CNS Pharmaceuticals(CNSP) - 2024 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents the unaudited interim financial statements, management's discussion, market risk disclosures, and controls and procedures for CNS Pharmaceuticals, Inc Item 1. Financial Statements This section presents the unaudited interim financial statements, including Balance Sheets, Statements of Operations, Equity, Cash Flows, and comprehensive Notes, for periods ended June 30, 2024, and December 31, 2023 Balance Sheets Presents the company's financial position, including assets, liabilities, and equity, as of June 30, 2024, and December 31, 2023 Balance Sheet Highlights: | Metric | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,491,559 | $548,721 | | Total current assets | $2,145,396 | $1,591,170 | | Total assets | $2,469,269 | $1,700,853 | | Accounts payable and accrued expenses | $6,639,622 | $5,832,162 | | Notes payable | $123,248 | $300,806 | | Total current liabilities | $6,762,870 | $6,132,968 | | Total liabilities | $6,762,870 | $6,132,968 | | Total Stockholders' Equity (Deficit) | $(4,293,601) | $(4,432,115) | Statements of Operations Details the company's revenues, expenses, and net loss for the three and six months ended June 30, 2024, and 2023 Statements of Operations Highlights: | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | General and administrative | $1,411,573 | $1,179,833 | $2,526,015 | $2,538,585 | | Research and development | $1,116,562 | $2,845,553 | $3,546,974 | $6,413,312 | | Total operating expenses | $2,528,135 | $4,025,386 | $6,072,989 | $8,951,897 | | Loss from operations | $(2,528,135) | $(4,025,386) | $(6,072,989) | $(8,951,897) | | Net loss | $(2,530,753) | $(4,021,234) | $(6,075,501) | $(8,953,181) | | Loss per share - basic | $(6.72) | $(51.86) | $(22.08) | $(154.70) | | Loss per share - diluted | $(6.72) | $(51.86) | $(22.08) | $(154.70) | | Weighted average shares outstanding - basic | 376,643 | 77,547 | 275,113 | 57,874 | | Weighted average shares outstanding - diluted | 376,643 | 77,547 | 275,113 | 57,874 | Statements of Stockholders' Equity (Deficit) Outlines changes in the company's equity, including common stock, additional paid-in capital, and accumulated deficit, for the six months ended June 30, 2024, and 2023 Statements of Stockholders' Equity (Deficit) Highlights (Six Months Ended June 30, 2024): | Item | Shares | Common Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Equity (Deficit) | | :--- | :--- | :--- | :--- | :--- | :--- | | Balance December 31, 2023 | 124,306 | $124 | $65,134,664 | $(69,566,903) | $(4,432,115) | | Common stock issued for cash, net | 44,314 | $44 | $3,330,954 | – | $3,330,998 | | Exercise of warrants, net | 44,774 | $45 | $12,360 | – | $12,405 | | Stock-based compensation | – | – | $202,933 | – | $202,933 | | Net loss | – | – | – | $(3,544,748) | $(3,544,748) | | Balance, March 31, 2024 | 213,394 | $213 | $68,680,911 | $(73,111,651) | $(4,430,527) | | Common stock issued for cash and warrants, net | 904,000 | $904 | $2,423,509 | – | $2,424,413 | | Exercise of warrants, net | 208,260 | $208 | $8,713 | – | $8,921 | | Stock-based compensation | – | – | $234,345 | – | $234,345 | | Adjustment related to reverse stock split | 117,620 | $118 | $(118) | – | – | | Net loss | – | – | – | $(2,530,753) | $(2,530,753) | | Balance, June 30, 2024 | 1,443,274 | $1,443 | $71,347,360 | $(75,642,404) | $(4,293,601) | Statements of Cash Flows Reports the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2024, and 2023 Statements of Cash Flows Highlights: | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net loss | $(6,075,501) | $(8,953,181) | | Stock-based compensation | $437,278 | $579,983 | | Depreciation | $1,570 | $2,282 | | Prepaid expenses and other current assets (change) | $(13,067) | $823,073 | | Accounts payable and accrued expenses (change) | $807,460 | $(679,516) | | Net cash used in operating activities | $(4,842,450) | $(8,227,359) | | Payments of deferred offering costs | $(16,750) | – | | Payments on notes payable | $(177,558) | $(243,572) | | Proceeds from exercise of warrants | $21,326 | $725,668 | | Proceeds from sale of common stock and warrants, net | $5,958,270 | $1,969,107 | | Net cash provided by financing activities | $5,785,288 | $2,451,203 | | Net change in cash and cash equivalents | $942,838 | $(5,776,156) | | Cash and cash equivalents, at beginning of period | $548,721 | $10,055,407 | | Cash and cash equivalents, at end of period | $1,491,559 | $4,279,251 | | Cash paid for interest | $11,088 | $9,086 | | Cash paid for income taxes | – | – | | Reclassification of deferred offering costs to equity | $202,859 | – | Notes to the Financial Statements Provides detailed explanations of accounting policies, equity changes, commitments, and subsequent events supporting the financial statements Note 1 – Nature of Business CNS Pharmaceuticals, Inc. is a clinical pharmaceutical company focused on developing anti-cancer drug candidates. The company underwent two reverse stock splits, one on November 28, 2022 (1-for-30) and another on June 4, 2024 (1-for-50), both retroactively adjusted in the financial statements - The Company is a clinical pharmaceutical company focused on the development of anti-cancer drug candidates[12] - A 1-for-30 reverse stock split became effective on November 28, 2022, retroactively adjusted in financial statements[12] - A 1-for-50 reverse stock split became effective on June 4, 2024, retroactively adjusted in financial statements[13] Note 2 – Summary of Significant Accounting Policies This note outlines the company's significant accounting policies, including the basis of presentation for unaudited interim financial statements, the going concern assumption, and policies for cash and cash equivalents, stock-based compensation (RSUs and PUs), and loss per common share. The company acknowledges substantial doubt about its ability to continue as a going concern due to historical negative cash flows and net losses, and its reliance on future equity financings Basis of Presentation Describes the preparation of unaudited interim financial statements in accordance with U.S. GAAP - Unaudited financial statements are prepared in accordance with U.S. GAAP for interim financial information[14] - Operating results for the three and six months ended June 30, 2024, are not necessarily indicative of the final results for the year ending December 31, 2024[14] Liquidity and Going Concern Addresses the company's ability to continue operations, highlighting reliance on financing and historical negative cash flows - The Company's continuation as a going concern is dependent upon obtaining equity financings to continue operations[15] - A history of negative cash flows from operations and net losses raises substantial doubt regarding the Company's ability to continue as a going concern[15] - Management believes cash on hand is sufficient to fund planned operations into but not beyond the near term[15] Cash and Cash Equivalents Defines cash equivalents and notes the portion of cash balances exceeding federally insured limits - Cash equivalents include highly liquid accounts with original maturities of three months or less[17] - As of June 30, 2024, $1,241,559 in cash balances at financial institutions exceeded the federally insured limit of $250,000[17] Stock-based Compensation Explains the accounting treatment for employee and non-employee share-based compensation - Employee and non-employee share-based compensation is measured at the grant date fair value and recognized as an expense over the requisite service period[17] Restricted Stock Units (RSUs) Details the vesting schedule and fair value measurement for Restricted Stock Units - RSUs vest over four years from the date of grant[17] - The fair value of RSUs is the market price of the common stock at the date of grant[17] Performance Units (PUs) Describes the vesting conditions for Performance Units, tied to share price targets and clinical data - PUs vest based on performance against predefined share price targets and the achievement of Positive Interim, Clinical Data as defined by the Board[18] Loss Per Common Share Explains the calculation of basic and diluted loss per common share and lists potentially dilutive securities - Basic loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding[19] - Diluted loss per common share excludes common stock equivalents in periods of loss because their inclusion would be anti-dilutive[19] Potentially Dilutive Shares (not included in EPS calculation): | Item | June 30, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Warrants to purchase common shares | 1,551,422 | 45,399 | | Unvested restricted stock units | 5,475 | 193 | | Unvested performance units | 577 | 577 | | Options for common shares | 12,177 | 2,591 | Note 3 – Note Payable The company entered into a short-term note payable of $329,571 on November 28, 2023, at 9.74% interest, for financing insurance policies. The note is to be repaid over 11 months, with the final payment due October 8, 2024. As of June 30, 2024, the outstanding balance was $123,248 - On November 28, 2023, the Company entered into a short-term note payable for $329,571, bearing interest at 9.74% per year, to finance insurance policies[20] - The note is to be repaid over an 11-month period, with the final payment due on October 8, 2024[20] - As of June 30, 2024, the Company's note payable balance was $123,248[20] Note 4 – Equity This note details changes in the company's equity structure, including authorized shares, reverse stock splits, and activity related to common stock, stock options, stock warrants, restricted stock units (RSUs), and performance units (PUs). Significant events include an increase in authorized common stock to 300,000,000 shares, a 1-for-50 reverse stock split in June 2024, and various equity offerings and grants of stock-based compensation Common Stock Details changes in authorized common stock, reverse stock splits, and proceeds from equity offerings - On May 2, 2024, authorized common stock increased from 75,000,000 shares to 300,000,000 shares[21] - A one-for-fifty (1:50) reverse stock split became effective on June 4, 2024[25] - In January 2024, a public offering of common stock and warrants generated net proceeds of $3,331,000[26] - In June 2024, a registered direct offering and private placement generated net proceeds of $1,203,259[28] - In late June 2024, another registered direct offering and private placement generated net proceeds of $1,221,154[31] Stock Options Describes amendments to the equity plan, stock-based compensation, and activity related to stock options - The 2020 Equity Plan was amended on April 30, 2024, increasing authorized shares for issuance by 70,000 to a total of 86,916 shares[25] - During the six months ended June 30, 2024, the Company recognized $412,749 of stock-based compensation related to options, with $366,400 of unrecognized expenses remaining[34] Stock Option Activity (Six Months Ended June 30, 2024): | Metric | Options | Exercise Price Per Share | | :--- | :--- | :--- | | Outstanding, December 31, 2023 | 6,598 | $1,020.47 | | Granted | 5,579 | $12.92 | | Exercised | – | – | | Forfeited | – | – | | Expired | – | – | | Outstanding, June 30, 2024 | 12,177 | $558.85 | | Exercisable, June 30, 2024 | 2,495 | $2,355.92 | Stock Warrants Outlines amendments to existing warrants, proceeds from exercises, and warrant activity - Existing warrants to purchase 75,120 shares were amended to reduce the exercise price from $64.00 to $15.00 and extend the termination date to February 1, 2029[38] - During the six months ended June 30, 2024, the Company received $21,326 from the exercise of 253,034 warrants[38] Stock Warrant Activity (Six Months Ended June 30, 2024): | Metric | Warrants | Weighted-Average Exercise Price Per Share | | :--- | :--- | :--- | | Outstanding, December 31, 2023 | 84,832 | $151.65 | | Granted | 1,719,694 | $8.12 | | Exercised | (253,034) | $13.18 | | Forfeited | – | – | | Expired | (70) | $2,635.71 | | Outstanding, June 30, 2024 | 1,551,422 | $15.03 | | Exercisable, June 30, 2024 | 1,551,422 | $15.03 | Restricted Stock Units Reports on RSU grants, recognized compensation expense, and non-vested RSU activity - On April 7, 2024, 5,330 RSUs were granted to officers, employees, and board members, valued at $69,027[39] - During the six months ended June 30, 2024, $19,566 of stock-based compensation related to RSUs was recognized, with $103,123 of unrecognized expenses remaining[39] RSU Activity (Six Months Ended June 30, 2024): | Metric | RSUs | Weighted-Average Grant Date Fair Value | | :--- | :--- | :--- | | Non-vested, December 31, 2023 | 145 | $501.00 | | Granted | 5,330 | $12.97 | | Vested | – | – | | Forfeited | – | – | | Non-vested, June 30, 2024 | 5,475 | $25.89 | Performance Units Explains vesting conditions, fair value estimation, and recognized compensation for Performance Units - PUs granted in 2022 vest based on share price targets ($3,000, $6,000) and achievement of 'Positive Interim, Clinical Data'[40] - The fair value of performance units with market conditions is estimated using a Monte Carlo simulation[41] - During the six months ended June 30, 2024, $4,963 was recognized related to outstanding PUs, with $95,399 of unrecognized expenses remaining[41] PU Activity (Six Months Ended June 30, 2024): | Metric | PUs | Weighted-Average Grant Date Fair Value | | :--- | :--- | :--- | | Non-vested, December 31, 2023 | 577 | $296.82 | | Granted | – | – | | Vested | – | – | | Forfeited | – | – | | Non-vested, June 30, 2024 | 577 | $296.82 | Note 5 – Commitments and Contingencies This note outlines the company's various contractual commitments and potential liabilities, including executive employment agreements, Scientific Advisory Board compensation, and intellectual property agreements for its drug candidates Berubicin (WP744 Portfolio) and WP1244 Portfolio. It also addresses the company's Nasdaq listing qualifications status Executive Employment Agreements Details CEO employment terms, severance benefits, and approved cash bonuses for officers - CEO John Climaco's employment agreement provides for annual extensions and severance benefits of twelve months of base salary upon termination without cause[45] - Mr. Climaco's 2021 annual base salary was set at $525,000[45] - In March 2024, cash bonuses totaling $240,608 were approved for officers, payable upon completion of sufficient financing[46] Scientific Advisory Board Reports the termination of the cash compensation program and accrued compensation for a board member - The cash compensation program for the Scientific Advisory Board was terminated on March 14, 2024[47] - As of June 30, 2024, the Company accrued $177,309 related to Mr. Hsu's Scientific Advisory Board compensation[47] WP744 Portfolio (Berubicin) Covers agreements for Berubicin, including royalties, license termination notice, and FDA designations - The Company purchased all rights to Berubicin from Reata Pharmaceuticals, Inc. in 2017, agreeing to pay a 2.25% royalty on net sales for 10 years[49] - The Company obtained a worldwide exclusive license to WP744 from Houston Pharmaceuticals, Inc. (HPI) in 2017, with royalties, milestone payments, and development fees[50] - On May 14, 2024, the Company provided notice to HPI of its intent to terminate the HPI License effective on or about July 14, 2024[50] - FDA granted Orphan Drug Designation (ODD) for Berubicin for malignant gliomas on June 10, 2020, potentially enabling 7 years of market exclusivity[54] - FDA granted Fast Track Designation for Berubicin on July 24, 2021[55] WP1244 Portfolio Discusses the license agreement for WP1244, its termination due to unmet milestones and unpaid fees - The Company obtained a royalty-bearing, worldwide, exclusive license to WP1244 drug technology from UTMDACC in January 2020[56] - On April 25, 2024, UTMDACC provided notice of intent to terminate the WP1244 Agreement due to unmet commercial diligence milestones and unpaid annual maintenance fees[56] - The WP1244 Agreement was terminated on May 25, 2024, with no termination penalty provisions[56] Nasdaq Capital Markets Listing Qualifications Addresses non-compliance with Nasdaq's equity and bid price rules and subsequent compliance efforts - On August 17, 2023, the Company was notified of non-compliance with Nasdaq's minimum $2,500,000 stockholders' equity requirement[57] - On February 27, 2024, the Company was notified of non-compliance with Nasdaq's $1.00 minimum bid price requirement[57] - The Nasdaq Hearings Panel granted an extension until August 12, 2024, to demonstrate compliance with both listing rules[58] - On July 5, 2024, the Company regained compliance with the Bid Price Rule[60] - On August 7, 2024, the Company filed an 8-K indicating shareholders' equity was above the $2.5 million requirement[60] Note 6 – Subsequent Events This note details significant events that occurred after the reporting period but before the filing of the 10-Q, including further equity offerings and a new exclusive license agreement for the TPI 287 compound - On July 3, 2024, the Company completed a registered direct offering and private placement, generating approximately $1.98 million in gross proceeds[62] - On July 26, 2024, the Company entered into an ATM Sales Agreement, increasing the aggregate sales price of common shares that may be sold to $25.0 million[63] - As of August 14, 2024, the Company sold 28,704,761 shares under the ATM agreement for net proceeds of approximately $10.5 million[63] - On July 29, 2024, the Company entered into an exclusive license agreement with Cortice Biosciences, Inc. for TPI 287 intellectual property rights in the United States, Canada, Mexico, and Japan[64] - The Cortice Agreements involve issuing 573,368 shares upon closing, 43,330 shares upon shareholder approval, and potential milestone payments (up to $90 million or 2,472,357 shares) and royalties (3.0%-7.5%)[65] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, liquidity, and capital resources, including an overview of operations, results analysis, and critical accounting policies CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Warns that forward-looking statements are subject to risks and uncertainties, and actual results may differ materially - Forward-looking statements are subject to known and unknown risks, uncertainties, and assumptions, and actual results may differ materially[67] - Key forward-looking statements include the ability to maintain Nasdaq listing, obtain additional funding, achieve regulatory approval, and commercialize product candidates[69] - Investors are cautioned not to place undue reliance on these statements, which speak only as of the date of this Form 10-Q[71] Overview Provides a general description of CNS Pharmaceuticals, its lead drug candidate Berubicin, its clinical trial status, and FDA designations - CNS Pharmaceuticals is a clinical pharmaceutical company focused on developing anti-cancer drug candidates for brain and central nervous system tumors[73] - Berubicin, the lead drug candidate, is an anthracycline believed to cross the blood-brain barrier and is currently in a potentially pivotal Phase II clinical trial for Glioblastoma Multiforme[75][76] - The Phase II trial compares Berubicin to Lomustine, with a 2:1 randomization of 252 patients; an independent Data Safety Monitoring Board (DSMB) recommended continuing the study without modification after an interim futility analysis[77] - Berubicin has received Orphan Drug Designation (ODD) and Fast Track Designation from the FDA[81][55] - The WP1244 Agreement with UTMDACC was terminated on May 25, 2024, due to unmet commercial diligence milestones and unpaid annual maintenance fees[83] Results of Operations (Three Months Ended June 30, 2024 vs. 2023) Compares the company's financial performance for the three months ended June 30, 2024, against the same period in 2023 General and Administrative Expense Analyzes changes in general and administrative expenses for the three-month period General and Administrative Expense (Three Months Ended June 30): | Period | Amount | | :--- | :--- | | June 30, 2024 | $1,412,000 | | June 30, 2023 | $1,180,000 | | Change | +$232,000 | - The increase was mainly attributable to approximately $333,000 in legal and professional expenses, offset by decreases in marketing, advertising, and other expenses[84] Research and Development Expense Examines the decrease in research and development expenses, primarily due to CRO costs Research and Development Expense (Three Months Ended June 30): | Period | Amount | | :--- | :--- | | June 30, 2024 | $1,117,000 | | June 30, 2023 | $2,846,000 | | Change | -$1,729,000 | - The decrease was mainly attributed to the timing of Contract Research Organization (CRO) expenses related to the continued progress of the Phase II clinical trial of Berubicin, with expenditures expected to continue declining[85] Net Loss Discusses the reduction in net loss, attributed to lower CRO and legal/professional fees Net Loss (Three Months Ended June 30): | Period | Amount | | :--- | :--- | | June 30, 2024 | $(2,531,000) | | June 30, 2023 | $(4,021,000) | | Change | +$1,490,000 (reduction in loss) | - The reduction in net loss is attributable to a decrease in CRO expenses related to the Berubicin clinical trial and decreases in legal and professional fees[86] Results of Operations (Six Months Ended June 30, 2024 vs. 2023) Compares the company's financial performance for the six months ended June 30, 2024, against the same period in 2023 General and Administrative Expense Analyzes the slight decrease in general and administrative expenses for the six-month period General and Administrative Expense (Six Months Ended June 30): | Period | Amount | | :--- | :--- | | June 30, 2024 | $2,526,000 | | June 30, 2023 | $2,539,000 | | Change | -$13,000 | - The slight decrease was mainly attributable to increases in legal and professional expenses, offset by decreases in stock-based compensation, marketing, advertising, and insurance expense[88] Research and Development Expense Examines the decrease in research and development expenses over the six-month period Research and Development Expense (Six Months Ended June 30): | Period | Amount | | :--- | :--- | | June 30, 2024 | $3,547,000 | | June 30, 2023 | $6,413,000 | | Change | -$2,866,000 | - The decrease was mainly attributed to the timing of CRO expenses related to the continued progress of the Phase II clinical trial, with expenditures expected to continue declining[88] Net Loss Discusses the reduction in net loss for the six-month period, driven by lower CRO and legal fees Net Loss (Six Months Ended June 30): | Period | Amount | | :--- | :--- | | June 30, 2024 | $(6,076,000) | | June 30, 2023 | $(8,953,000) | | Change | +$2,877,000 (reduction in loss) | - The reduction in net loss is attributable to a decrease in CRO expenses related to the Berubicin clinical trial and decreases in legal and professional fees[89] Liquidity and Capital Resources Assesses the company's cash position, working capital, funding sources, and future capital needs Liquidity Snapshot (June 30, 2024): | Metric | Amount | | :--- | :--- | | Cash | $1,492,000 | | Working Capital Deficit | $(4,617,000) | - The Company funds its operations from proceeds from equity sales[90] - Current cash on hand is expected to fund operations through the first quarter of 2025[95] - Additional capital is needed in the near term to continue to meet Nasdaq minimum equity requirements and potentially fund TPI 287 clinical preparations[96][95] - Failure to raise sufficient funds could lead to Nasdaq delisting or cessation of operations[96] Summary of Cash Flows Provides an overview of cash flows from operating and financing activities for the six-month periods Cash used in operating activities Details the primary expenditures contributing to cash used in operating activities Net Cash Used in Operating Activities (Six Months Ended June 30): | Period | Amount | | :--- | :--- | | June 30, 2024 | $(4,842,000) | | June 30, 2023 | $(8,227,000) | | Change | +$3,385,000 (reduction in cash used) | - Primarily included payments for clinical trial preparation, officer compensation, insurance, marketing, and professional fees[97] Cash provided by financing activities Explains the sources of cash from financing activities, mainly equity sales Net Cash Provided by Financing Activities (Six Months Ended June 30): | Period | Amount | | :--- | :--- | | June 30, 2024 | $5,785,000 | | June 30, 2023 | $2,451,000 | | Change | +$3,334,000 | - Primarily from the sale of common stock and exercise of warrants, offset by repayment of notes payable and payment of deferred offering costs[97] Off-balance Sheet Arrangements States that the company has no material off-balance sheet arrangements as of June 30, 2024 - As of June 30, 2024, the Company did not have any relationships with unconsolidated entities or financial partnerships for off-balance sheet arrangements[99] Purchase Commitments Notes the absence of material capital expenditure commitments, but highlights milestone fee obligations - The Company does not have any material commitments for capital expenditures, but is required to pay certain milestone fees to HPI, Reata, and Cortice[100] JOBS Act Accounting Election Explains the company's election to use the extended transition period for new accounting standards - As an 'emerging growth company,' the Company elected not to opt out of the extended transition period for new or revised financial accounting standards[101] - This election allows the Company to adopt new standards at the same time as private companies, which may make financial statement comparisons difficult[101] Critical Accounting Policies and Estimates States that management identified no critical accounting estimates for the period - Management determined there were no critical accounting estimates[102] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, CNS Pharmaceuticals, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company is a smaller reporting company and is not required to provide the information required under this item[103] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were ineffective as of June 30, 2024, due to material weaknesses, with remediation efforts underway Evaluation of Disclosure Controls and Procedures and Changes in Internal Control over Financial Reporting Details the ineffectiveness of disclosure controls and material weaknesses identified as of June 30, 2024 - As of June 30, 2024, disclosure controls and procedures were concluded to be ineffective[107] - Material weaknesses include lack of segregation of duties, limited access to timely and complete information regarding CRO costs, and lack of formal documentation of the control environment[107] - Management is commencing actions to address the lack of formal documentation and working with the CRO to improve data timeliness and completeness[107] - Despite material weaknesses, management believes the financial statements fairly present the Company's financial condition, results of operations, and cash flows[108] PART II OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, other information, and exhibits Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings. While litigation outcomes are unpredictable and can be costly, the company maintains insurance policies for potential losses where cost-effective - The Company is not currently involved in any legal proceedings[110] - The results of litigation are inherently unpredictable and can be time-consuming and costly[110] Item 1A. Risk Factors This section incorporates by reference the risk factors from the company's 2023 Annual Report on Form 10-K and highlights the critical risk of maintaining compliance with Nasdaq listing requirements. The company recently regained compliance with the bid price rule and reported sufficient shareholders' equity, but delisting remains a significant concern if compliance is not sustained - Risk factors from the 2023 Annual Report on Form 10-K are incorporated by reference[111] - Inability to maintain compliance with Nasdaq Capital Market listing requirements could have a material adverse effect[111] - The Company regained compliance with the Nasdaq Bid Price Rule on July 5, 2024[114] - On August 7, 2024, the Company filed an 8-K indicating shareholders' equity was above the $2.5 million requirement[116] - Delisting would adversely affect the ability to raise financing, trade securities, and negatively impact value and liquidity[116] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company has not issued any unregistered securities during the quarter ended June 30, 2024, except as previously disclosed on Form 8-K - Except as previously disclosed on Form 8-K, no unregistered securities were issued during the quarter ended June 30, 2024[117] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[117] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable to the Company[117] Item 5. Other Information During the reporting period, none of the company's directors or executive officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - None of the Company's directors or executive officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the period[118] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including amendments to articles of incorporation, forms of warrants, financial advisory agreements, securities purchase agreements, the amended 2020 Equity Plan, and certifications - Exhibits include Certificate of Amendment to Articles of Incorporation, forms of Common and Pre-Funded Warrants, Financial Advisory Agreements, Securities Purchase Agreements, and the 2020 Equity Plan[118][121] - Also includes Inline XBRL Instance Document, Taxonomy Extension Schema, Calculation, Definition, Label, and Presentation Linkbase Documents, and Cover Page Interactive Data File[119] - Certifications of the Principal Executive Officer and Principal Financial Officer are included pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350[121] Signatures Confirms the report's authorization by the Chief Executive Officer and Chief Financial Officer - The report was signed by John Climaco, Chief Executive Officer and Director, and Christopher Downs, Chief Financial Officer, on August 14, 2024[123]