PART
I — FINANCIAL INFORMATION
Item
1. Financial Statements.
Cingulate
Inc.
Consolidated
Balance Sheets (unaudited)
| |
March 31, | | |
December 31, | |
| |
2022 | | |
2021 | |
ASSETS | |
| | | |
| | |
| |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 12,614,180 | | |
$ | 16,492,745 | |
Short-term investments | |
| 933 | | |
| 933 | |
Miscellaneous receivables | |
| 651,371 | | |
| 690,248 | |
Prepaid expenses and other current assets | |
| 1,307,137 | | |
| 1,698,353 | |
Total current assets | |
| 14,573,621 | | |
| 18,882,279 | |
| |
| | | |
| | |
Property and equipment, net | |
| 3,054,349 | | |
| 3,145,378 | |
Operating lease right-of-use assets | |
| 804,711 | | |
| 858,600 | |
| |
| | | |
| | |
Total assets | |
| 18,432,681 | | |
| 22,886,257 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
| |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
| 556,326 | | |
| 264,687 | |
Accrued expenses | |
| 756,035 | | |
| 601,300 | |
Current installments of obligations under finance leases | |
| 15,335 | | |
| 15,096 | |
Other current liabilities | |
| 303,263 | | |
| 295,595 | |
Total current liabilities | |
| 1,630,959 | | |
| 1,176,678 | |
| |
| | | |
| | |
Long-term liabilities: | |
| | | |
| | |
Obligations under finance leases | |
| 33,613 | | |
| 37,534 | |
Operating lease liabilities | |
| 749,508 | | |
| 828,503 | |
| |
| | | |
| | |
Total liabilities | |
| 2,414,080 | | |
| 2,042,715 | |
| |
| | | |
| | |
Stockholders’ Equity | |
| | | |
| | |
Common Stock, $0.0001 par value; 240,000,000 shares authorized and 11,309,412 shares issued and outstanding as of March 31, 2022 and December 31, 2021 | |
| 1,131 | | |
| 1,131 | |
Preferred Stock, $0.0001 par value; 10,000,000 shares authorized and 0 shares issued and outstanding as of December 31, 2021 | |
| - | | |
| - | |
Additional Paid-in-Capital | |
| 72,756,028 | | |
| 72,574,510 | |
Accumulated other comprehensive income | |
| (2,783 | ) | |
| 165 | |
Accumulated deficit | |
| (56,735,775 | ) | |
| (51,732,264 | ) |
Total stockholders’ equity | |
| 16,018,601 | | |
| 20,843,542 | |
| |
| | | |
| | |
Total liabilities and stockholders’ equity | |
$ | 18,432,681 | | |
$ | 22,886,257 | |
See
notes to consolidated financial statements.
Cingulate
Inc.
Consolidated
Statements of Operations and Comprehensive Loss (unaudited)
| |
| | |
| |
| |
Three Months Ended March 31, | |
| |
2022 | | |
2021 | |
Operating expenses: | |
| | | |
| | |
Research and development | |
$ | 2,762,284 | | |
$ | 562,519 | |
General and administrative | |
| 2,247,060 | | |
| 767,645 | |
Operating loss | |
| (5,009,344 | ) | |
| (1,330,164 | ) |
| |
| | | |
| | |
Interest and other income (expense), net | |
| 5,833 | | |
| (3,759 | ) |
Loss before income taxes | |
| (5,003,511 | ) | |
| (1,333,923 | ) |
Income tax benefit (expense) | |
| - | | |
| - | |
| |
| | | |
| | |
Net loss | |
| (5,003,511 | ) | |
| (1,333,923 | ) |
Other comprehensive income (loss): | |
| | | |
| | |
Change in unrealized gain on short-term investments | |
| (2,948 | ) | |
| - | |
Comprehensive loss | |
$ | (5,006,459 | ) | |
$ | (1,333,923 | ) |
Net loss per share of common stock, basic and diluted | |
$ | (0.44 | ) | |
| - | |
| |
| | | |
| | |
Weighted average number of shares used in computing net loss per share of common stock, basic and diluted | |
| 11,309,412 | | |
| - | |
See
notes to consolidated financial statements.
Cingulate
Inc.
Consolidated
Statements of Stockholders’ Equity (unaudited)
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| |
Common Stock | | |
Additional | | |
Members’ | | |
Accumulated | | |
Accumulated Other Comprehensive | | |
Stockholders’ | |
| |
Shares | | |
Amount | | |
Paid-in-Capital | | |
Capital | | |
Deficit | | |
Income | | |
Equity | |
Balance January 1, 2021 | |
| - | | |
| - | | |
$ | - | | |
| 32,314,441 | | |
$ | (31,022,336 | ) | |
$ | 165 | | |
$ | 1,292,270 | |
Member contributions | |
| | | |
| | | |
| - | | |
| 1,385,688 | | |
| | | |
| | | |
| 1,385,688 | |
Net loss | |
| - | | |
| - | | |
| - | | |
| | | |
| (1,333,923 | ) | |
| - | | |
| (1,333,923 | ) |
Balance March 31, 2021 | |
| - | | |
$ | - | | |
$ | - | | |
$ | 33,700,129 | | |
$ | (32,356,259 | ) | |
$ | 165 | | |
$ | 1,344,035 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance January 1, 2022 | |
| 11,309,412 | | |
| 1,131 | | |
$ | 72,574,510 | | |
| - | | |
$ | (51,732,264 | ) | |
$ | 165 | | |
$ | 20,843,542 | |
Activity for the three months to March 31, 2022: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Unrealized losses on available for sale investments | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,948 | ) | |
| (2,948 | ) |
Stock-based compensation expense | |
| - | | |
| - | | |
| 181,518 | | |
| - | | |
| - | | |
| - | | |
| 181,518 | |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (5,003,511 | ) | |
| - | | |
| (5,003,511 | ) |
Balance March 31, 2022 | |
| 11,309,412 | | |
$ | 1,131 | | |
$ | 72,756,028 | | |
$ | - | | |
$ | (56,735,775 | ) | |
$ | (2,783 | ) | |
$ | 16,018,601 | |
See
notes to consolidated financial statements
Cingulate
Inc.
Consolidated
Statements of Cash Flows (unaudited)
| |
| | |
| |
| |
Three Months Ended March 31, | |
| |
2022 | | |
2021 | |
Operating activities: | |
| | | |
| | |
Net loss | |
$ | (5,003,511 | ) | |
$ | (1,333,923 | ) |
Adjustments to reconcile net loss to net | |
| | | |
| | |
cash used in operating activities: | |
| | | |
| | |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation | |
| 101,429 | | |
| 174,698 | |
Stock-based compensation | |
| 181,518 | | |
| | |
Other | |
| (2,948 | ) | |
| - | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Miscellaneous receivables | |
| 38,877 | | |
| (54,128 | ) |
Prepaid expenses and other current assets | |
| 391,216 | | |
| (187,294 | ) |
Operating lease right-of-use assets | |
| 53,889 | | |
| (49,826 | ) |
Trade accounts payable and accrued expenses | |
| 446,374 | | |
| (257,690 | ) |
Other current liabilities | |
| 7,668 | | |
| 38,833 | |
Operating lease liabilities | |
| (78,995 | ) | |
| (4,669 | ) |
Net cash used in operating activities | |
| (3,864,483 | ) | |
| (1,673,999 | ) |
| |
| | | |
| | |
Investing activities: | |
| | | |
| | |
Purchase of property and equipment | |
| (10,400 | ) | |
| (66,469 | ) |
Net cash used in investing activities | |
| (10,400 | ) | |
| (66,469 | ) |
| |
| | | |
| | |
Financing Activities: | |
| | | |
| | |
Members’ capital contributions | |
| - | | |
| 1,385,688 | |
Proceeds from notes payable | |
| - | | |
| 69,789 | |
Principal payments on finance lease obligations | |
| (3,682 | ) | |
| (104,438 | ) |
Net cash provided by financing activities | |
| (3,682 | ) | |
| 1,351,039 | |
| |
| | | |
| | |
Cash and cash equivalents: | |
| | | |
| | |
Net increase in cash and cash equivalents | |
| (3,878,565 | ) | |
| (389,429 | ) |
Cash and cash equivalents at beginning of year | |
| 16,492,745 | | |
| 1,197,672 | |
Cash and cash equivalents at end of year | |
$ | 12,614,180 | | |
$ | 808,243 | |
Non-cash activities | |
| | | |
| | |
Property and equipment accrued but not yet paid at end of period | |
$ | 10,400 | | |
$ | - | |
Cash payments: | |
| | | |
| | |
Interest paid | |
$ | 793 | | |
$ | 3,075 | |
See
notes to consolidated financial statements
CINGULATE
INC.
Notes
to Consolidated Financial Statements
(1)
Nature of the Business and Liquidity
Organization
Cingulate
Inc. is a clinical stage 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. The Company is preparing
to start Phase 3 clinical trials for CTx-1301 in the second half of 2022. In addition, the Company has a third product to treat anxiety,
CTx-2103, in a proof-of-concept stage.
On
November 14, 2012, Cingulate Therapeutics LLC (CTx), a Delaware limited liability company, was formed. On May 10, 2021, Cingulate Inc.
(Cingulate, or the Company), a Delaware corporation and wholly-owned subsidiary of CTx, was formed to serve as a holding company, in
anticipation of the Company becoming publicly traded. Through a Reorganization Merger which occurred in the third quarter of 2021, Cingulate
effectively acquired CTx and all outstanding units of CTx were converted into shares of Cingulate common stock. CTx remains the entity
through which the Company conducts operations.
CTx
is the predecessor of Cingulate for financial reporting purposes. The consolidated financial statements and notes for the year ended
December 31, 2021 represent the full consolidation of Cingulate and its subsidiaries, including CTx and all references to the Company
represent this full consolidation. For periods prior to the year ended December 31, 2021, the consolidated financial statements and notes
represent the full consolidation of CTx and its subsidiaries.
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. The IPO, which
was completed in December 2021, provided the Company the ability to continue its research and development activities; however, the Company
will need additional funding for operations and development in order to meet its obligations in the longer term. Management is evaluating
various strategies to obtain additional funding for operations and development beyond that time which may include additional offerings
of common stock, issuance of debt, potential strategic research and development partners, and licensing and/or marketing arrangements
with pharmaceutical companies. Successful implementation of these plans involves both the Company’s efforts and factors that are
outside its control, such as market factors and FDA approval of product candidates. The Company can give no assurance that its plans
will be effectively implemented in such a way that they will sufficiently alleviate or mitigate the conditions and events noted above,
which results in substantial doubt about the Company’s ability to continue as a going concern within one year after the date that
the financial statements are issued. The accompanying consolidated financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial
statements do not reflect any adjustments that might result from the outcome of this uncertainty.
(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 sheet as of March 31, 2022, the consolidated statements of operations for the three months ended March
31, 2022 and 2021, the consolidated statement of stockholders’ equity for the three-month periods ended March 31, 2022 and 2021,
the consolidated statements of cash flows for the three months ended March 31, 2022 and 2021, 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 audited consolidated
financial statements and the notes thereto.
(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 $250,000 (without regard to reconciling items). Management monitors the soundness of these financial
institutions and does not believe the Company is subject to any material credit risk relative to the uninsured portion of the deposits.
(d)
Miscellaneous Receivables
Miscellaneous
receivables consist of payroll tax credits generated from the Company’s 2020 and 2019 federal income tax returns, which have not
yet been received as of March 31, 2022, as well as employee retention tax credits for payroll costs incurred in 2020 and the first three
quarters of 2021. As of March 31, 2022 and December 31, 2021, the Company determined that there was no allowance necessary relating to
these receivables.
(e)
Impairment of Long-lived Assets
The
Company assesses the carrying value of its long-lived assets, including property and equipment, as well as lease 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 months ended March 31, 2022
or 2021.
(f) 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 9.
(3) Fair Value of Assets and Liabilities
The
Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent
possible. The Company determines fair values based on assumptions that market participants would use in pricing an asset or liability
in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following
fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
Level
1—Inputs represent unadjusted quoted prices for identical assets exchanged in active markets.
Level
2—Inputs include directly or indirectly observable inputs other than Level 1 inputs such as quoted prices for similar assets
exchanged in active or inactive markets; quoted prices for identical assets exchanged in inactive markets; other inputs that are considered
in fair value determinations of the assets, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level
3—Inputs include unobservable inputs used in the measurement of assets. Management is required to use its own assumptions regarding
unobservable inputs because there is little, if any, market activity in the assets or related observable inputs that can be corroborated
at the measurement date. Measurements of certain investments carried at fair value are based primarily on valuation models, discounted
cash flow models or other valuation techniques that are believed to be used by market participants. Unobservable inputs require management
to make certain projections and assumptions about the information that would be used by market participants in pricing assets.
The
categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The Company’s policy is to recognize significant transfers between the levels at the actual date of the event. There were no transfers
in or out of Levels 1, 2, or 3 during the three months ended March 31, 2022 or March 31, 2021.
The
Company has no Level 2 or Level 3 investments. The cash and short-term investments held by the Company are categorized as Level 1 investments
as quoted market prices are readily available for these investments.
Assets
measured and carried at fair value on a recurring basis are summarized below:
Schedule
of Assets Measured and Carried at Fair Value on Recurring Basis
| |
March 31, 2022 | |
| |
| | |
| | |
| | |
Fair | | |
Fair | | |
Fair | |
| |
Amortized | | |
Gross Unrealized | | |
Gross Unrealized | | |
Value of Current | | |
Value of Non-Current | | |
Value of Total | |
| |
Cost | | |
Gains | | |
Losses | | |
Assets | | |
Assets | | |
Assets | |
Money Market Fund | |
$ | 12,003,223 | | |
| - | | |
$ | (2,949 | ) | |
| - | | |
| - | | |
$ | 12,000,274 | |
Equity investments | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Mutual funds | |
| 933 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 933 | |
Total | |
$ | 12,004,156 | | |
$ | - | | |
$ | (2,949 | ) | |
$ | - | | |
$ | - | | |
$ | 12,001,207 | |
| |
December 31, 2021 | |
| |
| | |
| | |
| | |
Fair | | |
Fair | | |
Fair | |
| |
Amortized | | |
Gross Unrealized | | |
Gross Unrealized | | |
Value of Current | | |
Value of Non-Current | | |
Value of Total | |
| |
Cost | | |
Gains | | |
Losses | | |
Assets | | |
Assets | | |
Assets | |
Equity investments | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Mutual Funds | |
$ | 920 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 933 | |
(4)
Property and Equipment
Property
and equipment, net consists of the following at March 31, 2022 and December 31, 2021:
Schedule
of Property and Equipment
| |
Estimated | |
| | |
| |
| |
Useful Life | |
March 31, | | |
December 31, | |
| |
(in years) | |
2022 | | |
2021 | |
Equipment | |
2-7 | |
$ | 2,509,126 | | |
$ | 2,509,126 | |
Furniture and fixtures | |
7 | |
| 145,754 | | |
| 145,754 | |
Computer equipment | |
5 | |
| 41,898 | | |
| 41,898 | |
Leasehold improvements | |
5 | |
| 471,505 | | |
| 471,505 | |
Construction-in-process | |
- | |
| 1,653,550 | | |
| 1,643,150 | |
Property and equipment, gross | |
| |
| 4,821,833 | | |
| 4,811,433 | |
Less: accumulated depreciation | |
| |
| (1,767,484 | ) | |
| (1,666,055 | ) |
Property and equipment, net | |
| |
$ | 3,054,349 | | |
$ | 3,145,378 | |
Depreciation
expense for the three months ended March 31, 2022 was $101,429 and for the three months ended March 31, 2021 was $174,698.
(5)
Accrued Expenses
Accrued
expenses consisted of the following at March 31, 2022 and December 31, 2021:
Schedule
of Accrued Expenses
| |
March 31, | | |
December 31, | |
| |
2022 | | |
2021 | |
Professional and consulting fees | |
$ | 280,500 | | |
$ | 15,000 | |
Research and development | |
| 405,000 | | |
| 250,000 | |
CIP- Equipment | |
| - | | |
| 279,730 | |
Other | |
| 70,535 | | |
| 56,570 | |
Accrued Expenses | |
$ | 756,035 | | |
$ | 601,300 | |
(6) Members’ Capital
Prior
to the Reorganization Merger, the Company had multiple classes of Members’ capital, comprised of Founders Units, Class B, D, E,
F and G Preferred Units, and Class C Profits Interests. Class B, E, F and G Preferred Units had similar rights specifically related to
cash distributions as a return of invested capital. Class D Preferred Units had all the rights of Founders and the other Classes of Preferred
Units plus some additional rights noted below. All classes of Members’ capital had voting rights. The Company maintained capital
accounts for each Member. 3,243,201 Units of Class F and Class G were issued during the year ended December 31, 2021, prior to the Reorganization
Merger. 614,137 Units of Class F and Class G were issued during the three months ended March 31, 2021.
Class
F Preferred Units
The
CTx Board authorized 6,984,985 Class F Preferred Units in two tranches; all authorized Class F Units were issued prior to the Reorganization
Merger. The Company raised a total of $11.3 million from issuance of Class F Units. The newly created Class F Units as authorized by
the CTx Board and as reflected in the 3rd Amended and Restated Operating Agreement to reflect the creation of the Class F
Units became effective on December 14, 2018.
Class
G Preferred Units
The
CTx Board authorized 12,000,000 Class G Preferred Units; 2,998,184 were issued prior to the Reorganization Merger. The Company raised
a total of $6.7 million from issuance of Class G Units. The newly created Class G Units as authorized by the CTx Board became effective
on February 9, 2021.
Distributions,
if any, from the Company were to be made first to the holders of Class B, D, E, F and G Preferred Units, pro rata in proportion to each
such Member’s unreturned capital contributions. Distributions were then to be made to all Members including Founders Units, pro
rata in proportion to the number of units held by each Member, with consideration given to the applicable distribution thresholds for
Class C Profits Interests at which each was issued and as disclosed in each Profits Interest Unit agreement, as further described in
Note 7.
Costs
associated with issuance of the Units is immaterial. Pursuant to the terms of the Reorganization Merger, all Units were converted into
shares of common stock of Cingulate, as further described in Note 1.
(7)
Profits Interest Plan
During
2017, the CTx Board established and adopted the Cingulate Therapeutics LLC Equity Incentive Plan (the “Plan”) to provide
for issuance of Class C PIU’s to employees, CTx Members, Board members and service providers of the Company, as defined in the
Plan, eligible to receive PIU’s as an incentive under the Plan. PIU’s were granted at the discretion of the Board of Managers
of the Company and in some cases at the discretion of the Chief Executive Officer of the Company based upon Board authorization. The
PIU’s were issued at a Distribution Threshold equal to the pre-money fair market valuation of the Company at the date of issuance.
The Distribution Threshold was the amount by which a cash distribution, made pro rata to all Members, if any, must have been exceeded
in order for a particular PIU holder to participate in the allocated distribution beyond that threshold. Based on the terms of the award,
the Distribution Threshold was treated as a performance condition for purposes of financial statement recognition. The PIU’s vesting
period with respect to the service condition was defined in the PIU award agreement and ranged from 30 days to three years with an average
vesting period for all PIU’s granted of 107 days. As defined in the Company’s Operating Agreement, all PIU’s issued
under the Plan entitled the holder to participate pro rata in the profits, if any, of the Company over the stated Distribution Threshold,
assuming a cash distribution was generally made to all Members, subject to any preference or priorities of the other classes of Units.
The Class C PIU’s also held voting rights on a one-for-one basis.
Immediately
prior to the Reorganization Merger and as of December 31, 2020, the Company had granted and issued 8,500,000 and 8,142,461 PIU’s,
net of forfeitures, respectively. In April 2021, the Company issued the remaining 357,539 PIU’s. The Company accounted for these
awards under FASB ASC Topic 718, Compensation – Stock Compensation, as equity classified awards. No compensation expense
was recorded prior to the Reorganization Merger related to the PIU’s as the future achievement of the thresholds and targets (the
performance condition) to achieve payout was not deemed probable. This assessment was made based on the Company’s history of operating
losses and continued challenges in raising necessary equity capital to fund operations. In connection with the Reorganization Merger,
8.5 million PIU’s were exchanged for 1,158,008 shares of Cingulate common stock. The exchange of PIU’s for common stock created
a modification of the terms, character and rights of the PIU’s and achievement of performance was considered probable. This resulted
in the Company recognizing a noncash modification charge equal to $12.7 million, which charge was calculated based on the Company’s
assessment of the fair value of the shares of Cingulate common stock on the date of the modification. $8.2 million of this charge was
recorded to general and administrative expense and $4.5 million was recorded to research and development expense.
Prior
to the Reorganization Merger, the Company had issued all units available under the Plan and all units had vested based upon the vesting
period as outlined in the PIU agreement.
PIUs
issued and outstanding prior to the Reorganization Merger, which was also the modification date, at the various distribution thresholds
were as follows:
Schedule
of Various Distribution Thresholds
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| |
Distribution Threshold $ (in millions): | | |
| |
Year Granted | |
$25 | | |
$40 | | |
$75 | | |
$80 | | |
$90 | | |
$120 | | |
$160 | | |
Total | |
2017 | |
| 4,753,000 | | |
| 125,200 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 4,878,200 | |
2018 | |
| - | | |
| 661,525 | | |
| 217,725 | | |
| 22,883 | | |
| - | | |
| - | | |
| - | | |
| 902,133 | |
2019 | |
| - | | |
| - | | |
| - | | |
| - | | |
| 377,524 | | |
| 458,924 | | |
| - | | |
| 836,448 | |
2020 | |
| - | | |
| - | | |
| - | | |
| 1,476,126 | | |
| - | | |
| 49,554 | | |
| - | | |
| 1,525,680 | |
2021 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 357,539 | | |
| 357,539 | |
Total | |
| 4,753,000 | | |
| 786,725 | | |
| 217,725 | | |
| 1,499,009 | | |
| 377,524 | | |
| 508,478 | | |
| 357,539 | | |
| 8,500,000 | |
(8)
Stockholders’ Equity
The
Company has authorized 240,000,000 shares of $0.0001 par value common stock and 10,000,000 shares of $0.0001 par value preferred stock
at March 31, 2022 and December 31, 2021 of which 11,309,412 shares of common stock were issued and outstanding. The Company has not issued
any shares of preferred stock.
7,142,746
shares of common stock issued and outstanding were issued in connection with the Reorganization Merger to convert Units of CTx outstanding
immediately prior to the Reorganization Merger and reflects the stock dividend and reverse stock splits described below.
4,166,666
shares of common stock were issued at a price to the public of $6.00 per share in connection with the Company’s IPO, which was
completed in December 2021. The Company received net proceeds of approximately $20.4 million, after deducting underwriting discounts
and commissions and other offering expenses.
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 and if declared by the Board of Directors.
(9)
Stock-Based Compensation
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.
The
maximum number of shares of common stock available for issuance in connection with options and other awards granted under the 2021 Plan
is 1,927,810 and as of March 31, 2022, 1,061,526 shares of common stock were available for issuance under the 2021 Plan. The number of
shares of common stock available for issuance under the 2021 Plan will automatically increase on January 1st of each year until the expiration
of the 2021 Plan, in an amount equal to 5% percent of the total number of shares of our common stock outstanding on December 31st of
the preceding calendar year, on a fully diluted basis, unless the board of directors takes action prior thereto to provide that there
will not be an increase in the share reserve for such year or that the increase in the share reserve for such year will be of a lesser
number of shares of common stock than would otherwise occur. 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 $181,518 during the three months ended March 31, 2021, relating to options issued
in 2021 and 2022. As of March 31, 2022 and December 31, 2021, there was $2,854,519 and $2,637,895 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.
A
summary of option activity under the Plan during the three months ended March 31, 2022 is as follows:
Summary
of Option Activity
| |
| | |
Weighted-Average | | |
Weighted-Average | | |
Aggregate | |
| |
Shares | | |
Exercise Price per Share | | |
Remaining Contractual Term | | |
Intrinsic Value | |
Outstanding at December 31, 2021 | |
| 523,285 | | |
$ | 6.00 | | |
| 9.94 | | |
| | |
Grants | |
| 342,999 | | |
$ | 1.82 | | |
| 9.91 | | |
| | |
Exercised | |
| — | | |
| | | |
| | | |
| | |
Forfeitures or expirations | |
| — | | |
| | | |
| | | |
| | |
Outstanding at March 31, 2022 | |
| 866,284 | | |
$ | 4.35 | | |
| 9.78 | | |
$ | 182,900 | |
Vested and expected to vest at March 31, 2022 | |
| - | | |
| | | |
| | | |
| | |
Exercisable at March 31, 2022 | |
| - | | |
| | | |
| | | |
| | |
The
Company’s stock options issued qualify for equity accounting treatment under ASC 718 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 were as follows:
Schedule
of Fair Value Assumption
| |
March 31, | |
| |
2022 | |
Risk-free interest rate | |
| 1.54 | % |
Weighted-average expected term (in years) | |
| 6.0 | |
Expected volatility | |
| 1.12 | |
Expected dividend yield | |
| 0 | % |
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 year ended December 31, 2021 was $5.09 and the grant date fair value of the options
issued during the three months ended March 31, 2022 ranged from $1.12 to $1.16.
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. The fair value per share of common stock was $1.97 as of March 31, 2022, based upon the closing
price of our common stock on the Nasdaq Capital Market.
(10)
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 as of March 31, 2022, 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:
Schedule
of Effective Income Tax Rate Reconciliation
| |
Three Months Ended | |
| |
March 31, 2022 | |
Federal income tax benefit at statutory rate | |
$ | (1,039,582 | ) |
State income tax benefit | |
| (273,757 | ) |
Permanent differences | |
| 5,665 | |
Change in valuation allowance | |
| 1,361,886 | |
Other | |
| (54,212 | ) |
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 $2,209,156 as of March 31, 2022 and $847,269
at December 31, 2021, which was recorded as a component of income tax expense on the accompanying consolidated statements of operations
and other comprehensive loss.
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, 2022.
Schedule
of Deferred Tax Assets and Liabilities
| |
March 31, 2022 | | |
December 31, 2021 | |
Deferred income tax assets: | |
| | | |
| | |
Current: | |
| | | |
| | |
Research and development costs | |
$ | 569,826 | | |
$ | - | |
Unvested stock options | |
| 119,333 | | |
| 11,835 | |
Other | |
| - | | |
| 4,050 | |
Non-current: | |
| | | |
| | |
Patents | |
| 99,580 | | |
| 90,480 | |
Net operating losses | |
| 1,824,223 | | |
| 1,201,974 | |
Other | |
| 80,190 | | |
| 49,606 | |
Gross deferred income tax assets | |
| 2,693,152 | | |
| 1,357,945 | |
Less: valuation allowance | |
| (2,209,156 | ) | |
| (847,269 | ) |
Net deferred income tax asset | |
| 483,996 | | |
| 510,676 | |
| |
| | | |
| | |
Deferred income tax liabilities: | |
| | | |
| | |
Current: | |
| | | |
| | |
Accrual to cash | |
| (105,778 | ) | |
| (105,075 | ) |
Non-current | |
| | | |
| | |
Property and equipment | |
| (378,218 | ) | |
| (405,601 | ) |
Gross deferred income tax liabilities | |
| (483,996 | ) | |
| (510,676 | ) |
| |
| | | |
| | |
Net deferred tax asset (liability) | |
$ | - | | |
$ | - | |
(11)
Net Loss Per Share
The
following table sets forth the computation of the basic and diluted net loss per share for the three months ended March 31, 2022:
Schedule
of Net Loss Per Share Basic And Diluted
| |
| | |
Numerator: | |
| | |
Net loss | |
$ | (5,003,511 | ) |
Denominator: | |
| | |
Weighted average common shares outstanding | |
| 11,309,412 | |
Net loss per share, basic and diluted | |
$ | (0.44 | ) |
Potentially
dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows
as of March 31, 2022:
Schedule
of Potentially Dilutive Securities
| |
| | |
Stock options issued under the 2021 Equity Incentive Plan | |
| 866,284 | |
Common stock purchase warrants outstanding | |
| 4,999,998 | |
Total | |
| 5,866,282 | |
(12)
License Agreement
CTx
has a licensing agreement with a company related to the patents and licensed know-how for use in the development of CTx-1301, CTx-1302,
and CTx-2103. CTx will pay the following upon the occurrence of the following milestone events:
|
● |
$250,000
Milestone payment upon dosing of first patient in a Phase 3 Clinical Trial for each product in the field, payable on a per product
basis. |
|
● |
$250,000
Milestone payment upon licensee filing of new drug application for each product in the field, payable on a per product basis. |
|
● |
$250,000
Milestone payment for CTx-1301 and CTx-1302 and $500,000 Milestone payment for CTx-2103 upon receipt of first marketing approval
from the FDA , payable on a per product basis. |
|
● |
$250,000
Milestone payment for CTx-2103 upon receipt of first marketing approval from the EMA (European Medicines Agency) |
The
Company has accrued the $250,000 milestone for CTx-1301 related to dosing of first patient in a Phase 3 Clinical Trial as management
has deemed this milestone to be probable. The Company has not recorded any expense relating to the other milestones for either product
as it has not deemed them probable of occurring as of March 31, 2022.
(13)
Related Party Transactions
The
general counsel of the Company is a partner with a law firm providing office facilities space that is leased by the Company. Rental expense
incurred by the Company to the law firm was $9,000 for both the three months ended March 31, 2022 and 2021, which approximates fair value.
As of March 31, 2022 and December 31, 2021, the Company had no outstanding amounts payable under this lease.
(14)
Subsequent Events
Management
evaluated events that occurred subsequent to March 31, 2022 through May 12, 2022, which is the date the interim financial statements
were issued.
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, 2021 (“Form 10-K”) 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 clinical stage biopharmaceutical company using our proprietary Precision Timed ReleaseTM (PTR) 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. We are initially
focusing our efforts on the treatment of Attention Deficit/Hyperactivity Disorder (ADHD). 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, 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, was approximately $63.8 million as of March 31, 2022.
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 $5.0 million
and $1.3 million for the three months ended March 31, 2022 and March 31, 2021, respectively. As of March 31, 2022, we had an accumulated
deficit of $56.7 million.
We
expect to continue to incur significant expenses and increasing operating losses in the near term. We expect our expenses will increase
substantially in connection with our ongoing activities, as we:
|
● |
seek
regulatory approval for CTx-1301; |
|
|
|
|
● |
continue
research and development activities for our existing and new product candidates, primarily for CTx-1301; |
|
|
|
|
● |
manufacture
supplies for our preclinical studies and clinical trials, primarily for CTx-1301; |
|
|
|
|
● |
operate
as a public company; and |
|
|
|
|
● |
establish
or outsource commercial infrastructure to support sales and marketing for our product candidates. |
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.
CTx-1301:
We have designed our clinical program for CTx-1301 (dexmethylphenidate), our lead investigational asset for the treatment of ADHD,
based on U.S. Food and Drug Administration (FDA) feedback regarding our CTx-1301 initial Pediatric Study Plan (iPSP), and longstanding
guidance on the accelerated approval pathway under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act.
We plan to commence two
CTx-1301 Phase 3 clinical studies in 2022: (1) a fixed-dose pediatric and adolescent safety and efficacy study, with dosing of the first
patient targeted in the second half of 2022, and (2) a pediatric safety and efficacy dose-optimization study to assess the onset and
duration of efficacy, also targeted to begin in the second half of 2022. We have experienced certain manufacturing delays; our contract
manufacturing organization (CMO) has experienced operational resource issues in the manufacturing and delivery of clinical supply for the CTx-1301 fixed-dose study. This has delayed the first patient dosed, initially targeted for the second quarter
of 2022. Manufacturing of the final two dosage strengths is expected to begin in the second or third quarter of this year. Results from
the fixed-dose study are expected in late 2022/early 2023. Assuming we receive positive clinical results from our Phase 3 trials, we
still plan to submit a New Drug Application (NDA) for CTx-1301 in late 2023 under the Section 505(b)(2) pathway.
CTx-1302:
We plan to initiate a Phase 1/2 bioavailability study in ADHD patients for CTx-1302 (dextroamphetamine), our second investigational
asset for the treatment of ADHD, in 2023 and, if the results from this study are successful, we plan to initiate pivotal Phase 3 clinical
trials in all patient segments for CTx-1302 in late 2023 with results expected in late 2024.
CTx-2103:
We have embarked on a program to develop CTx-2103 (buspirone), which would expand the PTR platform into the anxiety therapeutic
category and extend the potential of PTR technology in another indication where multiple daily doses are required and the timing, style,
and ratio of this medication delivery is paramount. We initiated a human formulation study for CTx-2103 in May 2022 and have dosed the
first subject. Results from the study are expected in July 2022, and the site for the study is BDD Pharma, Glasgow, Scotland, UK.
As
of March 31, 2022, we had cash and cash equivalents of $12.6 million. Based on our operating plan, we believe that our cash and
cash equivalents will enable us to fund our research and development and general and administrative expenses through late 2022. In
addition, in order to achieve the filing of our NDA for CTx-1301 in late 2023 for potential FDA approval, we believe that we will
need approximately $21.5 million of additional capital, which amount has increased approximately $6.5 million from the original
estimate due primarily to an estimated six months of additional operating expenses resulting from the manufacturing delay described
above.
Inflation and additional clinical site expenses and manufacturing costs are also expected. We will also need additional capital to
advance our other programs. We are evaluating alternatives to raise additional capital, including equity and debt financing and
non-dilutive strategic collaborations in the U.S. and abroad. In addition, we continue to evaluate commercial collaborations and
strategic relationships with established pharmaceutical companies, which would provide us with more immediate access to marketing,
sales, market access and distribution infrastructure. See “Liquidity and Capital Resources” below.
Impact
of the COVID-19 Pandemic
We
are continuing to monitor the impact of the COVID-19 pandemic on
our business, the extent of which will depend on a number of factors, including, but not limited to, the extent and severity of the impact
on our service providers, suppliers, contract research organizations and our preclinical and clinical trials, all of which are uncertain
and cannot be predicted.
While
the full impact of the pandemic continues to evolve, the financial markets have been subject to significant volatility that may adversely
impact our ability to enter into, modify, and negotiate favorable terms and conditions relative to equity and debt financing initiatives.
The uncertain financial markets, disruptions in supply chains, mobility restraints, and changing priorities as well as volatile asset
values may also affect our ability to enter into collaborations, joint ventures, and license and royalty agreements. The outbreak and
government measures taken in response to the pandemic have also had a significant impact, both direct and indirect, on businesses and
commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand
for certain goods and services, such as medical services and supplies, have spiked, while demand for other goods and services, such as
travel, have fallen. We may face difficulties recruiting or retaining patients in our ongoing and planned preclinical and clinical trials
if patients are affected by the virus or are fearful of traveling to our clinical trial sites. We and our third-party CMOs, clinical
research organizations (CROs), and clinical sites may also face disruptions in procuring items that are essential to our research and
development activities, including, for example, medical and laboratory supplies used in our clinical trials or preclinical studies, in
each case, that are sourced from abroad or for which there are shortages because of ongoing efforts to address the outbreak.
The
extent to which the COVID-19 pandemic may in the future impact our financial condition, liquidity or results of operations is uncertain.
While the pandemic did not materially affect our financial results and business operations in the
quarter ended March 31, 2022, we are unable to predict the impact that COVID-19 may have on our financial position and operating results
in future periods due to numerous uncertainties. Management continues to actively monitor the situation and the possible effects on our
financial condition, operations, suppliers, vendors, our workforce and the overall industry. For additional information about risks and
uncertainties related to the COVID-19 pandemic that may impact our business, our financial condition or our results of operations, see
the “Risk Factors” section in our Form 10-K.
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 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 US Food and Drug Administration
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 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, including potential
collaborations with other companies or other strategic transactions.
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 continued research and development and potential commercialization of our product candidates. We have experienced 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.
Interest
and other income (expense), net
Interest
and other income (expense), net consists of interest earned on our short-term investments and interest expense. The primary objective
of our investment policy is liquidity and capital preservation.
Interest
expense to date has consisted primarily of interest expense on notes payable to related parties, interest charged by certain vendors,
and credit card interest. All related party notes were paid in full in December 2021 with proceeds from our IPO.
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.
While
our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements, we have identified
several accounting policies that are critical to the judgements and estimates used in the preparation of our consolidated financial statements.
These policies relate to research and development costs and stock-based compensation. 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, 2021.
Results
of Operations
Comparison
of the three months ended March 31, 2022 and March 31, 2021
The
following table summarizes our results of operations for the three months ended March 31, 2022 and March 31, 2021:
| |
Three months ended | | |
| | |
| |
| |
March 31, | | |
Increase | | |
% Increase | |
(in thousands) | |
2022 | | |
2021 | | |
(Decrease) | | |
(Decrease) | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Research and development | |
$ | 2,762 | | |
$ | 562 | | |
$ | 2,200 | | |
| 391.5 | % |
General and administrative | |
| 2,247 | | |
| 768 | | |
| 1,479 | | |
| 192.6 | % |
Loss from operations | |
| (5,009 | ) | |
| (1,330 | ) | |
| (3,679 | ) | |
| (584.0 | )% |
Interest and other income (expense), net | |
| 6 | | |
| (4 | ) | |
| 10 | | |
| (250.0 | )% |
Net loss | |
$ | (5,003 | ) | |
$ | (1,334 | ) | |
$ | (3,669 | ) | |
| 275.0 | % |
Research
and development expenses
The
following table summarizes our research and development expenses for the three months ended March 31, 2022 and 2021:
| |
Three months ended | | |
| | |
| |
| |
March 31, | | |
Increase | | |
% Increase | |
(in thousands) | |
2022 | | |
2021 | | |
(Decrease) | | |
(Decrease) | |
Clinical operations | |
$ | 808 | | |
$ | 21 | | |
$ | 787 | | |
| NM | |
Drug manufacturing and formulation | |
| 1,353 | | |
| 248 | | |
| 1,105 | | |
| 445.6 | % |
Personnel expenses | |
| 583 | | |
| 298 | | |
| 285 | | |
| 95.6 | % |
Regulatory costs | |
| 18 | | |
| (5 | ) | |
| 23 | | |
| 460.0 | % |
Total research and development expenses | |
$ | 2,762 | | |
$ | 562 | | |
$ | 2,200 | | |
| 391.5 | % |
Research
and development (R&D) expenses were $2.8 million for the three months ended March 31, 2022, an increase of $2.2 million or 391.5%
from the three months ended March 31, 2021. This increase was related to increased development activity as we prepare for a Phase 3 clinical trial for CTx-1301. Manufacturing clinical supply began in the first quarter of 2022 and study start-up activities
have been occurring since late 2021.
General
and administrative expenses
The
following table summarizes our general and administrative (G&A) expenses for the three months ended March 31, 2022 and 2021:
| |
Three months ended | | |
| | |
| |
| |
March 31, | | |
Increase | | |
% Increase | |
(in thousands) | |
2022 | | |
2021 | | |
(Decrease) | | |
(Decrease) | |
Personnel expenses | |
$ | 662 | | |
$ | 286 | | |
$ | 376 | | |
| 131.5 | % |
Legal and professional fees | |
| 648 | | |
| 264 | | |
| 384 | | |
| 145.5 | % |
Occupancy | |
| 126 | | |
| 102 | | |
| 24 | | |
| 23.5 | % |
Insurance | |
| 674 | | |
| 41 | | |
| 633 | | |
| NM | |
Other | |
| 137 | | |
| 75 | | |
| 62 | | |
| 82.7 | % |
Total general and administrative expenses | |
$ | 2,247 | | |
$ | 768 | | |
$ | 1,479 | | |
| 192.6 | % |
Total
G&A expenses were $2.2 million for the three months ended March 31, 2022, an increase of $1.5 million or 192.6% from the three months
ended March 31, 2021. The increase was primarily attributable to an increase in personnel expenses of $0.4 million as we added personnel in late 2021 in anticipation of becoming a public company, an increase of $0.6 million in insurance costs which
relates to the directors and officers insurance policy obtained when we became a publicly traded company, and an increase in legal and
professional fees of $0.4 million, which relates to the audit and tax fees for the 2021 audit which were in incurred in the first quarter
of 2022, an earlier timeframe as compared to 2021.
Interest
and other income (expense)
The
following table summarizes interest and other income (expense) for the three months ended March 31, 2022 and 2021:
| |
Three months ended | | |
| | |
| |
| |
March 31, | | |
Increase | | |
% Increase | |
(in thousands) | |
2022 | | |
2021 | | |
(Decrease) | | |
(Decrease) | |
Interest and other income (expense), net | |
$ | 6 | | |
$ | (4 | ) | |
$ | 10 | | |
| (250.0 | )% |
Total
interest and other income (expense), net primarily relates to interest and dividends earned on invested balances during the three months
ended March 31, 2022 and relates to interest incurred on outstanding notes payable during the three months ended March 31, 2021. All
notes payable were paid in full in December 2021 with proceeds from our IPO.
Cash
Flows
| |
Three months ended March 31, | | |
Increase | |
(in thousands) | |
2022 | | |
2021 | | |
(decrease) | |
Net cash (used in) operating activities | |
$ | (3,864 | ) | |
$ | (1,674 | ) | |
$ | 2,190 | |
Net cash (used in) investing activities | |
| (10 | ) | |
| (66 | ) | |
| (56 | ) |
Net cash (used in) provided by financing activities | |
| (4 | ) | |
| 1,351 | | |
| 1,355 | |
Net decrease in cash and cash equivalents | |
$ | (3,878 | ) | |
$ | (389 | ) | |
$ | 3,489 | |
Cash
Flows from Operating Activities
Net
cash used in operating activities was $3.9 million for the three months ended March 31, 2022. 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 $5.0 million, prior to the effects
of two noncash items, stock-based compensation expense of $0.2 million and depreciation of $0.1 million. Changes in operating assets
and liabilities included a decrease in prepaid expenses of $0.4 million primarily due to a significant down payment made on the directors
and officers insurance policy in late 2021, which is being amortized over the policy period, as well as an increase in accounts payable
and accrued expenses of $0.4 million due to increased development activity on CTx-1301 resulting in increased billings and amounts owed
as of March 31, 2022.
Net
cash used in operating activities was $1.7 million for the three months ended March 31, 2021. 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 $1.3 million, offset by depreciation.
Changes in operating assets and liabilities included a decrease in accounts payable and accrued expenses of $0.3 million mainly due to
the timing of payments to our service providers.
Cash
Flows from Investing Activities
Net
cash used in investing activities for both the three months ended March 31, 2022 and March 31, 2021 was related to the purchase of equipment
to support our research and development.
Cash
Flows from Financing Activities
Net
cash used in financing activities in the three months ended March 31, 2022 was related to principal payments on finance lease obligations.
Net
cash provided by financing activities in the three months ended March 31, 2021 was primarily related to proceeds of the issuance of $1.4
million of equity units of CTx.
Liquidity
and Capital Resources
Sources
of Liquidity
Since
our inception in 2012 through March 31, 2022, we have not generated any revenue and have incurred significant operating losses and
negative cash flow from our operations. Based on our current operating plan, we expect our cash and cash equivalents of $12.6
million as of March 31, 2022 will be sufficient to fund our operating expenses and capital expenditure requirements through late
2022. In addition, in order to achieve the filing of our NDA for CTx-1301 in late 2023
for potential FDA approval, we believe that we will need approximately $21.5 million of additional capital, which amount has
increased approximately $6.5 million from the original estimate due primarily to an estimated six months of additional operating
expenses resulting from the manufacturing delay described above. Inflation and additional clinical site expenses and manufacturing costs are also
expected. We will also need additional capital to advance our other programs. However, it is difficult to predict
our spending for our product candidates prior to obtaining FDA approval. Moreover, 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 at least the next several years as we continue to develop our
product candidates 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 agreements we may choose to execute; |
|
|
|
|
● |
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 of establishing, or outsourcing, 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 on our own. |
To
continue to grow our business over the longer term, we plan to commit substantial resources to research and development, 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 partnering arrangement. We have no arrangements, agreements, or understandings in place at
the present time to enter into any acquisition, in-licensing or similar strategic business transaction. In addition, we continue to evaluate
commercial collaborations and strategic relationships with established pharmaceutical companies, which would provide us with more immediate
access to marketing, sales, market access and distribution infrastructure.
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. 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.
Contractual
Obligations
The
following summarizes our contractual obligations as of March 31, 2022 that will affect our future liquidity. Based on our current operating
plan, we plan to satisfy the obligations identified below with cash and cash equivalents as of March 31, 2022.
We
entered into a patent and know-how licensing agreement with BDD Pharma Limited in August 2018. See
the “Business – Material Agreements” section of our Form 10-Kfor a description of this agreement. We
may be required to pay BDD Pharma certain amounts in connection with clinical trial and regulatory milestones. The first milestone payment
of $250,000 will likely become due in the next twelve months based on the dosing of the first patient in the Phase 3 fixed-dose pediatric
and adolescent safety and efficacy study for CTx-1301. This payment is accrued in our March 31, 2022 financial statements.
We
entered into an agreement with a CRO for the Phase 3 fixed-dose pediatric and adolescent safety and efficacy study for CTx-1301, in which
we plan to dose the first patient in the second half of 2022. We also entered into agreements with a CMO and other third parties for
manufacture of the Phase 3 clinical supply of CTx-1301. These
contracts do not contain any minimum purchase commitments and are cancelable by us upon prior written notice. Payments due upon cancellation
consist only of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up
to the date of cancellation and in some cases, wind-down costs. The exact amount of such obligations is dependent on the timing of termination
and the terms of the related agreement and are not known.
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 and 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, 2022 and March 31, 2021 and had accumulated losses of $56.7 million since inception to March 31, 2022. 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 and the issuance
of equity securities in connection with our IPO. Additional financings 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 financing will be available when needed or on
acceptable terms.
Recently
Issued Accounting Standards
In
June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments which significantly changes the
way entities recognize impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to
occur over their remaining life, instead of when incurred. In November 2018, the FASB issued ASU 2018-19, Codification Improvements
to Topic 326, Financial Instruments–Credit Losses, which amends Subtopic 326-20 (created by ASU 2016-13) to explicitly state
that operating lease receivables are not in the scope of Subtopic 326-20. Additionally, in April 2019, the FASB issued ASU 2019-04, Codification
Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments;
in May 2019, the FASB issued ASU 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief; in
November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic
815), and Leases (Topic 842): Effective Dates, and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit
Losses; and in March 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments, to provide further
clarifications on certain aspects of ASU 2016-13. The changes (as amended) are effective for the Company for annual and interim periods
in fiscal years beginning after December 15, 2022. The Company does not expect the adoption of ASU 2016-13 to have a material effect
on its consolidated financial statements.
JOBS
Act
On
April 5, 2012, the Jumpstart Our Business Startups Act of 2012, or the 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 the 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, 2022, have concluded that our disclosure controls and procedures were effective as of March 31, 2022.
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, 2022 that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
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 12, 2022 |
By: |
/s/
Shane J. Schaffer |
|
|
Shane
J. Schaffer |
|
|
Chairman
and Chief Executive Officer |
|
|
(Principal
Executive Officer)
|
|
|
|
Date:
May 12, 2022 |
By: |
/s/
Louis G. Van Horn |
|
|
Louis
G. Van Horn |
|
|
Chief
Financial Officer |
|
|
(Principal
Financial Officer) |
Exhibit
10.1
NONQUALIFIED
STOCK OPTION GRANT AGREEMENT
CINGULATE
INC.
This
Stock Option Grant Agreement (the “Grant Agreement”) is made and entered into effective on the Date of Grant set forth
in Exhibit A (the “Date of Grant”) by and between Cingulate Inc., a Delaware corporation (the “Company”),
and the individual named in Exhibit A hereto (the “Optionee”).
WHEREAS,
the Company desires to provide the Optionee an incentive to participate in the success and growth of the Company through the opportunity
to earn a proprietary interest in the Company; and
WHEREAS,
to give effect to the foregoing intention, the Company desires to grant the Optionee an option pursuant to the Cingulate Inc. 2021 Omnibus
Equity Incentive Plan (the “Plan”) to acquire the Company’s common stock, par value $0.0001 per share (the “Common
Stock”);
NOW,
THEREFORE, in consideration of the mutual covenants hereinafter set forth and for good and valuable consideration, the parties hereto
agree as follows:
1.
Grant. The Company hereby grants the Optionee a Nonqualified Stock Option (the “Option”) to purchase up to
the number of shares of Common Stock (the “Shares”) set forth in Exhibit A hereto at the exercise price per
Share (the “Exercise Price”) set forth in Exhibit A, and on the vesting schedule set forth in Exhibit A,
subject to the terms and conditions set forth herein and the provisions of the Plan, the terms of which are incorporated herein by reference.
Capitalized terms used but not otherwise defined in this Grant Agreement shall have the meanings as set forth in the Plan.
2.
Exercise Period Following Termination of Continuous Service. This Option shall terminate and be canceled to the extent not exercised
within ninety (90) days after the Optionee’s Continuous Service terminates, except that if such termination is due to the death
or Disability of the Optionee, this Option shall terminate and be canceled twelve (12) months from the date of termination of Continuous
Service. Notwithstanding the foregoing, in the event that the Optionee’s Continuous Service is terminated for Cause, then the Option
shall immediately terminate on the date of such termination of Continuous Service and shall not be exercisable for any period following
such date. In no event, however, shall this Option be exercised later than the Expiration Date set forth in Exhibit A and in no
event shall this Option be exercised for more Shares than the Shares which otherwise have become exercisable as of the date of termination
of Continuous Service.
3.
Method of Exercise. This Option is exercisable by delivery to the Company of an exercise notice (the “Exercise Notice”)
in a form satisfactory to the Committee or by such other form or means as the Committee may permit or require. Any Exercise Notice shall
state or provide the number of Shares with respect to which the Option is being exercised (the “Exercised Shares”),
and include such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price for the Exercised Shares in (i) cash; (ii) check; or (iii) such
other manner as is acceptable to the Committee, provided that such form of consideration is permitted by the Plan and by applicable law.
Upon exercise of the Option by the Optionee and prior to the delivery of such Exercised Shares, the Company shall have the right to require
the Optionee to satisfy applicable Federal and state tax income tax withholding requirements and the Optionee’s share of applicable
employment withholding taxes in a method satisfactory to the Company. Notwithstanding the foregoing, no Exercised Shares shall be issued
unless such exercise and issuance complies with the requirements relating to the administration of stock option plans and other applicable
equity plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system
on which the Common Stock is listed or quoted, and the applicable laws of any foreign country or jurisdiction where stock grants or other
applicable equity grants are made under the Plan; assuming such compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to such Shares.
4.
Covenants Agreement. This Option shall be subject to forfeiture at the election of the Company in the event that the Optionee
breaches any agreement between the Optionee and the Company with respect to noncompetition, nonsolicitation, assignment of inventions
and contributions and/or nondisclosure obligations of the Optionee.
5.
Taxes. By executing this Grant Agreement, Optionee acknowledges and agrees that Optionee is solely responsible for the satisfaction
of any applicable taxes that may be imposed on Optionee that arise as a result of the grant, vesting or exercise of the Option, including
without limitation any taxes arising under Section 409A of the Code (regarding deferred compensation) or Section 4999 of the Code (regarding
golden parachute excise taxes), and that neither the Company nor the Committee shall have any obligation whatsoever to pay such taxes
or otherwise indemnify or hold Optionee harmless from any or all of such taxes.
6.
Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent
or distribution and may be exercised during the lifetime of the Optionee only by the Optionee. The terms of the Plan and this Grant Agreement
shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.
7.
Securities Matters. All Shares and Exercised Shares shall be subject to the restrictions on sale, encumbrance and other disposition
provided by Federal or state law. The Company shall not be obligated to sell or issue any Shares or Exercised Shares pursuant to this
Grant Agreement unless, on the date of sale and issuance thereof, such Shares are either registered under the Securities Act of 1933,
as amended (the “Securities Act”), and all applicable state securities laws, or are exempt from registration thereunder.
Regardless of whether the offering and sale of Shares under the Plan have been registered under the Securities Act, or have been registered
or qualified under the securities laws of any state, the Company at its discretion may impose restrictions upon the sale, pledge or other
transfer of such Shares (including the placement of appropriate legends on stock certificates or the imposition of stop-transfer instructions)
if, in the judgment of the Company, such restrictions are necessary in order to achieve compliance with the Securities Act or the securities
laws of any state or any other law.
8.
Investment Purpose. The Optionee represents and warrants that unless the Shares are registered under the Securities Act, any and
all Shares acquired by the Optionee under this Grant Agreement will be acquired for investment for the Optionee’s own account and
not with a view to, for resale in connection with, or with an intent of participating directly or indirectly in, any distribution of
such Shares within the meaning of the Securities Act. The Optionee agrees not to sell, transfer or otherwise dispose of such Shares unless
they are either (1) registered under the Securties Act and all applicable state securities laws, or (2) exempt from such registration
in the opinion of Company counsel.
9.
Lock-Up Agreement. The Optionee hereby agrees that in the event that the Optionee exercises this Option during a period in which
any directors or officers of the Company have agreed with one or more underwriters not to sell securities of the Company, then, as a
condition to such exercise, the Optionee shall enter into an agreement, in form and substance satisfactory to the Company, pursuant to
which the Optionee shall agree to restrictions on transferability of the Shares comparable to the restrictions agreed upon by such directors
or officers of the Company.
10.
Other Plans. No amounts of income received by the Optionee pursuant to this Grant Agreement shall be considered compensation for
purposes of any pension or retirement plan, insurance plan or any other employee benefit plan of the Company or its subsidiaries, unless
otherwise expressly provided in such plan.
11.
No Guarantee of Continued Service. The Optionee acknowledges and agrees that the right to exercise the Option pursuant to the
exercise schedule hereof is earned only through Continuous Service and such other requirements, if any, as are set forth in Exhibit
A (and not through the act of being hired, being granted an option or purchasing shares hereunder). The Optionee further acknowledges
and agrees that (i) this Grant Agreement, the transactions contemplated hereunder and the exercise schedule set forth herein do not constitute
an express or implied promise of continued employment or service for the exercise period or for any other period, and shall not interfere
with the Optionee’s right or the right of the Company or its Subsidiaries to terminate the employment or service relationship at
any time, with or without cause, subject to the terms of any written employment agreement that the Optionee may have entered into with
the Company or any of its Subsidiaries; and (ii) the Company would not have granted this Option to the Optionee but for these acknowledgements
and agreements.
12.
Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Grant Agreement constitute the
entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and the Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee’s
interest except by means of a writing signed by the Company and the Optionee. In the event of any conflict between this Grant Agreement
and the Plan, the Plan shall be controlling, except as otherwise specifically provided in the Plan. This Grant Agreement shall be construed
under the laws of the State of Delaware, without regard to conflict of laws principles.
13.
Opportunity for Review. Optionee and the Company agree that this Option is granted under and governed by the terms and conditions
of the Plan and this Grant Agreement. The Optionee has reviewed the Plan and this Grant Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Grant Agreement and fully understands all provisions of the Plan and this Grant
Agreement. The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon
any questions relating to the Plan and this Grant Agreement. The Optionee further agrees to notify the Company upon any change in the
residence address indicated herein.
14.
Section 409A. This Option is intended to be excepted from coverage under Section 409A and shall be administered, interpreted
and construed accordingly. The Company may, in its sole discretion and without the Optionee’s consent, modify or amend the terms
of this Grant Agreement, impose conditions on the timing and effectiveness of the exercise of the Option by Optionee, or take any other
action it deems necessary or advisable, to cause the Option to be excepted from Section 409A (or to comply therewith to the extent the
Company determines it is not excepted).
15.
Recoupment. In the event the Company restates its financial statements due to material noncompliance with any financial reporting
requirements under applicable securities laws, any shares issued pursuant to this Agreement for or in respect of the year that is restated,
or the prior three years, may be recovered to the extent the shares issued exceed the number that would have been issued based on the
restatement. In addition and without limitation of the foregoing, any amounts paid hereunder shall be subject to recoupment in accordance
with The Dodd–Frank Wall Street Reform and Consumer Protection Act and any implementing regulations thereunder, any clawback policy
adopted by the Company or as is otherwise required by applicable law or stock exchange listing conditions.
[Signature
Page Follows]
IN
WITNESS WHEREOF, the parties hereto have executed this Grant Agreement as of the date set forth in Exhibit A.
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CINGULATE
INC. |
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By: |
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Name: |
Shane
Schaffer |
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Title: |
Chief
Executive Officer |
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OPTIONEE |
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Name: |
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EXHIBIT
A
NONQUALIFIED
STOCK OPTION GRANT AGREEMENT
CINGULATE
INC.
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(a). |
Optionee’s
Name: ____________________________________________ |
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(b). |
Date
of Grant: _______________________________________________ |
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(c). |
Number
of Shares Subject to the Option: _________________________ |
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(d). |
Exercise
Price: $______ per Share |
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(e). |
Expiration
Date: _____________________________________________ |
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(f). |
Vesting
Schedule: _____________________________________________ |
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_______
(Initials) |
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Optionee
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_______
(Initials) |
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Company
Signatory |
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Exhibit
10.2
INCENTIVE
STOCK OPTION GRANT AGREEMENT
CINGULATE
INC.
This
Stock Option Grant Agreement (the “Grant Agreement”) is made and entered into effective on the Date of Grant set forth
in Exhibit A (the “Date of Grant”) by and between Cingulate Inc., a Delaware corporation (the “Company”),
and the individual named in Exhibit A hereto (the “Optionee”).
WHEREAS,
the Company desires to provide the Optionee an incentive to participate in the success and growth of the Company through the opportunity
to earn a proprietary interest in the Company; and
WHEREAS,
to give effect to the foregoing intention, the Company desires to grant the Optionee an option pursuant to the Cingulate Inc. 2021 Omnibus
Equity Incentive Plan (the “Plan”) to acquire the Company’s common stock, par value $0.0001 per share (the “Common
Stock”);
NOW,
THEREFORE, in consideration of the mutual covenants hereinafter set forth and for good and valuable consideration, the parties hereto
agree as follows:
1.
Grant. The Company hereby grants the Optionee an Incentive Stock Option (the “Option”) to purchase up to the
number of shares of Common Stock (the “Shares”) set forth in Exhibit A hereto at the exercise price per Share
(the “Exercise Price”) set forth in Exhibit A, and on the vesting schedule set forth in Exhibit A, subject
to the terms and conditions set forth herein and the provisions of the Plan, the terms of which are incorporated herein by reference.
Capitalized terms used but not otherwise defined in this Grant Agreement shall have the meanings as set forth in the Plan.
This
Option is intended to qualify as an Incentive Stock Option (“ISO”) under Section 422 of the Code. However, notwithstanding
such designation, if the Optionee becomes eligible in any given year to exercise ISOs for Shares having a Fair Market Value in excess
of $100,000, those options representing the excess shall be treated as Nonqualified Stock Options. In the previous sentence, “ISOs”
include ISOs granted under any plan of the Company or any parent or any Subsidiary of the Company. For the purpose of deciding which
options apply to Shares that “exceed” the $100,000 limit, ISOs shall be taken into account in the same order as granted.
The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted. The Optionee
hereby acknowledges that there is no assurance that the Option will, in fact, be treated as an Incentive Stock Option under Section 422
of the Code.
2.
Exercise Period Following Termination of Continuous Service. This Option shall terminate and be cancelled to the extent not exercised
within three (3) months following termination of the Optionee’s Continuous Service; provided that if such termination is due to
the Optionee’s death or permanent and total disability within the meaning of Section 22(e)(3) of the Code, this Option shall terminate
and be cancelled one (1) year from the date of termination of Continuous Service. Notwithstanding the foregoing, in the event that the
Optionee’s Continuous Service is terminated for Cause, then the Option shall immediately terminate on the date of such termination
of Continuous Service and shall not be exercisable for any period following such date. In no event, however, shall this Option be exercised
later than the expiration date set forth in Exhibit A (the “Expiration Date”) and in no event shall this Option
be exercised for more Shares than the Shares which otherwise have become exercisable as of the date of termination of Continuous Service.
3.
Method of Exercise. This Option is exercisable by delivery to the Company of an exercise notice (the “Exercise Notice”)
in a form satisfactory to the Committee or by such other form or means as the Committee may permit or require. Any Exercise Notice shall
state or provide the number of Shares with respect to which the Option is being exercised (the “Exercised Shares”),
and include such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price for the Exercised Shares in (i) cash; (ii) check; or (iii) such
other manner as is acceptable to the Committee, provided that such form of consideration is permitted by the Plan and by applicable law.
Upon exercise of the Option by the Optionee and prior to the delivery of such Exercised Shares, the Company shall have the right to require
the Optionee to satisfy applicable Federal and state tax income tax withholding requirements and the Optionee’s share of applicable
employment withholding taxes in a method satisfactory to the Company. Notwithstanding the foregoing, no Exercised Shares shall be issued
unless such exercise and issuance complies with the requirements relating to the administration of stock option plans and other applicable
equity plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system
on which the Common Stock is listed or quoted, and the applicable laws of any foreign country or jurisdiction where stock grants or other
applicable equity grants are made under the Plan; assuming such compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to such Shares.
4.
Covenants Agreement. This Option shall be subject to forfeiture at the election of the Company in the event that the Optionee
breaches any agreement between the Optionee and the Company with respect to noncompetition, nonsolicitation, assignment of inventions
and contributions and/or nondisclosure obligations of the Optionee.
5.
Taxes. By executing this Grant Agreement, Optionee acknowledges and agrees that Optionee is solely responsible for the satisfaction
of any applicable taxes that may be imposed on Optionee that arise as a result of the grant, vesting or exercise of the Option, including
without limitation any taxes arising under Section 409A of the Code (regarding deferred compensation) or Section 4999 of the Code (regarding
golden parachute excise taxes), and that neither the Company nor the Committee shall have any obligation whatsoever to pay such taxes
or otherwise indemnify or hold Optionee harmless from any or all of such taxes.
6.
Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent
or distribution and may be exercised during the lifetime of the Optionee only by the Optionee. The terms of the Plan and this Grant Agreement
shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.
7.
Securities Matters. All Shares and Exercised Shares shall be subject to the restrictions on sale, encumbrance and other disposition
provided by Federal or state law. The Company shall not be obligated to sell or issue any Shares or Exercised Shares pursuant to this
Grant Agreement unless, on the date of sale and issuance thereof, such Shares are either registered under the Securities Act of 1933,
as amended (the “Securities Act”), and all applicable state securities laws, or are exempt from registration thereunder.
Regardless of whether the offering and sale of Shares under the Plan have been registered under the Securities Act, or have been registered
or qualified under the securities laws of any state, the Company at its discretion may impose restrictions upon the sale, pledge or other
transfer of such Shares (including the placement of appropriate legends on stock certificates or the imposition of stop-transfer instructions)
if, in the judgment of the Company, such restrictions are necessary in order to achieve compliance with the Securities Act or the securities
laws of any state or any other law.
8.
Investment Purpose. The Optionee represents and warrants that unless the Shares are registered under the Securities Act, any and
all Shares acquired by the Optionee under this Grant Agreement will be acquired for investment for the Optionee’s own account and
not with a view to, for resale in connection with, or with an intent of participating directly or indirectly in, any distribution of
such Shares within the meaning of the Securities Act. The Optionee agrees not to sell, transfer or otherwise dispose of such Shares unless
they are either (1) registered under the Securties Act and all applicable state securities laws, or (2) exempt from such registration
in the opinion of Company counsel.
9.
Lock-Up Agreement. The Optionee hereby agrees that in the event that the Optionee exercises this Option during a period in which
any directors or officers of the Company have agreed with one or more underwriters not to sell securities of the Company, then, as a
condition to such exercise, the Optionee shall enter into an agreement, in form and substance satisfactory to the Company, pursuant to
which the Optionee shall agree to restrictions on transferability of the Shares comparable to the restrictions agreed upon by such directors
or officers of the Company.
10.
Other Plans. No amounts of income received by the Optionee pursuant to this Grant Agreement shall be considered compensation for
purposes of any pension or retirement plan, insurance plan or any other employee benefit plan of the Company or its subsidiaries, unless
otherwise expressly provided in such plan.
11.
No Guarantee of Continued Service. The Optionee acknowledges and agrees that the right to exercise the Option pursuant to the
exercise schedule hereof is earned only through Continuous Service and such other requirements, if any, as are set forth in Exhibit
A (and not through the act of being hired, being granted an option or purchasing shares hereunder). The Optionee further acknowledges
and agrees that (i) this Grant Agreement, the transactions contemplated hereunder and the exercise schedule set forth herein do not constitute
an express or implied promise of continued employment or service for the exercise period or for any other period, and shall not interfere
with the Optionee’s right or the right of the Company or its Subsidiaries to terminate the employment or service relationship at
any time, with or without cause, subject to the terms of any written employment agreement that the Optionee may have entered into with
the Company or any of its Subsidiaries; and (ii) the Company would not have granted this Option to the Optionee but for these acknowledgements
and agreements.
12.
Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Grant Agreement constitute the
entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and the Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee’s
interest except by means of a writing signed by the Company and the Optionee. In the event of any conflict between this Grant Agreement
and the Plan, the Plan shall be controlling, except as otherwise specifically provided in the Plan. This Grant Agreement shall be construed
under the laws of the State of Delaware, without regard to conflict of laws principles.
13.
Opportunity for Review. Optionee and the Company agree that this Option is granted under and governed by the terms and conditions
of the Plan and this Grant Agreement. The Optionee has reviewed the Plan and this Grant Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Grant Agreement and fully understands all provisions of the Plan and this Grant
Agreement. The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon
any questions relating to the Plan and this Grant Agreement. The Optionee further agrees to notify the Company upon any change in the
residence address indicated herein.
14.
Section 409A. This Option is intended to be excepted from coverage under Section 409A and shall be administered, interpreted
and construed accordingly. The Company may, in its sole discretion and without the Optionee’s consent, modify or amend the terms
of this Grant Agreement, impose conditions on the timing and effectiveness of the exercise of the Option by Optionee, or take any other
action it deems necessary or advisable, to cause the Option to be excepted from Section 409A (or to comply therewith to the extent the
Company determines it is not excepted).
15.
Recoupment. In the event the Company restates its financial statements due to material noncompliance with any financial reporting
requirements under applicable securities laws, any shares issued pursuant to this Agreement for or in respect of the year that is restated,
or the prior three years, may be recovered to the extent the shares issued exceed the number that would have been issued based on the
restatement. In addition and without limitation of the foregoing, any amounts paid hereunder shall be subject to recoupment in accordance
with The Dodd–Frank Wall Street Reform and Consumer Protection Act and any implementing regulations thereunder, any clawback policy
adopted by the Company or as is otherwise required by applicable law or stock exchange listing conditions.
[Signature
Page Follows]
IN
WITNESS WHEREOF, the parties hereto have executed this Grant Agreement as of the date set forth in Exhibit A.
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CINGULATE
INC. |
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By: |
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Name: |
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Title
: |
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OPTIONEE |
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Name: |
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EXHIBIT
A
INCENTIVE
STOCK OPTION GRANT AGREEMENT
CINGULATE
INC.
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(a). |
Optionee’s
Name:_______________________________________________ |
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(b). |
Date
of Grant:_________________________________________________ |
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(c). |
Number
of Shares Subject to the Option:___________________________ |
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(d). |
Exercise
Price: $______ per Share |
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(e). |
Expiration
Date:_______________________________________________ |
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(f). |
Vesting
Schedule: |
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_______
(Initials) |
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Optionee |
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_______
(Initials) |
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Company
Signatory |
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Exhibit
31.1
CERTIFICATION
OF CHIEF EXECUTIVE OFFICER PURSUANT
TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I,
Shane J. Schaffer, certify that:
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1. |
I
have reviewed this Quartlery Report on Form 10-Q for the period ended March 31, 2022 of Cingulate
Inc.;
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2. |
Based
on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered
by this report;
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3. |
Based
on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The
registrant’s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the registrant and have: |
|
a) |
Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared; |
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b) |
(Paragraph
omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313);
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c) |
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and |
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d) |
Disclosed
in this report any change in the registrant’s internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and |
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5. |
The
registrant’s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors
and the audit committee of the registrant’s board of directors (or persons performing
the equivalent functions):
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a) |
All
significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and |
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b) |
Any
fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting. |
Date:
May 12, 2022 |
/s/
Shane J. Schaffer |
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Shane
J. Schaffer |
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Chief
Executive Officer |
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(Principal
Executive Officer) |
Exhibit
31.2
CERTIFICATION
OF CHIEF EXECUTIVE OFFICER PURSUANT
TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I,
Louis G. Van Horn, certify that:
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1. |
I
have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2022 of Cingulate Inc.; |
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2. |
Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report; |
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3. |
Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report; |
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4. |
The
registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
|
a) |
Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared; |
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b) |
(Paragraph
omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313); |
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c) |
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and |
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d) |
Disclosed
in this report any change in the registrant’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
and 15d-15(f)) that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter
in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and |
|
5. |
The
registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions): |
|
a) |
All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and |
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b) |
Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting. |
Date:
May 12, 2022 |
/s/
Louis G. Van Horn |
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Louis
G. Van Horn |
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Chief
Financial Officer |
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(Principal
Financial Officer) |
Exhibit
32.1
Certification
Pursuant to
18
U.S.C. Section 1350,
as
Adopted Pursuant to
Section
906 of the Sarbanes-Oxley Act of 2002
This
Certification is being filed pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002. This Certification
is included solely for the purposes of complying with the provisions of Section 906 of the Sarbanes-Oxley Act and is not intended to
be used for any other purpose. In connection with the accompanying Quarterly Report on Form 10-Q of Cingulate Inc. (the “Company”)
for the period ended March 31, 2022 (the “Quarterly Report”), the undersigned hereby certifies in his capacity as an officer
of the Company that to such officer’s knowledge:
|
(1) |
The
Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;
and |
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(2) |
The
information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations
of the Company. |
Dated:
May 12, 2022 |
By: |
/s/
Shane J. Schaffer |
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|
Shane
J. Schaffer |
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|
Chief
Executive Officer |
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(Principal
Executive Officer) |
Exhibit
32.2
Certification
Pursuant to
18
U.S.C. Section 1350,
as
Adopted Pursuant to
Section
906 of the Sarbanes-Oxley Act of 2002
This
Certification is being filed pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002. This Certification
is included solely for the purposes of complying with the provisions of Section 906 of the Sarbanes-Oxley Act and is not intended to
be used for any other purpose. In connection with the accompanying Quarterly Report on Form 10-Q of Cingulate Inc. (the “Company”)
for the period ended March 31, 2022 (the “Quarterly Report”), the undersigned hereby certifies in his capacity as an officer
of the Company that to such officer’s knowledge:
|
(1) |
The
Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;
and |
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(2) |
The
information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations
of the Company. |
Dated:
May 12, 2022 |
By: |
/s/
Louis G. Van Horn |
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|
Louis
G. Van Horn |
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|
Chief
Financial Officer |
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|
(Principal
Financial Officer) |