UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from________ to_________.
Commission File Number:
(Exact name of registrant as specified in its charter)
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
|
|
||
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||
|
The Stock Market LLC (Nasdaq Capital Market) | ||||
|
The Stock Market LLC (Nasdaq Capital Market) |
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 period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).
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 | ☐ | |
| ☒ | 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 7, 2025, shares of the registrant’s common stock, $ par value, were issued and outstanding.
Cingulate Inc.
Form 10-Q for the Quarter Ended March 31, 2025
TABLE OF CONTENTS
| Page | ||
| PART I | ||
| Item 1 | Financial Statements | 4 |
| Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 |
| Item 3 | Quantitative and Qualitative Disclosures About Market Risk | 27 |
| Item 4 | Controls and Procedures | 27 |
| PART II | ||
| Item 1 | Legal Proceedings | 27 |
| Item 1A | Risk Factors | 27 |
| Item 5 | Other Information | 28 |
| Item 6 | Exhibits | 28 |
| Signatures | 29 | |
| 2 |
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “estimate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions intended to identify statements about the future. These statements speak only as of the date of filing this report with the Securities and Exchange Commission (SEC) and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements include, without limitation, statements about the following:
| ● | our ability to maintain compliance with the continued listing requirements of The Nasdaq Stock Market LLC (Nasdaq); | |
| ● | our lack of operating history and need for additional capital; | |
| ● | our plans to develop and commercialize our product candidates; | |
| ● | the timing of our planned clinical trials for CTx-1301, CTx-1302, and CTx-2103; | |
| ● | the timing of our New Drug Application (NDA) submissions for CTx-1301, CTx-1302, and CTx-2103; | |
| ● | the timing of and our ability to obtain and maintain regulatory approvals for CTx-1301, CTx-1302, CTx-2103, or any other future product candidate; | |
| ● | the clinical utility of our product candidates; | |
| ● | our commercialization, marketing and manufacturing capabilities and strategy; | |
| ● | our ability to identify strategic partnerships; | |
| ● |
our expected use of cash;
| |
| ● | our competitive position and projections relating to our competitors or our industry; | |
|
● |
our ability to identify, recruit, and retain key personnel; | |
| ● | the impact of laws and regulations; | |
| ● | our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (JOBS Act); | |
| ● | our plans to identify additional product candidates with significant commercial potential that are consistent with our commercial objectives; and | |
| ● | our estimates regarding future revenue and expenses. |
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. You should refer to the “Risk Factors” section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 27, 2025, for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. We operate in an evolving environment and new risk factors and uncertainties may emerge from time to time. It is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. You should review the factors and risks and other information we describe in the reports we will file from time to time with the SEC.
| 3 |
PART I — FINANCIAL INFORMATION
Cingulate Inc.
Consolidated Balance Sheets (unaudited)
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Other receivables | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Total assets | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Note payable, current | ||||||||
| Finance lease liability, current | ||||||||
| Operating lease liability, current | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Note payable | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| Common Stock, $ par value; shares authorized and and shares issued and outstanding as of March 31, 2025 and December 31, 2024 | ||||||||
| Preferred Stock, $ par value; shares authorized and shares issued and outstanding as of March 31, 2025 and December 31, 2024 | ||||||||
| Additional Paid-in-Capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See notes to consolidated financial statements.
| 4 |
Cingulate Inc.
Consolidated Statements of Operations and Comprehensive Loss (unaudited)
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Operating expenses: | ||||||||
| Research and development | $ | $ | ||||||
| General and administrative | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Interest and other income (expense), net | ( | ) | ( | ) | ||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income tax benefit (expense) | ||||||||
| Net loss and comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per share of common stock, basic and diluted | $ | ) | $ | ) | ||||
| Weighted average number of shares used in computing net loss per share of common stock, basic and diluted | ||||||||
See notes to consolidated financial statements.
| 5 |
Cingulate Inc.
Consolidated Statements of Stockholders’ Equity (unaudited)
| Accumulated | ||||||||||||||||||||||||
| Common Stock | Additional Paid-in- | Accumulated | Other Comprehensive | Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||
| Balance January 1, 2024 | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||
| Activity for the three months to March 31, 2024: | ||||||||||||||||||||||||
| Issuance of common stock in connection with At the Market Offering and Purchase Agreement, net of fees | ||||||||||||||||||||||||
| Issuance of common stock in public offering, net of fees | ||||||||||||||||||||||||
| Issuance of pre-funded warrants in connection with the conversion of related party note payable | - | |||||||||||||||||||||||
| Capital contribution in connection with conversion of related party note payable | - | |||||||||||||||||||||||
| Issuance of restricted common stock | ||||||||||||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance March 31, 2024 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Balance January 1, 2025 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Activity for the three months to March 31, 2025: | ||||||||||||||||||||||||
| Issuance of common stock in connection with At the Market Offering and Purchase Agreement, net of fees | ||||||||||||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance March 31, 2025 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
See notes to consolidated financial statements
| 6 |
Cingulate Inc.
Consolidated Statements of Cash Flows (unaudited)
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net | ||||||||
| cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Stock-based compensation | ||||||||
| Accretion of discount on note payable | ||||||||
| Amortization of debt issue costs | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Other receivables | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Operating lease right-of-use assets | ||||||||
| Trade accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Current portion of operating lease liability | ( | ) | ||||||
| Long-term portion of operating lease liability | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Financing activities: | ||||||||
| Proceeds from the issuance of common stock and pre-funded common stock purchase warrants, net of fees | ||||||||
| Principal payments on finance lease obligations | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Cash and cash equivalents: | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of year | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Cash payments: | ||||||||
| Interest paid | $ | $ | ||||||
See notes to consolidated financial statements
| 7 |
CINGULATE INC.
Notes to Consolidated Financial Statements
(1) Nature of the Business and Liquidity
Organization
Cingulate Inc. (Cingulate, or the Company), a Delaware corporation, is a biopharmaceutical company focused on the development of products utilizing its drug delivery platform technology that enables the formulation and manufacture of once-daily tablets of multi-dose therapies, with an initial focus on the treatment of Attention Deficit/Hyperactivity Disorder (ADHD). The Company is developing two proprietary, first-line stimulant medications, CTx-1301 (dexmethylphenidate) and CTx-1302 (dextroamphetamine), for the treatment of ADHD intended for all patient segments: children, adolescents, and adults. CTx-1301 and CTx-1302 utilize a flexible core tableting technology with target product profile designed to deliver a rapid onset and last the entire active day with a controlled descent of plasma drug level and have favorable tolerability. In addition, the Company has a third product to treat anxiety, CTx-2103, in a formulation stage.
The consolidated financial statements and notes for the periods ended March 31, 2025 and 2024, represent the full consolidation of Cingulate and its subsidiaries, including Cingulate Therapeutics LLC (CTx) and all references to the Company represent this full consolidation.
Liquidity
The Company has incurred losses and negative cash
flows from operations since inception. As a pre-revenue entity, the Company is dependent on the ability to raise capital to support operations
until such time as the product candidates under development are U.S. Food and Drug Administration (FDA) approved, manufactured, commercially
available to the marketplace and produce revenues. On March 31, 2025, the Company had cash and cash equivalents of approximately $
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). The consolidated financial statements include the accounts of Cingulate and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
(b) Unaudited Interim Financial Information
The accompanying consolidated balance sheets as of March 31, 2025 and December 31, 2024, the consolidated statements of operations and comprehensive loss for the three-month periods ended March 31, 2025 and 2024, the consolidated statements of stockholders’ equity for the three-month periods ended March 31, 2025 and 2024, the consolidated statements of cash flows for the three-month periods ended March 31, 2025 and 2024, and the related interim disclosures are unaudited. These unaudited consolidated financial statements include all adjustments necessary, consisting of only normal recurring adjustments, to fairly state the financial position and the results of operations and cash flows for interim periods in accordance with U.S. GAAP. Interim period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period. The accompanying consolidated financial statements should be read in conjunction with the Company’s 2024 audited consolidated financial statements and the notes thereto.
| 8 |
(c) Concentration of Credit Risk
The Company maintains cash equivalent deposits,
which at various times throughout the fiscal year exceeded the amounts insured by the Federal Deposit Insurance Corporation limit of $
(d) Impairment of Long-lived Assets
The Company assesses the carrying value of its long-lived assets, including property and equipment, as well as lease right of use (ROU) assets, when events or circumstances indicate that the carrying value of such assets may not be recoverable. These events or changes in circumstances may include a significant deterioration of operating results, changes in business plans, or changes in anticipated future cash flows. If an impairment indicator is present, the Company evaluates recoverability by a comparison of the carrying amount of the assets to future undiscounted cash flows expected to be generated by the assets. If the sum of the expected future cash flows is less than the carrying amount, the Company would recognize an impairment loss. An impairment loss would be measured by comparing the amount by which the carrying value exceeds the fair value of the long-lived asset groups. No impairment was recognized during the three-month periods ended March 31, 2025 or 2024.
(e) Stock-Based Compensation
The Company measures employee and director stock-based compensation expense for all stock-based awards based on their grant date fair value using the Black-Scholes option-pricing model. For stock-based awards with service conditions, stock-based compensation expense is recognized over the requisite service period using the straight-line method. Forfeitures are recognized as they occur. See additional information in Note 10.
(f) Segments
Operating segments are defined as components of an enterprise for which discrete financial information is available and regularly reviewed by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company manages its business activities on a consolidated basis and operates as a single operating segment dedicated to the research and development and manufacturing of its product candidates. The Company’s CODM is its Chief Executive Officer. The CODM uses net loss, as reported in the Company’s Consolidated Statements of Comprehensive Loss, in evaluating performance of its segment and determining how to allocate resources of the Company as a whole, including investing in its research and development activities.
The measure used by the CODM for segment assets is reported in the Consolidated Balance Sheets as total consolidated assets.
| 9 |
The following table presents the operating results of the Company’s segment:
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Operating expenses: | ||||||||
| Research and development | ||||||||
| Clinical operations | $ | $ | ||||||
| Drug manufacturing and formulation | ||||||||
| Personnel | ||||||||
| Regulatory | ||||||||
| Total research and development | ||||||||
| General and administrative | ||||||||
| Personnel | ||||||||
| Legal and professional fees | ||||||||
| Occupancy | ||||||||
| Insurance | ||||||||
| Other | ||||||||
| Total general and administrative | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Interest and other income (expense), net | ( | ) | ( | ) | ||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income tax benefit (expense) | ||||||||
| Net loss and comprehensive loss | $ | ( | ) | $ | ( | ) | ||
(3) Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following at March 31, 2025 and December 31, 2024:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Research and development | $ | $ | ||||||
| Professional fees | ||||||||
| Marketing fees | ||||||||
| Dues and subscriptions | ||||||||
| Active pharmaceutical ingredients | ||||||||
| Insurance | ||||||||
| Other | ||||||||
| $ | $ | |||||||
| 10 |
(4) Property and Equipment
Property and equipment, net consisted of the following at March 31, 2025 and December 31, 2024:
| Estimated | ||||||||||
| Useful Life | March 31, | December 31, | ||||||||
| (in years) | 2025 | 2024 | ||||||||
| Equipment | $ | $ | ||||||||
| Furniture and fixtures | ||||||||||
| Computer equipment | ||||||||||
| Leasehold improvements | ||||||||||
| Construction-in-process- equipment | - | |||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||||
| $ | $ | |||||||||
Depreciation expense was $
(5) Accrued Expenses
Accrued expenses consisted of the following at March 31, 2025 and December 31, 2024:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Research and development | $ | $ | ||||||
| Interest | ||||||||
| State franchise taxes | ||||||||
| CIP- Equipment | ||||||||
| Other | ||||||||
| Employee compensation | ||||||||
| Professional fees | ||||||||
| Insurance | ||||||||
| $ | $ | |||||||
(6) Contingencies
The Company may, from time to time, be subject to legal proceedings and claims arising in the ordinary course of business and otherwise. A substantial legal liability against us could have an adverse effect on our business, financial condition and results of operations.
The Company records legal costs associated with loss contingencies as incurred and establishes reserves when those matters present material loss contingencies that management determines to be both probable and reasonably estimable in accordance with ASC 450, Contingencies. If a range of loss is estimated, and some amount within that range appears to be a better estimate than any other amount within that range, then that amount is accrued. If no amount within the range can be identified as a better estimate than any other amount, we accrue the minimum amount in the range. These amounts are not reduced by amounts that may be recovered under insurance or claims against third parties, but undiscounted receivables from insurers or other third parties may be accrued separately if recovery is considered probable. Management’s judgment is required related to loss contingencies because the outcomes are difficult to predict, and the ultimate resolution may differ from our current analysis. The Company revises accruals in light of new information. While it is not possible to predict the outcome of loss contingencies with certainty, management is of the opinion that adequate provision for potential losses associated with any such matters has been made in the financial statements. No accruals for loss contingencies were recorded in the consolidated balance sheets as of March 31, 2025 or December 31, 2024.
| 11 |
In December 2023, the Company implemented salary reductions
for all employees and the Board approved a contingent bonus plan in which the Company will pay to each employee three months after the
filing date of the New Drug Application for CTx-1301, an amount equal to the base salary that was not paid to the employee plus 20%. Base
salaries were reinstated in September 2024. This contingent bonus had not yet been deemed probable as of March 31, 2025 per the requirements
of ASC Topic 450, Contingencies, thus was not recorded in the financial statements; however, it is reasonably possible that it
will become due. The unpaid salary amounts plus 20%, estimated to be $
(7) Unsecured Promissory Note
On December 20, 2024, the Company entered into a note
purchase agreement with Streeterville Capital, LLC, a Utah limited liability company (Lender), pursuant to which the Company issued and
sold to Lender an unsecured promissory note (Promissory Note) in the amount of $
From time to time, beginning on July 2, 2025, Lender
may redeem a portion of the Promissory Note, not to exceed an amount of $
The Promissory Note provides for customary events
of default (each, an Event of Default), including, among other things, the event of nonpayment of principal, interest, fees or other amounts,
a representation or warranty proving to have been incorrect when made, failure to perform or observe covenants within a specified cure
period, a cross-default to certain other indebtedness and material agreements of the Company, and the occurrence of a bankruptcy, insolvency
or similar event affecting the Company.
In connection with the Promissory Note, the Company
incurred $
As of March 31, 2025, the outstanding principal balance
of the Promissory Note plus accrued interest was $
The following table provides a breakdown of interest expense (income) for the periods presented:
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Interest expense - Streeterville Capital | $ | $ | ||||||
| Interest expense - other | ||||||||
| Interest expense - WFIA | ||||||||
| Interest income | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| 12 |
(8) Stockholders’ Equity
The Company has authorized shares of $ par value common stock and shares of $ par value preferred stock at March 31, 2025 and December 31, 2024, of which and shares of common stock were issued and outstanding, respectively. The Company has not issued any shares of preferred stock.
The holders of common stock are entitled to one vote for each share of common stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, after the payment or provision for payment of all debts and liabilities of the Company, the holders of common stock shall be entitled to share in the remaining assets of the Company available for distribution, if any. Holders of the shares of common stock are entitled to dividends when, as and if declared by the Board of Directors.
Reverse Stock Splits
On November 30, 2023, the Company completed a
On August 9, 2024, the Company completed a
Except where disclosed, all amounts related to number of shares and per share amounts have been retrospectively restated in these financial statements to reflect the 2023 Reverse Stock Split and the 2024 Reverse Stock Split.
(9) Securities Issuances
At the Market Offering
The Company entered into the At-the-Market Agreement
(ATM Agreement) with H.C. Wainwright & Co., LLC (HCW) in January 2023, as amended in May 2023, pursuant to which the Company can issue
and sell, from time to time, shares of the Company’s common stock having an aggregate offering price of up to $
During the three months ended March 31, 2025 and 2024,
the Company sold and shares of common stock, respectively, under the ATM Agreement, for net proceeds of $
Purchase Agreement with Lincoln Park
In April 2023, the Company entered into a purchase
agreement (the LP Purchase Agreement) and a registration rights agreement (the Registration Rights Agreement) with Lincoln Park Capital
Fund, LLC (Lincoln Park). Pursuant to the terms of the LP Purchase Agreement, Lincoln Park has agreed to purchase from the Company up
to $
During the three months ended March 31, 2025, the
Company sold shares of common stock under the LP Purchase Agreement, for net proceeds of $
| 13 |
In September 2021, the Company’s board of directors and stockholders adopted the 2021 Equity Incentive Plan (the 2021 Plan), which provides for the grant of incentive stock options and non-qualified stock options to purchase shares of the Company’s common stock, stock appreciation rights, restricted stock units, restricted or unrestricted shares of common stock, performance shares, performance units, incentive bonus awards, other stock-based awards and other cash-based awards. No awards may be made under the 2021 Plan on or after September 24, 2031, but the 2021 Plan will continue thereafter while previously granted awards remain outstanding.
At the Company’s 2024 annual meeting, shareholders approved an amendment to the 2021 Plan to increase the number of shares of common stock authorized for issuance thereunder by shares to . As of March 31, 2025, shares of common stock were available for issuance under the 2021 Plan. The shares of common stock underlying any awards that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, repurchased or are otherwise terminated by the Company under the 2021 Plan will be added back to the shares of common stock available for issuance under the 2021 Plan.
The Company recorded stock-based compensation expense of $ and $ during the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025 and December 31, 2024, there was $ and $, respectively, of unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the 2021 Plan, which is expected to be recognized over the next one to four years.
| Weighted-Average | Weighted-Average Remaining Contractual | Aggregate Intrinsic | ||||||||||||||
| Shares | Exercise Price | Term (years) | Value | |||||||||||||
| Outstanding at January 1, 2024 | ||||||||||||||||
| Granted | $ | - | ||||||||||||||
| Exercised | ||||||||||||||||
| Forfeitures or expirations | ( | ) | ||||||||||||||
| Outstanding at March 31, 2024 | ||||||||||||||||
| Vested and expected to vest at March 31, 2024 | ||||||||||||||||
| Exercisable at March 31, 2024 | ||||||||||||||||
| Outstanding at January 1, 2025 | ||||||||||||||||
| Granted | $ | - | ||||||||||||||
| Exercised | ||||||||||||||||
| Forfeitures or expirations | ||||||||||||||||
| Outstanding at March 31, 2025 | ||||||||||||||||
| Vested and expected to vest at March 31, 2025 | ||||||||||||||||
| Exercisable at March 31, 2025 | ||||||||||||||||
| 14 |
The Company’s stock options issued qualify for equity accounting treatment under ASC 718, Compensation- Stock Compensation, and are measured at fair value as of their grant date accordingly. The fair value of the options were estimated using a Black-Scholes model. The assumptions that the Company used to estimate the grant-date fair value of stock options granted to employees and directors during the three-month periods ending March 31, 2025 and 2024 were as follows, shown on a weighted average basis:
| March 31, | March 31, | |||||||
| 2025 | 2024 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (in years) | ||||||||
| Expected volatility | ||||||||
| Expected dividend yield | % | % | ||||||
Risk-Free Interest Rate: The Company based the risk-free interest rate over the expected term of the options based on the constant maturity of U.S. Treasury securities with similar maturities as of the date of grant.
Expected Term: The expected term represents the period that the options granted are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting dates and the end of the contractual term.)
Expected Volatility: The Company uses an average historical stock price volatility of comparable public companies within the biotechnology and pharmaceutical industry that were deemed to be representative of future stock price trends as the Company does not have sufficient trading history for its common stock. The Company will continue to apply this process until a sufficient amount of historical information regarding volatility of its own stock price becomes available.
Expected Dividend Yield: The Company has not paid and does not anticipate paying any dividends in the near future. Therefore, the expected dividend yield was zero.
The grant-date fair value of options granted during the three months ended March 31, 2025 ranged from $ to $ and the grant-date fair value of options granted during the three months ended March 31, 2024 ranged from $ to $.
The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock. Because there were no stock options with exercise prices lower than the fair value of the Company’s common stock, the aggregate intrinsic value is as of March 31, 2025 and December 31, 2024.
(11) Common Stock Purchase Warrants
The following table summarizes the Company’s outstanding common stock purchase warrants as of March 31, 2025:
| Issuance Date | Issuance Date | |||||||||||||||
| Number of | Exercise | Fair Value | Fair Value | |||||||||||||
| Warrants | Price | per Warrant | Total | |||||||||||||
| December 2021 Initial Public Offering Warrants | $ | $ | $ | |||||||||||||
| December 2021 Placement Agent Warrants | $ | $ | ||||||||||||||
| September 2023 Public Offering Series A Warrants | $ | $ | ||||||||||||||
| September 2023 Public Offering Series B Warrants | $ | $ | ||||||||||||||
| September 2023 Placement Agent Warrants | $ | $ | ||||||||||||||
| February 2024 Public Offering Series A Warrants | $ | $ | ||||||||||||||
| February 2024 Public Offering Series B Warrants | $ | $ | ||||||||||||||
| February 2024 Placement Agent Warrants | $ | $ | ||||||||||||||
| June 2024 Series C Warrants | $ | $ | ||||||||||||||
| June 2024 Series D Warrants | $ | $ | ||||||||||||||
| July 2024 Placement Agent Warrants | $ | $ | ||||||||||||||
| Balance- March 31, 2025 | $ | |||||||||||||||
| 15 |
(12) Income Taxes
Cingulate Inc. is taxed as a C corporation under the Internal Revenue Code. Cingulate Inc. records deferred income taxes to reflect the impact of temporary differences between the recorded amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. CTx is a wholly-owned disregarded entity of Cingulate Inc., and all of the activity for CTx, along with its wholly-owned subsidiary Cingulate Works Inc., is included in the calculation of the current and deferred tax assets and liabilities for Cingulate Inc. No deferred income tax benefit or expense was recorded for the three-month periods ended March 31, 2025 and 2024 for federal or state income taxes.
Income tax expense differed from the expected expense computed by applying the U.S. Federal income tax rate as follows:
| Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |||||||
| Federal income tax benefit at statutory rate | $ | ( | ) | $ | ( | ) | ||
| State income tax benefit | ( | ) | ( | ) | ||||
| Permanent differences | ||||||||
| Change in valuation allowance | ||||||||
| Other | ( | ) | ( | ) | ||||
| Total income tax expense | $ | $ | ||||||
Evaluating the need for, and amount of, a valuation
allowance for deferred tax assets often requires significant judgment and extensive analysis of all available evidence on a jurisdiction-by-jurisdiction
basis. Such judgments require the Company to interpret existing tax law and other published guidance as applied to its circumstances.
As part of this assessment, the Company considers both positive and negative evidence about its profitability and tax situation. A valuation
allowance is provided if, based on available evidence, it is more likely than not that all or some portion of a deferred tax asset will
not be realized. The Company determined that it was more likely than not that it would not realize its deferred tax assets, based on historical
levels of income and future forecasts of taxable income, among other items. The Company recorded a valuation allowance of its net deferred
tax assets totaling $
The Company files income tax returns in the U.S. federal and various state jurisdictions. The Companies are not subject to U.S. federal and state income tax examinations by tax authorities for years before 2018.
The Company follows the provisions of FASB ASC 740, Income Taxes, to evaluate uncertain tax positions. This topic prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company has not identified any material uncertain tax positions requiring recognition in the consolidated financial statements as of March 31, 2025 or December 31, 2024.
(13) Subsequent Events
Management evaluated events that occurred subsequent to March 31, 2025, through May 8, 2025, which is the date the interim financial statements were issued.
On April 8, 2025, the Company entered into a Grant
Agreement (the “Grant Agreement”) with a private family foundation (the “Foundation”). Pursuant to the Grant Agreement,
the Company will receive a grant of $
Subsequent to March 31, 2025, the Company sold
shares of common stock under the ATM Agreement, for net proceeds of $
Subsequent to March 31, 2025, the Company
sold shares of common stock under the Lincoln Park Purchase Agreement, for net proceeds of $
| 16 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this report. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2024 (Form 10-K) and in this report, as well as disclosures in this report and our other reports filed with the SEC, for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a biopharmaceutical company using our proprietary Precision Timed ReleaseTM (PTRTM) drug delivery platform technology to build and advance a pipeline of next-generation pharmaceutical products designed to improve the lives of patients suffering from frequently diagnosed conditions characterized by burdensome daily dosing regimens and suboptimal treatment outcomes. With an initial focus on the treatment of Attention Deficit/Hyperactivity Disorder (ADHD) and anxiety, we are identifying and evaluating additional therapeutic areas where our PTR technology may be employed to develop future product candidates. Our PTR platform incorporates a proprietary Erosion Barrier Layer (EBL) designed to allow for the release of drug substance at specific, pre-defined time intervals, unlocking the potential for once-daily, multi-dose tablets. We believe there remains a significant, unmet need within the current treatment paradigm for true once-daily ADHD stimulant medications with lasting duration and a superior side effect profile to better serve the needs of patients throughout their entire active-day.
Since inception in 2012, our operations have focused on developing our product candidates, primarily CTx-1301, organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and conducting clinical trials. We do not have any product candidates approved for sale and have not generated any revenue. We have funded our operations through public and private capital raised. Cumulative capital raised from these sources, including debt financing, was approximately $109.3 million as of March 31, 2025.
We have incurred significant losses since our inception. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and commercialization of one or more of our product candidates. Our net losses were $3.8 million and $3.0 million for the three months ended March 31, 2025 and 2024, respectively. See “Results of Operations” below for an explanation of the fluctuations in our net losses. As of March 31, 2025, we had an accumulated deficit of $112.3 million.
| 17 |
We expect to continue to incur significant expenses and operating losses in the near term, as we:
| ● | seek regulatory approval for CTx-1301; | |
| ● | continue research and development activities for our existing and new product candidates, primarily for CTx-1301; | |
| ● | continue manufacturing activities, primarily relating to CTx-1301; | |
| ● | seek licensing partners and/or outsource commercial infrastructure to support sales and marketing for CTx-1301; and | |
| ● | operate as a public company. |
We are targeting to file our NDA submission for CTx-1301 in mid-2025 and believe our cash will satisfy our capital needs into the fourth quarter of 2025 under our current business plan. We will need additional capital to advance our other programs and commercialization efforts for CTx-1301. See “Liquidity and Capital Resources” below.
Our ability to generate product revenue will depend on the successful development, regulatory approval and eventual commercialization of one or more of our product candidates. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings, or other capital sources, including potential collaborations with other companies or other strategic transactions. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of our product candidates.
Clinical, Manufacturing and Business Update
CTx-1301: We have designed our clinical program for CTx-1301 (dexmethylphenidate), our lead investigational product candidate for the treatment of ADHD, based on U.S. Food and Drug Administration (FDA) feedback regarding our CTx-1301 clinical plan, and longstanding guidance on the streamlined approval pathway under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act.
In order to meet the pharmacology requirement for the CTx-1301 NDA submission, we completed a food effect study in October 2022 (25mg dose) and December 2024 (50mg dose). Each study demonstrated that CTx-1301 can be taken with or without food.
We initiated two CTx-1301 Phase 3 clinical studies in pediatric and adolescent patients- a fixed dose study and a dose-optimized onset and duration study in a laboratory classroom setting in the third quarter of 2023. Based upon written communication with the FDA that further conduct of these pediatric and adolescent studies is not required for the submission of an NDA, we closed enrollment on both Phase 3 trials. We are performing the data consolidation and analytical activities for these trials. Analysis of the safety data from the two closed Phase 3 trials and the 50mg dose food effect study revealed that no subjects experienced a serious treatment emergent adverse event (TEAE), a serious TEAE or a TEAE leading to death and there were no clinically relevant trends in TEAEs overall. A final analysis that combines both adult and pediatric safety and efficacy data will be included in the NDA submission for CTx-1301.
On April 2, 2025, we held a Pre-NDA meeting with FDA to discuss the NDA submission for CTx-1301, targeted for a mid-2025.
| 18 |
CTx-2103: We have embarked on a program to develop CTx-2103 (buspirone), for the treatment of anxiety, which is one of the most common mental health concerns in the United States. We completed a formulation study in which the pharmacokinetics were evaluated for this trimodal tablet providing three precisely timed doses of buspirone versus one immediate release dose. In addition, scintigraphic imaging visualized transit of the tablets through the gastrointestinal tract to confirm both the site and onset of release, which will then be correlated with pharmacokinetic data to establish the full release profile of the CTx-2103 formulation. Based on the pharmacokinetic profile seen in the data, CTx-2103 achieved a triple release of buspirone. These results provided the critical information required to allow us to request a Pre-IND meeting with the FDA to discuss the design of our clinical and regulatory program for CTx-2103 which occurred in the fourth quarter of 2023. We received input from the FDA regarding the regulatory pathway for CTx-2103, and the design of clinical studies for filing of an IND. Based on this FDA feedback, we believe that we can seek and win approval of CTx-2103 under the 505(b)(2) pathway, which typically requires less time and resources than the 505(b)(1) full NDA pathway. Additional resources will be required to complete the development of this product candidate.
On April 8, 2025, we entered into a Grant Agreement (the “Grant Agreement”) with a private family foundation (the “Foundation”). Pursuant to the Grant Agreement, we received a grant of $3 million in three equal installments of $1 million (the “Grant Funds”) to support the clinical and manufacturing development of CTx-2103 (the “Purpose). The first installment is expected to be received in May 2025, the second installment is expected to be received upon completion of a formulation study for CTX-2103, and the third installment is expected to be received upon completion of development batches required for CTx-2103. We are not required to return any Grant Funds received from the Foundation unless the Purpose has ended, in which case we will return any remaining Grant Funds to the Foundation. We will pay the Foundation a royalty, contingent on the commercialization of CTx-2103, of $500,000 per quarter, beginning six months after the first sale of CTx-2103, with a maximum cumulative payout of $3.5 million.
CTx-1302: We plan to initiate the clinical plan for CTx-1302 (dextroamphetamine), our second investigational asset for the treatment of ADHD, pending additional capital resources.
We continue to evaluate strategic partnerships under which we would license CTx-1301 in the United States and/or internationally. In March 2023, we entered into a joint commercialization agreement, which was replaced with a master services agreement in May 2025 with Indegene, Inc. (Indegene) in the United States . We are able to utilize Indegene for commercialization services for CTx-1301, including marketing, sales, market access and distribution, on a fee for service, at our discretion.
Securities Issuances
ATM Agreement
We entered into an At The Market Offering Agreement (ATM Agreement) with H.C. Wainwright & Co., LLC (HCW), as sales agent, in January 2023 as amended in May 2023, pursuant to which we may offer and sell, from time to time through HCW, shares of our common stock for aggregate proceeds of up to $23.5 million based on prospectus supplements filed with the SEC through the date of this report (upon the terms and subject to the conditions and limitations set forth in the ATM Agreement). In the three months ended March 31, 2025, we sold 200,484 shares of common stock under the ATM Agreement, for net proceeds of $1,020,368, after deducting $33,754 of compensation to HCW and other administration fees. Subsequent to March 31, 2025, we sold 205,826 shares of common stock under the ATM Agreement, for net proceeds of $868,520, after deducting $30,617 of compensation to HCW and other administration fees.
Equity Line of Credit
In April 2023, we entered into a purchase agreement (Lincoln Park Agreement) with Lincoln Park Capital Fund LLC (Lincoln Park). Pursuant to the Lincoln Park Agreement, Lincoln Park has agreed to purchase from us up to an aggregate of $12.0 million of common stock (upon the terms and subject to the conditions and limitations set forth in the Lincoln Park Agreement) from time to time and at our sole discretion over the 36-month term of the Lincoln Park Agreement. During the quarter ended March 31, 2025, we sold 223,409 shares of common stock under the Lincoln Park Agreement, for net proceeds of $899,989. Subsequent to March 31, 2025, we sold 197,104 shares of common stock under the Lincoln Park Purchase Agreement, for net proceeds of $749,991.
| 19 |
Components of Operating Results
Revenue
Since inception, we have not generated any revenue and do not expect to generate any revenue from the sale of products in the near future. If our development efforts for our product candidates are successful and result in regulatory approval, or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from collaboration of license agreements.
Operating Expenses
Research and Development Expenses
Research and development expenses consist of costs incurred in the discovery and development of our product candidates, and primarily include:
| ● | expenses incurred under third party agreements with contract research organizations (CROs), and investigative sites, that conducted or will conduct our clinical trials and a portion of our pre-clinical activities; | |
| ● | costs of raw materials, as well as manufacturing cost of our materials used in clinical trials and other development testing; | |
| ● | expenses, including salaries and benefits of employees engaged in research and development activities; | |
| ● | costs of manufacturing equipment, depreciation and other allocated expenses; and | |
| ● | fees paid for contracted regulatory services as well as fees paid to regulatory authorities including the FDA for review and approval of our product candidates. |
We expense research and development costs as incurred. Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our consolidated financial statements as prepaid or accrued costs.
Research and development activities are central to our business model. We expect that our research and development expenses will continue to increase for the foreseeable future as we continue clinical development for our product candidates, as well as adding additional PTR product candidates to our pipeline. As products enter later stages of clinical development, they will generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. Historically, our research and development costs have primarily related to the development of CTx-1301. As we advance CTx-1301, CTx-1302, and CTx-2103, as well as identify any other potential product candidates, we will continue to allocate our direct external research and development costs to the products. We expect to fund our research and development expenses from our current cash and cash equivalents and any future equity or debt financings, or other capital sources.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs for our employees in administrative, executive and finance functions. General and administrative expenses also include professional fees for legal, accounting, audit, tax and consulting services, insurance, office, and travel expenses.
We expect that our general and administrative expenses will increase in the future as we increase our general and administrative headcount to support our growing operations including the potential commercialization of our product candidates. We have experienced, and will continue to experience, increased expenses associated with being a public company, including costs of accounting, audit, legal, regulatory and tax compliance services; director and officer insurance; and investor and public relations costs.
| 20 |
Interest and other income (expense), net
Interest and other income (expense), net consisted of interest expense on our related party notes payable until the last of those obligations were converted to equity in the first quarter of 2024, and interest expense on the promissory note executed in December of 2024, offset by interest earned on our cash and cash equivalents, including money market funds. The primary objective of our investment policy is liquidity and capital preservation.
Critical Accounting Policies and Significant Judgments and Estimates
Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of expenses during a reporting period. Actual results could differ from estimates.
A discussion of these policies can be found in the “Critical Accounting Policies and Significant Judgments and Estimates” section of our Form 10-K. There have been no changes in our application of critical accounting policies since December 31, 2024.
Results of Operations
Comparison of the three months ended March 31, 2025 and 2024
The following table summarizes our results of operations for the three months ended March 31, 2025 and 2024:
| Three Months Ended | ||||||||||||||||
| March 31, | % | |||||||||||||||
| (in thousands) | 2025 | 2024 | Increase | Increase | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| Research and development | $ | 2,223 | $ | 1,807 | $ | 416 | 23.0 | % | ||||||||
| General and administrative | 1,483 | 1,141 | 342 | 30.0 | % | |||||||||||
| Operating Loss | (3,706 | ) | (2,948 | ) | 758 | 25.7 | % | |||||||||
| Interest and other income (expense), net | (97 | ) | (24 | ) | 73 | 304.2 | % | |||||||||
| Net Loss | $ | (3,803 | ) | $ | (2,972 | ) | $ | 831 | 28.0 | % | ||||||
| 21 |
Research and development expenses
The following table summarizes our research and development (R&D) expenses for the three months ended March 31, 2025 and 2024:
| Three Months Ended | ||||||||||||||||
| March 31, | % | |||||||||||||||
| (in thousands) | 2025 | 2024 | Increase | Increase | ||||||||||||
| Clinical operations | $ | 1,108 | $ | 1,077 | $ | 31 | 2.9 | % | ||||||||
| Drug manufacturing and formulation | 380 | 341 | 39 | 11.4 | % | |||||||||||
| Personnel expenses | 561 | 306 | 255 | 83.3 | % | |||||||||||
| Regulatory costs | 174 | 83 | 91 | 109.6 | % | |||||||||||
| Total research and development expenses | $ | 2,223 | $ | 1,807 | $ | 416 | 23.0 | % | ||||||||
R&D expenses were $2.2 million for the three months ended March 31, 2025, an increase of $0.4 million or 23.0% from the three months ended March 31, 2024. This change was primarily the result of an increase in personnel expenses and regulatory costs in the three months ended March 31, 2025 as compared to the same period in 2024. The increase in personnel costs is the result of the reinstatement of base salaries in September 2024 following salary reduction measures which had been implemented in late 2023. Regulatory costs increased in the three months ended March 31, 2025 as compared to the same period in 2024 due to preparation for the pre-NDA meeting with the FDA.
General and administrative expenses
The following table summarizes our general and administrative (G&A) expenses for the three months ended March 31, 2025 and 2024:
| Three Months Ended | % | |||||||||||||||
| March 31, | Increase | Increase | ||||||||||||||
| (in thousands) | 2025 | 2024 | (Decrease) | (Decrease) | ||||||||||||
| Personnel expenses | $ | 571 | $ | 413 | $ | 158 | 38.3 | % | ||||||||
| Legal and professional fees | 505 | 316 | 189 | 59.8 | % | |||||||||||
| Occupancy | 62 | 101 | (39 | ) | (38.6 | %) | ||||||||||
| Insurance | 196 | 241 | (45 | ) | (18.7 | %) | ||||||||||
| Other | 149 | 70 | 79 | 112.9 | % | |||||||||||
| Total general and administrative expenses | $ | 1,483 | $ | 1,141 | $ | 342 | 30.0 | % | ||||||||
Total G&A expenses were $1.5 million for the three months ended March 31, 2025, an increase of $0.3 million or 30.0% from the three months ended March 31, 2024. This is primarily the result of an increase in legal and professional fees and personnel expenses. The increase in professional fees was due to an increase in certain financial, accounting and investor relations fees. The increase in personnel costs is the result of reinstatement of base salaries in September 2024 following salary reduction measures which had been implemented in late 2023.
| 22 |
Interest and other income (expense), net
The following table summarizes interest and other income (expense), net for the three months ended March 31, 2025 and 2024:
| Three Months Ended | ||||||||||||||||
| March 31, | % | |||||||||||||||
| (in thousands) | 2025 | 2024 | Increase | Increase | ||||||||||||
| Interest and other income (expense), net | $ | (97 | ) | $ | (24 | ) | $ | 73 | 304.2 | % | ||||||
Total interest and other income (expense), net for the three months ended March 31, 2025 and March 31, 2024 relates to interest incurred on outstanding notes payable, offset by interest earned on invested balances. The increase in interest expense for the period ended March 31, 2025 is related to interest expense incurred on the $5.4 million promissory note which was executed in December 2024.
Cash Flows
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net cash (used in) operating activities | $ | (4,608 | ) | $ | (8,746 | ) | ||
| Net cash (used in) investing activities | - | (82 | ) | |||||
| Net cash (used in) financing activities | 1,916 | 9,889 | ||||||
| Net increase (decrease) in cash and cash equivalents | $ | (2,692 | ) | $ | 1,061 | |||
Cash Flows from Operating Activities
Net cash used in operating activities was $4.6 million for the three months ended March 31, 2025. Cash used in operating activities was primarily due to the use of funds in our operations to develop our product candidates resulting in a net loss of $3.8 million, prior to the effects of two noncash items, stock-based compensation expense of $0.4 million and depreciation expense of $0.2 million. Changes in operating assets and liabilities included a decrease in trade accounts payable and accrued expenses of $0.9 million primarily due to the payment of vendor balances in the first quarter of 2025 and an increase in prepaid expenses and other current assets of $0.5 million primarily due to payments for professional and marketing fees.
Net cash used in operating activities was $8.7 million for the three months ended March 31, 2024. Cash used in operating activities was primarily due to the use of funds in our operations to develop our product candidates resulting in a net loss of $3.0 million, prior to the effects of two noncash items, stock-based compensation expense of $0.2 million and depreciation expense of $0.2 million. Changes in operating assets and liabilities included an increase in prepaid expenses and other current assets of $1.1 million primarily due to a deposit made to Societal CDMO, Inc., our contract manufacturing organization (CMO), for registration batch activity for CTx-1301. In addition, there was a decrease in trade accounts payable and accrued expenses of $5.0 million due to the payment of vendor balances with the cash proceeds from the issuance of common stock pursuant to our ATM Agreement in January 2024 and the issuance of equity in February 2024.
| 23 |
Cash Flows from Investing Activities
Net cash used in investing activities for the three months ended March 31, 2024 was primarily related to the purchase of equipment to support our research and development.
Cash Flows from Financing Activities
Net cash provided by financing activities for the three-month period ended March 31, 2025 was related to the cash proceeds from the issuance of common stock pursuant to the ATM Agreement and the Lincoln Park Agreement.
Net cash provided by financing activities for the three months ended March 31, 2024 was related to the cash proceeds from the issuance of common stock pursuant to the ATM Agreement in January 2024 and the issuance of common stock in February 2024.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception in 2012 through March 31, 2025, we have not generated any revenue and have incurred significant operating losses and negative cash flow from our operations.
In the three months ended March 31, 2025, we sold 200,484 shares of common stock under the ATM Agreement, for net proceeds of $1,020,368, after deducting $33,754 of compensation to HCW and other administration fees. Subsequent to March 31, 2025, we sold 205,826 shares of common stock under the ATM Agreement, for net proceeds of $868,520, after deducting $30,617 of compensation to HCW and other administration fees.
During the three months ended March 31, 2025, we sold 223,409 shares of common stock under the Lincoln Park Purchase Agreement, for net proceeds of $899,989. Subsequent to March 31, 2025, we sold 197,104 shares of common stock under the Lincoln Park Purchase Agreement, for net proceeds of $749,991.
As of March 31, 2025, we had cash and cash equivalents of $9.5 million. We believe our cash will satisfy our capital needs into the fourth quarter of 2025 under our current business plan, which is beyond the targeted date to file our NDA submission for CTx-1301 of mid-2025. We will need additional capital to advance our commercialization efforts for CTx-1301 as well as our other programs. Changing circumstances may cause us to expend cash significantly faster than we currently anticipate, and we may need to spend more cash than currently expected because of circumstances beyond our control. Our policy is to invest any cash in excess of our immediate requirements in investments designed to preserve the principal balance and provide liquidity while producing a modest return on investment. Accordingly, our cash equivalents are invested primarily in money market funds which are currently providing only a minimal return given the current interest rate environment.
We expect to continue to incur substantial additional operating losses for the near term as we continue to develop our product candidates, primarily CTx-1301 and seek marketing approval and, subject to obtaining such approval, the eventual commercialization of our product candidates. If we obtain marketing approval for our product candidates, we will incur significant sales, marketing and outsourced manufacturing expenses. In addition, we expect to incur additional expenses to add operational, financial and information systems and personnel, including personnel to support our planned product commercialization efforts. We also expect to incur significant costs to comply with corporate governance, internal controls and similar requirements applicable to us as a public company.
Our future use of operating cash and capital requirements will depend on many forward-looking factors, including the following:
| ● | the cost and timing of manufacturing the clinical supply of our product candidates; | |
| ● | the initiation, progress, timing, costs and results of clinical trials for our product candidates; | |
| ● | the clinical development plans we establish for each product candidate; | |
| ● | the number and characteristics of product candidates that we develop or may in-license; | |
| ● | the terms of any collaboration or license agreements we may choose to execute; |
| 24 |
| ● | the outcome, timing and cost of meeting regulatory requirements established by the FDA or other comparable foreign regulatory authorities; | |
| ● | the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights; | |
| ● | the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us; | |
| ● | the cost and timing of the implementation of commercial scale manufacturing activities; and | |
| ● | the cost and timing of outsourcing our commercialization efforts, including, sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products. |
To continue to grow our business over the longer term, we plan to commit substantial resources to research and development, including clinical trials of our product candidates, and other operations and potential product acquisitions and in-licensing. We have evaluated and expect to continue to evaluate a wide array of strategic transactions as part of our plan to acquire or in-license and develop additional products and product candidates to augment our internal development pipeline. Strategic transaction opportunities that we may pursue could materially affect our liquidity and capital resources and may require us to incur additional indebtedness, seek equity capital or both. In addition, we may pursue development, acquisition or in-licensing of approved or development products in new or existing therapeutic areas or continue the expansion of our existing operations. Accordingly, we expect to continue to opportunistically seek access to additional capital to license or acquire additional products, product candidates or companies to expand our operations, or for general corporate purposes. Strategic transactions may require us to raise additional capital through one or more public or private debt or equity financings or could be structured as a collaboration or licensing arrangement. We are actively seeking a strategic pharmaceutical partnership under which we would license CTx-1301 in the United States, internationally, or both. In March 2023, we entered into a joint commercialization agreement, which was replaced with a master services agreement in May 2025, with Indegene. Should we be unable to identify an appropriate pharmaceutical partnership, if we receive FDA approval for CTx-1301, Indegene would provide commercialization services for CTx-1301, including marketing, sales, market access and distribution, on a fee for service basis.
If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
For example, pursuant to the Note Purchase Agreement, we are subject to certain restrictions on our ability to issue securities during the term of the Note. Specifically, we have agreed, among other things, to obtain Lender’s consent prior to issuing any debt securities or certain equity securities where the pricing of such equity securities is tied to the public trading price of our common stock and to refrain from entering into any agreement or covenant that locks up, restricts or otherwise prohibits us from entering into a variable rate transaction with Lender or any of its affiliates, or from issuing common stock or other equity or debt securities to Lender or any of its affiliates. If we are unable to obtain Lender’s consent prior to issuing any debt or certain equity securities, such issuance may be a breach of the Note Purchase Agreement, and we may be obligated to indemnify Lender for loss or damage arising as a result of any breach or alleged breach by us of the Note Purchase Agreement, which may affect our business operations and financial condition. Additionally, the Note provides that following an event of default under the Note, Lender has the right to seek and receive injunctive relief from a court or an arbitrator prohibiting us from issuing any of our common stock or preferred stock to any party unless fifty percent of the gross proceeds received by us in connection with such issuance are simultaneously used to make a payment under the Note. Lender also has the right to seek and receive injunctive relief from a court or arbitrator to prevent the consummation of any fundamental transaction, as defined in the Note, unless it contains a closing condition that the Note is paid in full upon consummation of the transaction or Lender has provided its written consent to such transaction.
| 25 |
Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences that are not favorable to us or our existing stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of our product candidates.
Contractual Obligations
The following summarizes our contractual obligations as of March 31, 2025 that will affect our future liquidity.
We entered into a patent and know-how licensing agreement with BDD Pharma Limited in August 2018. See “Item 1. Business – Material Agreements” section of our Form 10-K for a description of this agreement. We are required to pay BDD Pharma certain amounts in connection with clinical trial and regulatory milestones. The first milestone payment of $250,000 was paid in February 2023 upon dosing of the first patient in the Phase 3 adult onset and duration study for CTx-1301. Additional payments will become due upon completion of certain milestones as defined in the agreement.
We entered into agreements with Societal, our CMO, for both the manufacturing of pre-process validation batches of our lead asset, CTx-1301 and active pharmaceutical ingredients and materials to be used in process validation batches with a total estimated cost of approximately $1.8 million.
Going Concern
Since inception we have been engaged in organizational activities, including raising capital and research and development activities. We have not generated revenues and have not yet achieved profitable operations, nor have we ever generated positive cash flow from operations. There is no assurance that profitable operations, if achieved, could be sustained on a continuing basis. We are subject to those risks associated with any pre-clinical stage pharmaceutical company that has substantial expenditures for research and development. There can be no assurance that our research and development projects will be successful, that products developed will obtain necessary regulatory approval, or that any approved product will be commercially viable. In addition, we operate in an environment of rapid technological change that is largely dependent on the services of our employees and consultants. Further, our future operations are dependent on the success of our efforts to raise additional capital. These uncertainties raise substantial doubt about our ability to continue as a going concern for one year after the issuance date of our financial statements. The accompanying consolidated financial statements have been prepared on a going concern basis. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the company to continue as a going concern, which contemplates the continuation of operations, realization of assets and liquidation of liabilities in the ordinary course of business. We have incurred a net loss for the three months ended March 31, 2025 and 2024 and had accumulated losses of $112.3 million since inception to March 31, 2025. We anticipate incurring additional losses until such time, if ever, that we can generate significant revenue from our product candidates currently in development. Our sources of capital have included private capital raises in various classes of units of CTx prior to the Reorganization Merger, the issuance of equity securities in connection with our initial public offering (IPO), public offerings, including the September 2023 Offering and the February 2024 Offering, sales of common stock under our ATM Agreement and Lincoln Park Agreement, a private placement with WFIA, the WFIA Note, which was subsequently converted to equity, the June 2024 Warrant Inducement and the issuance of the Promissory Note in December 2024. Additional capital will be needed by us to fund our operations, to complete development of and to commercially develop our product candidates. There is no assurance that such capital will be available when needed or on acceptable terms.
| 26 |
JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (JOBS Act) was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an “emerging growth company.” As an “emerging growth company,” we are electing to take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for emerging growth companies.
Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. These exemptions will apply until the fifth anniversary of the completion of our IPO or until we no longer meet the requirements for being an “emerging growth company,” whichever occurs first.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures.
Evaluation of Our Disclosure Controls
We maintain a system of disclosure controls and procedures that is designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to the our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of March 31, 2025, have concluded that our disclosure controls and procedures were effective as of March 31, 2025.
Evaluation of Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
See Part I, Item 1, Notes to Consolidated Financial Statements, Note 6 – Contingencies, of this report.
Item 1A. Risk Factors.
Our business is subject to substantial risks and uncertainties. Investing in our securities involves a high degree of risk. You should carefully consider the risk factors in Part I, Item 1A of our Form 10-K, together with the information contained elsewhere in this report, including Part I, Item 1 “Financial Statements” and Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in our other SEC filings in evaluating our business. These risks and uncertainties could materially and adversely affect our business, financial condition, results of operations, prospects for growth, and the value of an investment in our securities.
Except as set forth below, there were no material changes to the risk factors previously disclosed in our Form 10-K.
| 27 |
Item 5. Other Information
Rule 10b5-1 Trading Arrangements
In the first quarter of 2025,
no director or officer (as defined in Exchange Act Rule 16a-1(f)) of the Company
Agreement with Indegene, Inc.
On March 7, 2023, we entered into a Joint Commercialization Agreement (the “Commercialization Agreement”) with Indegene, Inc. (“Indegene”). On May 7, 2025, the Commercialization Agreement was terminated and we and Indegene entered into a Master Services Agreement (the “Indegene MSA”).
Like the Commercialization Agreement prior to its termination, the Indegene MSA governs the general terms under which Indegene will provide commercialization services, upon our request. Pursuant to the Indegene MSA, the parties will enter into statements of work that will set forth, among other things, the services to be performed by Indegene, the deliverables for such services, and the fees to be paid by us. Each statement of work will be governed by the terms of the Indegene MSA unless expressly modified in such statement of work. We may elect to receive the following services from Indegene: (a) medical affairs & pharmacovigilance; (b) pricing, reimbursement and market access; (c) commercial operations; and (d) marketing (including field force).
In the event that we intend to outsource any services within the scope of services that Indegene has the capability to perform, we shall allow Indegene to participate in our request for proposals; provided, that we may, in our sole discretion, select the party that will provide such services.
Indegene personnel will not be assigned to or interact with any other Indegene customer engaged in similar or competing projects within the same therapeutic area for which such personnel are providing services to us. This restriction does not restrict Indegene from offering similar or competing services to other customers through separate personnel, teams or affiliates; provided, that Indegene complies with the terms and conditions of the Indegene MSA, including the confidentiality provisions.
The Indegene MSA has a three-year term. The Indegene MSA may not be terminated for convenience during the initial twelve (12) months following the first commercial sale of CTx-1301 or eighteen (18) months from the effective date of the Indegene MSA, whichever is earlier. Thereafter, either party may terminate the Indegene MSA upon six (6) months prior written notice to the other party. Either party may terminate the Indegene MSA upon thirty (30) days prior, written notice for material, uncured breaches or immediately in the event of the other party’s bankruptcy.
The Indegene MSA contains representations, warranties, confidentiality and indemnity obligations customary for agreements of this type.
The description of the Indegene MSA does not purport to be complete and is qualified in its entirety by reference to the full text of the Indegene MSA, which has been filed as Exhibit 10.4 to this report and is incorporated herein by reference.
Item 6. Exhibits
* Filed Herewith
** Furnished Herewith
| 28 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CINGULATE INC. | ||
| Date: May 8, 2025 | By: | /s/ Shane J. Schaffer |
| Shane J. Schaffer | ||
| Chairman and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: May 8, 2025 | By: | /s/ Jennifer L. Callahan |
| Jennifer L. Callahan | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) | ||
| 29 |