Quarterly report pursuant to Section 13 or 15(d)

Equity

v3.22.2
Equity
6 Months Ended
Jun. 30, 2022
Equity [Abstract]  
Equity

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 six months ended June 30, 2022 and 2021, the Company recognized $605,657 and $875,039 of stock-based compensation, respectively, related to outstanding stock options. At June 30, 2022, the Company had $1,854,997 of unrecognized expenses related to outstanding options.

  

The following table summarizes the stock option activity for the six months ended June 30, 2022: 

           
   

Options

    Weighted-Average Exercise Price Per Share  
Outstanding, December 31, 2021     2,864,736     $ 2.25  
Granted            
Exercised            
Forfeited            
Expired            
Outstanding, June 30, 2022     2,864,736     $ 2.25  
Exercisable, June 30, 2022     1,924,861     $ 1.94  

 

As of June 30, 2022, the outstanding stock options have a weighted average remaining term of 7.27 years and the aggregate intrinsic value of options vested and outstanding were $81,400. As of June 30, 2022, there were no awards remaining to be issued under the 2017 Plan and 992,764 awards remaining to be issued under the 2020 Plan.

 

Stock Warrants

 

During the six months ended June 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 six months ended June 30, 2022: 

           
   

 

 

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            
Outstanding, June 30, 2022     16,925,504     $ 1.81  
Exercisable, June 30, 2022     16,925,504     $ 1.81  

 

As of June 30, 2022, the outstanding and exercisable warrants have a weighted average remaining term of 4.01 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 six months ended June 30, 2022, the Company recognized $5,962 of stock-based compensation, related to outstanding stock RSUs. At June 30, 2022, the Company had $89,437 of unrecognized expenses related to outstanding RSUs.

 

The following table summarizes the RSUs activity for the six months ended June 30, 2022: 

         
   

 

 

RSUs

    Weighted-Average Grant Date Fair Value
Non-vested, December 31, 2021         $
Granted     285,625       0.33
Vested          
Forfeited          
Non-vested, June 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 six months ended June 30, 2022, the Company recognized $7,309 for vesting term (i), $4,596 for vesting term (ii) and $0 for vesting term (iii), related to outstanding stock PUs. At June 30, 2022, the Company had $157,758 of unrecognized expenses related to PUs.

 

The following table summarizes the PUs activity for the six months ended June 30, 2022: 

         
   

 

 

PUs

    Weighted-Average Grant Date Fair Value
Non-vested, December 31, 2021         $
Granted     856,875         0.20
Vested          
Forfeited          
Non-vested, June 30, 2022     856,875     $ 0.20