment of Parkinson's disease
and temporal lobe epilepsy and Medtronic will use its experience in delivery
systems for biologic and pharmaceutical compositions to collaborate on a
project through which Medtronic will develop a system for delivering biologics
(the "Product"). The Development Agreement will be in place for two years and
will renew automatically for successive one-year periods thereafter, unless
either party gives the other at least sixty days' prior written notice of its
intent not to renew.
Pursuant to the Development Agreement, the NRI Entities are required
to pay development costs of $850 to Medtronic over the course of the project
based upon development milestones. As of June 30, 2005, the NRI Entities have
paid $213. Following regulatory approval and commercialization of the Product,
Medtronic will pay certain commissions to the NRI Entities with respect to
sales of the Product. Furthermore, the NRI Entities have granted to Medtronic
a right of first offer to negotiate, in good faith, for the right to
distribute or commercialize certain gene therapy products developed by the NRI
Entities for Parkinson's disease or temporal lobe epilepsy.
(12) Pro forma Financial Statements
As described in Note 1 above, NRI merged with and into a wholly-owned
subsidiary of Neurologix on February 10, 2004. The following unaudited pro
forma information summarizes the combined results of Neurologix and NRI for
the three and six months ended June 30, 2004 as if the merger had occurred at
the beginning of 2004.
Six Months Three Months
Ended June 30, Ended June 30,
-------------------------------------
2004 2004
-------------------------------------
Net loss $(1,562) $(866)
=====================================
Basic and diluted net loss per share ($0.08) ($0.04)
=====================================
Weighted average common shares
outstanding, basic and diluted 18,992,874 22,519,214
=====================================
Management's Discussion and Analysis or Plan of Operation
(Dollar amounts, in thousands except for per share data)
Item 2 - Management's Discussion and Analysis or Plan of Operation
------------------------------------------------------------------
Plan of Operation
Effective February 10, 2004, pursuant to a Merger Agreement (the
"Merger Agreement"), Neurologix Research, Inc. (formerly known as Neurologix,
Inc. and referred to herein as "NRI") merged (the "Merger") with and into a
wholly-owned subsidiary of Neurologix, Inc. (formerly known as Change
Technology Partners, Inc. and referred to herein individually as "Neurologix"
and, together with its subsidiary, as the "Company") with NRI being the
surviving corporation and becoming a wholly-owned subsidiary of the Company.
As a result of the Merger, stockholders of NRI received an aggregate number of
shares of Neurologix common stock, $.001 par value (the "Common Stock"),
representing approximately 68% of the total number of shares of Common Stock
outstanding after the Merger. Accordingly, the business combination was
accounted for as a reverse acquisition with NRI being the accounting parent
and Neurologix being the accounting subsidiary. The Company's unaudited
condensed consolidated financial statements include the operations of
Neurologix, being the accounting subsidiary, from the date of acquisition.
The Company is in the development stage and is involved in the
development of proprietary treatments for disorders of the brain and central
nervous system using gene therapy and other innovative therapies. These
treatments are designed as alternatives to conventional surgical and
pharmacological treatments. To date, it has not generated any operating
revenues and has incurred total net losses and aggregate negative cash flows
from operating activities from inception to June 30, 2005 of $10,993 and
$9,704, respectively.
The Company's primary efforts are directed to develop therapeutic
products (i) to meet the needs of patients suffering from Parkinson's disease
and (ii) the needs of patients suffering from a type of human epilepsy known
as temporal lobe epilepsy or "TLE."
On June 8, 2005, the Company announced the completion of all
neurosurgical gene transfer procedures for the 12 patients in its Phase I
clinical trial of gene therapy for Parkinson's disease. During the second half
of 2005, the Company plans to submit to the Food and Drug Administration
("FDA") an amendment to its current study for Parkinson's disease. The primary
goal of this amendment is to extend the scope of treatments conducted as part
of the originally submitted Phase I study. In that study, patients were
treated on only one side of the brain. The extended study will treat both
sides of the brain.
In October 2004, motivated by encouraging rodent studies, the Company
entered into an agreement with Universida Federal de Sao Paolo to commence a
non-human primate study for evaluating the toxicity and efficacy of using its
technology in the brain for the treatment of TLE. The study has begun and is
expected to be completed in the second half of 2005. Subject to the successful
completion of this study, the Company plans to submit an Investigational New
Drug application to the FDA in the second half of 2005 for permission to begin
a Phase I clinical trial in TLE. Subject to the FDA's approval, the clinical
trial is expected to begin in the first quarter of 2006. The proposed clinical
protocol was presented to the NIH Recombinant DNA Advisory Committee on
September 23, 2004 and was reviewed favorably.
The Company will also continue its efforts in developing therapies to
treat Huntington's disease and Alzheimer's disease as well as continuing its
work under the Company's research agreement with Cornell University. Under
that agreement the Company funds the development of gene therapy approaches
for neurodegenerative disorders, including Parkinson's disease, Huntington's
disease, Alzheimer's disease and epilepsy.
The Company has taken and intends to take steps to improve and
increase its technical and administrative staff. The Company has, on a
part-time basis, retained a consultant to assist in financial and legal
matters. The Company has also recently hired an administrative assistant to
the CEO and plans to hire, by the end of its fiscal year, a chief
administrative officer with accounting and financial experience. In addition,
the Company expects to hire an additional lab technician during the third
quarter of 2005 to assist the research scientists working at its lab facility.
As of June 30, 2005, the Company had cash and cash equivalents of
$1,769 and investments being held to maturity of $3,997. Management believes
that the Company's current resources will enable it to continue as a going
concern through at least June 30, 2006 and fund the operations described
above. See Results of Operations - - - Liquidity and Capital Resources.
Critical Accounting Policies
The Company's discussion and analysis and plan of operation is based
upon the Company's condensed consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the United States of America for interim financial statements filed with the
Securities and Exchange Commission. The preparation of these unaudited
condensed consolidated financial statements requires the Company to make
estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, the Company evaluates its
estimates, including those related to fixed assets, intangible assets,
stock-based compensation, income taxes and contingencies. The Company bases
its estimates on historical experience and on various other assumptions that
are believed to be reasonable under the circumstances, the results of which
form 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.
The accounting policies and estimates used as of December 31, 2004,
as outlined in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2004, have also been applied for the six months ended June 30,
2005.
Results of Operations
Three Months Ended June 30, 2005 Compared to the Three Months Ended
June 30, 2004
Revenues. The Company did not generate any operating revenues during
the three months ended June 30, 2005 and 2004.
Costs and Expenses.
Research and Development. Research and development expenses increased
by $378 (87%) during the three months ended June 30, 2005 to $811 as compared
to $433 during the same period in 2004. The increase is primarily attributable
to costs of $382 incurred by the Company in connection with the Medtronic
Development Agreement, the Auckland Uniservices Research Agreement and the
KEIO License Agreement, which were executed during the second quarter of 2005.
(See note 11 -- Other Agreements). Costs associated with the treatment of
patients as part of the Company's Phase I clinical trial for Parkinson's
disease during the second quarter of 2005 did not significantly increase when
compared to such costs for the second quarter of 2004. The Company was at the
completion stage of its gene transfer procedures in patients at the end of
such fiscal quarter. (See Item 2 -- Management's Discussion and Analysis or
Plan of Operation -Plan of Operation). Other research and development expenses
decreased by an aggregate of approximately $7.
General and Administrative. General and administrative expenses
increased by $110 (24%) to $568 during the three months ended June 30, 2005,
as compared to $458 during the comparable period in 2004. The increase in 2005
is primarily related to expenses of $70 associated with additional
administrative staff and consultants (see notes 6 and 8) and with an increase
of $48 in salary payable to Dr. Sorell (see note 7). In addition, the Company
incurred increases of approximately $96 in legal fees and miscellaneous
expenses. The increase in legal fees (approximately $34,000) is principally
related to SEC filings and agreements entered into with consultants during the
second quarter of 2005. The increase in miscellaneous expenses is primarily
attributable to the increased efforts of communicating and meeting with the
Company's stockholders and potential investors as well as attendances at and
participations in scientific conferences. These increases were offset by an
overall decrease in other general and administrative expenses of approximately
$105.
Other Income (Net). Other income (net) increased by $32 (128%) during
the three months ended June 30, 2005, over the comparable period of 2004. This
increase is primarily attributable to an increase in dividend and interest
income earned on funds received by the Company during the second quarter of
2005 from its private placements of Common Stock (see note 10).
Six Months Ended June 30, 2005 Compared to the Six Months Ended June 30, 2004
Revenues. The Company did not generate any operating revenues during
the six months ended June 30, 2005 and 2004.
Costs and Expenses.
Research and Development. Research and development expenses increased
by $546 (71%) during the six months ended June 30, 2005 to $1,313 as compared
to $767 during the same period in 2004. The increase is principally related to
costs of $382 incurred by the Company in connection with the Medtronic
Development Agreement, the Auckland Uniservices Research Agreement and the
KEIO License Agreement discussed above in the results of operations for the
three months ended June 30, 2005. During the six-month period ended June 30,
2005, the Company's costs of patient treatments relating to its Phase I
clinical trial on Parkinson's disease increased by approximately $131 over the
comparable period of 2004. In addition, the Company incurred costs associated
with impairment on certain intellectual property of $89. Other research and
development expenses decreased by an aggregate of approximately $56.
General and Administrative. General and administrative expenses
increased by $196 (24%) to $997 during the six months ended June 30, 2005, as
compared to $801 during the comparable period in 2004. The increase in 2005 is
primarily related to expenses incurred during the second quarter of 2005
relating to increased costs of administrative staff and consultants as well as
an increase in compensation to Dr. Sorell. Also, the Company incurred
increases in legal fees and miscellaneous expenses in the second quarter of
2005 as discussed above. These increases were offset by an overall decrease in
other general and administrative expenses of $108.
Other Income (Net). Other income (net) increased by $85 (1,417%)
during the six months ended June 30, 2005 over the comparable period of 2004.
This increase is a result of the Merger completed on February 10, 2004, which
enabled the Company to satisfy its loans to related parties, thereby
eliminating the related interest expense and providing it with interest
bearing cash accounts and cash equivalents, as well as the interest earned on
private placement proceeds received during the first six months of 2005 (see
note 10).
Liquidity and Capital Resources.
--------------------------------
Cash and cash equivalents were $1,769 and investments being held to
maturity were $3,997 at June 30, 2005.
The Company is still in the development stage and has not generated
any operating revenues as of June 30, 2005. In addition, the Company will
continue to incur net losses and cash flow deficiencies from operating
activities for the foreseeable future. Management believes that the Company's
current resources will enable it to continue as a going concern through at
least June 30, 2006.
Although the Company believes that its resources are sufficient to
complete a Phase I clinical trial for Parkinson's disease and to initiate a
Phase I clinical trial for epilepsy, the Company's resources are not
sufficient to allow it to perform all of the clinical trials required for drug
approval and marketing. Accordingly, it will continue to seek additional funds
through public or private equity offerings, debt financings or corporate
collaboration and licensing arrangements. The Company does not know whether
additional financing will be available when needed or, if available, will be
on acceptable or favorable terms to it or its stockholders.
Operating activities used $1,963 of cash during the six months ended
June 30, 2005 as compared to $1,650 during the same period in 2004. The
Company used the cash to fund its operating expenses, which increased over the
comparable period in 2004. See Results of Operations - - - Six Months Ended
June 30, 2005 Compared to the Six Months Ended June 30, 2004.
Net cash used in investing activities during the six month periods
ended June 30, 2005 and 2004 were $2,552 and $2,889, respectively, primarily
for the purchases of marketable securities and development of intangible
assets.
Net cash provided by financing activities was $5,162 during the six
months ended June 30, 2005, principally from the closing of the private
placements described in note 10. During the six months ended June 30, 2004,
financing activities provided $5,045, principally from cash acquired in the
Merger of $5,413, partially offset by Merger-related costs of $375.
Recent Accounting Pronouncements
In December 2004, the FASB issued SFAS No. 153, "Exchanges of
Nonmonetary Assets". This Statement addresses the measurement of exchanges of
nonmonetary assets and is effective for nonmonetary asset exchanges occurring
in fiscal years beginning after June 15, 2005. The adoption of SFAS No. 153 is
not expected to have a material effect on the Company's financial position or
results of operations.
In December 2004, the FASB issued SFAS No. 123(R) - Share-Based
Payment, which is a revision of SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123(R) supersedes APB Opinion No. 25, "Accounting for
Stock Issued to Employees", and amends SFAS No. 95, "Statement of Cash Flows".
Generally, the approach in SFAS No. 123(R) is similar to the approach
described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based
payments to employees, including grants of employee stock options, to be
recognized in the income statement based on their fair values. Pro forma
disclosure is no longer an alternative. The Company will be required to
expense the fair value of options granted over the service period beginning in
the first quarter of the year ending December 31, 2006. The Company is still
evaluating the impact the adoption of this standard will have on its financial
statements.
FORWARD LOOKING STATEMENTS
--------------------------
This document includes certain statements of the Company that may
constitute "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, and which are made pursuant to the Private
Securities Litigation Reform Act of 1995. These forward-looking statements and
other information relating to the Company are based upon the beliefs of
management and assumptions made by and information currently available to the
Company. Forward-looking statements include statements concerning plans,
objectives, goals, strategies, future events, or performance, as well as
underlying assumptions and statements that are other than statements of
historical fact. When used in this document, the words "expects,"
"anticipates," "estimates," "plans," "intends," "projects," "predicts,"
"believes," "may" or "should," and similar expressions, are intended to
identify forward-looking statements. These statements reflect the current view
of the Company's management with respect to future events and are subject to
numerous risks, uncertainties, and assumptions. Many factors could cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance, or achievements that may be
expressed or implied by such forward-looking statements, including, among
other things:
o the inability of the Company to raise additional funds,
when needed, through public or private equity offerings,
debt financings or additional corporate collaboration and
licensing arrangements, and
o the inability of the Company to successfully complete the
Phase I clinical trial for Parkinson's disease or to
commence Phase I for temporal lobe epilepsy.
Other factors and assumptions not identified above could also cause
the actual results to differ materially from those set forth in the
forward-looking statements. Additional information regarding factors which
could cause results to differ materially from management's expectations is
found in the section entitled "Risk Factors" contained in the Company's 2004
Annual Report on Form 10-KSB. Although the Company believes these assumptions
are reasonable, no assurance can be given that they will prove correct.
Accordingly, you should not rely upon forward-looking statements as a
prediction of actual results. Further, the Company undertakes no obligation to
update forward-looking statements after the date they are made or to conform
the statements to actual results or changes in the Company's expectations.
Item 3 - Controls and Procedures
--------------------------------
(a) Disclosure Controls and Procedures. The Company's Chief Executive
Officer and Secretary and Treasurer (as the Company's principal financial
officer) have evaluated the effectiveness of the Company's disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the
end of the period covered by this report. Based on such evaluation, the
Company's Chief Executive Officer and Secretary and Treasurer have concluded
that, as of the end of such period, the Company's disclosure controls and
procedures were not effective due to a material weakness in internal control
over financial reporting, as more fully described below, which relates to the
accounting treatment of stock options granted to non-employee consultants.
During the preparation of this Form 10-QSB, the Company, together
with its independent registered public accounting firm, identified a material
weakness with respect to the recording and accounting for stock options granted
to non-employee consultants in accordance with Emerging Issues Task Force
("EITF") 96-18. Of the total options granted to such consultants, most were
granted in the second quarter of 2005. See notes 8 and 9 to the Company's
unaudited condensed consolidated financial statements. This weakness did not
require or result in a restatement of any previously reported financial
statements or any other financial disclosure.
Under EITF 96-18, the stock options granted to such consultants should
have been accounted for under variable accounting. Under such accounting, the
Company could be required, on a quarterly and annual basis, to recognize
additional expense relating to any unvested options depending on increases in
the fair value of such options measured at the end of a quarter or annual
period. The Company intends to implement such variable accounting for these
stock options as of the third quarter of 2005. The Company is implementing
additional control policies and procedures to resolve this internal control
matter.
The Company's management, the Audit Committee and the Board of
Directors are fully committed to the review and evaluation of the Company's
procedures and policies designed to assure effective internal control over
financial reporting. All steps and disclosures relating to this matter have
been and will remain subject to the oversight of the Audit Committee with the
involvement of the Company's independent registered public accounting firm and
other professional firms.
(b) Internal Control Over Financial Reporting. There have not been any
changes in the Company's internal control over financial reporting (as such
term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during
the quarter to which this report relates that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
-------------------------------------------------------------------
As disclosed in the Current Reports on Form 8-K filed by the Company
on April 8 and May 2, 2005, between April 4 and April 27, 2005, the Company
issued and sold 1,180,014 shares of Common Stock and warrants to purchase
295,003 shares of Common Stock for a weighted average purchase price of $1.74
per share. Total expenses incurred for the Company's account in connection
with the issuance and distribution of the securities are estimated to be
$68,000, all of which were legal fees. This resulted in net proceeds after
expenses of approximately $1,982,000. Proceeds from such issuance and sale
will be used for the Company's general corporate purposes, including clinical
trials and research and development.
On March 28, 2005, one individual exercised options to purchase
120,000 shares of Common Stock at an exercise price of $0.75 per share. On
June 8, 2005, one entity exercised options to purchase 276,054 shares of
Common Stock at an exercise price of $0.0825 per share. In the event that the
exercise of options by such persons is deemed to be a "sale" as that term is
defined under Section 2 (a) (3) of the Securities Act of 1933, as amended (the
"Securities Act"), each such exercise is exempt from registration under the
Securities Act in reliance upon Section 4 (2) thereof. Such option exercises
did not involve the use of underwriters, and no commissions were paid in
connection therewith. Proceeds will be used for the Company's general
corporate purposes, including research and development.
Item 4. Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
The Annual Meeting of Stockholders was held on May 9, 2005. At the
meeting, Mark S. Hoffman and Martin J. Kaplitt, the nominees for Class II
directors, were elected. The number of votes for each nominee is set forth
below:
Number of Shares Number of Shares
Name of Director Nominee Voted For Voted Against
------------------------------------------------------------------
Mark S. Hoffman 19,904,079 58,293
Martin J. Kaplitt 19,904,079 58,293
In addition, the Company's 2000 Stock Option Plan was amended to
increase the number of shares that may be issued pursuant thereto from 800,000
to 1,300,000 shares. The number of votes for the amendment to the 2000 Stock
Option Plan is set forth below:
Number of Shares Number of Shares Number of Shares
Issue Voted For Voted Against Abstained
----------------------------------------------------------------------------------------------
Amendment to the 2000 Stock 16,081,007 39,995 214
Option Plan
Austin M. Long and Craig J. Nickels, the Class III directors, and
Clark A. Johnson, Jeffrey B. Reich and Michael Sorell, the Class I directors,
have terms which expire in 2006 and 2007, respectively. Accordingly, these
directors were not up for re-election at the meeting and their terms of office
continued after the meeting.
Item 6. Exhibits
----------------
See Exhibit Index
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
NEUROLOGIX, INC.
August 12, 2005 /s/ Michael Sorell
------------------------------
Michael Sorell, President and CEO
August 12, 2005 /s/ Mark S. Hoffman
------------------------------
Mark S. Hoffman, Secretary and
Treasurer
EXHIBIT INDEX
Exhibit No. Exhibit
----------- -------
10.1 Amended and Restated Consulting Agreement by and between
Michael G. Kaplitt and Neurologix Research, Inc., dated April
25, 2005 (filed as an exhibit to the Registrant's Current
Report on Form 8-K, dated April 29, 2005, and incorporated
herein by reference).
10.2 Stock Purchase Agreement, dated as of April 27, 2005, by and
among Neurologix, Inc. and Medtronic International, Ltd.
(filed as an exhibit to the Registrant's Current Report on
Form 8-K, dated May 2, 2005, and incorporated herein by
reference).
10.3 Warrant Certificate (filed as an exhibit to the Registrant's
Current Report on Form 8-K, dated May 2, 2005, and
incorporated herein by reference).
10.4 Registration Rights Agreement, dated as of April 27, 2005, by
and among Neurologix, Inc. and Medtronic International, Ltd.
(filed as an exhibit to the Registrant's Current Report on
Form 8-K, dated May 2, 2005, and incorporated herein by
reference).
10.5 Development and Manufacturing Agreement by and among
Neurologix, Inc. and Neurologix Research, Inc. and Medtronic,
Inc., dated as of April 27, 2005 (filed as an exhibit to the
Registrant's Quarterly Report on Form 10-QSB for the three
months ended March 31, 2005 and incorporated herein by
reference).
10.6 Consulting Agreement between Neurologix, Inc. and David B.
Hertzog, executed on June 20, 2005 (filed as an exhibit to the
Registrant's Current Report on Form 8-K, dated June 23, 2005,
and incorporated herein by reference).
13.1 Note 2 to the Company's consolidated financial statements
contained in the Registrant's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 2004 is incorporated herein
by reference.
31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
Officer. **
31.2 Rule 13a-14(a)/15d-14(a) Certification of Secretary and
Treasurer (as Principal Financial Officer). **
32.1 Section 1350 Certification, Chief Executive Officer and
Secretary and Treasurer (as Principal Financial Officer). **
__________
** Filed herewith