See accompanying notes to the unaudited financial statements.
See accompanying notes to the unaudited financial statements.
See accompanying notes to the unaudited financial statements.
Notes to the Financial Statements
(Unaudited)
Note 1 – Nature of Business
CNS Pharmaceuticals, Inc. (“we”, “our”, the
“Company”) is a clinical pharmaceutical company organized as a Nevada corporation on July 27, 2017 to focus on the development
of anti-cancer drug candidates.
Note 2 – Summary of Significant Accounting
Policies
Basis of Presentation - The accompanying unaudited financial
statements of the Company have been prepared in accordance with accounting principles generally accepted in the United Stated of America
(“U.S. GAAP”) for interim unaudited financial information. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial statements. The unaudited financial statements include all
adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary in order to make the condensed
financial statements not misleading. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative
of the final results that may be expected for the year ending December 31, 2022. For more complete financial information, these unaudited
financial statements should be read in conjunction with the audited financial statements for the period ended December 31, 2021 included
in our Form 10-K filed with the SEC on March 3, 2022 (“Form 10-K”). Notes to the financial statements which would substantially
duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K,
have been omitted.
Liquidity and Going Concern - These financial statements have
been prepared on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities in
the normal course of business. The continuation of the Company as a going concern is dependent upon the ability of the Company to obtain
equity financings to continue operations. The Company has a history of and expects to continue to report negative cash flows from operations
and a net loss. Management believes that the cash on hand is sufficient to fund its planned operations into but not beyond the near term.
These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements
do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern. The Company may seek additional funding through a combination
of equity offerings, debt financings, government or other third-party funding, commercialization, marketing and distribution arrangements,
other collaborations, strategic alliances and licensing arrangements and delay planned cash outlays or a combination thereof. Management
cannot be certain that such events or a combination thereof can be achieved.
Cash and Cash Equivalents - The Company considers all highly
liquid accounts with original maturities of three months or less at the date of acquisition to be cash equivalents. Periodically, the
Company may carry cash balances at financial institutions in excess of the federally insured limit of $250,000. The amount in excess of
the FDIC insurance as of September 30, 2022 was $6,777,470. 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.
Stock-based Compensation - Employee and non-employee share-based
compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service
period for stock options and restricted stock units.
Restricted Stock Units (“RSUs”) - Our RSUs vest over
four years from the date of grant. The fair value of RSUs is the market price of our common stock at the date of grant.
Performance Units (“PUs”) - The PUs vest based on
our performance against predefined share price targets and the achievement of Positive Interim, Clinical Data as defined by the Board.
Loss Per Common Share - Basic loss per common share is computed
by dividing net loss available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted
loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the
dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding
excludes common stock equivalents, because their inclusion would be anti-dilutive. For the nine months ended September 30, 2022 and 2021,
the Company’s potentially dilutive shares and options, which were not included in the calculation of net loss per share, included
warrants to purchase 15,719,445 and 5,130,240 common shares, unvested restricted stock units of 285,625 and 0 common shares, unvested
performance units of 856,875 and 0 common shares, and options for 2,789,736 and 2,939,736 common shares, respectively.
Note 3 – Note Payable
On November 8, 2021, the Company entered into a short-term note payable
for an aggregate of $425,990, bearing interest at 3.3% per year to finance certain insurance policies. Principal and interest payments
related to the note will be repaid over a 11-month period with the final payment due on September 30, 2022. As of September 30, 2022 and
December 31, 2021, the Company’s note payable balance was $39,260 and $387,794, respectively. Subsequent to September 30, 2022,
the Company repaid the outstanding note balance in full.
Note 4 – Equity
Common Stock
The Company engaged H.C. Wainwright & Co., LLC (“Wainwright”),
to act as placement agent related to the Securities Purchase Agreement described below. The Company agreed to pay Wainwright an aggregate
fee equal to 7.0% of the gross proceeds received by the Company from the sale of the securities in the transaction. The Company also issued
to Wainwright or its designees warrants to purchase up to 5.0% of the aggregate number of shares of Common Stock sold in the transactions
(the “Placement Agent Warrants”), or 605,263 Placement Agent Warrants. The Placement Agent Warrants have substantially the
same terms as the Common Warrants, except that the Placement Agent Warrants have an exercise price equal to 125% of the offering price,
or $1.1875 per share. The Company also paid Wainwright $50,000 for non-accountable expenses and $10,000 for legal fees and expenses.
On January 5, 2022, the Company entered into a Securities Purchase
Agreement (the “Purchase Agreement”) with several institutional investors for the sale by the Company of (i) 9,489,474 shares
(the “Shares”) of the Company’s common stock, (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase
up to an aggregate of 2,615,790 shares of common stock and (iii) warrants to purchase up to an aggregate of 12,105,264 shares of common
stock (the “Common Warrants” and, collectively with the Pre-Funded Warrants, the “Warrants”), in a private placement
offering. The combined purchase price of one share of common stock (or one Pre-Funded Warrant) and the accompanying Common Warrant is
$0.95.
Subject to certain ownership limitations, the Warrants are exercisable
upon issuance. Each Pre-Funded Warrant is exercisable into one share of common stock at a price per share of $0.001 (as adjusted from
time to time in accordance with the terms thereof). Each Common Warrant is exercisable into one share of common stock at a price per share
of $0.82 (as adjusted from time to time in accordance with the terms thereof) and will expire on the fifth anniversary of the date of
issuance. The gross proceeds from the Purchase Agreement were $11,497,385 resulting in net proceeds, after payment of commissions and
expenses, received by the Company of $10,625,786.
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 2,000,000 shares of common stock. No key employee may receive more than 500,000 shares of common stock (or options to
purchase more than 500,000 shares of common stock) in a single year.
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 3,000,000 shares of common stock. No key employee may receive more than 750,000 shares of common stock (or options to
purchase more than 750,000 shares of common stock) in a single year.
During the nine months ended September 30, 2022 and 2021, the Company
recognized $877,510 and $1,228,811 of stock-based compensation, respectively, related to outstanding stock options. At September 30, 2022,
the Company had $1,583,144 of unrecognized expenses related to outstanding options.
The following table summarizes the stock option
activity for the nine months ended September 30, 2022:
Schedule of Stock Option Activity | |
| | | |
| | |
| |
Options | | |
Weighted-Average Exercise Price Per Share | |
Outstanding, December 31, 2021 | |
| 2,864,736 | | |
$ | 2.25 | |
Granted | |
| – | | |
| – | |
Exercised | |
| – | | |
| – | |
Forfeited | |
| – | | |
| – | |
Expired | |
| (75,000 | ) | |
| 2.35 | |
Outstanding, September 30, 2022 | |
| 2,789,736 | | |
$ | 2.25 | |
Exercisable, September 30, 2022 | |
| 1,990,361 | | |
$ | 1.93 | |
As of September 30, 2022, the outstanding stock options have a weighted
average remaining term of 6.98 years and the aggregate intrinsic value of options vested and outstanding were $36,850. As of September
30, 2022, there were no awards remaining to be issued under the 2017 Plan and 1,067,764 awards remaining to be issued under the 2020 Plan.
Stock Warrants
During the nine months ended September 30, 2022, the Company received
$2,616 in cash proceeds from the exercise of 2,615,790 warrants previously issued at an exercise price of $0.001.
The following table summarizes the stock warrant
activity for the nine months ended September 30, 2022:
Schedule of warrants activity | |
| | | |
| | |
| |
Warrants | | |
Weighted-Average Exercise Price Per Share | |
Outstanding, December 31, 2021 | |
| 4,214,977 | | |
$ | 4.76 | |
Granted | |
| 15,326,317 | | |
| 0.69 | |
Exercised | |
| (2,615,790 | ) | |
| 0.001 | |
Forfeited | |
| – | | |
| – | |
Expired | |
| (1,206,059 | ) | |
| 11.00 | |
Outstanding, September 30, 2022 | |
| 15,719,445 | | |
$ | 1.11 | |
Exercisable, September 30, 2022 | |
| 15,719,445 | | |
$ | 1.11 | |
As of September 30, 2022, the outstanding and exercisable warrants
have a weighted average remaining term of 4.06 years and have no aggregate intrinsic value.
Restricted Stock Units
On April 28, 2022, the Compensation Committee approved cash bonuses
totaling $213,000 to the officers of the Company. In addition, the officers and employees were awarded a total of 285,625 Restricted Stock
Units that partially vest over 4 years. The Company valued the RSUs based on the stock price at grant which total $95,399.
During the nine months ended September 30, 2022, the Company recognized
$11,925 of stock-based compensation, related to outstanding stock RSUs. At September 30, 2022, the Company had $83,474 of unrecognized
expenses related to outstanding RSUs.
The following table summarizes the RSUs activity
for the nine months ended September 30, 2022:
Schedule of restricted stock units activity | |
| | | |
| | |
| |
RSUs | | |
Weighted-Average Grant Date Fair Value | |
Non-vested, December 31, 2021 | |
| – | | |
$ | – | |
Granted | |
| 285,625 | | |
| 0.33 | |
Vested | |
| – | | |
| – | |
Forfeited | |
| – | | |
| – | |
Non-vested, September 30, 2022 | |
| 285,625 | | |
$ | 0.33 | |
Performance Units
On April 28, 2022, the Compensation Committee approved, the officers
and employees were awarded a total of 856,875 PUs. For awards granted in 2022, they vest as follows: (i) 285,625 of the PU grant will
vest if within 24 months from issuance the average the closing price of the Company’s common stock over a ten trading day period
exceeds $2.00 (subject to pro rata adjustment for stock splits or similar events), (ii) 285,625 of the PU grant will vest if within 36
months from issuance the average the closing price of the Company’s common stock over a ten trading day period exceeds $4.00 (subject
to pro rata adjustment for stock splits or similar events) and (iii) 285,625 of the PU grant will vest if within 24 months from issuance
the Company achieves “Positive Interim, Clinical Data” as defined by the Board of Directors. To the extent that the market
and/or “Positive Interim Clinical Data” conditions are not met, the applicable portions of the PUs will not vest and will
be cancelled. The fair value at grant date of these performance units was $169,663. Compensation expense is recognized ratably during
the period the PUs are expected to vest or when “Positive Interim Clinical Data” is achieved.
The fair value of each performance unit with market conditions (vesting
terms (i) and (ii)) is estimated at the date of grant using a Monte Carlo simulation with the following assumptions: underlying stock
price $0.33, hurdle prices ranging from $2.00 -$4.00, expected terms ranging from 2-3 years, cost of equity 18.7% and risk-free rate of
2.8%.
During the nine months ended September 30, 2022, the Company recognized
$14,619 for vesting term (i), $9,193 for vesting term (ii) and $0 for vesting term (iii), related to outstanding stock PUs. At September
30, 2022, the Company had $145,853 of unrecognized expenses related to PUs.
The following table summarizes the PUs activity
for the nine months ended September 30, 2022:
Schedule of performance units activity | |
| | | |
| | |
| |
PUs | | |
Weighted-Average Grant Date Fair Value | |
Non-vested, December 31, 2021 | |
| – | | |
$ | – | |
Granted | |
| 856,875 | | |
| 0.20 | |
Vested | |
| – | | |
| – | |
Forfeited | |
| – | | |
| – | |
Non-vested, September 30, 2022 | |
| 856,875 | | |
$ | 0.20 | |
Note 5 – Commitments and Contingencies
Executive Employment Agreements
On September 1, 2017, the Company entered into an employment agreement
with Mr. John Climaco pursuant to which Mr. Climaco agreed to serve as Chief Executive Officer and Director of the Company commencing
on such date for an initial term of three years. On September 1, 2020, the Company entered into an amendment to the employment agreement
with Mr. Climaco. The amendment extends the term of employment under the Employment Agreement, which was originally for a three-year period,
for additional twelve-month periods, unless and until either the Company or Mr. Climaco provides written notice to the other party not
less than sixty days before such anniversary date that such party is electing not to extend the term. If the Company provides notice of
its election not to extend the term, Mr. Climaco may terminate his employment at any time prior to the expiration of the term by giving
written notice to the Company at least thirty days prior to the effective date of termination, and upon the earlier of such effective
date of termination or the expiration of the term, Mr. Climaco shall be entitled to receive the same severance benefits as are provided
upon a termination of employment by the Company without cause. Pursuant to the Amendment, the severance benefits shall be twelve months
of Mr. Climaco’s base salary. Such severance payment shall be made in a single lump sum sixty days following the termination, provided
that Mr. Climaco has executed and delivered to the Company and has not revoked a general release of the Company. Pursuant to the employment
agreement, the compensation committee of the board of directors reviews the base salary payable to Mr. Climaco annually during the term
of the agreement. On February 6, 2021, the compensation committee of the board of directors set Mr. Climaco’s 2021 annual base salary
to $525,000.
On June 28, 2019, we entered into employment letters with Drs. Silberman
and Picker 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 February 6, 2021, the compensation committee of the board of directors set Drs. Silberman and Picker 2021 annual
base salaries to $200,000 and $115,000, respectively.
On September 14, 2019, the Company, entered into an employment agreement
with Christopher Downs to serve as its Chief Financial Officer commencing on the closing date of the Company’s IPO, which occurred
on November 13, 2019. The initial term of the Employment Agreement will continue for a period of three years. Pursuant to the employment
agreement, the compensation committee of the board of directors reviews the base salary payable to Mr. Downs annually during the term
of the agreement. On February 6, 2021, the compensation committee of the board of directors set Mr. Downs’ 2021 annual base salary
to $340,000.
Scientific Advisory Board
On July 15, 2021, our Board approved the following compensation policy
for the Scientific Advisory Board members. The Scientific Advisory board consisted of Dr. Waldemar Priebe, a significant shareholder and
related party, and Dr. Sigmond Hsu. Each scientific advisory board member shall receive annual cash compensation of $68,600. During the
nine month months ended September 30, 2022, the Company paid $76,087 related to the Scientific Advisory Board compensation. As of August
25, 2022, Dr. Waldemar Priebe is no longer a member of the Scientific Advisory Board. As of September 30, 2022, the Company has accrued
$82,984 related to Mr. Hsu’s Scientific Advisory Board compensation.
WP744 Portfolio (Berubicin)
On November 21, 2017, the Company entered into a Collaboration and
Asset Purchase Agreement with Reata Pharmaceuticals, Inc. (“Reata”). Through this agreement, the Company purchased all of
Reata’s rights, title, interest and previously conducted research and development results in the chemical compound commonly known
as Berubicin. In exchange for these rights, the Company agreed to pay Reata an amount equal to 2.25% of the net sales of Berubicin for
a period of 10 years from the Company’s first commercial sale of Berubicin plus $10,000. Reata also agreed to collaborate with the
Company on the development of Berubicin, from time to time.
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
and significant shareholder. 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 200,000 shares of the Company’s common stock valued at $0.045
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 nine months ended September
30, 2022 and 2021, the Company recognized $262,500 related to this agreement. Unrelated to this agreement, from time to time, the Company
purchases pharmaceutical products from HPI which are necessary for the manufacturing of Berubicin API and drug product in related party
transactions which are reviewed and approved by the Company’s audit committee based upon the standards of providing superior pricing
and time to delivery than that available from unrelated third parties. During the nine months ended September 30, 2022 and 2021, the Company
expensed $41,075 and $385,000 respectively related to the purchase of pharmaceutical products from HPI.
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 consideration for the rights granted under the sublicense agreement, to the extent we are required to make any payments
to HPI pursuant to the HPI License as a result of this sublicense agreement, WPD agreed to advance us such payments, and to pay us a royalty
equal to 1% of such payments. WPD is a Polish corporation that is majority-owned by an entity controlled by Dr. Priebe, our founder and
largest shareholder.
On February 19, 2021, CNS entered into an Investigational Medicinal
Product Supply Agreement with WPD, a related party. CNS agreed to sell the Berubicin drug product to WPD at historical cost of manufacturing
without markup so that WPD may conduct the clinical trials contemplated by the sublicense agreement. WPD agreed to pay CNS the following
payments: (i) an upfront payment of $131,073 upon execution of the agreement, (ii) a payment of $262,145 upon final batch release
and certification performed by WPD's subcontractor, and (iii) a final payment of $262,145 upon Clinical Trial Application acceptance
by the relevant regulatory authority. All three milestones have been met as of December 31, 2021. In addition, as of December 31, 2021,
the drug product with a cost of approximately $655,000 has been delivered to WPD and is being held at a third party depot. As such, the
full amount of approximately $655,000 is due from WPD. As of December 31, 2021, CNS has invoiced the three amounts plus pass through cost
for a total of $656,938. As of September 30, 2022, the Company has received payments for the first and second amounts due for a total
of $393,182 and has entered into a settlement agreement whereby WPD agreed to return 168 vials (approximately 40% of the total) to us
in settlement of the final amount owed. On October 24, 2022, the Company received confirmation from our third party depot service provider
that the vials had been transferred into our inventory. As such, this matter is now fully resolved.
On August 31, 2018, the Company entered into a sublicense agreement
with Animal Life Sciences, LLC (“ALI”), a related party, pursuant to which we granted ALI an exclusive sublicense, even as
to us, for the patent rights we licensed pursuant to the HPI License solely for the treatment of cancer in non-human animals through any
type of administration. In consideration for the rights granted under the sublicense agreement, ALI agreed to issue us membership interests
in ALI equal to 1.52% of the outstanding ALI membership interests. As additional consideration for the rights granted, to the extent we
are required to make any payments to HPI pursuant to the HPI License as a result of this sublicense agreement, ALI agreed to advance us
such payments, and to pay us a royalty equal to 1% of such payments. Dr. Waldemar Priebe, our founder and largest shareholder, is also
the founder and a shareholder of ALI, holds 38% of the membership interests of ALI.
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 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 constitutes our primary intellectual property protections although the Company is exploring if there are other patents
that could be filed related to Berubicin to extend additional protections.
On July 24, 2021, the Company received Fast Track Designation from
the FDA for Berubicin. Fast Track Designation is designed to facilitate the development and expedite the review of drugs to treat
serious conditions and fill an unmet medical need.
WP1244 Portfolio
On January 10, 2020, Company entered into a Patent and Technology License
Agreement (“Agreement”) with The Board of Regents of The University of Texas System, an agency of the State of Texas, on behalf
of The University of Texas M. D. Anderson Cancer Center (“UTMDACC”). Pursuant to the Agreement, the Company obtained a royalty-bearing,
worldwide, exclusive license to certain intellectual property rights, including patent rights, related to the Company’s recently
announced WP1244 drug technology. In consideration, the Company must make payments to UTMDACC including an up-front license fee, annual
maintenance fee, milestone payments and royalty payments (including minimum annual royalties) on sales of licensed products developed
under the Agreement. The term of the Agreement expires on the last to occur of: (a) the expiration of all patents subject to the Agreement,
or (b) fifteen years after execution; provided that UTMDACC has the right to terminate this Agreement in the event that the Company fails
to meet certain commercial diligence milestones. The commercial diligence milestones are as follows (i) initiated PC toxicology to support
filing of Investigational New Drug Application (“IND”) or New Drug Application (“NDA”) for the Licensed Product
within the eighteen (18) month period following the Effective Date (ii) file and IND for the Licensed Product within three (3) year period
following the Effective Date and (iii) Commencement of Phase I Study within the five (5) year period following the Effective Date. During
the nine months ended September 30, 2022 and 2021, the Company paid $49,607 and $22,902, respectively.
On May 7,
2020, pursuant to the WP1244 Portfolio license agreement described above, the Company entered into a Sponsored Research Agreement with
UTMDACC to perform research relating to novel anticancer agents targeting CNS malignancies. The Company agreed to fund approximately $1,134,000
over a two-year period. During the year ended December 31, 2020, the Company paid $ and accrued $400,000 related to this agreement
in research and development expenses in the Company’s Consolidated Statements of Operations. During the year ended December 31,
2021, the Company paid $800,000 to UTMDACC related to this agreement. The Company has no further payment obligations as of September
30, 2022. The principal investigator for this agreement is Dr. Waldemar Priebe, a significant shareholder.
Anti-Viral Portfolio
On March 20, 2020, the Company entered into a Development Agreement
(“Agreement”) with WPD Pharmaceuticals (“WPD”), a company founded by Dr. Waldemar Priebe, the founder and largest
shareholder of the Company. Pursuant to the Agreement, WPD agreed to use its commercially reasonable efforts in good faith to develop
and commercialize certain products that WPD had previously sublicensed, solely in the field of pharmaceutical drug products for the treatment
of any viral infection in humans, with a goal of eventual approval of in certain territories consisting of: Germany, Poland, Estonia,
Latvia, Lithuania, Belarus, Ukraine, Romania, Armenia, Azerbaijan, Georgia, Slovakia, Czech Republic, Hungary, Uzbekistan, Kazakhstan,
Greece, Austria, Russia, Netherlands, Turkey, Belgium, Switzerland, Sweden, Portugal, Norway, Denmark, Ireland, Finland, Luxembourg, Iceland.
Pursuant to the Agreement, the Company agreed to pay WPD the following
payments: (i) an upfront payment of $225,000 to WPD (paid in April 2020); and (ii) within thirty days of the verified achievement
of the Phase II Milestone, (such verification shall be conducted by an independent third party mutually acceptable to the parties hereto),
the Company will make a payment of $775,000 to WPD. WPD agreed to pay the Company a development fee of 50% of the net sales for any products
in the above territories; provided that Poland shall not be included as a territory after WPD receives marketing approval for a product
in one-half of the countries included in the agreed upon territories or upon the payment by WPD to the Company of development fees of
$1.0 million. The term of the Agreement will expire on the expiration of the sublicense pursuant to which WPD has originally sublicensed
the products.
Nasdaq Capital Markets Listing Qualifications
On February 18, 2022, the Company received a deficiency letter from
the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) notifying the Company that for the last 30 consecutive
business days the bid price for the Company’s common stock had closed below the minimum $1.00 per share requirement for continued
inclusion in Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). The deficiency letter
does not result in the immediate delisting of the Company’s common stock from Nasdaq.
The Company was initially provided an initial period of 180 calendar
days, or until August 17, 2022, to regain compliance with the Bid Price Rule. The Company was granted a second 180 calendar day
period, or until February 13, 2023, to regain compliance since it met the continued listing requirement for market value of publicly held
shares and all other initial listing standards required by Nasdaq, except for the minimum bid price requirement.
On July 7, 2022, the Company filed a Definitive Proxy Statement on
Form DEF 14A for its Annual Meeting of Stockholders to be held on July 27, 2022. The Annual Meeting of Stockholders was
adjourned on July 27, 2022 until August 3, 2022, then adjourned again until August 16, 2022, and then adjourned again until August 25,
2022. In this Definitive Proxy Statement, the Company included a proposal to authorize an amendment to the Company’s amended and
restated articles of incorporation to empower the Board of Directors to effect a reverse stock split of the outstanding shares of the
Company’s common stock, at a split ratio of between 1-for-2 and 1-for-30 as determined by the Board of Directors in its sole discretion,
prior to the one-year anniversary of this Annual Meeting. This proposal was approved by the Company’s stockholders when the Annual
Meeting of Stockholders was reconvened on August 25, 2022. The Company intends to monitor the closing bid price of its common stock and,
if appropriate, effect a reverse stock split of the Company’s common stock, to regain compliance with the Bid Price Rule in order
to avoid being delisted from Nasdaq as well as to provide for additional shares available for issuance to continue to fund the Company’s
clinical research programs. Notwithstanding the foregoing, there can be no assurance that the Company will be able to regain and maintain
compliance with the Bid Price Rule if a reverse stock split is effected.