CNS Pharmaceuticals(US:CNSP)2024-11-14 22:00markdown [PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents CNS Pharmaceuticals, Inc.'s unaudited financial statements and notes, detailing financial position, performance, and cash flows [Balance Sheets](index=3&type=section&id=Balance%20Sheets) | Metric | Sep 30, 2024 | Dec 31, 2023 | | :------------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $6,973,124 | $548,721 | | Total current assets | $7,388,098 | $1,591,170 | | Total Assets | $7,409,273 | $1,700,853 | | Total current liabilities | $4,056,929 | $6,132,968 | | Total Stockholders' Equity (Deficit) | $3,352,344 | $(4,432,115) | - The company's cash and cash equivalents increased significantly by over **1170%** from December 31, 2023, to September 30, 2024, primarily due to financing activities. Total stockholders' equity shifted from a deficit to a positive balance[4](index=4&type=chunk) [Statements of Operations](index=4&type=section&id=Statements%20of%20Operations) | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total operating expenses | $5,628,906 | $4,533,840 | $11,701,895 | $13,485,737 | | Loss from operations | $(5,628,906) | $(4,533,840) | $(11,701,895) | $(13,485,737) | | Net loss | $(5,605,934) | $(4,522,795) | $(11,681,435) | $(13,475,976) | | Loss per share - basic | $(0.25) | $(54.14) | $(1.54) | $(202.48) | | Weighted average shares outstanding - basic | 22,180,874 | 83,542 | 7,581,312 | 66,553 | - The net loss for the three months ended September 30, 2024, increased to **$5.6 million** from **$4.5 million** in the prior year. However, the net loss for the nine months ended September 30, 2024, decreased to **$11.7 million** from **$13.5 million** in the prior year, primarily due to reduced R&D expenses[5](index=5&type=chunk) [Statements of Stockholders' Equity (Deficit)](index=5&type=section&id=Statements%20of%20Stockholders'%20Equity%20(Deficit)) | Metric | Dec 31, 2023 | Sep 30, 2024 | | :------------------------------------- | :----------- | :----------- | | Common Stock (Amount) | $124 | $33,446 | | Additional Paid-in Capital | $65,134,664 | $84,567,236 | | Accumulated Deficit | $(69,566,903) | $(81,248,338) | | Total Stockholders' Equity (Deficit) | $(4,432,115) | $3,352,344 | - Total Stockholders' Equity (Deficit) improved from a deficit of **$(4,432,115)** at December 31, 2023, to a positive **$3,352,344** at September 30, 2024, largely driven by increases in common stock and additional paid-in capital from equity offerings[7](index=7&type=chunk) [Statements of Cash Flows](index=6&type=section&id=Statements%20of%20Cash%20Flows) | Metric | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :------------------------------------ | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(11,642,440) | $(11,603,678) | | Net cash provided by financing activities | $18,066,843 | $2,459,562 | | Net change in cash and cash equivalents | $6,424,403 | $(9,145,860) | | Cash and cash equivalents, at end of period | $6,973,124 | $909,547 | - Net cash provided by financing activities increased significantly by **635%** to **$18.1 million** for the nine months ended September 30, 2024, compared to **$2.5 million** in the prior year, leading to a positive net change in cash[9](index=9&type=chunk) [Notes to the Financial Statements](index=7&type=section&id=Notes%20to%20the%20Financial%20Statements) [Note 1 – Nature of Business](index=7&type=section&id=Note%201%20–%20Nature%20of%20Business) - CNS Pharmaceuticals, Inc. is a clinical pharmaceutical company focused on developing anti-cancer drug candidates, organized in **July 2017**[11](index=11&type=chunk) - The company effected two reverse stock splits: **1-for-30 on November 28, 2022**, and **1-for-50 on June 4, 2024**, both retroactively adjusted in financial statements[12](index=12&type=chunk)[13](index=13&type=chunk) [Note 2 – Summary of Significant Accounting Policies](index=7&type=section&id=Note%202%20–%20Summary%20of%20Significant%20Accounting%20Policies) - Financial statements are unaudited, prepared under U.S. GAAP for interim information, and should be read in conjunction with the Form 10-K for December 31, 2023[14](index=14&type=chunk) - The company's ability to continue as a going concern is dependent on obtaining equity financing due to a history of negative cash flows and net losses; current cash is sufficient only for the near term[15](index=15&type=chunk) - As of September 30, 2024, the company held **$6,723,124** in cash balances at financial institutions in excess of the federally insured limit of **$250,000**[17](index=17&type=chunk) - Stock-based compensation for employees and non-employees is measured at grant date fair value and recognized over the service period, including Restricted Stock Units (RSUs) and Performance Units (PUs)[18](index=18&type=chunk)[19](index=19&type=chunk) - Diluted loss per common share excludes common stock equivalents (warrants, RSUs, PUs, options) in periods of net loss as their inclusion would be anti-dilutive[20](index=20&type=chunk) [Note 3 – Note Payable](index=8&type=section&id=Note%203%20–%20Note%20Payable) - As of September 30, 2024, the company's note payable balance was **$31,187**, related to a short-term note for insurance policies entered into on November 28, 2023, with a final payment due on **October 8, 2024**[21](index=21&type=chunk) [Note 4 – Equity](index=8&type=section&id=Note%204%20–%20Equity) - The company increased its authorized common stock from **75,000,000** to **300,000,000 shares** on **May 2, 2024**[22](index=22&type=chunk) - Multiple equity offerings and private placements of common stock and warrants occurred in 2024, generating significant net proceeds, including **$3.33 million** in February, **$1.20 million** in June, **$1.22 million** in June, and approximately **$10.6 million** from an ATM Sales Agreement by September 30, 2024[29](index=29&type=chunk)[33](index=33&type=chunk)[35](index=35&type=chunk)[38](index=38&type=chunk) - On **July 29, 2024**, the company issued **573,368 shares** of common stock with a fair value of **$596,302** as part of an exclusive license agreement with Cortice Biosciences, Inc. for the compound TPI 287[39](index=39&type=chunk)[41](index=41&type=chunk) Stock Option Activity (9 Months Ended Sep 30, 2024) | Metric | Options | Weighted Average Exercise Price Per Share | | :---------------------------- | :------ | :---------------------------------------- | | Outstanding, Dec 31, 2023 | 6,598 | $1,020.47 | | Granted | 5,579 | $12.92 | | Outstanding, Sep 30, 2024 | 12,177 | $558.85 | | Exercisable, Sep 30, 2024 | 6,863 | $911.11 | - The company recognized **$571,705** in stock-based compensation related to stock options for the nine months ended September 30, 2024, with **$207,444** of unrecognized expenses remaining[46](index=46&type=chunk)[49](index=49&type=chunk) Stock Warrant Activity (9 Months Ended Sep 30, 2024) | Metric | Warrants | Weighted Average Exercise Price Per Share | | :---------------------------- | :------- | :---------------------------------------- | | Outstanding, Dec 31, 2023 | 84,832 | $151.65 | | Granted | 3,144,694 | $2.83 | | Exercised | (253,034) | $13.18 | | Outstanding, Sep 30, 2024 | 2,976,422 | $6.13 | | Exercisable, Sep 30, 2024 | 2,976,422 | $6.13 | - The company recognized **$36,990** in stock-based compensation for Restricted Stock Units (RSUs) and **$100,362** for Performance Units (PUs) during the nine months ended September 30, 2024[55](index=55&type=chunk)[57](index=57&type=chunk) [Note 5 – Commitments and Contingencies](index=14&type=section&id=Note%205%20–%20Commitments%20and%20Contingencies) - Cash bonuses totaling **$240,608** were approved for officers in March 2024, contingent on sufficient financing[63](index=63&type=chunk) - The cash compensation program for the Scientific Advisory Board was terminated on **March 14, 2024**, with **$177,309** accrued for Mr. Hsu's compensation as of September 30, 2024[64](index=64&type=chunk) - The company acquired rights to Berubicin from Reata Pharmaceuticals in **2017** and licensed WP744 from HPI, but provided notice to HPI to terminate the HPI License effective **July 14, 2024**[66](index=66&type=chunk)[67](index=67&type=chunk)[95](index=95&type=chunk) - Berubicin received Orphan Drug Designation (ODD) from the FDA on **June 10, 2020**, for malignant gliomas, potentially enabling **7 years** of market exclusivity, and Fast Track Designation on **July 24, 2021**[71](index=71&type=chunk)[72](index=72&type=chunk)[97](index=97&type=chunk) - The WP1244 License Agreement with UTMDACC was terminated on **May 25, 2024**, due to the company's failure to meet commercial diligence milestones and pay annual maintenance fees[73](index=73&type=chunk)[99](index=99&type=chunk) - The company received a Nasdaq notice on **September 12, 2024**, for non-compliance with the **$1.00 minimum bid price** requirement and was granted a temporary exception until **March 11, 2025**, but is not eligible for a standard compliance period due to prior reverse stock splits[74](index=74&type=chunk)[75](index=75&type=chunk)[134](index=134&type=chunk) - The company regained compliance with Nasdaq's **$2,500,000 stockholders' equity** requirement on **September 10, 2024**, but is subject to a **one-year Mandatory Panel Monitor**, meaning future non-compliance would lead to a delist determination without a cure period[136](index=136&type=chunk) [Note 6 – Subsequent Events](index=17&type=section&id=Note%206%20–%20Subsequent%20Events) - On **October 23, 2024**, the company completed a registered direct offering of common stock and pre-funded warrants, generating approximately **$3.0 million** in gross proceeds[77](index=77&type=chunk) - Subsequent to September 30, 2024, the company sold an additional **6,393,243 shares** through its ATM Sales Agreement for approximately **$1.6 million** in net proceeds[78](index=78&type=chunk) - A total of **13,947,060 pre-funded warrants** were exercised by investors subsequent to September 30, 2024[79](index=79&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, operations, Berubicin's clinical progress, liquidity, capital resources, and accounting policies [Overview](index=19&type=section&id=Overview) - CNS Pharmaceuticals is a clinical pharmaceutical company focused on developing anti-cancer drug candidates for brain and central nervous system tumors, with Berubicin as its lead candidate for Glioblastoma[89](index=89&type=chunk)[91](index=91&type=chunk) - Berubicin is currently in a potentially pivotal Phase II clinical trial for Glioblastoma Multiforme, with overall survival (OS) as the primary endpoint, and an independent Data Safety Monitoring Board (DSMB) recommended continuing the study without modification after an interim futility analysis on **December 18, 2023**[92](index=92&type=chunk)[93](index=93&type=chunk) - The company relies on third parties for all manufacturing activities and does not have a sales organization[94](index=94&type=chunk) - The WP1244 Agreement with UTMDACC was terminated on **May 25, 2024**, due to unmet commercial diligence milestones and unpaid fees[99](index=99&type=chunk) [Results of Operations for the Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023](index=21&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20September%2030,%202024%20Compared%20to%20the%20Three%20Months%20Ended%20September%2030,%202023) | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :----- | | General and administrative expense | $1,384,000 | $1,123,000 | +$261,000 | | Research and development expense | $4,245,000 | $3,411,000 | +$834,000 | | Net loss | $(5,606,000) | $(4,523,000) | -$1,083,000 | - The increase in general and administrative expense was mainly due to increases in legal and professional expenses (**$269,000**) and stock-based compensation (**$63,000**)[100](index=100&type=chunk) - The increase in research and development expenses was mainly attributed to license expenses related to the Cortice Agreements[101](index=101&type=chunk) [Results of Operations for the Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023](index=22&type=section&id=Results%20of%20Operations%20for%20the%20Nine%20Months%20Ended%20September%2030,%202024%20Compared%20to%20the%20Nine%20Months%20Ended%20September%2030,%202023) | Metric | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :----- | | General and administrative expense | $3,910,000 | $3,662,000 | +$248,000 | | Research and development expense | $7,792,000 | $9,824,000 | -$2,032,000 | | Net loss | $(11,681,000) | $(13,476,000) | +$1,795,000 | - The decrease in research and development expenses was mainly attributed to the timing of Contract Research Organization (CRO) expenses related to the Phase II clinical trial, which are expected to continue to decline[104](index=104&type=chunk) - The net loss decreased by approximately **$1.8 million** year-over-year, primarily due to the reduction in CRO expenses and contract labor[105](index=105&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 30, 2024, the company had approximately **$6,973,000** in cash and a working capital of approximately **$3,331,000**[106](index=106&type=chunk) - The company funded its operations through multiple equity sales and warrant exercises, including a public offering in **January 2024** (gross proceeds ~**$4.0M**), registered direct offerings in **June and July 2024** (net proceeds ~**$1.2M each**), and ATM sales (net proceeds ~**$10.6M** by Sep 30, 2024)[107](index=107&type=chunk)[108](index=108&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk) - Subsequent to September 30, 2024, the company completed another registered direct offering (gross proceeds ~**$3.0M**) and additional ATM sales (net proceeds ~**$1.6M**)[112](index=112&type=chunk)[113](index=113&type=chunk) - Current cash on hand is expected to fund operations through the **first quarter of 2025**, with final top-line data for the Berubicin trial expected in the **first half of 2025**. An additional **$4.0 million** would be needed for TPI 287 clinical preparations[114](index=114&type=chunk) [Summary of Cash Flows](index=23&type=section&id=Summary%20of%20Cash%20Flows) | Metric | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :------------------------------------ | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(11,642,000) | $(11,604,000) | | Net cash provided by financing activities | $18,067,000 | $2,460,000 | - Net cash provided by financing activities increased significantly to approximately **$18,067,000** in 2024, primarily from the sale of common stock and exercise of warrants, compared to **$2,460,000** in 2023[115](index=115&type=chunk) [Off-balance Sheet Arrangements](index=24&type=section&id=Off-balance%20Sheet%20Arrangements) - As of September 30, 2024, the company did not have any relationships with unconsolidated entities or financial partnerships for off-balance sheet arrangements[117](index=117&type=chunk) [Purchase Commitments](index=24&type=section&id=Purchase%20Commitments) - The company does not have any material commitments for capital expenditures but is required to pay certain milestone fees to Reata and Cortice[118](index=118&type=chunk) [JOBS Act Accounting Election](index=24&type=section&id=JOBS%20Act%20Accounting%20Election) - As an emerging growth company, CNS Pharmaceuticals elected not to opt out of the extended transition period for complying with new or revised financial accounting standards under the JOBS Act[119](index=119&type=chunk) [Critical Accounting Policies and Estimates](index=24&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Management determined there were no critical accounting estimates for the period[120](index=120&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, CNS Pharmaceuticals, Inc. is exempt from providing quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide information on market risk[121](index=121&type=chunk) [Item 4. Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) Evaluates disclosure controls and procedures, identifying material weaknesses in internal control over financial reporting, and details corrective actions [Evaluation of Disclosure Controls and Procedures and Changes in Internal Control over Financial Reporting](index=24&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures%20and%20Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - As of September 30, 2024, the company's disclosure controls and procedures were deemed ineffective due to material weaknesses in internal control over financial reporting[125](index=125&type=chunk) - Material weaknesses include a lack of segregation of duties (due to limited personnel), limited access to timely and complete information from the third-party Contract Research Organization (CRO), and a lack of formal documentation of the control environment[125](index=125&type=chunk) - Management is commencing actions to address the lack of formal documentation, working with the CRO to improve data timeliness, and conducting increased analytical analysis. Plans include hiring experienced personnel and upgrading the accounting system when economically feasible[125](index=125&type=chunk)[126](index=126&type=chunk) - Despite the material weaknesses, management believes the financial statements fairly present the company's financial condition, results of operations, and cash flows due to additional analysis and post-closing procedures[126](index=126&type=chunk) [PART II OTHER INFORMATION](index=26&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings, acknowledging the unpredictable and potentially costly nature of litigation - The company is not currently involved in any legal proceedings[130](index=130&type=chunk) - Litigation outcomes are inherently unpredictable and could be time-consuming and costly[129](index=129&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) This section highlights significant risks, primarily the company's ongoing challenge to maintain compliance with Nasdaq listing requirements, specifically the minimum bid price, and the implications of a mandatory panel monitor for its stockholders' equity requirement - The company received a Nasdaq notice on **September 12, 2024**, for non-compliance with the **$1.00 minimum bid price** requirement and was granted a temporary exception until **March 11, 2025**, but is not eligible for a standard compliance period due to prior reverse stock splits[134](index=134&type=chunk) - The company regained compliance with Nasdaq's **$2,500,000 stockholders' equity** requirement on **September 10, 2024**, but is subject to a **one-year Mandatory Panel Monitor**, meaning future non-compliance during this period would lead to a delist determination without a cure period[136](index=136&type=chunk) - Delisting from The Nasdaq Capital Market would adversely affect the company's ability to raise additional financing, impact investors' ability to trade securities, and negatively affect stock value and liquidity[137](index=137&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the quarter ended September 30, 2024, beyond what was previously disclosed - No unregistered securities were issued during the quarter ended September 30, 2024, except as previously disclosed on Form 8-K[138](index=138&type=chunk) [Item 3. Defaults Upon Senior Securities](index=27&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the reporting period - No defaults upon senior securities were reported[138](index=138&type=chunk) [Item 4. Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Mine Safety Disclosures are not applicable to the company[138](index=138&type=chunk) [Item 5. Other Information](index=27&type=section&id=Item%205.%20Other%20Information) During the reporting period, no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by the company's directors or executive officers - 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 quarter[138](index=138&type=chunk) [Item 6. Exhibits](index=28&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with Form 10-Q, including agreements, warrants, and certifications, often incorporated by reference - The exhibits include forms of common and pre-funded warrants, financial advisory agreements, securities purchase agreements, a sales agreement, and an exclusive license agreement[140](index=140&type=chunk) - Certifications from the Principal Executive Officer and Principal Financial Officer are included, along with Inline XBRL documents for financial data[140](index=140&type=chunk)[141](index=141&type=chunk) - Many exhibits are incorporated by reference to prior Form 8-K filings[140](index=140&type=chunk) [Signatures](index=28&type=section&id=Signatures) The Form 10-Q is signed by the CEO and CFO of CNS Pharmaceuticals, Inc. on November 14, 2024 - The report is signed by John Climaco, Chief Executive Officer, and Christopher Downs, Chief Financial Officer[143](index=143&type=chunk) - The signing date for the report is **November 14, 2024**[143](index=143&type=chunk)