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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004

Commission file number: 000-25571

AXONYX INC.
(Exact name of registrant as specified in its charter)


Nevada
(State or Other Jurisdiction of Incorporation) 		86-0883978
(IRS Employer Identification No.)

500 Seventh Avenue, 10th Floor, New York, New York 10018
(Address of Principal Executive Offices)       (Zip Code)

Registrant’s telephone number, including area code (212) 645-7704

Indicate by a 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 by a check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|

As of August 10, 2004, there were 51,706,222 shares of the registrant’s common stock outstanding.



AXONYX INC.

INDEX


PART I.   FINANCIAL INFORMATION    
   
Item 1.   Condensed Consolidated Financial Statements  
   
    Condensed Consolidated Balance Sheets as of June 30, 2004 (unaudited)  
    and December 31, 2003   1  
   
    Condensed Consolidated Statements of Operations (unaudited) for the three  
    and six months ended June 30, 2004 and 2003   2  
   
    Condensed Consolidated Statements of Changes in Stockholders’ Equity  
    (unaudited) for the six months ended June 30, 2004   3  
   
    Condensed Consolidated Statements of Cash Flows (unaudited) for the six  
    months ended June 30, 2004 and 2003   4  
   
    Notes to Condensed Consolidated Financial Statements   5  
   
Item 2.   Management’s Discussion and Analysis of Financial Condition and  
    Results of Operations   9  
   
Item 3.   Quantitative and Qualitative Disclosures About Market Risk   17  
   
Item 4.   Controls and Procedures   17  
   
PART II.   OTHER INFORMATION   18  
   
Item 2.   Changes in Securities and Use of Proceeds   18  
   
Item 4.   Submission of Matters to a Vote of Security Holders   18  
   
Item 6.   Exhibits and Reports on Form 8-K   19  
   
Signatures       20  



PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

AXONYX INC.

Condensed Consolidated Balance Sheets


  June 30,
2004 		  December 31,
2003 		 
(unaudited)
ASSETS            
Current Assets:    
     Cash and cash equivalents     $ 93,341,000   $ 28,780,000  
     Accounts receivable       198,000        
     Inventories       318,000        
     Other current assets       305,000        
              Total current assets       94,162,000     28,780,000  
     
     Equipment, net       73,000     24,000  
     
     Technology for developed products, net       7,208,000        
     Patents and patents pending, net       878,000        
     Security deposit       18,000     11,000  
      $ 102,339,000   $ 28,815,000  
     
LIABILITIES    
Current liabilities:    
     Accounts payable     $ 3,380,000   $ 1,284,000  
     Accrued expenses       1,614,000     880,000  
     Note payable       160,000        
     Convertible bridge loans       261,000        
          Total liabilities       5,415,000     2,164,000  
     
STOCKHOLDERS’ EQUITY    
Preferred stock - $.001 par value, 15,000,000 shares authorized; none issued    
Common Stock - $.001 par value, 150,000,000 and 75,000,000 shares authorized;    
     as of 2004 and 2003 respectively; 51,271,555 and 33,919,948 shares    
     issued and outstanding in 2004 and 2003 respectively       51,000     34,000  
Additional paid-in capital       143,968,000     60,345,000  
Unearned compensation - stock options       (210,000 )   —  
Accumulated comprehensive loss       (34,000 )      
Accumulated deficit       (46,851,000 )   (33,728,000 )
              Total stockholders’ equity       96,924,000     26,651,000  
              Total liabilities and stockholders’ equity     $ 102,339,000   $ 28,815,000  

See notes to condensed consolidated financial statements.

1



AXONYX INC.

Condensed Consolidated Statements of Operations
(unaudited)


  Three months ended June 30,   Six months ended June 30,
  2004
  2003
  2004
  2003
 
Revenue     $ 433,000   $ 1,000,000   $ 911,000   $ 1,000,000  
Cost of revenue       238,000           504,000        
Gross profit       195,000     1,000,000     407,000     1,000,000  
     
Costs and expenses:    
     Research and development       5,782,000   $ 1,249,000     9,834,000   $ 2,276,000  
     Sales, general and administrative       2,127,000     1,017,000     4,498,000     1,590,000  
        7,909,000     2,266,000     14,332,000     3,866,000  
Loss from operations       (7,714,000 )   (1,266,000 )   (13,925,000 )   (2,866,000 )
     
Other income (expense)    
     Interest income       241,000     15,000     426,000     37,000  
     Foreign exchange       34,000     4,000     (37,000 )   7,000  
     Gain on issuance of subsidiary stock       55,000           55,000        
     Financing fees       (164,000 )         (300,000 )      
     Interest expense       (13,000 )   —     (25,000 )   —  
Net loss before minority interest in subsidiary       (7,561,000 )   (1,247,000 )   (13,806,000 )   (2,822,000 )
     
Minority interest in loss of subsidiary       429,000     —     683,000     —  
Net loss       (7,132,000 )   (1,247,000 )   (13,123,000 )   (2,822,000 )
     
Comprehensive loss    
     Foreign currency translation adjustment       (34,000 )         (34,000 )      
Comprehensive loss     $ (7,166,000 ) $ (1,247,000 ) $ (13,157,000 ) $ (2,822,000 )
     
Net loss per common share     $ (0.14 ) $ (0.05 ) $ (0.28 ) $ (0.12 )
Weighted average shares-basic and diluted       50,056,812     24,138,566     47,586,535     23,943,202  

See notes to condensed consolidated financial statements.

2



AXONYX INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity
(unaudited)


  Common Stock
    Unearned     Accumulated      
  Number
of
Shares
  Amount
  Additional
Paid-in
Capital
  Compensation
Stock
Options
  Accumulated
Deficit
  Other
Comprehensive
Loss
  Total
Stockholders’
Equity
 
Balance - December 31, 2003       33,919,948   $ 34,000   $ 60,345,000   $ —   $ (33,728,000 ) $ —   $ 26,651,000  
     
Issuance of common stock and warrants - net of expenses       12,727,106     13,000     64,745,000                       64,758,000  
     
Issuance of common stock for the acquisition of 53% of    
     Oxis International Inc.       1,618,061     1,000     8,193,000                       8,194,000  
     
Issuance of common stock options and warrants    
    for consulting services                   1,234,000                       1,234,000  
     
Issuance of common stock options                   387,000     (387,000 )               —  
     
Exercise of common stock warrants and options       3,001,441     3,000     9,064,000                       9,067,000  
     
Amortization                         177,000                 177,000  
     
Foreign currency translation adjustment                                     (34,000 )   (34,000 )
     
Net loss       —     —     —     —     (13,123,000 )   —     (13,123,000 )
     
 
 
 
 
 
 
 
Balance - June 30, 2004       51,266,556   $ 51,000   $ 143,968,000   $ (210,000 ) $ (46,851,000 ) $ (34,000 ) $ 96,924,000  
     
 
 
 
 
 
 
 

See notes to condensed consolidated financial statements.

3



AXONYX INC.

Condensed Consolidated Statements of Cash Flows
(unaudited)


  Six months ended June 30,  
  2004
  2003
 
Cash flows from operating activities:            
   Net Loss     $ (13,123,000 ) $ (2,822,000 )
   Adjustments to reconcile net loss to cash used in    
      operating activities:    
         Depreciation and amortization       443,000     8,000  
         Amortization of deferred financing costs       300,000        
         Minority interest in net loss of subsidiary       (683,000 )      
         Compensation related to common stock issued for services       47,000     213,000  
         Compensation related to options and warrants issued for services       1,411,000     81,000  
         Gain on issuance of subsidiary stock       (55,000 )      
         Changes in:    
            Accounts receivable       69,000        
            Inventory       (23,000 )      
            Other current assets       (128,000 )   (93,000 )
            Other assets       25,000     46,000  
            Accounts payable       1,546,000     (103,000 )
            Accrued expenses and other       456,000