Cingulate Inc

Previous wording

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, 2023 (Form 10-K) and in this report, as well as disclosures in this report and our other reports filed with the Securities and Exchange Commission (SEC), for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Current wording

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, 2023 (Form 10-K) and in this report, as well as disclosures in this report and our other reports filed with the SEC, for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Previous wording

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, including debt financing, was approximately $94.3 million as of June 30, 2024.

Current wording

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, including debt financing, was approximately $106.4 million as of September 30, 2024.

Previous wording

We have incurred significant losses since our inception. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and commercialization of one or more of our product candidates. Our net losses were $3.2 million and $6.6 million for the three months ended June 30, 2024 and 2023, respectively. See “Results of Operations” below for an explanation of the fluctuations in our net losses. As of June 30, 2024, we had an accumulated deficit of $99.1 million.

Current wording

We have incurred significant losses since our inception. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and commercialization of one or more of our product candidates. Our net losses were $3.2 million and $6.0 million for the three months ended September 30, 2024 and 2023, respectively. See “Results of Operations” below for an explanation of the fluctuations in our net losses. As of September 30, 2024, we had an accumulated deficit of $102.4 million.

Previous wording

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:

Current wording

We expect to continue to incur significant expenses and operating losses in the near term, as we:

Previous wording

On August 9, 2024, we completed a one-for-twelve reverse stock split (the “2024 Reverse Stock Split”), which reduced the number of shares of our common stock that were issued and outstanding immediately prior to the effectiveness of the 2024 Reverse Stock Split. The number of shares of our authorized common stock was not affected by the 2024 Reverse Stock Split and the par value of our common stock remained unchanged at $0.0001 per share. No fractional shares were issued in connection with the 2024 Reverse Stock Split. All share and per share amounts in this Report have been adjusted to reflect the 2024 Reverse Stock Split.

Current wording

On August 9, 2024, we completed a one-for-twelve reverse stock split (2024 Reverse Stock Split), which reduced the number of shares of our common stock that were issued and outstanding immediately prior to the effectiveness of the 2024 Reverse Stock Split. The number of shares of our authorized common stock was not affected by the 2024 Reverse Stock Split and the par value of our common stock remained unchanged at $0.0001 per share. No fractional shares were issued in connection with the 2024 Reverse Stock Split. All share and per share amounts in this report have been adjusted to reflect the 2024 Reverse Stock Split.

Previous wording

**CTx-1301:**We have designed our clinical program for CTx-1301 (dexmethylphenidate), our lead investigational product candidate for the treatment of ADHD, based on U.S. Food and Drug Administration (FDA) feedback regarding our CTx-1301 initial Pediatric Study Plan (iPSP), and longstanding guidance on the streamlined approval pathway under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act.

Current wording

**CTx-1301:**We have designed our clinical program for CTx-1301 (dexmethylphenidate), our lead investigational product candidate for the treatment of ADHD, based on U.S. Food and Drug Administration (FDA) feedback regarding our CTx-1301 clinical plan, and longstanding guidance on the streamlined approval pathway under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act.

Previous wording

We initiated two CTx-1301 Phase 3 clinical studies in pediatric and adolescent patients- a fixed dose study and a dose-optimized onset and duration study in a laboratory classroom setting in the third quarter of 2023. Based upon recent written communication with the FDA that further conduct of these pediatric and adolescent studies is not required for the submission of an NDA, we have closed enrollment on both Phase 3 trials. We will be performing the analytical activities for these trials in 2024. Per FDA guidance, however, we will conduct a Phase 1 food effect study utilizing CTx-1301’s highest dosage strength, 50-mg. Appropriate data will be included in the NDA, targeted for a first half of 2025 submission.

Current wording

We initiated two CTx-1301 Phase 3 clinical studies in pediatric and adolescent patients- a fixed dose study and a dose-optimized onset and duration study in a laboratory classroom setting in the third quarter of 2023. Based upon written communication with the FDA that further conduct of these pediatric and adolescent studies is not required for the submission of an NDA, we closed enrollment on both Phase 3 trials. We are performing the data consolidation and analytical activities for these trials. In addition, per FDA guidance, we initiated a food effect study utilizing CTx-1301’s highest dosage strength, 50-mg, in September 2024 and is expected to be completed by the end of 2024. Appropriate data will be included in the NDA, targeted for a mid-2025 submission.

Previous wording

**CTx-2103:**We have embarked on a program to develop CTx-2103 (buspirone), for the treatment of anxiety, which is one of the most common mental health concerns in the United States. We completed a formulation study in which the pharmacokinetics were evaluated for this trimodal tablet providing three precisely timed doses of buspirone versus one immediate release dose. In addition, scintigraphic imaging visualized transit of the tablets through the gastrointestinal tract to confirm both the site and onset of release, which will then be correlated with pharmacokinetic data to establish the full release profile of the CTx-2103 formulation. Based on the pharmacokinetic profile seen in the data, CTx-2103 achieved a triple release of buspirone. These results provided the critical information required to allow us to request a Pre-IND meeting with the FDA to discuss the design of our clinical and regulatory program for CTx-2103 which occurred in the fourth quarter of 2023. We received input from the FDA regarding the regulatory pathway for CTx-2103, and the design of clinical studies for filing of an IND. Based on this FDA feedback, we believe that we can seek and win approval of CTx-2103 under the 505(b)(2) pathway, which typically requires less time and resources than the 505(b)(1) full NDA pathway. We plan to continue development of this product candidate pending additional capital resources.

Current wording

**CTx-2103:**We have embarked on a program to develop CTx-2103 (buspirone), for the treatment of anxiety, which is one of the most common mental health concerns in the United States. We completed a formulation study in which the pharmacokinetics were evaluated for this trimodal tablet providing three precisely timed doses of buspirone versus one immediate release dose. In addition, scintigraphic imaging visualized transit of the tablets through the gastrointestinal tract to confirm both the site and onset of release, which will then be correlated with pharmacokinetic data to establish the full release profile of the CTx-2103 formulation. Based on the pharmacokinetic profile seen in the data, CTx-2103 achieved a triple release of buspirone. These results provided the critical information required to allow us to request a Pre-IND meeting with the FDA to discuss the design of our clinical and regulatory program for CTx-2103 which occurred in the fourth quarter of 2023. We received input from the FDA regarding the regulatory pathway for CTx-2103, and the design of clinical studies for filing of an IND. Based on this FDA feedback, we believe that we can seek and win approval of CTx-2103 under the 505(b)(2) pathway, which typically requires less time and resources than the 505(b)(1) full NDA pathway. Additional resources will be required to complete the development of this product candidate.

Previous wording

We are actively seeking a strategic pharmaceutical partnership under which we would license CTx-1301 in the United States, internationally, or both. In March 2023, we entered into a joint commercialization agreement (the Commercialization Agreement) with Indegene, Inc. (Indegene). We are able to utilize Indegene for commercialization services for CTx-1301, including marketing, sales, market access and distribution, on a fee for service, at our discretion. Alternatively, we may identify an appropriate pharmaceutical partnership, including commercialization activities of CTx-1301, if approved.

Current wording

We continue to evaluate strategic partnerships under which we would license CTx-1301 in the United States and/or internationally. In March 2023, we entered into a joint commercialization agreement (the Commercialization Agreement) with Indegene, Inc. (Indegene) in the United States. We are able to utilize Indegene for commercialization services for CTx-1301, including marketing, sales, market access and distribution, on a fee for service, at our discretion.

Previous wording

On February 2, 2024, we entered into agreements, including a Securities Purchase Agreement, with investors, pursuant to which we issued 114,583 shares of our common stock, pre-funded warrants to purchase up to an aggregate of 197,917 shares of our common stock, Series A warrants to purchase up to 312,500 shares of our common stock and Series B warrants to purchase up to 156,250 shares of our common stock (the “February 2024 Offering”). The February 2024 Offering closed on February 6, 2024. The combined purchase price per share of common stock and accompanying Series A and Series B warrants was $24.00. The combined purchase price per prefunded warrant and accompanying Series A and Series B warrants was $23.99, which represents the public offering price per share of common stock and accompanying warrants less the $0.0012 per share exercise price for each prefunded warrant. The pre-funded warrants are exercisable at any time after the date of issuance and have no expiration date. The holder of pre-funded warrants may not exercise the warrants if the holder, together with its affiliates, would beneficially own more than 4.99% (or, at the election of the holder, 9.99%) of the number of shares of common stock outstanding immediately after giving effect to such exercise. The Series A warrants have an exercise price of $24.00 per share, were exercisable immediately, and will expire five years after the issuance date, and the Series B warrants have an exercise price of $24.00 per share, were exercisable immediately, and will expire two years after the issuance date. We received gross proceeds of approximately $7.5 million, before deducting $750,950 of placement agent’s fees and other offering expenses, pursuant to the February 2024 Offering. As of June 30, 2024, all but 16,500 of the pre-funded warrants had been exercised. Pre-funded warrants to purchase 9,900 shares of common stock were exercised in July 2024. Holders of Series A warrants to purchase 177,084 shares and Series B warrants to purchase 88,500 shares gave notice of exercise in connection with the June 2024 Warrant Inducement (as defined below) on June 28, 2024.

Current wording

On February 2, 2024, we entered into agreements, including a Securities Purchase Agreement, with investors, pursuant to which we issued 114,583 shares of our common stock, pre-funded warrants to purchase up to an aggregate of 197,917 shares of our common stock, Series A warrants to purchase up to 312,500 shares of our common stock and Series B warrants to purchase up to 156,250 shares of our common stock (the “February 2024 Offering”). The February 2024 Offering closed on February 6, 2024. The combined purchase price per share of common stock and accompanying Series A and Series B warrants was $24.00. The combined purchase price per prefunded warrant and accompanying Series A and Series B warrants was $23.99, which represents the public offering price per share of common stock and accompanying warrants less the $0.0012 per share exercise price for each prefunded warrant. The pre-funded warrants are exercisable at any time after the date of issuance and have no expiration date. The holder of pre-funded warrants may not exercise the warrants if the holder, together with its affiliates, would beneficially own more than 4.99% (or, at the election of the holder, 9.99%) of the number of shares of common stock outstanding immediately after giving effect to such exercise. The Series A warrants have an exercise price of $24.00 per share, were exercisable immediately, and will expire five years after the issuance date, and the Series B warrants have an exercise price of $24.00 per share, were exercisable immediately, and will expire two years after the issuance date. We received gross proceeds of approximately $7.5 million, before deducting $750,950 of placement agent’s fees and other offering expenses, pursuant to the February 2024 Offering. As of September 30, 2024, all pre-funded warrants had been exercised. Holders of Series A warrants to purchase 177,084 shares and Series B warrants to purchase 88,500 shares gave notice of exercise in connection with the June 2024 Warrant Inducement (as defined below) on June 28, 2024.

Previous wording

On June 28, 2024, we entered into an inducement offer letter agreement (the “June 2024 Warrant Inducement”), pursuant to which certain holders (“Holders”) of certain of our existing warrants to purchase 265,625 shares of common stock issued to the Holders on February 6, 2024 (the “February 2024 Warrants”) agreed to exercise for cash their February 2024 Warrants at a reduced exercise price of $7.02 per share. In consideration for the exercise of the February 2024 Warrants, the Holders received new Series C common stock purchase warrants to purchase an aggregate of 354,167 shares of common stock and new Series D common stock purchase warrants to purchase an aggregate of 177,083 shares of common stock. Such new warrants have an exercise price of $7.02 per share. We received net proceeds of $1.6 million from the closing of the June 2024 Warrant Inducement, which occurred on July 1, 2024.

Current wording

On June 28, 2024, we entered into an inducement offer letter agreement (June 2024 Warrant Inducement), pursuant to which certain holders (Holders) of certain of our existing warrants to purchase 265,625 shares of common stock issued to the Holders on February 6, 2024 (February 2024 Warrants) agreed to exercise for cash their February 2024 Warrants at a reduced exercise price of $7.02 per share. In consideration for the exercise of the February 2024 Warrants, the Holders received new Series C common stock purchase warrants to purchase an aggregate of 354,167 shares of common stock and new Series D common stock purchase warrants to purchase an aggregate of 177,083 shares of common stock. Such new warrants have an exercise price of $7.02 per share. We received net proceeds of $1.6 million from the closing of the June 2024 Warrant Inducement, which occurred on July 1, 2024.

Previous wording

We entered into an At The Market Offering Agreement (ATM Agreement) with H.C. Wainwright &Co., LLC (HCW), as sales agent, in January 2023 as amended in May 2023, pursuant to which we may offer and sell, from time to time through HCW, shares of our common stock for aggregate proceeds of up to $8.47 million (upon the terms and subject to the conditions and limitations set forth in the ATM Agreement). In the three months ended June 30, 2024, we sold 23,650 shares of common stock under the ATM Agreement, for net proceeds of $354,259, after deducting $13,179 of compensation to HCW and other administration fees.

Current wording

We entered into an At The Market Offering Agreement (ATM Agreement) with H.C. Wainwright & Co., LLC (HCW), as sales agent, in January 2023 as amended in May 2023, pursuant to which we may offer and sell, from time to time through HCW, shares of our common stock for aggregate proceeds of up to $19.7 million based on prospectus supplements filed with the SEC through the date of this report (upon the terms and subject to the conditions and limitations set forth in the ATM Agreement). In the three months ended September 30, 2024, we sold 902,300 shares of common stock under the ATM Agreement, for net proceeds of approximately $5.8 million, after deducting $0.2 million of compensation to HCW and other administration fees. In the nine months ended September 30, 2024, we sold 957,808 shares of common stock under the ATM Agreement, for net proceeds of approximately $9.3 million, after deducting $0.3 million of compensation to HCW and other administration fees.

Previous wording

In April 2023, we entered into a purchase agreement (Lincoln Park Agreement) with Lincoln Park Capital Fund LLC (Lincoln Park). Pursuant to the Lincoln Park Agreement, Lincoln Park has agreed to purchase from us up to an aggregate of $12.0 million of common stock (upon the terms and subject to the conditions and limitations set forth in the Lincoln Park Agreement) from time to time and at our sole discretion over the 36-month term of the Lincoln Park Agreement. During the quarter ended June 30, 2024, we sold 84,420 shares of common stock under the Lincoln Park Agreement, for net proceeds of $755,703.

Current wording

In April 2023, we entered into a purchase agreement (Lincoln Park Agreement) with Lincoln Park Capital Fund LLC (Lincoln Park). Pursuant to the Lincoln Park Agreement, Lincoln Park has agreed to purchase from us up to an aggregate of $12.0 million of common stock (upon the terms and subject to the conditions and limitations set forth in the Lincoln Park Agreement) from time to time and at our sole discretion over the 36-month term of the Lincoln Park Agreement. During the quarter ended September 30, 2024, we sold 1,092,337 shares of common stock under the Lincoln Park Agreement, for net proceeds of approximately $6.1 million. During the nine months ended September 30, 2024, we sold 1,181,757 shares of common stock under the Lincoln Park Purchase Agreement, for net proceeds of approximately $6.8 million. Subsequent to September 30, 2024, we sold 213,522 shares of common stock under the Lincoln Park Purchase Agreement, for net proceeds of approximately $0.9 million.

Previous wording

Interest and other income (expense), net consists of interest expense on our related party notes payable and interest earned on our cash and cash equivalents, including money market funds. The primary objective of our investment policy is liquidity and capital preservation.

Current wording

Interest and other income (expense), net consisted of interest expense on our related party notes payable until the last of those obligations were converted to equity in the first quarter of 2024, and interest earned on our cash and cash equivalents, including money market funds. The primary objective of our investment policy is liquidity and capital preservation.

Previous wording

R&D expenses were $1.9 million for the three months ended June 30, 2024, a decrease of $2.6 million or 57.8% from the three months ended June 30, 2023. This change was primarily the result of decreased clinical activity in the three months ended June 30, 2024 as compared to the same period in 2023. During the second quarter of 2023, we incurred significant costs relating to two Phase 3 studies for CTx-1301, the fixed dose pediatric and adolescent safety and efficacy study and the pediatric dose optimization and duration study. Enrollment in these two studies was completed in late 2023 and we are progressing with the remaining close-out and analytical activities required for an NDA submission. Manufacturing costs also decreased as the activity in 2023 was more significant for the manufacture of clinical supply for the Phase 3 studies. In 2024, manufacturing activity included the completion of registration batches of CTx-1301. The decrease in personnel costs is the result of lower headcount and the cost containment measures, which we implemented in late 2023 in order to conserve cash, including salary reductions ranging from 5-55% for all employees.

Current wording

R&D expenses were $1.4 million for the three months ended September 30, 2024, a decrease of $2.5 million or 63.6% from the three months ended September 30, 2023. This change was primarily the result of decreased clinical activity in the three months ended September 30, 2024 as compared to the same period in 2023. During the third quarter of 2023, we incurred significant costs relating to two Phase 3 studies for CTx-1301, the fixed dose pediatric and adolescent safety and efficacy study and the pediatric dose optimization and duration study. Enrollment in these two studies was closed in early 2024 and we are progressing with the remaining close-out and analytical activities required for an NDA submission. Manufacturing costs also decreased, as the activity in 2023 was more significant for the manufacture of clinical supply for the Phase 3 studies. In 2024, manufacturing activity included the completion of registration batches of CTx-1301. The decrease in personnel costs is the result of lower headcount and the cost containment measures, which were implemented in late 2023 in order to conserve cash, including salary reductions ranging from 5-55% for all employees. This decrease was offset by the reinstatement of 2023 base salaries for all employees in September 2024.

Previous wording

Total G&A expenses were $2.5 million for the six months ended June 30, 2024, a decrease of $1.2 million or 32.0% from the six months ended June 30, 2023. This is primarily the result of a decrease in personnel expenses and insurance. The decrease in personnel expenses is the result of lower headcount and the cost containment measures which we implemented in late 2023 in order to conserve cash, including salary reductions ranging from 5-55% for all employees. In addition, there was a decrease in the annual directors’ and officers’ insurance premium from 2023 to 2024.

Current wording

Total G&A expenses were $1.9 million for the three months ended September 30, 2024, an increase of 1.5% from the three months ended September 30, 2023. This is primarily the result of an increase in legal and professional fees, offset by a decrease in personnel expenses and insurance. The increase in legal and professional fees was due to the increased use of consultants in connection with the special shareholders meetings, the 2024 Reverse Stock Split and capital raising activity. This increase was offset by a decrease in personnel expenses primarily due to lower headcount and the cost containment measures, which we implemented in late 2023 in order to conserve cash, including salary reductions ranging from 5-55% for all employees. 2023 base salaries for all employees were reinstated in September 2024. In addition, there was a decrease in the annual directors’ and officers’ insurance premium from 2023 to 2024.

Previous wording

Total interest and other income (expense), net for the six months ended June 30, 2024 and 2023, relates to interest incurred on outstanding notes payable, offset by interest earned on invested balances. The decrease is the result of the conversion to equity of the WFIA Note in two transactions, which occurred in August 2023 and January 2024.

Current wording

Total interest and other income (expense), net for the three months ended September 30, 2023, primarily relates to interest incurred on outstanding notes payable, offset by interest earned on invested balances. Total interest and other income for the three months ended September 30, 2024 relates to interest earned on invested balances, resulting from the increase in the Company’s cash balance relating to capital raise activities in the third quarter of 2024.

Previous wording

The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023:

Current wording

The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023:

Previous wording

R&D expenses were $3.7 million for the six months ended June 30, 2024, a decrease of $3.0 million or 44.0% from the six months ended June 30, 2023. This change was primarily the result of decreased clinical activity in the six months ended June 30, 2024 as compared to the same period in 2023. During the first half of 2023, we incurred significant costs relating to two Phase 3 studies for CTx-1301, the fixed dose pediatric and adolescent safety and efficacy study and the pediatric dose optimization and duration study. Enrollment in these two studies was completed in late 2023 and we are progressing with the remaining close-out and analytical activities required for an NDA submission. Manufacturing costs also decreased as the activity in 2023 was more significant for the manufacture of clinical supply for the Phase 3 studies. In 2024, manufacturing activity included the completion of registration batches of CTx-1301. The decrease in personnel costs is the result of lower headcount and the cost containment measures, which we implemented in late 2023 in order to conserve cash, including salary reductions ranging from 5-55% for all employees.

Current wording

R&D expenses were $5.1 million for the nine months ended September 30, 2024, a decrease of $5.4 million or 51.3% from the nine months ended September 30, 2023. This change was primarily the result of decreased clinical activity in the nine months ended September 30, 2024 as compared to the same period in 2023. During the first nine months of 2023, we incurred significant costs relating to two Phase 3 studies for CTx-1301, the fixed dose pediatric and adolescent safety and efficacy study and the pediatric dose optimization and duration study. Enrollment in these two studies was closed in early 2024 and we are progressing with the remaining close-out and analytical activities required for an NDA submission. Manufacturing costs also decreased, as the activity in 2023 was more significant for the manufacture of clinical supply for the Phase 3 studies. In 2024, manufacturing activity included the completion of registration batches of CTx-1301. The decrease in personnel costs is the result of lower headcount and the cost containment measures, which were implemented in late 2023 in order to conserve cash, including salary reductions ranging from 5-55% for all employees. This decrease was offset by the reinstatement of 2023 base salaries for all employees in September 2024.

Previous wording

Total G&A expenses were $1.3 million for the three months ended June 30, 2024, a decrease of $0.6 million or 30.5% from the three months ended June 30, 2023. This is primarily the result of a decrease in personnel expenses and insurance. The decrease in personnel expenses is the result of lower headcount and the cost containment measures which we implemented in late 2023 in order to conserve cash, including salary reductions ranging from 5-55% for all employees. In addition, there was a decrease in the annual directors’ and officers’ insurance premium from 2023 to 2024.

Current wording

Total G&A expenses were $4.3 million for the nine months ended September 30, 2024, a decrease of $1.1 million or 20.8% from the nine months ended September 30, 2023. This is primarily the result of a decrease in personnel expenses and insurance. The decrease in personnel expenses is the result of lower headcount and the cost containment measures which we implemented in late 2023 in order to conserve cash, including salary reductions ranging from 5-55% for all employees. 2023 base salaries for all employees were reinstated in September 2024. In addition, there was a decrease in the annual directors’ and officers’ insurance premium from 2023 to 2024. The decrease was offset by an increase in legal and professional fees due to the increased use of consultants in connection with the special shareholders meetings, the 2024 Reverse Stock Split and capital raising activity.

Previous wording

The following table summarizes interest and other income (expense), net for the six months ended June 30, 2024 and 2023:

Current wording

The following table summarizes interest and other income (expense), net for the nine months ended September 30, 2024 and 2023:

Previous wording

Total interest and other income (expense), net for the three months ended June 30, 2024 and 2023, relates to interest incurred on outstanding notes payable, offset by interest earned on invested balances. The decrease is the result of the conversion to equity of the related party note payable (the WFIA Note) to Werth Family Investment Associates LLC (WFIA) in two transactions, which occurred in August 2023 and January 2024.

Current wording

Total interest and other income (expense), net for the nine months ended September 30, 2023, primarily relates to interest incurred on outstanding notes payable, offset by interest earned on invested balances. Total interest and other income for the nine months ended September 30, 2024 relates to interest earned on invested balances, resulting from the increase in the Company’s cash balance relating to capital raise activities.

Previous wording

Net cash used in operating activities was $10.5 million for the six months ended June 30, 2024. Cash used in operating activities was primarily due to the use of funds in our operations to develop our product candidates resulting in a net loss of $6.2 million, prior to the effects of two noncash items, stock-based compensation expense of $0.5 million and depreciation expense of $0.3 million. Changes in operating assets and liabilities included a decrease in trade accounts payable and accrued expenses of $5.3 million due to the payment of vendor balances in the first quarter of 2024 with the cash proceeds from the issuance of common stock pursuant to our ATM Agreement in January 2024 and the issuance of equity in the February 2024 Offering.

Current wording

Net cash used in operating activities was $14.4 million for the nine months ended September 30, 2024. Cash used in operating activities was primarily due to the use of funds in our operations to develop our product candidates resulting in a net loss of $9.4 million, prior to the effects of two noncash items, stock-based compensation expense of $0.9 million and depreciation expense of $0.5 million. Changes in operating assets and liabilities included a decrease in trade accounts payable and accrued expenses of $5.5 million primarily due to the payment of vendor balances in the first quarter of 2024 with the cash proceeds from the issuance of common stock pursuant to our ATM Agreement in January 2024 and the issuance of equity in the February 2024 Offering.

Previous wording

Net cash used in operating activities was $8.2 million for the six months ended June 30, 2023. 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 $10.6 million, prior to the effects of two noncash items, stock-based compensation expense of $0.4 million and depreciation expense of $0.3 million. Changes in operating assets and liabilities included a decrease in miscellaneous receivables of $0.2 million primarily due to collection of an amount recoverable on an insurance claim which had been recorded as a receivable as of December 31, 2022, a decrease of prepaid expenses and other current assets of $0.6 million primarily due to the utilization of a deposit made to our contract manufacturing organization (CMO) for the build out of our new manufacturing suite and the utilization of deposits made to our CROs, and an increase in trade accounts payable and accrued expenses of $1.0 million due to increased clinical and manufacturing amounts resulting from increased development activity, an increase in interest accrued due to the WFIA Note and an increase in legal fees payable relating to legal activity incurred primarily in connection with capital raise activities

Current wording

Net cash used in operating activities was $12.5 million for the nine months ended September 30, 2023. 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 $16.6 million, prior to the effects of two noncash items, stock-based compensation expense of $0.7 million and depreciation expense of $0.4 million. Changes in operating assets and liabilities included a decrease in miscellaneous receivables of $0.2 million primarily due to collection of an amount recoverable on an insurance claim which had been recorded as a receivable as of December 31, 2022, a decrease of prepaid expenses and other current assets of $1.4 million primarily due to the utilization of a deposit made to our contract manufacturing organization (CMO) for the build out of our new manufacturing suite and the utilization of deposits made to our CROs, and an increase in trade accounts payable and accrued expenses of $1.5 million due to increased clinical and manufacturing amounts resulting from increased development activity, an increase in interest accrued due to the WFIA Note and an increase in legal fees payable relating to legal activity incurred primarily in connection with capital raise activities.

Previous wording

Net cash used in investing activities for both the six months ended June 30, 2024 and 2023 was primarily related to the purchase of equipment to support our research and development.

Current wording

Net cash used in investing activities for both the nine months ended September 30, 2024 and 2023 was primarily related to the purchase of equipment to support our research and development.

Previous wording

Net cash provided by financing activities for the six-month period ended June 30, 2024 was related to the cash proceeds from the issuance of common stock pursuant to the ATM Agreement, the Lincoln Park Agreement and the February 2024 Offering.

Current wording

Net cash provided by financing activities for the nine-month period ended September 30, 2024 was related to the cash proceeds from the issuance of common stock pursuant to the ATM Agreement, the Lincoln Park Agreement, the February 2024 Offering and the June 2024 Warrant Inducement.

Previous wording

Net cash provided by financing activities for the six months ended June 30, 2023 was primarily related to $3.0 million received pursuant to the WFIA Note. In addition, we received $0.3 million in net proceeds from the Lincoln Park Agreement and $0.1 million from the ATM Agreement during the six months ended June 30, 2023.

Current wording

Net cash provided by financing activities for the nine months ended September 30, 2023 was primarily related to gross proceeds of approximately $4.0 million from the capital raise in September 2023, gross proceeds of approximately $1.0 million from the WFIA Private Placement and proceeds from the issuance of shares of common stock pursuant to the Lincoln Park Agreement and the ATM Agreement. In addition, we received $3.0 million from the 2023 WFIA Debt Financing .

Previous wording

As of June 30, 2024, we had cash and cash equivalents of $0.4 million. Subsequent to June 30, 2024, we received net proceeds of $1.6 million from the June 2024 Warrant Inducement. We believe our cash will satisfy our capital needs through late in the third quarter of 2024 under our current business plan. In order to achieve the filing of our NDA for CTx-1301 in the first half of 2025 for potential FDA approval, we believe that we will need approximately $12-13 million of additional capital. We will also need additional capital to advance our other programs and commercialization efforts. While we aware of the clinical and manufacturing requirements and estimated costs for an NDA submission of CTx, 1301, it is difficult to predict spending for additional 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.

Current wording

As of September 30, 2024, we had cash and cash equivalents of $10 million. We believe our cash will satisfy our capital needs into the third quarter of 2025 under our current business plan. We are targeting to file our NDA submission for CTx-1301 in mid-2025. We will need additional capital to advance our other programs and commercialization efforts. While we aware of the clinical and manufacturing requirements and estimated costs for an NDA submission of CTx-1301, it is difficult to predict spending for additional 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.

Previous wording

To continue to grow our business over the longer term, we plan to commit substantial resources to research and development, including clinical trials of our product candidates, and other operations and potential product acquisitions and in-licensing. We have evaluated and expect to continue to evaluate a wide array of strategic transactions as part of our plan to acquire or in-license and develop additional products and product candidates to augment our internal development pipeline. Strategic transaction opportunities that we may pursue could materially affect our liquidity and capital resources and may require us to incur additional indebtedness, seek equity capital or both. In addition, we may pursue development, acquisition or in-licensing of approved or development products in new or existing therapeutic areas or continue the expansion of our existing operations. Accordingly, we expect to continue to opportunistically seek access to additional capital to license or acquire additional products, product candidates or companies to expand our operations, or for general corporate purposes. Strategic transactions may require us to raise additional capital through one or more public or private debt or equity financings or could be structured as a collaboration or partnering arrangement. We are actively seeking a strategic pharmaceutical partnership under which we would license CTx-1301 in the United States, internationally, or both. In March 2023, we entered into a Joint Commercialization Agreement with Indegene, Inc. (Indegene). Should we be unable to identify an appropriate pharmaceutical partnership, if we receive FDA approval for CTx-1301, Indegene would provide commercialization services for CTx-1301, including marketing, sales, market access and distribution, on a fee for service basis.

Current wording

To continue to grow our business over the longer term, we plan to commit substantial resources to research and development, including clinical trials of our product candidates, and other operations and potential product acquisitions and in-licensing. We have evaluated and expect to continue to evaluate a wide array of strategic transactions as part of our plan to acquire or in-license and develop additional products and product candidates to augment our internal development pipeline. Strategic transaction opportunities that we may pursue could materially affect our liquidity and capital resources and may require us to incur additional indebtedness, seek equity capital or both. In addition, we may pursue development, acquisition or in-licensing of approved or development products in new or existing therapeutic areas or continue the expansion of our existing operations. Accordingly, we expect to continue to opportunistically seek access to additional capital to license or acquire additional products, product candidates or companies to expand our operations, or for general corporate purposes. Strategic transactions may require us to raise additional capital through one or more public or private debt or equity financings or could be structured as a collaboration or licensing arrangement. We are actively seeking a strategic pharmaceutical partnership under which we would license CTx-1301 in the United States, internationally, or both. In March 2023, we entered into a Joint Commercialization Agreement with Indegene. Should we be unable to identify an appropriate pharmaceutical partnership, if we receive FDA approval for CTx-1301, Indegene would provide commercialization services for CTx-1301, including marketing, sales, market access and distribution, on a fee for service basis.

Previous wording

Since inception we have been engaged in organizational activities, including raising capital and research and development activities. We have not generated revenues and have not yet achieved profitable operations, nor have we ever generated positive cash flow from operations. There is no assurance that profitable operations, if achieved, could be sustained on a continuing basis. We are subject to those risks associated with any pre-clinical stage pharmaceutical company that has substantial expenditures for research and development. There can be no assurance that our research and development projects will be successful, that products developed will obtain necessary regulatory approval, or that any approved product will be commercially viable. In addition, we operate in an environment of rapid technological change that is largely dependent on the services of our employees and consultants. Further, our future operations are dependent on the success of our efforts to raise additional capital. These uncertainties raise substantial doubt about our ability to continue as a going concern for one year after the issuance date of our financial statements. The accompanying consolidated financial statements have been prepared on a going concern basis. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the company to continue as a going concern, which contemplates the continuation of operations, realization of assets and liquidation of liabilities in the ordinary course of business. We have incurred a net loss for the three months ended June 30, 2024 and 2023 and had accumulated losses of $99.1 million since inception to June 30, 2024. We anticipate incurring additional losses until such time, if ever, that we can generate significant revenue from our product candidates currently in development. Our sources of capital have included private capital raises in various classes of units of CTx prior to the Reorganization Merger, the issuance of equity securities in connection with our initial public offering (IPO), public offerings, including the February 2024 Offering, sales of common stock under our ATM Agreement and Lincoln Park Agreement, a private placement with WFIA, the WFIA Note which was subsequently converted to equity, and the June 2024 Warrant Inducement. Additional capital will be needed by us to fund our operations, to complete development of and to commercially develop our product candidates. There is no assurance that such capital will be available when needed or on acceptable terms.

Current wording

Since inception we have been engaged in organizational activities, including raising capital and research and development activities. We have not generated revenues and have not yet achieved profitable operations, nor have we ever generated positive cash flow from operations. There is no assurance that profitable operations, if achieved, could be sustained on a continuing basis. We are subject to those risks associated with any pre-clinical stage pharmaceutical company that has substantial expenditures for research and development. There can be no assurance that our research and development projects will be successful, that products developed will obtain necessary regulatory approval, or that any approved product will be commercially viable. In addition, we operate in an environment of rapid technological change that is largely dependent on the services of our employees and consultants. Further, our future operations are dependent on the success of our efforts to raise additional capital. These uncertainties raise substantial doubt about our ability to continue as a going concern for one year after the issuance date of our financial statements. The accompanying consolidated financial statements have been prepared on a going concern basis. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the company to continue as a going concern, which contemplates the continuation of operations, realization of assets and liquidation of liabilities in the ordinary course of business. We have incurred a net loss for the three months ended September 30, 2024 and 2023 and had accumulated losses of $102.4 million since inception to September 30, 2024. We anticipate incurring additional losses until such time, if ever, that we can generate significant revenue from our product candidates currently in development. Our sources of capital have included private capital raises in various classes of units of CTx prior to the Reorganization Merger, the issuance of equity securities in connection with our initial public offering (IPO), public offerings, including the February 2024 Offering, sales of common stock under our ATM Agreement and Lincoln Park Agreement, a private placement with WFIA, the WFIA Note which was subsequently converted to equity, and the June 2024 Warrant Inducement. Additional capital will be needed by us to fund our operations, to complete development of and to commercially develop our product candidates. There is no assurance that such capital will be available when needed or on acceptable terms.

Previous wording

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.

Current wording

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 ( JOBS Act) was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an “emerging growth company.” As an “emerging growth company,” we are electing to take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for emerging growth companies.