UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10QSB
[X]Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003
OR
[ ]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 333-72392
CORTEX SYSTEMS INC.
(Exact name of registrant as specified in its charter)
Nevada
(State of other jurisdiction of incorporation or organization)
98-0353403
(IRS Employer Identification Number)
777 Royal Oak Drive
Suite 310
Victoria, British Columbia
Canada V8X 5K2
(Address of principal executive offices)
(250) 744-4230
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ x ] No [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date.
Common stock, par value $.0001; 34,573,800 shares outstanding
as of May 6, 2003.
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CORTEX SYSTEMS INC.
(Development Stage Company)
BALANCE SHEETS
(Unaudited)
March 31, 2003, and June 30, 2002
Mar 31, Jun 30,
2003 2002
ASSETS
CURRENT ASSETS
Cash $510 73,772
TOTAL ASSETS $510 73,772
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $2,000 34,474
related party-see Note 4
Total Current Liabilities $2,000 34,474
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock
100,000,000 shares authorized, at $0.0001
par value; 34,573,800 shares issued and outstanding 3457 3457
Capital in excess of par value 73,363 73,363
Accumulated deficit during development stage (78,310) (37,522)
Total Stockholders' Deficit (1490) 39,298
Total Stockholders' Equity $ 510 $73,772
The accompanying notes are an integral part of these financial statements.
-2-
CORTEX SYSTEMS INC.
(Development Stage Company)
STATEMENT OF OPERATIONS
(Unaudited)
For the Nine Months Ended March 31, 2003, and 2002,
and the Period July 6, 2001 (Date of Inception) to March 31, 2003
Nine Months July 6, 2001
Mar 31, Mar 31, to Mar 31,
2003 2002 2003
REVENUES 295 - 409
EXPENSES 41,083 23,954 78,719
NET LOSS (40,788) (23,954) (78,310)
NET LOSS PER
COMMON SHARE
Basic $ - $ -
AVERAGE NUMBER
OF COMMON STOCK
OUTSTANDING
SHARES
34,573,800 30,000,000
The accompanying notes are an integral part of these financial statements.
-3-
CORTEX SYSTEMS INC.
(Development Stage Company)
STATEMENT OF CASH FLOWS
(Unaudited)
For the Nine Months Ended March 31, 2003, and 2002,
and the Period July 6, 2001 (Date of Inception) to March 31, 2003
Nine Months Ended
Mar 31 Mar 31 July 6, 2001 to
2003 2002 Mar 31, 2003
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Loss (40,788) (23,954) (78,310)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Changes in accounts
payable (32,474) 20,665 2,000
Issuance of capital
stock for expenses - 90 90
Net Cash Flow Used
in Operations (73,262) (3,199) (76,220)
CASH FLOWS FROM
INVESTING ACTIVITIES
- - -
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from note payable - 14,500 -
Proceeds from issuance
of common stock - 500 76,730
Net Change in Cash (77,262) 11,801 510
Cash at Beginning of
Period 73,772 - -
Cash at End of Period 510 11,801 510
NON CASH FLOWS FROM
OPERATING ACTIVITIES
Issuance of common
shares for web sites - 90 90
The accompanying notes are an integral part of these financial statements.
-4-
CORTEX SYSTEMS INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS, MARCH 31, 2003
(Unaudited)
1. ORGANIZATION
The Company was incorporated under the laws of the State of Nevada on
July 6, 2001,with authorized common capital stock of 100,000,000 shares
with a par value of $0.0001. The Company was organized for the purpose
of establishing memory assessment clinics and acquiring and marketing
websites that will function to provide services and information
via the Internet.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Methods
The Company recognizes income and expenses based on the accrual method
of accounting.
Dividend Policy
The Company has not yet adopted a policy regarding payment of dividends.
Income Taxes
On March 31, 2003, the Company had a net operating loss available for
carry forward of $78,310. The tax benefit of approximately $23,493
from the carryforward has been fully offset by a valuation reserve
because the use of the future tax benefit is doubtful since the Company
has no operations. The net operating loss will expire starting in 2023.
Basic Income (Loss) Per Share
Basic net income (loss) per share amounts are computed based on the
weighted average number of shares actually outstanding.
Financial Instruments
The carrying amounts of financial instruments, including cash and
accounts payable, are considered by management to be their estimated
fair values.
Estimates and Assumptions
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amounts of the assets
and liabilities, the disclosure of contingent assets and liabilities, and
the reported revenues and expenses. Actual results could vary from the
estimates that were assumed in preparing these financial statements.
-5-
Amortization of Web Site
Costs of preliminary development and post-implementation of the
websites are expensed as incurred and costs of application and
development are capitalized and amortized over the useful life of the
web site or expensed if there is an impairment in value.
Other Recent Accounting Pronouncements
The Company does not expect that the adoption of other recent
accounting pronouncements will have a material impact on its
financial statements.
3. ACQUISITION OF WEB SITES
During July, 2001, the Company acquired two web sites and domain names,
"thememorycentre.com", and "cortex-systems.com" from a related party,
by the issuance of common shares of the Company which were recorded at the
cost to the predecessor. The web sites have not been fully developed and
remain in the preliminary development stage; therefore the costs have
been expensed. Costs of application and development will be capitalized
and amortized over their useful lives or expensed if there is an impairment
in value.
4. RELATED PARTY TRANSACTIONS
Officer-director's have acquired 86.8% of the common stock issued.
A related party has made a demand non-interest bearing loan to the
Company of $2,000.
5. GOING CONCERN
The accompanying financial statements have been prepared with
the presumption that the Company will continue as a going concern.
However, the Company did not achieve its objective of raising the maximum
amount of its public offering, does not currently have sufficient working
capital to implement its business plan, its' cash reserves have
been depleted, and operating expenses are currently funded from related
party loans. Thus, continuation of the Company as a going concern will
depend upon the Company securing additional working capital. To allow for
the Company to continue operations, Company management is attempting to
secure additional working capital through private placement equity funding
which will enable the Company to continue as a going concern.
6. CAPITAL STOCK
Since its inception, the Company completed private placement
offerings of 30,000,000 common shares, post-split, to its' officers and
directors for $590. On March 11, 2002, the Securities and Exchange Commission
declared our Form SB-2 Registration Statement effective. The Company then
proceeded to offer for sale a maximum of 12,000,000 common shares, post-split,
at $.10 per share. On May 17, 2002, the Company's offering was closed.
4,573,800 shares, post-split, had been sold for $76,230. On November 5,
2002, (the "Record Date") the Company declared a six-for-one forward stock
split. This report has been prepared showing post-split shares from inception.
-6-
BASIS OF PRESENTATION
The foregoing unaudited interim financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and
Regulation S-B as promulgated by the Securities and Exchange Commission.
Accordingly, these financial statements do not include all of the
disclosures required by generally accepted accounting principles for
complete financial statements. These unaudited interim financial
statements should be read in conjunction with the audited financial
statements for the period ended June 30, 2002. In the opinion of
management, the unaudited interim financial statements furnished
herein include all adjustments, all of which are of a normal recurring
nature, necessary for a fair statement of the results for the interim
period presented.
The preparation of financial statements in accordance with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities known to exist as of the date the financial statements are
published, and the reported amounts of revenues and expenses during the
reporting period. Uncertainties with respect to such estimates and assumptions
are inherent in the preparation of the Company's financial statements;
accordingly, it is possible that the actual results could differ from these
estimates and assumptions that could have a material effect on the reported
amounts of the Company's financial position and results of operations.
Operating results for the nine month period ended March 31, 2003, are not
necessarily indicative of the results that may be expected for the year ending
June 30, 2003.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Cautionary Statement Regarding Forward-Looking Statements
This Form 10-QSB contains certain forward-looking statements. For this purpose
any statements contained in this Form 10-QSB that are not statements of
historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, words such as "may," "will," "expect,"
"believe," "anticipate," "estimate" or "continue" or comparable terminology
are intended to identify forward-looking statements. These statements by their
nature involve substantial risks and uncertainties. Actual results may differ
materially depending on a variety of factors.
Financial Condition, Liquidity and Capital Resources
Since inception on July 6, 2001, the purpose of our Company has been to
establish and operate memory assessment clinics in selected North American
locations. Our Company's principal capital resources have been acquired
through issuance of common stock and from shareholder loans.
-7-
On May 17, 2002, we completed our public offering by raising $76,230. We sold
4,573,800 shares, post-split, of our common stock at an offering price of ten
cents per share.
On November 5, 2002, we declared a stock dividend of five additional shares for
each one share outstanding.
At March 31, 2003, we had negative working capital of $(78,310) compared to
negative working capital of $(37,522) at June 30, 2002. This change is
primarily the result of payment of expenses related to professional fees
and corporate administration.
At March 31, 2003, our Company had total assets of $510 consisting
of cash, which compares with our Company's total assets at June 30, 2002,
of $73,772 consisting of cash. This change is primarily the result of expenses
related to professional fees, corporate administration, and repayment of a
related party loan.
At March 31, 2003, our Company's total liabilities were $2,000. This sum
represents a related party loan. Our total liabilities at June 30, 2002, were
$34,474. This decrease reflects payments of accounts payable.
Our Company has not had revenues since inception. We do not have
sufficient capital to implement our business plan nor to commence operations.
We believe that our survival is dependent upon securing funding through private
placement equity funding.
We have depleted our cash reserves. Currently, expenses are paid through
shareholder loans to the Company. We anticipate that shareholder loans will
pay for operating expenses through June, 2003. We cannot guarantee
availability of shareholder loans in the future.
Our Company has no long-term debt and does not regard long-term borrowing as
a good, prospective source of financing.
We will not be conducting any product research or development. We do not
expect to purchase or sell any significant equipment nor do we expect
any significant changes in the number of our employees.
-8-
Results of Operations
Our Company posted a loss of $40,788 for the nine months ending March 31,
2003. The principal component of the loss was professional expenses. Operating
expenses for the nine months ending March 31, 2003, were $41,083 compared to
operating expenses of $23,954 in the comparable nine month period ending
March 31, 2002; the increase in expenses being primarily the result of
professional fees and corporate administration expense.
Item 3. Controls and Procedures
a. Evaluation of disclosure controls and procedures.
The Company's chief executive officer/chief financial officer
has reviewed and evaluated the effectiveness of the Company's
disclosure controls and procedures (as defined in
Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934 (the
"Exchange Act")), as of a date within ninety days before the filing of
this quarterly report. Based on that evaluation, the chief executive
officer/chief financial officer has concluded that the Company's
current disclosure controls and procedures are effective to
ensure that information required to be disclosed by the Company in
reports that it files or submits under the Exchange Act are recorded,
processed, summarized, and reported within the time periods specified in
the Securities and Exchange Commission rules and forms.
b. Changes in internal controls.
There have not been any significant changes in the Company's internal
controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation. There were no significant
deficiencies or material weakness in the internal controls, and therefore no
corrective actions were taken.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The following reports on Form 8-K were filed during the quarter for which
this report is filed:
1. Form 8-K report filed January 21, 2003, advising that on January
15, 2003, the share purchase agreement executed between the Company's
majority shareholders and a third party was terminated with consent of all
parties thereto.
2. Exhibits: 99.1 Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
-9-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORTEX SYSTEMS INC.
(Registrant)
May 6, 2003 BY:/s/ Kenneth H. Finkelstein
----------------------------
Kenneth H. Finkelstein,
President, Chief Financial
Officer, Principal Accounting
Officer, a member of the Board of Directors
-10-
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
AND PRINCIPAL FINANCIAL OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
I, Kenneth H. Finkelstein, certify that:
(1) I have reviewed this quarterly report on Form 10-QSB of Cortex
Systems, Inc., (the "Company");
(2) Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report;
(3) Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in
all material respects the financial condition, results of operations and
cash flows of the Company as of, and for, the periods presented in this
quarterly report;
(4) I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
Company and have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the Company is made known
to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the Company's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
(5) I have disclosed, based on my most recent evaluation, to the
Company's auditors and the audit committee of the Company's board
of directors (or persons fulfilling the equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial data
and have identified for the Company's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the Company's
internal controls; and
(6) I have indicated in this quarterly report whether or not there
were significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: May 6, 2003 By: /S/ Kenneth H. Finkelstein
Kenneth H. Finkelstein
President, Chief Financial
Officer, Principal Accounting
Officer, a member of the Board of Directors