Form 10-Q Celcuity Inc. For: Jun 30
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
OR
For the transition period from to
Commission
File No.
(Exact name of registrant as specified in its charter)
| No.
| ||
| (State of incorporation) | (IRS Employer Identification No.) |
(Address of principal executive offices, including zip code)
Registrant’s
telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| ☒ | Smaller reporting company | |||||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐
On August 8, 2022 there were shares of the registrant’s common stock, $0.001 par value per share, outstanding.
Celcuity Inc.
Table of Contents
As used in this report, the terms “we,” “us,” “our,” “Celcuity,” and the “Company” mean Celcuity Inc., unless the context indicates another meaning.
| 2 |
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Celcuity Inc.
Condensed Balance Sheets
| June 30, 2022 | December 31, 2021 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Deposits | ||||||||
| Deferred transaction costs | ||||||||
| Payroll tax receivable | ||||||||
| Prepaid assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity: | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Finance lease liabilities | ||||||||
| Operating lease liabilities | ||||||||
| Accrued expenses | ||||||||
| Total current liabilities | ||||||||
| Finance lease liabilities | ||||||||
| Operating lease liabilities | ||||||||
| Note payable, non-current | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $ par value: shares authorized; shares issued and outstanding as of June 30, 2022 and December 31, 2021 | ||||||||
| Common stock, $ par value: and shares authorized as of June 30, 2022 and December 31, 2021, respectively; and shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to the financial statements
| 3 |
Celcuity Inc.
Condensed Statements of Operations
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | $ | $ | $ | ||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income | ||||||||||||||||
| Loss on sale of fixed assets | ( | ) | ||||||||||||||
| Other income (expense), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax benefits | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share, basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding, basic and diluted | ||||||||||||||||
See accompanying notes to the financial statements
| 4 |
Celcuity Inc.
Condensed Statements of Changes in Stockholders’ Equity
Three and Six Months Ended June 30, 2022
| Additional | ||||||||||||||||||||
| Common Stock | Paid-In | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Exercise of common stock options, net of shares withheld for exercise price | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at March 31, 2022 (unaudited) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Employee stock purchases | ||||||||||||||||||||
| Exercise of common stock options, net of shares withheld for exercise price | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2022 (unaudited) | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to the financial statements
| 5 |
Celcuity Inc.
Condensed Statements of Changes in Stockholders’ Equity
Three and Six Months Ended June 30, 2021
| Additional | ||||||||||||||||||||
| Common Stock | Paid-In | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance at December 31, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Exercise of common stock warrants | ||||||||||||||||||||
| Exercise of common stock options, net of shares withheld for exercise price | ( | ) | ||||||||||||||||||
| Issuance of common stock upon closing of follow-on offering, net of underwriting discounts and offering costs | ||||||||||||||||||||
| Issuance of common stock in an at-the-market (“ATM”) offering | ||||||||||||||||||||
| Issuance costs associated with ATM offering | - | ( | ) | ( | ) | |||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at March 31, 2021 (unaudited) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Employee stock purchases | ||||||||||||||||||||
| Exercise of common stock options, net of shares withheld for exercise price | ||||||||||||||||||||
| Issuance of common stock warrants, note payable | - | |||||||||||||||||||
| Issuance of common stock, licensing agreement | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2021 (unaudited) | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to the financial statements
| 6 |
Celcuity Inc.
Condensed Statements of Cash Flows
(unaudited)
| Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used for operations: | ||||||||
| Depreciation | ||||||||
| Stock-based compensation | ||||||||
| Issuance of common stock, licensing agreement | ||||||||
| Amortization of debt issuance costs and discount | ||||||||
| Payment-in-Kind interest | ||||||||
| Loss on sale of fixed assets | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Payroll tax receivable | ||||||||
| Prepaid assets and deposits | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued expenses | ( | ) | ||||||
| Non-cash operating lease, net | ( | ) | ( | ) | ||||
| Net cash used for operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from sale of property and equipment | ||||||||
| Net cash used for investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from exercise of common stock warrants | ||||||||
| Proceeds from exercise of employee stock options | ||||||||
| Proceeds from employee stock purchases | ||||||||
| Proceeds from follow-on offering, net of underwriting discounts and offering costs | ||||||||
| Proceeds from note payable, net of debt issuance
costs and discount of $ | ||||||||
| Gross proceeds from an ATM offering | ||||||||
| Payments for secondary registration statement costs | ( | ) | ( | ) | ||||
| Payments for finance leases | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ( | ) | ||||||
| Net change in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents: | ||||||||
| Beginning of period | ||||||||
| End of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Interest paid | $ | $ | ||||||
| Supplemental disclosures of non-cash investing and financing activities: | ||||||||
| Offering and registration statement costs included in accounts payable | $ | $ | ||||||
| Offering and registration statement costs included in accrued expenses | ||||||||
| Issuance of common stock warrants and final fee recognized as discount to note payable | ||||||||
See accompanying notes to the financial statements
| 7 |
CELCUITY INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)
(For the Three and Six Months Ended June 30, 2022 and 2021)
1. Organization
Nature of Business
Celcuity Inc., a Delaware corporation (the “Company”), is a clinical-stage biotechnology company focused on development of targeted therapies for hormonally driven cancers. The company’s lead therapeutic candidate is gedatolisib, a potent, reversible dual inhibitor that selectively targets all Class I PI3K isoforms and mTOR. Its mechanism of action and pharmacokinetic properties are highly differentiated from other currently approved and investigational therapies that target PI3K or mTOR alone or together. The company expects to initiate a Phase 3 study evaluating gedatolisib in patients with HR+/HER2- advanced breast cancer in 2022. Its CELsignia companion diagnostic platform is uniquely able to analyze live patient tumor cells to identify new groups of cancer patients likely to benefit from already approved targeted therapies. The Company was co-founded in 2012 by Brian F. Sullivan and Dr. Lance G. Laing and is based in Minnesota. The Company has not generated any revenues to date.
2. Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Basis of Presentation
The accompanying unaudited financial statements include the accounts of the Company and have been prepared in accordance with Article 10 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, as permitted by Article 10, the unaudited financial statements do not include all of the information required by accounting principles generally accepted in the United States (“U.S. GAAP”). The balance sheet at December 31, 2021 was derived from the audited financial statements at that date and does not include all the disclosures required by U.S. GAAP. In the opinion of management, all adjustments which are of a normal recurring nature and necessary for a fair presentation have been reflected in the financial statements. These unaudited condensed financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2021 and the related footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period.
Accounting Estimates
Management uses estimates and assumptions in preparing these unaudited condensed financial statements in accordance with U.S. GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates and the difference could be material. Significant items subject to such estimates and assumptions include the valuation of stock-based compensation and prepaid or accrued clinical trial costs.
Risks and Uncertainties
The Company is subject to risks common to companies in the development stage including, but not limited to, dependency on, the clinical and commercial success of its initial drug product, gedatolisib, the clinical and commercial success of its diagnostic tests, ability to obtain regulatory approval of its drug product, gedatolisib, ability to obtain regulatory approval of its diagnostic tests, the need for substantial additional financing to achieve its goals, uncertainty of broad adoption of its approved products, if any, by physicians and consumers, and significant competition.
Clinical Trial Costs
The Company records prepaid assets or accrued expenses for prepaid or estimated clinical trial costs conducted by third-party service providers, which includes the conduct of preclinical studies and clinical trials. These costs can be a significant component of the Company’s research and development expenses. The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with service agreements with its third-party service providers. The Company makes significant judgments and estimates in determining the accrued liabilities balance in each reporting period. As actual costs become known, the Company adjusts its prepaid assets or accrued expenses. The Company has not experienced any material differences between accrued costs and actual costs incurred. However, the status and timing of actual services performed, number of patients enrolled, and the rate of patient enrollments may vary from the Company’s estimates, resulting in an adjustment to expense in future periods. Changes in these estimates that result in material changes to the Company’s prepaid assets or accrued expenses could materially affect the Company’s results of operations.
| 8 |
Application of New or Revised Accounting Standards
Pursuant to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), a company constituting an “emerging growth company” is, among other things, entitled to rely upon certain reduced reporting requirements. The Company is an emerging growth company but has irrevocably elected not to take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. As a result, the Company will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for public companies that are not emerging growth companies.
Basic and diluted net loss per common share is determined by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding during the period. For all periods presented, the common shares underlying the options and warrants have been excluded from the calculation because their effect would be anti-dilutive. Therefore, the weighted-average shares outstanding used to calculate both basic and diluted loss per common share is the same.
For the three and six months ended June 30, 2022 and 2021, potentially dilutive securities excluded from the computations of diluted weighted-average shares outstanding were options to purchase and shares of common stock, respectively, warrants to purchase and shares of common stock, respectively, and and shares of restricted common stock, respectively.
4. Commitments
Operating and Finance Leases
The
Company leases its corporate space in Minneapolis, Minnesota. In September 2017, the Company entered into a non-cancelable operating
lease agreement for building space. The lease commenced, and the Company moved to the facility in May 2018, in conjunction with the termination
of its then existing lease. Rent expense is recorded on a straight-line basis over the lease term. In July 2020, the Company signed an
amendment to extend this lease through April 30, 2022. The lease amendment provides for monthly rent, real estate taxes and operating
expenses. As a result of the lease amendment, the Company recorded an incremental $
In May 2018, the Company entered into a non-cancelable finance lease agreement for office equipment with a five-year term. The underlying assets are included in furniture and equipment. The lease contains a bargain purchase option at the end of the lease.
When an implicit rate is not provided, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.
| 9 |
Supplemental balance sheet information consisted of the following at June 30, 2022:
| Operating Lease | ||||
| Right-of-use assets | $ | |||
| Operating lease liability | $ | |||
| Less: short term portion | ( | ) | ||
| Long term portion | $ | |||
| Finance Lease | ||||
| Furniture and equipment | $ | |||
| Less: Accumulated depreciation | ( | ) | ||
| Net book value of property and equipment under finance lease | $ | |||
| Finance lease liability | $ | |||
| Less: short term portion | ( | ) | ||
| Long term portion | $ |
Maturity analysis under lease agreements consisted of the following as of June 30, 2022:
| Operating Leases | Finance Leases | |||||||
| 2022 | $ | $ | ||||||
| 2023 | ||||||||
| Total minimum lease payments | ||||||||
| Less: Present value discount | ( | ) | ( | ) | ||||
| Less amount representing services | ( | ) | ||||||
| Present value of net minimum lease payments | $ | $ | ||||||
| Remaining Lease Term | Discount Rate | |||||
| Weighted Average | ||||||
| Operating lease | % | |||||
| Finance lease | % | |||||
Lease costs for the period ended June 30, 2022:
| Three-month period | Six-month period | |||||||
| Operating lease cost | $ | $ | ||||||
| Finance lease cost: | ||||||||
| Amortization | ||||||||
| Interest | ||||||||
| Variable lease cost | ||||||||
| $ | $ | |||||||
Supplemental cash flow information related to leases period ended June 30, 2022:
| Three-month period | Six-month period | |||||||
| Cash paid for amounts included in operating and finance leases: | ||||||||
| Operating cash outflow from operating leases | $ | $ | ||||||
| Operating cash outflow from finance leases | ||||||||
| Financing cash outflow from finance leases | ||||||||
| $ | $ | |||||||
| 10 |
Clinical Research Studies
The
Company enters into contracts in the normal course of business to conduct research and development programs internally and through
third parties that include, among others, arrangements with vendors, consultants, CMOs, and CROs. The Company currently has
five Phase 2 clinical trial agreements in place to evaluate targeted therapies selected with one of our CELsignia tests. Timing of
milestone payments related to the Phase 2 clinical trials are uncertain and the contracts generally provide for termination
following a certain period after notice, therefore the Company believes that non-cancelable obligations under the agreements are not
material. The Company also has a license agreement in place with Pfizer to research, develop, manufacture and commercialize
gedatolisib. In conjunction with the license agreement, the Company continued a Phase 1b study – B2151009 related to
gedatolisib. These patients subsequently transitioned to an Expanded Access study – CELC-G-001. Contracts related to the Phase
1b study and the Expanded Access study, are generally based on time and material. In addition, contracts related to the
Company’s forthcoming Phase 3 clinical study (VIKTORIA-1) are generally cancelable with
reasonable notice within 120 days and the Company’s obligations under these contracts are primarily based on services
performed through termination dates plus certain cancelation charges, if any, as defined in each of the respective agreements. In
addition, these agreements may, from time to time, be subjected to amendments as a result of any change orders executed by the
parties. As of June 30, 2022, the Company had only one material non-cancelable contractual commitment with respect to these arrangements,
which totaled approximately $
5. Stockholders’ Equity
On
May 15, 2022, the Company entered into a securities purchase agreement with certain institutional and other accredited investors for
the sale of Company common stock, preferred stock that may be convertible into common stock and warrants initially exercisable for preferred
stock for $
On
February 4, 2022, the Company entered into an Open Market Sale AgreementSM with Jefferies LLC, as agent (“Jefferies”),
pursuant to which we may offer and sell, from time to time, through Jefferies, shares of our common stock having an aggregate offering
price of up to $
On
July 1, 2021, the Company completed a follow-on offering whereby it sold shares of common stock at a public offering price
of $ per share. The offering generated approximately $
On
February 26, 2021, the Company completed a follow-on offering whereby it sold shares of common stock (including shares
of common stock in connection with the full exercise of the underwriters’ option to purchase additional shares) at a public offering
price of $ per share. The aggregate gross proceeds from the sale of shares in the follow-on offering, including the sale of shares
pursuant to the full exercise of the underwriters’ option to purchase additional shares, was approximately $
On June 5, 2020, the Company entered into an At Market Issuance Sales Agreement (the “ATM Agreement”) with B. Riley FBR, Inc. (the “Agent”). Pursuant to the ATM Agreement, the Company was able to offer and sell from time to time, at its option, shares of common stock having an aggregate offering price of up to $, par value $ per share (the “Placement Shares”), through the Agent.
The Placement Shares were registered under the Securities Act of 1933, as amended, pursuant to the Registration Statement on Form S-3 (File No. 333-227466), which was originally filed with the SEC on September 21, 2018 and declared effective by the SEC on October 4, 2018, the base prospectus contained within the Registration Statement, and a prospectus supplement that was filed on June 5, 2020. Sales of the Company’s common stock under this prospectus supplement were able to be made by any method deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended.
| 11 |
During the six months ended June 30, 2022 and 2021, the Company sold and shares, respectively, of common stock pursuant to the ATM Agreement, at an average selling price of $ per share.
On February 23, 2021, in conjunction with the Company’s follow-on offering, the ATM Agreement was terminated.
| 2022 | 2021 | |||||||||||||||
| Shares | Weighted
Average Exercise Price | Shares | Weighted
Average Exercise Price | |||||||||||||
| Options outstanding at beginning of year | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ( | ) | ||||||||||||
| Forfeited | ( | ) | ( | ) | ||||||||||||
| Balance at June 30 | $ | $ | ||||||||||||||
| Options exercisable at June 30: | $ | $ | ||||||||||||||
| Weighted Average Grant Date Fair Value for options granted during the period: | $ | $ | ||||||||||||||
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
| Options Outstanding | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Aggregate Intrinsic Value | Options Exercisable | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||
The
Company recognized stock-based compensation expense for stock options of $ and $ for the three months ended June 30,
2022 and 2021, respectively and $ and $ for the six months ended June 30, 2022 and 2021, respectively. In May 2022, the
Company modified the exercise price on stock option awards to $
| 2022 | 2021 | |||||||
| Risk-free interest rate | % - % | % - % | ||||||
| Expected volatility | % - % | % - % | ||||||
| Expected life (years) | to | to | ||||||
| Expected dividend yield | ||||||||
| 12 |
The inputs for the Black-Scholes valuation model require management’s significant assumptions. Prior to the Company’s initial public offering, the price per share of common stock was determined by the Company’s board based on recent prices of common stock sold in private offerings. Subsequent to the initial public offering, the price per share of common stock is determined by using the closing market price on the Nasdaq Capital Market on the grant date. The risk-free interest rates are based on the rate for U.S. Treasury securities at the date of grant with maturity dates approximately equal to the expected life at the grant date. The expected life is based on the simplified method in accordance with the SEC Staff Accounting Bulletin Nos. 107 and 110. The expected volatility is estimated based on historical volatility information of peer companies that are publicly available in combination with the Company’s calculated volatility since being publicly traded.
All assumptions used to calculate the grant date fair value of non-employee options are generally consistent with the assumptions used for options granted to employees. In the event the Company terminates any of its consulting agreements, the unvested options issued in connection with the agreements would also be cancelled.
Restricted stock awards were granted to members of the Company’s board during the three months ended June 30, 2022 and 2021. The Company had and shares of restricted stock outstanding as of June 30, 2022 and 2021, respectively, and and shares of restricted stock vested during the three months ended June 30, 2022 and 2021. The Company recognized stock-based compensation expense for restricted stock of $ and $ for the three months ended June 30, 2022 and 2021, respectively and $ and $ for the six months ended June 30, 2022 and 2021, respectively.
The
Company initially reserved a maximum of
shares of common stock for issuance under the 2017 Amended and Restated Stock Incentive Plan (the “2017 Plan”). The
number of shares reserved for issuance was automatically increased by ,
and
shares on January 1, 2020, 2021 and 2022, respectively, and will
Total unrecognized compensation cost related to stock options and restricted stock is estimated to be recognized as follows:
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total estimated compensation cost to be recognized | $ |
The
Company recognized stock-based compensation expense related to its employee stock purchase plan of $ and $ for the three months
ended June 30, 2022 and 2021, respectively and $ and $ for the six months ended June 30, 2022 and 2021, respectively. The
Company initially reserved a total of shares for issuance under the employee stock purchase plan. The number of shares reserved
for issuance was automatically increased by , and shares on January 1, 2020, 2021 and 2022, respectively, and will
increase automatically on each subsequent January 1 by
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Stock-based compensation expense in operating expenses: | ||||||||||||||||
| Research and development | $ | $ | $ | $ | ||||||||||||
| General and administrative | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| 13 |
7. Debt
On
April 8, 2021, the Company entered into a loan and security agreement (the “Loan Agreement”) with Innovatus Life Sciences
Lending Fund I, LP, a Delaware limited partnership (“Innovatus”) in its capacity as Collateral Agent and sole Lender. The
Lender agreed to loan up to $
The
Company is entitled to make interest-only payments for thirty-six months, or up to forty-eight months if certain conditions are met.
Innovatus
also has the right, at its election, after June 1, 2021 and until the third anniversary of the Loan Agreement, to convert up to
In
connection with the Loan Agreement and the funding of the first tranche of the Term Loans, the Company incurred debt issuance costs of
approximately $
Long-term debt consisted of the following:
| June 30, 2022 | ||||
| Note payable | $ | |||
| Add: Payment-in-Kind interest (added to principal) | ||||
| Add: final fee | ||||
| Less: unamortized debt issuance costs | ( | ) | ||
| Less: unamortized debt discount | ( | ) | ||
| Total long-term debt | $ | |||
| 14 |
Future principal payments, including the final fee, are as follows:
| Years
Ending December 31, |
||||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| Total | $ | |||
8. License Agreement
On
April 8, 2021, the Company entered into a license agreement with Pfizer to research, develop, manufacture and commercialize gedatolisib,
a potent, well-tolerated, reversible dual inhibitor that selectively targets all Class I PI3K isoforms and mTOR. The Company paid Pfizer
$
The
Company is also required to make milestone payments to Pfizer upon achievement of certain development and commercial milestone events,
up to an aggregate of $
The Company has the right to terminate the license agreement for convenience upon 90 days’ prior written notice. Pfizer may not terminate the agreement for convenience. Either the Company or Pfizer may terminate the license agreement if the other party is in material breach and such breach is not cured within the specified cure period. In addition, either the Company or Pfizer may terminate the license agreement in the event of specified insolvency events involving the other party.
9. Subsequent Events
On July 27, 2022, the Company signed an amendment to exercise the option to extend the operating lease for building space for a period of one year. The commencement of the extended period is May 1, 2023 and will terminate on April 30, 2024.
On August 9, 2022, the
Company amended the Loan Agreement described in Note 7 above. Under the amended Loan Agreement, Innovatus, as Lender, has agreed to loan
up to $
Under the amended Loan Agreement, Innovatus has the
right, at its election and until August 9, 2025, the third anniversary of the loan amendment date, to convert into Common Stock up to:
The Company is entitled to make interest-only
payments for forty-eight months, or up to sixty months from the original loan agreement date if certain conditions are met.
The amended Loan Agreement remains secured by all assets of the Company. Proceeds will be used for working capital purposes and to fund the Company’s general business requirements. The amended Loan Agreement contains customary representations and warranties and covenants, subject to customary carve outs, and includes financial covenants related to or based upon liquidity, trailing twelve months revenue and the funded loan amounts.
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed financial statements and the related notes appearing under Item 1 of Part I of this Quarterly Report on Form 10-Q (this “Quarterly Report”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and expected financial results, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” discussed in our Quarterly Report for the period ended March 31, 2022 and elsewhere in this Quarterly Report 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
Celcuity is a clinical-stage biotechnology company focused on development of targeted therapies for hormonally driven cancers. The company’s lead therapeutic candidate is gedatolisib, a pan-PI3K/mTOR inhibitor. Its mechanism of action and pharmacokinetic properties are highly differentiated from other currently approved and investigational therapies that target PI3K or mTOR alone or together. The company expects to initiate a Phase 3 study evaluating gedatolisib in patients with HR+/HER2- advanced breast cancer in 2022. Its CELsignia companion diagnostic platform is uniquely able to analyze live patient tumor cells to identify new groups of cancer patients likely to benefit from already approved targeted therapies.
Gedatolisib, is a potent, well-tolerated, small molecule reversible dual inhibitor, administered intravenously, that selectively targets all class I isoforms of PI3K and mammalian target of rapamycin (mTOR). In April 2021, we obtained exclusive global development and commercialization rights to gedatolisib under a license agreement with Pfizer, Inc. We believe gedatolisib’s unique mechanism of action, differentiated chemical structure, favorable pharmacokinetic properties, and intravenous formulation offer distinct advantages over currently approved and investigational therapies that target PI3K or mTOR alone or together.
| ● | Overcomes limitations of therapies that only inhibit a single class I PI3K isoform or only one mTOR kinase complex |
Gedatolisib is a pan-class I isoform PI3K inhibitor with low nanomolar potency for the p110α, p110β, p110γ, and p110δ isoforms. Each isoform is known to preferentially affect different signal transduction events that involve tumor cell survival, depending upon the aberrations associated with the linked pathway. When a therapy only inhibits a single class I isoforms (e.g., alpelisib, a PI3K-α inhibitor) or only one mTOR kinase complex (e.g., everolimus, an mTORC1 inhibitor), numerous feedforward and feedback loops between the PI3K isoforms and mTOR cross-activates the uninhibited sub-units. This, in turn, induces compensatory resistance that reduces the efficacy of isoform specific PI3K or single mTOR kinase complex inhibitors. Inhibiting all four PI3K isoforms and both mTOR complexes, as gedatolisib does, thus prevents the confounding effect of isoform interaction that may occur with isoform-specific PI3K inhibitors and the confounding interaction between PI3K isoforms and mTOR.
| ● | Better tolerated by patients than oral PI3K and mTOR drugs |
Gedatolisib is administered intravenously (IV) on a four-week cycle of three weeks-on, one week-off, in contrast to the orally administered pan-PI3K or dual PI3K/mTOR inhibitors that are no longer being clinically developed. Oral pan-PI3K or PI3K/mTOR inhibitors have repeatably been found to induce significant side effects that were not well tolerated by patients. This typically leads to a high proportion of patients requiring dose reductions or treatment discontinuation. The challenging toxicity profile of these drug candidates ultimately played a significant role in the decisions to halt their development, despite showing promising efficacy. By contrast, gedatolisib stabilizes at lower concentration levels in plasma compared to orally administered PI3K inhibitors, resulting in less toxicity, while maintaining concentrations sufficient to inhibit PI3K/mTOR signaling.
Isoform-specific PI3K inhibitors administered orally were developed to reduce toxicities in patients. While the range of toxicities associated with isoform-specific inhibitors is narrower than oral pan-PI3K or PI3K/mTOR inhibitors, administering them orally on a continuous basis still leads to challenging toxicities. The experience with an FDA approved oral p110-α specific inhibitor, Piqray (“alpelisib”), illustrates the challenge. In its Phase 3 pivotal trial Piqray was found to induce a Grade 3 or 4 adverse event (AE) related to hyperglycemia in 39% of patients evaluated. In addition, 26% of patients discontinued alpelisib due to treatment related adverse events. By contrast, in the 103-patient dose expansion portion of the Phase 1b clinical trial with gedatolisib, only 7% of patients experienced Grade 3 or 4 hyperglycemia and less than 10% discontinued treatment.
As of June 30, 2022, 492 patients with solid tumors have received gedatolisib in eight clinical trials sponsored by Pfizer. Of the 492 patients, 129 were treated with gedatolisib as a single agent in three clinical trials. The remaining 363 patients received gedatolisib in combination with other anti-cancer agents in five clinical trials. Additional patients received gedatolisib in combination with other anti-cancer agents in nine investigator sponsored clinical trials.
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A Phase 1b trial (B2151009) evaluating patients with HR+/HER2- metastatic breast cancer was initiated in 2016 and subsequently enrolled 138 patients. Ten patients from this study continue to receive study treatment, as of June 30, 2022, each of whom have received study treatment for more than three years. The B2151009 clinical trial was an open label, multiple arm Phase 1b study that evaluated gedatolisib in combination with palbociclib (CDK4/6 inhibitor) and fulvestrant or letrozole in patients with HR+/HER2- advanced breast cancer. Thirty-five patients were enrolled in two dose escalation arms to evaluate the safety and tolerability and to determine the maximum tolerated dose (MTD) of gedatolisib when used in combination with the standard doses of palbociclib and endocrine therapy (letrozole or fulvestrant). The MTD was determined to be 180 mg administered intravenously once weekly. A total of 103 patients were subsequently enrolled in one of four expansion arms (A, B, C, D).
High objective overall response rates (ORR) were observed in all four expansion arms and were comparable in each arm for PIK3CA WT and PIK3CA MT patients. In treatment-naïve patients (Arm A), ORR was 85%. In patients who received prior hormonal therapy alone or in combination with a CDK4/6 inhibitor (Arms B, C, and D), ORR ranged from 32% to 77%. Each arm achieved its primary endpoint target, which was reporting higher ORR in the study arm than ORR from either the PALOMA-2 (ORR=55%) study that evaluated palbociclib plus letrozole for Arm A or the PALOMA-3 study (ORR=25%) that evaluated palbociclib plus fulvestrant for Arms B, C, and D. For all enrolled patients, a clinical benefit rate (CBR) of ≥79% was observed. Median progression-free survival (PFS) was 31.1 months for patients receiving first-line treatment (Arm A) and 12.9 months for patients who received a prior CDK4/6 inhibitor and were treated in the study with the Phase 3 dosing schedule (Arm D).
Gedatolisib combined with palbociclib and endocrine therapy demonstrated a favorable safety profile with manageable toxicity. The majority of treatment emergent adverse events were Grade 1 and 2. The most frequently observed adverse events included stomatitis/mucosal inflammation, the majority of which were Grade 1 and 2. The most common Grade 4 AEs were neutropenia and neutrophil count decrease, which were assessed as related to treatment with palbociclib. No grade 5 events were reported in this study.
We are preparing to initiate VIKTORIA-1, a Phase 3, open-label, randomized clinical trial to evaluate the efficacy and safety of two regimens in adults with HR+/HER2- advanced breast cancer whose disease has progressed after prior CDK4/6 therapy in combination with an aromatase inhibitor: 1) gedatolisib in combination with palbociclib and fulvestrant; and 2) gedatolisib in combination with fulvestrant. We expect to initiate the VIKTORIA-1 study in 2022.
The clinical trial will enable separate evaluation of subjects according to their PIK3CA status. Subjects who meet eligibility criteria and are PIK3CA WT will be randomly assigned (1:1:1) to receive a regimen of either gedatolisib, palbociclib, and fulvestrant (Arm A), gedatolisib and fulvestrant (Arm B), or fulvestrant (Arm C). Subjects who meet eligibility criteria and are PIK3CA MT will be randomly assigned (1:1:1) to receive a regimen of either gedatolisib, palbociclib, and fulvestrant (Arm D), alpelisib and fulvestrant (Arm E), or gedatolisib and fulvestrant (Arm F).
Our proprietary CELsignia diagnostic platform is the only commercially ready technology we are aware of that uses a patient’s living tumor cells to identify the specific abnormal cellular process driving a patient’s cancer and the targeted therapy that best treats it. This enables us to identify patients whose tumors may respond to a targeted therapy, even though they lack a previously associated molecular mutation. By identifying cancer patients whose tumors lack an associated genetic mutation but have abnormal cellular activity a matching targeted therapeutic is designed to inhibit, CELsignia CDx can expand the markets for a number of already approved targeted therapies. Our current CDx identifies breast and ovarian cancer patients whose tumors have cancer drivers potentially responsive to treatment with human epidermal growth factor receptor 2-negative (HER2), mesenchymal-epithelial transition factor (c-MET), or phosphatidylinositol 3-kinases (PI3K) targeted therapeutics. While U.S. Food and Drug Administration (“FDA”) approval or clearance is not currently required for CELsignia tests offered as a stand-alone laboratory developed test, if we are partnered with a drug company to launch a CELsignia test as a companion diagnostic for a new drug indication, we would be required to obtain premarket approval, or PMA, in conjunction with the pharmaceutical company seeking a new drug approval for the matching therapy.
We are supporting the advancement of new potential indications for four different targeted therapies, controlled by other pharmaceutical companies, that would rely on a CELsignia CDx to select patients. Five Phase 2 trials are underway to evaluate the efficacy and safety of these therapies in CELsignia selected patients. These patients are not currently eligible to receive these drugs and are not identifiable with a molecular test.
Supporting the development of a potential first-in-class targeted therapy for breast cancer, like gedatolisib, with our CELsignia platform is a natural extension of our strategy to use our CELsignia CDx to enable new indications for other companies’ targeted therapies. By combining companion diagnostics designed to enable proprietary new drug indications with targeted therapies that treat signaling dysregulation our CDx identifies, we believe we are uniquely positioned to improve the standard-of-care for many early and late-stage breast cancer patients. Our goal is to play a key role in the multiple treatment approaches required to treat breast cancer patients at various stages of their disease. With each program, we are:
| ● | Leveraging the proprietary insights CELsignia provides into live patient tumor cell function | |
| ● | Using a CELsignia CDx to identify new patients likely to respond to the paired targeted therapy | |
| ● | Developing a new targeted therapeutic option for breast cancer patients | |
| ● | Maximizing the probability of getting regulatory approval to market the targeted therapy indication |
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Recent Developments
On August 9, 2022, Celcuity amended its existing debt financing agreement with an affiliate of Innovatus Capital Partners, LLC (“Innovatus”) to provide Celcuity with up to $75 million in term loans, a $50 million increase from the original debt financing agreement dated April 8, 2021. Celcuity received $15 million at the closing of the original agreement in April 2021. Celcuity will be able to draw an additional $20 million tranche following closing of the $100 million private placement. Celcuity will be able to draw on two additional tranches of $10 million each and one additional tranche of $20 million upon achievement of certain clinical trial milestones and satisfaction of certain financial covenants determined on a pro forma as-funded basis. Funding of these additional tranches is also subject to other customary conditions and limits on when the Company can request funding for such tranches. Celcuity is entitled to make interest only payments for the 48-month period from the original agreement date or for the 60-month period from the original agreement date if certain conditions are met. The loans will mature on April 8, 2027, the sixth anniversary of the initial funding date. Innovatus has the right to convert outstanding principal into shares of Celcuity common stock until the third anniversary of the loan amendment date, with such amount limited to an aggregate of up to $6.5 million assuming all tranches are funded. The loan is secured by all of Celcuity’s assets.
The VIKTORIA-1 Phase 3 clinical trial remains on track to dose the first patient in the next few months. The operational activities required to initiate the clinical trial at a study site are completed. Further details about the study will be available at www.CT.gov. The clinical trial protocol was updated to include an additional study arm (Arm F) to evaluate gedatolisib plus fulvestrant in 50 patients who have PIK3CA mutations. This update was made in response to a recommendation from the European Medicines Agency (EMA) that the study arms for PIK3CA mutated patients mirror the same study arms for PIK3CA non-mutated patients. No changes were made to the primary endpoints. VIKTORIA-1 will evaluate the safety and efficacy of gedatolisib in combination with fulvestrant with or without palbociclib in adults with HR+/HER2- advanced breast cancer whose disease progressed while receiving prior CDK4/6 therapy.
On July 18, 2022, gedatolisib was granted Breakthrough Therapy Designation for HR+/HER2- metastatic breast cancer after progression on CDK4/6 therapy. Breakthrough Therapy designation is granted by the FDA to expedite the development and regulatory review of an investigational medicine that is intended to treat a serious or life-threatening condition. The criteria for Breakthrough Therapy designation require preliminary clinical evidence that demonstrates the drug may have substantial improvement on one or more clinically significant endpoints over available therapy. The benefits of Breakthrough Therapy Designation include more intensive guidance from the FDA on an efficient development program, access to a scientific liaison to help accelerate review time, and potential eligibility for priority review if relevant criteria are met. Celcuity’s breakthrough application was supported by data from a Phase 1b study that assessed the safety, tolerability and clinical activity of gedatolisib in combination with palbociclib and fulvestrant in patients with HR+/HER2- metastatic breast cancer whose disease progressed during treatment with a CDK4/6 therapy and an aromatase inhibitor.
On May 15, 2022, the Company entered into a securities purchase agreement with certain institutional and other accredited investors for the sale of Company common stock, preferred stock that may be convertible into common stock and warrants initially exercisable for preferred stock for $100 million in the aggregate, before deducting placement agent fees and other offering expenses. Pursuant to the securities purchase agreement, investors will purchase shares of common stock and preferred stock at a price per share of $5.75 (on an as converted to common stock basis). For each share of common stock and each 1/10 of a share of preferred stock purchased, investors will receive a warrant initially exercisable for preferred stock equivalent to 0.40 shares of common stock on an as converted basis. The exercise price of the warrants will be at a 40% premium to the price paid by investors for the initial shares of common stock purchased in the private placement. The preferred stock will be convertible into common stock at the holder’s election, subject to certain limitations such as beneficial ownership and the approval by the Company’s stockholders to increase the number of authorized shares of common stock sufficient to cover the shares of common stock issuable upon conversion of (i) the preferred stock purchased in the private placement and (ii) the shares of preferred stock that may be issued upon exercise of warrants purchased in the private placement. The warrants are initially exercisable for preferred stock and will convert into warrants to purchase common stock if the proposed increase in the Company’s authorized common stock is approved by stockholders. The closing of the private placement is conditioned on, among other customary items, the first patient enrolled in the Company’s forthcoming Phase 3 clinical study (VIKTORIA-1) having received their first dose of treatment at a clinical site located in the United States, provided that such date must occur on or before December 31, 2022. The Company also entered into a customary registration rights agreement with the investors pursuant to which it agreed to file a registration statement with the SEC registering the resale of (i) the shares of common stock to be issued and sold in the private placement, (ii) the shares of common stock issuable upon conversion of the preferred stock purchased in the private placement and (iii) the shares of common stock issuable upon conversion of the shares of preferred stock that may be issued upon exercise of warrants purchased in the private placement.
Impact of COVID-19 on our Business
Although we have largely returned to normal operations in our facility, the COVID-19 pandemic continues and its effect on our operations and financial condition will depend in large part on future developments which cannot be reasonably estimated at this time. Future developments include the duration, scope and severity of the pandemic, the emergence of new virus variants that are more contagious or harmful than prior variants, actions taken by governmental authorities, suppliers, clinical trial sites, and other business partners to contain or mitigate the pandemic’s impact, and the potential adverse effects on the suppliers, labor market and general economic activity.
As we continue to advance our clinical trial collaborations, we remain in close contact with our current clinical sponsors, and principal investigators, as well as prospective pharmaceutical company and clinical collaborators, to monitor the impact of COVID-19 on our trial enrollment timelines and collaboration discussions. We experienced delays in the enrollment of patients in our ongoing clinical trials and now expect interim results from two of our CELsignia Phase 2 clinical trials, FACT-1 and FACT-2 to be delayed until mid-2023 and final results approximately nine months later. We could experience further delays in clinical trials and collaborations with pharmaceutical companies and sponsors if new variants emerge or if the spread of COVID-19 once again accelerates. Due to the inherent uncertainty associated with the COVID-19 pandemic, we are unable to predict the impact the pandemic may have on our clinical trial work and overall financial condition.
Results of Operations
We have not generated any revenue from sales to date, and we continue to incur significant research and development and other expenses related to our ongoing operations. As a result, we are not and have never been profitable and have incurred losses in each period since our inception in 2012. For the three months ended June 30, 2022 and 2021, we reported a net loss of approximately $10.0 million and $14.0 million, respectively and for the six months ended June 30, 2022 and 2021, we reported a net loss of approximately $17.9 million and $16.8 million, respectively. As of June 30, 2022, we had an accumulated deficit of approximately $73.8 million. As of June 30, 2022, we had cash and cash equivalents of approximately $66.9 million.
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Components of Operating Results
Revenue
To date, we have not generated any revenue. With the execution of the Pfizer license agreement in April 2021, whereby we acquired exclusive world-wide licensing rights to develop and commercialize gedatolisib, we expect to conduct clinical trials to support potential regulatory approval to market gedatolisib. If we obtain regulatory approvals to market gedatolisib, we expect to generate revenue from sales of the drug for the treatment of breast cancer patients. Additionally, we will seek to generate revenue from partnership agreements with pharmaceutical companies to provide companion diagnostics for such pharmaceutical partners’ existing or investigational targeted therapies. If a new drug indication is received that requires use of our companion diagnostic to identify eligible patients, we expect to generate revenues from sales of tests to treating physicians.
Research and Development
Since our inception, we have primarily focused on research and development of our CELsignia platform, development and validation of our CELsignia tests, and research related to the discovery of new cancer sub-types. Beginning in April 2021, we are also focusing on development of gedatolisib, a PI3K/mTOR targeted therapy. Research and development expenses primarily include:
| ● | employee-related expenses related to our research and development activities, including salaries, benefits, recruiting, travel and stock-based compensation expenses; |
| ● | laboratory supplies; |
| ● | consulting fees paid to third parties; |
| ● | clinical trial costs; |
| ● | validation costs for gedatolisib; |
| ● | facilities expenses; and |
| ● | legal costs associated with patent applications. |
Internal and external research and development costs are expensed as they are incurred. As we continue development of gedatolisib, initiate the VIKTORIA-1 Phase 3 trial and manage clinical trials to evaluate the efficacy of targeted therapies in cancer patients selected with one of our CELsignia tests, the proportion of research and development expenses allocated to external spending will grow at a faster rate than expenses allocated to internal expenses.
General and Administrative
General and administrative expenses consist primarily of salaries, benefits and stock-based compensation related to our executive, finance and support functions. Other general and administrative expenses include professional fees for auditing, tax, and legal services associated with being a public company, director and officer insurance, investor relations and travel expenses for our general and administrative personnel.
Sales and Marketing
Sales and marketing expenses consist primarily of professional and consulting fees related to these functions. To date, we have incurred immaterial sales and marketing expenses as we continue to focus primarily on the development of our first drug, gedatolisib, CELsignia platform and corresponding CELsignia tests. We would expect to begin to incur increased sales and marketing expenses in anticipation of the commercialization of our first drug, gedatolisib, and CELsignia tests. These increased expenses are expected to include payroll-related costs as we add employees in the commercial departments, costs related to the initiation and operation of our sales and distribution network and marketing related costs.
Interest Expense
Interest expense is primarily due to a loan agreement and finance lease obligations.
Interest Income
Interest income consists of interest income earned on our cash and cash equivalent balances.
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Results of Operations
Comparison of the Three Months Ended June 30, 2022 and 2021
| Three Months Ended | ||||||||||||||||
| June 30, | Increase (Decrease) | |||||||||||||||
| 2022 | 2021 | $ | Percent Change | |||||||||||||
| Statements of Operations Data: | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | 8,367,687 | $ | 13,070,108 | $ | (4,702,421 | ) | (36 | )% | |||||||
| General and administrative | 1,233,040 | 573,360 | 659,680 | 115 | % | |||||||||||
| Total operating expenses | 9,600,727 | 13,643,468 | (4,042,741 | ) | (30 | )% | ||||||||||
| Loss from operations | (9,600,727 | ) | (13,643,468 | ) | 4,042,741 | (30 | )% | |||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | (455,445 | ) | (391,187 | ) | (64,258 | ) | 16 | % | ||||||||
| Interest income | 95,646 | 1,803 | 93,843 | 5,206 | % | |||||||||||
| Other income (expense), net | (359,799 | ) | (389,384 | ) | 29,585 | (8 | )% | |||||||||
| Net loss before income taxes | (9,960,526 | ) | (14,032,852 | ) | 4,072,326 | (29 | )% | |||||||||
| Income tax benefits | - | - | - | - | ||||||||||||
| Net loss | $ | (9,960,526 | ) | $ | (14,032,852 | ) | $ | 4,072,326 | (29 | )% | ||||||
Comparison of the Six Months Ended June 30, 2022 and 2021
| Six Months Ended | ||||||||||||||||
| June 30, | Increase (Decrease) | |||||||||||||||
| 2022 | 2021 | $ | Percent Change | |||||||||||||
| Statements of Operations Data: | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | 15,064,000 | $ | 15,306,451 | $ | (242,451 | ) | (2 | )% | |||||||
| General and administrative | 2,044,332 | 1,128,787 | 915,545 | 81 | % | |||||||||||
| Total operating expenses | 17,108,332 | 16,435,238 | 673,094 | 4 | % | |||||||||||
| Loss from operations | (17,108,332 | ) | (16,435,238 | ) | (673,094 | ) | 4 | % | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | (890,446 | ) | (391,210 | ) | (499,236 | ) | 128 | % | ||||||||
| Interest income | 103,805 | 2,191 | 101,614 | 4,638 | % | |||||||||||
| Loss on sale of fixed assets | - | (263 | ) | 263 | n/a | |||||||||||
| Other income (expense), net | (786,641 | ) | (389,282 | ) | (397,359 | ) | 102 | % | ||||||||
| Net loss before income taxes | (17,894,973 | ) | (16,824,520 | ) | (1,070,453 | ) | 6 | % | ||||||||
| Income tax benefits | - | - | - | - | ||||||||||||
| Net loss | $ | (17,894,973 | ) | $ | (16,824,520 | ) | $ | (1,070,453 | ) | 6 | % | |||||
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Research and Development
Our research and development expenses for the three months ended June 30, 2022 were approximately $8.4 million, representing a decrease of approximately $4.7 million, or 36%, compared to the same period in 2021. This decrease reflected a $10 million reduction in gedatolisib licensing related expenses partially offset by increases of $5.3 million in other research and development expenses. In the 2021 period, research and development expenses included a $10.0 million upfront license fee related to the execution of the Pfizer license agreement while there were no licensing agreement expenses for gedatolisib in 2022. Of the $5.3 million increase in research and development expenses, $1.5 million was related to increased employee and consulting expenses, of which $0.5 million was in the form of non-cash stock-based compensation. The remaining $3.8 million increase of research and development expenses is primarily related to costs for existing clinical trials and for activities supporting the initiation of the VIKTORIA-1 pivotal trial.
Our research and development expenses for the six months ended June 30, 2022 were approximately $15.1 million, representing a decrease of approximately $0.2 million, or 2%, compared to the same period in 2021. The decrease reflected a $10 million reduction in gedatolisib licensing related expenses largely offset by increases of $9.8 million in other research and development expenses. In the 2021 period, research and development expenses included a $10.0 million upfront license fee related to the execution of the Pfizer license agreement while there were no licensing agreement expenses for gedatolisib in 2022. Of the $9.8 million increase in research and development expense, $3.1 million was related to increased employee and consulting expenses, of which $0.7 million was in the form of non-cash stock-based compensation. The remaining $6.7 million increase of research and development expenses is related to costs for existing clinical trials and for activities supporting the initiation of the VIKTORIA-1 pivotal trial.
Conducting a significant amount of research and development is central to our business model. We plan to increase our research and development expenses for the foreseeable future as we seek to develop gedatolisib, discover new cancer sub-types, and develop and validate additional CELsignia tests to diagnose such sub-types. We also expect to incur increased expenses to support companion diagnostic business development activities with pharmaceutical companies as we develop additional CELsignia tests and initiate a clinical trial for gedatolisib.
General and Administrative
Our general and administrative expenses for the three months ended June 30, 2022 were approximately $1.2 million, representing an increase of approximately $0.6 million, or 115%, compared to the same period in 2021. Employee related expenses accounted for the $0.6 million increase, including approximately $0.5 million in non-cash stock-based compensation.
Our general and administrative expenses for the six months ended June 30, 2022 were approximately $2.0 million, representing an increase of approximately $0.9 million, or 81%, compared to the same period in 2021. Employee related expenses accounted for $0.8 million of the $0.9 million increase, including approximately $0.6 million in non-cash stock-based compensation. The remaining $0.1 million of the increase resulted from director and officer insurance and other professional fees associated with being a public company.
We anticipate that our general and administrative expenses will increase in future periods, reflecting both increased costs in connection with the potential future commercialization of gedatolisib and CELsignia tests, an expanding infrastructure, and increased professional fees associated with being a public company.
Interest Expense
Interest expense for the three months ended June 30, 2022 was $0.5 million and represents an increase of $0.1 million, or 16%, compared to the same period in 2021. The increase is due to the loan agreement being in place for the entire three-month period in 2022 rather than for only a fraction of the period in 2021 and a higher interest rate on the loan.
Interest expense for the six months ended June 30, 2022 was $0.9 million and represents an increase of $0.5 million, or 128%, compared to the same period in 2021. The increase is due to the loan agreement being in place for the entire six-month period in 2022 rather than for only a fraction of the period in 2021 and a higher interest rate on the loan.
Interest Income
Interest income for the three months ended June 30, 2022 was $0.1 million higher compared to the same period in 2021. The increase was due to higher market interest rates and a higher cash and cash equivalents balance.
Interest income for the six months ended June 30, 2022 was $0.1 million higher compared to the same period in 2021. The increase was due to higher market interest rates and a higher cash and cash equivalents balance.
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Liquidity and Capital Resources
Since our inception, we have incurred losses and cumulative negative cash flows from operations. Through June 30, 2022, we have raised capital of approximately $13.7 million and $7.5 million through private placements of common equity and unsecured convertible notes, respectively. On September 22, 2017, we closed on the initial public offering of our common stock, which generated approximately $23.3 million of additional cash after taking into account underwriting discounts and commissions and offering expenses. On June 5, 2020, we entered into an At Market Issuance Sales Agreement with B. Riley, FBR, Inc (the “ATM Agreement”). The ATM Agreement allowed us to sell shares of common stock up to an aggregate offering price of $10.0 million. Through March 31, 2022, we generated approximately $0.1 million of additional cash through sales pursuant to the ATM Agreement, after taking into account commissions and offering expenses. On February 26, 2021, we completed a follow-on offering of our common stock, which generated approximately $25.8 million of additional cash after taking into account underwriting discounts and offering expenses. In conjunction with the follow-on offering, the ATM Agreement was terminated. On April 8, 2021, we entered into a loan agreement with Innovatus Life Sciences Lending Fund I, LP (“Innovatus”), whereby Innovatus agreed to loan up to $25 million in three tranches consisting of (i) a $15.0 million non-contingent term A loan that was funded on April 8, 2021, (ii) a $5 million term B loan with a deadline of March 31, 2022, which we are no longer eligible to draw on, and (iii) a $5 million term C loan to be funded upon our request no later than March 31, 2023. Funding of the term C loan is subject to our ability to achieve certain milestones. On July 1, 2021, we completed a follow-on offering of our common stock, which generated approximately $52.8 million of additional cash after taking into account underwriting discounts of approximately $3.4 million and offering expenses of approximately $0.1 million.
On February 4, 2022, we entered into an Open Market Sale AgreementSM with Jefferies LLC, as agent, pursuant to which we may offer and sell, from time to time, through Jefferies, shares of our common stock having an aggregate offering price of up to $50,000,000. To date, we have not yet made any sales under this arrangement.
On May 15, 2022, we entered into a securities purchase agreement with certain institutional and other accredited investors for the sale of Company common stock, preferred stock that may be convertible into common stock and warrants initially exercisable for preferred stock for $100 million in the aggregate, before deducting placement agent fees and other offering expenses. Pursuant to the securities purchase agreement, investors will purchase shares of common stock and preferred stock at a price per share of $5.75 (on an as converted to common stock basis), with the closing (funding) of such purchase to occur following the achievement of a milestone in our forthcoming Phase 3 study (VIKTORIA-1). The sale of shares of common stock includes forty percent (40%) warrant coverage and customary resale registration rights. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments” above for additional details.
On August 9, 2022, the Company amended the loan agreement with Innovatus to provide up to $75 million in term loans. As mentioned above, the initial term A loan of $15 million was funded on April 8, 2021. The Company will be able to draw an additional $20 million following the closing of the $100 million private placement. Additionally, the Company will be able to draw on two additional tranches of $10 million and one additional tranche of $20 million upon achievement of certain clinical trial milestones and satisfaction of certain financial covenants determined on a pro forma as-funded basis. Funding of these additional tranches is also subject to other customary conditions and limits on when the Company can request funding for such tranches.
Cash from our historical capital raising activities has been our primary source of funds for our operations since inception. As of June 30, 2022, our cash and cash equivalents were approximately $66.9 million, and we had an accumulated deficit of approximately $73.8 million.
We expect that our research and development and general and administrative expenses will increase as we continue to develop gedatolisib, conduct research related to the discovery of new cancer sub-types, conduct clinical trials, and pursue other business development activities. We would also expect to incur sales and marketing expenses as we commercialize gedatolisib and our CELsignia tests. We expect to use cash on hand, together with the funds to be received under the Securities Purchase Agreement described above, to fund our research and development expenses, clinical trial costs, capital expenditures, working capital, sales and marketing expenses, and general corporate expenses.
Based on our current business plan, we believe that our current cash on hand will provide sufficient cash to finance operations and pay obligations when due for at least the next twelve months.
We may seek to raise additional capital to expand our business, pursue strategic investments, and take advantage of financing or other opportunities that we believe to be in the best interests of the Company and our stockholders. Additional capital may be raised through the sale of common or preferred equity or convertible debt securities, entry into debt facilities or other third-party funding arrangements. The sale of equity and convertible debt securities may result in dilution to our stockholders and those securities may have rights senior to those of our common shares. Agreements entered into in connection with such capital raising activities could contain covenants that would restrict our operations or require us to relinquish certain rights. Additional capital may not be available on reasonable terms, or at all.
Cash Flows
The following table sets forth the primary sources and uses of cash for the six months ended June 30:
| June 30, | ||||||||
| 2022 | 2021 | |||||||
| Net cash provided by (used in): | ||||||||
| Operating activities | $ | (17,222,132 | ) | $ | (10,139,253 | ) | ||
| Investing activities | (34,621 | ) | (57,397 | ) | ||||
| Financing activities | (118,804 | ) | 40,197,362 | |||||
| Net increase (decrease) in cash and cash equivalents | $ | (17,375,557 | ) | $ | 30,000,712 | |||
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Operating Activities
Net cash used in operating activities was approximately $17.2 million for the six months ended June 30, 2022 and consisted primarily of a net loss of approximately $17.9 million and working capital changes of approximately $2.1 million, offset by non-cash expense items of approximately $2.8 million. The approximately $2.1 million of working capital changes was primarily due to an increase of approximately $3.9 million in prepaid assets, partially offset by increases in accounts payable and accrued expenses of approximately $0.7 million and $0.9 million, respectively. Non-cash expense items of approximately $2.8 million primarily consisted of approximately $2.3 million of stock-based compensation expense, non-cash interest expense of approximately $0.4 million and depreciation expense of approximately $0.1 million.
Net cash used in operating activities was approximately $10.1 million for the six months ended June 30, 2021 and consisted primarily of a net loss of approximately $16.8 million, offset by non-cash expense items of approximately $6.4 million and working capital changes of $0.3 million. Non-cash expense items of approximately $6.4 million primarily consisted of $5.0 for issuance of common stock related to a license agreement, stock-based compensation expense of approximately $1.0 million, non-cash interest expense of approximately $0.2 million and depreciation expense of approximately $0.2 million. The approximately $0.3 million of working capital changes was primarily due to an increase in accounts payable and a decrease in accrued expenses.
Investing Activities
Net cash used in investing activities for the six months ended June 30, 2022 and 2021 were minimal and consisted of purchases of property and equipment.
Financing Activities
Net cash used in financing activities was approximately $0.1 million for the six months ended June 30, 2022 and consisted of payments for secondary registration statement costs, offset partially by proceeds from the exercise of employee stock options and proceeds from employee stock purchases.
Net cash provided by financing activities for the six months ended June 30, 2021 was approximately $40.2 million. The $40.2 million primarily consisted of approximately $25.8 million from net proceeds from the sale of shares of our common stock through a follow-on offering and approximately $14.3 million from net proceeds related to the closing of a loan agreement. The remaining $0.1 million was the result of proceeds from the exercise of common stock warrants and employee stock options and proceeds from employee stock purchases.
Recent Accounting Pronouncements
From time-to-time new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed in Note 2 to our unaudited condensed financial statements included in Item 1 of Part I of this Quarterly Report, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.
Critical Accounting Policies and Use of Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our unaudited condensed financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances; the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially from these estimates.
Our significant accounting policies are more fully described in Note 2 to our unaudited condensed financial statements included in Item 1 of Part I of this Quarterly Report.
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Private Securities Litigation Reform Act
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Such forward-looking information is included in this Quarterly Report and in other materials filed or to be filed by us with the SEC (as well as information included in oral statements or other written statements made or to be made by us). Forward-looking statements include all statements based on future expectations. This Quarterly Report contains forward-looking statements that involve risks and uncertainties including, but not limited to, (i) our clinical trial plans and the estimated costs for such trials, including the timing of launching a Phase 3 clinical trial for gedatolisib; (ii) our expectations with respect to costs and timelines to develop, validate and launch CELsignia tests and to continue to develop gedatolisib; (iii) our beliefs related to the perceived advantages of our CELsignia tests compared to traditional molecular or other diagnostic tests; (iv) the expected benefits of gedatolisib; (v) our expectations regarding the timeline of patient enrollment and results from clinical trials, including the existing clinical trial for gedatolisib; (vi) the future payments that may be owed to Pfizer under the license agreement; (vii) our expectations regarding partnering with pharmaceutical companies and other third parties; (viii) our expectations regarding revenue from sales of CELsignia tests and revenue from milestone or other payment sources; (ix) our plans with respect to research and development and related expenses for the foreseeable future; (x) our expectations regarding business development activities, including companion diagnostic related activities with pharmaceutical companies, expanding our sales and marketing functions and the costs associated with such activities; (xi) our expectations with respect to the CELsignia tests and the analytical capabilities and potential impact of such tests; (xii) our beliefs regarding the ability of our cash on hand to fund our research and development expenses, capital expenditures, working capital, sales and marketing expenses, and general corporate expenses, as well as the increased costs associated with being a public company; (xiii) our plans with respect to potentially raising capital; and (xiv) our expectations regarding the impact that the COVID-19 pandemic and related economic effects will have on our business and results of operations.
In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management’s beliefs and assumptions, which in turn are based on their interpretation of currently available information.
These statements involve known and unknown risks, uncertainties and other factors that may cause our results or our industry’s actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Certain risks, uncertainties and other factors include, but are not limited to, our limited operating history; the potential impact of the COVID-19 pandemic on our business; our initial success being heavily dependent on the success of our CELsignia HER2 Pathway Activity Test; our inability to develop and commercialize gedatolisib; our inability to determine whether our CELsignia tests are currently commercially viable; challenges we may face in developing and maintaining relationships with pharmaceutical company partners; the complexity and timeline for development of CELsignia tests and gedatolisib; the uncertainty and costs associated with clinical trials; the uncertainty regarding market acceptance by physicians, patients, third-party payors and others in the medical community, and with the size of market opportunities available to us; the pricing of molecular and other diagnostic products and services that compete with us; uncertainty with insurance coverage and reimbursement for our CELsignia tests; difficulties we may face in managing growth, such as hiring and retaining a qualified sales force and attracting and retaining key personnel; changes in government regulations; and obtaining and maintaining intellectual property protection for our technology and time and expense associated with defending third-party claims of intellectual property infringement, investigations or litigation threatened or initiated against us. These and additional risks, uncertainties and other factors are described more fully in our Quarterly Report for the period ended March 31, 2022 and elsewhere in this Quarterly Report. Copies of filings made with the SEC are available through the SEC’s electronic data gathering analysis and retrieval system (EDGAR) at www.sec.gov.
You should read the cautionary statements made in this Quarterly Report as being applicable to all related forward-looking statements wherever they appear in this Quarterly Report. We cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. You should read this Quarterly Report completely. Other than as required by law, we undertake no obligation to update these forward-looking statements, even though our situation may change in the future.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
As a smaller reporting company, we are not required to provide disclosure pursuant to this item.
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer, referred to collectively herein as the Certifying Officers, are responsible for establishing and maintaining our disclosure controls and procedures. The Certifying Officers have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2022. Based on that review and evaluation, the Certifying Officers have concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures, as designed and implemented, are effective and provide reasonable assurance that information required to be disclosed by us in the periodic and current reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the periods specified by the SEC’s rules and forms.
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) during the three months ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
From time to time we may be involved in disputes or litigation relating to claims arising out of our operations. We are not currently a party to any legal proceedings that could reasonably be expected to have a material adverse effect on our business, financial condition and results of operations.
ITEM 1A. Risk Factors
As a smaller reporting company, we are not required to provide disclosure pursuant to this item. However, in addition to other information set forth in this Quarterly Report, including important information in the section entitled “Private Securities Litigation Reform Act,” you should carefully consider the “Risk Factors” discussed in our Quarterly Report on Form 10-Q for the period ended March 31, 2022 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 this Quarterly Report. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial might materially adversely affect our actual business, financial condition and/or operating results.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
Recent Unregistered Sales of Equity Securities
None
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Mine Safety Disclosures
None.
ITEM 5. Other Information
None.
| 25 |
ITEM 6. Exhibits
EXHIBIT INDEX
| 26 |
| 31.1* | Certification of Chairman and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2* | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1** | Certification of Chairman and Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2** | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101* | Financial statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2022, formatted in Inline XBRL: (i) the Condensed Balance Sheets, (ii) the Condensed Statements of Operations, (iii) the Condensed Statements of Changes in Stockholders’ Equity, (iv) the Condensed Statements of Cash Flows, and (v) the Notes to Condensed Financial Statements. | |
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| * | Filed herewith. |
| ** | Furnished herewith. |
| 27 |
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.
| Dated: August 12, 2022 | CELCUITY INC. | |
| By | /s/ Brian F. Sullivan | |
| Brian F. Sullivan | ||
| Chairman and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By | /s/ Vicky Hahne | |
| Vicky Hahne | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
| 28 |
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
CELCUITY INC.
The undersigned, being of full age, for the purpose of forming a corporation under and pursuant to the Delaware General Corporation Law, as amended (the “DGCL”), hereby adopts the following Certificate of Incorporation:
ARTICLE
1
NAME
The name of the corporation is Celcuity Inc.
ARTICLE
2
REGISTERED OFFICE AND AGENT
The address of the registered office of the corporation in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The name of the registered agent of the corporation at such address is The Corporation Trust Company.
ARTICLE
3
PURPOSE
The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the DGCL.
ARTICLE
4
CAPITAL STOCK
4.1 The aggregate number of shares the corporation has authority to issue is 50,000,000 shares, par value of $0.001 per share, consisting of 45,000,000 shares of Common Stock and 5,000,000 shares of undesignated Preferred Stock. The Board of Directors of the corporation has the authority, without first obtaining approval of the stockholders of the corporation or any class thereof, to establish from the undesignated shares of Preferred Stock, by resolution adopted and filed in the manner provided by law, one or more series of Preferred Stock and to fix the number of shares, the voting powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions of such class or series.
4.2 The Board of Directors is expressly authorized to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series. The number of authorized shares of Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the votes represented by all outstanding shares of stock of the Company entitled to vote, irrespective of the provisions of Section 242(b)(2) of the DGCL.
4.3 Unless and except to the extent set forth in a resolution adopted and filed in the manner provided by law establishing one or more series of Preferred Stock, no holder of shares of the corporation of any class or series now or hereafter authorized has any preferential or preemptive right provided under applicable law to subscribe for, purchase or receive any shares of the corporation of any class or series now or hereafter authorized, or any options or warrants for such shares, that may at any time be issued, sold or offered for sale by the Company.
4.4 No holder of shares of the Company of any class now or hereafter authorized will be entitled to cumulative voting.
ARTICLE
5
MEETINGS AND BOOKS
5.1 Meetings of the stockholders may be held within or outside the State of Delaware, as the Bylaws may provide.
5.2 Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the corporation shall be given in the manner provided in the Bylaws of the corporation.
5.3 The books of the corporation may be kept within or (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the corporation.
ARTICLE
6
INCORPORATOR
The name and mailing address of the incorporator are as follows:
Annette Peterson-Igbinovia
Fredrikson & Byron, P.A.
200 South Sixth Street, Suite 4000
Minneapolis, MN 55402-1425
ARTICLE
7
DIRECTORS
7.1 The management of the business and the conduct of the affairs of the corporation shall be vested in its Board of Directors. The number of directors which shall constitute the Board of Directors shall be fixed exclusively by resolutions adopted by a majority of the authorized number of directors then constituting the Board of Directors.
7.2 The directors of the corporation need not be elected by written ballot unless the Bylaws so provide.
7.3 To the fullest extent permitted by law, any past or present director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. No amendment to, modification of or repeal of this Article 7 will apply to or have any effect on the liability or alleged liability of any past or present director of the Company for or with respect to any acts or omissions of such director occurring prior to such amendment.
ARTICLE
8
BYLAWS
The Board of Directors is expressly empowered to adopt, amend or repeal the Bylaws of the corporation. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the then-outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of the Bylaws of the corporation.
ARTICLE
9
SHAREHOLDER ACTION
Any action required or permitted to be taken by the stockholders of the corporation must be effected at an annual or special meeting of stockholders called in accordance with the Bylaws and may not be effected by any consent in writing by such stockholders pursuant to Section 228 of the DGCL or any other provision of the DGCL.
ARTICLE
10
AMENDMENT
10.1 The corporation reserves the right to amend, alter or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by statute, except as provided in Section 10.2, and all rights conferred upon the stockholders herein are granted subject to this reservation.
10.2 Notwithstanding any other provisions of this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the corporation required by law or by this Certificate of Incorporation or any certificate of designation filed with respect to a series of Preferred Stock, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or repeal Articles 5, 7, 8, 9 and 10.
THE UNDERSIGNED, being the incorporator named herein, for the purpose of forming a corporation pursuant to the DGCL, makes this Certificate, hereby declaring and certifying that this is his or her act and deed and the facts herein stated are true, and accordingly has hereunto set his or her hand on September 15, 2017.
| /s/ Annette Peterson-Igbinovia | |
| Annette Peterson-Igbinovia, Incorporator |
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CELCUITY INC.
Celcuity Inc., a corporation organized and existing under and by the virtue of the Delaware General Corporation Law, as amended, through its duly authorized officer and by the authority of its Board of Directors does hereby certify that:
FIRST: The name of the corporation is Celcuity Inc. (the “Corporation”).
SECOND: The Corporation’s Certificate of Incorporation was originally filed with the Delaware Secretary of State on September 15, 2017.
THIRD: This amendment to the Certificate of Incorporation has been duly authorized by the directors and the requisite stockholders of the Corporation in accordance with the provisions of Sections 228 and 242 of the Delaware General Corporation Law.
FOURTH: The Certificate of Incorporation is hereby amended by deleting the text of Section 4.1 of Article 4 in its entirety and replacing such text with the following:
4.1 The aggregate number of shares the corporation has authority to issue is 27,500,000 shares, par value of $0.001 per share, consisting of 25,000,000 shares of Common Stock and 2,500,000 shares of undesignated Preferred Stock. The Board of Directors of the Corporation has the authority, without first obtaining approval of the stockholders of the corporation or any class thereof, to establish from the undesignated shares of Preferred Stock, by resolution adopted and filed in the manner provided by law, one or more series of Preferred Stock and to fix the number of shares, the voting powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions of such class or series.
[Signature page follows]
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed on May 11, 2018.
| CELCUITY INC. | ||
| /s/ Brian F. Sullivan | ||
| Name: | Brian F. Sullivan | |
| Title: | Chief Executive Officer | |
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CELCUITY INC.
Celcuity Inc., a corporation organized and existing under and by the virtue of the Delaware General Corporation Law, as amended, through its duly authorized officer and by the authority of its Board of Directors does hereby certify that:
FIRST: The name of the corporation is Celcuity Inc. (the “Corporation”).
SECOND: The Corporation’s certificate of incorporation was originally filed with the Delaware Secretary of State on September 15, 2017 and was amended on May 11, 2018 (as amended, the “Certificate of Incorporation”).
THIRD: This amendment to the Certificate of Incorporation has been duly authorized by the directors and the requisite stockholders of the Corporation in accordance with the provisions of Sections 228 and 242 of the Delaware General Corporation Law.
FOURTH: The Certificate of Incorporation is hereby amended by deleting the text of Section 4.1 of Article 4 in its entirety and replacing such text with the following:
4.1 The aggregate number of shares the corporation has authority to issue is 32,500,000 shares, par value of $0.001 per share, consisting of 30,000,000 shares of Common Stock and 2,500,000 shares of undesignated Preferred Stock. The Board of Directors of the Corporation has the authority, without first obtaining approval of the stockholders of the corporation or any class thereof, to establish from the undesignated shares of Preferred Stock, by resolution adopted and filed in the manner provided by law, one or more series of Preferred Stock and to fix the number of shares, the voting powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions of such class or series.
[Signature page follows]
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed on May 12, 2022.
| CELCUITY INC. | ||
| /s/ Brian F. Sullivan | ||
| Name: | Brian F. Sullivan | |
| Title: | Chief Executive Officer | |
CELCUITY INC.
CERTIFICATE
OF DESIGNATIONS OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151 of the Delaware General Corporation Law
The undersigned, Brian F. Sullivan, does hereby certify that:
1. He is the Chief Executive Officer of Celcuity Inc., a Delaware corporation (the “Corporation”).
2. The Corporation is authorized to issue two million five hundred thousand (2,500,000) shares of Preferred Stock, $0.001 par value, none of which have been issued or designated as to series.
3. The following resolution was duly adopted by the board of directors of the Corporation (the “Board of Directors”):
RESOLVED, that pursuant to the provisions of Article 4.1 of the Corporation’s Certificate of Incorporation, the Board of Directors hereby establishes a series of Preferred Stock and fixes the number of shares, the designation, voting powers, preferences and other rights, powers, privileges and restrictions, qualifications and limitations of such series as set forth below:
TERMS OF SERIES A CONVERTIBLE PREFERRED STOCK
1. Designation; Amount; Issuance. One million eight hundred fifty thousand (1,850,000) shares of the authorized Preferred Stock, $0.001 par value, of the Corporation are hereby designated Series A Convertible Preferred Stock (the “Series A Preferred Stock”), with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations. The “Series A Original Issue Price” shall mean $57.50 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock. Shares of Series A Preferred Stock may only be issued pursuant to the Securities Purchase Agreement dated as of May 15, 2022, by and between the Corporation and the investors named therein, as amended, modified or supplemented from time to time in accordance with its terms, or upon the exercise of warrants issued pursuant to the Securities Purchase Agreement.
2. Dividends. Holders of Series A Preferred Stock (each, a “Holder”) shall be entitled to receive, and the Corporation shall pay, dividends or distributions on shares of Series A Preferred Stock equal (on an as-if-converted-to-Common Stock basis without regard to the Beneficial Ownership Limitation (as defined in Section 6.5 below) or the Share Reservation Limitation (as defined in Section 6.2.2 below) and whether or not there is then a sufficient number of authorized but unissued shares of Common Stock to effect such conversion) to and in the same form as dividends or distributions actually paid on shares of the Common Stock when, as and if such dividends or distributions are paid on shares of the Common Stock. No other dividends or distributions shall be paid on shares of Series A Preferred Stock.
3. Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.
3.1. Preferential Payments to Holders of Series A Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the Holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, and in the event of a Deemed Liquidation Event (as defined below), the Holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the consideration payable to stockholders in such Deemed Liquidation Event or out of the Available Proceeds (as defined below), as applicable, before any payment shall be made to the Holders of Common Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the Series A Original Issue Price, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable assuming all shares of Series A Preferred Stock are converted into Common Stock pursuant to Section 6 (on an as-converted to-Common-Stock basis without regard to the Beneficial Ownership Limitation or the Share Reservation Limitation and whether or not there is then a sufficient number of authorized but unissued shares of Common Stock to effect such conversion) immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event (the amount payable pursuant to this sentence is hereinafter referred to as the “Series A Liquidation Amount”). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the Holders of shares of Series A Preferred Stock the full amount to which they shall be entitled under this Section 3.1, the Holders shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts that would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.
3.2. Payments to Holders of Common Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after the payment of all preferential amounts required to be paid to the Holders of shares of Series A Preferred Stock, the remaining assets of the Corporation available for distribution to its stockholders or, in the case of a Deemed Liquidation Event, the consideration not payable to the Holders of shares of Series A Preferred Stock pursuant to Section 3.1 or the remaining Available Proceeds, as the case may be, shall be distributed among the Holders of shares of Common Stock, pro rata based on the number of shares held by each such Holder.
3.3. Deemed Liquidation Events.
3.3.1 Definition. Each of the following events shall be considered a “Deemed Liquidation Event” unless the Holders of at least a majority of the outstanding shares of Series A Preferred Stock, voting together as a separate class (the “Requisite Holders”), elect otherwise by written notice sent to the Corporation at least five (5) days prior to the effective date of any such event:
(a) a merger or consolidation in which:
(i) the Corporation is a constituent party or
(ii) a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation,
except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation; or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or
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(b) (1) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or (2) the sale or disposition (whether by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation.
3.3.2 Effecting a Deemed Liquidation Event.
(a) The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Section 3.3.1(a)(i) unless the agreement or plan of merger or consolidation for such transaction (the “Merger Agreement”) provides that the consideration payable to the stockholders of the Corporation in such Deemed Liquidation Event shall be paid to the holders of capital stock of the Corporation in accordance with Section 3.1 and 3.2.
(b) In the event of a Deemed Liquidation Event referred to in Section 3.3.1(a)(ii) or 3.3.1(b), if the Corporation does not effect a dissolution of the Corporation under the General Corporation Law within ninety (90) days after such Deemed Liquidation Event, then (A) the Corporation shall send a written notice to each Holder of Series A Preferred Stock no later than the ninetieth (90th) day after the Deemed Liquidation Event advising such Holders of their right (and the requirements to be met to secure such right) pursuant to the terms of the following clause (B) to require the redemption of such shares of Series A Preferred Stock, and (B) if the Requisite Holders so request in a written instrument delivered to the Corporation not later than one hundred twenty (120) days after such Deemed Liquidation Event, the Corporation shall use the consideration received by the Corporation for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board of Directors of the Corporation), together with any other assets of the Corporation available for distribution to its stockholders, all to the extent permitted by Delaware law governing distributions to stockholders (the “Available Proceeds”), on the one hundred fiftieth (150th) day after such Deemed Liquidation Event(the “Redemption Date”), to redeem all outstanding shares of Series A Preferred Stock at a price per share equal to the Series A Liquidation Amount (the “Redemption Price”). Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Series A Preferred Stock, the Corporation shall redeem a pro rata portion (based on the respective amounts that would otherwise be payable in respect of the shares to be redeemed if the Available Proceeds were sufficient to redeem all such shares) of each Holder’s shares of Series A Preferred Stock to the fullest extent of such Available Proceeds, and shall redeem the remaining shares as soon as it may lawfully do so under Delaware law governing distributions to stockholders. Prior to the distribution or redemption provided for in this Section 3.3.2(b), the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event or in the ordinary course of business.
3.3.3 Amount Deemed Paid or Distributed. The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity. The value of such property, rights or securities shall be determined in good faith by the Board of Directors of the Corporation.
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4. Non-Voting Stock. The Series A Preferred Stock is non-voting stock and does not entitle the Holder thereof to vote on any matter submitted to the stockholders of the Corporation for their action or consideration, except as provided in Section 5 below or as otherwise provided by the General Corporation Law of the State of Delaware or the other provisions of the Certificate of Incorporation or this Certificate of Designations.
5. Series A Preferred Stock Protective Provisions. At any time when shares of Series A Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation, recapitalization, reclassification or otherwise, do any of the following without (in addition to any other vote required by law, the Certificate of Incorporation or this Certificate of Designations) the written consent or affirmative vote of the Requisite Holders, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:
5.1.1 amend, alter or repeal any provision of the Certificate of Incorporation, this Certificate of Designations or Bylaws of the Corporation in a manner that adversely affects the powers, preferences or rights of the Series A Preferred Stock;
5.1.2 create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock unless the same ranks junior to the Series A Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends and rights of redemption, or increase the authorized number of shares of Series A Preferred Stock or increase the authorized number of shares of any additional class or series of capital stock of the Corporation unless the same ranks junior to the Series A Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends and rights of redemption;
5.1.3 (i) reclassify, alter or amend any existing security of the Corporation that is pari passu with the Series A Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to the Series A Preferred Stock in respect of any such right, preference, or privilege or (ii) reclassify, alter or amend any existing security of the Corporation that is junior to the Series A Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Series A Preferred Stock in respect of any such right, preference or privilege; or
5.1.4 purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on the Series A Preferred Stock as expressly authorized herein, and (ii) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock.
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6. Conversion. The Series A Preferred Stock shall be convertible into shares of Common Stock as follows:
6.1. Optional Conversion; Conversion Rate. Subject to (a) the Share Reservation Limitation (as defined in Section 6.2.2 below) and (b) the Beneficial Ownership Limitation (as defined in Section 6.5 below), each share of Series A Preferred Stock shall be convertible, at the option of the Holder thereof, at any time and from time to time, and without the payment of additional consideration by the Holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by multiplying one share of Series A Preferred Stock by the Series A Conversion Rate in effect at the time of conversion. The “Series A Conversion Rate” shall initially be ten (10) shares of Common Stock for each share of Series A Preferred Stock. The Series A Conversion Rate shall be subject to adjustment as provided in Section 7.2.
6.2. Mechanics of Conversion.
6.2.1 Notice of Conversion. In order for a Holder of Series A Preferred Stock to voluntarily convert shares of Series A Preferred Stock into shares of Common Stock, such Holder shall (a) provide written notice to the Corporation at the principal office of the Corporation that such Holder elects to convert all or any number of such Holder’s shares of Series A Preferred Stock and, if applicable, any event on which such conversion is contingent and (b) if such Holder’s shares are certificated, surrender the certificate or certificates for such shares of Series A Preferred Stock (or, if such registered Holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the principal office of the Corporation. Such notice shall state such Holder’s name or the names of the nominees in which such Holder wishes the shares of Common Stock to be issued. If required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered Holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the Corporation of such notice and, if applicable, certificates (or lost certificate affidavit and agreement) shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the specified shares shall be deemed to be outstanding of record as of such date. The Corporation shall, or shall cause the Transfer Agent to, as soon as practicable after the Conversion Time, issue and deliver to such Holder of Series A Preferred Stock, or to his, her or its nominees, (i) a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof (or at the Holder’s request, shall instruct the Transfer Agent to deliver such number of shares of Common Stock, registered in the name of such Holder or such Holder’s nominee, in book-entry form), and (ii) a certificate for the number (if any) of the shares of Series A Preferred Stock represented by the surrendered certificate that were not converted into Common Stock.
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6.2.2 Authorized Share Approval; Reservation of Shares. The Company shall use commercially reasonable efforts to obtain and effect the Authorized Share Approval (as defined below) no later than December 31, 2022. Notwithstanding the foregoing, on or prior to the date that is thirty (30) days following the last closing date with respect to the purchase and sale of all securities under the Purchase Agreement, the Company shall call, and deliver notice of, a special meeting of stockholders in accordance with the Company’s bylaws for the purpose of obtaining the Authorized Share Approval, and shall thereafter use commercially reasonable efforts to promptly obtain and effect the Authorized Share Approval. “Authorized Share Approval” means receipt of the stockholder approval required to increase the aggregate number of shares of capital stock and the number of shares of Common Stock the Company has authority to issue, and has available for issuance, to include such number of duly authorized but unissued shares of Common Stock as shall be sufficient to effect the conversion of all shares of Series A Preferred Stock then outstanding or available for issuance (assuming the shares of Series A Preferred Stock are convertible in full on an as-converted to-Common-Stock basis without regard to the Beneficial Ownership Limitation or the Share Reservation Limitation and whether or not there is then a sufficient number of authorized but unissued shares of Common Stock to effect such conversion), and the filing of an amendment to the Company’s Certificate of Incorporation for such increase in authorized shares. From and after the Authorized Share Approval, the Corporation shall, at all times when the Series A Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series A Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series A Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series A Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate of Incorporation. Prior to the Authorized Share Approval, (i) the Corporation shall, at all times when the Series A Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series A Preferred Stock, the maximum number of its duly authorized but unissued shares of Common Stock as are not subject to reservation for other purposes, and (ii) the number of shares of Common Stock so reserved shall be the maximum number of shares of Common Stock the Corporation shall be obligated to issue upon conversion of Series A Preferred Stock (the “Share Reservation Limitation”).
6.2.3 Effect of Conversion. All shares of Series A Preferred Stock that shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the Holders thereof to receive shares of Common Stock in exchange therefor. Any shares of Series A Preferred Stock so converted shall be retired and cancelled as provided in Section 12 of this Certificate of Designations.
6.3. Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series A Preferred Stock. In lieu of any fractional shares to which the Holder would otherwise be entitled, the number of shares of Common Stock to be issued upon conversion of the Series A Preferred Stock shall be rounded to the nearest whole share.
6.4. Transfer Taxes and Expenses. The issuance of certificates for shares of the Common Stock on conversion of Series A Preferred Stock shall be made without charge to the Holder thereof for any documentary stamp or similar taxes that may be payable in respect of the issuance or delivery of such certificates; provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate in a name other than that in which the shares of Series A Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.
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6.5. Beneficial Ownership Limitation. Notwithstanding anything herein to the contrary, the Corporation shall not effect any conversion of the Series A Preferred Stock, and a Holder shall not have the right to convert any portion of the Series A Preferred Stock, to the extent that, after giving effect to an attempted conversion, such Holder (together with such Holder’s affiliates (that is, any person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act of 1933, as amended), and any other person whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) or Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the applicable regulations of the United States Securities and Exchange Commission (the “Commission”), including any “group” of which the Holder is a member (the foregoing, “Attribution Parties”)) would beneficially own a number of shares of Common Stock in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (A) conversion of the remaining, unconverted Series A Preferred Stock beneficially owned by such Holder or any of its Attribution Parties, and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation beneficially owned by such Holder or any of its Attribution Parties (including, without limitation, any convertible notes or convertible preferred stock or warrants) that are subject to a limitation on conversion or exercise similar to the limitation contained herein. For purposes of this Section 6.5, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the applicable regulations of the Commission. In addition, for purposes hereof, “group” has the meaning set forth in Section 13(d) of the Exchange Act and the applicable regulations of the Commission. For purposes of this Section 6.5, in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (A) the Corporation’s most recent periodic or annual filing with the Commission, as the case may be, (B) a more recent public announcement by the Corporation that is filed with the Commission, or (C) a more recent notice by the Corporation or the Corporation’s transfer agent to the Holder setting forth the number of shares of Common Stock then outstanding. Upon the written request of a Holder (which may be by email), the Corporation shall, within three (3) Trading Days thereof, confirm in writing to such Holder (which may be via email) the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to any actual conversion or exercise of securities of the Corporation, including shares of Series A Preferred Stock, by such Holder or its Attribution Parties since the date as of which such number of outstanding shares of Common Stock was last publicly reported or confirmed to the Holder. The “Beneficial Ownership Limitation” shall initially be set at 9.9% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock pursuant to such conversion (to the extent permitted pursuant to this Section 6.5). The Corporation shall be entitled to rely on representations made to it by the Holder regarding its Beneficial Ownership Limitation. Notwithstanding the foregoing, (i) by written notice to the Corporation, which will not be effective until the sixty-first (61st) day after such written notice is delivered to the Corporation, the Holder may reset the Beneficial Ownership Limitation percentage to a higher percentage, not to exceed 19.9%, to the extent then applicable and (ii) by written notice to the Corporation, which will be effective immediately after such notice is delivered to the Corporation, the Holder may reset the Beneficial Ownership Limitation percentage to a lower percentage. Any such increase or decrease will apply only to the Holder and not to any other holder of Series A Preferred Stock. Upon such a change by a Holder of the Beneficial Ownership Limitation, the Beneficial Ownership Limitation may not be further amended by such Holder without first providing the minimum notice required by this Section 6.5. Notwithstanding the foregoing, at any time following notice of a Deemed Liquidation Event, the Holder may waive and/or change the Beneficial Ownership Limitation effective immediately upon written notice to the Corporation and may reinstitute a Beneficial Ownership Limitation at any time thereafter effective immediately upon written notice to the Corporation.
7. Certain Adjustments.
7.1. Calculations. All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 7, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the number of shares of Common Stock (excluding any treasury shares of the Corporation) issued and outstanding.
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7.2. Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the effective date of this Certificate of Designations effect a subdivision of the outstanding Common Stock, the Series A Conversion Rate in effect immediately before that subdivision shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the effective date of this Certificate of Designations combine the outstanding shares of Common Stock, the Series A Conversion Rate in effect immediately before the combination shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.
7.3. Notice to the Holder of Adjustment to Series A Conversion Rate. Whenever the Series A Conversion Rate is adjusted, the Corporation shall promptly deliver to the Holders of shares of Series A Preferred Stock a notice setting forth the Series A Conversion Rate after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
8. Stock Register. The Corporation shall maintain a register of shares of the Series A Preferred Stock, upon records to be maintained by the Corporation for that purpose (the “Series A Preferred Stock Register”), in the name of the Holders thereof from time to time, including the name, address, electronic mail address and facsimile number of each such Holder. The Corporation may deem and treat the registered Holder of shares of Series A Preferred Stock as the absolute owner thereof for the purpose of any conversion thereof and for all other purposes. Shares of Series A Preferred Stock may be issued solely in book entry form or, if requested by any Holder, such Holder’s shares may be issued in certificated form. The Corporation shall register the transfer of any shares of Series A Preferred Stock in the Series A Preferred Stock Register, upon surrender of the certificates (if applicable) evidencing such shares to be transferred, duly endorsed by the Holder thereof, to the Corporation at its address specified herein. Upon any such registration or transfer, a new certificate evidencing the shares of Series A Preferred Stock so transferred shall be issued to the transferee and a new certificate evidencing the remaining portion of the shares not so transferred, if any, shall be issued to the transferring Holder, in each case, within three Business Days. The provisions of this Certificate of Designation are intended to be for the benefit of all Holders from time to time and shall be enforceable by any such Holder.
9. Notices. All notices, instructions and other communications hereunder or in connection herewith shall be in writing, shall be sent to the address of the relevant party set forth in the Purchase Agreement. Any such notice, instruction or communication shall be deemed to have been delivered upon the earlier of actual receipt, or (a) personal delivery to the party to be notified, (b) when sent, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) business day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt.
10. Lost or Mutilated Series A Preferred Stock Certificate. If a Holder’s certificate for Series A Preferred Stock shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Series A Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.
11. Waiver. Unless otherwise specified herein, any of the rights, powers, preferences and other terms of the Series A Preferred Stock set forth herein may be waived on behalf of all Holders of Series A Preferred Stock by the affirmative vote or written consent of the Requisite Holders of at least a majority of the shares of Series A Preferred Stock then outstanding, as a separate class.
12. Status of Converted, Redeemed or Reacquired Series A Preferred Stock. Any shares of Series A Preferred Stock that are converted, redeemed or otherwise reacquired by the Corporation shall be retired and cancelled and may not be reissued as shares of such series, shall no longer be designated as Series A Preferred Stock and shall resume the status of authorized but unissued shares of Preferred Stock, undesignated as to series.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed this ______ day of May, 2022.
| CELCUITY INC. | ||
| By: | ||
| Name: | Brian F. Sullivan | |
| Title: | Chief Executive Officer | |
Exhibit 31.1
CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian F. Sullivan, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Celcuity Inc.; |
| 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; |
| 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; |
| 4. | The registrant’s other certifying officer 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (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 |
| (d) | Disclosed in this report any change in the registrant's internal control over financial reporting 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 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 |
| (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. |
| Dated: August 12, 2022 | By | /s/ Brian F. Sullivan |
| Brian F. Sullivan | ||
| Chairman and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Vicky Hahne, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Celcuity Inc.; |
| 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; |
| 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; |
| 4. | The registrant’s other certifying officer 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (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 |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting 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 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 |
| (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. |
| Dated: August 12, 2022 | By | /s/ Vicky Hahne |
| Vicky Hahne | ||
| Chief 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
In connection with the filing of the Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 (the “Report”) by Celcuity Inc. (“Registrant”), I, Brian F. Sullivan, the Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
| Dated: August 12, 2022 | By | /s/ Brian F. Sullivan |
| Brian F. Sullivan | ||
| Chairman and Chief 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
In connection with the filing of the Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 (the “Report”) by Celcuity Inc. (“Registrant”), I, Vicky Hahne, the Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
| Dated: August 12, 2022 | By | /s/ Vicky Hahne |
| Vicky Hahne | ||
| Chief Financial Officer |
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