CNS Pharmaceuticals, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS CNS Pharmaceuticals, Inc. Balance Sheets (Unaudited) March 31, 2024 December 31, 2023 Assets Current Assets: Cash and cash equivalents $ 815,226 $ 548,721 Deferred offering costs – 202,859 Prepaid expenses and other current assets 786,050 839,590 Total current assets 1,601,276 1,591,170 Noncurrent Assets: Prepaid expenses, net of current portion 55,296 104,750 Property and equipment, net 4,305 4,933 Total noncurrent assets 59,601 109,683 Total Assets $ 1,660,877 $ 1,700,853 Liabilities and Stockholders' Equity (Deficit) Current Liabilities: Accounts payable and accrued expenses $ 5,878,298 $ 5,832,162 Notes payable 213,104 300,806 Total current liabilities 6,091,402 6,132,968 Total Liabilities 6,091,402 6,132,968 Commitments and contingencies – – Stockholders' Equity (Deficit): Preferred stock, $ 0.001 par value, 5,000,000 shares authorized and 0 shares issued and outstanding – – Common stock, $ 0.001 par value, 75,000,000 shares authorized and 10,668,932 and 6,214,598 shares issued and outstanding, respectively 10,669 6,214 Additional paid-in capital 68,670,457 65,128,574 Accumulated deficit ( 73,111,651 ) ( 69,566,903 ) Total Stockholders' Equity (Deficit) ( 4,430,525 ) ( 4,432,115 ) Total Liabilities and Stockholders' Equity (Deficit) $ 1,660,877 $ 1,700,853 See accompanying notes to the unaudited financial statements. 3 CNS Pharmaceuticals, Inc. Statements of Operations (Unaudited) Three Months Ended Three Months Ended March 31, 2024 March 31, 2023 Operating expenses: General and administrative $ 1,114,442 $ 1,358,752 Research and development 2,430,412 3,567,759 Total operating expenses 3,544,854 4,926,511 Loss from operations ( 3,544,854 ) ( 4,926,511 ) Other income (expenses): Interest income 6,731 – Interest expense ( 6,625 ) ( 5,436 ) Total other income (expense) 106 ( 5,436 ) Net loss $ ( 3,544,748 ) $ ( 4,931,947 ) Loss per share - basic $ ( 0.41 ) $ ( 2.59 ) Loss per share - diluted $ ( 0.41 ) $ ( 2.59 ) Weighted average shares outstanding - basic 8,712,680 1,906,494 Weighted average shares outstanding - diluted 8,712,680 1,906,494 See accompanying notes to the unaudited financial statements. 4 CNS Pharmaceuticals, Inc. Statements of Stockholders' Equity (Deficit) For the three months ended March 31, 2024 and 2023 (Unaudited) Additional Total Common Stock Paid-in Accumulated Stockholders' Shares Amount Capital Deficit Equity (Deficit) Balance December 31, 2023 6,214,598 $ 6,214 $ 65,128,574 $ ( 69,566,903 ) $ ( 4,432,115 ) Common stock issued for cash, net 2,215,667 2,216 3,328,784 – 3,331,000 Exercise of warrants, net 2,238,667 2,239 10,166 – 12,405 Stock-based compensation – – 202,933 – 202,933 Net loss – – – ( 3,544,748 ) ( 3,544,748 ) Balance, March 31, 2024 10,668,932 $ 10,669 $ 68,670,457 $ ( 73,111,651 ) $ ( 4,430,525 ) Balance December 31, 2022 1,617,325 $ 1,617 $ 58,846,916 $ ( 50,715,677 ) $ 8,132,856 Exercise of warrants 609,000 609 – – 609 Stock-based compensation – – 290,313 – 290,313 Net loss – – – ( 4,931,947 ) ( 4,931,947 ) Balance, March 31, 2023 2,226,325 $ 2,226 $ 59,137,229 $ ( 55,647,624 ) $ 3,491,831 See accompanying notes to the unaudited financial statements. 5 CNS Pharmaceuticals, Inc. Statements of Cash Flows (Unaudited) Three Months Ended Three Months Ended March 31, 2024 March 31, 2023 Cash Flows from Operating Activities: Net loss $ ( 3,544,748 ) $ ( 4,931,947 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation 202,933 290,313 Depreciation 818 1,279 Gain on disposal of fixed assets ( 190 ) – Changes in operating assets and liabilities: Prepaid expenses and other current assets 102,994 692,222 Accounts payable and accrued expenses 46,136 ( 876,459 ) Net cash used in operating activities ( 3,192,057 ) ( 4,824,592 ) Cash Flows from Financing Activities: Payments on notes payable ( 87,702 ) ( 120,893 ) Proceeds from exercise of warrants 12,405 609 Proceeds from sale of common stock 3,533,859 – Net cash provided by (used in) financing activities 3,458,562 ( 120,284 ) Net change in cash and cash equivalents 266,505 ( 4,944,876 ) Cash and cash equivalents, at beginning of period 548,721 10,055,407 Cash and cash equivalents, at end of period $ 815,226 $ 5,110,531 Supplemental disclosures of cash flow information: Cash paid for interest $ 6,625 $ 5,436 Cash paid for income taxes $ – $ – Supplemental disclosure of non-cash investing and financing activities: Reclassification of deferred offering costs to equity $ 202,859 $ – See accompanying notes to the unaudited financial statements. 6 CNS Pharmaceuticals, Inc. Notes to the Financial Statements (Unaudited) Note 1 – Nature of Business CNS Pharmaceuticals, Inc. (“we”, “our”, the “Company”) is a clinical pharmaceutical company organized as a Nevada corporation on July 27, 2017 to focus on the development of anti-cancer drug candidates. On August 25, 2022, the stockholders of the Company approved an amendment to the Company’s amended and restated articles of incorporation (the “Amendment”) to effect the reverse stock split at a ratio in the range of 1-for-2 to 1-for-30. The reverse stock split became effective on November 28, 2022 on a 1-for-30 basis without any change in the par value per share, which remained at $0.001. The reverse stock split has been retroactively adjusted throughout these financial statements and footnotes. Note 2 – Summary of Significant Accounting Policies Basis of Presentation - The accompanying unaudited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United Stated of America (“U.S. GAAP”) for interim unaudited financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The unaudited financial statements include all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary in order to make the condensed financial statements not misleading. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the final results that may be expected for the year ending December 31, 2024. For more complete financial information, these unaudited financial statements should be read in conjunction with the audited financial statements for the period ended December 31, 2023 included in our Form 10-K filed with the SEC on April 1, 2024 (“Form 10-K”). Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted. Liquidity and Going Concern - These financial statements have been prepared on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the ability of the Company to obtain equity financings to continue operations. The Company has a history of and expects to continue to report negative cash flows from operations and a net loss. Management believes that the cash on hand is sufficient to fund its planned operations into but not beyond the near term. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company may seek additional funding through a combination of equity offerings, debt financings, government or other third-party funding, commercialization, marketing and distribution arrangements, other collaborations, strategic alliances and licensing arrangements and delay planned cash outlays or a combination thereof. Management cannot be certain that such events or a combination thereof can be achieved. Cash and Cash Equivalents - The Company considers all highly liquid accounts with original maturities of three months or less at the date of acquisition to be cash equivalents. Periodically, the Company may carry cash balances at financial institutions in excess of the federally insured limit of $ 250,000 . The amount in excess of the FDIC insurance as of March 31, 2024 was $ 565,226 . The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant. 7 Stock-based Compensation - Employee and non-employee share-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period for stock options and restricted stock units. Restricted Stock Units (“RSUs”) - Our RSUs vest over four years from the date of grant. The fair value of RSUs is the market price of our common stock at the date of grant. Performance Units (“PUs”) - The PUs vest based on our performance against predefined share price targets and the achievement of Positive Interim, Clinical Data as defined by the Board. Loss Per Common Share - Basic loss per common share is computed by dividing net loss available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. As of March 31, 2024, the Company’s potentially dilutive shares and options, which were not included in the calculation of net loss per share, included warrants to purchase 39,785,731 common shares, unvested restricted stock units of 7,144 common shares, unvested performance units of 28,563 and options for 341,190 common shares, respectively. As of March 31, 2023, the Company’s potentially dilutive shares and options, which were not included in the calculation of net loss per share, included warrants to purchase 3,524,252 common shares, unvested restricted stock units of 9,523 common shares, unvested performance units of 28,563 and options for 126,489 common shares, respectively. Note 3 – Note Payable On November 28, 2023, the Company entered into a short-term note payable for an aggregate of $ 329,571 , bearing interest at 9.74 % per year to finance certain insurance policies. Principal and interest payments related to the note will be repaid over an 11-month period with the final payment due on October 8, 2024 . As of March 31, 2024 the Company’s note payable balance was $ 213,104 . Note 4 – Equity The Company has authorized 75,000,000 shares of common stock having a par value of $ 0.001 per share. In addition, the Company authorized 5,000,000 shares of preferred stock to be issued having a par value of $ 0.001 . The specific rights of the preferred stock shall be determined by the board of directors. On May 2, 2024, the Company filed a Certificate of Amendment to its Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada to increase the number of the Company’s authorized shares of common stock from 75,000,000 shares to 300,000,000 shares. On August 25, 2022, the stockholders of the Company approved an amendment to the Company’s amended and restated articles of incorporation (the “Amendment”) to effect the reverse stock split at a ratio in the range of 1-for-2 to 1-for-30, with such ratio to be determined in the discretion of the Company’s board of directors and with such reverse stock split to be effected at such time and date, if at all, as determined by the Company’s board of directors in its sole discretion prior to the one-year anniversary of the annual meeting. Pursuant to such authority granted by the Company’s stockholders, the Company’s board of directors approved a one-for-thirty (1:30) reverse stock split of the Company’s common stock and the filing of the Amendment to effectuate the reverse split. The reverse stock split became effective on November 28, 2022 on a 1-for-30 basis without any change in the par value per share, which remained at $0.001. 8 Common Stock On January 29, 2024, the Company entered into a placement agency agreement with A.G.P./Alliance Global Partners (“AGP”) and Maxim Group LLC (“Maxim” and collectively with AGP, the “Placement Agents”) (the “Placement Agreement”) for the public offering by the Company of (i) 2,215,667 shares (the “Shares”) of the Company’s common stock, par value $ 0.001 per share (the “Common Stock”) (ii) pre-funded warrants to purchase 11,117,667 shares of Common Stock (the “Pre-Funded Warrants”); (iii) Series A Warrants to purchase up to an aggregate of 13,333,334 shares of Common Stock (the “Series A Warrants”); and (iv) Series B Warrants to purchase up to an aggregate of 13,333,334 shares of Common Stock (the “Series B Warrants”, and together with the Series A Warrants, the “Common Warrants)). The Common Warrants and Pre-Funded Warrants are collectively referred to herein as the (“Warrants”). The combined purchase price of one share of Common Stock and accompanying Common Warrants was $ 0.30 and the combined purchase price of one Pre-Funded Warrant and accompanying Common Warrants was $ 0.299 . In connection with the offering, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors that participated in the offering. As of April 1, 2024, 2,204,667 of the Pre-Funded Warrants have been exercised. The closing of the sales of these securities occurred on February 1, 2024. The net proceeds to the Company from the offering were $ 3,331,000 , after deducting the placement agents’ fees and other offering expenses. Stock Options In 2017, the Board of Directors of the Company approved the CNS Pharmaceuticals, Inc. 2017 Stock Plan (the “2017 Plan”). The 2017 Plan allows for the Board of Directors to grant various forms of incentive awards for up to 66,667 shares of common stock. In 2020, the Board of Directors of the Company approved the CNS Pharmaceuticals, Inc. 2020 Stock Plan (the “2020 Plan”). The 2020 Plan allows for the Board of Directors to grant various forms of incentive awards for up to 100,000 shares of common stock. The 2020 Plan was amended effective as of August 9, 2023, which was approved by the Company’s stockholders at the Company’s annual meeting on September 14, 2023. The amendment increased the 2020 Plan by 745,800 shares of common stock. On January 19, 2024, the Board of Directors of the Company approved the issuance of 12,420 options to Ms. Mahery as compensation for her appointment to our Board of Directors. The options have a ten-year term at an exercise price of $ 0.253 and vest in 36 equal monthly installments succeeding the issuance date. The total fair value of these option grants at issuance was $ 2,728 . During the three months ended March 31, 2024 and 2023, the Company recognized $ 192,375 and $ 272,446 of stock-based compensation, respectively, related to outstanding stock options. At March 31, 2024, the Company had $ 528,432 of unrecognized expenses related to outstanding options. The following table summarizes the stock option activity for the three months ended March 31, 2024: Schedule of stock option activity Options Weighted-Average Exercise Price Per Share Outstanding, December 31, 2023 328,770 $ 20.35 Granted 12,420 0.25 Exercised – – Forfeited – – Expired – – Outstanding, March 31, 2024 341,190 $ 19.62 Exercisable, March 31, 2024 99,920 $ 58.39 9 The aggregate fair value of the options measured during the three months ended March 31, 2024 were calculated using the Black-Scholes option pricing model based on the following assumptions: Schedule of assumptions for options Three Months Ended December 31, 2024 Fair value of common stock on measurement date $ 0.253 per share Risk free interest rate (1) 3.80 % Volatility (2) 113.08 % Dividend yield (3) 0 % Expected term (in years) 6.5 (1) The risk-free interest rate was determined by management using the market yield on U.S. Treasury securities with comparable terms as of the measurement date. (2) The trading volatility was determined by calculating the volatility of the Company's peer group. (3) The Company does not expect to pay a dividend in the foreseeable future. As of March 31, 2024, the outstanding stock options have a weighted average remaining term of 8.35 years and aggregate intrinsic value of options vested and outstanding of $ 1,354 . As of March 31, 2024, there were no awards remaining to be issued under the 2017 Plan and 533,190 awards remaining to be issued under the 2020 Plan. Stock Warrants On January 29, 2024, the Company entered into a warrant amendment agreement (the “Warrant Amendment”) pursuant to which the Company agreed, subject to shareholder approval, to amend certain existing warrants to purchase up to an aggregate of 3,756,000 shares of Common Stock at an exercise price of $1.28 per share and a termination date of October 16, 2028, so that the amended warrants will have a reduced exercise price of $0.30 per share and a new termination date of February 1, 2029. If shareholder approval is not received, such existing warrants will have an exercise price equal to the Nasdaq minimum price on the six-month anniversary of February 1, 2024 and a new termination date of February 1, 2029. The other terms of such warrants will remain unchanged. During the three months ended March 31, 2024, the Company received $ 12,405 in cash proceeds from the exercise of 2,204,667 warrants issued at an exercise price of $0.299 and 34,000 warrants previously issued at an exercise price of $0.30. The following table summarizes the stock warrant activity for the three months ended March 31, 2024: Schedule of stock warrant activity Warrants Weighted-Average Exercise Price Per Share Outstanding, December 31, 2023 4,240,063 $ 3.88 Granted 37,784,335 0.30 Exercised ( 2,238,667 ) 0.30 Forfeited – – Expired – – Outstanding, March 31, 2024 39,785,731 $ 0.59 Exercisable, March 31, 2024 39,785,731 $ 0.59 As of March 31, 2024, the outstanding and exercisable warrants have a weighted average remaining term of 3.65 years and had no aggregate intrinsic value. 10 Restricted Stock Units On April 28, 2022, the Compensation Committee approved cash bonuses totaling $ 213,000 to the officers of the Company. In addition, the officers and employees were awarded a total of 9,523 Restricted Stock Units that partially vest over 4 years. The Company valued the RSUs based on the stock price at grant which total $ 95,399 . During the three months ended March 31, 2024, the Company recognized $ 5,962 of stock-based compensation, related to outstanding stock RSUs. At March 31, 2024, the Company had $ 47,699 of unrecognized expenses related to outstanding RSUs. The following table summarizes the RSUs activity for the three months ended March 31, 2024: Schedule of restricted stock units activity RSUs Weighted-Average Grant Date Fair Value Non-vested, December 31, 2023 7,144 $ 10.02 Granted – – Vested – – Forfeited – – Non-vested, March 31, 2024 7,144 $ 10.02 Performance Units On April 28, 2022, the Compensation Committee approved, the officers and employees were awarded a total of 28,563 PUs. For awards granted in 2022, they vest as follows: (i) 9,521 of the PU grant will vest if within 24 months from issuance the average the closing price of the Company’s common stock over a ten trading day period exceeds $60.00 (subject to pro rata adjustment for stock splits or similar events), (ii) 9,521 of the PU grant will vest if within 36 months from issuance the average the closing price of the Company’s common stock over a ten trading day period exceeds $120.00 (subject to pro rata adjustment for stock splits or similar events) and (iii) 9,521 of the PU grant will vest if within 24 months from issuance the Company achieves “Positive Interim, Clinical Data” as defined by the Board of Directors. To the extent that the market and/or “Positive Interim Clinical Data” conditions are not met, the applicable portions of the PUs will not vest and will be cancelled. The fair value at grant date of these performance units was $ 169,663 . Compensation expense is recognized over the derived service period for the PUs with market conditions and over the requisite service period for PUs with performance conditions on the date when achievement of such conditions are deemed probable. The fair value of each performance unit with market conditions (vesting terms (i) and (ii)) is estimated at the date of grant using a Monte Carlo simulation with the following assumptions: underlying stock price $10.02, hurdle prices ranging from $60.00 -$120.00, expected terms ranging from 2-3 years, cost of equity 18.7% and risk-free rate of 2.8%. During the three months ended March 31, 2024, the Company recognized $ 4,596 related to outstanding stock PUs. At March 31, 2024, the Company had $ 95,766 of unrecognized expenses related to PUs. The following table summarizes the PUs activity for the three months ended March 31, 2024: Schedule of performance units activity PUs Weighted-Average Grant Date Fair Value Non-vested, December 31, 2023 28,563 $ 5.94 Granted – – Vested – – Forfeited – – Non-vested, March 31, 2024 28,563 $ 5.94 11 Note 5 – Commitments and Contingencies Executive Employment Agreements On September 1, 2017, the Company entered into an employment agreement with Mr. John Climaco pursuant to which Mr. Climaco agreed to serve as Chief Executive Officer and Director of the Company commencing on such date for an initial term of three years. On September 1, 2020, the Company entered into an amendment to the employment agreement with Mr. Climaco. The amendment extends the term of employment under the Employment Agreement, which was originally for a three-year period, for additional twelve-month periods, unless and until either the Company or Mr. Climaco provides written notice to the other party not less than sixty days before such anniversary date that such party is electing not to extend the term. If the Company provides notice of its election not to extend the term, Mr. Climaco may terminate his employment at any time prior to the expiration of the term by giving written notice to the Company at least thirty days prior to the effective date of termination, and upon the earlier of such effective date of termination or the expiration of the term, Mr. Climaco shall be entitled to receive the same severance benefits as are provided upon a termination of employment by the Company without cause. Pursuant to the Amendment, the severance benefits shall be twelve months of Mr. Climaco’s base salary. Such severance payment shall be made in a single lump sum sixty days following the termination, provided that Mr. Climaco has executed and delivered to the Company and has not revoked a general release of the Company. Pursuant to the employment agreement, the compensation committee of the board of directors reviews the base salary payable to Mr. Climaco annually during the term of the agreement. On February 6, 2021, the compensation committee of the board of directors set Mr. Climaco’s 2021 annual base salary to $ 525,000 . On June 28, 2019, we entered into employment letters with Drs. Silberman and Picker. Dr. Silberman agreed to commit 50% of her time to our matters and Dr. Picker agreed to commit 25% of his time to our matters. In March 2024, the Board of Directors approved, based upon the recommendation of the Compensation Committee, cash bonuses totaling $ 240,608 to the officers of the Company payable upon completion of a subsequent round of financing and a determination by the Board that such financing is sufficient for the Company's needs after payment of such bonus. Scientific Advisory Board On July 15, 2021, our Board approved the following compensation policy for the Scientific Advisory Board members. The Scientific Advisory board consisted of Dr. Waldemar Priebe, our founder and related party, and Dr. Sigmond Hsu. Each scientific advisory board member shall receive annual cash compensation of $68,600. As of August 25, 2022, Dr. Waldemar Priebe is no longer a member of the Scientific Advisory Board. On March 14, 2024, the Board of Directors terminated the cash compensation program for the Scientific Advisory Board. As of March 31, 2024, the Company has accrued $ 185,884 related to Mr. Hsu’s Scientific Advisory Board compensation. WP744 Portfolio (Berubicin) On November 21, 2017, the Company entered into a Collaboration and Asset Purchase Agreement with Reata Pharmaceuticals, Inc. (“Reata”). Through this agreement, the Company purchased all of Reata’s rights, title, interest and previously conducted research and development results in the chemical compound commonly known as Berubicin. In exchange for these rights, the Company agreed to pay Reata an amount equal to 2.25% of the net sales of Berubicin for a period of 10 years from the Company’s first commercial sale of Berubicin plus $10,000. Reata also agreed to collaborate with the Company on the development of Berubicin, from time to time. 12 On December 28, 2017, the Company entered into a Technology Rights and Development Agreement with Houston Pharmaceuticals, Inc. (“HPI”). HPI is affiliated with Dr. Waldemar Priebe, our founder. Pursuant to this agreement, the Company obtained a worldwide exclusive license to the chemical compound commonly known as WP744. In exchange for these rights, the Company agreed to pay consideration to HPI as follows: (i) a royalty of 2% of net sales of any product utilizing WP744 for a period of ten years after the first commercial sale of such; and (ii) $100,000 upon beginning Phase II clinical trials (paid in 2021); and (iii) $200,000 upon the approval by the FDA of a New Drug Application for any product utilizing WP744; and (iv) a series of quarterly development payments totaling $750,000 beginning immediately after the Company’s raise of $7,000,000 of investment capital. In addition, the Company issued 6,667 shares of the Company’s common stock valued at $1.35 per share to HPI upon execution of the agreement. On November 13, 2019, the Company closed its IPO, thereby fulfilling all conditions precedent and completing the acquisition of the intellectual property discussed in the HPI agreement. During the three months ended March 31, 2024 and 2023, the Company recognized $ 12,500 and $ 12,500 related to this agreement. Unrelated to this agreement, from time to time, the Company purchases pharmaceutical products from HPI which are necessary for the manufacturing of Berubicin API and drug product in related party transactions which are reviewed and approved by the Company’s audit committee based upon the standards of providing superior pricing and time to delivery than that available from unrelated third parties. On May 14, 2024, the Company provided notice to HPI of its intent to terminate the HPI License effective on or about July 14, 2024. On August 30, 2018, we entered into a sublicense agreement with WPD Pharmaceuticals, Inc. (“WPD”). Pursuant to the agreement, the Company granted WPD an exclusive sublicense, even as to us, for the patent rights we licensed pursuant to the HPI License within the following countries: Poland, Estonia, Latvia, Lithuania, Belarus, Ukraine, Moldova, Romania, Bulgaria, Serbia, Macedonia, Albania, Armenia, Azerbaijan, Georgia, Montenegro, Bosnia, Croatia, Slovenia, Slovakia, Czech Republic, Hungary, Chechnya, Uzbekistan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Greece, Austria, and Russia. The sublicense agreement provides that WPD must use commercially reasonable development efforts to attempt to develop and commercialize licensed products in the above mentioned territories, which means the expenditure of at least $2.0 million on the development, testing, regulatory approval or commercialization of the licensed products during the three year period immediately following the date of the sublicense agreement. In the event that WPD fails to use commercially reasonable development efforts by the foregoing three-year deadline, we have the right to terminate this sublicense agreement. As of December 31, 2021, the Company has received reports of the WPD expenditures related to this agreement, has conducted due inquiry into validating those expenditures, and has determined that WPD has exercised commercially reasonable development efforts and has therefore fulfilled the terms of the agreement necessary to secure their rights under the sublicense in perpetuity subject to the ongoing obligations of the sublicense. In consideration for the rights granted under the sublicense agreement, to the extent we are required to make any payments to HPI pursuant to the HPI License as a result of this sublicense agreement, WPD agreed to advance us such payments, and to pay us a royalty equal to 1% of such payments. WPD is a Polish corporation that is majority-owned by an entity controlled by Dr. Priebe, our founder. On November 21, 2022, CNS entered into an Investigational Medicinal Product Supply Agreement with Pomeranian Medical University (“PUM”) in Szczecin, Poland. CNS agreed to sell berubicin hydrochloride drug product (and related reference standards) to PUM at a discount to the historical cost of manufacturing so that PUM may conduct an investigator-initiated clinical trial of Berubicin in CNS lymphomas. PUM agreed to pay CNS the following payments: (i) PLN 5,870 upon delivery of 2 vials each of berubicin and berubicinol reference standards, (ii) PLN 873,201 upon delivery of a first batch of 150 berubicin drug product vials, and (iii) PLN 873,201 upon delivery of a second batch of 150 berubicin drug product vials. As of December 31, 2022, the reference standards were delivered, and the Company recognized $ 1,302 in accounts receivable and as a reduction to research and development expense. In April 2023, the first batch of berubicin drug product vials were delivered, and the Company recognized $ 196,303 in accounts receivable and as a reduction to research and development expense. As of December 31, 2023, the outstanding accounts receivable balance of $ 197,605 was collected in full. On August 31, 2018, the Company entered into a sublicense agreement with Animal Life Sciences, LLC (“ALI”), a related party, pursuant to which we granted ALI an exclusive sublicense, even as to us, for the patent rights we licensed pursuant to the HPI License solely for the treatment of cancer in non-human animals through any type of administration. In consideration for the rights granted under the sublicense agreement, ALI agreed to issue us membership interests in ALI equal to 1.52% of the outstanding ALI membership interests. As additional consideration for the rights granted, to the extent we are required to make any payments to HPI pursuant to the HPI License as a result of this sublicense agreement, ALI agreed to advance us such payments, and to pay us a royalty equal to 1% of such payments. Dr. Waldemar Priebe, our founder, is also the founder and a shareholder of ALI, holds 38% of the membership interests of ALI. 13 On June 10, 2020, the FDA granted Orphan Drug Designation (“ODD”) for Berubicin for the treatment of malignant gliomas. ODD from the FDA is available for drugs targeting diseases with less than 200,000 cases per year. ODD may enable market exclusivity of 7 years from the date of approval of an NDA in the United States. During that period the FDA generally could not approve another product containing the same drug for the same designated indication. Orphan drug exclusivity will not bar approval of another product under certain circumstances, including if a subsequent product with the same active ingredient for the same indication is shown to be clinically superior to the approved product on the basis of greater efficacy or safety, or providing a major contribution to patient care, or if the company with orphan drug exclusivity is not able to meet market demand. The ODD now constitutes our primary intellectual property protections although the Company is exploring if there are other patents that could be filed related to Berubicin to extend additional protections. On July 24, 2021, the Company received Fast Track Designation from the FDA for Berubicin. Fast Track Designation is designed to facilitate the development and expedite the review of drugs to treat serious conditions and fill an unmet medical need. WP1244 Portfolio On January 10, 2020, Company entered into a Patent and Technology License Agreement (“Agreement”) with The Board of Regents of The University of Texas System, an agency of the State of Texas, on behalf of The University of Texas M. D. Anderson Cancer Center (“UTMDACC”). Pursuant to the Agreement, the Company obtained a royalty-bearing, worldwide, exclusive license to certain intellectual property rights, including patent rights, related to the Company’s recently announced WP1244 drug technology. In consideration, the Company must make payments to UTMDACC including an up-front license fee, annual maintenance fee, milestone payments and royalty payments (including minimum annual royalties) on sales of licensed products developed under the Agreement. The term of the Agreement expires on the last to occur of: (a) the expiration of all patents subject to the Agreement, or (b) fifteen years after execution; provided that UTMDACC has the right to terminate this Agreement in the event that the Company fails to meet certain commercial diligence milestones. The commercial diligence milestones are as follows (i) initiated PC toxicology to support filing of Investigational New Drug Application (“IND”) or New Drug Application (“NDA”) for the Licensed Product within the eighteen (18) month period following the Effective Date (ii) file and IND for the Licensed Product within three (3) year period following the Effective Date and (iii) Commencement of Phase I Study within the five (5) year period following the Effective Date. The Company has not met the commercial diligence milestones and has not paid the annual maintenance fee required as of the date hereof. On April 25, 2024, UTMDACC provided notice to the Company of its intent to terminate the WP1244 Agreement if the Company fails to pay the annual maintenance fee of $50,000, as well as $1,300 in expenses. As of the date hereof, the Company has not determined whether to cure the foregoing defaults. If the Company fails to cure the defaults, on May 25, 2024, the WP1244 Agreement will terminate.. During the three months ended March 31, 2024 and 2023, the Company paid $ 694 and $ 11,744 , respectively. On May 7, 2020, pursuant to the WP1244 Portfolio license agreement described above, the Company entered into a Sponsored Research Agreement with UTMDACC to perform research relating to novel anticancer agents targeting CNS malignancies. The Company agreed to fund approximately $1,134,000 over a two-year period. During the year ended December 31, 2020, the Company paid $ 334,000 and accrued $ 400,000 related to this agreement in research and development expenses in the Company’s Consolidated Statements of Operations. During the year ended December 31, 2021, the Company paid $ 800,000 to UTMDACC related to this agreement. The Company has no further payment obligations as of December 31, 2021. This agreement was extended and now expires on March 31, 2023. The principal investigator for this agreement is Dr. Waldemar Priebe, our founder. Nasdaq Capital Markets Listing Qualifications On August 17, 2023, the Company was notified by the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) that the Company was not in compliance with the minimum $ 2,500,000 stockholders’ equity requirement for continued listing set forth in Listing Rule 5550(b). On February 27, 2024, the Staff notified the Company that it did not comply with the $1.00 minimum bid price requirement set forth under Listing Rule 5550(a)(2). On February 14, 2024, the Company was notified that because it had not regained compliance with the Nasdaq equity requirement, its securities would be delisted unless it requested a hearing. On February 21, 2024, the Company requested a hearing, which was held on April 18, 2024. 14 On May 6, 2024, the Company received notification from the Nasdaq Hearings Panel (“Panel”) that it has granted an extension until July 15, 2024, to demonstrate compliance with Listing Rules 5550(a)(2) and 5550(b). The Company intends to implement its plan to meet the milestones set forth by the Panel prior to July 15, 2024. Note 6 – Subsequent Events On April 7, 2024, the Compensation Committee recommended, and the Board approved such recommendation, equity grants for service in 2023 from the Stock Plan a total of 179,000 Options that vest over 3 years, and 179,000 Restricted Stock Units which vest over 2 years. On April 30, 2024, the Company held its scheduled 2024 Annual Meeting of Stockholders at which the Company’s stockholders approved amendments to the Company's 2020 Equity Plan (the “2020 Plan”) including an increase in the number of shares of common stock, par value $0.001 per share, authorized for issuance under the 2020 Plan by 3,500,000 shares. As amended, the number of shares of the common stock that may be issued under the 2020 Plan is 4,345,800 shares (this includes the 3,500,000 share increase). Subsequent to March 31, 2024, a total of 1,183,000 Warrants (exercisable into one share of common stock at a price per share of $0.001) were exercised by investors. 15