Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 20549
FORM 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________
to ___________________
Commission File Number: 001-39126
CNS Pharmaceuticals, Inc.
(Exact Name of Registrant as Specified in its Charter)
Nevada
82-2318545
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer Identification No.)
2100 West Loop South, Suite 900
Houston, Texas 77027
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, including
Area Code: 800-946-9185
Securities registered pursuant to Section 12(b) of the Exchange
Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
CNSP
The NASDAQ Stock Market LLC
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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
periods as the registrant was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes
☒ No ☐
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions
of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging
growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller reporting company ☒
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on
and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.
☐
If securities are registered pursuant to Section 12(b) of the Act,
indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to
previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements
that required a recovery analysis of incentive-based compensation received
by any of the registrant’s executive officers during
the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Act). YES ☐ NO ☒
The aggregate market value of the registrant’s voting equity
held by non-affiliates of the registrant, computed by reference to the price at which the
common stock was last sold as of the last business
day of the registrant’s most recently completed second fiscal quarter, was $8.78 million. In determining
the market value of the
voting equity held by non-affiliates, securities of the registrant beneficially owned by directors, officers and 10% or greater
shareholders
of the registrant have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
The number of shares of the registrant’s common stock outstanding
as of March 31, 2025 was 2,944,381.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of this registrant’s definitive proxy statement for
its 2024 Annual Meeting of Stockholders to be filed with the SEC no later than 120 days after the
end of the registrant’s fiscal
year are incorporated herein by reference in Part III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
Page
PART I
ITEM 1.
Business
1
ITEM 1A.
Risk Factors
16
ITEM 1B.
Unresolved Staff Comments
33
ITEM 1C.
Cybersecurity
33
ITEM 2.
Properties
34
ITEM 3.
Legal Proceedings
34
ITEM 4.
Mine Safety Disclosures
34
PART II
ITEM 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
35
ITEM 6.
[RESERVED]
35
ITEM 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
35
ITEM 7A.
Quantitative and Qualitative Disclosures About Market Risks
41
ITEM 8.
Financial Statements and Supplementary Data
41
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
62
ITEM 9A.
Controls and Procedures
62
ITEM 9B.
Other Information
63
ITEM 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
63
PART III
ITEM 10
Directors, Executive Officers and Corporate Governance
64
ITEM 11
Executive Compensation
64
ITEM 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
64
ITEM 13
Certain Relationships and Related Transactions, and Director Independence
64
ITEM 14
Principal Accountant Fees and Services
64
PART IV
ITEM 15
Exhibits, Financial Statement Schedules
65
Exhibit Index
65
ITEM 16
10-K Summary
68
Signatures
69
i
References in this Form 10-K to “we”,
“us”, “its”, “our” or the “Company” are to CNS Pharmaceuticals, Inc., as appropriate to
the context.
Cautionary Statement About
Forward-Looking Statements
We make forward-looking statements under the “Risk
Factors,” “Business,” “Management’s Discussion and Analysis of Financial Condition and
Results of Operations”
and in other sections of this report. In some cases, you can identify these statements by forward-looking words such as “may,”
“might,” “should,” “would,” “could,” “expect,” “plan,” “anticipate,”
“intend,” “believe,” “estimate,” “predict,” “potential” or “continue,”
and the negative
of these terms and other comparable terminology. These forward-looking statements, which are subject to known and unknown
risks, uncertainties and
assumptions about us, may include projections of our future financial performance based on our growth strategies
and anticipated trends in our business.
These statements are only predictions based on our current expectations and projections about
future events. There are important factors that could cause
our actual results, level of activity, performance or achievements to differ
materially from the results, level of activity, performance or achievements
expressed or implied by the forward-looking statements. In
particular, you should consider the numerous risks and uncertainties described under “Risk
Factors”.
While we believe we have identified material risks,
these risks and uncertainties are not exhaustive. Other sections of this report may describe
additional factors that could adversely impact
our business and financial performance. Moreover, we operate in a very competitive and rapidly changing
environment. New risks and uncertainties
emerge from time to time, and it is not possible to predict all risks and uncertainties, nor can we assess the impact
of all factors on
our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained
in any forward-looking statements.
Although we believe the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee future results, level of
activity, performance or achievements.
Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these
forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of
these forward-looking
statements after the date of this report to conform our prior statements to actual results or revised expectations, and we do not intend
to do so.
Forward-looking statements include, but are not
limited to, statements about:
·
our ability to obtain additional funding to develop our product candidates;
·
the need to obtain regulatory approval of our product candidates;
·
the success of our clinical trials through all phases of clinical development;
·
compliance with obligations under intellectual property licenses with third parties;
·
any delays in regulatory review and approval of product candidates in clinical development;
·
our ability to commercialize our product candidates;
·
market acceptance of our product candidates;
·
competition from existing products or new products that may emerge;
·
potential product liability claims;
ii
·
our dependency on third-party manufacturers to supply or manufacture our products;
·
our ability to establish or maintain collaborations, licensing or other arrangements;
·
our ability and third parties’ abilities to protect intellectual property rights;
·
our ability to adequately support future growth; and
·
our ability to attract and retain key personnel to manage our business effectively.
We caution you not to place undue reliance on the
forward-looking statements, which speak only as of the date of this report in the case of
forward-looking statements contained in this
report.
You should not rely upon forward-looking
statements as predictions of future events. Our actual results and financial condition may differ
materially from those indicated in
the forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.
Although we believe
that the expectations reflected in the forward looking statements are reasonable, we cannot guarantee future results, levels of
activity,
performance or achievements. Therefore, you should not rely on any of the forward-looking statements. In addition, with
respect to all of our forward-
looking statements, we claim the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of
1995.
iii
PART I
Item 1.
Business.
Overview
We are a clinical pharmaceutical company organized
as a Nevada corporation in July 2017 to focus on the development of anti-cancer drug
candidates for the treatment of brain and central
nervous system tumors, based on intellectual property that we license under license agreements with
Cortice Biosciences, Inc. (“Cortice”)
and own pursuant to a collaboration and asset purchase agreement with Reata Pharmaceuticals, Inc. (“Reata”).
We believe our drug candidates, TPI 287 and Berubicin,
may be significant developments in the treatment of Glioblastoma and other CNS
malignancies, and if approved by the U.S. Food and Drug
Administration (“FDA”), could give Glioblastoma patients important new therapeutic
alternatives to the current standard of
care. Glioblastomas are tumors that arise from astrocytes, which are star-shaped cells making up the supportive tissue
of the brain. These
tumors are usually highly malignant (cancerous) because the cells reproduce quickly, and they are supported by a large network of blood
vessels. Berubicin is an anthracycline, which is a class of drugs that are among the most powerful and extensively used chemotherapy drugs
known. TPI
287 is an abeotaxane, and is related to the family of common chemotherapy drugs known as taxanes. Based on limited clinical
and preclinical data, we
believe TPI 287 is the first taxane that appears to cross the blood brain barrier (“BBB”) in significant
concentrations targeting brain cancer cells. Based on
clinical and preclinical data, Berubicin is the first anthracycline that appears
to cross the BBB in significant concentrations targeting brain cancer cells.
While our focus is currently on the development of TPI 287
and Berubicin, we are also in the process of attempting to secure intellectual property rights to
additional compounds that we plan to
develop into drugs to treat CNS and other cancers.
TPI 287 had previously been granted Orphan Drug
Designation (“ODD”) status by the FDA. 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 a New Drug Application
(“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 strengthens our intellectual
property protections although the Company is exploring if there are other patents
that could be filed related to TPI 287 to extend additional protections.
TPI 287 is an abeotaxane and is an investigational
chemotherapy agent classified as a third-generation taxane derivative. It was developed to
address some of the limitations of earlier
taxanes like paclitaxel (Taxol) and docetaxel (Taxotere), particularly issues related to drug resistance and poor
penetration of the BBB.
As a synthetic, lipophilic compound, TPI 287 is designed to be brain-penetrant, potentially allowing it to reach CNS tumors more
effectively
than its predecessors. Like other taxanes, TPI 287’s mechanism of action is to stabilize microtubules, which disrupts cell division
and induces
apoptosis. However, one of its notable advantages is its reduced susceptibility to drug efflux pumps such as P-glycoprotein
(P-gp), a common mechanism
by which cancer cells develop resistance to chemotherapy. This feature gives TPI 287 potential utility in treating
drug-resistant cancers in the CNS.
TPI 287 has been studied in early-phase clinical
trials (Phase I and II) in over 300 patients for several indications, including Glioblastoma,
metastatic breast cancer with brain metastases,
non-small cell lung cancer (“NSCLC”), castration-resistant prostate cancer, and neuroblastoma. TPI 287
represents a promising
candidate for treating cancers involving the CNS, as well as those that have become resistant to traditional taxane therapies. While it
has shown promise in limited clinical trials, further clinical development is necessary to determine its future in neuro-oncology.
Berubicin was discovered at The University of Texas
M.D. Anderson Cancer Center (“UTMDACC”) by Dr. Waldemar Priebe, the founder of the
Company. Through a series of transactions,
Berubicin was initially licensed to Reata. Reata initiated several Phase I clinical trials with Berubicin for CNS
malignancies, one of
which was for malignant gliomas, but subsequently allowed their Investigational New Drug (“IND”) with the FDA to lapse for
strategic reasons. This required us to obtain a new IND for Berubicin before beginning further clinical trials. On December 17, 2020,
we announced that
our IND application with the FDA for Berubicin for the treatment of Glioblastoma Multiforme was in effect. We initiated
this trial for patient enrollment
during the second quarter of 2021 with the first patient dosed during the third quarter of 2021 to investigate
the efficacy of Berubicin in adults with
Glioblastoma Multiforme who have failed first-line therapy. The first patient on the trial was
treated during the third quarter of 2021. Correspondence
between the Company and the FDA resulted in modifications to our initial trial
design, including designating overall survival (OS) as the primary endpoint
of the study. OS is a rigorous endpoint that the FDA has recognized
as a basis for approval of oncology drugs when a statistically significant improvement
can be shown relative to a randomized control arm.
1
On March 25, 2025, CNS released topline data from
a primary analysis of a clinical trial being conducted to evaluate the efficacy of Berubicin in
patients with Glioblastoma Multiforme
who have failed primary treatment for their disease. The trial, compares the efficacy of Berubicin to that of
Lomustine, a current standard
of care in this setting, with a 2 to 1 randomization of the 252 patients to Berubicin or Lomustine. Patients receiving
Berubicin were
administered a 2-hour IV infusion of 7.5 mg/m2 berubicin hydrochloride daily for three consecutive days followed by 18 days off (a 21-day
cycle). Lomustine is administered orally once every six weeks. The trial design included a pre-planned, non-binding interim futility analysis.
We reached
the criteria required by the study protocol to conduct this interim futility analysis, which an independent Data Safety Monitoring
Board (“DSMB”) was
responsible for conducting. The DSMB’s charter mandated that they review the primary endpoint, Overall
Survival, as well as secondary endpoints and
safety data to determine whether the efficacy data for the risk-benefit profile warrants
modification or discontinuation of the study. On December 18, 2023,
we released the DSMB’s recommendation which was to continue
the study without modification. The recently released topline data showed that although
Berubicin produced clinically relevant outcomes
that appear to be comparable (although the trial was not powered to determine non-inferiority) to
Lomustine across multiple endpoints,
it did not demonstrate a statistically significant difference in overall survival, the primary endpoint. Nevertheless,
given the dearth
of alternative approved therapies for GBM, we believe Berubicin has demonstrated potential value as a possible treatment for
Glioblastoma.
As such we are currently evaluating whether any potential paths forward exist for the program. Any such path will be planned and executed
in consultation with the FDA. Even if Berubicin is approved, there is no assurance that patients will choose an infusion treatment, as
compared to the
current standard of care, which requires oral administration.
We do not have manufacturing facilities and all
manufacturing activities are contracted out to third parties. Additionally, we do not have a sales
organization.
On November 21, 2017, we entered into a Collaboration
and Asset Purchase Agreement with Reata (the “Reata Agreement”). Pursuant to the
Reata Agreement we purchased all of Reata’s
intellectual property and development data regarding Berubicin, including all trade secrets, knowhow,
confidential information and other
intellectual property rights.
On December 28, 2017, we obtained the rights to
a worldwide, exclusive royalty-bearing, license to the chemical compound commonly known as
Berubicin from HPI in an agreement we refer
to as the HPI License. HPI is affiliated with our founder, Dr. Priebe. Under the HPI License we obtained the
exclusive right to develop
certain chemical compounds for use in the treatment of cancer anywhere in the world. In the HPI License we agreed to pay HPI:
(i) development
fees of $750,000 over a three-year period beginning November 2019; (ii) a 2% royalty on net sales; (iii) a $50,000 per year license fee;
(iv)
milestone payments of $100,000 upon the commencement of a Phase II trial and $1.0 million upon the approval of a New Drug Application
(“NDA”) for
Berubicin; and (v) 3 shares of our common stock. The patents we licensed from HPI expired in March 2020. On March
23, 2025, the Company terminated
the HPI License.
On June 10, 2020, the FDA granted Orphan Drug Designation
for Berubicin for the treatment of malignant gliomas. The ODD now constitutes our
primary intellectual property protections related to
Berubicin although the Company is exploring other patents that could be filed related to Berubicin to
extend additional protections. We
believe we have all rights and intellectual property necessary to develop Berubicin. As stated earlier, it is our plan to
obtain additional
intellectual property covering other compounds which, subject to the receipt of additional financing, may be developed into drugs for
brain and other cancers.
On July 29, 2024, we entered into an Exclusive
License Agreement and Stock Purchase Agreement (collectively, the “Cortice Agreements”) with
Cortice Biosciences, Inc. (“Cortice”)
pursuant to which Cortice granted us an exclusive license to the intellectual property rights related to certain patents
around the compound
TPI 287 in the United States, Canada, Mexico and Japan. The term of the license will expire, other than due to a breach of the
Cortice
Agreements, at the end of the royalty term with respect to any licensed product in any of the included territories, which begins upon
the first
commercial sale in such territory and ends on the latest of (i) ten years after such sale, (ii) the expiration of regulatory
or marketing exclusivity for such
licensed product in such country, or (c) the expiration of the last to expire valid patent claim in
such country covering such licensed product.
2
Market for Cancer Drugs
Cancer is the second leading cause of death in
the United States behind heart disease. In 2019, there were an estimated 16.9 million cancer
survivors in the United States. In 2022,
the American Cancer Society estimated that nearly 1.9 million new cases would be diagnosed and over 600,000
Americans would die from cancer.
Digestive, reproductive, breast and respiratory
cancers comprise 69% of expected cancer diagnoses in 2022, while cancers like leukemia and brain
tumors are considered “rare diseases.”
The worldwide cancer drug business has been estimated
to represent nearly $100 billion in annual sales. Our drug candidate, Berubicin, is in a
class of drugs referred to as anthracyclines,
which are chemotherapy drugs designed to destroy the DNA of targeted cancer cells. The most common
approved anthracyclines are daunorubicin
and doxorubicin and, prior to the expansion of their generic equivalents, annual revenues generated from
anthracyclines have been estimated
in the range of $600 million. Many cancers are currently treated with anthracyclines; however, primary and metastatic
brain cancers have
not been among them because heretofore no anthracyclines have been able to sufficiently penetrate the BBB. We believe that based on
clinical
and preclinical data, Berubicin appears to cross the BBB despite not showing a statistically significant superiority to Lomustine, the
current
standard of care in refractory and recurrent GBM.
Brain cancer in general is considered a rare disease
for which there are few available treatments. The leading brain tumor drug is temozolomide
(“TMZ”), a drug introduced under
the brand name Temodar®. In 2012, one industry source reported annual revenues of approximately $882 million for
Temodar before the
expiration of its patent protection, at which point generic versions of the drug began to enter the market and reduce prices. TMZ
extends
overall survival when used in combination with radiation after preliminary surgery, followed by maintenance therapy as a single agent
thereafter.
The Orphan Drug Act and other legislative initiatives
provide incentives, including market exclusivity and accelerated approval pathways, for
companies that pursue the development of treatments
for rare diseases and serious diseases for which there are few or no acceptable available treatment
alternatives. Orphan Drug exclusivity
prevents for seven years the approval of another product with the same active moiety for the same rare disease. If a
product is a new
chemical entity (i.e., generally that the moiety has not previously been approved), it may receive five years of exclusivity, during which
period FDA may not accept for review certain NDAs for another product with the same moiety. If approval of a product required new clinical
data, it may
convey three years of exclusivity against approval of certain NDAs for similar products. Over the last 10 years, an increasing
number of companies have
begun using these designations to obtain new drug approvals for drugs where patent coverage has expired and/or
where accelerated approval appears
possible. An IMS Health report estimated that, in 2013, the sale of drugs with full or partial Orphan
Drug exclusivity represented approximately $29 billion
in revenue. We consider the receipt of Orphan Drug exclusivity and expedited pathways
to approval or further development to be an important part of our
development strategy for our drug candidates.
The Clinical Therapeutic Opportunity
The Company was created to specialize in the discovery
and development of novel treatments for brain tumors. Our main focus is currently the
development and testing of TPI 287 and Berubicin.
We believe TPI 287 is the first taxane and Berubicin is the first anthracycline that appears to cross the
BBB and target cancer cells
based upon preclinical animal models and limited clinical data derived from Phase 1 human clinical trials, and in the case of
Berubicin,
based on Phase 2 clinical data. Currently, there are no curative therapies for glioblastoma.
TPI 287 has been investigated in neuro-oncology
for its potential to treat brain tumors due to its apparent ability to cross the blood-brain barrier. A
Phase 1/2 clinical trial evaluated
TPI 287 in combination with bevacizumab in patients with recurrent glioblastoma multiforme (GBM). The study reported
an objective response
rate of 54%, including two complete responses, and a disease control rate of 92%. The combination therapy was generally well-
tolerated,
with no dose-limiting toxicities observed up to doses of 170 mg/m². These early trials suggest that TPI 287 shows potential in neuro-oncology.
3
In 2009, Reata, the prior developer of Berubicin,
completed its Phase 1 clinical trial in patients diagnosed with brain cancers, including
glioblastoma, the most aggressive form of brain
cancer. In the clinical trial completed by Reata in February 2009, Berubicin demonstrated one durable
complete response lasting over 17
years in a patient treated on the original Phase 1 clinical trial. This patient remains disease free and clinically stable as of
November
2022 (the date of the patient’s most recent confirmed MRI).
The Phase 1 trial was in a patient population that
had a median survival rate of only 14.6 months from glioblastoma diagnosis and few effective
therapeutic options. In this trial, 25 of
the 35 patients enrolled were evaluable for response, and there was 1 complete response, 1 partial response, and 1
minor response, all
indicative of tumor shrinkage. In addition, 8 other patients had stable disease, for a disease control rate (“DCR”) of 44%.
If in
consultation with the FDA we determine a path forward exists for Berubicin, despite not showing statistically significant superiority
to Lomustine, and
regulatory approval is secured to market it, we believe this drug has the potential to become an important therapeutic
option for this deadly cancer.
In the eight major markets for pharmaceuticals
(the US, France, Germany, Italy, Spain, the UK, Japan and China), approximately 55,000 new
glioblastoma patients were diagnosed in 2021
with a median survival rate for these patients of only 15 months (GlobalData, 2018). Due to the lack of
effective therapies, the five-year
survival rate of glioblastoma ranges from 13% for younger aged patients (20 to 44 years) to 1% for older populations (over
44 years).
The current standard of care for first-line treatment is surgery, radiation, and chemotherapy with TMZ. TMZ, the current chemotherapeutic
component of the first-line standard of care for glioblastoma, has limited efficacy. In the TMZ final clinical trial performed before
submitting for FDA
approval (573 patients), overall survival was improved by 2.5 months versus radiation alone, a clearly significant
improvement in survival. However, at
least 50% of TMZ treated patients do not respond to TMZ (or have responded very poorly), primarily
due to the O6-methylguanine methyltransferase
(“MGMT”) enzyme, which is a DNA repair pathway in glioblastoma cells.
Berubicin
Our first product under development is Berubicin,
a development stage anthracycline intended to treat glioblastoma and with potential to treat
other neuro-oncology indications. Berubicin
is an anthracycline, a class of drugs that are among the most powerful chemotherapy drugs known. Berubicin
intercalates into DNA and interrupts
topoisomerase II activity, resulting in the inhibition of DNA replication and repair, and ultimately RNA and protein
synthesis. Based
on clinical and preclinical data, Berubicin appears to cross the blood brain barrier and target cancer cells, specifically glioblastoma,
more
effectively and efficiently than any other known anthracyclines.
Berubicin hydrochloride (HCl) is a novel synthetic
anthracycline with a chemical structure similar to doxorubicin HCl, a cytotoxic anthracycline
topoisomerase II inhibitor isolated from
cultures of Streptomyces peucetius var. caesius. Doxorubicin HCl Injection and Doxorubicin HCl for Injection,
drugs related in chemical
structure and mechanism of action to Berubicin, are approved by the FDA for the treatment of various cancers, including acute
lymphoblastic
leukemia, acute myeloblastic leukemia, Hodgkin lymphoma, Non-Hodgkin lymphoma, metastatic breast cancer, metastatic Wilms’ tumor,
metastatic neuroblastoma, metastatic soft tissue sarcoma, metastatic bone sarcomas, metastatic ovarian carcinoma, metastatic transitional
cell bladder
carcinoma, metastatic thyroid carcinoma, metastatic gastric carcinoma, and metastatic bronchogenic carcinoma, as well as
part of a multiagent adjuvant
chemotherapy for the treatment of women with axillary lymph node involvement after resection of primary
breast cancer. A liposomal formulation of
doxorubicin HCl is also approved for the treatment of ovarian cancer, AIDS-related Kaposi’s
sarcoma, and multiple myeloma.
Doxorubicin HCl is not indicated for cancers of
the brain, where it has limited efficacy due to its poor penetration through the blood-brain barrier.
Further, even for those cancers
that doxorubicin HCl is indicated, development of drug resistance remains a problem. In an effort to develop a second-
generation anthracycline
topoisomerase II inhibitor that can circumvent the BBB and the development of drug resistance, a library of high-affinity and
sequence-selective
deoxyribonucleic acid (“DNA”)-binding agents was created and screened against a panel of P-glycoprotein 1 (Pgp) and multidrug
resistance-associated protein 1 (MRP1)-overexpressing cells. This led to the identification of berubicin HCl, which preclinical studies
appear to show to be
less affected by multidrug transporters than doxorubicin, to be potentially more potent as an inhibitor of cell growth
and inducer of apoptosis than
doxorubicin, to sequester preferentially in tumor tissue versus brain tissue, and to improve overall survival
in an intracranial orthotopic glioma model.
There is no assurance that Berubicin will be able to demonstrate such traits in clinical trials.
4
Glioblastoma has an unfavorable prognosis mainly
due to its high propensity for tumor recurrence, which is inevitable after a median survival time
of 32–36 weeks. A plethora of
monotherapy and combination chemotherapy strategies have been evaluated in patients with recurrent glioblastoma.
Although these can result
in some minor improvements in progression-free survival, with an estimation of approximately 30% after six months, no obvious
increase
in survival has been associated with any particular regimen since the Stupp regimen of TMZ and radiation (2005).
Despite aggressive initial treatment, most patients
develop recurrent diseases which can be treated with re-resection, systemic treatment with
targeted agents or cytotoxic chemotherapy,
reirradiation, or radiosurgery. Research into novel therapies is investigating alternative temozolomide regimens,
convection-enhanced
delivery, immunotherapy, gene therapy, antiangiogenic agents, poly ADP ribose polymerase inhibitors, or cancer stem cell signaling
pathways.
Overall, the 5-year survival rate is <10%, with a final mortality rate of close to 100%. Therefore, the development of novel therapeutic
options
for patients with recurrent glioblastoma remains a priority. Given the short-term efficacy and low survival rate of glioblastoma
and other central nervous
system patient groups, we believe there is a significant unmet need, and financial opportunity.
Less than 40% of glioblastoma patients have a genetic
variation which makes their tumors initially more responsive to TMZ. However, because
nearly all these patients will quickly become resistant,
Berubicin could be prescribed after failure with TMZ. The remaining 60% of patients initially fail to
respond to TMZ, primarily due to
the over-expression of O6-methylguanine methyltransferase (MGMT) conferring a lack of a DNA repair pathway in
glioblastoma cells.
Reata licensed in berubicin HCl with the intent
of developing it for commercialization. On December 28, 2004, Reata filed an initial IND (IND
68,279; Serial No. 000) for an injection
formulation of berubicin HCl (RTA 744 Injection) for the treatment of anaplastic astrocytoma, anaplastic
oligodendroglioma, anaplastic
mixed oligo-astrocytoma, glioblastoma, and gliosarcoma. Three clinical trials were initiated under IND 68,279, two phase 1
trials and
one phase 2 trial. The initial phase 1 trial (Study RTA 744-C-0401) was completed and the maximum tolerated dose determined. A 44% disease
control response rate was observed. The disease control rate was based on patients with stable disease plus responses. In the trial, out
of 25 patients, one
patient achieved a complete response, 1 patient had a partial response, 1 patient had a minor response, and 8 patients
achieved a stable response. The 44%
disease control response rate is based on these 11 patients (out of 25 patients). Regardless, in 2008,
Reata decided to curtail development of RTA 744
Injection for strategic reasons. Further enrollment in the two other ongoing berubicin
clinical trials was halted. Reata submitted a request to inactivate the
IND on March 17, 2011 (Serial No. 054) and requested that the
IND be withdrawn on June 10, 2016 (Serial No. 0055). IND 68,279 was not withdrawn due
to safety or efficacy concerns, but rather due to
the above noted corporate reprioritization.
CNS was formed in 2017. Reata sold CNS all rights
to the berubicin investigational drug data, including the data submitted under IND 68,279,
and CNS has assumed sole authority, discretion,
and responsibility with respect to the development of the drug. As a result of the Reata Agreement, we are
the direct beneficiaries of
the 4 years of active clinical development work performed by Reata, including the execution of multiple Phase 1 human clinical
trials.
Berubicin Phase 1 Clinical Trial
In the first clinical trial for Berubicin, which
was referred to as Study RTA 744-C-0401, 25 of the 35 patients enrolled were evaluable for response.
One patient achieved a complete response,
remained on study through seven cycles of therapy and was withdrawn for adverse events unrelated to
Berubicin. The patient was disease
free as of November 2022.
Study design
Study RTA 744-C-0401 was a Phase 1 dose-finding,
safety and pharmacokinetic (PK) study of intravenous Berubicin injection in patients with
recurrent or refractory anaplastic astrocytoma,
anaplastic oligodendroglioma, anaplastic mixed oligo-astrocytoma, glioblastoma multiforme or gliosarcoma.
5
The study was an open-label, accelerated dose-escalation
study to determine the maximum tolerated dose starting with patients who were not
taking concurrent enzyme-inducing anti-epileptic drugs
(EIAEDs) that could interfere with Berubicin drug metabolism. Intra-patient dose-escalation was
allowed after a patient had received a
minimum of 4 cycles. Berubicin injection was administered either daily for three consecutive days repeated every
three weeks (Group A),
or once-weekly for four-consecutive weeks repeated every five weeks (Group C). Enrollment for a planned dose escalation in
Group B (patients
on EIAEDs) was not initiated after it was determined that the standard of care had changed and an insufficient number of patients being
treated with these anti-epileptic drugs would make it difficult to accrue the requisite number of patients. The MTD for the remaining
groups was
determined in a stepwise fashion such that once the MTD for Group A (three days in a row every 3 weeks) was determined, Group
C was initiated at the
MTD from Group A, given on a weekly basis for 4 of every 5 weeks to evaluate the tolerability and MTD of Berubicin
on this alternative schedule.
Study Results
The first patient was enrolled into the study in
November 2005 and as of February 2009, the study was closed to accrual with no active patients
remaining on study. Berubicin was administered
to a total of 54 patients (35 male and 19 female) with ages ranging from 25 to 70 years. Thirty-seven of the
patients (69%) entered the
study with a diagnosis of glioblastoma multiforme, seven of which were secondary to transformation from anaplastic
astrocytoma. The time
from the initial brain tumor diagnosis to enrollment on the study ranged from four months to 301 months (this last timing for a
patient
diagnosed with childhood anaplastic astrocytoma).
Efficacy: Twenty-five of the 35 patients
enrolled in Group A were evaluable for response (under the Macdonald criteria described below). One
patient receiving Berubicin at 2.4
mg/m2/day achieved a complete response. The patient remained on study through 7 cycles of therapy before being
withdrawn for elevated
liver function tests unrelated to study drug, and in follow-up remains disease free and clinically stable as of November 2022.
One additional patient receiving Berubicin at 7.5
mg/m2/day achieved an unconfirmed partial response as their best recorded response,
unconfirmed since the scan showing the partial response
required a second scan corroborating the response. Although the patient had an 80% reduction in
tumor volume after two cycles of therapy,
at the end of four cycles of therapy when an additional scan was obtained, despite the fact that the initial lesion
remained reduced,
the patient developed a new lesion and was assessed as having disease progression, thus the PR could not be confirmed. Ten additional
patients in Group A had stable disease of 2-to-8 cycles in duration, with a median progression free survival of four cycles (12 weeks).
In Group C, seven
patients were evaluable for response and all had progressive disease. Twelve patients were discontinued from the study
prior to the end of cycle 2 due to
clinical deterioration and/or disease progression.
Macdonald criteria: The Macdonald criteria,
similarly to other systems, divides response into four types of response based on imaging (MRI) and
clinical features:
Assessment
Imaging Features
Clinical Features
Complete Response (CR)
§
Disappearance of all enhancing disease (measurable and non-measurable)
§
Sustained for at least four weeks
§
No new lesions
§
No corticosteroids
§
Clinically stable or improved
Partial Response (PR)
§
50% or more decrease of measurable enhancing lesions
§
Sustained for at least four weeks
§
No new lesions
§
Stable or reduced corticosteroids
§
Clinically stable or improved
Stable Disease (SD)
§ Does not qualify for CR, PR or progression
§ Clinically stable
Progression
§
25% or more increase in enhancing lesions
§
Any new lesions
§ Clinical deterioration
6
Measurements of lesions are obtained from axial
post contrast T1 images. The maximal diameter is obtained, and then the second diameter is
obtained at right angles to the first. The
product of these measurements is then used as the size of the lesion for the purpose of comparison.
Summary of Adverse Events: The adverse events
documented during Study RTA 744-C-0401 for all CTC grades of severity and regardless of
relationship to study medication are identified
below.
Serious Adverse Event
Number of Patients Experiencing Adverse Event
Pulmonary embolism
5
Convulsion
5
Urinary tract infection
1
Peripheral motor neuropathy
1
Peripheral sensory neuropathy
1
Urinary retention
1
Nausea
4
Vomiting
5
Constipation
1
Leukopenia
1
Neutropenia
1
Headache
3
Speech disorder
1
Pyramidal tract syndrome
3
Somnolence
1
Dehydration
3
Brain oedema
1
Papilloedema
1
Eyelid ptosis
1
Macular oedema
1
Syncope
2
Deep vein thrombosis
1
Loss of consciousness
1
Embolism
1
Hemiparesis
1
Hydrocephalus
1
Muscle atrophy
1
Thrombocytopenia
1
Disease progression
3
Mental status changes
4
Thrombosis
1
Sepsis
1
Depressed level of consciousness
1
Dyspnoea
2
The larger number of events related to the central
nervous system is consistent with the impact of the underlying malignant disease in the brain of
these patients. Myelosupression, i.e.,
a decrease in the number of bone-marrow derived cells, is expected and consistent with the known toxicities of
anthracyclines, which can
be managed by the use of effective supportive care.
7
Berubicin Phase 2 Clinical Trial
Based on data relating to the mechanism of action
of Berubicin, as well as clinical results from the Phase 1 study in brain tumors performed by
Reata, the prior developer of Berubicin,
we initiated a randomized, controlled multicenter study intended to evaluate the efficacy of Berubicin versus
Lomustine (CCNU, CeeNU®,
or Gleostine®) in patients with recurrent glioblastoma. Randomization to the two therapies (Berubicin or Lomustine) was on
a 2:1 basis
with 2 patients receiving Berubicin for every patient randomized to Lomustine. Lomustine is a drug considered effective in patients with
glioblastoma that has recurred or progressed following first line therapy. From the data available from the Reata Phase 1 clinical trial
(RTA 744-C-0401),
the FDA has agreed that the dosage for Berubicin will be at the maximum tolerated dose (“MTD”) determined
in that trial. Thus, patients randomized to the
Berubicin arm receive a 2-hour IV infusion of 7.5 mg/m2 berubicin hydrochloride daily
for three consecutive days followed by 18 days off (21-day cycle).
Patients randomized to Lomustine receive a single oral dose of 130
mg/m2 (rounded to the nearest 5 mg) every 6 weeks, or per the full prescribing
information for Lomustine incorporating institutional standards
at each study site.
Efficacy was measured by the benefit of Berubicin
vs. Lomustine in terms of overall survival (OS), considered by the FDA as the only endpoint
acceptable for clinical trials in Neuro-Oncology
which form the basis for a request for approval of a New Drug Application. Secondary endpoints using
accepted radiologic methodology (magnetic
resonance imaging “MRI”), including both pre- and post-gadolinium T1-weighted scans and T2/fluid
attenuated inversion recovery
(“FLAIR”) images will evaluate objective response rates (ORR), which include complete responses (CR) and partial
responses
(PR) as per RANO (Response Assessment for Neuro-Oncology), and progression free survival at 6 months (PFS6). Additional information
collected
include event free survival (EFS), corticosteroid usage, neurologic status, quality of life, and safety, and for Berubicin, the pharmacokinetics
(PK)
at the dose and schedule employed. On March 25, 2025, we released the results of the primary analysis of the Berubicin trial. While
Berubicin showed
clinically relevant outcomes comparable (although the trial was not powered to determine non-inferiority) to Lomustine
across multiple endpoints, it did
not demonstrate a statistically significant difference in overall survival, the primary endpoint.
The trial included a pre-planned, non-binding interim
futility analysis which was conducted by an independent DSMB to recommend whether this
study should continue as planned, be discontinued,
or be modified to address safety concerns. The trial design called for this interim analysis to be
conducted after at least 50% of the
patients in the interim analysis population (30-50% of total expected patients for the trial) can be evaluated as having
failed the primary
efficacy endpoint of Overall Survival. The median survival of patients receiving second-line treatment for glioblastoma has historically
been shown to be approximately 6 months. The DSMB’s charter mandated that they review the primary endpoint, Overall Survival, as
well as secondary
endpoints and safety data to determine whether the efficacy data for the risk-benefit profile warrants modification
or discontinuation of the study. On
December 18, 2023, we released the DSMB’s recommendation which was to continue the study without
modification.
We are currently exploring what path forward, if
any, may be available for Berubicin. Our planning process will involve consultation with and
input from the FDA. If a path forward is
identified, we may look for a partner with which to conduct any additional studies which may be required, or we
may attempt to raise sufficient
capital to conduct such studies on our own. The goal of these additional studies, should they be necessary, would be to
develop a body
of evidence to support a successful application with the FDA and/or other similar regulatory agencies around the world. Should we obtain
approval from the FDA or other international regulatory agencies to market Berubicin, we will either partner with third parties to sell
and distribute it to
physicians and patients, or we will develop our own sales force to do so.
Competition
We operate in a highly competitive segment of the
pharmaceutical market, which market is highly competitive as a whole. We face competition
from numerous sources including commercial pharmaceutical
and biotechnology enterprises, academic institutions, government agencies, and private and
public research institutions. Many of our competitors
may have significantly greater financial, product development, manufacturing and marketing
resources. Additionally, many universities
and private and public research institutes are active in cancer research, and some may be in direct competition
with us. We may also compete
with these organizations to recruit scientists and clinical development personnel. Smaller or early-stage companies may also
prove to
be significant competitors, particularly through collaborative arrangements with large and established companies.
8
The unmet medical need for more effective cancer
therapies is such that oncology drugs are one of the leading class of drugs in development.
These include a wide array of products against
cancer targeting many of the same indications as our drug candidates. While the introduction of newer
targeted agents may result in extended
overall survival, induction therapy regimens are likely to remain a cornerstone of cancer treatment in the foreseeable
future.
The current standard for the initial treatment
of glioblastoma is surgery, followed by radiation in combination with TMZ, followed by maintenance
TMZ. Treatment with Lomustine is considered
to be the standard of care for recurrent glioblastoma even though it is not formally approved by the FDA for
this purpose, a fact which
highlights the lack of available options for treatment. While the percentage of patients who survive two years from the diagnosis
of glioblastoma
has increased because of the use of TMZ, overall survival for GBM patients remains dismal. There are currently at least 77 different
experimental
therapies under clinical development in the United States for recurrent GBM based on the clinicaltrials.gov website. Thus, we are operating
in
a highly competitive clinical trial environment, moving towards the pharmaceutical market, which is also extremely competitive for
patients with GBM.
We also face competition from numerous sources including commercial pharmaceutical and biotechnology enterprises, academic
institutions, government
agencies, and private and public research institutions. Many of our competitors may have significantly greater
cancer research capabilities, as well as
financial, product development, manufacturing, and marketing resources. Additionally, many universities
and private and public research institutes are
active in cancer research, and some may be in direct competition with us. In addition,
we also compete with these organizations to recruit scientists and
clinical development personnel. Smaller or early-stage companies may
also prove to be significant competitors, particularly through collaborative
arrangements with large and established companies.
Intellectual Property
When we licensed TPI 287 from Cortice on July 29,
2024, it had previously been granted Orphan Drug Designation (“ODD”)by the FDA. On
June 10, 2020, the FDA granted Orphan Drug
Designation 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 a 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. We
do not hold or license any patents related to Berubicin
and 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.
We are exploring the possibility to file additional
patent applications that potentially might allow for further increase of the exclusive market
protection for use of TPI 287 and Berubicin.
However, we can provide no assurance that we will be able to file or receive additional patent protection. The
failure to receive such
additional patent protection will reduce the barrier to entry for competition for TPI 287 and Berubicin, which may adversely affect
our
operations.
Governmental Regulation
Government authorities in the United States, at
the federal, state and local level, and in other countries extensively regulate, among other things,
the research, development, testing,
manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising,
distribution, post-approval
monitoring and reporting, marketing and export and import of products such as those we are developing. The pharmaceutical
drug product
candidates that we develop must be approved by the FDA before they may be marketed and distributed.
9
In the United States, the FDA regulates pharmaceutical
products under the Federal Food, Drug, and Cosmetic Act, and implementing regulations.
Pharmaceutical products are also subject to other
federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the
subsequent compliance with appropriate
federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial
resources. Failure
to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval,
may subject an applicant to administrative or judicial sanctions. FDA and related enforcement activity could include refusal to approve
pending
applications, withdrawal of an approval, a clinical hold, warning letters, product recalls, product seizures, total or partial
suspension of production or
distribution injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal
penalties. Any agency or judicial enforcement
action could have a material adverse effect on us. The process required by the FDA before
a pharmaceutical product may be marketed in the United States
generally involves the following:
·
Completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices or other
applicable regulations;
·
Submission to the FDA of an Investigational New Drug application, or IND, which must become effective before human clinical studies
may begin;
·
Performance of adequate and well-controlled human clinical studies according to the FDA’s current good clinical practices (“GCP”), to
establish the safety and efficacy of the proposed pharmaceutical product for its intended use;
·
Submission to the FDA of an NDA for a new pharmaceutical product;
·
Satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the pharmaceutical product is produced, to
assess compliance with current good manufacturing practices (“cGMP”), to assure that the facilities, methods and controls are adequate
to preserve the pharmaceutical product’s identity, strength, quality and purity;
·
Potential FDA audit of the preclinical and clinical study sites that generated the data in support of the NDA; and
·
FDA review and approval of the NDA.
The lengthy process of seeking required approvals
and the continuing need for compliance with applicable statutes and regulations require the
expenditure of substantial resources and approvals,
and continued compliance is inherently uncertain.
Before testing any compounds with potential therapeutic
value in humans, the pharmaceutical product candidate enters the preclinical testing
stage. Preclinical tests include laboratory evaluations
of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety
and activity of the pharmaceutical
product candidate. These early proof-of-principle studies are done using sound scientific procedures and thorough
documentation. The conduct
of the single and repeat dose toxicology and toxicokinetic studies in animals must comply with federal regulations and
requirements including
good laboratory practices. The sponsor must submit the results of the preclinical tests, together with manufacturing information,
analytical
data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. The IND automatically
becomes
effective 30 days after receipt by the FDA, unless the FDA has concerns and notifies the sponsor. In such a case, the IND sponsor
and the FDA must
resolve any outstanding concerns before the clinical study can begin. If resolution cannot be reached within the 30-day
review period, either the FDA
places the IND on clinical hold or the sponsor withdraws the application. The FDA may also impose clinical
holds on a pharmaceutical product candidate
at any time before or during clinical studies for various reasons. Accordingly, we cannot
be sure that submission of an IND will result in the FDA allowing
clinical studies to begin, or that, once begun, issues will not arise
that suspend or terminate such clinical study.
10
Clinical studies involve the administration of
the pharmaceutical product candidate to healthy volunteers or patients under the supervision of
qualified investigators, generally physicians
not employed by or under the clinical study sponsor’s control. Clinical studies are conducted under protocols
detailing, among other
things, the objectives of the clinical study, dosing procedures, subject selection and exclusion criteria, how the results will be
analyzed
and presented and the parameters to be used to monitor subject safety. Each protocol must be submitted to the FDA as part of the IND.
Clinical
studies must be conducted in accordance with GCP. Further, each clinical study must be reviewed and approved by an independent
institutional review
board (“IRB”) at, or servicing, each institution at which the clinical study will be conducted. An IRB
is charged with protecting the welfare and rights of
study participants and considers such items as whether the risks to individuals participating
in the clinical studies are minimized and are reasonable in
relation to anticipated benefits. The IRB also approves the informed consent
form that must be provided to each clinical study subject or his or her legal
representative and must monitor the clinical study until
completed.
Human clinical studies are typically conducted
in three sequential phases that may overlap or be combined. While such designations are not
officially defined by the regulatory agencies
(including the FDA), the generally accepted meanings are:
·
Phase 1: The pharmaceutical product is initially introduced into healthy human subjects and tested for safety, dosage tolerance,
absorption, metabolism, distribution and excretion. In the case of some products for severe or life-threatening diseases such as cancer,
especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing is often
conducted in patients, with a goal of characterizing the safety profile of the drug and establishing a maximum tolerable dose.
·
Phase 2: With the maximum tolerable dose established in a Phase 1 trial, the pharmaceutical product is evaluated in a limited patient
population at the MTD to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for
specific targeted diseases, to determine dosage tolerance, optimal dosage and dosing schedule and to identify patient populations with
specific characteristics where the pharmaceutical product may be more effective.
·
Phase 3: Clinical studies are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at
geographically dispersed clinical study sites. These clinical studies are intended to establish the overall risk/benefit ratio of the product
and provide an adequate basis for product labeling. The studies must be well controlled and usually include a control arm for comparison.
One or two Phase 3 studies are usually required by the FDA for an NDA approval, depending on the disease severity and other available
treatment options. In some instances, an NDA approval may be obtained based on Phase 2 clinical data with the understanding that the
approved drug can be sold subject to a confirmatory trial to be conducted post-approval.
Post-approval studies, or Phase 4 clinical studies,
may be conducted after initial marketing approval. These studies are often used to gain
additional experience from the treatment of patients
in the intended therapeutic indication. The FDA also may require Phase 4 studies, Risk Evaluation and
Mitigation Strategies (“REMS”)
and post-marketing surveillance, among other things, to monitor the effects of an approved product or place conditions on
an approval
that could restrict the distribution or use of the product.
Progress reports detailing the results of the clinical
studies must be submitted at least annually to the FDA and written IND safety reports must be
submitted to the FDA and the investigators
for serious and unexpected adverse events or any finding from tests in laboratory animals that suggests a
significant risk for human subjects.
Phase 1, Phase 2 and Phase 3 clinical studies may not be completed successfully within any specified period, if at all.
The FDA or the
sponsor or its data safety monitoring board may suspend a clinical study at any time on various grounds, including a finding that the
research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of
a clinical study at its
institution if the clinical study is not being conducted in accordance with the IRB’s requirements or if
the pharmaceutical product has been associated with
unexpected serious harm to patients.
11
Concurrent with clinical studies, companies may
complete additional animal studies and must also develop additional information about the
chemistry and physical characteristics of the
pharmaceutical product as well as finalize a process for manufacturing the product in commercial quantities in
accordance with cGMP requirements.
The manufacturing process must be capable of consistently producing quality batches of the pharmaceutical product
candidate and, among
other things, must develop methods for testing the identity, strength, quality and purity of the final pharmaceutical product.
Additionally,
appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the pharmaceutical product
candidate does not undergo unacceptable deterioration over its shelf life.
The results of product development, preclinical
studies and clinical studies, along with descriptions of the manufacturing process, analytical tests
conducted on the chemistry of the
pharmaceutical product, proposed labeling and other relevant information are submitted to the FDA as part of an NDA
requesting approval
to market the product. The submission of an NDA is subject to the payment of substantial user fees. A waiver of such fees may be
obtained
under certain limited circumstances.
The FDA reviews all NDAs submitted before it accepts
them for filing and may request additional information rather than accepting an NDA for
filing. Once the submission is accepted for filing,
the FDA begins an in-depth review of the NDA. Under the goals and policies agreed to by the FDA under
the Prescription Drug User Fee Act
(“PDUFA”), the FDA has 10 months after the 60-day filing date in which to complete its initial review of a standard
review
NDA and respond to the applicant, and six months after the 60-day filing date for a priority review NDA. The FDA does not always meet
its
PDUFA goal dates for standard and priority NDAs.
After the NDA submission is accepted for filing,
the FDA reviews the NDA application to determine, among other things, whether the proposed
product is safe and effective for its intended
use, and whether the product is being manufactured in accordance with cGMP to assure and preserve the
product’s identity, strength,
quality and purity. The FDA may refer applications for novel pharmaceutical products or pharmaceutical products which
present difficult
questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation
and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations
of an
advisory committee, but it considers such recommendations carefully when making decisions. During the pharmaceutical product approval
process, the
FDA also will determine whether a REMS is necessary to assure the safe use of the pharmaceutical product. If the FDA concludes
that a REMS is needed,
the sponsor of the NDA must submit a proposed REMS; the FDA will not approve the NDA without a REMS, if required.
Before approving an NDA, the FDA will inspect the
facilities at which the product is manufactured. The FDA will not approve the product unless
it determines that the manufacturing processes
and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the
product within required specifications.
Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites as well as the site
where the pharmaceutical
product is manufactured to assure compliance with GCP and cGMP. If the FDA determines the application, manufacturing
process or manufacturing
facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or
information.
In addition, the FDA will require the review and approval of product labeling.
The NDA review and approval process is lengthy
and difficult, and the FDA may refuse to approve an NDA if the applicable regulatory criteria
are not satisfied or may require additional
clinical data or other data and information. Even if such data and information is submitted, the FDA may
ultimately decide that the NDA
does not satisfy the criteria for approval. Data obtained from clinical studies are not always conclusive and the FDA may
interpret data
differently than we interpret the same data. The FDA will issue a complete response letter if the agency decides not to approve the NDA.
The
complete response letter usually describes all of the specific deficiencies in the NDA identified by the FDA. The deficiencies identified
may be minor, for
example, requiring labeling changes, or major, for example, requiring additional clinical studies. Additionally, the
complete response letter may include
recommended actions that the applicant might take to place the application in a condition for approval.
If a complete response letter is issued, the applicant
may either resubmit the NDA, addressing all of the deficiencies identified in the
letter, or withdraw the application.
12
If a product receives regulatory approval, the
approval may be significantly limited to specific diseases and dosages or the indications for use may
otherwise be limited, which could
restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings, or
precautions be
included in the product labeling. In addition, the FDA may require Phase 4 testing which involves clinical studies designed to further
assess
pharmaceutical product safety and effectiveness and may require testing and surveillance programs to monitor the safety of approved
products that have
been commercialized.
Expedited Development and Review Programs
On July 24, 2021,
the Company received Fast Track Designation from the FDA for Berubicin. The Company intends to seek Fast Track
Designation for TPI 287
as well.
The FDA’s Fast Track program is intended
to expedite or facilitate the process for reviewing new pharmaceutical products that meet certain
criteria. Specifically, new pharmaceutical
products are eligible for Fast Track designation if they are intended to treat a serious condition and demonstrate
the potential to address
unmet medical needs for the condition. Fast Track designation applies to the combination of the product and the specific indication
for
which it is being studied. Unique to a Fast Track product, the FDA may consider for review sections of the NDA on a rolling basis before
the complete
application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, if the FDA determines
that the schedule is
acceptable and if the sponsor pays any required user fees upon submission of the first section of the NDA.
Any product submitted to the FDA for market, including
a Fast Track program, may also be eligible for other FDA programs intended to expedite
development and review, such as priority review
and accelerated approval. Any product is eligible for priority review if it is intended to treat a serious
condition and it offers a significant
improvement in the treatment, diagnosis or prevention of a disease compared to marketed products. The FDA will
attempt to direct additional
resources to the evaluation of an application for a new pharmaceutical product designated for priority review in an effort to
facilitate
the review. Additionally, accelerated approval may be available for a product intended to treat a serious condition that provides meaningful
therapeutic benefit over existing treatments, which means the product may be approved on the basis of adequate and well-controlled clinical
studies
establishing that the product has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or
on the basis of an effect on an
intermediate clinical endpoint. As a condition of accelerated approval, the FDA may require the sponsor
to perform adequate and well-controlled post-
marketing clinical studies. In addition, the FDA currently requires pre-approval of promotional
materials for products receiving accelerated approval,
which could impact the timing of the commercial launch of the product. Fast Track
designation, priority review and accelerated approval do not change the
standards for approval but may expedite the development or approval
process.
Post-Approval Requirements
Any pharmaceutical products for which the Company
receives FDA approvals are subject to continuing regulation by the FDA, including, among
other things, cGMP compliance, record-keeping
requirements, reporting of adverse experiences with the product, providing the FDA with updated safety
and efficacy information, product
sampling and distribution requirements, complying with certain electronic records and signature requirements and
complying with FDA promotion
and advertising requirements, which include, among others, standards for direct-to-consumer advertising, prohibitions on
promoting pharmaceutical
products for uses or in patient populations that are not described in the pharmaceutical product’s approved labeling (known as
“off-label
use”), industry-sponsored scientific and educational activities and promotional activities involving the internet. Failure to comply
with FDA
requirements can have negative consequences, including adverse publicity, enforcement letters from the FDA, actions by the U.S.
Department of Justice
and/or U.S. Department of Health and Human Services’ Office of Inspector General, mandated corrective advertising
or communications with doctors, and
civil or criminal penalties. Although physicians may prescribe legally available pharmaceutical products
for off-label uses, manufacturers may not directly
or indirectly market or promote such off-label uses.
13
We expect to rely on third parties for the production
of clinical and commercial quantities of our products. Manufacturers of our products are
required to comply with applicable FDA manufacturing
requirements contained in the FDA’s cGMP regulations. cGMP regulations require, among other
things, quality control and quality
assurance, as well as the corresponding maintenance of records and documentation. Pharmaceutical product
manufacturers and other entities
involved in the manufacture and distribution of approved pharmaceutical products are required to register their
establishments with the
FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for
compliance
with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality
control to maintain cGMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer
or holder
of an approved NDA, including withdrawal of the product from the market. In addition, changes to the manufacturing process generally
require prior FDA
approval before being implemented and other types of changes to the approved product, such as adding new indications
and additional labeling claims, are
also subject to further FDA review and approval.
Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage
and reimbursement status of any pharmaceutical product candidates for which we may obtain
regulatory approval. In the United States and
in markets in other countries, sales of any products for which we receive regulatory approval for commercial
sale will depend in part
upon the availability of reimbursement from third-party payers. Third-party payers include government payers such as Medicare
and Medicaid,
managed care providers, private health insurers and other organizations. The process for determining whether a payer will provide coverage
for a pharmaceutical product may be separate from the process for setting the price or reimbursement rate that the payer will pay for
the pharmaceutical
product. Third-party payers may limit coverage to specific pharmaceutical products on an approved list, or formulary,
which might not, and frequently does
not, include all of the FDA-approved pharmaceutical products for a particular indication. Third-party
payers are increasingly challenging the price and
examining the medical necessity and cost-effectiveness of medical products and services,
in addition to their safety and efficacy. A payer’s decision to
provide coverage for a pharmaceutical product does not imply that
an adequate reimbursement rate will be approved. Adequate third-party reimbursement
may not be available to enable us to maintain price
levels sufficient to realize an appropriate return on our investment in product development. In addition,
in the United States there is
a growing emphasis on comparative effectiveness research, both by private payers and by government agencies. We may need
to conduct expensive
pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the
costs
required to obtain the FDA approvals. Our pharmaceutical product candidates may not be considered medically necessary or cost-effective.
To the
extent other drugs or therapies are found to be more effective than our products, payers may elect to cover such therapies in lieu
of our products and/or
reimburse our products at a lower rate.
Orphan Drug exclusivity prevents for seven years
the approval of another product with the same active moiety for the same rare disease. On June
10, 2020, the FDA granted Orphan Drug Designation
for Berubicin for the treatment of malignant gliomas. If a product is a new chemical entity (i.e.,
generally that the moiety has not previously
been approved), it may receive five years of exclusivity, during which period FDA may not accept for review
certain NDAs for another product
with the same moiety. If approval of a product required new clinical data, it may convey three years of exclusivity
against approval of
certain NDAs for similar products.
The marketability of any pharmaceutical product
candidates for which we may receive regulatory approval for commercial sale may suffer if the
government and third-party payers fail to
provide adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has
increased and we expect this
will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may
change at
any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we may receive regulatory
approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
14
International Regulation
In addition to regulations in the United States,
we will be subject to a variety of foreign regulations governing clinical trials and commercial sales
and distribution of our future drugs.
Whether or not we obtain FDA approval for a drug, we must obtain approval of a drug by the comparable regulatory
authorities of foreign
countries before we can commence clinical trials or marketing of the drug in those countries. The approval process varies from
country
to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical
trials,
product licensing, pricing and reimbursement vary greatly from country to country.
Under European Union regulatory systems, marketing
authorizations may be submitted either under a centralized or mutual recognition procedure.
The centralized procedure provides for the
grant of a single marketing authorization that is valid for all European Union member states. The mutual
recognition procedure provides
for mutual recognition of national approval decisions. Under this procedure, the holder of a national marketing
authorization may submit
an application to the remaining member states. Within 90 days of receiving the applications and assessment report, each member
state must
decide whether to recognize approval.
In addition to regulations in Europe and the United
States, we will be subject to a variety of foreign regulations governing clinical trials and
commercial distribution of our future drugs.
License Agreements
On November 21, 2017, we entered into the Reata
Agreement. Pursuant to the Reata Agreement we purchased all of Reata’s intellectual property
and development data regarding Berubicin,
including all trade secrets, knowhow, confidential information and other intellectual property rights.
On December 28, 2017, the Company entered into
a Technology Rights and Development Agreement with HPI. 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 3 shares of the Company’s common stock
valued at $3,000
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 years
ended December 31, 2024 and 2023, the Company
recognized $50,000 and $50,000 related to this agreement, respectively. 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. On March 23, 2025, the Company
terminated the HPI License.
On July 29, 2024, the Company entered into the Cortice
Agreements, pursuant to which Cortice granted the Company an exclusive license to the
intellectual property rights related to certain
patents around the compound TPI 287 in the United States, Canada, Mexico and Japan. The term of the license
will expire, other than due
to a breach of the Cortice Agreements, at the end of the royalty term with respect to any licensed product in any of the included
territories,
which begins upon the first commercial sale in such territory and ends on the latest of (i) ten years after such sale, (ii) the expiration
of
regulatory or marketing exclusivity for such licensed product in such country, or (c) the expiration of the last to expire valid patent
claim in such country
covering such licensed product.
Employees
As of March 31, 2025, we had four full time employees.
We also have one part-time employee serving as our chief scientific officer, and
accordingly, a high percentage of the work performed
for our development projects is conducted by qualified part-time staff and independent contractors.
15
Legal Proceedings
From time to time in the ordinary course of our
business, we may be involved in legal proceedings, the outcomes of which may not be
determinable. The results of litigation are inherently
unpredictable. Any claims against us, whether meritorious or not, could be time consuming, result in
costly litigation, require significant
amounts of management time and result in diversion of significant resources. We have insurance policies covering any
potential losses
where such coverage is cost effective.
We are not at this time involved in any additional
legal proceedings that we believe could have a material effect on our business, financial
condition, results of operations or cash flows.
Properties
Our corporate headquarter is located in a leased facility
in Houston, Texas. We believe our facilities are sufficient to meet our current needs and
that suitable space will be available as and
when needed. We do not own any real property.
Available Information
Our Internet address is www.cnspharma.com.
On this Web site, we post the following filings as soon as reasonably practicable after they are
electronically filed with or furnished
to the U.S. Securities and Exchange Commission (“SEC”): our Annual Reports on Form 10-K; our Quarterly Reports
on Form 10-Q;
our Current Reports on Form 8-K; our proxy statements related to our annual stockholders’ meetings; and any amendments to those
reports
or statements. The SEC maintains an internet site that contains reports, proxy and information statements and other information
regarding issuers that file
electronically with the SEC at www.sec.gov. All such filings are also available on our Web site free of charge.
The charters of our audit, nominating and
governance and compensation committees and our Code of Business Conduct and Ethics Policy are
also available on our Web site and in print to any
stockholder who requests them. The content on our Web site is not incorporated by reference
into this Form 10-K unless expressly noted.
Item 1A.
Risk Factors.
An investment in our securities involves a high
degree of risk. You should consider carefully all of the material risks described below, together
with the other information contained
in this Form 10-K. If any of the following events occur, our business, financial condition, results of operations and
cash flows may be
materially adversely affected.
Risks Related to the Company’s Business and Industry
We will require substantial funding to complete our clinical trials,
which may not be available to us on acceptable terms, or at all, and, if not so
available, may require us to delay, limit, reduce or cease
our operations.
We have used the proceeds from our previous financings
to, among other uses, advance Berubicin through clinical development. Developing
pharmaceutical products, including conducting preclinical
studies and clinical trials, is expensive. We will require substantial additional future capital in the
near term in order to complete
clinical development and commercialize TPI 287 and Berubicin. If the FDA requires that we perform additional nonclinical
studies or clinical
trials, our expenses would further increase beyond what we currently expect and the anticipated timing of any potential approval of TPI
287 and Berubicin would likely be delayed. Further, there can be no assurance that the costs we will need to incur to obtain regulatory
approval of TPI 287
and Berubicin will not increase.
16
We will continue to require substantial additional
capital to continue our clinical development and commercialization activities. Because
successful development of our product candidates
is uncertain, we are unable to estimate the actual amount of funding we will require to complete research
and development and commercialize
our products under development.
We estimate that we have sufficient capital to
take us into the first quarter of 2026, a period during which we would likely expect to initiate a trial
of TPI 287, as well as complete
the Phase 2 Berubicin trial including its further analysis. In addition, we have working capital to fund our operations during
this period
(with such operations estimated at $4.5 to $5.0 million per annum). We do not currently have a firm trial design for TPI 287 so estimates
of
development cost are not available, however, regardless of trial design, the cost of bringing TPI 287 to regulatory approval for marketing
will require
significant additional financing. The timing and costs of clinical trials are difficult to predict and as such the foregoing
estimates may prove to be
inaccurate. We have no commitments for such additional needed financing and will likely be required to raise
such financing through the sale of additional
equity or debt securities.
The amount and timing of our future funding requirements will depend on many
factors, including but not limited to:
·
whether our plan for clinical trials will be completed on a timely basis;
·
whether we are successful in obtaining an accelerated approval pathway with the FDA related to Berubicin;
·
the progress, costs, results of and timing of our
clinical trials for TPI 287 and Berubicin;
·
the outcome, costs and timing of seeking and obtaining FDA and any other regulatory approvals;
·
the costs associated with securing and establishing commercialization and manufacturing capabilities;
·
market acceptance of our product candidates;
·
the costs of acquiring, licensing or investing in businesses, products, product candidates and technologies;
·
our ability to maintain, expand and enforce the scope of our intellectual property portfolio, including the amount and timing of any
payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and
enforcement of any patents or other intellectual property rights;
·
our need and ability to hire additional management and scientific and medical personnel;
·
the effect of competing drug candidates and new product approvals;
·
our need to implement additional internal systems and infrastructure, including financial and reporting systems; and
·
the economic and other terms, timing of and success of our existing licensing arrangements and any collaboration, licensing or other
arrangements into which we may enter in the future.
Some of these factors are outside of our control.
We may seek additional funding through a combination of equity offerings, debt financings,
government or other third-party funding, commercialization,
marketing and distribution arrangements and other collaborations, strategic alliances and
licensing arrangements. Additional funding may
not be available to us on acceptable terms or at all. In addition, the terms of any financing may adversely
affect the holdings or the
rights of our stockholders.
17
If we are unable to obtain funding on a timely
basis, we may be required to significantly curtail one or more of our research or development
programs. We also could be required to seek
funds through arrangements with collaborative partners or otherwise that may require us to relinquish rights to
some of our technologies
or product candidates or otherwise agree to terms unfavorable to us.
The report of our independent registered public accounting firm
expresses substantial doubt about our ability to continue as a going concern.
Such “going concern” opinion could impair our
ability to obtain financing.
Our auditors have indicated in their report on
our financial statements for the fiscal year ended December 31, 2024 that conditions exist that raise
substantial doubt about our ability
to continue as a going concern due to our recurring losses from operations. A “going concern” opinion could impair our
ability
to finance our operations through the sale of equity, incurring debt, or other financing alternatives. Our ability to continue as a going
concern will
depend upon the availability and terms of future funding. If we are unable to achieve this goal, our business would be jeopardized
and we may not be able
to continue. If we ceased operations, it is likely that all of our investors would lose their investment.
Our success depends greatly on the success of TPI 287 and Berubicin’s
development for the treatment of glioblastoma, and our pipeline of product
candidates beyond this lead indication is extremely early stage
and limited.
Other than TPI 287 and Berubicin, we do not have any
other clinical-stage drug candidates in our portfolio. As such, we are dependent on the
success of TPI 287 and Berubicin in the near
term. We cannot provide you any assurance that we will be able to successfully advance TPI 287 and
Berubicin through the development
process or that we will be able to secure other additional assets for development.
We have never been profitable, we have no products
approved for commercial sale, and we have not generated any revenue from product sales. As
a result, our ability to reduce our losses
and reach profitability is unproven, and we may never achieve or sustain profitability. Therefore, we may
not be able to continue as
a going concern.
We have never been profitable and do not expect to
be profitable in the foreseeable future. We have not yet submitted any drug candidates for
approval by regulatory authorities in the United
States or elsewhere. Our ability to continue as a going concern is dependent upon our generating cash flow
from sales that are sufficient
to fund operations or finding adequate financing to support our operations. To date, we have had no revenues and have relied
on equity-based
financing from the sale of securities in public and private placements and the issuance of convertible notes. The continuation of the
Company as a going concern is dependent upon our ability to obtain necessary equity or debt financing to continue operations and the attainment
of
profitable operations. As of December 31, 2024 the Company has incurred an accumulated deficit of $84,424,704 since inception and had
not yet generated
any revenue from operations. Additionally, management anticipates that its cash on hand as of December 31, 2024, combined
with capital raised
subsequent to December 31, 2024, is sufficient to fund its planned operations within one year after the date that
the financial statements are issued.
To date, we have devoted most of our financial
resources to corporate overhead, preparing for and conducting the clinical trial and marketing of
our securities. We have not generated
any revenues from product sales. We expect to continue to incur losses for the foreseeable future, and we expect these
losses to increase
as we continue our development of and seek regulatory approvals for Berubicin and TPI 287, prepare for and begin the
commercialization
of any approved products, and add infrastructure and personnel to support our continuing product development efforts. We anticipate
that
any such losses could be significant for the next several years. If Berubicin or any of our other drug candidates fail in clinical trials
or do not gain
regulatory approval, or if our drug candidates do not achieve market acceptance, we may never become profitable. As a result
of the foregoing, we expect
to continue to experience net losses and negative cash flows for the foreseeable future. These net losses
and negative cash flows have had, and will
continue to have, an adverse effect on our stockholders’ equity and working capital.
18
Because of the numerous risks and uncertainties
associated with pharmaceutical product development, we are unable to accurately predict the
timing or amount of increased expenses or
when, or if, we will be able to achieve profitability. In addition, our expenses could increase if we are required
by the FDA to perform
studies or trials in addition to those currently expected, or if there are any delays in completing our clinical trials or the development
of any of our drug candidates. The amount of future net losses will depend, in part, on the rate of future growth of our expenses and
our ability to generate
revenues.
We have a limited operating history and we expect a number of factors
to cause our operating results to fluctuate on an annual basis, which may
make it difficult to predict our future performance.
We are a clinical pharmaceutical company with limited
operating history. Our operations to date have been limited to acquiring our technology
portfolio, preparing for and conducting our Berubicin
clinical trial, and preparing for and conducting our TPI 287 clinical trial. We have not yet obtained
any regulatory approvals for any
of our drug candidates. Consequently, any predictions made about our future success or viability may not be as accurate as
they could
be if we had a longer operating history or approved products on the market. Our operating results are expected to significantly fluctuate
from
quarter to quarter or year to year due to a variety of factors, many of which are beyond our control. Factors relating to our business
that may contribute to
these fluctuations include:
·
any delays in regulatory review and approval of our
product candidates in clinical development, including our ability to receive approval
from the FDA for TPI 287 and
Berubicin;
·
delays in the commencement, enrollment and timing of clinical trials;
·
difficulties in identifying patients suffering from our target indications;
·
the success of our clinical trials through all phases of clinical development;
·
potential side effects of our product candidate that could delay or prevent approval or cause an approved drug to be taken off the market;
·
our ability to obtain additional funding to develop drug candidates;
·
our ability to identify and develop additional drug candidates beyond Berubicin;
·
competition from existing products or new products that continue to emerge;
·
our ability to adhere to clinical trial requirements directly or with third parties such as contract research organizations (CROs);
·
our ability to establish or maintain collaborations, licensing, or other arrangements;
·
our ability to defend against any challenges to our intellectual property including, claims of patent infringement;
·
our ability to enforce our intellectual property rights against potential competitors;
19
·
our ability to secure additional intellectual property protection for our developing drug candidates and associated technologies;
·
our ability to attract and retain key personnel to manage our business effectively; and
·
potential product liability claims.
These factors are our best estimates of possible
factors but cannot be considered a complete recitation of possible factors that could affect the
Company. Accordingly, the results of
any historical quarterly or annual periods should not be relied upon as indications of future operating performance.
We cannot be certain that TPI 287 and Berubicin will receive regulatory
approval, and without regulatory approval we will not be able to market
TPI 287 and Berubicin.
Our business currently depends largely on the
successful development and commercialization of TPI 287 and Berubicin. Our ability to generate
revenue related to product sales, if ever,
will depend on the successful development and regulatory approval of TPI 287 and Berubicin for the treatment of
glioblastoma.
We currently have no products approved for sale
and we cannot guarantee that we will ever have marketable products. The development of a
product candidate and issues relating to its
approval and marketing are subject to extensive regulation by the FDA in the United States and regulatory
authorities in other countries,
with regulations differing from country to country. We are not permitted to market our product candidates in the United States
until
we receive approval of an NDA from the FDA. We have not submitted any marketing applications for any of our product candidates.
NDAs must include extensive preclinical and clinical
data and supporting information to establish the product candidate’s safety and effectiveness
for each desired indication. NDAs
must also include significant information regarding the chemistry, manufacturing and controls for the product. Obtaining
approval of an
NDA is a lengthy, expensive, and uncertain process, and we may not be successful in obtaining approval. The FDA review processes can
take
years to complete, and approval is never guaranteed. If we submit an NDA to the FDA, the FDA must decide whether to accept or reject the
submission for filing. We cannot be certain that any submissions will be accepted for filing and review by the FDA. Regulators in other
jurisdictions have
their own procedures for approval of product candidates. Even if a product is approved, the FDA may limit the indications
for which the product may be
marketed, require extensive warnings on the product labeling or require expensive and time-consuming clinical
trials or reporting as conditions of approval.
Regulatory authorities in countries outside of the United States and Europe also have requirements
for approval of drug candidates with which we must
comply with prior to marketing in those countries. Obtaining regulatory approval for
marketing of a product candidate in one country does not ensure that
we will be able to obtain regulatory approval in any other country.
In addition, delays in approvals or rejections of marketing applications in the United
States, Europe or other countries may be based
upon many factors, including regulatory requests for additional analyses, reports, data, preclinical studies
and clinical trials, regulatory
questions regarding different interpretations of data and results, changes in regulatory policy during the period of product
development
and the emergence of new information regarding our product candidates or other products. Also, regulatory approval for any of our product
candidates may be withdrawn.
If we are unable to obtain approval from the FDA,
or other regulatory agencies, for Berubicin and our other product candidates, or if, subsequent
to approval, we are unable to successfully
commercialize Berubicin or our other product candidates, we will not be able to generate sufficient revenue to
become profitable or to
continue our operations, likely resulting in the total loss of principal for our investors.
Any statements in this filing indicating that TPI 287
and Berubicin has demonstrated preliminary evidence of efficacy are our own and are not
based on the FDA’s or any other comparable
governmental agency’s assessment of TPI 287 and Berubicin and do not indicate that TPI 287 and Berubicin
will achieve favorable
efficacy results in any later stage trials or that the FDA or any comparable agency will ultimately determine that TPI 287 and
Berubicin
is effective for purposes of granting marketing approval.
20
Delays in the commencement, enrollment and completion of clinical trials
could result in increased costs to us and delay or limit our ability to
obtain regulatory approval for TPI 287 and Berubicin and our other
product candidates.
Delays in the commencement, enrollment and completion
of clinical trials could increase our product development costs or limit the regulatory
approval of our product candidates. We do not
know whether any future trials or studies of our other product candidates will begin on time or will be
completed on schedule, if at all.
The start or end of a clinical study is often delayed or halted due to changing regulatory requirements, manufacturing
challenges, including
delays or shortages in available drug product, required clinical trial administrative actions, slower than anticipated patient enrollment,
changing standards of care, availability or prevalence of use of a comparative drug or required prior therapy, clinical outcomes or financial
constraints. For
instance, delays or difficulties in patient enrollment or difficulties in retaining trial participants can result in
increased costs, longer development times or
termination of a clinical trial. Clinical trials of a new product candidate require the enrollment
of a sufficient number of patients, including patients who are
suffering from the disease the product candidate is intended to treat and
who meet other eligibility criteria. The rates of patient enrollment are affected by
many factors, including the size of the patient population,
the eligibility criteria for the clinical trial, that include the age and condition of the patients and
the stage and severity of disease,
the nature of the protocol, the proximity of patients to clinical sites and the availability of effective treatments and/or
availability
of investigational treatment options for the relevant disease.
A product candidate can unexpectedly fail at any
stage of preclinical and clinical development. The historical failure rate for product candidates is
high due to scientific feasibility,
safety, efficacy, changing standards of medical care and other variables. The results from preclinical testing or early
clinical trials
of a product candidate may not predict the results that will be obtained in later phase clinical trials of the product candidate. We,
the FDA or
other applicable regulatory authorities may suspend clinical trials of a product candidate at any time for various reasons,
including, but not limited to, a
belief that subjects participating in such trials are being exposed to unacceptable health risks or adverse
side effects, or other adverse initial experiences or
findings. We may not have the financial resources to continue development of, or
to enter into collaborations for, a product candidate if we experience any
problems or other unforeseen events that delay or prevent regulatory
approval of, or our ability to commercialize, product candidates, including, but not
limited to:
·
inability to obtain sufficient funds required for a clinical trial;
·
inability to reach agreements on acceptable terms with prospective CROs and trial sites, the terms of which can be subject to extensive
negotiation and may vary significantly among different CROs and trial sites;
·
negative or inconclusive results from our clinical trials or the clinical trials of others for product candidates similar to ours, leading to a
decision or requirement to conduct additional preclinical testing or clinical trials or abandon a program;
·
serious and unexpected drug-related side effects experienced by subjects in our clinical trials or by individuals using drugs similar to our
product candidates;
·
conditions imposed by the FDA or comparable foreign authorities regarding the scope or design of our clinical trials;
·
difficulty in enrolling research subjects in clinical trials including the inability to enroll any subjects at all;
·
high dropout rates and high fail rates of research subjects;
·
inadequate supply or quality of product candidate components or materials or other supplies necessary for the conduct of our clinical
trials;
21
·
greater than anticipated clinical trial costs;
·
poor effectiveness of our product candidates during clinical trials; or
·
unfavorable FDA or other regulatory agency inspection and review of a clinical trial site or vendor.
We have never completed a clinical trial or submitted an NDA before,
and any product candidate we advance through clinical trials may not have
favorable results in later clinical trials or receive regulatory
approval.
Clinical failure can occur at any stage of our
clinical development. Clinical trials may produce negative or inconclusive results, and our
collaborators or we may decide, or regulators
may require us, to conduct additional clinical trials or nonclinical studies. In addition, data obtained from
trials and studies are susceptible
to varying interpretations, and regulators may not interpret our data as favorably as we do, which may delay, limit, or
prevent regulatory
approval. Success in preclinical studies and early clinical trials does not ensure that subsequent clinical trials will generate the same
or
similar results or otherwise provide adequate data to demonstrate the efficacy and safety of a product candidate. Many companies in
the pharmaceutical
industry, including those with greater resources and experience than us, have suffered significant setbacks in clinical
trials, even after seeing promising
results in earlier clinical trials.
In addition, the design of a clinical trial can
determine whether its results will support approval of a product and flaws in the design of a clinical
trial may not become apparent until
the clinical trial is well advanced. We may be unable to design and execute a clinical trial to support regulatory
approval. Further,
clinical trials of potential products often reveal that it is not practical or feasible to continue development efforts.
If TPI 287 and Berubicin is found to be unsafe or lack efficacy, we
will not be able to obtain regulatory approval for it and our business would be
materially and possibly irreparably harmed.
In some instances, there can be significant variability
in safety and/or efficacy results between different trials of the same product candidate due to
numerous factors, including changes in
trial protocols, differences in composition of the patient populations, adherence to the dosing regimen and other
trial protocols and
the rate of dropout among clinical trial participants. We do not know whether any clinical trials we or any of our potential future
collaborators
may conduct will demonstrate the consistent or adequate efficacy and safety that would be required to obtain regulatory approval and market
any products. If we are unable to bring Berubicin to market, or to acquire other products that are on the market or can be developed,
our ability to create
long-term stockholder value will be limited.
22
Interim or preliminary data from our clinical trials that we announce
or publish from time to time may change as more patient data become
available and are subject to audit and verification procedures that
could result in material changes in the final data.
We may publicly disclose preliminary data from
our clinical trials, which is based on a preliminary analysis of then-available data, and the results
and related findings and conclusions
are subject to change following a full analysis of all data related to the particular trial. We also make assumptions,
estimations, calculations,
and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully
evaluate all
data. As a result, the preliminary results that we report may differ from future results of the same trials, or different conclusions
or
considerations may qualify such results once additional data have been received and fully evaluated. Preliminary data also remain subject
to audit and
verification procedures that may result in the final data being materially different from the preliminary data we previously
published. As a result,
preliminary data should be viewed with caution until the final data are available. We may also disclose interim
data from our clinical trials. Interim data
from clinical trials that we may complete are subject to the risk that one or more of the
clinical outcomes may materially change as patient enrollment
continues and more patient data become available. Adverse differences between
preliminary or interim data and final data could significantly harm our
business prospects. Further, disclosure of preliminary or interim
data by us could result in volatility in the price of shares of our common stock.
In addition, others, including regulatory agencies, may not accept
or agree with our assumptions, estimates, calculations, conclusions or analyses
or may interpret or weigh the importance of data differently,
which could impact the approvability of the particular drug candidate and our business in
general. In addition, the information we choose
to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive
information, and you or others
may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and
any information
we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or
otherwise regarding a particular drug candidate or our business. If the interim data that we report differ from actual results, or if
others, including regulatory
authorities, disagree with the conclusions reached, our ability to obtain approval for and commercialize
our current or any our future drug candidate, our
business, operating results, prospects or financial condition may be materially harmed.
Our product candidates may have undesirable side effects that may
delay or prevent marketing approval, or, if approval is received, require them
to be taken off the market, require them to include safety
warnings or otherwise limit their sales.
Unforeseen side effects from any of our product candidates
could arise either during clinical development or, if TPI 287 and Berubicin (or our
other product candidates) are approved, after the
approved product has been marketed. The range and potential severity of possible side effects from
therapies such as TPI 287 and Berubicin
(or our other product candidates) are significant. If TPI 287 and Berubicin (or our other product candidates) causes
undesirable or unacceptable
side effects in the future, this could interrupt, delay or halt clinical trials and result in the failure to obtain or suspension or
termination
of marketing approval from the FDA and other regulatory authorities, or result in marketing approval from the FDA and other regulatory
authorities only with restrictive label warnings.
If any of our product candidates receives marketing
approval and we or others later identify undesirable or unacceptable side effects caused by
such products:
·
regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts to physicians
and pharmacies;
·
we may be required to change instructions regarding the way the product is administered, conduct additional clinical trials or change the
labeling of the product;
·
we may be subject to limitations on how we may promote the product;
23
·
sales of the product may decrease significantly;
·
regulatory authorities may require us to take our approved product off the market;
·
we may be subject to litigation or product liability claims; and
·
our reputation may suffer.
Any of these events could prevent us or our potential
future collaborators from achieving or maintaining market acceptance of the affected product
or could substantially increase commercialization
costs and expenses, which in turn could delay or prevent us from generating significant revenues from the
sale of our products.
If the FDA does not find the manufacturing facilities of our future
contract manufacturers acceptable for commercial production, we may not be
able to commercialize any of our product candidates, or such
commercialization efforts may be delayed until we can contract with manufacturers
with facilities acceptable to the FDA or other regulatory
authorities.
We do not have any manufacturing capabilities and we
do not intend to manufacture the pharmaceutical products that we plan to sell. We utilize
contract manufacturers for the production of
the active pharmaceutical ingredients and the formulation of drug product for our pre-clinical development and
clinical trials of TPI
287 and Berubicin that we will need to conduct prior to seeking regulatory approval. However, we do not have agreements for supplies
of
TPI 287 and Berubicin or any of our other product candidates and we may not be able to reach agreements with these or other contract manufacturers
for
sufficient supplies to commercialize TPI 287 or Berubicin if they are approved. Additionally, the facilities used by any contract
manufacturer to
manufacture Berubicin or any of our other product candidates must be the subject of a satisfactory inspection before the
FDA approves the product
candidate manufactured at that facility. We will be completely dependent on these third-party manufacturers for
compliance with the requirements of U.S.
and non-U.S. regulators for the manufacture of our finished products. If our manufacturers cannot
successfully manufacture material that conform to our
specifications and the FDA’s current good manufacturing practice standards,
or GMP, and other requirements of any governmental agency whose
jurisdiction to which we are subject, our product candidates will not
be approved or, if already approved, may be subject to recalls. Reliance on third-party
manufacturers entails risks to which we would
not be subject if we manufactured our product candidates, including:
·
the possibility that we are unable to enter into a manufacturing agreement with a third party to manufacture our product candidates;
·
the possible breach of the manufacturing agreements by the third parties because of factors beyond our control; and
·
the possibility of termination or nonrenewal of the agreements by the third parties before we are able to arrange for a qualified
replacement third-party manufacturer.
Any of these factors could cause the delay of approval
or commercialization of our product candidates, cause us to incur higher costs or prevent us
from commercializing our product candidates
successfully. Furthermore, if any of our product candidates are approved and contract manufacturers fail to
deliver the required commercial
quantities of finished product on a timely basis at commercially reasonable prices and we are unable to find one or more
replacement manufacturers
capable of production at a substantially equivalent cost, in substantially equivalent volumes and quality and on a timely basis,
we would
likely be unable to meet demand for our products and could lose potential revenue. It may take several years to establish an alternative
source of
supply for our product candidates and to have any such new source approved by the government agencies that regulate our products.
24
We have no sales, marketing or distribution experience and we will
have to invest significant resources to develop those capabilities or enter into
third-party sales and marketing arrangements, the problems
with which could materially harm our business at any time.
We have no sales, marketing, or distribution experience.
To develop sales, distribution, and marketing capabilities, we will have to invest
significant amounts of financial and management resources,
some of which will need to be committed prior to any confirmation that Berubicin or any of
our other product candidates will be approved
by the FDA. For product candidates where we decide to perform sales, marketing, and distribution functions
ourselves or through third
parties, we could face a number of additional risks, including that we or our third-party sales collaborators may not be able to
build
and maintain an effective marketing or sales force. If we use third parties to market and sell our products, we may have limited or no
control over
their sales, marketing and distribution activities on which our future revenues may depend.
We may not be successful in establishing and maintaining development
and commercialization collaborations, which could adversely affect our
ability to develop certain of our product candidates and our financial
condition and operating results.
Because developing pharmaceutical products, conducting
clinical trials, obtaining regulatory approval, establishing manufacturing capabilities and
marketing approved products are expensive,
we may seek to enter into collaborations with companies that have more experience. Additionally, if any of our
product candidates receives
marketing approval, we may enter into sales and marketing arrangements with third parties with respect to our unlicensed
territories.
If we are unable to enter into arrangements on acceptable terms, if at all, we may be unable to effectively market and sell our products
in our
target markets. We expect to face competition in seeking appropriate collaborators. Moreover, collaboration arrangements are complex
and time consuming
to negotiate, document and implement and they may require substantial resources to maintain. We may not be successful
in our efforts to establish and
implement collaborations or other alternative arrangements for the development of our product candidates.
One or more of our collaboration partners may not
devote sufficient resources to the commercialization of our product candidates or may
otherwise fail in their commercialization. The terms
of any collaboration or other arrangement that we establish may contain provisions that are not
favorable to us, or the favorability of
which is dependent on conditions that are out of our control or unknowable at the time of execution. In addition, any
collaboration that
we enter into may be unsuccessful in the development and commercialization of our product candidates. In some cases, we may be
responsible
for continuing preclinical and initial clinical development of a product candidate or research program under a collaboration arrangement,
and
the payment we receive from our collaboration partner may be insufficient to cover the cost of this development. If we are unable
to reach agreements with
suitable collaborators for our product candidates, we would face increased costs, we may be forced to limit the
number of our product candidates we can
commercially develop or the territories in which we commercialize them. As a result, we might
fail to commercialize products or programs for which a
suitable collaborator cannot be found. If we fail to achieve successful collaborations,
our operating results and financial condition could be materially and
adversely affected.
We face competition from other biotechnology and pharmaceutical
companies and our operating results will suffer if we fail to compete effectively.
The biotechnology and pharmaceutical industries
are intensely competitive and subject to rapid and significant technological change. We have
competitors in the United States, Europe,
and other jurisdictions, including major multinational pharmaceutical companies, established biotechnology
companies, specialty pharmaceutical
and generic drug companies and universities and other research institutions. Many of our competitors have greater
financial and other
resources, such as larger research and development staff and more experienced marketing and manufacturing organizations than we do.
Large
pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining regulatory approvals, recruiting patients
and
manufacturing pharmaceutical products. These companies also have significantly greater research, sales and marketing capabilities
and collaborative
arrangements in our target markets with leading companies and research institutions. Established pharmaceutical companies
may also invest heavily to
accelerate discovery and development of novel compounds or to in-license novel compounds that could make the
product candidates that we develop
obsolete. As a result of all of these factors, our competitors may succeed in obtaining patent protection
and/or FDA approval or discovering, developing
and commercializing drugs for the diseases that we are targeting before we do or may develop
drugs that are deemed to be more effective or gain greater
market acceptance than ours. Smaller or early-stage companies may also prove
to be significant competitors, particularly through collaborative
arrangements with large, established companies. In addition, many universities
and private and public research institutes may become active in our target
disease areas. Our competitors may succeed in developing, acquiring,
or licensing on an exclusive basis, technologies and drug products that are more
effective or less costly than any of our product candidates
that we are currently developing or that we may develop, which could render our products
obsolete or noncompetitive.
25
If our competitors market products that are more
effective, safer or less expensive or that reach the market sooner than our future products, if any,
we may not achieve commercial success.
In addition, because of our limited resources, it may be difficult for us to stay abreast of the rapid changes in each
technology. If
we fail to stay at the forefront of technological change, we may be unable to compete effectively. Technological advances or products
developed by our competitors may render our technologies or product candidates obsolete, less competitive or not economical.
Our licensed U.S. patents for Berubicn expired in March 2020 and the
patents for TPI 287 will expire before commercialization is reasonably
possible, and the expiration of our patents may subject us to increased
competition, and the Orphan Drug Designations for TPI 287 and Berubicin
will not bar approval of other similar products under certain
circumstances.
The U.S. and foreign patents for TPI 287 will all expire
in 2028 well before commercialization is reasonably possible. The U.S. patents for
Berubicin that we previously licensed from Houston
Pharmaceuticals, Inc. expired in March 2020. Such patent expirations may subject us to increased
competition. TPI 287 held Orphan Drug
Designation when we licensed it from Cortice and on June 10, 2020, the FDA granted Orphan Drug Designation
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 we are exploring if there
are other patents that could be filed related to Berubicin to extend
additional protections. The ODD similarly strengthens our TPI 287 patent protections
and would become our primary protection upon expiration
of those patents, however, we are also exploring new patent opportunities related to TPI 287.
Nevertheless, we can provide no assurance
that we will be able to file or receive additional patent protection. The failure to obtain additional patent
protection will reduce the
barrier to entry for competition for TPI 287 or Berubicin, which may adversely affect our operations.
We may incur substantial costs as a result of litigation or other
proceedings relating to patent and other intellectual property rights.
We may from time to time seek to enforce our intellectual
property rights against infringers when we determine that a successful outcome is
probable and may lead to an increase in the value of
the intellectual property. If we choose to enforce our patent rights against a party, then that individual
or company has the right to
ask the court to rule that such patents are invalid or should not be enforced. Additionally, the validity of our patents and the
patents
we have licensed may be challenged if a petition for post grant proceedings such as interpartes review and post grant review is filed
within the
statutorily applicable time with the U.S. Patent and Trademark Office (USPTO). These lawsuits and proceedings are expensive
and would consume time
and resources and divert the attention of managerial and scientific personnel even if we were successful in stopping
the infringement of such patents. In
addition, there is a risk that the court will decide that such patents are not valid and that we
do not have the right to stop the other party from using the
inventions. There is also the risk that, even if the validity of such patents
is upheld, the court will refuse to stop the other party on the ground that such other
party’s activities do not infringe our intellectual
property rights. In addition, in recent years the U.S. Supreme Court modified some tests used by the
USPTO in granting patents over the
past 20 years, which may decrease the likelihood that we will be able to obtain patents and increase the likelihood of a
challenge of
any patents we obtain or license.
We may be subject to claims that our employees and contractors have
wrongfully used or disclosed alleged trade secrets of their former
employers.
As is common in the biotechnology and pharmaceutical
industries, we employ individuals who were previously employed at other biotechnology
or pharmaceutical companies, including our competitors
or potential competitors. We may be subject to claims that these employees, or we, have used or
disclosed trade secrets or other proprietary
information of their former employers. Litigation may be necessary to defend against these claims. Even if we
are successful in defending
against these claims, litigation could result in substantial costs and be a distraction to management.
26
If we are not able to adequately prevent disclosure of trade secrets
and other proprietary information, the value of our technology and products
could be significantly diminished.
We rely on trade secrets to protect our proprietary
technologies, especially where we do not believe patent protection is appropriate or obtainable.
However, trade secrets are difficult
to protect. We rely in part on confidentiality agreements with our employees, consultants, outside scientific
collaborators, and other
advisors to protect our trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of
confidential
information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others
may independently discover our trade secrets and proprietary information. Costly and time-consuming litigation could be necessary to enforce
and
determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our
competitive business
position.
We will need to expand our operations and increase the size of our
Company, and we may experience difficulties in managing growth.
As of March 31, 2025, we have four full-time employees.
We also have 1 officer serving as part-time employee. As we advance our product
candidates through preclinical studies and clinical trials,
we will need to increase our product development, scientific and administrative headcount to
manage these programs. In addition, to meet
our obligations as a public company, we may need to increase our general and administrative capabilities. Our
management, personnel, and
systems currently in place may not be adequate to support this future growth. If we are unable to successfully manage this
growth and
increased complexity of operations, our business may be adversely affected.
We may not be able to manage our business effectively if we are
unable to attract and retain key personnel and consultants.
We may not be able to attract or retain qualified
management, finance, scientific and clinical personnel, and consultants due to the intense
competition for qualified personnel and consultants
among biotechnology, pharmaceutical and other businesses. If we are not able to attract and retain
necessary personnel and consultants
to accomplish our business objectives, we may experience constraints that will significantly impede the achievement
of our development
objectives, our ability to raise additional capital.
We are highly dependent on the development, regulatory,
commercialization and business development expertise of our management team, key
employees, and consultants. If we lose one or more of
our executive officers or key employees or consultants, our ability to implement our business
strategy successfully could be seriously
harmed. Any of our executive officers or key employees or consultants may terminate their employment at any
time. Replacing executive
officers, key employees and consultants may be difficult and may take an extended period of time because of the limited number
of individuals
in our industry with the breadth of skills and experience required to develop, gain regulatory approval of and commercialize products
successfully. Competition to hire and retain employees and consultants from this limited pool is intense, and we may be unable to hire,
train, retain or
motivate these additional key personnel and consultants. Our failure to retain key personnel or consultants could materially
harm our business.
In addition, we have scientific and clinical advisors
and consultants who assist us in formulating our research, development, and clinical strategies.
These advisors are not our employees
and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability
to us and typically
they will not enter into noncompete agreements with us. If a conflict of interest arises between their work for us and their work for
another entity, we may lose their services. In addition, our advisors may have arrangements with other companies to assist those companies
in developing
products or technologies that may compete with ours.
Our chief science officer is currently working for us on a part-time
basis. Our chief executive officer and chief science officer, also provide services
for other companies in our industry and such other
positions may create conflicts of interest for such officers in the future.
Certain of our key employees are currently part-time
and/or provide services for other biotechnology development efforts, including companies,
with respect to our chief executive officer
and chief science officer, which are developing anti-cancer drug candidates. Specifically, John M. Climaco, our
chief executive officer,
is also serving as a director for Moleculin Biotech, Inc., a company also actively developing anticancer drugs. Donald Picker, our
chief
science officer, is the chief scientific officer at Moleculin.
27
In addition to our officers’ part-time status,
since Mr. Climaco and Dr. Picker are associated with other companies that are developing anti-cancer
drug candidates, they may encounter
conflicts of interest in the future. Although we do not believe that the drug candidates we are currently pursuing
compete with the types
of drug candidates being pursued by the other companies Mr. Climaco and Dr. Picker are associated with, there is no assurance that
such
conflicts will not arise in the future.
We do not expect that our insurance policies will cover all of our
business exposures thus leaving us exposed to significant uninsured liabilities.
We do not carry insurance for all categories of
risk that our business may encounter. There can be no assurance that we will secure adequate
insurance coverage or that any such insurance
coverage will be sufficient to protect our operations to significant potential liability in the future. Any
significant uninsured liability
may require us to pay substantial amounts, which would adversely affect our financial position and results of operations.
Although dependent on certain key personnel, we do not have any
key man life insurance policies on any such people.
We are dependent on John M. Climaco, Christopher
Downs, Sandra Silberman, and Donald Picker in order to conduct our operations and execute
our business plan, however, we have not purchased
any insurance policies with respect to those individuals in the event of their death or disability.
Therefore, if any of John M. Climaco,
Christopher Downs, Sandra Silberman, or Donald Picker die or become disabled, we will not receive any
compensation to assist with such
person’s absence. The loss of such person could negatively affect us and our operations.
There are limited suppliers for active pharmaceutical ingredients
(“API”) used in our drug candidates. Problems with the third parties that
manufacture the API used in our drug candidates,
or in the supply chain between the manufacturer and CNS, may delay our clinical trials or
subject us to liability.
We do not currently own or operate manufacturing
facilities for clinical or commercial production of the API used in any of our drug candidates.
We have no experience in API manufacturing,
and we lack the resources and the capability to manufacture any of the APIs used in our drug candidates, on
either a clinical or commercial
scale. As a result, we rely on third parties to supply the API used in each of our drug candidates and commercial couriers to
deliver
the manufactured API to us. We expect to continue to depend on third parties to supply the API for our current and future product candidates
and to
supply the API in commercial quantities. We are ultimately responsible for confirming that the APIs used in our product candidates
are manufactured in
accordance with applicable regulations.
Our third-party suppliers and couriers may not
carry out their contractual obligations or meet our deadlines. In addition, the API they supply to us
may not meet our specifications
and quality policies and procedures or they may not be able to supply the API in commercial quantities. If we need to find
alternative
suppliers for the API used in any of our product candidates, we may not be able to contract for such supplies on acceptable terms, if
at all. Any
such failure to supply or delay caused by such contract manufacturers or couriers would have an adverse effect on our ability
to continue clinical
development of our product candidates or commercialization of our product candidates.
If our third-party drug suppliers fail to achieve
and maintain high manufacturing standards in compliance with cGMP regulations, we could be
subject to certain product liability claims
in the event such failure to comply resulted in defective product that caused injury or harm.
We may not be able to recover from any catastrophic event affecting
our suppliers.
Our suppliers may not have adequate measures in
place to minimize and recover from catastrophic events that may substantially destroy their
capability to meet customer needs and any
measures they may have in place may not be adequate to recover production processes quickly enough to
support critical timelines or market
demands. These catastrophic events may include weather and geologic events such as tornadoes, earthquakes, floods,
tidal waves, volcanic
eruptions, and fires as well as infectious disease epidemics, acts of war, acts of terrorism and nationalization of private industry.
In
addition, these catastrophic events may render some or all of the products at the affect facilities unusable.
28
We may be materially adversely affected in the event of cyber-based
attacks, network security breaches, service interruptions, or data corruption.
We rely on information technology to process and
transmit sensitive electronic information and to manage or support variety of business processes
and activities. We use technology systems
to record, process, and summarize financial information and results of operations for internal reporting purposes
and to comply with regulatory
financial reporting, legal, and tax requirements. Our information technology systems, some of which are managed by third
parties, may
be susceptible to damage, disruptions or shut down student computer viruses, attacks by computer hackers, failures during the process
of
upgrading or replacing software, databases or components thereof, power outages, hardware failures, technology for communication failures,
user errors or
catastrophic events. Although we have developed systems and processes that are designed to protect proprietary or confidential
information and prevent
data loss and other security breaches, such measures cannot provide absolute security. If our systems are breached
or suffer severe damage, disruption or
shutdown and we are unable to effectively resolve the issues in a timely manner, our business and
operating results may significantly suffer and we may be
subject to litigation, government enforcement actions or potential liability.
Security breaches could also cause us to incur significant remediation costs,
result in product development delays, disrupt key business
operations, including development of our product candidates, and divert attention of
management and key information technology resources.
Our cash and cash equivalents could be adversely affected if the
financial institutions in which we hold our cash and cash equivalents fail.
We regularly maintain cash balances at third-party
financial institutions in excess of the Federal Deposit Insurance Corporation, or FDIC,
insurance limit. Events involving limitations
to liquidity, defaults, non-performance or other adverse developments that affect financial institutions, or
concerns or rumors about
any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For
example,
on March 10, 2023, the FDIC, took control and was appointed receiver of Silicon Valley Bank (to which the Company had no exposure). If
other
banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting
the banking system and
financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened
and could have a material adverse effect on
our business and financial condition.
Risks Related to Our Common Stock
Failure to maintain effective internal control over our financial
reporting in accordance with Section 404 of the Sarbanes-Oxley Act has caused
and may cause in the future our financial reports to be
inaccurate.
We are required pursuant to Section 404 of the
Sarbanes-Oxley Act of 2002, or Section 404, to maintain internal control over financial reporting
and to assess and report on the effectiveness
of those controls. This assessment includes disclosure of any material weaknesses identified by our
management in our internal control
over financial reporting. Our management concluded that our internal controls over financial reporting were, and
continue to be, ineffective
as of December 31, 2024, identified a material weakness in our internal controls due to the lack of sufficient personnel to allow
for
segregation of duties (resulting from the limited number of personnel available), limited access to timely and complete information regarding
the status
of costs incurred in the activation of investigational sites and costs from treating patients in our study which is a result
of the use of a third-party Contract
Research Organization (“CRO”) to manage the study, and the lack of formal documentation
of our control environment. While management is working to
remediate the material weaknesses, there is no assurance that such changes,
when economically feasible and sustainable, will remediate the identified
material weaknesses or that the controls will prevent or detect
future material weaknesses. If we are not able to maintain effective internal control over
financial reporting, our financial statements,
including related disclosures, may be inaccurate, which could have a material adverse effect on our business.
29
Failure to continue improving our accounting systems and controls
could impair our ability to comply with the financial reporting and internal
controls requirements for publicly traded companies.
As a public company, we operate in an increasingly
demanding regulatory environment, which requires us to comply with the Sarbanes-Oxley Act
of 2002, and the related rules and regulations
of the SEC. Company responsibilities required by the Sarbanes-Oxley Act include establishing corporate
oversight and adequate internal
control over financial reporting and disclosure controls and procedures. Effective internal controls are necessary for us to
produce reliable
financial reports and are important to help prevent financial fraud.
Management performed an annual assessment as of
December 31, 2024 of the effectiveness of our internal control over financial reporting for its
annual report. Our management concluded
that our internal control over financial reporting was, and continues to be, ineffective as of December 31, 2024,
due to material weaknesses
in our internal controls due to the lack of segregation of duties (resulting from the limited number of personnel available),
limited
access to timely and complete information regarding the status of costs incurred in the activation of investigational sites and costs
from treating
patients in our study which is a result of the use of a third-party Contract Research Organization (“CRO”) to
manage the study, and the lack of formal
documentation of our control environment. For as long as we remain an “emerging growth
company” as defined in the JOBS Act, we have and intend to
consider to take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not “emerging
growth companies” including, but not limited
to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-
Oxley Act. We may continue
to take advantage of these reporting exemptions until we are no longer an “emerging growth company.” To mitigate the lack
of segregation of duties material weaknesses, we engaged an outside firm to assist management with such accounting and will continue to
use outside firms
as a resource to deal with other non-recurring or unusual transactions. However, notwithstanding our mitigation efforts,
there is no assurance we will not
encounter accounting errors in the future. If we cannot provide reliable financial reports or prevent
fraud, our business and results of operations could be
harmed, and investors could lose confidence in our reported financial information.
Our current stockholders’ ownership may be diluted if additional
capital stock is issued to raise capital, to finance acquisitions or in connection
with strategic transactions.
We intend to seek to raise additional funds, finance
acquisitions or develop strategic relationships by issuing equity or convertible debt securities,
which would reduce the percentage ownership
of our existing stockholders. Our board of directors has the authority, without action or vote of the
stockholders, to issue all or any
part of our authorized but unissued shares of common or preferred stock. Our articles of incorporation authorize us to issue
up to 300,000,000
shares of common stock and 5,000,000 shares of preferred stock. Future issuances of common or preferred stock would reduce your
influence
over matters on which stockholders vote and would be dilutive to earnings per share. In addition, any newly issued preferred stock could
have
rights, preferences, and privileges senior to those of the common stock. Those rights, preferences, and privileges could include,
among other things, the
establishment of dividends that must be paid prior to declaring or paying dividends or other distributions to
holders of our common stock or providing for
preferential liquidation rights. These rights, preferences and privileges could negatively
affect the rights of holders of our common stock, and the right to
convert such preferred stock into shares of our common stock at a
rate or price that would have a dilutive effect on the outstanding shares of our common
stock.
We have in the past been unable to maintain compliance with the
listing requirements of The Nasdaq Capital Market, and any future failure to
maintain compliance could subject our common stock to be
delisted from The Nasdaq Capital Market, which could have a material adverse effect
on our financial condition and could make it more
difficult for you to sell your shares.
Our common stock is listed on The Nasdaq Capital
Market, and we are therefore subject to its continued listing requirements, including
requirements with respect to the market value of
publicly-held shares, market value of listed shares, minimum bid price per share, and minimum
stockholder's equity, among others, and
requirements relating to board and committee independence. If we fail to satisfy one or more of the requirements,
we may be delisted from
The Nasdaq Capital Market.
30
During 2024, we were not in compliance with the requirement
to maintain a closing bid price of $1.00 per share (the “Minimum Bid Price
Requirement”) pursuant to Nasdaq Listing Rule 5550(a)(2),
and we were not in compliance with the minimum $2,500,000 stockholders’ equity
requirement for continued listing set forth in Listing
Rule 5550(b) (the “Equity Requirement”). As of the date of this filing, we are in compliance with both
requirements. However,
with respect to the Equity Requirement, pursuant to Nasdaq Listing Rule 5815(d)(4)(B), we are subject to a Mandatory Panel
Monitor until
September 10, 2025. If, within that monitoring period, the Staff finds us again out of compliance with the Equity Requirement,
notwithstanding
Listing Rule 5810(c)(2), we will not be permitted to provide the Staff with a plan of compliance with respect to that deficiency and Staff
will not be permitted to grant additional time for us to regain compliance with respect to that deficiency, nor will we be afforded an
applicable cure or
compliance period pursuant to Listing Rule 5810(c)(3). With respect to the Minimum Bid Price Requirement, since we
completed a reverse split on
February 21, 2025, if we fall out of compliance with the Minimum Bid Price Requirement prior to February
21, 2026, we will not be eligible for any
compliance period specified in Listing Rule 5810(c)(3)(A). In either case described in the preceding
two sentences, the Staff will issue a Delist
Determination Letter and we will have an opportunity to request a hearing. Our common stock
may be at that time be delisted from Nasdaq.
There can be no assurance
that we will continue to meet the continued listing requirements of The Nasdaq Capital Market and could be subject to
delisting at a future
time. Delisting from The Nasdaq Capital Market would adversely affect our ability to raise additional financing through the public or
private sale of equity securities, may significantly affect the ability of investors to trade our securities and may negatively affect
the value and liquidity of
our common stock. Delisting also could have other negative results, including the potential loss of employee
confidence, the loss of institutional investors
or interest in business development opportunities.
We may be required to repurchase certain of our warrants upon a
fundamental transaction, which may prevent or deter a third party from
acquiring us.
Certain of our warrants to purchase common stock
provide that in the event of a “Fundamental Transaction” (as defined in the related warrant
agreement, which generally includes
any merger with another entity, the sale, transfer or other disposition of all or substantially all of our assets to another
entity, or
the acquisition by a person of more than 50% of our common stock), each warrant holder will have the right at any time prior to the
consummation
of the Fundamental Transaction to require us to repurchase the warrant for a purchase price in cash equal to the Black-Scholes value (as
calculated under the warrant agreement) of the then remaining unexercised portion of such common warrant on the date of such Fundamental
Transaction,
which may materially adversely affect our financial condition and/or results of operations and may prevent or deter a third
party from acquiring us.
General Risk Factors
As a biotechnology company, we may be at an increased risk of securities
class action litigation.
Historically, securities class action litigation
has often been brought against a company following a decline in the market price of its securities.
This risk is especially relevant for
us because biotechnology and pharmaceutical companies have experienced significant stock price volatility in recent
years. If we were
to be sued, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.
If securities or industry analysts do not publish research or reports
about us, or if they adversely change their recommendations regarding our
common stock, then our stock price and trading volume could
decline.
The trading market for our common stock will be
influenced by the research and reports that industry or securities analysts publish about us, our
industry and our market. If no analyst
elects to cover us and publish research or reports about us, the market for our common stock could be severely
limited and our stock price
could be adversely affected. As a small-cap company, we are more likely than our larger competitors to lack coverage from
securities analysts.
In addition, even if we receive analyst coverage, if one or more analysts ceases coverage of us or fails to regularly publish reports
on us,
we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. If one
or more analysts who elect to
cover us issue negative reports or adversely change their recommendations regarding our common stock, our
stock price could decline.
31
As an “emerging growth company” under the Jumpstart
Our Business Startups Act, or JOBS Act, we are permitted to, and intend to, rely on
exemptions from certain disclosure requirements.
As an “emerging growth company” under
the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure
requirements. We are an emerging growth company
until the earliest of:
·
the last day of the fiscal year during which we have total annual gross revenues of $1.235 billion or more;
·
the last day of the fiscal year following the fifth anniversary of our IPO, which occurred in November 2019;
·
the date on which we have, during the previous 3-year period, issued more than $1 billion in non-convertible debt; or
·
the date on which we are deemed a “large accelerated issuer” as defined under the federal securities laws.
For so long as we remain an emerging growth company,
we will not be required to:
·
have an auditor report on our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;
·
comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm
rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor
discussion and analysis);
·
submit certain executive compensation matters to shareholders advisory votes pursuant to the “say on frequency” and “say on pay”
provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the “say on golden
parachute” provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers
in connection with mergers and certain other business combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection
Act of 2010;
·
include detailed compensation discussion and analysis in our filings under the Securities Exchange Act of 1934, as amended, and instead
may provide a reduced level of disclosure concerning executive compensation;
·
may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of
Financial Condition and Results of Operations, or MD&A; and
·
are eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS
Act.
We intend to take advantage of all of these reduced
reporting requirements and exemptions, other than the longer phase-in periods for the adoption
of new or revised financial accounting
standards under §107 of the JOBS Act.
Certain of these reduced reporting requirements
and exemptions were already available to us due to the fact that we also qualify as a “smaller
reporting company” under SEC
rules. For instance, smaller reporting companies are not required to obtain an auditor attestation and report regarding
management’s
assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are not required
to provide a pay-for-performance graph or CEO pay ratio disclosure; and may present only two years of audited financial statements and
related MD&A
disclosure.
32
We cannot predict if investors will find our securities
less attractive due to our reliance on these exemptions. If investors were to find our common
stock less attractive as a result of our
election, we may have difficulty raising financing in the future.
Item 1B.
Unresolved Staff Comments.
None.
Item 1C.
Cybersecurity.
There have been an increasing number of cyberattacks
on companies around the world, which have caused operational failures, compromised
sensitive corporate or customer data, and/or resulted
in significant financial damages. These attacks have occurred over the internet, through malware,
viruses or attachments to e-mails, or
through inside actors with access to systems within the organization.
Risk Management and Strategy
We have recently implemented additional security
measures as part of an evolving cybersecurity posture and will continue to devote resources to
address security vulnerabilities in an
effort to prevent cyberattacks and mitigate the damage that could result from such an attack. All employees have
recently begun receiving
cybersecurity training and other education regarding their use of computers, information technology, and sensitive data including
specifically
how to recognize common attack strategies. As the Company does not have a physical office location, it does not have a local network or
in-
house servers and proprietary applications. We therefore utilize third parties applications and resources to support our information
technology (“IT”) needs.
All applications utilized by the Company are Software as a Service (“SaaS”) offerings.
As our applications are developed and managed by third parties, we
are dependent on these providers for many functions including disaster
recovery during a disaster or cyber incident. Our goal is to only utilize the most
secure and trusted providers for our IT needs. Our
business continuity plans are evaluated against evolving security and service level standards, which
includes evaluating those cybersecurity
threats associated with our use of key third party service providers.
Our cybersecurity management strategy consists
of utilizing a combination of employee education, preventative controls, detective controls, and
periodic third-party cybersecurity testing.
During fiscal year 2023 we began to deploy and utilize enterprise scale technology to support an appropriate
cybersecurity posture including:
endpoint detection and response, firewalls, security information and event management, email security, multifactor
authentication, and
vulnerability management. As part of the service offering from our outsourced IT security services provider, cybersecurity related alerts
will be issued to us as relevant situations develop. These alerts will be evaluated in concert with our IT provider and in the event an
alert requires action
within our environment, such actions will be taken promptly. Our process and cybersecurity posture will continue
to be refined based on the results of
periodic cybersecurity assessments conducted jointly with our IT provider. We have recently begun
reporting on cybersecurity in reports to the Board of
Directors and will continue to do so.
To operate our business, we rely upon certain third-party
service providers to perform a variety of functions, such as outsourced business critical
functions, clinical research, professional services,
SaaS platforms, managed services, cloud-based infrastructure, content delivery, encryption and
authentication technology, corporate productivity
services, and other functions. We are developing certain vendor management processes designed to help
to manage cybersecurity risks associated
with our use of certain of these providers. Depending on the nature of the services provided, the sensitivity and
quantity of information
processed, and the identity of the service provider, our vendor management process may include reviewing the cybersecurity
practices of
such provider, contractually imposing obligations on the provider related to the services they provide and/or the information they process,
conducting security assessments, conducting on-site inspections, requiring their completion of written questionnaires regarding their
services and data
handling practices, and conducting periodic re-assessments during their engagement. For our largest third-party provider,
our Contract Research
Organization (“CRO”) which is helping us manage our global trial of Berubicin, we
are currently conducting a security assessment and review including
their cybersecurity practices, protocols and protections, handling
of information protected by HIPAA, and physical security.
33
Governance
The
Board of Directors is responsible for oversight of cybersecurity risk. Our Chief
Financial Officer and Chief Executive Officer are the
members of management responsible for managing and assessing our
cybersecurity practices and have recently commenced reporting on such practices and
risks. The plan for the future is that
they will continue to report to the Board on cybersecurity at least quarterly. Should any cybersecurity threat or incident
be
detected, our senior management team would timely report such threat or incident to the Board of Directors and provide regular
communications and
updates throughout the incident and any subsequent investigation, in order that the impact, materiality, and
reporting requirements of such incident are
appropriately identified and assessed for further necessary or appropriate action to be
taken.
We believe we are appropriately staffed (as supported
by our outsourced IT provider) to support a healthy cybersecurity posture given our size and
scope. Our Chief Financial Officer, who reports
to the Chief Executive Officer, is directly responsible for IT functions and has earned a Master of Business
Administration and also a
Master of Science degree in Accounting with a Management Information Systems concentration.
To date, there have been no risks identified from
cybersecurity threats or previous cybersecurity incidents that have materially affected or are
reasonably likely to materially affect
the company. However, despite all of the above aforementioned efforts, a cyberattack, if it occurred, could cause
system operational problems,
disrupt service to clinical trial sites, compromise important data or systems or result in an unintended release of confidential
information.
See “Item 1A. Risk Factors” for additional discussion of cybersecurity risks impacting our Company.
Item 2.
Properties.
Our corporate and executive offices are located
in a leased facility in Houston, Texas. We believe our facilities are sufficient to meet our current
needs and that suitable space will
be available as and when needed. We do not own any real property.
Item 3.
Legal Proceedings.
From time to time in the ordinary course of our
business, we may be involved in legal proceedings, the outcomes of which may not be
determinable. The results of litigation are inherently
unpredictable. Any claims against us, whether meritorious or not, could be time consuming, result in
costly litigation, require significant
amounts of management time and result in diversion of significant resources. However, we are currently not a party to
any pending legal
actions. We have insurance policies covering any potential losses where such coverage is cost effective.
We are not at this time involved in any additional
legal proceedings that we believe could have a material effect on our business, financial
condition, results of operations or cash flows.
Item 4.
Mine Safety Disclosures.
Not applicable.
34
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock has been listed on the NASDAQ
Capital Market under the symbol “CNSP” since November 8, 2019.
Holders of Common Equity
As of March 28, 2025, we had approximately 5 stockholders
of record of our common stock holding shares directly with the transfer agent. This
does not include beneficial owners of our common
stock.
Dividends
We have never declared or paid any cash dividends
on our capital stock. We currently intend to retain earnings, if any, to finance the growth and
development of our business. We do not
expect to pay any cash dividends on our common stock in the foreseeable future. Payment of future dividends, if
any, will be at the discretion
of our board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions
contained
in any financing instruments, provisions of applicable law and other factors the board deems relevant.
Recent Sales of Unregistered Securities
Except as previously disclosed on Form 8-K, there
were no sales of unregistered securities during the year ended December 31, 2024.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We did not repurchase any of our equity securities
during the year ended December 31, 2024.
Equity Compensation Plan Information
See Part III, Item 12 to this Form 10-K for information
relating to securities authorized for issuance under our equity compensation plans.
Item 6.
[Reserved].
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and
analysis of our financial condition and results of operations in conjunction with the financial
statements and the related notes appearing
elsewhere in this Form 10-K. This discussion contains forward-looking statements reflecting our current
expectations that involve risks
and uncertainties, including those set forth under “Cautionary Statement About Forward-Looking Statements.” Actual
results
and experience could differ materially from the anticipated results and other expectations expressed in our forward-looking statements
as a result of
a number of factors, including but not limited to those discussed in this Item and in Item 1A - “Risk Factors.”
Actual results and the timing of events could
differ materially from those discussed in our forward-looking statements as a result of
many factors, including those set forth under “Risk Factors” and
elsewhere in this Form 10-K.
35
Overview
We are a clinical stage pharmaceutical company
organized as a Nevada corporation in July 2017 to focus on the development of anti-cancer drug
candidates for the treatment of brain and
central nervous system tumors, based on intellectual property that we license under license agreement Cortice and
own pursuant to a collaboration
and asset purchase agreement with Reata.
We believe our drug candidates, TPI 287 and Berubicin,
may be significant developments in the treatment of Glioblastoma and other CNS
malignancies, and if approved by the FDA could give Glioblastoma
patients an important new therapeutic alternative to the current standard of care.
Glioblastoma are tumors that arise from astrocytes,
which are star-shaped cells making up the supportive tissue of the brain. These tumors are usually
highly malignant (cancerous) because
the cells reproduce quickly, and they are supported by a large network of blood vessels. TPI 287 is an abeotaxane
(derived from the taxane
family of drugs) and Berubicin is an anthracycline. Both of these are classes of drugs that are among the most powerful and
extensively
used chemotherapy drugs known. Based on clinical and preclinical data, we believe TPI 287 is the first taxane to appear to cross the BBB
and
Berubicin is the first anthracycline to appear to cross the BBB, both in significant concentrations targeting brain cancer cells.
While our focus is currently
on the development of TPI 287 and Berubicin, we are also in the process of attempting to secure intellectual
property rights to additional compounds that
we plan to develop into drugs to treat CNS cancers.
TPI 287 represents a promising candidate for treating
cancers involving the CNS, as well as those that have become resistant to traditional taxane
therapies. While it has shown promise in
limited clinical trials, further clinical development is necessary to determine its future in neuro-oncology. TPI 287
is an abeotaxane
and is an investigational chemotherapy agent classified as a third-generation taxane derivative. It was developed to address some of the
limitations of earlier taxanes like paclitaxel (Taxol) and docetaxel (Taxotere), particularly issues related to drug resistance and poor
penetration of the BBB.
As a synthetic, lipophilic compound, TPI 287 is designed to be brain-penetrant, allowing it to reach CNS tumors
more effectively than its predecessors.
Like other taxanes, TPI 287’s mechanism of action is to stabilize microtubules, which disrupts
cell division and induces apoptosis. However, one of its
notable advantages is its reduced susceptibility to drug efflux pumps such as
P-glycoprotein (P-gp), a common mechanism by which cancer cells develop
resistance to chemotherapy. This feature gives TPI 287 potential
utility in treating drug-resistant cancers in the CNS.
TPI 287 had previously been granted Orphan Drug Designation
by the FDA. 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 a 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 strengthens our intellectual property protections although the
Company is exploring if there are other patents that could be filed related to TPI 287 to extend additional protections.
Berubicin was discovered at UTMDACC by Dr. Waldemar
Priebe, the founder of the Company. Through a series of transactions, Berubicin was
initially licensed to Reata. Reata initiated several
Phase I clinical trials with Berubicin for CNS malignancies, one of which was for malignant gliomas, but
subsequently allowed their IND
with the FDA to lapse for strategic reasons. This required us to obtain a new IND for Berubicin before beginning further
clinical trials.
On December 17, 2020, we announced that our IND application with the FDA for Berubicin for the treatment of Glioblastoma Multiforme
was
in effect. We dosed the first patient in this trial during the third quarter of 2021. Correspondence between the Company and the FDA resulted
in
modifications to our initial trial design, including designating overall survival (OS) as the primary endpoint of the study. OS is
a rigorous endpoint that the
FDA has recognized as a basis for approval of oncology drugs when a statistically significant improvement
can be shown relative to a randomized control
arm.
We do not have manufacturing facilities and all
manufacturing activities are contracted out to third parties. Additionally, we do not have a sales
organization.
On November 21, 2017, we entered into a Collaboration
and Asset Purchase Agreement with Reata (the “Reata Agreement”). Pursuant to the
Reata Agreement we purchased all of Reata’s
intellectual property and development data regarding Berubicin, including all trade secrets, knowhow,
confidential information and other
intellectual property rights.
On December 28, 2017, we obtained the rights to
a worldwide, exclusive royalty-bearing, license to the chemical compound commonly known as
Berubicin from HPI in an agreement we refer
to as the HPI License. HPI is affiliated with our founder, Dr. Priebe. Under the HPI License we obtained the
exclusive right to develop
certain chemical compounds for use in the treatment of cancer anywhere in the world. In the HPI License we agreed to pay HPI:
(i) development
fees of $750,000 over a three-year period beginning November 2019; (ii) a 2% royalty on net sales; (iii) a $50,000 per year license fee;
(iv)
milestone payments of $100,000 upon the commencement of a Phase II trial and $1.0 million upon the approval of an NDA for Berubicin;
and (v) 3 shares
of our common stock. The patents we licensed from HPI expired in March 2020. On March 23, 2025, the Company terminated
the HPI License.
36
On June 10, 2020, the FDA granted Orphan Drug Designation
(“ODD”) for Berubicin for the treatment of malignant gliomas. The ODD now
constitutes our primary intellectual property protection
for Berubicin although the Company is exploring if there are other patents that could be filed related
to Berubicin to extend additional
protections.
On January 10, 2020, we entered into a Patent and Technology License Agreement
(the “WP1244 Agreement”) with The Board of Regents of The
University of Texas System, an agency of the State of Texas, on
behalf of the UTMDACC. Pursuant to the WP1244 Agreement, we obtained a royalty-
bearing, worldwide, exclusive license to certain intellectual
property rights, including patent rights, related to our portfolio of WP1244 drug technology. On
April 25, 2024, UTMDACC provided notice
to us if its intent to terminate the WP1244 Agreement if we fail to pay the annual maintenance fee of $50,000,
as well as $1,300 in expenses.
On May 25, 2024 the WP1244 Agreement was terminated. There are no termination penalty provisions in the Agreement.
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
On July 29, 2024, the Company entered into an
Exclusive License Agreement and Stock Purchase Agreement (collectively, the “Cortice
Agreements”) with Cortice Biosciences,
Inc. (“Cortice”) pursuant to which Cortice granted the Company an exclusive license to the intellectual property
rights related
to certain patents around the compound TPI 287 in the United States, Canada, Mexico and Japan. The term of the license will expire, other
than due to a breach of the Cortice Agreements, at the end of the royalty term with respect to any licensed product in any of the included
territories, which
begins upon the first commercial sale in such territory and ends on the latest of (i) ten years after such sale, (ii)
the expiration of regulatory or marketing
exclusivity for such licensed product in such country, or (c) the expiration of the last to
expire valid patent claim in such country covering such licensed
product.
Our plan of operations is primarily focused on
completing a clinical trial for TPI 287 and finishing the on-going trial of Berubicin. We estimate
that we have sufficient capital to
take us into the first quarter of 2026, a period during which we would likely expect to initiate a trial of TPI 287, as well as
complete
the Berubicin trial including its final analysis. In addition, we have working capital to fund our operations during this period (with
such
operations estimated at $4.5 to $5.0 million per annum). We do not currently have a firm trial design for TPI 287 so estimates of
development cost are not
available, however, regardless of trial design, the cost of bringing TPI 287 to regulatory approval for marketing
will require significant additional financing.
The timing and costs of clinical trials are difficult to predict and as such the foregoing
estimates may prove to be inaccurate. We have no commitments for
such additional needed financing and will likely be required to raise
such financing through the sale of additional equity or debt securities.
Results of Operations for
the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023
General and Administrative Expense
General and administrative expense was approximately
$5,612,000 for the year ended December 31, 2024 compared to approximately $4,770,000
for 2023. The increase in general and administrative
expense was mainly attributable to increase of approximately $756,000 in professional expenses,
$440,000 in employee compensation.
These changes were offset by decrease of approximately $104,000 in stock-based compensation, $49,000 in
insurance expenses, $21,000 in
travel expenses, board of director compensation of $9,000, advertising and marketing of $119,000 and other general and
administrative
expenses of $52,000.
37
Research and Development Expense
Research and development expense was approximately
$9,290,000 for the year ended December 31, 2024 compared to approximately
$14,096,000 for 2023. The decrease in research and development
expenses during the period was mainly attributed to the timing of research organization
(CRO) expenses and patient treatment costs related
to continued progress with our clinical trial for Berubicin. Our CRO expenditures are primarily for
labor related to activating selected
trial sites, managing patient enrollment processes, collecting and managing data from patient treatments throughout the
trial, processing
reimbursement to the sites for patient treatment, and assisting with necessary submissions to amend the IND. CRO expenditures are
expected
to begin to taper off throughout the remainder of the trial as we are no longer activating sites and no longer enrolling patients after
January 2024.
We expect our research and development costs to taper off in the near future as we move toward completion of our clinical
trial for Berubicin primarily due
to patients moving from active treatment to follow-up leading to decreasing costs of treating and following
these patients as more patients eventually
succumb to their disease, then toward year end 2025 we expect costs related to the future trial
of TPI 287 to begin increasing to levels similar to those seen
during our trial of Berubicin.
Other Income (Expense)
Interest income was approximately $60,000 and $28,000
for the years ended December 31, 2024 and 2023, respectively. Interest expense was
approximately $16,000 and $14,000 for the years ended
December 31, 2024 and 2023, respectively.
Net Loss
The net loss for the year ended December 31, 2024
was approximately $14,858,000 compared to approximately $18,851,000 for 2023. The change
in net loss is primarily attributable to increased
research and development costs.
Liquidity and Capital Resources
On December 31, 2024, we had cash of approximately
$6,461,000 and we had a working capital of approximately $6,134,000. We have
historically funded our operations from proceeds from debt
and equity sales.
On
February 1, 2024, the Company completed a public offering of (i) 889 shares of common stock; (ii) pre-funded warrants to purchase
4,448
shares of common stock; (iii) Series A Warrants to purchase up to an aggregate of 5,342 shares of common stock ; and (iv) Series
B Warrants to purchase
up to an aggregate of 5,342 shares of common stock The net proceeds to the Company from the offering were $3,331,000,
after deducting the placement
agents’ fees and other offering expenses.
On June 14, 2024, the Company entered into securities
purchase agreements with institutional investors for the sale by the Company of 6,720
shares of common stock and pre-funded warrants to
purchase 601 shares of common stock in lieu thereof in a registered direct offering. In a concurrent
private placement, the Company also
sold to the investors unregistered warrants to purchase up to an aggregate of 7,321 shares of common stock. The gross
proceeds to the
Company from the offering was approximately $1.37 million, resulting in net proceeds, after payment of commissions and expenses,
received
by the Company of $1,203,267.
On June 26, 2024, the Company entered into securities
purchase agreements with institutional investors for the sale by the Company of 11,360
shares of common stock in a registered direct offering.
In a concurrent private placement, the Company also sold to the investors unregistered warrants to
purchase up to an aggregate of 11,360
shares of common stock. The gross proceeds to the Company from the offering were approximately $1.39 million
resulting in net proceeds,
after payment of commissions and expenses, received by the Company of $1,221,146.
38
On July 3, 2024, the Company entered into securities
purchase agreements with institutional investors for the sale by the Company of 28,500
shares of common stock in a registered direct offering.
In a concurrent private placement, the Company also sold to the investors unregistered warrants to
purchase up to an aggregate of 28,500
shares of common stock. The gross proceeds to the Company from the offering were approximately $1.98 million,
before deducting the financial
advisor fees and other estimated offering expenses payable by the Company. After payment of commissions and expenses,
the proceeds received
by the Company was $1,787,000.
On July 26, 2024, the Company entered into a Sales
Agreement (the “AGP ATM Sales Agreement”) with A.G.P./Alliance Global Partners
(“AGP”). Pursuant to the terms
of the AGP ATM Sales Agreement, the Company originally was permitted to sell from time to time through AGP, as sales
agent or principal,
shares of the Company’s common stock, par value $0.001 per share with initial aggregate sales price of up to $5.2 million. On July
30,
2024, the Company increased the aggregate sales price of common shares that may be sold under the AGP ATM Sales Agreement to $25.0
million (not
including the original $5.2 million). On March 20, 2025, the Company increased the aggregate sales price of common shares
that may be sold under the
AGP ATM Sales Agreement to $43.5 million (including $6.4 million remaining from the previous increase). As
of December 31, 2024, the Company has
sold 991,773 shares pursuant to the AGP ATM Sales Agreement for net proceeds of approximately $13.7
million. $882,539 of the net proceeds was
deposited on January 10, 2025. As of December 31, 2024, the Company recorded a subscription
receivable for $882,539.
On October 23, 2024, the Company entered into securities
purchase agreements with institutional investors for the sale by the Company of 74,000
shares of common stock in a registered direct offering.
In a concurrent private placement, the Company also sold to the investors unregistered warrants to
purchase up to an aggregate of 278,943
shares of common stock. The gross proceeds to the Company from the offering were approximately $3 million,
before deducting the financial
advisor fees and other estimated offering expenses payable by the Company. After payment of commissions and expenses,
the proceeds received
by the Company was $2,725,907.
We estimate that we have sufficient capital to take us into the first quarter
of 2026, a period during which we would likely expect to initiate a trial
of TPI 287, as well as complete the Berubicin trial including
its final analysis. In addition, we have working capital to fund our operations during this
period (with such operations estimated at
$4.5 to $5.0 million per annum). We do not currently have a firm trial design for TPI 287 so estimates of
development cost are not available,
however, regardless of trial design, the cost of bringing TPI 287 to regulatory approval for marketing will require
significant additional
financing. The timing and costs of clinical trials are difficult to predict and as such the foregoing estimates may prove to be
inaccurate.
We have no commitments for such additional needed financing and will likely be required to raise such financing through the sale of additional
equity or debt securities.
We will need to raise significant
additional capital in the future in order to meet our future obligations and execute our business plan. If we are
unable to raise sufficient
funds, we will be required to develop and implement an alternative plan to further extend payables, reduce overhead or scale back
our
business plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan
will be successful and
if it is not successful we may need to cease operations entirely.
Summary of Cash Flows
Cash used in operating activities
Net cash used in operating activities was approximately
$17,113,000 and $14,140,000 for the years ended December 31, 2024 and 2023,
respectively, and mainly included payments made for drug development
(including the cost of our trial of Berubicin), contract labor, officer compensation,
stock-based compensation, marketing
and professional fees to our consultants, attorneys and accountants.
39
Cash used in investing activities
Net cash used in investing activities was approximately
$4,000 and $4,000 for the years ended December 31, 2024 and 2023 and included
payments for furniture and equipment.
Cash provided by financing activities
Net cash provided by financing activities was approximately
$23,030,000 and $4,637,000 for the years ended December 31, 2024 and 2023,
respectively. We received net proceeds of approximately
$23,376,000 from the issuance of common stock during the year ended December 31, 2024.
Off-balance Sheet Arrangements
As of December 31, 2024, we did not have any relationships
with unconsolidated entities or financial partnerships, such as entities often referred
to as structured finance or special purpose entities,
established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow
or limited purposes.
Purchase Commitments
We do not have any material commitments for capital
expenditures, although we are required to pay certain milestone fees and royalties to Reata
and Cortice as described in the section “Overview”
above.
JOBS Act Accounting Election
The Jumpstart Our Business Startups Act of 2012,
or the JOBS Act, exempts an “emerging growth company” such as us from being required to
comply with new or revised financial
accounting standards until private companies are required to comply with the new or revised financial accounting
standards. The JOBS Act
provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging
growth companies but any such election to opt out is irrevocable. We elected not to opt out of such extended transition period which means
that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth
company, can
adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison
of our financial statements
with another public company which is neither an emerging growth company nor an emerging growth company which
has opted out of using the extended
transition period difficult or impossible because of the potential differences in accounting standards
used.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America requires
management to make estimates, assumptions and judgments
that affect the amounts reported in the financial statements, including the notes thereto. We
consider critical accounting policies to
be those that require more significant judgments and estimates in the preparation of our financial statements.
Management relies on historical
experience and other assumptions believed to be reasonable in making its judgment and estimates. Actual results could
differ materially
from those estimates.
Management believes its application of accounting
policies, and the estimates inherently required therein, are reasonable. These accounting
policies and estimates are periodically reevaluated,
and adjustments are made when facts and circumstances dictate a change. As of December 31, 2024,
there was no critical audit estimates.
40
Item 7A.
Quantitative and Qualitative Disclosure About Market Risk.
We are a smaller reporting company as defined by
Rule 12b-2 of the Exchange Act and are not required to provide the information required under
this item.
Item 8.
Financial Statements and Supplementary Data.
CNS Pharmaceuticals, Inc.
Index to Financial Statements
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 206)
42
Balance Sheets as of December 31, 2024 and 2023
43
Statements of Operations for the years ended December 31, 2024 and 2023
44
Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2024 and 2023
45
Statements of Cash Flows for the years ended December 31, 2024 and 2023
46
Notes to Financial Statements
47
41
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
CNS Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance
sheets of CNS Pharmaceuticals, Inc (the “Company”) as of December 31, 2024 and 2023, and the related
statements of operations,
stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the
“financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Company as of
December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended,
in conformity with accounting principles
generally accepted in the United States of America.
Going Concern Matter
The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company
has suffered recurring losses from operations that raises substantial doubt about its ability to continue as a going
concern. Management's
plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might
result
from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
("PCAOB")
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor
were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control over
financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ MaloneBailey, LLP
www.malonebailey.com
We have served as the Company's auditor
since 2019.
Houston, Texas
March 31, 2025
42
CNS Pharmaceuticals, Inc.
Balance Sheets
December 31,
2024
December 31,
2023
Assets
Current Assets:
Cash and cash equivalents
$
6,461,378
$
548,721
Deferred offering costs
20,637
202,859
Subscription receivable
882,539
–
Prepaid expenses and other current assets
1,293,954
839,590
Total current assets
8,658,508
1,591,170
Noncurrent Assets:
Prepaid expenses, net of current portion
36,430
104,750
Property and equipment, net
6,005
4,933
Total noncurrent assets
42,435
109,683
Total Assets
$
8,700,943
$
1,700,853
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Accounts payable and accrued expenses
$
2,198,260
$
5,832,162
Notes payable
326,072
300,806
Total current liabilities
2,524,332
6,132,968
Total Liabilities
2,524,332
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, 300,000,000 shares authorized and 1,413,556 and 2,486 shares
issued and outstanding, respectively
1,414
2
Additional paid-in capital
90,599,901
65,134,786
Accumulated deficit
(84,424,704)
(69,566,903)
Total Stockholders' Equity (Deficit)
6,176,611
(4,432,115)
Total Liabilities and Stockholders' Equity (Deficit)
$
8,700,943
$
1,700,853
See accompanying notes to the financial statements.
43
CNS Pharmaceuticals, Inc.
Statements of Operations
Year ended
Year ended
December 31, 2024
December 31, 2023
Operating expenses:
General and administrative
$
5,611,800
$
4,769,502
Research and development
9,290,143
14,095,606
Total operating expenses
14,901,943
18,865,108
Loss from operations
(14,901,943)
(18,865,108)
Other income (expenses):
Interest income
60,262
27,687
Interest expense
(16,120)
(13,805)
Total other income (expense)
44,142
13,882
Net loss
$
(14,857,801)
$
(18,851,226)
Loss per share - basic
$
(38.87)
$
(12,509.11)
Loss per share - diluted
$
(38.87)
$
(12,509.11)
Weighted average shares outstanding - basic
382,241
1,507
Weighted average shares outstanding - diluted
382,241
1,507
See accompanying notes to the financial statements.
44
CNS Pharmaceuticals, Inc.
Statements of Stockholders' Equity (Deficit)
For the years ended December 31, 2024 and 2023
Common Stock
Additional
Paid-in
Accumulated
Total
Stockholders'
Equity
Shares
Amount
Capital
Deficit
(Deficit)
Balance December 31, 2022
636 $
1 $
58,848,532 $
(50,715,677) $
8,132,856
Common stock issued for cash, net
342
–
2,317,599
–
2,317,599
Exercise of warrants
1,507
1
2,961,238
–
2,961,239
Stock-based compensation
1
–
1,007,417
–
1,007,417
Net loss
–
–
–
(18,851,226)
(18,851,226)
Balance December 31, 2023
2,486
2
65,134,786
(69,566,903)
(4,432,115)
Common stock issued for cash and warrants,
net
1,113,242
1,114
24,008,828
–
24,009,942
Exercise of warrants, net
284,006
284
21,041
–
21,325
Stock-based compensation
–
–
838,957
–
838,957
Shares issued for license agreement
11,468
12
596,291
–
596,303
Stock issued for stock split rounding
2,354
2
(2)
–
–
Net loss
–
–
–
(14,857,801)
(14,857,801)
Balance December 31, 2024
1,413,556 $
1,414 $
90,599,901 $
(84,424,704) $
6,176,611
See accompanying notes to the financial statements.
45
CNS Pharmaceuticals, Inc.
Statements of Cash Flows
Years Ended
Years Ended
December 31, 2024
December 31, 2023
Cash Flows from Operating Activities:
Net loss
$
(14,857,801)
$
(18,851,226)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation
838,957
1,007,417
Depreciation
3,306
4,134
Common stock issued for license agreement
596,303
–
Loss on disposal of fixed assets
(190)
498
Changes in operating assets and liabilities:
Prepaid expenses and other current assets
(59,972)
2,377,275
Accounts payable and accrued expenses
(3,633,902)
1,321,871
Net cash used in operating activities
(17,113,299)
(14,140,031)
Cash Flows from Investing Activities:
Purchase of property and equipment
(4,188)
(3,901)
Net cash used in investing activities
(4,188)
(3,901)
Cash Flows from Financing Activities:
Payments of deferred offering costs
(66,750)
(202,859)
Payments on notes payable
(300,806)
(438,733)
Proceeds from exercise of warrants
21,325
2,961,239
Proceeds from sale of common stock
23,376,375
2,317,599
Net cash provided by financing activities
23,030,144
4,637,246
Net change in cash and cash equivalents
5,912,657
(9,506,686)
Cash and cash equivalents, at beginning of period
548,721
10,055,407
Cash and cash equivalents, at end of period
$
6,461,378
$
548,721
Supplemental disclosures of cash flow information:
Cash paid for interest
$
13,599
$
13,805
Cash paid for income taxes
$
–
$
–
Supplemental disclosure of non-cash investing and financing activities:
Prepaid expense financed with note payable
$
326,072
$
329,571
Reclassification of deferred offering costs to equity
248,972
–
Common stock issued for subscription receivable
882,539
–
Stock issued for stock split rounding
2
–
See accompanying notes to the financial statements.
46
CNS Pharmaceuticals, Inc.
Notes to the Financial Statements
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 April 30, 2024, 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-50. The reverse stock split became effective on June 4, 2024 on a 1-
for-50 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.
On November 26, 2024, 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-50. The reverse stock split became effective on February 21, 2025
on a 1-for-50 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
The accompanying financial statements and related notes have been prepared
in accordance with accounting principles generally accepted in the United
States of America (“U.S. GAAP”) and in accordance
with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”).
The Company’s fiscal
year end is December 31.
Use of Estimates in Financial Statement Presentation - The
preparation of these financial statements in conformity with accounting principles generally
accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
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, combined with aggressive working
capital management, will allow us to
continue operating Within one year after the date that the financial statements are issued. 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.
47
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 at December 31, 2023 was $6,211,378. 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.
Property and Equipment - Property and equipment is recorded
at cost and depreciated over their estimated useful lives using the straight-line depreciation
method as follows:
Leasehold improvement
Shorter of estimated useful lives or the term of the lease
Computer equipment
3 years
Machinery and equipment
5 years
Furniture and office equipment
7 years
Repairs and maintenance costs are expensed as incurred.
Impairment of Long-lived Assets - The Company evaluates
its long-lived tangible assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of such assets
may not be recoverable. The recoverability of a long-lived asset is measured by comparison of the carrying
amount to the expected future
undiscounted cash flows that the asset is expected to generate. Any impairment to be recognized is measured by the amount
by which the
carrying amount of the asset exceeds its fair value.
Fair Value of Financial Instruments - The carrying value of
short-term instruments, including cash and cash equivalents, accounts payable and accrued
expenses, and short-term notes approximate
fair value due to the relatively short period to maturity for these instruments.
Fair value is defined as the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in
an orderly transaction between market participants on the measurement date. Valuation techniques used to
measure fair value maximize the
use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a three-level valuation
hierarchy for disclosures
of fair value measurements, defined as follows:
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted)
for identical assets or liabilities in active markets.
Level 2 - inputs to the valuation methodology include quoted prices
for similar assets and liabilities in active markets, and inputs that are observable for the
assets or liability, either directly or indirectly,
for substantially the full term of the financial instruments.
Level 3 - inputs to the valuation methodology are unobservable and
significant to the fair value.
The Company does not have any assets or liabilities that are required
to be measured and recorded at fair value on a recurring basis.
Related Parties - The Company follows ASC
850, Related Party Disclosures, for the identification of related parties and disclosure of related party
transactions.
Income Taxes - The Company uses the asset and liability method
of accounting for income taxes. Under this method, deferred tax assets and liabilities are
determined based on the differences between
the financial reporting and the tax bases of reported assets and liabilities and are measured using the enacted
tax rates and laws that
will be in effect when the differences are expected to reverse. The Company must then assess the likelihood that the resulting
deferred
tax assets will be realized. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred
tax asset will not
be realized.
48
The Company accounts for uncertain tax positions in accordance with
the provisions of Accounting Standards Codification (ASC) 740-10 which prescribes
a recognition threshold and measurement attribute for
financial statement disclosure of tax positions taken, or expected to be taken, on its tax return. The
Company evaluates and records any
uncertain tax positions based on the amount that management deems is more likely than not to be sustained upon
examination and ultimate
settlement with the tax authorities in the tax jurisdictions in which it operates.
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.
Restricted Stock Units (“RSUs”) - Our RSUs vest over
two or 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 December 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
59,579 common
shares, unvested restricted stock units of 114 common shares, unvested performance units of 5 and options for 270 common shares,
respectively.
As of December 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 1,732 common shares, unvested restricted stock units of 6 common shares, unvested performance
units of 19 and
options for 157 common shares, respectively.
Research and Development Costs - Research and
development costs are expensed as incurred. The Company recognized the benefit of refundable
research and development tax credits as
a reduction of research and development expenses when there is reasonable assurance that the amount claimed will
be recovered.
Segments
Reporting
The Company manages its operations as a
single segment for the purpose of assessing performance and making operating decisions. The Company’s Chief
Operating Decision
Maker (“CODM”) is its Chief Executive Officer. The CODM allocates resources and evaluates the performance of the Company
using
information about combined net income from operations. All significant operating decisions are based upon an analysis of the
Company as one operating
segment, which is the same as its reporting segment. See statement of operations for information
about combined net income from operations.
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU No. 2023-07,
“Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure.” The ASU
updates reportable segment disclosure
requirements, primarily through requiring enhanced disclosures about significant segment expenses and information
used to assess segment
performance. The amendments do not change how segments are determined, aggregated, or how thresholds are applied to determine
reportable
segments. We adopted ASU No. 2023-07 during the year ended December 31, 2024.
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement—Reporting
Comprehensive Income—Expense Disaggregation Disclosures
(Subtopic 220-40): Disaggregation of Income Statement Expenses” to
improve disclosures about the nature of expenses in commonly presented financial
statement captions. ASU 2024-03 is effective for all
public business entities for annual reporting periods beginning after December 15, 2026, on either a
prospective or retrospective basis.
Early adoption permitted. Management is currently evaluating the impact of this accounting standard update on its
consolidated financial
statements and related disclosures.
49
Note 3 – Note Payable
On November 28, 2024, the Company entered into a short-term note payable
for an aggregate of $326,072, bearing interest at 9.24% 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, 2025. As of December 31, 2024, the
Company’s note payable balance was $326,072.
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 December 31, 2024 and 2023, the Company’s note payable balance was $0
and $300,806,
respectively.
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 April 30, 2024, 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-50, 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-fifty (1:50) 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 June 4, 2024 on a
1-for-50 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.
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 1,400 shares. As amended, the number of shares of the common stock that may be issued under the 2020 Plan is 1,739
shares (this includes
the 1,400 share increase).
On November 26, 2024, 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-50, 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-fifty (1:50) 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 February 21,
2025 on a 1-for-50 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.
50
Common Stock
2024
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) 889 shares (the
“Shares”)
of the Company’s common stock, par value $0.001 per share (the “Common Stock”) (ii) pre-funded warrants to purchase
4,448 shares of
Common Stock (the “Pre-Funded Warrants”); (iii) Series A Warrants to purchase up to an aggregate of 5,342
shares of Common Stock (the “Series A
Warrants”); and (iv) Series B Warrants to purchase up to an aggregate of 5,342 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 $750.00 and the combined purchase price of one Pre-
Funded Warrant and accompanying
Common Warrants was $747.50. 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 December 31, 2024, 4,448 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.
On June 14, 2024, the Company entered into securities purchase agreements
with institutional investors for the sale by the Company of 6,720 shares of the
Company’s common stock and pre-funded warrants to
purchase 601 shares of common stock in lieu thereof (the “June 14 Pre-Funded Warrants”) in a
registered direct offering. In
a concurrent private placement, the Company also sold to the investors unregistered warrants to purchase up to an aggregate of
7,321 shares
of common stock (the “June 14 Common Warrants”). The combined purchase price of one share of common stock (or pre-funded warrant
in
lieu thereof) and accompanying June 14 Common Warrant was $187.50. The closing of this offering and private placement occurred on June
17, 2024.
Subject to certain ownership limitations, each of the June 14 Common
Warrants is immediately exercisable, has an exercise price of $181.00 per share, and
expire five years from the date of issuance. Each
June 14 Pre-Funded Warrant is exercisable into one share of common stock at a price per share of $0.05
(as adjusted from time to time
in accordance with the terms thereof). The gross proceeds to the Company from the offering was approximately $1.37
million, resulting
in net proceeds, after payment of commissions and expenses, received by the Company of $1,203,267.
On June 26, 2024, the Company entered into securities purchase agreements
with institutional investors for the sale by the Company of 11,360 shares of the
Company’s common stock in a registered direct offering.
In a concurrent private placement, the Company also sold to the investors unregistered warrants to
purchase up to an aggregate of 11,360
shares of common stock (the “June 26 Common Warrants”). The combined purchase price of one share of common
stock and accompanying
June 26 Common Warrant was $122.50. The closing of the offering and private placement occurred on June 27, 2024 (the
“Closing Date”).
Subject to certain ownership limitations, each of the June 26 Common
Warrants is immediately exercisable, has an exercise price of $116.00 per share, and
expire five years from the date of issuance. The
June 26 Common Warrants may only be exercised on a cashless basis if there is no registration statement
registering, or a prospectus contained
therein in not available for, the resale of the shares of common stock underlying the June 26 Common Warrants. The
gross proceeds to the
Company from the offering were approximately $1.39 million resulting in net proceeds, after payment of commissions and expenses,
received
by the Company of $1,221,146.
On July 3, 2024, the Company entered into securities purchase agreements
with institutional investors for the sale by the Company of 28,500 shares of the
Company’s common stock in a registered direct offering.
In a concurrent private placement, the Company also sold to the investors unregistered warrants to
purchase up to an aggregate of 28,500
shares of common stock (the “July 3 Common Warrants”). The combined purchase price of one share of common
stock and accompanying
July 3 Common Warrant is $69.50. The closing of this offering and private placement occurred on July 5, 2024.
51
Subject to certain ownership limitations, each of the July 3 Common
Warrants is immediately exercisable, has an exercise price of $63.00 per share, and
expire five years from the date of issuance. The gross
proceeds to the Company from the offering were approximately $1.98 million, before deducting the
financial advisor fees and other estimated
offering expenses payable by the Company, and excluding the proceeds, if any, from the exercise of the Common
Warrants. After payment
of commissions and expenses, the proceeds received by the Company was $1,787,000.
On July 26, 2024, the Company entered into a Sales Agreement (the “AGP
ATM Sales Agreement”) with A.G.P./Alliance Global Partners (“AGP”).
Pursuant to the terms of the AGP ATM Sales Agreement,
the Company originally was permitted to sell from time to time through AGP, as sales agent or
principal, shares of the Company’s
common stock, par value $0.001 per share with initial aggregate sales price of up to $5.2 million. On July 30, 2024, the
Company increased
the aggregate sales price of common shares that may be sold under the AGP ATM Sales Agreement to $25.0 million (not including the
original
$5.2 million). On March 20, 2025, the Company increased the aggregate sales price of common shares that may be sold under the AGP ATM
Sales
Agreement to $43.5 million (including $6.4 million remaining from the previous increase). As of December 31, 2024, the Company has
sold 991,773
Shares pursuant to the AGP ATM Sales Agreement for net proceeds of approximately $13.7 million. $882,539 of the net proceeds
was deposited on
January 10, 2025. As of December 31, 2024, the Company recorded a subscription receivable for $882,539.
On October 23, 2024, the Company entered into securities purchase agreements
with institutional investors for the sale by the Company of 74,000 shares of
the Company’s common stock in a registered direct offering.
In a concurrent private placement, the Company also sold to the investors unregistered
warrants to purchase up to an aggregate of 278,943
shares of common stock (the “July 3 Common Warrants”). The per share purchase price of each share
of common stock was $8.50
per share and the purchase price for each Pre-Funded Warrant was $8.45 per Pre-Funded Warrant. The closing of this offering
and private
placement occurred on October 23, 2024.
Subject to certain ownership limitations, each of the October 23 Common
Warrants is immediately exercisable, has an exercise price of $0.05 per share,
and expire five years from the date of issuance. The gross
proceeds to the Company from the offering were approximately $3 million, before deducting the
financial advisor fees and other estimated
offering expenses payable by the Company, and excluding the proceeds, if any, from the exercise of the Common
Warrants. After payment
of commissions and expenses, the proceeds received by the Company was $2,725,907.
Common share issued for license agreement
On July 29, 2024, the Company entered into an Exclusive License Agreement
and Stock Purchase Agreement (collectively, the “Cortice Agreements”) with
Cortice Biosciences, Inc. (“Cortice”)
pursuant to which Cortice granted the Company an exclusive license to the intellectual property rights related to
certain patents around
the compound TPI 287 in the United States, Canada, Mexico and Japan. The term of the license will expire, other than due to a
breach of
the Cortice Agreements, at the end of the royalty term with respect to any licensed product in any of the included territories, which
begins upon
the first commercial sale in such territory and ends on the latest of (i) ten years after such sale, (ii) the expiration of
regulatory or marketing exclusivity for
such licensed product in such country, or (c) the expiration of the last to expire valid patent
claim in such country covering such licensed product.
Pursuant to the Cortice Agreements, the Company agreed to issue Cortice
11,468 shares of the Company’s common stock upon the closing of the
transaction, which occurred on July 29, 2024, and 867 shares
of Company common stock upon the receipt of shareholder approval of such issuance as
required by the rules of the Nasdaq Stock Market.
The Company also agreed to make milestone payments to Cortice in either cash or shares of Company
common stock (at Cortice’s option)
upon: (i) meeting the primary endpoint a pivotal trial for a licensed product – either $15.0 million or 8,223 shares of
Company
common stock; (ii) FDA acceptance of an New Drug Application for a licensed product – either $30.0 million or 16,446 shares of Company
common stock; (iii) the first commercial sale in the United States of a licensed product – either $45.0 million or 24,668 shares
of Company common stock;
and (iv) the first commercial sale in Japan of a licensed product – either $10.0 million or 4,112 shares
of Company common stock. The Company’s
obligation to pay the above milestones in Company common stock is subject to the receipt
of shareholder approval as required by the rules of the Nasdaq
Stock Market. The Company also agreed to pay Cortice royalties on sales
of licensed products of between 3.0%-7.5%. Finally, to the extent Cortice is
required to pay any milestone payments to the original holder
of the intellectual property rights licensed, the Company has agreed to make such payments
to Cortice. As of December 31, 2024, there
were no accruals related to the milestone payments and the Company issued 11,468 Shares with a fair value of
$596,303 pursuant to the
Cortice Agreement.
52
2023
Pursuant to the terms of the Capital on Demand™
Sales Agreement with JonesTrading Institutional Services LLC and Brookline Capital Markets, a
division of Arcadia Securities, LLC (collectively,
the “Agent”), the Company may sell from time to time, through the Agent, shares of the Company’s
common stock with an
aggregate sales price of up to $20.0 million. During the year ended December 31, 2023, the Company sold 342 shares of common
stock to
the Agent for net proceeds of $2,317,599.
During the year ended December 31, 2023, the Company issued 1,497 shares
of common stock from the exercise of warrants.
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 27 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 40 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 298 shares of common
stock.
2024
On January 19, 2024, the Board of Directors of the Company approved
the issuance of 5 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 $632.50 and vest in 36 equal monthly installments succeeding the issuance
date. The total fair value of these
option grants at issuance was $2,728.
On April 7, 2024, the Board of Directors approved grants of 108 options
to officers, employees, and board of directors. The options have a ten-year term at
an exercise price of $646.5. Of the 108 options issued,
35 options vest on the first anniversary or at the time of the 2025 shareholder meeting, whichever
occurs first and 73 options vest in
36 equal monthly installments over 3 years. The total fair value of these option grants at issuance was $58,335.
2023
On March 29, 2023, the Board of Directors approved, based upon the
recommendation of the Compensation Committee, cash bonuses totaling $550,750 to
the officers of the Company. In addition, the officers
and an employee were awarded a total of 12 options with a ten-year term at an exercise price of
$2,490. Of the options issued, 50% vest
over 2 years and 50% vest upon the Company’s common stock price exceeding various closing prices ranging from
$6.00 - $24.00 per
share. The total fair value of these option grants at issuance was $25,820.
On May 3, 2023, the Board of Directors of the Company appointed Bettina
M. Cockroft, M.D., M.B.A as an independent member of the Company’s Board
of Directors. Dr. Cockroft was granted a ten-year option
to purchase 1 share of Company common stock at an exercise price of $4,175 vesting in 36 equal
monthly installments succeeding the issuance
date. The total fair value of these option grants at issuance was $3,514.
On August 4, 2023, the Board of Directors approved the issuance of
3 options to Dr. Cockroft. The options have a ten-year term at an exercise price of
$5,675 and vest in 36 equal monthly installments succeeding
the issuance date. The total fair value of these option grants at issuance was $12,771.
53
On August 27, 2023, the Board of Directors approved the issuance of
79 options to the board of directors. The options have a ten-year term at an exercise
price of $4,750 and vest on the first anniversary
date of issuance. The total fair value of these option grants at issuance was $313,846.
During the years ended December 31, 2024 and 2023, the Company recognized
$684,181 and $949,982 of stock-based compensation, respectively, related
to outstanding stock options. At December 31, 2024, the Company
had $94,968 of unrecognized expenses related to options.
The following table summarizes the stock option activity for the years
ended December 31, 2024 and 2023:
Options
Weighted-Average
Exercise Price
Per Share
Outstanding, December 31, 2022
51
$
168,547.02
Granted
106
4,460.14
Exercised
–
–
Forfeited
–
–
Expired
–
–
Outstanding, December 31, 2023
157
56,287.36
Granted
113
645.88
Exercised
–
–
Forfeited
–
–
Expired
–
–
Outstanding, December 31, 2024
270
$
33,000.37
Exercisable, December 31, 2024
175
$
48,148.42
The aggregate fair value of the options measured during the years
ended December 31, 2024 and 2023 were calculated using the Black-Scholes option
pricing model based on the following assumptions:
Year Ended
Year Ended
December 31, 2024
December 31, 2023
Fair value of common stock on measurement date
$632.50 to $646.50 per share
$1.00 to $2.40 per share
Risk free interest rate (1)
3.80% to 4.39%
3.38% to 4.37%
Volatility (2)
102.25% to 118.36%
114.13% to 118.09%
Dividend yield (3)
0%
0%
Expected term (in years)
5.5 – 6.3
5.5 – 6.3
(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.
54
As of December 31, 2024, the outstanding stock options have a weighted
average remaining term of 8.16 years and the aggregate intrinsic value of options
vested and outstanding was $0. As of December 31, 2024,
there were no awards remaining to be issued under the 2017 Plan and 28 awards remaining to be
issued under the 2020 Plan.
As of December 31, 2023, the outstanding stock options have a weighted
average remaining term of 8.54 years and the aggregate intrinsic value of options
vested and outstanding was $8,217.
Stock Warrants
The following table summarizes the stock warrant activity for the years
ended December 31, 2024 and 2023:
Warrants
Weighted-Average
Exercise Price
Per Share
Outstanding, December 31, 2022
1,597
$
8,875.44
Granted
1,544
3,220.82
Exercised
(1,407)
2,090.82
Forfeited
–
–
Expired
(2)
77,274.54
Outstanding, December 31, 2023
1,732
9,709.31
Granted
341,858
36.50
Exercised
(284,006)
0.13
Forfeited
–
–
Expired
(5)
202,500
Outstanding, December 31, 2024
59,579
$
465.88
On October 16, 2023, the Company entered into a warrant exercise inducement
offer letter (the “Inducement Letter”) with a holder of certain existing
warrants (“Holder”) to receive new warrants
to purchase up to a number of shares of common stock equal to 200% (the “Inducement Warrants”) of the
number of warrant shares
issued pursuant to the exercise of such certain existing warrants to purchase shares of common stock (the “Existing Warrants”)
pursuant to which the Holder agreed to exercise for cash their Existing Warrants to purchase up to 751 shares of the Company’s common
stock, at a
Reduced Exercise Price (as defined below), in exchange for the Company’s agreement to issue the Inducement Warrants
to purchase up to 1,502 shares of
the Company’s common stock (the “Inducement Warrant Shares”). The Existing Warrants
consist of: (i) warrants, originally issued on December 22, 2020
and amended on December 5, 2022; (ii) warrants, originally issued on
January 10, 2022 and amended on December 5, 2022; and (iii) warrants issued on
December 5, 2022. Pursuant to the Inducement Letter, the
exercise price for such Existing Warrants was reduced to $3,200 per share (the “Reduced
Exercise Price”). In connection with
the warrant inducement, the Company estimated the fair value of the warrants based on the Black-Scholes option
pricing model and recorded
a deemed dividend to additional paid in capital of $5,571,694.
55
The aggregate fair value of the warrants measured during the year ended
December 31, 2023 were calculated using the Black-Scholes option pricing model
based on the following assumptions:
Year Ended
December 31, 2023
Fair value of common stock on measurement date
$4,000 per share
Risk free interest rate (1)
4.72%
Volatility (2)
124.66%
Dividend yield (3)
0%
Expected term (in years)
4.2 – 5.0
(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.
(3)
The Company does not expect to pay a dividend in the foreseeable future.
During the year ended December 31, 2024, the Company received $21,325
in net cash proceeds from the exercise of 4,448 warrants issued at an exercise
price of $2.5, 14 warrants issued at an exercise price
of $750 and 279,944 warrants issued at an exercise price of $0.05. As of December 31, 2024, the
remaining weighted average term for the
outstanding stock warrant is 4.09 years.
During the year ended December 31, 2023, the Company received $2,961,239
in net cash proceeds from the exercise of 753 warrants issued at an exercise
price of $3,200, 96 warrants issued at an exercise price
of $7,575 and 650 warrants previously issued at an exercise price of $2.5.
As of December 31, 2023 the outstanding and exercisable warrants have
a weighted average remaining term of 4.64 years and an intrinsic value of $15,245.
Restricted Stock Units
On April 7, 2024, the Board of Directors approved grants of 108 RSUs
to officers, employees, and board of directors. Of the 108 RSUs issued, 35 RSUs
vest on the first anniversary or at the time of the 2025
shareholder meeting, whichever occurs first and 73 RSUs vest in 8 equal quarterly installments over
2 years. The Company valued the RSUs
based on the stock price at grant which total $58,335.
During the years ended December 31, 2024 and 2023, the Company recognized
$54,414 and $23,850 of stock-based compensation, related to outstanding
RSUs, respectively. At December 31, 2024, the Company had $68,275
of unrecognized expenses related to outstanding RSUs.
56
The following table summarizes the RSUs activity
for the years ended December 31, 2024 and 2023:
RSUs
Weighted-Average
Grant Date
Fair Value
Non-vested, December 31, 2022
–
$
–
Granted
6
25,050.00
Vested
–
–
Forfeited
–
–
Non-vested, December 31, 2023
6
25,050.00
Granted
108
648.25
Vested
–
–
Forfeited
–
–
Non-vested, December 31, 2024
114
$
1,932.55
Performance Units
During the years ended December 31, 2024 and 2023, the Company recognized
$100,362 and $33,585 related to outstanding stock PUs, respectively. At
December 31, 2024, the Company had $0 of unrecognized expenses
related to PUs.
The following table summarizes the PUs activity
for the years ended December 31, 2024 and 2023:
PUs
Weighted-Average
Grant Date
Fair Value
Non-vested, December 31, 2022
19
$
14,581.58
Granted
–
–
Vested
–
–
Forfeited
–
–
Non-vested, December 31, 2023
19
14,581.58
Granted
–
–
Vested
(6)
25,050.00
Forfeited
(8)
9,750.00
Non-vested, December 31, 2024
5
$
9,750.00
57
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 March 6, 2025, the compensation committee of the
board of directors set Mr. Climaco’s annual base salary to
$580,000.
On June 28, 2019, we entered into employment letters with Drs. Silberman
and Picker pursuant to which 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. On March 6, 2025, the compensation committee of the board of directors
set Drs. Silberman and Picker annual base
salaries to $247,000 and $120,000, respectively.
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.
On March 6, 2025, the Board of Directors approved, based upon the recommendation
of the Compensation Committee, cash bonuses totaling $631,243 to
the officers of the Company.
Scientific Advisory Board
The Scientific Advisory board is consisted of one member, Dr. Sigmond
Hsu. Dr. Hsu receives annual cash compensation of $68,600. As of December 31,
2024 and 2023, the Company has accrued $177,309 and $168,734,
respectively, for 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.
58
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 3 shares of the Company’s common stock valued at $3,375 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 years ended December 31, 2024 and 2023, the Company recognized
$50,000 and $50,000, respectively, 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. During the years ended December 31, 2024
and 2023, the Company expensed $0 related to the purchase of
pharmaceutical products from HPI. This agreement was terminated March 23,
2025.
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 and was affiliated with
Dr. Priebe. This agreement was terminated March 23, 2025.
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”), 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 was an affiliate of ALI. This agreement was terminated March 23,
2025.
59
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 (the “WP1244 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 WP1244 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 WP1244 Agreement. The term of the WP1244 Agreement expires on the last to occur of: (a) the expiration
of all
patents subject to the WP1244 Agreement, or (b) fifteen years after execution; provided that UTMDACC has the right to terminate
this WP1244
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 May 25, 2024 the WP1244 Agreement was
terminated. There are no termination penalty
provisions in the Agreement. During the year ended December 31, 2024 and 2023, the Company paid $52,537
and $55,092, respectively.
Cortice Biosciences, Inc. Exclusive License Agreement
On July 29, 2024, the Company entered into an Exclusive License Agreement
with Cortice Biosciences, Inc. (“Cortice”) pursuant to which Cortice granted
the Company an exclusive license to the intellectual
property rights related to certain patents around the compound TPI 287 in the United States, Canada,
Mexico and Japan. The term of the
license will expire, other than due to a breach of the Cortice Agreements, at the end of the royalty term with respect to
any licensed
product in any of the included territories, which begins upon the first commercial sale in such territory and ends on the latest of (i)
ten years
after such sale, (ii) the expiration of regulatory or marketing exclusivity for such licensed product in such country, or (c)
the expiration of the last to expire
valid patent claim in such country covering such licensed product. Pursuant to the Cortice Agreements,
the Company agreed to issue Cortice 11,468 shares
of the Company’s common stock upon the closing of the transaction, which occurred
on July 29, 2024, and 867 shares of Company common stock upon the
receipt of shareholder approval of such issuance as required by the
rules of the Nasdaq Stock Market. The Company also agreed to make milestone
payments to Cortice in either cash or shares of Company common
stock (at Cortice’s option) upon: (i) meeting the primary endpoint a pivotal trial for a
licensed product – either $15.0 million
or 8,223 shares of Company common stock; (ii) FDA acceptance of an New Drug Application for a licensed
product – either $30.0 million
or 16,446 shares of Company common stock; (iii) the first commercial sale in the United States of a licensed product – either
$45.0
million or 24,668 shares of Company common stock; and (iv) the first commercial sale in Japan of a licensed product – either $10.0
million or 4,112
shares of Company common stock. The Company’s obligation to pay the above milestones in Company common stock is
subject to the receipt of
shareholder approval as required by the rules of the Nasdaq Stock Market. The Company also agreed to pay Cortice
royalties on sales of licensed products
of between 3.0%-7.5%. Finally, to the extent Cortice is required to pay any milestone payments
to the original holder of the intellectual property rights
licensed, the Company has agreed to make such payments to Cortice. As of December
31, 2024, there were no accruals related to the milestone payments
and the Company issued 11,468 Shares with a fair value of $596,303
pursuant to the Cortice Agreement.
60
Note 6 – Income Taxes
The Company is subject to United States federal income taxes at an
approximate rate of 21%. The reconciliation of the provision for income taxes at the
United States federal statutory rate compared to
the Company’s income tax expense as reported is as follows:
Year Ended
Year Ended
December 31,
December 31,
2024
2023
Income tax benefit computed at the statutory rate
$
3,120,000
$
3,959,000
Tax effect of:
True-ups and non-deductible expenses
(585,000)
118,000
Change in valuation allowance
(2,535,000)
(4,077,000)
Provision for income taxes
$
–
$
–
Significant components of the Company’s deferred tax assets and
liabilities after applying enacted corporate income tax rates are as follows:
As of
As of
December 31,
December 31,
2024
2023
Deferred income tax assets
Net operating losses
$
7,923,000
$
6,672,000
Stock-based compensation
999,000
873,000
Capitalized 174 expenses
6,659,000
5,420,000
Deferred income tax liability
Prepaid expenses
(279,000)
(198,000)
Valuation allowance
(15,302,000)
(12,767,000)
Net deferred income tax assets
$
–
$
–
As of December 31, 2024, the Company currently has net operating loss
carryforwards of approximately $37,727,000. Approximately $200,000 of the net
operating loss carryforward will begin to expire in 2037.
The remaining net operating loss carryforward post-2017 may be carried forward indefinitely.
The Tax Reform Act of 1986 limits the use of net operating loss carryforwards
in certain situations where changes occur in the stock ownership of a
company. In the event that the Company has a change in ownership,
utilization of carryforwards could be limited.
Note 7 – Subsequent Events
On November 26, 2024, the stockholders of the Company approved the
granting to the Company’s board of directors of the discretion to effect the reverse
stock split at a ratio in the range of 1-for-2
to 1-for-50. Upon the approval of the Company’s board of directors, The reverse stock split became effective on
February 21, 2025
on a 1-for-50 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.
On March 11, 2025, the Company approved the issuance of options to
purchase 263,537 shares of common stock to the management group, subject to
approval of an increase in the Company’s equity plan
by the Company’s shareholders. Each of the options will vest as follows: (i) 50% on the six month
anniversary of the issuance date;
(ii) 25% on the 12 month anniversary of the issuance date; and (iii) 25% on the 18 month anniversary of the issuance date.
The exercise
price of the option is $2.50, the closing price on the date of the Board’s approval of the compensation plan.
On March 20, 2025, the Company increased the aggregate sales price
of common shares that may be sold under the AGP ATM Sales Agreement to $43.5
million. Subsequent to December 31, 2024, the Company
has sold 1,530,985 Shares pursuant to the AGP ATM Sales Agreement for net proceeds of
approximately $9.9 million.
61
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.
None.
Item 9A.
Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, including our chief executive officer,
who serves as our principal executive officer, and our chief financial officer, who serves as
our principal financial officer, evaluated
the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-
15(e) and 15d-15(e) under
the Exchange Act), as of the end of the period covered by this Form 10-K. Based on this evaluation, our chief executive officer
and our
chief financial officer, concluded that as a result of the material weaknesses in our internal control over financial reporting discussed
below, our
disclosure controls and procedures were not effective at ensuring that information required to be disclosed in the reports
we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities
and Exchange Commission's rules and
forms and that such information is accumulated and communicated to our management, including our chief
executive officer and our chief financial officer,
or persons performing similar functions, as appropriate to allow timely decisions regarding
disclosure.
Attestation Report of the Registered Public Accounting Firm
Our independent registered public accounting firm
will not be required to formally attest to the effectiveness of our internal controls over financial
reporting for as long as we are an
“emerging growth company” pursuant to the provisions of the Jumpstart Our Business Startups Act.
Management’s Report on Internal Control Over Financial Reporting
Our chief executive officer and our chief financial
officer are responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in
Exchange Act Rules 13a-15(f). Management conducted an assessment of the effectiveness of our internal control over
financial reporting
as of December 31, 2024. In making this assessment, management used the criteria described in Internal Control-Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our management concluded that
our internal
control over financial reporting were, and continue to be ineffective, as of December 31, 2024 due to a lack of segregation
of duties (resulting from the
limited number of personnel available), limited access to timely and complete information regarding the
status of costs incurred in the activation of
investigational sites and costs from treating patients in our study which is a result of
the use of a third-party Contract Research Organization (“CRO”) to
manage the study, and the lack of formal documentation
of our control environment. Management is commencing actions to address the lack of formal
documentation of our control environment, although
this will not address the lack of segregation of duties. Management is also working with the CRO to
improve the timeliness and completeness
of the data reported to the Company to address this material weakness, as well as conducting increased analytical
analysis of such data
to be performed by the Company.
A material weakness is a control deficiency (within
the meaning of the Public Company Accounting Oversight Board (“PCAOB”) Auditing
Standard 1305) or combination of control deficiencies
that result in more than a remote likelihood that a material misstatement of the annual or interim
financial statements will not be prevented
or detected.
62
It should be noted that any system of controls,
however well designed and operated, can provide only reasonable and not absolute assurance that
the objectives of the system are met.
In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain
events. Because
of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions, regardless of how remote.
In light of the material weakness described above,
we performed additional analysis and other post-closing procedures to ensure our financial
statements were prepared in accordance with
generally accepted accounting principles. Accordingly, we believe that the financial statements included in
this report fairly present,
in all material respects, our financial condition, results of operations and cash flows for the periods presented.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control
over financial reporting during our most recent calendar year that has materially affected, or is
reasonably likely to materially affect,
our internal control over financial reporting.
Item 9B.
Other Information.
During the year ended December 31, 2024, no director
or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement” or
“non-Rule 10b5-1 trading arrangement,”
as each term is defined in Item 408(a) of Regulation S-K.
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
63
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
The information required by this item is incorporated
by reference to our Proxy Statement for the 2025 Annual Meeting of Stockholders to be filed
with the Securities and Exchange Commission
within 120 days of the fiscal year ended December 31, 2024.
Our Board of Directors has adopted a written Code
of Business Conduct and Ethics applicable to all officers, directors and employees, which is
available on our website (www.cnspharma.com)
under “Governance Documents” within the “Corporate Governance” section. We intend to satisfy the
disclosure requirement
under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of this Code and by posting such information on
the website
address and location specified above.
Item 11.
Executive Compensation
The information required by this item is incorporated
by reference to our Proxy Statement for the 2025 Annual Meeting of Stockholders to be filed
with the Securities and Exchange Commission
within 120 days of the fiscal year ended December 31, 2024.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated
by reference to our Proxy Statement for the 2025 Annual Meeting of Stockholders to be filed
with the Securities and Exchange Commission
within 120 days of the fiscal year ended December 31, 2024.
Securities Authorized for Issuance under Equity Compensation
Plans
The following table sets forth information regarding
our equity compensation plans at December 31, 2024:
Plan category
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(a)
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
Number of securities
(by class) remaining
available
for future
issuance under equity
compensation
plans (excluding
securities reflected in
column
(a))
(c)
Equity compensation plans approved by security holders (1)
59,698 $
18.55
545,610
(1) Represents shares of common stock issuable upon exercise of outstanding stock options and rights under our 2017 and 2020 Stock Plans.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated
by reference to our Proxy Statement for the 2025 Annual Meeting of Stockholders to be filed
with the Securities and Exchange Commission
within 120 days of the fiscal year ended December 31, 2024.
Item 14.
Principal Accounting Fees and Services
The information required by this item is incorporated
by reference to our Proxy Statement for the 2025 Annual Meeting of Stockholders to be filed
with the Securities and Exchange Commission
within 120 days of the fiscal year ended December 31, 2024.
64
PART IV
Item 15.
Exhibits, Financial Statement Schedules
(a)
The following documents are filed or furnished as part of this Form 10-K:
1.
Financial Statements. Reference is made to the Index to Financial Statements under Item 8, Part II hereof.
2.
Financial Statement Schedules. The Financial Statement Schedules have been omitted either because they are not required or
because the information has been included in the financial statements or the notes thereto included in this Annual Report on
Form 10-K.
3.
Exhibits
EXHIBIT INDEX
Exhibit
Number
Description of Document
3.1
Amended and Restated Articles of Incorporation of CNS Pharmaceuticals, Inc. (filed as exhibit 2.1 to the Company’s Form 1-A file no.
024-10855)
3.2
Certificate of Amendment to the Amended and Restated Articles of Incorporation of CNS Pharmaceuticals, Inc., filed with the Secretary
of State of the State of Nevada (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the Commission
on November 28, 2022)
3.3
Certificate of Amendment to the Amended and Restated Articles of Incorporation of CNS Pharmaceuticals, Inc., filed with the Secretary
of State of the State of Nevada (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the Commission
on May 3, 2024)
3.4
Certificate of Amendment to the Amended and Restated Articles of Incorporation of CNS Pharmaceuticals, Inc., filed with the Secretary
of State of the State of Nevada (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the Commission
on June 5, 2024)
3.5
Amended and Restated Bylaws of CNS Pharmaceuticals, Inc. (filed as exhibit 3.1 to the Company’s Form 8-K filed August 15, 2023)
4.1 *
Description of Securities of CNS Pharmaceuticals, Inc.
4.2
Form of Warrant issued in January 2022 offering (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with
the Commission on January 6, 2022)
4.3
Form of Common Warrant issued in November 2023 offering (filed as exhibit 4.8 to the Company’s Form S-1 file no. 333-267975)
4.4
Form of Placement Agent Warrant issued in November 2023 offering (filed as exhibit 4.9 to the Company’s Form S-1 file no. 333-
267975)
4.5
Form of Inducement Warrant issued in October 2023 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed
with the Commission on October 17, 2023)
65
Exhibit
Number
Description of Document
4.6
Form of Series A Common Warrant issued January 2024 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K
filed with the Commission on February 2, 2024)
4.7
Form of Series B Common Warrant issued January 2024 (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K
filed with the Commission on February 2, 2024)
4.8
Form of Pre-Funded Warrant issued January 2024 (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed with
the Commission on February 2, 2024)
4.9
Form of Warrant issued June 14 2024 (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed with the
Commission on June 14, 2024)
4.9
Form of Pre-Funded Warrant issued June 14 2024 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with
the Commission on June 14, 2024)
4.10
Form of Warrant issued June 26 2024 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the
Commission on June 26, 2024)
4.11
Form of Warrant issued July 3 2024 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the
Commission on July 3, 2024)
4.12
Form of Pre-Funded Warrant issued October 23 2024 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed
with the Commission on October 24, 2024)
10.1
Amended And Restated Patent License Agreement effective as of December 28, 2017 between CNS Pharmaceuticals, Inc. and Houston
Pharmaceuticals, Inc. (filed as exhibit 6.1 to the Company’s Form 1-A file no. 024-10855)
10.2
Collaboration and Asset Purchase Agreement between CNS Pharmaceuticals, Inc. and Reata Pharmaceuticals, Inc. dated November 21,
2017 (filed as exhibit 6.2 to the Company’s Form 1-A file no. 024-10855)
10.3 **
2017 Stock Plan of CNS Pharmaceuticals, Inc. (filed as exhibit 6.3 to the Company’s Form 1-A file no. 024-10855)
10.4 **
Employment Agreement between CNS Pharmaceuticals, Inc. and John M. Climaco dated September 1, 2017 (filed as exhibit 6.4 to the
Company’s Form 1-A file no. 024-10855)
10.5
Sublicense Agreement between CNS Pharmaceuticals, Inc. and WPD Pharmaceuticals, Inc. dated August 30, 2018 (filed as exhibit 6.6
to the Company’s Form 1-A Amendment file no. 024-10855)
10.6
Sublicense Agreement between CNS Pharmaceuticals, Inc. and Animal Life Sciences, LLC. dated August 31, 2018 (filed as exhibit 6.7
to the Company’s Form 1-A Amendment file no. 024-10855)
10.7 **
Employment Letter between CNS Pharmaceuticals, Inc. and Donald Picker (filed as exhibit 10.8 to the Company’s Form S-1
Amendment file no. 333-232443)
66
Exhibit
Number
Description of Document
10.8 **
Employment Letter between CNS Pharmaceuticals, Inc. and Sandra Silberman (filed as exhibit 10.9 to the Company’s Form S-1
Amendment file no. 333-232443)
10.9 **
Employment Agreement between CNS Pharmaceuticals, Inc. and Christopher Downs (filed as exhibit 10.10 to the Company’s Form S-1
Amendment file no. 333-232443)
10.10 **
2020 Stock Plan of CNS Pharmaceuticals, Inc. (as amended) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-
K filed with the Commission on May 3, 2024)
10.11**
Amendment to Employment Agreement between CNS Pharmaceuticals, Inc. and John Climaco dated September 1, 2020 (filed as exhibit
99.1 to the Company’s Form 8-K filed September 4, 2020)
10.12
Non-Employee Director Compensation Policy effective July 15, 2021 (incorporated by reference to Exhibit 10.1 to the Company’s Form
10-Q filed with the Commission on August 12, 2022)
10.13
Form of Placement Agent Agreement in November 2023 offering (filed as exhibit 10.21 to the Company’s Form S-1 file no. 333-
267975)
10.14
Form of Securities Purchase Agreement in January 2024 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K
filed with the Commission on February 2, 2024)
10.15
Form of Amendment to Common Stock Warrants (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed
with the Commission on February 2, 2024)
10.15
Form of Securities Purchase Agreement in June 14 2024 offering (incorporated by reference to Exhibit 10.1 to the Current Report on
Form 8-K filed with the Commission on June 14, 2024)
10.16
Financial Advisory Agreement between CNS Pharmaceuticals, Inc. and A.G.P./Alliance Global Partners (incorporated by reference to
Exhibit 10.2 to the Current Report on Form 8-K filed with the Commission on June 14, 2024)
10.17
Form of Securities Purchase Agreement in June 26 2024 offering (incorporated by reference to Exhibit 10.1 to the Current Report on
Form 8-K filed with the Commission on June 26, 2024)
10.18
Financial Advisory Agreement between CNS Pharmaceuticals, Inc. and A.G.P./Alliance Global Partners (incorporated by reference to
Exhibit 10.2 to the Current Report on Form 8-K filed with the Commission on June 26, 2024)
10.19
Form of Securities Purchase Agreement in July 3 2024 offering (incorporated by reference to Exhibit 10.1 to the Current Report on Form
8-K filed with the Commission on July 3, 2024)
10.20
Financial Advisory Agreement between CNS Pharmaceuticals, Inc. and A.G.P./Alliance Global Partners (incorporated by reference to
Exhibit 10.2 to the Current Report on Form 8-K filed with the Commission on July 3, 2024)
10.21
Sales Agreement, dated July 26, 2024, by and between CNS Pharmaceuticals, Inc. and A.G.P./Alliance Global Partners (incorporated by
reference to Exhibit 1.1 to the Current Report on Form 8-K filed with the Commission on July 26, 2024)
67
Exhibit
Number
Description of Document
10.22
Form of Waiver and Consent (incorporated by reference
to Exhibit 10.1 to the Current Report on Form 8-K filed with the Commission
on July 26, 2024)
10.23
Exclusive License Agreement between CNS Pharmaceuticals, Inc. and Cortice Biosciences, Inc. (incorporated by reference to Exhibit
10.1 to the Current Report on Form 8-K filed with the Commission on July 30, 2024)
10.24
Stock Purchase Agreement between CNS Pharmaceuticals, Inc. and Cortice Biosciences, Inc. (incorporated by reference to Exhibit 10.2
to the Current Report on Form 8-K filed with the Commission on July 30, 2024)
10.25
Form of Securities Purchase Agreement in October 23 2024 offering (incorporated by reference to Exhibit 10.1 to the Current Report on
Form 8-K filed with the Commission on October 24, 2024)
10.26
Placement Agency Agreement between CNS Pharmaceuticals, Inc. and A.G.P./Alliance Global Partners (incorporated by reference to
Exhibit 1.1 to the Current Report on Form 8-K filed with the Commission on October 24, 2024)
19.1 *
Insider Trading Policy
23.1 *
Consent of MaloneBailey LLP
31.1 *
Certification of Principal Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended
31.2 *
Certification of Principal Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended
32.1 *
Certification of Principal Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2 *
Certification of Principal Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
97
CNS Pharmaceuticals, Inc. Restatement Recoupment Policy
(incorporated by reference to Exhibit 97 to the Annual Report on Form 10-
K filed with the Commission on April 1, 2024)
101.INS
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are
embedded within the Inline XBRL document)**
101.SCH
Inline XBRL Taxonomy Extension Schema Document**
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document**
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document**
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
*
Filed herewith.
**
Management contract or compensatory plan, contract or arrangement.
+
Pursuant to Item 601(b)(10)(iv) of Regulation S-K promulgated by the SEC, certain portions of this exhibit have been redacted. The Company
hereby agrees to furnish supplementally to the SEC, upon its request, an unredacted copy of this exhibit.
Item 16.
10-K Summary
None.
68
SIGNATURES
Pursuant to the requirements of Section 13
or 15(d) Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto
duly authorized
CNS PHARMACEUTICALS, INC.
Date: March 31, 2025
By:
/s/ John Climaco
John Climaco
Chief Executive Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
Registrant and in the capacity and on
the dates indicated.
Date: March 31, 2025
By:
/s/ John Climaco
John Climaco
Chief Executive Officer, President and Director
(Principal Executive Officer)
Date: March 31, 2025
/s/ Christopher Downs
Christopher Downs
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: March 31, 2025
/s/ Faith Charles
Faith Charles
Director
Date: March 31, 2025
/s/ Jerzy (George) Gumulka
Jerzy (George) Gumulka
Director
Date: March 31, 2025
/s/ Jeffry Keyes
Jeffry Keyes
Director
Date: March 31, 2025
/s/ Bettina Cockroft
Bettina Cockroft
Director
Date: March 31, 2025
/s/ Amy Mahery
Amy Mahery
Director
69
EXHIBIT 4.1
DESCRIPTION OF THE COMPANY’S SECURITIES
The following summary is a description of the material terms of
our capital stock. This summary is not complete, and is qualified by reference to our
amended and restated articles of incorporation,
and our amended and restated bylaws, which are filed as exhibits to this Annual Report on Form 10-K and
are incorporated by reference
herein. We encourage you to read our amended and restated articles of incorporation, our amended and restated bylaws and
the applicable
provisions of the Nevada Revised Statutes for additional information.
Our amended and restated articles of incorporation authorize us to
issue up to 75,000,000 shares of common stock and 5,000,000 shares of preferred stock.
Common Stock
Shares of our common stock have the following rights, preferences and
privileges:
Voting
Each holder of common stock is entitled to one vote for each share
of common stock held on all matters submitted to a vote of stockholders. Any action at
a meeting at which a quorum is present will be
decided by a majority of the voting power present in person or represented by proxy, except in the case of
any election of directors,
which will be decided by a plurality of votes cast. There is no cumulative voting.
Dividends
Holders of our common stock are entitled to receive dividends when,
as and if declared by our board of directors out of funds legally available for payment,
subject to the rights of holders, if any, of
any class of stock having preference over the common stock. Any decision to pay dividends on our common stock
will be at the discretion
of our board of directors. Our board of directors may or may not determine to declare dividends in the future. See “Dividend
Policy.”
The board’s determination to issue dividends will depend upon our profitability and financial condition any contractual restrictions,
restrictions
imposed by applicable law and the SEC, and other factors that our board of directors deems relevant.
Liquidation Rights
In the event of a voluntary or involuntary liquidation, dissolution
or winding up of the Company, the holders of our common stock will be entitled to share
ratably on the basis of the number of shares held
in any of the assets available for distribution after we have paid in full, or provided for payment of, all of
our debts and after the
holders of all outstanding series of any class of stock have preference over the common stock, if any, have received their liquidation
preferences in full.
Other
Our issued and outstanding shares of common stock are fully paid and
nonassessable. Holders of shares of our common stock are not entitled to preemptive
rights. Shares of our common stock are not convertible
into shares of any other class of capital stock, nor are they subject to any redemption or sinking fund
provisions.
1
Preferred Stock
We are authorized to issue up to 5,000,000 shares of preferred stock.
Our articles of incorporation authorizes the board to issue these shares in one or more
series, to determine the designations and the
powers, preferences and relative, participating, optional or other special rights and the qualifications,
limitations and restrictions
thereof, including the dividend rights, conversion or exchange rights, voting rights (including the number of votes per share),
redemption
rights and terms, liquidation preferences, sinking fund provisions and the number of shares constituting the series. Our board of directors
could,
without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and
other rights of the holders
of common stock and which could have the effect of making it more difficult for a third party to acquire,
or of discouraging a third party from attempting to
acquire, a majority of our outstanding voting stock.
Warrants
As of December 31, 2024, we had outstanding warrants to purchase an
aggregate of 59,579 shares of common stock at a weighted average exercise price of
$465.88, expiring between December 28, 2025 and October
24, 2029.
With respect to the foregoing warrants, in the event of a fundamental
transaction, as described in the warrants and generally including any reorganization,
recapitalization or reclassification of our common
stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our
consolidation or merger with
or into another person, the acquisition of more than 50% of our outstanding common stock, or any person or group becoming
the beneficial
owner of 50% of the voting power represented by our outstanding common stock, the holders of the warrants will have the right at any time
prior to the consummation of the fundamental transaction to require us to repurchase the warrants for a purchase price in cash equal to
the Black-Scholes
value (as calculated under the warrant agreement) of the then remaining unexercised portion of such common warrant on
the date of such fundamental
transaction, which may materially adversely affect our financial condition and/or results of operations and
may prevent or deter a third party from acquiring
us.
Except by virtue of such holder’s ownership of shares of our
common stock, the holder of a warrant does not have the rights or privileges of a holder of our
common stock, including any voting rights,
until the holder exercises the warrant.
Articles of Incorporation and Bylaw Provisions
Our articles of incorporation and bylaws include a number of anti-takeover
provisions that may have the effect of encouraging persons considering
unsolicited tender offers or other unilateral takeover proposals
to negotiate with our board of directors rather than pursue non-negotiated takeover attempts.
These provisions include:
Advance Notice Requirements. Our bylaws establish advance notice
procedures with regard to stockholder proposals relating to the nomination of
candidates for election as directors or new business to
be brought before meetings of stockholders. These procedures provide that notice of stockholder
proposals must be timely and given in
writing to our corporate Secretary. Generally, to be timely, notice must be received at our principal executive offices
not fewer than
120 calendar days prior to the first anniversary date on which our notice of meeting and related proxy statement were mailed to stockholders
in connection with the previous year’s annual meeting of stockholders. The notice must contain the information required by the bylaws,
including
information regarding the proposal and the proponent.
Special Meetings of Stockholders. Our bylaws provide that special
meetings of stockholders may be called at any time by only the Chairman of the Board,
the Chief Executive Officer, the President or the
board of directors, or in their absence or disability, by any vice president.
No Written Consent of Stockholders. Our articles of incorporation
and bylaws provide that any action required or permitted to be taken by stockholders
must be effected at a duly called annual or special
meeting of stockholders and may not be effected by any consent in writing by such stockholders.
2
Amendment of Bylaws. Our stockholders may amend any provisions
of our bylaws by obtaining the affirmative vote of the holders of a majority of each
class of issued and outstanding shares of our voting
securities, at a meeting called for the purpose of amending and/or restating our bylaws.
Preferred Stock. Our articles of incorporation authorizes our
board of directors to create and issue rights entitling our stockholders to purchase shares of our
stock or other securities. The ability
of our board to establish the rights and issue substantial amounts of preferred stock without the need for stockholder
approval may delay
or deter a change in control of us. See “Preferred Stock” above.
Nevada Takeover Statute
The Nevada Revised Statutes contain provisions governing the acquisition
of a controlling interest in certain Nevada corporations. Nevada’s “acquisition of
controlling interest” statutes (NRS
78.378 through 78.3793, inclusive) contain provisions governing the acquisition of a controlling interest in certain
Nevada corporations.
These “control share” laws provide generally that any person that acquires a “controlling interest” in certain
Nevada corporations
may be denied voting rights, unless a majority of the disinterested stockholders of the corporation elects to restore
such voting rights. These laws will apply
to us if we were to have 200 or more stockholders of record (at least 100 of whom have addresses
in Nevada appearing on our stock ledger) and do
business in the State of Nevada directly or through an affiliated corporation, unless
our articles of incorporation or bylaws in effect on the tenth day after
the acquisition of a controlling interest provide otherwise.
These laws provide that a person acquires a “controlling interest” whenever a person acquires
shares of a subject corporation
that, but for the application of these provisions of the NRS, would enable that person to exercise (1) one-fifth or more, but
less than
one-third, (2) one-third or more, but less than a majority or (3) a majority or more, of all of the voting power of the corporation in
the election of
directors. Once an acquirer crosses one of these thresholds, shares which it acquired in the transaction taking it over
the threshold and within the 90 days
immediately preceding the date when the acquiring person acquired or offered to acquire a controlling
interest become “control shares” to which the voting
restrictions described above apply. These laws may have a chilling effect
on certain transactions if our amended and restated articles of incorporation or
amended and restated bylaws are not amended to provide
that these provisions do not apply to us or to an acquisition of a controlling interest, or if our
disinterested stockholders do not confer
voting rights in the control shares.
Nevada’s “combinations with interested stockholders”
statutes (NRS 78.411 through 78.444, inclusive) provide that specified types of business
“combinations” between certain Nevada
corporations and any person deemed to be an “interested stockholder” of the corporation are prohibited for two
years after
such person first becomes an “interested stockholder” unless the corporation’s board of directors approves the combination
(or the transaction by
which such person becomes an “interested stockholder”) in advance, or unless the combination is approved
by the board of directors and 60% of the
corporation’s voting power not beneficially owned by the interested stockholder, its affiliates
and associates. Furthermore, in the absence of prior approval
certain restrictions may apply even after such two-year period. For purposes
of these statutes, an “interested stockholder” is any person who is (1) the
beneficial owner, directly or indirectly, of 10%
or more of the voting power of the outstanding voting shares of the corporation, or (2) an affiliate or
associate of the corporation and
at any time within the two previous years was the beneficial owner, directly or indirectly, of 10% or more of the voting
power of the
then-outstanding shares of the corporation. The definition of the term “combination” is sufficiently broad to cover most significant
transactions between a corporation and an “interested stockholder”. These laws generally apply to Nevada corporations with
200 or more stockholders of
record. However, a Nevada corporation may elect in its articles of incorporation not to be governed by these
particular laws, but if such election is not made
in the corporation’s original articles of incorporation, the amendment (1) must
be approved by the affirmative vote of the holders of stock representing a
majority of the outstanding voting power of the corporation
not beneficially owned by interested stockholders or their affiliates and associates, and (2) is
not effective until 18 months after the
vote approving the amendment and does not apply to any combination with a person who first became an interested
stockholder on or before
the effective date of the amendment. We have not made such an election in our original articles of incorporation or in our amended
and
restated articles of incorporation
Limitations on Liability and Indemnification of Officers and Directors
Our articles of incorporation and bylaws limit the liability of our
officers and directors and provide that we will indemnify our officers and directors, in
each case, to the fullest extent permitted by
the Nevada Revised Statutes.
Listing
Our common stock is listed on the Nasdaq Capital Market under the symbol
“CNSP”.
Transfer Agent
The transfer agent for our common stock is Continental Stock Transfer
and Trust.
.
3
EXHIBIT 19.1
Insider Trading Policy
CNS Pharmaceuticals, Inc.
Effective March 1, 2022
Table of Contents
Introduction
2
Sanctions and Penalties
2
Persons Covered
2
Definition of Material Non-Public Information
2
Requirements Applicable to Everyone
3
No trading in CNS securities while aware of material non-public information
3
Event-specific blackout periods may apply
4
No “tipping” of material non-public information
5
Frequent trading of CNS securities is strongly discouraged
5
No short sales of CNS securities
5
No trading in derivatives of CNS
5
No hedging transactions
5
No margin accounts or pledges
5
Limited use of standing orders
5
No trading on rumors
6
Material non-public information must be kept confidential
6
Participation in electronic bulletin boards, chat rooms, blogs or websites must be consistent with this Policy
6
Public disclosures should be made only by designated persons
6
Post-employment transactions may be prohibited
6
Exceptions
6
Additional Requirements Applicable to Restricted Persons
7
Quarterly blackout periods
7
Trading pre-clearance requirement for certain Restricted Persons
7
10b5-1 Plans
8
Inquiries
8
1
Introduction
The Board of Directors of CNS has adopted this policy to provide guidelines
to all directors, officers, associates and consultants of CNS with respect to
trading in CNS securities, as well as the securities of
publicly traded companies with whom CNS has a business relationship.
This policy has been designed to prevent insider trading or even allegations
of insider trading. Your strict adherence to this policy will help safeguard CNS’
reputation and will further ensure that CNS conducts
its business with the highest level of integrity and in accordance with the highest ethical standards.
Each CNS associate is responsible
for the consequences of his or her actions. You are responsible for understanding and complying with this policy.
Federal and state securities laws prohibit the purchase or sale of
a company’s securities by anyone who is aware of material information about that
company that is not generally known or available
to the public. These laws also prohibit anyone who is aware of material nonpublic information from
disclosing this information to others
who may trade. Companies and their controlling persons may also be subject to liability if they fail to take reasonable
steps to prevent
insider trading by company personnel.
It is important that you understand the breadth of activities that
constitute illegal insider trading and the consequences, which can be severe. Cases have
been successfully prosecuted against trading
by associates through foreign accounts, trading by family members and friends, and trading involving only a
small number of shares. Both
the U.S. Securities and Exchange Commission (the “SEC”) and the Financial Industry Regulatory Authority (“FINRA”)
investigate and are very effective at detecting insider trading. Both the SEC and the U.S. Department of Justice pursue insider trading
violations vigorously.
Sanctions and Penalties
Violations of the insider trading laws can result in severe civil and
criminal sanctions. For example, under U.S. securities laws, individuals may be subject
to imprisonment for up to 20 years, criminal fines
of up to $5 million and civil fines of up to three times the profit gained or loss avoided. Failure to comply
with this policy may also
subject you to sanctions imposed by CNS, up to and including immediate dismissal for cause, whether or not your failure to
comply with
this policy results in a violation of law.
Persons Covered
As a director, officer, associate or consultant of CNS or its subsidiaries,
this policy applies to you. The same restrictions that apply to you apply to your
family members who reside with you, anyone else who
lives in your household, and any family members who do not live in your household but whose
transactions in CNS securities are directed
by you or are subject to your influence or control (such as parents or children who consult with you before they
trade in CNS securities).
You are responsible for making sure that any transaction in securities covered by this policy by any of these people complies with
this
policy.
Definition of Material Non-Public Information
“Material non-public information” is any material information
about CNS that has not yet become publicly available.
2
Information is “material” if a reasonable investor would
likely consider it important in making a decision to buy, hold or sell securities. Any information
that could reasonably be expected to
affect the price of the security is material. The information may be positive or negative. Financial information is
frequently material,
even if it covers only part of a fiscal period or less than all of CNS’s operations, since either of these might convey enough information
about CNS’s consolidated results to be considered material information. Other common examples of information that may be material
include:
·
information regarding sales, revenues or earnings (including projections);
·
financial forecasts of any kind, including earnings estimates or changes in previously announced earnings estimates;
·
significant business trends and metrics;
·
significant proposed mergers, acquisitions, investments or divestitures;
·
significant developments in products or services;
·
gain or loss of substantial customers;
·
execution or termination of significant contracts;
·
financings or restructurings;
·
significant unusual gains or losses;
·
changes in business strategies;
·
developments in significant litigation or government investigations;
·
public or private debt or equity offerings;
·
significant changes in senior management;
·
CNS share repurchases; or
·
stock splits or dividend information.
It is not possible to define all categories of material information,
and you should recognize that the public, the media and the courts may use hindsight in
judging what is material. Therefore, it is important
to err on the safe side and assume information is material if there is any doubt.
Information is “non-public” if it is not generally known
or available to the public. Information may still be non-public even though it is widely known
within CNS.
Release of information to the media does not immediately mean the information
has become publicly available. Information is considered to be available to
the public only when it has been released broadly to the marketplace
(such as by a press release or an SEC filing) and the investing public has had time to
absorb and evaluate it. Ordinarily, information
about CNS should not be considered public until at least one full trading day has passed following its formal
release to the market. For
example, if CNS announces earnings before trading begins on a Tuesday, the first time you can buy or sell CNS securities is the
opening
of the market on Wednesday (assuming you are not aware of other material non-public information at that time). If, however, CNS announces
earnings after trading begins that Tuesday, the first time you can buy or sell CNS securities is the opening of the market on the Thursday.
Requirements Applicable to Everyone
No trading in CNS securities while aware of material non-public
information
You are prohibited from engaging in any transaction in CNS securities
while aware of material non-public information about CNS. It makes no difference
whether or not you relied upon or used material non-public
information in deciding to trade – if you are aware of material non-public information about
CNS, the prohibition applies. You should
avoid even the appearance of an improper transaction to preserve CNS’s reputation for adhering to the highest
ethical standards
of conduct.
3
This prohibition covers virtually all transactions in CNS securities.
“Securities” includes common stock, options to purchase common stock, debt securities,
preferred stock and derivative securities
such as put and call options, warrants, swaps, caps and collars. Transactions in CNS securities include purchases,
sales, pledges, hedges,
loans and gifts of CNS securities, as well as other direct or indirect transfers of CNS securities. Certain of these transactions are
addressed in more detail below and may not be permitted under this policy. This prohibition extends to trades of CNS securities in which
you have any
“beneficial” or other interest, or over which you exercise investment control, including:
·
transactions in CNS securities held in joint accounts or accounts of persons or entities controlled directly or indirectly by you;
·
transactions in CNS securities for which you act as trustee, executor or custodian; and
·
transactions in any other account or investment involving in any way any CNS securities over which you exercise any direct or indirect
control.
Stock Option Exercises.
·
Exercise and Hold. This prohibition does not apply to the exercise of stock options issued under CNS plans if the exercise
price is paid in cash or
through CNS withholding a portion of the shares underlying the options and the underlying shares acquired (net
of any withholding) are held (not
sold into the market). Similarly, CNS may withhold underlying shares to satisfy tax withholding requirements.
·
Exercise and Sell / Cashless Exercise. This prohibition does apply, however, to sales of the underlying stock and broker-assisted
cashless
exercises of options, as well as to any other market sales for the purpose of generating the cash needed to cover the costs of
exercise.
Vesting of Restricted Stock or Settlement of Performance Stock
Units. This prohibition does not apply to the automatic deduction of shares by CNS from
your restricted stock or performance stock
unit account to satisfy the minimum statutory tax withholding liability upon the vesting of restricted stock or
settlement of performance
stock units. The prohibition does apply, however, to any open market sale of vested shares, including to satisfy tax liabilities.
10b5-1 Plans. This prohibition does not apply to trades
made pursuant to a valid “10b5-1 plan” approved by CNS as described below.
Dividend Reinvestment Plan. This prohibition does not
apply to purchases of CNS stock under the CNS dividend reinvestment plan (if such a plan has
been established, which as of the date of
this policy, one has not been established) that result from your reinvestment of dividends paid on CNS stock held
in such plan. This prohibition
does apply, however, to other purchases of CNS stock under the plan that result from additional contributions you choose to
make to the
dividend reinvestment plan, or to increases or decreases in your level of participation in the plan. This prohibition also applies to
your sale of
any CNS securities purchased pursuant to the plan.
Event-specific blackout periods may apply
Although you are always responsible for monitoring for yourself whether
you possess material non-public information, from time to time CNS may decide
to impose a special trading blackout on those who are aware
of particular information that CNS determines may be considered material non-public
information. This kind of trading blackout may be
imposed in connection with a potential acquisition, a financial analyst conference, an anticipated positive
or negative earnings surprise
or other material development. If you are subject to the blackout, you may not trade in any CNS securities, except pursuant to
a 10b5-1
plan previously approved by CNS, until notified that the blackout has ended.
The Compliance Officer (which shall initially be the Chief Financial
Officer) , in consultation with the Chief Executive Officer and the Chief Financial
Officer, will determine whether an event-specific
blackout should be imposed. The existence of an event-specific blackout will not be generally announced.
If you are covered by the event-specific
blackout, you will be notified by the Compliance Officer. Any person made aware of an event-specific blackout
should not disclose the
existence of the blackout to anyone else.
No trading in securities of other companies while aware of material
non-public information.
CNS may engage in business transactions with companies whose securities
are publicly traded. These transactions may include, among other things,
mergers, acquisitions, divestitures or renewal or termination
of significant contracts or other arrangements. Information learned in connection with these
transactions or relationships may constitute
material non-public information about the other company. You are prohibited from trading in the securities of
these companies while aware
of material non-public information about the companies and from communicating that information to any other person for
such use.
4
No “tipping” of material non-public information
You may not pass material non-public information about CNS or any other
company on to others or otherwise make unauthorized disclosure or use of this
information, regardless of whether you profit or intend
to profit by the tipping, disclosure, or use. This practice, known as “tipping”, also violates the
securities laws and can
result in the same civil and criminal penalties that apply to insider trading, even though you did not trade and did not gain any
benefit
from another's trading.
Frequent trading of CNS securities is strongly discouraged
Frequent trading of CNS securities can create an appearance of wrongdoing
even if the decision to trade was based solely on public information such as
stock price ranges and other market events. You are strongly
discouraged from trading in CNS securities for short-term trading profits. Daily or frequent
trading, which can be time-consuming and
distracting, is strongly discouraged. CNS reserves the right to request brokerage account statements to assure
compliance with this and
other provisions of the policy.
No short sales of CNS securities
You may not engage in short sales of CNS securities (sales of securities
that are not then owned), including “sales against the box” (short sales not
exceeding the number of shares already owned).
Generally, short sales are transactions whereby a person will benefit from a decline in the price of the
securities, and CNS believes
it is inappropriate for associates to engage in these transactions with respect to CNS securities.
No trading in derivatives of CNS
You may not trade in derivatives of an CNS security, such as exchange-traded
put or call options and forward transactions.
No hedging transactions
Certain forms of hedging or monetization transactions may offset a
decrease, or limit your ability to profit from an increase, in the value of CNS securities
you hold, enabling you to continue to own CNS
securities without the full risks and rewards of ownership. CNS believes that such transactions separate the
holder's interests from those
of other stockholders. Therefore, you and any person acting on your behalf are prohibited from purchasing any financial
instruments (such
as prepaid variable forward contracts, equity swaps, collars or exchange funds) or otherwise engaging in any transactions that hedge or
offset any decrease in the market value of CNS securities or limit your ability to profit from an increase in the market value of CNS
securities.
No margin accounts or pledges
Securities held in a margin account or pledged as collateral for a
loan may be sold without your consent by the broker if you fail to meet a margin call or by
the lender in foreclosure if you default on
the loan. Because a margin or foreclosure sale may occur at a time when you are aware of material nonpublic
information or otherwise are
not permitted to trade in CNS securities, you are prohibited from holding CNS securities in a margin account or pledging CNS
securities
as collateral for a loan.
Limited use of standing orders
Standing orders should be used only for three business days. A standing
order placed with a broker to sell or purchase stock at a specified price leaves you
with no control over the timing of the transaction.
A standing order transaction executed by the broker when you are aware of material nonpublic
information may result in unlawful insider
trading. A standing order incorporated into a 10b5-1 plan approved by CNS is permitted.
5
No trading on rumors
Rumors within CNS concerning matters which, if true, would be material
non-public information are deemed to constitute material non-public information
for purposes of this policy. Accordingly, you should not
trade on the basis of these rumors.
Material non-public information must be kept confidential
Material non-public information about CNS or its business partners
is the property of CNS, and unauthorized disclosure or use of that information is
prohibited. That information should be maintained in
strict confidence and should be discussed, even within CNS, only with persons who have a “need to
know.” You should exercise
the utmost care and circumspection in dealing with information that may be material non-public information. Conversations in
public places,
such as hallways, elevators, restaurants and airplanes, involving information of a sensitive or confidential nature should be avoided.
Written
information should be appropriately safeguarded and should not be left where it may be seen by persons not entitled to the information.
The unauthorized
disclosure of information could result in serious consequences to CNS, whether or not the disclosure is made for the
purpose of facilitating improper
trading in securities.
Participation in electronic bulletin boards, chat rooms, blogs
or websites must be consistent with this Policy
Any written or verbal statement that would be prohibited under the
law or under this policy is equally prohibited if made on electronic bulletin boards, chat
rooms, blogs, websites or any other form of
social media, including the disclosure of material non-public information about CNS or material non-public
information with respect to
other companies that you come into possession of as an associate of CNS.
Public disclosures should be made only by designated persons
No individuals other than specifically authorized personnel should
release material information to the public or respond to inquiries from the media,
analysts, investors or others outside of CNS. You should
not respond to these inquiries unless expressly authorized to do so and should refer any inquiries
to the Chief Executive Officer or Chief
Financial Officer.
Post-employment transactions may be prohibited
The portions of this policy relating to trading while in possession
of material non-public information and the use or disclosure of that information continue
to apply to transactions in CNS securities even
after termination of employment or association with CNS. If you are aware of material non-public
information about CNS when your employment
or other business relationship with CNS ends, you may not trade in CNS securities or disclose the material
non-public information to anyone
else until that information is made public or becomes no longer material.
Exceptions
In certain limited circumstances, a transaction otherwise prohibited
by this policy may be permitted if, prior to the transaction, the Compliance Officer
determines that the transaction is not inconsistent
with the purposes of this policy. The existence of a personal financial emergency does not excuse you
from compliance with this policy
and will not be the basis for an exception to the policy for a transaction that is inconsistent with the purposes of the
policy.
6
Additional Requirements Applicable to Restricted Persons
“Restricted Persons” are those who are at an
enhanced risk of possessing inside information and who therefore must exercise greater diligence to comply
with insider trading prohibitions.
This group includes all members of the Board of Directors, officers and certain senior finance, clinical, legal, HR,
business development,
investor relations, corporate communication and management associates, as well as any other associates in a role that makes it likely
they will have involvement with material non-public information. This list is updated on a quarterly basis by the Chief Financial Officer
in consultation
with the Compliance Officer. You will be notified by the Chief Financial Officer if you are considered a Restricted Person
under this policy, and you will
remain so until notified of a change in such status.
If you are a Restricted Person that is not a director or executive
officer, the procedures set forth in this section of the policy will cease to apply to your
transactions in CNS securities upon the expiration
of any blackout period that is applicable to your transactions at the time your employment or other
relationship with CNS ends. Directors
will remain Restricted Persons for a period of six months following the last day of service as a director of CNS, and
executive officers
will remain Restricted Persons for a period of six months following the last day of employment with CNS.
Quarterly blackout periods
No Restricted Person may trade in CNS securities during a quarterly
blackout period, regardless of whether they are then actually aware of material non-
public information.
A quarterly blackout period is in effect with respect to each quarterly
earnings announcement, starting on the 15th day of the third month of the applicable
CNS fiscal quarter and ending when two full trading
days have passed following the filing of Form 10-Q or Form 10-K with the SEC (as appropriate for
the period). CNS has selected this period
because it is the time when there is likely to be material non-public information about CNS that may be available
to Restricted Persons.
Note, that if you are in possession of material non-public information following the announcement of earnings and/or the filing of the
10-Q/10-K, the other provisions of this policy would remain in effect to prohibit you from trading.
For certain Restricted Persons designated by the Compliance Officer,
in consultation with the Chief Executive Officer and the Chief Financial Officer from
time to time, the quarterly blackout period may
start prior to the 15th day of the third month of the quarter.
Notwithstanding the above, a quarterly blackout period does not prohibit
trading in CNS securities pursuant to a valid pre-existing 10b5-1 plan approved by
CNS as described below.
Trading pre-clearance requirement for certain Restricted Persons
Certain Restricted Persons designated by the Chief Financial Officer,
in consultation with the Chief Executive Officer and the Compliance Officer from
time to time, must obtain pre-clearance by CNS’s
Compliance Officer or, in his or her absence, CNS’s Chief Executive Officer (each an “Approving
Person”) before engaging
in any transaction involving CNS securities, including, but not limited to, purchases, sales, and gifts. Those Restricted Persons
who
are required to obtain pre-clearance will be notified from time to time by the Compliance Officer of the applicable pre-clearance or other
procedures
applicable to them. Each Approving Person should consult with the other Approving Person, or his or her designee, prior to
granting pre-clearance for
trades. Neither Approving Person may engage in a transaction in CNS securities unless the other Approving Person
has pre-cleared the transaction.
The Approving Persons are under no obligation to approve a transaction
submitted for pre-clearance and may determine not to permit a transaction, even if
it would not violate the federal securities laws or
a specific provision of this policy. In certain circumstances, other associates may be asked to clear with an
Approving Person all proposed
transactions before initiating them. The fact that a particular intended trade has been denied pre-clearance should be treated
as confidential
information and should not be disclosed to any person unless authorized by the Approving Person.
If a request for pre-clearance is approved, you have three business
days to effect the transaction (or, if sooner, before commencement of a quarterly or
event-specific blackout period). Under no circumstance
may a person trade while aware of material non-public information about CNS, even if pre-cleared.
Thus, if you become aware of material
non-public information after receiving pre-clearance, but before the trade has been executed, you must not effect the
pre-cleared transaction.
CNS’s approval of any particular transaction under this pre-clearance
procedure does not insulate any Restricted Person from liability under the securities
laws. Under the law, the ultimate responsibility
for determining whether an individual is aware of material non-public information about CNS rests with
that individual in all cases.
7
10b5-1 Plans
SEC Rule 10b5-1(c) of the Securities Exchange Act of 1934 permits corporate
insiders to establish written trading plans (commonly referred to as “10b5-1
plans”) that can be useful in enabling insiders
to plan ahead without fear that they might become exposed to material non-public information that will
prevent them from trading. Where
a valid 10b5-1 plan has been established at a time when the insider was not in possession of material non-public
information, trades executed
as specified by the plan do not violate the securities laws or this policy even if the insider is in possession of material non-
public
information at the time the trade is executed. Trades executed as specified by the plan are not subject to the pre-clearance requirement.
To qualify as a 10b5-1 plan for purposes of this policy, the plan must
be approved in advance by the Compliance Officer, and you should allow at least five
business days for that approval. These pre-planned
trading programs are available only to officers and such other CNS associates as may be designated
from time to time by the Chief Executive
Officer, the Chief Financial Officer and the Compliance Officer. For more information about how to establish a
10b5-1 plan, please contact
the Compliance Officer. CNS reserves the right to disapprove any submitted plan, and to suspend or instruct you to terminate
any plan
that it has previously approved.
Inquiries
Any questions about this policy, its application to a proposed transaction,
or the requirements of applicable laws should be directed to the Chief Financial
Officer or Compliance Officer.
Adopted by the Board of Directors on March 1, 2022:
/s/ John Climaco
/s/ Christopher S. Downs
John Climaco
Christopher S. Downs
Chairman and Chief Executive Officer
Secretary to the Board and Chief Financial Officer
8
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
We consent to the incorporation
by reference in the Registration Statements on Forms S-3 (File Nos. 333-262262, 333-275671 and 333-279285), Forms S-8
(File Nos. 333-239998
and 333-275699), and Forms S-1 (File Nos. 333-249068, 333-267975, 333-251530, 333-275973, and 333-280790) of our report
dated March 31,
2025 with respect to the audited financial statements of CNS Pharmaceuticals, Inc. (the “Company”) appearing in this Annual
Report on
Form 10-K of the Company for the year ended December 31, 2024.
/s/ MaloneBailey, LLP
www.malonebailey.com
Houston, Texas
March 31, 2025
EXHIBIT 31.1
CERTIFICATION BY OFFICER
I, John Climaco, certify that:
1.
I have reviewed this Form 10-K for the year ended December 31, 2024 of CNS Pharmaceuticals, Inc.;
2.
Based on my knowledge, this 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
report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15(d)-15(f)) for the registrant and we have:
a.
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b.
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c.
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting.
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: March 31, 2025
By:
/s/ John Climaco
John Climaco
Chief Executive Officer and President
EXHIBIT 31.2
CERTIFICATION BY OFFICER
I, Christopher Downs, certify that:
1.
I have reviewed this Form 10-K for the year ended December 31, 2024 of CNS Pharmaceuticals, Inc.;
2.
Based on my knowledge, this 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
report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15(d)-15(f)) for the registrant and we have:
a.
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b.
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c.
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting.
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: March 31, 2025
By:
/s/ Christopher Downs
Christopher Downs
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION OF OFFICER
Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
(Subsections (a) and (b) of Section 1350,
Chapter 63 of Title 18, United States Code)
Pursuant to section 906 of the Sarbanes-Oxley Act
of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the
undersigned officer of CNS Pharmaceuticals,
Inc., a Nevada corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:
The Form 10-K for the year ended December 31, 2024
(the “Report”) of the Company fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act
of 1934, as amended, and information contained in the Report fairly presents, in all material respects, the financial
condition and results
of operations of the Company.
Date: March 31, 2025
By:
/s/ John Climaco
John Climaco
Chief Executive Officer and President
EXHIBIT 32.2
CERTIFICATION OF OFFICER
Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
(Subsections (a) and (b) of Section 1350,
Chapter 63 of Title 18, United States Code)
Pursuant to section 906 of the Sarbanes-Oxley Act
of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the
undersigned officer of CNS Pharmaceuticals,
Inc., a Nevada corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:
The Form 10-K for the year ended December 31, 2024
(the “Report”) of the Company fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act
of 1934, as amended, and information contained in the Report fairly presents, in all material respects, the financial
condition and results
of operations of the Company.
Date: March 31, 2025
By:
/s/ Christopher Downs
Christopher Downs
Chief Financial Officer