CNS Pharmaceuticals, Inc. Form 10-K

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C., 20549

FORM 10-K

For the fiscal year ended December 31, 2023

For the transition period from _________________

to ___________________

Commission File Number: 001-39126

CNS Pharmaceuticals, Inc.

(Exact Name of Registrant as Specified in its

Charter)

2100 West Loop South, Suite 900

Houston, Texas77027

(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 April 1, 2024 was 10,634,932.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of this registrant’s definitive proxy statement for

its 2023 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 17

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 6. [RESERVED] 35

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risks 40

ITEM 8. Financial Statements and Supplementary Data 40

ITEM 9A. Controls and Procedures 60

ITEM 9B. Other Information 61

ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 61

PART III

ITEM 10 Directors, Executive Officers and Corporate Governance 62

ITEM 11 Executive Compensation 62

ITEM 14 Principal Accountant Fees and Services 62

PART IV

ITEM 15 Exhibits, Financial Statement Schedules 63

Exhibit Index 63

Signatures 66

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;

· 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;

· our ability to adequately support future growth; and

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 Houston Pharmaceuticals, Inc. (“HPI”)

and The University of Texas M.D. Anderson Cancer Center (“UTMDACC”) and own pursuant to a collaboration and asset purchase

agreement with Reata Pharmaceuticals, Inc. (“Reata”).

We believe our lead drug candidate, Berubicin,

may be a significant development 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 an important new therapeutic alternative 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. Based on limited clinical data, we believe Berubicin is the first anthracycline that appears to cross the blood brain barrier

(“BBB”) in significant concentrations targeting brain cancer cells. While our focus is currently on the development of 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.

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 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.

The current trial being conducted will evaluate

the efficacy of Berubicin in patients with Glioblastoma Multiforme who have failed primary treatment for their disease, and results will

be compared to the efficacy 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 are 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”) is 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. Management remains blinded

to the data underlying the recommendation of the DSMB. 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 Dr. Priebe, who controls a majority of our shares. 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) 6,667 shares of our common stock. The patents we licensed

from HPI expired in March 2020.

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 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.

With the Reata Agreement and the HPI License, we

believe we have obtained 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 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. In consideration,

we must make payments to UTMDACC including an up-front license fee, annual maintenance fee, milestone payments and royalty payments (including

minimum annual royalties) for 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 the WP1244 Agreement in the event that we fail to meet certain commercial diligence milestones. We

have not met the commercial diligence milestones required as of the date hereof. As such, UTMDACC has the right to terminate the WP1244

Agreement upon notice to us. As of March 19, 2024, UTMDACC has not notified us of its intention to terminate the WP1244 Agreement.

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. The Company

paid and recorded $334,000 in 2020 related to this agreement in research and development expenses in the Company’s Statements of

Operations. The remaining $800,000 was paid in 2021. The principal investigator for this agreement is Dr. Priebe. The work conducted under

this Sponsored Research Agreement has produced a new mesylate salt of WP1244 termed WP1874. We believe the enhanced solubility of this

salt may increase its ability to be formulated for use in an IV infusion, while maintaining similar potency and toxicity characteristics.

As such, WP1874 will be the primary focus in any development efforts of the WP1244 portfolio. This agreement was extended and expired

on March 31, 2023.

Market for Cancer Drugs and Berubicin

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 lead 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 currently

limited pre-clinical and clinical data, Berubicin appears to demonstrate that it can cross the BBB. However, there is no assurance that

Berubicin will be able to demonstrate such traits in more fulsome clinical trials including our current potentially pivotal trial of Berubicin.

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 Berubicin 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 Berubicin. Based on limited

clinical data, we believe Berubicin is the first anthracycline that appears in animal models and limited clinical data derived from a

Phase 1 human clinical trial to cross the BBB and target cancer cells. 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.

Currently, there are no curative therapies for

glioblastoma. In the clinical trial completed by Reata in February 2009, Berubicin demonstrated one durable complete response lasting

over 14 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 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 these results are reproducible and if regulatory approval is secured to market Berubicin, based on its apparent ability to cross the

BBB combined with its mechanism of action, more thoroughly discussed below, we believe this drug has the potential to become an effective

treatment 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 respond very poorly), primarily due to

the O6-methylguanine methyltransferase (“MGMT”) enzyme, which is a DNA repair pathway in glioblastoma cells. When methylated,

the enzyme has reduced DNA repair activity, and increases the activity of TMZ; thus unmethylated patients have greater DNA repair activity,

and this confers a poorer prognosis. Given the different mechanism of action of Berubicin, patients with unmethylated MGMT may show a

better outcome and this will be explored by stratification to the MGMT methylation status of patients on the current trial. This could

potentially be used to support an application for approval of Berubicin as a frontline therapy, however, we believe that the most prudent

initial investigational objective is the current stratified trial that can either serve as a registration trial or provide sufficient

data to power an additional registration trial.

Berubicin

Our first product under development is Berubicin,

a development stage anthracycline intended to treat glioblastoma. 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 evidence developed from animal models and limited clinical

data derived from a Phase 1 human clinical trial, 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, Dr. Priebe created a library of high-affinity

and sequence-selective deoxyribonucleic acid (“DNA”)-binding agents 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.

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. If Berubicin

shows efficacy in clinical trials, of which there is no assurance, it could become the primary drug treatment because TMZ is ineffective

in this patient population.

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, with Dr. Priebe as the

Scientific Founder. 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 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.

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

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.

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 are conducting a randomized, controlled multicenter study that will evaluate the efficacy of Berubicin versus Lomustine (CCNU, CeeNU®,

or Gleostine®) in patients with recurrent glioblastoma. Randomization to the two therapies (Berubicin or Lomustine) are 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 will be 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 to

be 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.

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.

Assuming data from the above-described study is

positive (and depending on the strength and quality of such data) at its completion we may seek an expedited pathway to approval to market

Berubicin from relevant regulatory authorities, we may look for a partner with which to conduct a Phase 3 study, or we may attempt to

raise sufficient capital to conduct such a study on our own. The goal of these potential Phase 3 studies, should they be necessary, is

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.

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

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. We have licensed the right to certain

intellectual property covering products comprised of anthracycline antibiotic compound, methods for manufacture and use for the treatment

of cancer. The licensed intellectual property originally included certain material patents in the United States and their foreign counterparts

throughout the world. The U.S. patents have expired, and as such, we may be subject to increased competition.