Note 5 – Equity

Stock Options

In 2017, the Board of Directors of the Company approved the CNS Pharmaceuticals, Inc. 2017 Stock Plan (the “Plan”). The Plan allows for the Board of Directors to grants 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.

On June 28, 2019, the Board of Directors approved a grant 889,500 to officers and employees of the Company. The options will vest in four equal annual installments beginning on the first anniversary following issuance. The options have a ten-year term and have an exercise price of $2.00 per share. The fair value of the options at issuance was $1,631,737.

During the nine months ended September 30, 2019 and 2018, the Company recognized $237,432 and $58,724 of stock-based compensation, respectively, related to outstanding stock options. At September 30, 2019, the Company had $1,899,006 of unrecognized expenses related to options.

The following table summarizes the stock option activity for the nine months ended September 30, 2019:

The following table discloses information regarding outstanding and exercisable options at September 30, 2019:

As of September 30, 2019, the aggregate intrinsic value of options vested and outstanding was $362,219. As of September 30, 2019, there are 435,500 awards remaining to be issued under the Plan.

Stock Warrants

The following table summarizes the stock warrant activity for the nine months ended September 30, 2019:

In April 2019, the Company entered into two consulting agreements with consultants to provide services and advice related to company operations, investor relations, marketing, corporate structure, financing and public markets. The initial term of the agreement is eighteen months. As consideration for entering into this agreement the Company issued each consultant 50,000 common stock warrants with a term of five years and an exercise price of $1.75. The warrants vest over an eighteen-month period in equal monthly installments provided that the consultant is providing services on each vesting date. In addition, each consultant will earn $5,000 per month for these services. Payment of the cash portion of the fee accrued until the Company completed its initial public offering.

The common stock warrants were valued at $161,500 and will be recognized over the 18-month vesting term. During the nine months ended September 30, 2019, $49,346 has been recognized as an expense. At September 30, 2019, the Company had $112,154 of unrecognized expenses related to options.

The following table discloses information regarding outstanding and exercisable warrants at September 30, 2019

As of September 30, 2019, the aggregate intrinsic value of warrants vested and outstanding was $3,200,070.

Other

On April 11, 2019, the Company’s board of directors approved a private placement of up to a maximum of 817,500 shares of common stock at $2.00 per share. As of September 30, 2019, 817,500 shares had been sold for proceeds net of fundraising expenses of $1,507,169.

On April 17, 2019, the Company entered into an agreement with a foreign registered broker dealer to assist in fundraising on the Company’s behalf. Fees for these services consisted of a cash fee of 10% of amounts raised and an equity fee of 10% of the amounts raised. The equity fee will be payable in five-year common stock warrants with an exercise price of $2.00 per share. As of September 30, 2019, 63,750 warrants with a fair value of $101,206 were issued under this agreement.

On April 10, 2018, the Company engaged Boustead Securities, LLC (“Boustead”) to act as exclusive financial advisor related to the Company’s IPO. The agreement expired in April 2019 prior to the Company completing its IPO. In addition, an entity related to Boustead is a holder of the Company’s outstanding convertible debt as of September 30, 2019.

On April 11, 2019, the Company entered into a consulting agreement with a consultant to provide services and advice related to social media, investor relations, marketing and public markets. The initial term of the agreement is twelve months. As consideration for entering into this agreement the Company issued a total of 75,000 shares of common stock. The shares will vest over an eight-month period in equal monthly installments provided that the consultant is providing services on each vesting date. If the agreement is terminated prior to full vesting the Company shall have the right to repurchase unvested shares from the consultant for $0.001 per share. During the nine months ended September 30, 2019, $105,430 of expense has been recognized related to this agreement.

On June 3, 2019, the Company engaged The Benchmark Company, LLC (“Benchmark”) to act as exclusive financial advisor related to the Company’s IPO. Benchmark was compensated with a success fee of 7% of the gross offering proceeds, expense allowance of 1% of the gross offering proceeds and warrants equal to 7% of the shares sold with a five-year term and an exercise price equal to the price of the initial public offering. In addition, the Company agreed to reimburse Benchmark for expenses. The agreement can be terminated by either party with 30 days written notice.