United States
Securities and Exchange Commission
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒
| Filed by a Party other than the Registrant ☐ |
Check the appropriate box:
| ☐ | Preliminary Proxy Statement |
| ☐ | Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ☒ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Materials Pursuant to Rule 14a-12 |
CINGULATE INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
| ☒ | No fee required. |
| ☐ | Fee paid previously with preliminary materials |
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 |
CINGULATE INC.
1901 W. 47th Place
Kansas City, Kansas 66205
NOTICE OF ANNUALSPECIAL MEETING OF STOCKHOLDERS
To be held on June 8, 2022November 3, 2023
To the Stockholders of Cingulate Inc.
NOTICE IS HEREBY GIVEN that the Annuala Special Meeting of Stockholders (the “Annual“Special Meeting”) of Cingulate Inc. (the “Company”) will be held on June 8, 2022,November 3, 2023, beginning at 10:00 a.m. Central Time. The AnnualSpecial Meeting will be held solely in a virtual meeting format online at www.meetnow.global/MPQLHZLMUFPRUD. You will not be able to attend the AnnualSpecial Meeting at a physical location. If you plan to attend the Annual Meeting, please review and follow the instructions in the “General Information” section of the accompanying proxy statement. At the AnnualSpecial Meeting, stockholders will act on the following matters:
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Only stockholders of record atPursuant to the Company’s Amended and Restated Bylaws, as amended (the “Bylaws”), the Board has fixed the close of business on April 13, 2022 are entitled to receive notice of and to vote atSeptember 12, 2023 as the Annual Meeting or any postponement or adjournment thereof. A listrecord date for determination of the stockholders entitled to vote at the AnnualSpecial Meeting will be available during ordinary business hours ten (10) days before the Annual Meeting at the Company’s principal place of business located at 1901 W. 47th Place, Kansas City, Kansas 66205 and on the date of the Annual Meeting, on the virtual platform for the meeting at www.meetnow.global/MPQLHZL.any adjournments or postponements thereof.
Your vote is important. Whether or not you plan to attend the meeting or not, you maySpecial Meeting, please submit your proxy to vote your shares by telephone orelectronically via the Internet or by completingtelephone, or please complete, sign, date and returning yourreturn the accompanying proxy card or voting instruction card in the envelope provided.enclosed postage-paid envelope. If your shares are held in “street name” by your bank, broker or other nominee, your bank, broker or other nominee will be unableyou attend the Special Meeting and prefer to vote during the Special Meeting, you may do so even if you have already submitted a proxy to vote your shares without instructions from you.shares. You should instructmay revoke your bank, broker or other nominee to vote your sharesproxy in accordance with the procedures provided by your bank, broker or other nominee.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 8, 2022.
Ourmanner described in the proxy materials, including our Proxy Statement forstatement at any time before it has been voted at the 2022 Annual Meeting, our Annual Report for the fiscal year ended December 31, 2021 and proxy card are available on the Internet at www.envisionreports.com/CING. Under Securities and Exchange Commission rules, we are providing access to our proxy materials by notifying you of the availability of our proxy materials on the Internet.Special Meeting.
| By Order of the Board of Directors | |
| /s/ Craig S. Gilgallon | |
| Craig S. Gilgallon | |
| Executive Vice President, General Counsel and Secretary | |
Kansas City, Kansas |
TABLE OF CONTENTS
CINGULATE INC.
1901W. 47th Place
Kansas City, Kansas 66205
PROXY STATEMENT
This proxy statement contains information related to our AnnualSpecial Meeting of Stockholders to be held on June 8, 2022November 3, 2023 at 10:00 a.m. Central Time, or at such other time and place to which the AnnualSpecial Meeting may be adjourned or postponed (the “Annual“Special Meeting”). The enclosed proxy is solicited by the Board of Directors (the “Board”) of Cingulate Inc. (the “Company”). The proxy materials relating to the AnnualSpecial Meeting are being mailed to stockholders entitled to vote at the meeting on or about April 22, 2022.October 2, 2023. A list of record holders of the Company’s common stock entitled to vote at the Special Meeting will be available for examination by any stockholder, for any purpose germane to the Special Meeting, at our principal offices at 1901 W. 47th Place, Kansas City, Kansas 66205, during normal business hours for ten days prior to the Special Meeting and available during the Special Meeting.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 3, 2023: This Notice of Special Meeting of Stockholders, Proxy Statement and the proxy card are available online at: www.envisionreports.com/CING. Under Securities and Exchange Commission rules, we are providing access to our proxy materials both by sending you this full set of proxy materials, and by notifying you of the availability of our proxy materials on the Internet.
When and where will the AnnualSpecial Meeting be held?
The AnnualSpecial Meeting will be held on June 8, 2022,November 3, 2023, at 10:00 a.m., Central Time, in a virtual meeting format online at www.meetnow.global/MPQLHZLMUFPRUD, and at any adjournment or postponement thereof. You will not be able to attend the AnnualSpecial Meeting at a physical location. If you plan to attend the Annual Meeting, please review the instructions under “How can I attend and vote at the Annual Meeting?” below.
What is the purpose of the AnnualSpecial Meeting?
We are calling the AnnualSpecial Meeting to seek the approval of our stockholders:
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What are the Board’s recommendations?
The Board recommends you vote:
| ● | FOR the |
| ● | FOR the |
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Why did I receive a notice in the mail regarding the Internet availability of the proxy materials instead of a paper copy of the proxy materials?
In accordance with rules adopted by the Securities and Exchange Commission (the “SEC”), we have elected to furnish to our stockholders this Proxy Statement and our Annual Report by providing access to these documents on the Internet rather than mailing printed copies. Accordingly,If you are a Notice of Internet Availability of Proxy Materials (the “Notice”) is being mailed to our stockholdersstockholder of record and beneficial owners, which will direct stockholders toyou return a website where they can access ourproperly executed proxy materials and view instructions on howcard or submit a proxy to vote online or by telephone. Ifover the Internet but do not mark the boxes showing how you would preferwish to receive a paper copyvote, your shares will be voted in accordance with the recommendations of our proxy materials, please follow the instructions included inBoard, as set forth above.
No other matters may be brought before the Notice.Special Meeting.
Who is entitled to vote at the AnnualSpecial Meeting?
Only stockholders of record at the close of business on the record date, April 13, 2022,September 12, 2023, are entitled to receive notice of, and to vote the shares of common stock that they held on that date at, the AnnualSpecial Meeting, or any adjournment or postponement thereof. Holders of our common stock are entitled to one vote per share on each matter to be voted upon.
As of the record date, we had 11,309,41215,658,798 outstanding shares of common stock.
Who canYou do not need to attend the meeting?
All stockholders as ofSpecial Meeting to vote your shares. Instead, you may vote your shares by marking, signing, dating and returning the record date,enclosed proxy card or their duly appointed proxies, may attendvoting by telephone or through the Annual Meeting.internet.
What constitutes a quorum?
The presence at the AnnualSpecial Meeting, in person or by proxy, of the holders of one third of our common stock outstanding on the record date will constitute a quorum for the AnnualSpecial Meeting. Signed proxies received but not votedPursuant to the General Corporation Law of the State of Delaware, abstentions will be counted for the purpose of determining whether a quorum is present. If brokers have, and exercise, discretionary authority on at least one item on the agenda for the Special Meeting, uninstructed shares for which broker non-votes occur will be included inconstitute voting power present for the calculation ofdiscretionary matter and will therefore count towards the number of shares considered to be present at the Annual Meeting.
How can I attend and vote at the Annual Meeting?
For registered stockholders: If on the record date your shares were registered directly in your name with our transfer agent, Computershare Trust Company, N.A. (“Computershare”), then you are a stockholder of record (also known as a “record holder”). Stockholders of record at the close of business on the record date will be able to attend the Annual Meeting, vote, and submit questions during the Annual Meeting by visiting www.meetnow.global/MPQLHZL at the meeting date and time. We encourage you to access the meeting prior to the start time. Online access will begin at 9:45 a.m., Central Time. To access the Annual Meeting, you will need the 15-digit control number located in the shaded bar on the proxy card.
For beneficial owners: If on the record date your shares were not registered directly in your name with Computershare but instead held by an intermediary, such as a bank, broker or other nominee, then you are the beneficial owner of shares held in “street name.” The organization holding your account is considered to be the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you must register in advance to attend the Annual Meeting, vote and submit questions. To register in advance you will need to obtain a legal proxy from the bank, broker or other nominee that holds your shares giving you the right to vote the shares. Once you have received a legal proxy form from your bank, broker or other nominee, forward the email with your name and the legal proxy attached or send a separate email with your name and legal proxy attached labeled “Legal Proxy” in the subject line to Computershare, at legalproxy@computershare.com. Requests for registration must be received no later than 5:00 p.m., Central Time, on June 3, 2022. You will then receive a confirmation of your registration, with a control number, by email from Computershare. At the time of the meeting, go to www.meetnow.global/MPQLHZL and enter your control number. If you do not have your control number you may attend as a guest (non-stockholder) by going to www.meetnow.global/MPQLHZL and entering the requested information. Please note that guest access is in listen-only mode and you will not have the ability to ask questions or vote during the Annual Meeting.quorum.
Do I need to attend the AnnualSpecial Meeting?
No. It is not necessary for you to attend the virtual AnnualSpecial Meeting in order to vote your shares. You may vote by telephone, through the Internet or by mail, as described in more detail below.
How do I vote my shares without attending the AnnualSpecial Meeting?
Stockholder of record: shares registered in your name. If you are a stockholder of record, you may authorize a proxy to vote on your behalf at the AnnualSpecial Meeting in any of the following ways:
By Telephone or via the Internet. You can submit a proxy to vote your shares by telephone or via the Internet by following the instructions on the enclosed proxy card. Proxies submitted by telephone or via the Internet must be received by 11:59 p.m., Central Time, on the day before the AnnualSpecial Meeting. Have your proxy card in hand as you will be prompted to enter your control number.
By Mail. You can submit a proxy to vote your shares by mail if you received a printed proxy card by completing, signing, dating and promptly returning your proxy card in the postage-prepaid envelope provided with the materials. Proxies submitted by mail must be received by the close of business on June 7, 2022November 2, 2023 in order to ensure that your vote is counted.
To facilitate timely receipt of your proxy, we encourage you to promptly vote via the Internet or telephone following the instructions on the enclosed proxy card promptly.card. If you are submitting your proxy by telephone or through the Internet, your voting instructions must be received by 11:59 p.m., Central Time on the day before the AnnualSpecial Meeting.
Submitting your proxy by mail, by telephone or through the Internet will not prevent you from casting your vote at the AnnualSpecial Meeting. You are encouraged to submit a proxy by mail, by telephone or through the Internet even if you plan to attend the AnnualSpecial Meeting via the virtual meeting website to ensure that your shares are represented at the AnnualSpecial Meeting.
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If you return your signed proxy card, but do not mark the boxes showing how you wish to vote, your shares will be voted (1) “FOR” the election of Patrick Gallagher and Peter J. Werth as Class I directors, (2) “FOR” the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2022, (3) “FOR” the approval of the proposal to adjourn the Annual Meeting if necessary or appropriate and (4) in accordance with the proxy holders’ best judgment as to any other business that properly comes before the Annual Meeting.
Beneficial owner: shares registered in the name of bank, broker or other nominee. If you are a beneficial owner of shares registered in the name of your bank, broker or other nominee, you should have received voting instructions from that organization rather than from us. Simply complete and mail the voting instruction form to ensure that your vote is counted. Alternatively, you may vote by telephone or over the Internet as instructed by your bank, broker or other nominee. Follow the instructions from your broker, bank or other nominee included with this proxy statement, or contact your bank, broker or other nominee to request a proxy form.
Even if you plan to attend the AnnualSpecial Meeting live via the Internet, we encourage you to vote in advance by Internet, telephone, or mail so that your vote will be counted if you later decide not to attend the AnnualSpecial Meeting live via the Internet.
May I change my vote after I have mailed my proxy card or after I have submitted my proxy by telephone or through the Internet?
Yes. You may revoke your proxy or change your vote at any time before the proxy is exercised at the AnnualSpecial Meeting. You may revoke your proxy by delivering a signed written notice of revocation stating that the proxy is revoked and bearing a date later than the date of the proxy to the Company’s Secretary, Craig S. Gilgallon, at Cingulate Inc., 1901 W. 47th Place, 3rd Floor, Kansas City, Kansas 66205. You may also revoke your proxy or change your vote by submitting another proxy by telephone or through the Internet in accordance with the instructions on the enclosed proxy card. You may also submit a later-dated proxy card relating to the same shares. If you voted by completing, signing, dating and returning the enclosed proxy card, you should retain a copy of the voter control number found on the proxy card in the event that you later decide to revoke your proxy or change your vote by telephone or through the Internet. Alternatively, your proxy may be revoked or changed by attending the AnnualSpecial Meeting via the virtual meeting website and voting at the meeting by following the internet voting instructions on your proxy card. However, simply attending the AnnualSpecial Meeting without voting will not revoke or change your proxy. “Street name” holders of shares of our common stock should contact their bank, broker, trust or other nominee to obtain instructions as to how to revoke or change their proxies.
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
Many of our stockholders hold their shares through a broker, bank or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially.
Stockholder of Record
If your shares are registered directly in your name with our transfer agent, Computershare, you are considered, with respect to those shares, the stockholder of record. As the stockholder of record, you have the right to directly grant your voting proxy directly to us or to vote in person at the AnnualSpecial Meeting.
Beneficial Owner
If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you by your broker, bank or nominee which is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker as to how to vote and are also invited to attend the AnnualSpecial Meeting. However, because you are not the stockholder of record, you may not vote these shares in person at the AnnualSpecial Meeting unless you obtain a signed proxy from the record holder giving you the right to vote the shares. If you do not vote your shares or otherwise provide the stockholder of record with voting instructions youror otherwise obtain a signed proxy from the record holder giving you the right to vote the shares, broker non-votes may constitute broker non-votes.occur for the shares that you beneficially own. The effect of broker non-votes is more specifically described in “What vote is required to approve each proposal?” below.
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What vote is required to approve each proposal?
The holders of one-third of our common stock outstanding on the record date must be present, in person or by proxy, at the Annual Meeting in order to have the required quorum for the transaction of business. Pursuant to Delaware corporate law, abstentions and broker non-votes will be counted for the purpose of determining whether a quorum is present.
Assuming that a quorum is present, the following votes will be required:
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HoldersUnder the General Corporation Law of the State of Delaware, holders of the common stock will not have any dissenters’ rights of appraisal in connection with any of the matters to be voted on at the Annual Meeting.meeting.
What is a “broker non-vote”?
Banks and brokers acting as nominees are permitted to use discretionary voting authority to vote proxies for proposals that are deemed “routine” by the New York Stock Exchange, butwhich means that they can submit a proxy or cast a ballot on behalf of stockholders who do not provide a specific voting instruction. Brokers and banks are not permitted to use discretionary voting authority to vote proxies for proposals that are deemed “non-routine” by the New York Stock Exchange. The determination of which proposals are deemed “routine” versus “non-routine” may not be made by the New York Stock Exchange until after the date on which this proxy statementProxy Statement has been mailed to you. As such, it is important that you provide voting instructions to your bank, broker or other nominee, if you wish to determineensure that your shares are present and voted at the Special Meeting on all matters and if you wish to direct the voting of your shares.shares on “routine” matters.
AWhen there is at least one “routine” matter to be considered at a meeting, a broker “non-vote” occurs when a proposal is deemed “non-routine” and a nominee holding shares for a beneficial owner does not have discretionary voting authority with respect to the “non-routine” matter being considered and has not received instructions from the beneficial owner.
Under the applicable rules governing brokers, we believe the proposal to adopt and approve an amendment to our Charter to effect the Reverse Split at the discretion of the Board (Proposal 1) is likely to be considered a “routine” matter. If such proposal is “routine,” a bank or broker may be able to vote on Proposal 1 even if it does not receive instructions from you, so long as it holds your shares in its name. If, however, Proposal 1 is deemed by the New York Stock Exchange to be a “non-routine” matter, brokers will not be permitted to vote on Proposal 1 if the broker has not received instructions from the beneficial owner.
The electionapproval of directors (proposal 1)the proposal to approve, for the purpose of complying with the applicable provisions of Nasdaq Listing Rule 5635(d), the issuance of up to 10,387,812 shares of our common stock issuable upon the exercise of our Series A warrants and Series B warrants issued to an institutional investor in connection with our offering that closed on September 13, 2023(Proposal 2) is generally not considered to be a “routine” matter and banks or brokers are not permitted to vote on these matters if the bank or broker has not received instructions from the beneficial owner. Accordingly, it is particularly important that beneficial owners instruct their brokers how they wish to vote their shares. The ratification of our independent registered public accounting firm (proposal 2) is generally considered to be a “routine” matter, and hence your brokerage firm may be able to vote on proposal 2 even if it does not receive instructions from you, so long as it holds your shares in its name.for Proposal 2.
Who will count the votes?
Our transfer agent, Computershare, will serve as inspector of election at the AnnualSpecial Meeting and will tabulate and certify the votes.
Where can I find the voting results of the AnnualSpecial Meeting?
The Companypreliminary voting results will be announced at the Special Meeting, and we will publish final voting results of the Annual Meeting in a Current Report on Form 8-K filed with the SEC within four business days afterof the AnnualSpecial Meeting.
How are we soliciting this proxy?
We are soliciting this proxy on behalf of our Board and will pay all expenses associated therewith. Some of our officers, directors and other employees also may, but without compensation other than their regular compensation, solicit proxies by further mailing or personal conversations, or by telephone, facsimile or other electronic means.
We will also, upon request, reimburse brokers and other persons holding stock in their names, or in the names of nominees, for their reasonable out-of-pocket expenses for forwarding proxy materials to the beneficial owners of the capital stock and to obtain proxies.
PROPOSAL 1: ELECTIONADOPTION AND APPROVAL OF DIRECTORS
Our Certificate of Incorporation provides that the number of directors shall be established from time to time by our Board. Our Board has fixed the number of directors at seven, and we currently have seven directors serving on the Board.
Our Certificate of Incorporation provides that the Board be divided into three classes, designated as Class I, Class II and Class III. Each class must consist, as nearly as may be practicable, of one-third of the total number of directors constituting the entire Board. Each class of directors shall serve for a term ending on the date of the third annual meeting of stockholders following the annual meeting at which such class of directors was elected; provided, that each director initially assigned to Class I shall serve for a term expiring at the 2022 annual meeting of stockholders; each director initially assigned to Class II shall serve for a term expiring at the 2023 annual meeting of stockholders; and each director initially assigned to Class III shall serve for a term expiring at the 2024 annual meeting of stockholders; provided further, that the term of each director will continue until the election and qualification of his or her successor and is subject to his or her earlier death, disqualification, resignation or removal. Generally, vacancies or newly created directorships on the Board will be filled only by vote of a majority of the directors then in office and will not be filled by the stockholders.AN AMENDMENT TO OUR CHARTER TO
EFFECT A director appointed by the Board to fill a vacancy will hold office until the next election of the class for which such director was chosen, subject to the election and qualification of his or her successor and his or her earlier death, disqualification, resignation or removal.
Messrs. Gallagher and Werth have been nominated by the Board to stand for election. As the directors assigned to Class I, the current term for each of Messrs. Gallagher and Werth will expire at the Annual Meeting. If elected by the stockholders at the Annual Meeting, Messrs. Gallagher and Werth will each serve for a term expiring at the annual meeting of stockholders to be held in 2025 subject to the election and qualification of his successor or until his earlier death, resignation or removal.
Directors are elected by a plurality of the votes of the holders of shares present in person or represented by proxy and entitled to vote on the election of directors. Stockholders may not vote, or submit a proxy, for a greater number of nominees than the nominees named below. The nominees receiving the highest number of affirmative votes will be elected. Unless otherwise directed, shares represented by executed proxies will be voted for the election of the nominees named below. Each person nominated for election has agreed to serve if elected, and management has no reason to believe that any nominee will be unable to serve. If, however, prior to the Annual Meeting, the Board should learn that any nominee will be unable to serve for any reason, the proxies that otherwise would have been voted for this nominee will be voted for a substitute nominee as selected by the Board. Alternatively, the proxies, at the Board’s discretion, may be voted for that fewer number of nominees as results from the inability of any nominee to serve. The Board has no reason to believe that any of the nominees will be unable to serve.
The following table sets forth the director name, class, age as of March 28, 2022, and other information for each member of our Board:
| Name |
Class |
Age |
Director Since |
Current Term Expires | Expiration of Term For Which Nominated |
Skills and Experience | ||||||
| Patrick Gallagher | I | 57 | 2014 | 2022 | 2025 | Life Sciences, Finance and Capital Raising | ||||||
| Peter J. Werth | I | 83 | 2018 | 2022 | 2025 | Life Sciences, International Markets, Commercialization, Product Development, Manufacturing and Corporate Development | ||||||
| Jeff Conroy | II | 56 | 2018 | 2023 | Life Sciences, Finance, International Markets, Product Development, Sales & Marketing and Corporate Development | |||||||
| Gregg Givens | II | 61 | 2021 | 2023 | Finance, Accounting, Capital Raising, International Markets and Corporate Development | |||||||
| Curt Medeiros | II | 46 | 2021 | 2023 | Life Sciences, International Markets and Commercialization | |||||||
Jeff Hargroves | III | 55 | 2018 | 2024 | Life Sciences, Finance, Capital Raising, International Markets, Product Development, Commercialization and Corporate Development | |||||||
| Shane J. Schaffer | III | 47 | 2012 | 2024 | Life Sciences, Commercialization, Product Development, Clinical and CEO |
Class I Nominees for Election for a Term Expiring at the 2025 Annual Meeting
Patrick Gallagher, MBA, CFA has served as a member of our Board of Directors since January 2014. Mr. Gallagher has served as Senior Managing Director at Laidlaw & Co.REVERSE STOCK SPLIT OF OUR ISSUED SHARES OF COMMON STOCK, AT A
SPECIFIC RATIO, RANGING FROM ONE-FOR-TWO (1:2) TO ONE-FOR-FORTY (1:40), and as Managing Partner at Laidlaw Venture Partners, since September 2014. Since January 2018, he has also served as the Chief Executive Officer and as a member of the Board of Directors of Voltron Therapeutics, a privately held biotechnology company. Mr. Gallagher also serves as the Chief Executive Officer and a member of the Board of Directors at PD Theranostics, Inc. positions he has held since April 2018, and has served as Treasurer of Aerwave Medical, Inc. since November 2020. Prior to his current roles, Mr. Gallagher was a founding partner and Chief Executive Officer of BDR Research Group, LLC, from July 2001 through October 2010. Previously, he served as a Management Consultant for CHD Bioscience, Inc. from July 2012 through August 2014. He has served a member of the Board of Directors of BioSig Technologies, Inc. (NASDAQ: BSGM) since July 2014, Evermore Global since June 2015, and Algorithm Sciences, Inc. since May 2019. Mr. Gallagher earned his Master in Business Administration from Penn State University and his Bachelor of Science in Finance from the University of Vermont. We believe that Mr. Gallagher’s extensive experience in the life sciences industry qualifies him to serve on our Board of Directors.
Peter J. Werth has served on our Board of Directors since June 2018. Mr. Werth is Founder and Chief Executive Officer of ChemWerth Inc., a full-service generic drug development and supply company providing Active Pharmaceutical Ingredients to regulated markets worldwide. Mr. Werth previously served as Vice President at Ganes Chemicals, a subsidiary of Siegfried Chemicals, from March 1975 through May 1982. From 1965 through 1975, Mr. Werth worked in Research and Development for Upjohn Pharmaceuticals, now Pfizer (NYSE: PFE). In addition to serving on the Board of Cingulate, Mr. Werth serves on the Board of Directors of VM Pharma LLC since December 2010, VM Therapeutics LLC since May 2012, Alopexx Vaccines LLC since June 2012, Altos Therapeutics LLC since December 2012, VM Oncology LLC since August 2014, Nuance Designs of CT LLC since January 2015, Perseus Science Group LLC since January 2015, Alzeca Biosciences, Inc. since July 2017, Likarda LLC since August 2017, Techtona LLC since September 2017, Bright Path Pharma/Labs since November 2017, MedRhythms LLC since June 2018 and Bastion Healthcare LLC since September 2020. He earned his Master of Science in Organic Chemistry from Stanford University and his Bachelor of Science in Chemistry and Math from Fort Hays State University. We believe that Mr. Werth’s extensive experience in the life sciences industry and his knowledge in business and international markets qualifies him to serve on our Board of Directors.
Class II Directors Continuing in Office until the 2023 Annual Meeting
Jeff Conroy has served on our Board of Directors since May 2018. Mr. Conroy currently serves as the Chairman and Chief Executive Officer of Embody, Inc., a medical device company he co-founded in April 2014. He also has served as a Director of Odyssey Group International, Inc. (OTC: ODYY) since January 2020. Mr. Conroy was the Managing Director of Windward Investments from May 2012 through December 2019. Previously, he was the Managing Director of Adjuvant Partners from January 2000 through May 2012. Mr. Conroy is a Director and Past Chairman of the Virginia Biotechnology Association and serves on the Virginia Bioscience Healthcare Research Corporation’s (VBHRC) Board of Directors. Mr. Conroy holds a Bachelor of Science in Business Administration from Providence College. We believe that Mr. Conroy’s experience in the life sciences industry and his knowledge in financial and corporate development qualifies him to serve on our Board of Directors.
Gregg Givens has served on our Board of Directors since July 2021. Mr. Givens currently serves as the Chief Financial Officer at Park University, a position he has held since March 2020. From November 2018 to November 2021, Mr. Givens served as a member of the Board of Directors of Excel Industries, Inc. Previously, Mr. Givens served as a member of the Board of Directors at Asurion, Inc. from January 2006 to July 2007. From May 1996 through April 2018, Mr. Givens served in various positions at DST Systems, Inc. (NYSE: DST), including as Senior Vice President, Chief Financial Officer and Treasurer. Mr. Givens received his Bachelor of Science in Accountancy from the University of Missouri and is a Certified Public Accountant. We believe Mr. Givens’ extensive financial and accounting experience qualifies him to serve on our Board of Directors.
Curt Medeiros, MBA has served on our Board of Directors since July 2021. Since January 2022, Mr. Medeiros has served as the Chief Executive Officer and a board member of Ovation.io, Inc., a software and data company in the laboratory and life sciences industry. He has served as a Strategic Advisor to HealthRhythms and DermTech since June 2021. Mr. Medeiros served as the President and Chief Operating Officer at Ontrak, Inc., from December 2019 through June 2021 (NASDAQ: OTRK). From June 2010 to November 2019, he served in various positions at UnitedHealth Group, including President of UnitedHealth Group subsidiaries OPTUM Analytics and OPTUM Life Sciences. Mr. Medeiros received his Bachelor of Science in Chemical Engineering from Massachusetts Institute of Technology and his Master in Business Administration from Harvard Business School. We believe Mr. Medeiros’ extensive experience in the life sciences industry qualifies him to serve on our Board of Directors.
Class III Directors Continuing in Office until the 2024 Annual Meeting
Jeff Hargroves has served as a member of our Board of Directors since June 2018. In July 2001, Mr. Hargroves founded ProPharma Group, at which he served as a Board Member through its sale in September 2020. He served as President and Chief Executive Officer of ProPharma Group from its inception until May 2018. Previously, he served as the Director of Production at Ivy Animal Health (subsidiary of Elanco) from 1999 through 2001, and prior to that, as a Director of ALZA (subsidiary of Johnson and Johnson) from 1996 through 1999. Mr. Hargroves earned both his Bachelor of Science in Computer Engineering and Bachelor of Science in Electrical Engineering from the University of Missouri. We believe that Mr. Hargroves’ experience in product launch and commercialization in the pharmaceutical industry and his extensive knowledge in financial management and corporate development qualifies him to serve on our Board of Directors.
Shane J. Schaffer, PharmD co-founded Cingulate in 2012 and has since served as its Chief Executive Officer and Chairman of the Board of Directors. Prior to his work at Cingulate, Dr. Schaffer served as the Managing Director of Sabre Scientific Solutions, from July 2009 through December 2012. Previously, Dr. Schaffer worked as a Director of National Accounts at Pri-Med Access from September 2008 through May 2009, Senior Marketing at Sanofi from February 2004 through December 2007, and as a Marketing Manager at Novartis from June 2001 through October 2003. From July 1999 through June 2001, he served as Chief Fellow of the Rutgers Pharmaceutical Industry Fellowship Program and was Senior Fellow at Warner Lambert/Parke Davis and Pfizer. From June 1997 to July 1999, he worked as a clinical research associate at Hoechst Marion Roussel. Dr. Schaffer has 25 years’ experience in drug development, commercialization and biotech commercial operation. Dr. Schaffer received his Doctor of Pharmacy from The University of Kansas School of Pharmacy. We believe that Dr. Schaffer’s extensive knowledge of the pharmaceutical industry, his clinical and commercial background in a wide range of therapeutic areas, and his experience serving as our Chief Executive Officer, qualifies him to serve on our Board of Directors.
Board Membership Diversity
In accordance with Nasdaq’s new Board Diversity Rules (Rule 5605(f) and Rule 5606), the following Board Diversity Matrix presents our Board diversity statistics. The minimum diversity objective for small reporting companies listed on the Nasdaq Capital Market on or after August 6, 2021 is two diverse directors by August 6, 2026 or two years from the date of listing, whichever is later, including one who self-identifies as female, and one who self-identifies as either female, an underrepresented minority or LGBTQ+. “Underrepresented Minority” means an individual who self-identifies as one or more of the following: Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, or Two or More Races or Ethnicities. “Two or More Races or Ethnicities” means a person who identifies with more than one of the following categories: White (not of Hispanic or Latinx origin), Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander. Our Board does not currently include any diverse directors; however, we intend to have at least two diverse directors by the August 6, 2026, the deadline set forth in the Nasdaq rules.
| Board Diversity Matrix (As of April 22, 2022) | |||||||||
| Total Number of Directors | 7 | ||||||||
Female |
Male |
Non-Binary | Did Not Disclose Gender | ||||||
| Part I: Gender Identity | |||||||||
| Directors | - | 6 | - | 1 | |||||
| Part II: Demographic Background | |||||||||
| African American or Black | - | - | - | ||||||
| Alaskan Native or Native American | - | - | - | ||||||
| Asian | - | - | - | ||||||
| Hispanic or Latinx | - | - | - | ||||||
| Native Hawaiian or Pacific Islander | - | - | - | ||||||
| White | - | 6 | - | ||||||
| Two or More Races or Ethnicities | - | - | - | ||||||
| LGBTQ+ | - | ||||||||
| Did Not Disclose Demographic Background | 1 | ||||||||
AT ANY TIME PRIOR TO THE ONE-YEAR ANNIVERSARY DATE OF THE SPECIAL
MEETING, WITH THE EXACT RATIO TO BE DETERMINED BY THE BOARD RECOMMENDS THATWITHOUT
FURTHER APPROVAL OR AUTHORIZATION OF OUR STOCKHOLDERS VOTE FOR THE ELECTION OF EACH OF THE DIRECTOR NOMINEES.
Board of Director CompositionOverview
Our Board currently consists of seven members. Our directors hold office until their successors have been elected and qualified or until the earlier of their death, resignation or removal.
Corporate Governance Guidelines
Our Board adopted Corporate Governance Guidelines, a copy of which can be found in the “Corporate Governance—Governance Documents” section of the “Investors” page of our website located at www.cingulate.com. Among the topics addressed in our Corporate Governance Guidelines are:
Board and Committee Meetings
During 2021, our Board met once. The Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee did not meet during 2021, as our IPO closed on December 10, 2021. Each of the incumbent directors attended at least 75% of the total of the meetings of the Board during 2021.
Director Attendance at Annual Meeting of Stockholders
This is our first annual meeting of stockholders since our IPO. Board members are encouraged to attend all stockholder meetings.
Executive Sessions
Non-employee directors meet regularly (a minimum of two times per year) in executive session without management present. Currently, all non-employee directors, except Patrick Gallagher, are independent. The non-employee directors in attendance determine which member will preside at the executive session.
Director Independence
Pursuant to the rules of Nasdaq, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Our Board has determined that Jeff Conroy, Gregg Givens, Jeff Hargroves, Curt Medeiros,it is advisable and Peter J. Werthin the best interests of the Company and its stockholders to authorize our Board to amend our Charter to effect a reverse stock split (the “Charter Amendment”) of our issued shares of common stock at a specific ratio, ranging from one-for-two (1:2) to one-for-forty (1:40) (the “Approved Split Ratios”), to be determined by the Board without further approval or authorization of our stockholders (the “Reverse Split”). A vote for this Proposal 1 will constitute adoption and approval of the Charter Amendment and the Reverse Split that, once effected by filing the Charter Amendment with the Secretary of State of the State of Delaware, will combine between two and forty shares of our common stock into one share of our common stock. If implemented, the Reverse Split will have the effect of decreasing the number of shares of our common stock issued, but will have no effect on the number of shares of common stock we are “independent directors”authorized to issue.
Accordingly, stockholders are asked to adopt and approve the Charter Amendment set forth in Appendix A to effect the Reverse Split as such termset forth in the Charter Amendment, subject to the Board’s determination, in its sole discretion, whether or not to implement the Reverse Split, as well as the specific ratio within the range of the Approved Split Ratios, and provided that the Reverse Split must be effected on or prior to the one-year anniversary date of the Special Meeting. As set forth on Appendix A, by approving this Proposal 1, the stockholders will be deemed to have adopted and approved an amendment to effect the Reverse Split withing the range of the Approved Split Ratios.
If adopted and approved by our stockholders, the Reverse Split would be effected at an Approved Split Ratio approved by the Board prior to the one-year anniversary date of the Special Meeting, if at all. To effect the Reverse Stock Split, the Charter Amendment setting forth the Approved Split Ratio approved by the Board would be filed with the Secretary of State of the State of Delaware and any amendment to effect the Reverse Split at the other Approved Split Ratios would be abandoned. The Board reserves the right to elect to abandon the Charter Amendment and the Reverse Split at any of the Approved Split Ratios if it determines, in its sole discretion, that the Reverse Split is definedno longer in the best interests of the Company and its stockholders.
Purpose and Rationale for the Reverse Split
Avoid Delisting from Nasdaq. On July 28, 2023, we received a written notice from the Listing Qualifications Department (the “Staff”) of Nasdaq indicating that the Company is not in compliance with the $1.00 Minimum Bid Price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on Nasdaq (the “Minimum Bid Price Requirement”). The Notice does not result in the immediate delisting of the Company’s common stock and warrants from Nasdaq. We were provided a compliance period of 180 calendar days from the date of the Minimum Bid Price Requirement notice, or until January 24, 2024, to regain compliance with the Minimum Bid Price Requirement, pursuant to Nasdaq Listing Rule 5810(c)(3)(A). If at any time during this period the bid price of the Company’s common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, the Staff will provide the Company with a written confirmation of compliance and the matter will be closed. Alternatively, if we fail to regain compliance with Rule 5550(a)(2) prior to the expiration of the initial 180 calendar day period, we may be eligible for an additional 180 calendar day compliance period, provided (i) we meet the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on Nasdaq (except for the Minimum Bid Price Requirement) and (ii) we provide written notice to Nasdaq of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
If we do not regain compliance within the allotted compliance periods, including any extensions that may be granted by Nasdaq, MarketplaceNasdaq will provide notice that our common stock will be subject to delisting. We would then be entitled to appeal that determination to a Nasdaq hearings panel.
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Failure to approve the Reverse Split may potentially have serious, adverse effects on us and our stockholders. Our common stock could be delisted from Nasdaq because shares of our common stock may continue to trade below the requisite $1.00 per share price needed to maintain our listing in accordance with the Minimum Bid Price Requirement. Our shares may then trade on the OTC Bulletin Board or other small trading markets, such as the pink sheets. In that event, our common stock could trade thinly as a microcap or penny stock, adversely decrease to nominal levels of trading and may be avoided by retail and institutional investors, resulting in the impaired liquidity of our common stock.
As of September 20, 2023, our common stock closed at $0.746 per share on Nasdaq. The Reverse Split, if effected, is expected to have the immediate effect of increasing the price of our common stock as reported on Nasdaq, therefore reducing the risk that our common stock could be delisted from Nasdaq. Accordingly, the Board has approved resolutions proposing the Charter Amendment to effect the Reverse Split and directed that it be submitted to our stockholders for approval at the Special Meeting.
Management and the Board have considered the potential harm to us and our stockholders should Nasdaq delist our common stock from trading. Delisting could adversely affect the liquidity of our common stock since alternatives, such as the OTC Bulletin Board and the pink sheets, are generally considered to be less efficient markets. An investor likely would find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our common stock on an over-the-counter market. Many investors likely would not buy or sell our common stock due to difficulty in accessing over-the-counter markets, policies preventing them from trading in securities not listed on a national exchange, or other reasons.
Other Effects. The Board also believes that the increased market price of our common stock expected as a result of implementing the Reverse Split could improve the marketability and liquidity of our common stock and will encourage interest and trading in our common stock. The Reverse Split, if effected, could allow a broader range of institutions to invest in our common stock (namely, funds that are prohibited from buying stock whose price is below a certain threshold), potentially increasing the trading volume and liquidity of our common stock. The Reverse Split could help increase analyst and broker’s interest in common stock, as their policies can discourage them from following or recommending companies with low stock prices. Because of the trading volatility often associated with low-priced stocks, many brokerage houses and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. Some of those policies and practices may make the processing of trades in low-priced stocks economically unattractive to brokers. Additionally, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, a low average price per share of our common stock can result in individual stockholders paying transaction costs representing a higher percentage of their total share value than would be the case if the share price were higher.
Our Board does not intend for this transaction to be the first step in a series of plans or proposals effect a “going private transaction” within the meaning of Rule 5605(a)(2)13e-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Due
In addition, because the number of authorized shares of our common stock will not be reduced, the Reverse Split will result in an effective increase in the authorized number of shares of our common stock. The effect of the relative increase in the amount of authorized and unissued shares of our common stock would allow us to Laidlaw & Company (UK) Ltd. actingissue additional shares of common stock in connection with future financings, employee and director benefit programs and other desirable corporate activities, without requiring our stockholders to approve an increase in the authorized number of shares of common stock each time such an action is contemplated.
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Risks of the Proposed Reverse Split
We cannot assure you that the proposed Reverse Split will increase the price of our common stock and have the desired effect of regaining and maintaining compliance with Nasdaq listing rules.
If the Reverse Split is implemented, our Board expects that it will increase the market price of our common stock so that we are able to regain and maintain compliance with the Nasdaq minimum bid price requirement. However, the effect of the Reverse Split upon the market price of our common stock cannot be predicted with any certainty, and the history of similar stock splits for companies in like circumstances is varied. It is possible that (i) the per share price of our common stock after the Reverse Split will not rise in proportion to the reduction in the number of shares of our common stock outstanding resulting from the Reverse Split, (ii) the market price per post-Reverse Split share may not exceed or remain in excess of the $1.00 minimum bid price for a sustained period of time, or (iii) the Reverse Split may not result in a per share price that would attract brokers and investors who do not trade in lower priced stocks. Even if the Reverse Split is implemented, the market price of our common stock may decrease due to factors unrelated to the Reverse Split. In any case, the market price of our common stock will be based on other factors which may be unrelated to the number of shares outstanding, including our future performance. If the Reverse Split is consummated and the trading price of our common stock declines, the percentage decline as co-lead book-running underwriter for our IPO and Patrick Gallagher’s position as Senior Managing Director at Laidlaw & Coan absolute number and as Managing Partner at Laidlaw Venture Partners,a percentage of our Board determined that Mr. Gallagher is not an independent director. In addition, Shane Schaffer is not an independent directoroverall market capitalization may be greater than would occur in the absence of the Reverse Split. Even if the market price per post-Reverse Split share of our common stock remains in excess of $1.00 per share, we may be delisted due to his position as Chief Executive Officera failure to meet other continued listing requirements, including the minimum stockholders’ equity requirement under Nasdaq Listing Rule 5550(b)(1) and Nasdaq requirements related to the minimum number of shares that must be in the public float and the minimum market value of the Company.public float.
CommitteesA decline in the market price of our common stock after the BoardReverse Split is implemented may result in a greater percentage decline than would occur in the absence of Directorsa reverse stock split.
Our Board has established an Audit Committee, a Compensation Committee,If the Reverse Split is implemented and a Nominating and Corporate Governance Committee. Our Board may establish other committees to facilitate the managementmarket price of our business. The composition and functions of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by our Board. Each of these committees operate under a charter that has been approved by our Board, which cancommon stock declines, the percentage decline may be foundgreater than would occur in the “Corporate Governance—Committee Charters” sectionabsence of the “Investors” pagea reverse stock split. The market price of our website located at www.cingulate.com.common stock will, however, also be based upon our performance and other factors, which are unrelated to the number of shares of common stock outstanding.
Audit Committee. Our Audit Committee consists of Gregg Givens, Curt Medeiros, and Jeff Hargroves, with Gregg Givens serving asThe proposed Reverse Split may decrease the Chairman of the Audit Committee. Our Board has determined that the three directors currently serving on our Audit Committee are independent within the meaning of the Nasdaq Marketplace Rules and Rule 10A-3 under the Exchange Act. In addition, our Board has determined that Gregg Givens qualifies as an audit committee financial expert within the meaning of SEC regulations and the Nasdaq Marketplace Rules.
The Audit Committee’s primary responsibilities are to (i) oversee and monitor our financial reporting process, internal control system and disclosure controls and procedures, (ii) review and evaluate the audit performed by our registered independent public accountants and report to the Board any substantive issues found during the audit; (iii) oversee communication among our registered independent public accountants, senior management and the Board; (iv) appoint, compensate and oversee the workliquidity of our registered independent public accountants; (v) oversee compliance with legal and regulatory requirements; (vi) review and approve all related party transactions; and (vii) oversee compliance with our Code of Business Conduct and Ethics.
Compensation Committee. Our Compensation Committee consists of Jeff Conroy, Gregg Givens, and Peter J. Werth, with Jeff Conroy serving as the Chairman of the Compensation Committee. Our Board has determined that the three directors currently serving on our Compensation Committee are independent under the listing standards, are “non-employee directors” as defined in rule 16b-3 promulgated under the Exchange Act.
The Compensation Committee’s primary responsibilities are to review and approve all forms of non-equity and equity-based compensation of our executive officers and directors and to administer our equity-based compensation plans. The Compensation Committee also reviews and approves corporate goals and objectives relevant to the compensation of our Chief Executive Officer and evaluates performance in light of the goals and objectives.
Compensation Consultantcommon stock
In accordance with its authority to retain consultants and advisors, and in connection with our IPO, the Compensation Committee has directly engaged Pay Governance LLC to provide executive and director compensation consulting services to the Compensation Committee. In 2021, Pay Governance LLC provided services to the Compensation Committee, which included providing information and data on current trends and developments in executive and director compensation, establishing a peer group, analyzing benchmarking data for our peer group and establishing an equity incentive plan. The Compensation Committee evaluated whether any of the work performed by Pay Governance LLC during 2021 raised any conflict of interest and determined that it did not.
Nominating and Corporate Governance Committee. Our Nominating and Corporate Governance Committee consists of Jeff Hargroves, Jeff Conroy, and Curt Medeiros, with Jeff Hargroves serving as the Chairman of the Nominating and Corporate Governance Committee. All members of the Nominating and Corporate Governance Committee are independent directors as defined under the Nasdaq listing standards. The Nominating and Corporate Governance Committee (i) identifies, reviews the qualifications of, and recommends to the Board individuals to be elected to the Board and (ii) considers recommendations from stockholders if submitted in a timely manner in accordance with the procedures set forth in our bylaws and will apply the same criteria to all persons being considered. The Nominating and Corporate Governance Committee also oversees the annual evaluation of the Board and its committees.
Director Nominations Process.
The Nominatingliquidity of our common stock may be harmed by the proposed Reverse Split given the reduced number of shares of common stock that would be outstanding after the Reverse Split, particularly if the stock price does not increase as a result of the Reverse Split.
Determination of the Ratio for the Reverse Split
If Proposal 1 is approved by stockholders and Corporate Governance Committeethe Board determines that it is responsible for recommending candidates to serve on our Boardin the best interests of the Company and its committees.stockholders to move forward with the Reverse Split, the Approved Split Ratio will be selected by the Board, in its sole discretion. However, the Approved Split Ratio will not be less than a ratio of one-for-two (1:2) or exceed a ratio of one-for-forty (1:40). In considering whetherdetermining which Approved Split Ratio to recommend any particular candidate to serveuse, the Board will consider numerous factors, including the historical and projected performance of our common stock, prevailing market conditions and general economic trends, and will place emphasis on the Board or its committees or for inclusionexpected closing price of our common stock in the Board’s slate of recommended director nominees for election at an annual meeting of stockholders,period following the Nominating and Corporate Governance Committee considers the criteria set forth in our Corporate Governance Guidelines. Specifically, the Nominating and Corporate Governance Committee may take into account many factors, including: personal and professional integrity, ethics and values; experience in corporate management, such as serving as an officer or former officer of a publicly held company; strong finance experience; relevant social policy concerns; experience relevant to the Company’s industry; experience as a board member of another publicly held company; relevant academic expertise or other proficiency in an areaeffectiveness of the Company’s operations; diversity of expertise and experience in substantive matters pertaining to the Company’s business relative to otherReverse Split. The Board members; diversity of background and perspective, including, but not limited to, with respect to age, gender, race and ethnicity; practical and mature business judgment, including, but not limited to, the ability to make independent analytical inquiries; and any other relevant qualifications, attributes or skills In determining whether to recommend a director for re-election, the Nominating and Corporate Governance Committee maywill also consider the director’s past attendance at meetingsimpact of the Approved Split Ratios on investor interest. The purpose of selecting a range is to give the Board the flexibility to meet business needs as they arise, to take advantage of favorable opportunities and participation into respond to a changing corporate environment. Based on the number of shares of common stock issued and contributions tooutstanding as of September 20, 2023, after completion of the activitiesReverse Split, we will have between 434,470 and 8,689,399 shares of common stock issued and outstanding, depending on the Approved Split Ratio selected by the Board.
We doPrincipal Effects of the Reverse Split
After the effective date of the proposed Reverse Split, each stockholder will own a reduced number of shares of common stock. Except for adjustments that may result from the treatment of fractional shares as described below, the proposed Reverse Split will affect all stockholders uniformly. The proportionate voting rights and other rights and preferences of the holders of our common stock will not be affected by the proposed Reverse Split except for adjustments that may result from the treatment of fractional shares as described below For example, a holder of 2% of the voting power of the outstanding shares of our common stock immediately prior to the Reverse Split would continue to hold 2% of the voting power of the outstanding shares of our common stock immediately after the Reverse Split. The number of stockholders of record also will not be affected by the proposed Reverse Split.
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The following table contains approximate number of issued and outstanding shares of common stock, and the estimated per share trading price following a 1:2 to 1:40 Reverse Split as of September 20, 2023, without giving effect to any adjustments for fractional shares of common stock or the issuance of any derivative securities.
After Each Reverse Split Ratio
| Current | 1:2 | 1:10 | 1:20 | 1:40 | ||||||||||||||||
| Common stock Authorized(1) | 240,000,000 | 240,000,000 | 240,000,000 | 240,000,000 | 240,000,000 | |||||||||||||||
| Common Stock Issued and Outstanding | 17,378,798 | 8,689,399 | 1,737,880 | 868,940 | 434,470 | |||||||||||||||
| Number of Shares of Common Stock Reserved for Issuance (2) | 30,563,823 | 15,281,912 | 3,056,382 | 1,528,191 | 764,096 | |||||||||||||||
| Number of Shares of Common Stock Authorized but Unissued and Unreserved | 192,057,379 | 216,028,690 | 235,205,738 | 237,602,869 | 238,801,434 | |||||||||||||||
| Price per share, based on the closing price of our common stock on September 20, 2023 (3) | $ | 0.746 | 1.492 | 7.460 | 14.920 | 29.840 | ||||||||||||||
(1) The Reverse Split will not have a formal policy with regard to the consideration of diversity in identifying director nominees. The Board evaluates each individualany impact in the contextnumber of the Board asshares of common stock we are authorized to issue under our Charter.
(2) Includes (i) warrants to purchase an aggregate of 15,734,070 shares of common stock with a whole, with the objectiveweighted average exercise price of assembling a group that can best perpetuate the success$2.32 per share, (ii) 12,043,443 shares of the business and represent stockholder interests throughcommon stock issuable upon the exercise of sound judgment using its diversitypre-funded warrants with a weighted average exercise price of experience in these various areas.$0.0001 per share, (iii) 1,424,995 shares of common stock issuable upon exercise of stock options, with a weighted average exercise price of $3.03 per share, under the 2021 Omnibus Equity Incentive Plan (the “2021 Plan”) and (iv) 1,361,315 shares of common stock reserved for future issuance under the 2021 Plan.
In identifying prospective director candidates,(3) The price per share indicated reflects solely the Nominating and Corporate Governance Committee may seek referrals from other membersapplication of the Board, management, stockholdersapplicable Reverse Split ratio to the closing price of the common stock on September 20, 2023.
After the effective date of the Reverse Split, our common stock would have a new committee on uniform securities identification procedures (CUSIP) number, a number used to identify our common stock.
Our common stock is currently registered under Section 12(b) of the Exchange Act, and we are subject to the periodic reporting and other sources, including third party recommendations. The Nominating and Corporate Governance Committee also may, but need not, retain a search firm in order to assist it in identifying candidates to serve as directorsrequirements of the Company.Exchange Act. The Nominating and Corporate Governance Committee usesproposed Reverse Split will not affect the same criteria for evaluating candidates regardlessregistration of our common stock under the Exchange Act. Our common stock would continue to be reported on Nasdaq under the symbol “CING,” assuming that we are able to regain compliance with the Minimum Bid Price Requirement, although it is likely that Nasdaq would add the letter “D” to the end of the sourcetrading symbol for a period of twenty trading days after the effective date of the referral or recommendation. When considering director candidates,Reverse Split to indicate that the Nominating and Corporate Governance Committee seeks individuals with backgrounds and qualities that, when combined with those of our incumbent directors, provide a blend of skills and experience to further enhance the Board’s effectiveness. In connection with its annual recommendation of a slate of nominees, the Nominating and Corporate Governance Committee also may assess the contributions of those directors recommended for re-election in the context of the Board evaluation process and other perceived needs of the Board.
Each of the director nominees to be elected at the Annual Meeting was evaluated in accordance with our standard review process for director candidates in connection with their initial appointment and their nomination for election at the Annual Meeting. When considering whether the directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board to satisfy its oversight responsibilities effectively in light of our business and structure, the Board focused primarily on the information discussed in each of the member’s biographical information set forth above. We believe that our directors provide an appropriate mix of experience and skills relevant to the size and nature of our business. This process resulted in the Board’s nomination of the incumbent directors named in this Proxy Statement and proposed for election by you at the Annual Meeting.Reverse Split had occurred.
Stockholder Nominations for DirectorshipsEffect on Outstanding Derivative Securities
Stockholders may recommend individualsThe Reverse Split will require that proportionate adjustments be made to the Nominatingper share exercise price and Corporate Governance Committee for consideration as potential director candidates by submitting their names and background to the Secretarynumber of shares issuable upon the exercise of the Company at the address set forth below under “Stockholder Communications”following outstanding derivative securities issued by us, in accordance with the provisions set forth in our bylaws. All such recommendations will be forwarded to the NominatingApproved Split Ratio (all figures are as of September 20, 2023 and Corporate Governance Committee, which will review and only consider such recommendations if appropriate biographical and other information is provided, including, but not limited to, the items listed below,are on a timely basis. All stockholder recommendations for director candidates must be received by the Company in the timeframe(s) set forth under the heading “Stockholder Proposals” below.pre-Reverse Split basis), including:
| ● | 15,734,070 shares of common stock issuable upon the | |
| ● | 12,043,443 shares of common stock issuable upon the exercise of outstanding pre-funded warrants, with a |
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| ● | 1,424,995 shares of common stock issuable upon exercise of stock options, with a weighted average exercise price of $3.03 per share, under the | |
| ● | 1,361,315 shares of common stock reserved for future issuance under the |
Assuming that appropriate information is provided for candidates recommendedThe adjustments to the above securities, as required by stockholders, the NominatingReverse Split and Corporate Governance Committee will evaluate those candidates by following substantiallyin accordance with the Approved Split Ratio, would result in approximately the same process,aggregate price being required to be paid under such securities upon exercise, and applying substantiallyapproximately the same criteria,value of shares of common stock being delivered upon such exercise or conversion, immediately following the Reverse Split as was the case immediately preceding the Reverse Split.
Effect on our Equity Incentive Plan
As of September 20, 2023, we had 1,424,995 shares of common stock reserved for candidates submitted by membersissuance pursuant to the exercise of outstanding options issued under our 2021 Plan, as well as 1,361,315 shares of common stock available for issuance under the 2021 Plan. Pursuant to the terms of the 2021 Plan, the Board, or a designated committee thereof, as applicable, will adjust the number of shares of common stock underlying outstanding stock options, the exercise price per share of outstanding stock options and other persons, as described above and as set forth in its written charter.terms of outstanding awards issued pursuant to the 2021 Plan to equitably reflect the effects of the Reverse Split. Furthermore, the number of shares available for future grant under the 2021 Plan will be similarly adjusted.
Board Leadership StructureEffective Date
The Board believes that it should haveproposed Reverse Split would become effective on the flexibility to make determinations as to whether the same individual should serve as both the Chief Executive Officer and the Chairmandate of filing of the Board, taking into account changing needs and circumstances of bothCharter Amendment with the Company and the Board over time. In determining the appropriate leadership structure, the Board considers, among other things, the current compositionoffice of the Board, the roleSecretary of State of the Lead Independent Director, ifState of Delaware unless another effective date is set forth in the Charter Amendment. On the effective date, shares of common stock issued immediately prior thereto will be combined and reclassified, automatically and without any and challenges and opportunities specific toaction on the Company. Currently, the Chief Executive Officer and Chairman positions are held by Shane J. Schaffer. Periodically, our Board assesses these roles and the Board leadership structure to ensure the interestspart of Cingulate and our stockholders, are best served. Our Board has determined that its current leadership structureinto new shares of common stock in accordance with the Approved Split Ratio set forth in this Proposal 1. If the proposed Charter Amendment is appropriate givennot adopted and approved by our stockholders, the efficiencies of having a single individual fulfill both roles, the benefit of having a single source of leadership and authority for the Board, and Dr. Schaffer’s extensive knowledge of all aspects of Cingulate, our business and risks.Reverse Split will not occur.
RoleTreatment of Board in Risk Oversight ProcessFractional Shares
While managementNo fractional shares of common stock will be issued as a result of the Reverse Split. Instead, record holders of our common stock who otherwise would be entitled to receive a fractional share because they hold a number of shares not evenly divisible by the Approved Split Ratio will automatically be entitled to receive an additional fraction of a share of common stock to round up to the next whole share. In any event, cash will not be paid for fractional shares.
Record and Beneficial Stockholders
If the Charter Amendment is responsible for assessingadopted and managingapproved and the Reverse Split is authorized by our risks,stockholders and our Board elects to implement the Reverse Split, stockholders of record holding some or all of their shares of common stock electronically in book-entry form under the direct registration system for securities will receive a transaction statement at their address of record indicating the number of shares of common stock they hold after the Reverse Split. Non-registered stockholders holding common stock through a bank, broker or other nominee should note that such banks, brokers or other nominees may have different procedures for processing the consolidation than those that would be put in place by us for registered stockholders. If you hold your shares with such a bank, broker or other nominee and if you have questions in this regard, you are encouraged to contact your nominee.
If the Charter Amendment is responsibleadopted and approved and the Reverse Split is authorized by the stockholders and our Board elects to implement the Reverse Split, stockholders of record holding some or all of their shares in certificated form (i.e., shares represented by one or more physical stock certificates) will be requested to exchange their old stock certificate(s) (“Old Certificate(s)”) for overseeing management’s efforts to assessshares held in book-entry form at our transfer agent, Computershare, in their direct registration system representing the appropriate number of whole shares of our common stock resulting from the Reverse Split. Stockholders of record upon the effective time of the Reverse Split will be furnished the necessary materials and manage risk. This oversight is conductedinstructions for the surrender and exchange of their Old Certificate(s) at the appropriate time by our full Board, which has responsibilitytransfer agent. As soon as practicable after the effective time of the Reverse Split, our transfer agent will send a transmittal letter to each stockholder advising such holder of the procedure for general oversightsurrendering Old Certificate(s) in exchange for new shares held in book-entry. Your Old Certificate(s) representing pre-split shares cannot be used for either transfers or deliveries. Accordingly, you must exchange your Old Certificate(s) in order to effect transfers or deliveries of risks,your shares. Any stockholder whose Old Certificate(s) have been lost, destroyed or stolen will be entitled to new shares in book-entry only after complying with the requirements that we and standing committees of our Board. Our Board satisfies this responsibility through full reports by each committee chair regarding the committee’s considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within our company. Our Board believes that full and open communication between management and the Board is essential for effective risk management and oversight.transfer agent customarily apply in connection with lost, stolen or destroyed certificates.
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STOCKHOLDERS SHOULD NOT DESTROY ANY PRE-SPLIT STOCK CERTIFICATE AND SHOULD NOT SUBMIT ANY CERTIFICATES UNTIL THEY ARE REQUESTED TO DO SO.
Accounting Consequences
The Audit Committee is responsible for discussingpar value per share of common stock would remain unchanged at $0.0001 per share after the Company’s policiesReverse Split. As a result, on the effective date of the Reverse Split, the stated capital on our balance sheet attributable to the common stock will be reduced proportionally, based on the Approved Split Ratio selected by the Board, from its present amount, and the additional paid-in capital account shall be credited with respect to risk assessment and risk management, including guidelines and policies to govern the processamount by which the Company’s exposurestated capital is reduced. The per share common stock net income or loss and net book value will be increased because there will be fewer shares of common stock outstanding. The shares of common stock held in treasury, if any, will also be reduced proportionately based on the Approved Split Ratio selected by the Board. Retroactive restatement will be given to all share numbers in our financial risk is handled. In accordance with those policies, our Boardstatements, and the Board committees shall have an active role in overseeing managementaccordingly all amounts including per share amounts will be shown on a post-split basis. We do not anticipate that any other accounting consequences would arise as a result of the Company’s risks. Our Board regularly reviews information regarding the Company’s credit, liquidity and operations, as well as the risks associated with each. The Compensation Committee oversees the management of risks relating to the Company’s executive compensation plans and arrangements. The Audit Committee oversees financial and cybersecurity risks. The Nominating and Corporate Governance Committee manages risks associated with the independence of our Board and potential conflicts of interest.Reverse Split.
Stockholder Communications
Any stockholder or any other interested party who desires to communicate with our Board, our non-management directors or any specified individual director, may do so by directing such correspondence to the attention of our Secretary, Craig S. Gilgallon, at Cingulate Inc., 1901 W. 47th Place, 3rd Floor, Kansas City, Kansas 66205. Our Secretary will forward the communication to the appropriate director or directors.
Code of Business Conduct and EthicsNo Appraisal Rights
Our Board adopted a Code of Business Conductstockholders are not entitled to dissenters’ or appraisal rights under the Delaware General Corporation Law with respect to this Proposal 1 and Ethics (the “Code of Conduct”) that applies towe will not independently provide our employees, officers and directors. A copy ofstockholders with any such right if the Code of ConductReverse Split is posted on the Corporate Governance section of the Investor Relations page of our website, which is located at www.cingulate.com/investors. We intend to disclose future amendments to certain provisions of the Code of Conduct, or waivers of such provisions applicable to any principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, and our directors, on our website identified above or in filings with the SEC.implemented.
Anti-Hedging Policy
Our Board has adopted a StatementMaterial Federal U.S. Income Tax Consequences of Company Policy on Insider Trading and Policy Regarding Special Trading Procedures, which applies to all of our directors, officers and employees. The policy prohibits our directors, officers and employees from engaging in hedging or monetization transactions, such as zero-cost collars and forward sale contracts.
EXECUTIVE OFFICERSthe Reverse Split
The following table provides informationis a summary of material U.S. federal income tax consequences of a Reverse Split to our U.S. Holders (as defined below). The summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), applicable Treasury Regulations promulgated thereunder, judicial authority and current administrative rulings and practices as in effect on the date of this Proxy Statement. Changes to the laws could alter the tax consequences described below, possibly with retroactive effect. We have not sought and will not seek an opinion of counsel or a ruling from the Internal Revenue Service regarding the federal income tax consequences of a Reverse Split. This discussion only addresses U.S. Holders who hold common stock as capital assets. It does not purport to be complete and does not address U.S. Holders subject to special tax treatment under the Code, including, without limitation, financial institutions, tax-exempt organizations, insurance companies, dealers in securities, foreign stockholders, stockholders who hold their pre-reverse stock split shares as part of a straddle, hedge or conversion transaction, and stockholders who acquired their pre-reverse stock split shares pursuant to the exercise of employee stock options or otherwise as compensation. If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) is the beneficial owner of our executive officerscommon stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. Accordingly, partnerships (and other entities treated as partnerships for U.S. federal income tax purpose) holding our common stock and the partners in such entities should consult their own tax advisors regarding the U.S. federal income tax consequences of the proposed Reverse Split to them. In addition, the following discussion does not address the tax consequences of the Reverse Split under state, local and foreign tax laws. Furthermore, the following discussion does not address any tax consequences of transactions effectuated before, after or at the same time as the Reverse Split, whether or not they are in connection with their respective ages as of March 28, 2022:the Reverse Split.
For purposes of the discussion below, a “U.S. Holder” is a beneficial owner of shares of the Company’s common stock that for U.S. federal income tax purposes is: (i) an individual citizen or resident of the United States; (ii) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state therein or the District of Columbia; (iii) an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or (iv) a trust with respect to which a U.S. court is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions of the trust, or that has a valid election in effect to be treated as a U.S. person under applicable U.S. Treasury Regulations.
The Reverse Split is expected to constitute a “recapitalization” for U.S. federal income tax purposes pursuant to Section 368(a)(1)(E) of the Code. A U.S. Holder generally will not recognize gain or loss on the deemed exchange of shares pursuant to the Reverse Split, except potentially with respect to any additional fractions of a share of our common stock received as a result of the rounding up of any fractional shares that otherwise would be issued, as discussed below. Subject to the following discussion regarding a U.S. Holder’s receipt of a whole share of the Company’s common stock in lieu of a fractional share, a U.S. Holder’s aggregate tax basis in the shares of common stock received in the Reverse Split will equal the U.S. Holder’s basis in its old shares of common stock and such U.S. Holder’s holding period in the shares received will include the holding period in its old shares exchanged. The Treasury Regulations provide detailed rules for allocating the tax basis and holding period of shares of common stock surrendered in a recapitalization to shares received in the recapitalization. U.S. Holders of our common stock acquired on different dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares.
As described above under “Treatment of Fractional Shares,” no fractional shares of the Company’s common stock will be issued as a result of the Reverse Split. Instead, record holders of our common stock who otherwise would be entitled to receive a fractional share because they hold a number of shares not evenly divisible by the Approved Split Ratio will automatically be entitled to receive an additional fraction of a share of common stock to round up to the next whole share. A U.S. Holder who receives one whole share of the Company’s common stock in lieu of a fractional share may recognize income or gain in an amount not to exceed the excess of the fair market value of such share over the fair market value of the fractional share to which such U.S. Holder was otherwise entitled. The Company is not making any representation as to whether the receipt of one whole share in lieu of a fractional share will result in income or gain to any stockholder, and stockholders are urged to consult their own tax advisors as to the possible tax consequences of receiving a whole share in lieu of a fractional share in the Reverse Split.
We will not recognize any gain or loss as a result of the proposed Reverse Split.
THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL U.S. INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT AND DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT THERETO. YOU SHOULD CONSULT YOUR OWN TAX ADVISORS AS TO THE PARTICULAR FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE REVERSE SPLIT IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES.
Required Vote and Recommendation
In accordance with our Charter and Delaware law, approval and adoption of this Proposal 1 requires the affirmative vote of a majority of the votes cast at the Special Meeting. Abstentions and broker non-votes, if any, with respect to this proposal are not counted as votes cast and will not affect the outcome of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF AN AMENDMENT TO THE CHARTER TO EFFECT THE REVERSE SPLIT.
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See page 10 of this Proxy Statement for Mr. Schaffer’s biography.PROPOSAL 2: APPROVAL, FOR THE PURPOSE OF COMPLYING WITH THE APPLICABLE PROVISIONS OF NASDAQ LISTING RULE 5635(D), OF THE ISSUANCE OF UP TO 10,387,812 SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF WARRANTS
Louis G. Van Horn, MBA has served as our Executive Vice President and Chief Financial Officer since May 2017. He previously served as a consultant with Tarsus CFO Services, LLC from December 2016 to May 2017. From December 2004 through June 2016, Mr. Van Horn served as Executive Vice President and Chief Financial Officer of Store Financial Services, LLC. Previously, Mr. Van Horn served as Vice President and Comptroller of Kansas City Southern (NYSE: KSU) from June 1988 to December 2003. He previously held financial positions at Yellow Freight Systems and PricewaterhouseCoopers. Mr. Van Horn received his Master of Business Administration from the University of Missouri – Kansas City, and a Bachelor of Arts in Accounting from Westminster College. Mr. Van Horn is a Certified Public Accountant.
Laurie A. Myers, PhD, MBA has served as our Executive Vice President and Chief Operating Officer since April 2018 and previously served as a member of our Board of Directors from June 2013 through April 2018 and as our Senior Vice President of Operations from November 2017 to April 2018. Dr. Myers also serves as a Member of the Board of Advisors of Linea System, LLC, a position she has held since September 2020. Dr. Myers previously served as the Head of Marketing of Fidia Pharma USA Inc., a wholly owned subsidiary of Fidia Farmaceutici from September 2014 through November 2017. Dr. Myers was an Adjunct Professor at the College of New Jersey School of Business from January 2012 through December 2014, and served as President and a Member of the Board of the Hallett David Strategic Group from January 2010 through September 2014. Dr. Myers received her Doctor of Philosophy in Toxicology from Rutgers Medical School and Rutgers School of Pharmacy, her Masters in Business Administration from St. Joseph’s University and her Master of Science and Bachelor of Science from the University of Scranton.
Craig S. Gilgallon, Esq. co-founded Cingulate in 2013 and has served as our Executive Vice President, General Counsel and Board Secretary since our inception. Previously, he served as our Director of Operations from March 2017 through November 2017. Since 2012, Mr. Gilgallon has served as a partner at the law firm of Pawar Gilgallon & Rudy, LLC. Prior to that, he served as the owner of the Law Office of Craig S. Gilgallon from October 2004 through August 2012. Mr. Gilgallon received his Juris Doctor from the Thomas Jefferson School of Law and his Bachelor of Science from Ithaca College.
Raul R. Silva, MD co-founded Cingulate in 2013 and has served as our Executive Vice President and Chief Science Officer since January 2018. He has been in private practice since 2009. Previously, Dr. Silva served as Executive Director of Rockland Children’s Psychiatric Center from 2006-2009. He also served as Vice Chairman of The New York University Child Study Center 2005 through 2009. Dr. Silva served as Deputy Director of Child Psychiatry at Bellevue Hospital Center from 1999 through 2006. Prior to that, he was Director of Child and Adolescent Psychiatry at St. Luke’s/Roosevelt Hospital in New York City from 1995 through 1990. He completed his fellowship in child and adolescent psychiatry at Columbia University’s St. Luke’s/Roosevelt Hospital Center in 1990 Dr. Silva completed a psychopharmacology research fellowship at New York University Medical Center. Dr. Silva is board certified in general, child and adolescent psychiatry. Dr. Silva received his Doctor of Medicine degree from Ross University and his Bachelor of Science in Biology from Fairleigh Dickinson University.
Matthew N. Brams, MD co-founded Cingulate in 2013 and has served as our Executive Vice President and Chief Medical Officer since January 2018 and served as a director of Cingulate from January 2018 through July 2021. Dr. Brams served as a Principal of Bayou City Research, a position he held from April 1999 to January 2021. Prior to that, he served as a consultant medical director and/or admitting Psychiatrist at numerous medical facilities including Taylor Recover Center (April 2019 to present); Lakeview Health Rehabilitation Center (2018-2019); The Parc, Houston Tx (2012-2015); GeroPsych Unit Gulf Coast Hospital (2009-Present). Dr. Brams has been integral to the research teams for all the major pharmaceutical companies participating in the ADHD clinical arena. Dr. Brams completed residency and fellowship at Baylor College of Medicine in adult and child psychiatry, respectively. He is Board certified in Adult and Child Psychiatry (1994) and is an acting Senior Board Examiner for the American Board of Psychiatry and Neurology. He received his Doctor of Medicine from The University of Texas Science Center and his Bachelor of Arts in Biology from the University of Texas.
EXECUTIVE OFFICER AND DIRECTOR COMPENSATION
The following tables and accompanying disclosure set forth information about the compensation earned by our named executive officers during 2021. Our named executive officers include our principal executive officer and the three most highly-compensated executive officers (other than our principal executive officer) serving as executive officers as of December 31, 2021 as set forth below:
SUMMARY COMPENSATION TABLE
The following table sets forth information regarding compensation awarded to, earned by or paid to each of our named executive officers for the years shown.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||
| Shane J. Schaffer, | 2021 | 475,000 | - | 3,000 | 920,799 | - | - | 1,398,799 | ||||||||||||||||||||||||
| Chairman and CEO | 2020 | 275,000 | - | - | - | - | - | 275,000 | ||||||||||||||||||||||||
| Laurie A. Myers | 2021 | 400,000 | - | 3,000 | 345,302 | - | - | 748,302 | ||||||||||||||||||||||||
| EVP and COO (3) | ||||||||||||||||||||||||||||||||
| Louis G. Van Horn, | 2021 | 380,000 | - | 3,000 | 345,302 | - | - | 728,302 | ||||||||||||||||||||||||
| EVP and CFO | 2020 | 238,499 | - | - | - | - | - | 238,499 | ||||||||||||||||||||||||
| Craig S. Gilgallon | 2021 | 380,000 | - | 3,000 | 345,302 | - | - | 728,302 | ||||||||||||||||||||||||
| EVP, GC and Secretary | 2020 | 235,000 | - | - | - | - | - | 235,000 | ||||||||||||||||||||||||
We currently provide broad-based health and welfare benefits that are available to all of our employees, including our named executive officers, including medical, dental, and vision insurance.
401(k) PlanOverview
We sponsor a 401(k) savings plan (the “401(k) Plan”)are seeking stockholder approval, for all eligible employees. Under the 401(k) Plan, we do not make matching contributions intopurpose of complying with the 401(k) Plan other thanapplicable provisions of Nasdaq Listing Rule 5635(d), for the annual required safe harbor match.
Employment Arrangementsissuance of up to 10,387,812 shares of our common stock issuable upon the exercise of the Series A warrants and Series B warrants that were issued in and in connection with our Named Executive Officers
Shane J. Schafferoffering that closed on September 13, 2023 (the “Offering”).
On September 23, 2021,11, 2023, we entered into a securities purchase agreement (the “Purchase Agreement”) with an employment agreementinstitutional investor (the “Investor”), pursuant to which we sold (i) 1,720,000 shares of common stock, (ii) pre-funded warrants to purchase up to an aggregate of 5,205,208 shares of common stock (the “Pre-Funded Warrants”), (iii) Series A warrants to purchase up to an aggregate of 6,925,208 shares of common stock (“Series A warrants”), and (iv) Series B warrants to purchase up to 3,462,604 shares of common stock (“Series B warrants” and, together with Dr. Schaffer. Under the termsSeries A warrants, the “Common Warrants”). The Offering closed on September 13, 2023.
The combined purchase price for each share of Dr. Schaffer’s employment agreement, he holdscommon stock and accompanying Common Warrants was $0.5776, and the position of Chief Executive Officercombined purchase price for each Pre-Funded Warrant and receives a base salary of $475,000 annually. In addition, Dr. Schaffer is eligible to receive an annual bonus, with a target amount equal to twenty-five percent (25%) of Dr. Schaffer’s annual base salary.accompanying Common Warrants was $0.5775. The actual amount of each bonus will be determined by the sole discretionNasdaq Official Closing Price of our Compensation Committeecommon stock on Nasdaq on September 8, 2023, the trading date immediately preceding the signing of the Purchase Agreement, was $0.5776 per share.
Description of Common Warrants
Duration and Exercise Price
Pursuant to Nasdaq Listing Rule 5635(d), the Common Warrants are not exercisable until our stockholders approve the issuance of shares of common stock issuable upon exercise of the Common Warrants (the “Warrant Stockholder Approval”). We have agreed with the Investor that if we do not obtain the Warrant Approval at the first stockholder meeting at which such stockholder approval is sought, we will a call additional stockholder meeting every 60 days.
The Series A warrants have an exercise price of $0.5776 per share and will be based upon bothexercisable beginning on the Company’s performance and Dr. Schaffer’s individual performance. Pursuant to the terms of his employment agreement, Dr. Schaffer is also eligible to participate in all incentive and deferred compensation programs available to other executives or officerseffective date of the Company,Warrant Stockholder Approval (the “Initial Exercise Date”). The Series A warrants will expire on the five-year anniversary of the Initial Exercise Date. The Series B warrants have exercise price of $0.5776 per share and will be eligible to participate in any employee benefit plans and equity plans that we may adopt, which plans may be amended byexercisable beginning on the Company from time to time in its sole discretion.Initial Exercise Date. The Series B warrants will expire on the two-year anniversary of the Initial Exercise Date.
We may terminate Dr. Schaffer’s employment at any time without causeThe exercise price and number of shares of common stock issuable upon providing written notice to Dr. Schaffer, and Dr. Schaffer may terminate his employment at any time for any reason, including for Good Reason (as that termexercise of the Common Warrants is defined in Dr. Schaffer’s employment agreement).
If Dr. Schaffer’s employment is terminated by the Company without cause or by Dr. Schaffer for Good Reason, Dr. Schaffer will be entitled to receive, subject to his signing a general releaseappropriate adjustment in the event of claims in favor ofstock dividends, stock splits, reorganizations or similar events affecting our common stock and the Company and related persons and entities within twenty-one (21) days of the date of termination and following the expiration of seven (7) days thereafter, a severance payment of a lump sum amount in cash equal to one and one half (1 ½) times Dr. Schaffer’s base salary, within 60 days following the date of termination. In addition, all stock options and stock appreciation rights held by Dr. Schaffer, which would have vested if he had remained employed for an additional four (4) months following the date of termination, shall become vested and exercisable as of the date of termination for the remainder of their full term. If Dr. Schaffer’s employment is terminated by the Company without cause or by Dr. Schaffer for Good Reason within twelve (12) months of a Change of Control, Dr. Schaffer will be entitled to receive, subject to his signing a general release of claims in favor of the Company and related persons and entities within twenty-one (21) days of the date of termination and following the expiration of seven (7) days thereafter, a severance payment of a lump sum amount in cash equal to two (2) times Dr. Schaffer’s base salary, within 60 days following the date of termination; provided however, if any payment or benefits would constitute an “parachute payment” as defined in Section 280(G) of the Internal Revenue Code, the payments will be the greater of (i) the largest amount to ensure that no portion of those payments be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code and (ii) the amount of the full payment, less all taxes, including the excise tax imposed by Section 4999 of the Internal Revenue Code. In addition, all stock options and stock appreciation rights held by Dr. Schaffer shall become vested and exercisable as of the date of termination for the remainder of their full term.
Laurie A. Myers
On September 23, 2021, we entered into an employment agreement with Ms. Myers. Under the terms of Ms. Myers’ employment agreement, she holds the positions of Executive Vice President and Chief Operating Officer and receives a base salary of $400,000 annually. In addition, Ms. Myers is eligible to receive an annual bonus, with a target amount equal to twenty-five percent (25%) of Ms. Myers’ annual base salary. The actual amount of each bonus will be determined by the sole discretion of our Compensation Committee and will be based upon both the Company’s performance and Ms. Myers’ individual performance, as recommended by the Chief Executive Officer. Pursuant to the terms of her employment agreement, Ms. Myers is also eligible to participate in all incentive and deferred compensation programs available to other executives or officers of the Company, and will be eligible to participate in any employee benefit plans and equity plans that we may adopt, which plans may be amended by the Company from time to time in its sole discretion.
We may terminate Ms. Myers’ employment at any time without cause upon providing written notice to Ms. Myers, and Ms. Myers may terminate her employment at any time for any reason, including for Good Reason (as that term is defined in Ms. Myers’ employment agreement).
If Ms. Myers’ employment is terminated by the Company without cause or by Ms. Myers for Good Reason, Ms. Myers will be entitled to receive, subject to her signing a general release of claims in favor of the Company and related persons and entities within twenty-one (21) days of the date of termination and following the expiration of seven (7) days thereafter, a severance payment of a lump sum amount in cash equal to one (1) times Ms. Myers’ base salary, within 60 days following the date of termination. In addition, all stock options and stock appreciation rights held by Ms. Myers, which would have vested if she had remained employed for an additional four (4) months following the date of termination, shall become vested and exercisable as of the date of termination for the remainder of their full term. If Ms. Myers’ employment is terminated by the Company without cause or by Ms. Myers for Good Reason within twelve (12) months of a Change of Control, Ms. Myers will be entitled to receive, subject to her signing a general release of claims in favor of the Company and related persons and entities within twenty-one (21) days of the date of termination and following the expiration of seven (7) days thereafter, a severance payment of a lump sum amount in cash equal to one (1) times Ms. Myers’ base salary, within 60 days following the date of termination; provided however, if any payment or benefits would constitute an “parachute payment” as defined in Section 280(G) of the Internal Revenue Code, the payments will be the greater of (i) the largest amount to ensure that no portion of those payments be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code and (ii) the amount of the full payment, less all taxes, including the excise tax imposed by Section 4999 of the Internal Revenue Code. In addition, all stock options and stock appreciation rights held by Ms. Myers shall become vested and exercisable as of the date of termination for the remainder of their full term.exercise price.
Louis G. Van HornExercisability
On September 23, 2021, we entered into an employment agreementSubject to receipt of the Warrant Stockholder Approval, the Common Warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). A holder (together with Mr. Van Horn. Underits affiliates) may not exercise any portion of such holder’s Common Warrants to the extent that the holder would own more than 4.99% of the outstanding common stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to us, the holder may increase the amount of ownership of outstanding stock after exercising the holder’s Common Warrants up to 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of Mr. Van Horn’s employment agreement, he holds the positions of Executive Vice President and Chief Financial Officer and receives a base salary of $380,000 annually. In addition, Mr. Van Horn is eligible to receive an annual bonus, with a target amount equal to twenty-five percent (25%) of Mr. Van Horn’s annual base salary. The actual amount of each bonus will be determined by the sole discretion of our Compensation Committee and will be based upon both the Company’s performance and Mr. Van Horn’s individual performance, as recommended by the Chief Executive Officer. Pursuant to the terms of his employment agreement, Mr. Van Horn is also eligible to participate in all incentive and deferred compensation programs available to other executives or officers of the Company, and will be eligible to participate in any employee benefit plans and equity plans that we may adopt, which plans may be amended by the Company from time to time in its sole discretion.Common Warrants.
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We may terminate Mr. Van Horn’s employment at any time without cause upon providing written notice to Mr. Van Horn, and Mr. Van Horn may terminate his employment at any time for any reason, including for Good Reason (as that term is defined in Mr. Van Horn’s employment agreement).
Cashless Exercise
If, Mr. Van Horn’s employmentat the time a holder exercises its Common Warrants, a registration statement registering the issuance or resale of the shares of common stock underlying the Common Warrants under the Securities Act is terminatednot then effective or available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of common stock determined according to a formula set forth in the Common Warrant.
Fundamental Transactions
In the event of a fundamental transaction, as described in the Common Warrants and generally including any reorganization, recapitalization or reclassification of our shares of common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of the voting power represented by our outstanding shares of capital stock, any person or group becoming the Company without causebeneficial owner of more than 50% of the voting power represented by our outstanding shares of capital stock, any merger with or into another entity or a tender offer or exchange offer approved by Mr. Van Hornmore than 50% of the voting power represented by our outstanding shares of capital, then upon any subsequent exercise of a Common Warrant, the holder will have the right to receive as alternative consideration, for Good Reason, Mr. Van Horneach share of our common stock that would have been issuable upon such exercise immediately prior to the occurrence of such fundamental transaction, the number of shares of common stock of the successor or acquiring corporation or of our company, if it is the surviving corporation, and any additional consideration receivable upon or as a result of such transaction by a holder of the number of shares of our common stock for which the Common Warrant is exercisable immediately prior to such event. Notwithstanding the foregoing, in the event of a fundamental transaction, the holders of the Common Warrants have the right to require us or a successor entity to redeem the Common Warrants for cash in the amount of the Black-Scholes Value (as defined in each Common Warrant) of the unexercised portion of the Common Warrants concurrently with or within 30 days following the consummation of a fundamental transaction.
However, in the event of a fundamental transaction which is not in our control, including a fundamental transaction not approved by our board of directors, the holders of the Common Warrants will only be entitled to receive subject to his signing a general release of claims in favor of the Company and related persons and entities within twenty-one (21) days of the date of termination and following the expiration of seven (7) days thereafter, a severance payment of a lump sum amount in cash equal to one (1) times Mr. Van Horn’s base salary, within 60 days following the date of termination. In addition, all stock options and stock appreciation rights held by Mr. Van Horn, which would have vested if he had remained employed for an additional four (4) months following the date of termination, shall become vested and exercisablefrom us or our successor entity, as of the date of termination forconsummation of such fundamental transaction the remaindersame type or form of their full term. If Mr. Van Horn’s employmentconsideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of the Common Warrant that is terminated bybeing offered and paid to the Company without causeholders of our common stock in connection with the fundamental transaction, whether that consideration is in the form of cash, stock or by Mr. Van Horn for Good Reason within twelve (12) monthsany combination of a Changecash and stock, or whether the holders of Control, Mr. Van Horn will be entitledour common stock are given the choice to receive subject to his signing a general releasealternative forms of claimsconsideration in favor ofconnection with the Company and related persons and entities within twenty-one (21) days of the date of termination and following the expiration of seven (7) days thereafter, a severance payment of a lump sum amount in cash equal to one (1) times Mr. Van Horn’s base salary, within 60 days following the date of termination; provided however, if any payment or benefits would constitute an “parachute payment” as defined in Section 280(G) of the Internal Revenue Code, the payments will be the greater of (i) the largest amount to ensure that no portion of those payments be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code and (ii) the amount of the full payment, less all taxes, including the excise tax imposed by Section 4999 of the Internal Revenue Code. In addition, all stock options and stock appreciation rights held by Mr. Van Horn shall become vested and exercisable as of the date of termination for the remainder of their full term.fundamental transaction.
Craig S. Gilgallon, Esq.Transferability
On September 23, 2021,Subject to applicable laws, a Common Warrant may be transferred at the option of the holder upon surrender of the Common Warrant to us together with the appropriate instruments of transfer.
Fractional Shares
No fractional shares of common stock will be issued upon the exercise of the Common Warrants. Rather, the number of shares of common stock to be issued will, at our election, either be rounded up to the next whole share or we entered intowill pay a cash adjustment in respect of such final fraction in an employment agreement with Mr. Gilgallon. Under the terms of Mr. Gilgallon’s employment agreement, he holds the positions of Executive Vice President and General Counsel and receives a base salary of $380,000 annually. In addition, Mr. Gilgallon is eligible to receive an annual bonus, with a target amount equal to twenty-five percent (25%) of Mr. Gilgallon’s annual base salary. The actual amount of each bonus will be determinedsuch fraction multiplied by the sole discretion of our Compensation Committee and will be based upon both the Company’s performance and Mr. Gilgallon’s individual performance, as recommended by the Chief Executive Officer. Pursuant to the terms of his employment agreement, Mr. Gilgallon is also eligible to participate in all incentive and deferred compensation programs, and other executive retirement plans available to other executives or officers of the Company, and will be eligible to participate in any employee benefit plans and equity plans that we may adopt, which plans may be amended by the Company from time to time in its sole discretion.
We may terminate Mr. Gilgallon’s employment at any time without cause upon providing written notice to Mr. Gilgallon, and Mr. Gilgallon may terminate his employment at any time for any reason, including for Good Reason (as that term is defined in Mr. Gilgallon’s employment agreement)exercise price.
If Mr. Gilgallon’s employment is terminated by the Company without cause or by Mr. Gilgallon for Good Reason, Mr. Gilgallon will be entitled to receive, subject to his signing a general release of claims in favor of the Company and related persons and entities within twenty-one (21) days of the date of termination and following the expiration of seven (7) days thereafter, a severance payment of a lump sum amount in cash equal to one (1) times Mr. Gilgallon’s base salary, within 60 days following the date of termination. In addition, all stock options and stock appreciation rights held by Mr. Gilgallon, which would have vested if he had remained employed for an additional four (4) months following the date of termination, shall become vested and exercisable as of the date of termination for the remainder of their full term. If Mr. Gilgallon’s employment is terminated by the Company without cause or by Mr. Gilgallon for Good Reason within twelve (12) months of a Change of Control, Mr. Gilgallon will be entitled to receive, subject to his signing a general release of claims in favor of the Company and related persons and entities within twenty-one (21) days of the date of termination and following the expiration of seven (7) days thereafter, a severance payment of a lump sum amount in cash equal to one (1) times Mr. Gilgallon’s base salary, within 60 days following the date of termination; provided however, if any payment or benefits would constitute an “parachute payment” as defined in Section 280(G) of the Internal Revenue Code, the payments will be the greater of (i) the largest amount to ensure that no portion of those payments be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code and (ii) the amount of the full payment, less all taxes, including the excise tax imposed by Section 4999 of the Internal Revenue Code. In addition, all stock options and stock appreciation rights held by Mr. Gilgallon shall become vested and exercisable as of the date of termination for the remainder of their full term.
Outstanding Equity Awards at 2021 Fiscal Year-End
| Name | Grant date (1) | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Option exercise price ($) | Option expiration date | |||||||||||
| Shane J. Schaffer | 12-7-2021 | - | 179,668 | $ | 6.00 | 12-7-2031 | ||||||||||
| Laurie A. Myers | 12-7-2021 | - | 67,376 | $ | 6.00 | 12-7-2031 | ||||||||||
| Louis G. Van Horn | 12-7-2021 | - | 67,376 | $ | 6.00 | 12-7-2031 | ||||||||||
| Craig S. Gilgallon | 12-7-2021 | - | 67,376 | $ | 6.00 | 12-7-2031 | ||||||||||
Director CompensationTrading Market
In 2021, we did not maintain any standard fee arrangementsThere is no established trading market for the non-employee membersCommon Warrants, and we do not expect such a market to develop. We do not intend to apply to list the Common Warrants on any securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of our Board of Directors for their servicethe Common Warrants will be extremely limited.
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Right as a director other than for reimbursement of reasonable expenses incurred in attending meetings of our Board of Directors and committees of the Board of Directors.
2021 Director Compensation Table
| Name | Fees earned or paid in cash ($) | Stock ($)(1) | Option awards ($)(2) | Total ($) | ||||||||||||
| Jeff Conroy | — | 3,600 | 46,038 | 49,638 | ||||||||||||
| Patrick Gallagher | — | 2,400 | 46,038 | 48,438 | ||||||||||||
| Gregg Givens | — | — | 46,038 | 46,038 | ||||||||||||
| Jeff Hargroves | — | 2,400 | 46,038 | 48,438 | ||||||||||||
| Curt Medeiros | — | — | 46,038 | 46,038 | ||||||||||||
| Peter Werth | — | 1,500 | 46,038 | 47,538 | ||||||||||||
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2022 Director Compensation Program
Our Compensation Committee and Board of Directors approved a director compensation program for our non-employee directors, effective beginning January 1, 2022. This program provides forExcept as otherwise provided in the following annual cash compensation:
If the Board of Directors appoints a lead independent director, that individual would receive an additional annual cash retainer equal to $20,000. All cash fees will be paid quarterly in arrears and shall be pro-rated based on the number of wholeCommon Warrants or partial months served during a calendar year. Although directors are not paid meeting fees, the lead independent director, if any, and the Chairmanby virtue of the Compensation Committee may determine to pay meeting fees for one or more meetings to the extent the numberholder’s ownership of Board or committee meetings exceeds the typical number of meetings during the year. We will also reimburse non-employee directors for reasonable expenses incurred in connection with attending board of director and committee meetings.
Non-employee directors will receive an annual stock option award, which will vest in a single installment on the first anniversary of the date of grant. Each non-employee director received a non-qualified stock option award of 9,000 options on February 25, 2022. Newly appointed non-employee directors will receive an initial non-qualified stock option award of 12,000 options.
Dr. Schaffer, our Chief Executive Officer, serves as Chairman of our Board of Directors but does not receive additional compensation for his service as a director. See the Summary Compensation Table for a description of Dr. Schaffer’s 2021 compensation.
Equity Compensation Plan Information
In September 2021, our Board of Directors and stockholders adopted the 2021 Omnibus Equity Incentive Plan (the “Equity Plan”), which provides for the grant of incentive stock options and non-qualified stock options to purchase shares of our common stock, and other typessuch holder of awards. The general purposeCommon Warrants does not have the rights or privileges of the Equity Plan is to provide a means whereby eligible employees, officers, non-employee directors and other individual service providers develop a sense of proprietorship and personal involvement in our development and financial success, and to encourage them to devote their best efforts to our business, thereby advancing our interests and the interests of our stockholders.
The following table provides information as of December 31, 2021 with respect to sharesholder of our common stock, including any voting rights, until such holder exercises such holder’s Common Warrants. The Common Warrants will provide that the holders of the Common Warrants have the right to participate in distributions or dividends paid on our shares of common stock.
Waivers and Amendments
The Common Warrants may be issued pursuantmodified or amended or the provisions of such Common Warrants waived with our consent and the consent of each holder.
The foregoing description of the Common Warrants is not complete and is qualified in its entirety by reference to our equity compensation plans.
the full text of the forms of the Series A warrant and Series B warrant, copies of which are attached as Exhibits 4.6 and 4.7, respectively, to the Company’s registration statement on form S-1 (No. 333-273405) that was declared effective by the SEC on September 11, 2023.
| Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a) | ||||||||||
| Plan category | (a) | (b) | (c)(2) | |||||||||
| Equity compensation plans approved by security holders (1) | 523,284 | $ | 6.00 | 562,876 | ||||||||
| Equity compensation plans not approved by security holders | — | $ | — | — | ||||||||
| Total | 523,284 | $ | 6.00 | 562,876 | ||||||||
Reasons for the Warrant Exercise Proposal
Our common stock is listed on Nasdaq and trades under the ticker symbol “CING.” Nasdaq Listing Rule 5635(d) requires stockholder approval for certain transactions, other than public offerings, involving the issuance of 20% or more of the total pre-transaction shares outstanding at less than the applicable Minimum Price. Under Rule 5635(d), the “Minimum Price” means a price that is the lower of: (i) the Nasdaq Official Closing Price immediately preceding the signing of the binding agreement; or (ii) the average Nasdaq Official Closing Price of the common stock for the five trading days immediately preceding the signing of the binding agreement. The Nasdaq Official Closing Price of our common stock on Nasdaq on September 8, 2023, the trading date immediately preceding the signing of the Purchase Agreement, was $0.5776 per share. Additionally, for an offering to satisfy the “Minimum Price,” Nasdaq generally attributes a value of $0.125 for each warrant to purchase one share of common stock when determining whether a transaction is effected at a discount and when an equal number of warrants are issued with the common stock (100% coverage) and in the Offering a value of $0.19 since the Offering had 150% warrant coverage. In order to ensure that such value was not attributed to the Common Warrants, the Common Warrants provide that they may not be exercised, and therefore have no value, until stockholder approval of their exercise is obtained.
Potential Consequences if Proposal 2 is Not Approved
The Board is not seeking the approval of our stockholders to authorize our entry into or consummation of the transactions contemplated by the Purchase Agreement, as the Offering has already been completed and the Common Warrants have already been issued. We are only asking for approval to issue the shares of common stock underlying the Common Warrants upon exercise thereof.
The failure of our stockholders to approve this Proposal 2 will mean that: (i) we cannot permit the exercise of the Common Warrants and (ii) may incur substantial additional costs and expenses, including the costs and expense of seeking stockholder approval every 60 days until our stockholders approve the issuance of the shares underlying the Common Warrants.
Each Common Warrant has an initial exercise price of $0.5776 per share. Accordingly, we would realize an aggregate of up to approximately $6.0 million in gross proceeds if all the Common Warrants were exercised for cash. If the Common Warrants cannot be exercised, we will not receive any such proceeds, which could adversely impact our ability to fund our operations.
In addition, in connection with the Offering and the issuance of Common Warrants, we agreed to seek stockholder approval every 60 days until our stockholders approve the issuance of the shares underlying the Common Warrants. The costs and expenses associated with seeking such approval could materially adversely impact our ability to fund our operations.
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Potential Adverse Effects of the Approval of Proposal 2
If this Proposal 2 is approved, existing stockholders will suffer dilution in their ownership interests in the future upon the issuance of shares of common stock upon exercise of the Common Warrants. Assuming the full exercise of the Common Warrants, an aggregate of 10,387,812 additional shares of common stock will be outstanding, and the ownership interest of our existing stockholders would be correspondingly reduced. In addition, the sale into the public market of these shares also could materially and adversely affect the market price of our common stock.
No Appraisal Rights
No appraisal rights are available under the General Corporation Law of the State of Delaware or under our Charter or Bylaws with respect to Proposal 2.
Required Vote and Recommendation
In accordance with our Charter and Delaware law, approval and adoption of this Proposal 2 requires the affirmative vote of a majority of the votes cast at the Special Meeting. Abstentions and broker non-votes, if any, with respect to this proposal are not counted as votes cast and will not affect the outcome of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL, FOR THE PURPOSE OF COMPLYING WITH THE APPLICABLE PROVISIONS OF NASDAQ LISTING RULE 5636(D), OF THE ISSUANCE OF UP TO 10,387,812 SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF WARRANTS
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information about the beneficial ownership of our common stock as of April 15, 2022September 12, 2023 (unless otherwise noted) by:
| ● | each person or group known to us who beneficially owns more than 5% of our common stock; | |
| ● | each of our directors; | |
| ● | each of our Named Executive Officers; and | |
| ● | all of our directors and executive officers as a group. |
We have determined beneficial ownership in accordance with the rules of the SEC. Under these rules, beneficial ownership includes any shares of common stock as to which the individual or entity has sole or shared voting power or investment power. In computing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person, shares of common stock subject to options or warrants held by such person that are currently exercisable or will become exercisable within 60 days of April 15, 2022September 12, 2023 are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person.
| Name of Beneficial Owner (1) | Number of Shares Beneficially Owned | Percent of Class (2) | Number of Shares Beneficially Owned | Percent of Class (2) | ||||||||||||
| 5% or Greater Stockholders | ||||||||||||||||
| Sabby Volatility Warrant Master Fund, Ltd. (3) | 886,254 | 7.84 | % | |||||||||||||
| Matthew Brams, MD (4) | 650,240 | 5.75 | % | |||||||||||||
| Named Executive Officers and Directors | ||||||||||||||||
| Shane J. Schaffer, Pharm.D. | 890,828 | (5) | 7.83 | % | 993,114 | (3) | 6.28 | % | ||||||||
| Laurie A. Myers | 46,316 | (6) | * | 77,609 | (4) | * | ||||||||||
| Louis G. Van Horn, MBA | 156,606 | (7) | 1.38 | % | 185,952 | (5) | 1.19 | % | ||||||||
| Craig S. Gilgallon, Esq. | 196,287 | (8) | 1.73 | % | 229,208 | (6) | 1.46 | % | ||||||||
| Jeff Conroy | 4,949 | (9) | * | |||||||||||||
| Scott Applebaum | 12,000 | (7) | * | |||||||||||||
| Patrick Gallagher, MBA | 68,358 | (10) | * | 79,604 | (8) | * | ||||||||||
| Gregg Givens | 115,818 | (11) | 1.02 | % | 212,064 | (9) | 1.35 | % | ||||||||
| Jeff Hargroves | -54,143 | (12) | * | |||||||||||||
| Curt Medeiros | 17,532 | (13) | * | 11,246 | (10) | * | ||||||||||
| Peter J. Werth | 901,880 | (14) | 7.97 | % | 3,206,715 | (11) | 19.99 | % | ||||||||
All Directors and Executive Officers as a group (12 persons) | 3,570,189 | (15) | 31.28 | % | ||||||||||||
| All Directors and Executive Officers as a group (11 persons) | 6,197,078 | (12) | 38.43 | % | ||||||||||||
| * | Denotes less than 1%. |
| (1) | Unless noted otherwise, the address of all listed stockholder is 1901 W. |
| (2) | We have determined beneficial ownership in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended, which is generally determined by voting power and/or |
(3) |
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|
|
(7)
| (4) | Includes 29,346 shares of our common stock issuable upon the exercise of stock options that are exercisable within 60 days of September 12, 2023. Does not include September 12, 2023. |
| (5) | Includes (i) 141,606 shares of common stock held by Louis G. Van Horn Trust, 12/23/19. Mr. Van Horn is the Trustee of Louis G. Van Horn Trust, 12/23/19 and has voting and investment power over the securities held by Louis G. Van Horn Trust, 12/23/ |
| |
| (6) | Includes (i) 5,016 shares of our common stock issuable upon exercise of warrants that are currently exercisable, (ii) 29,346 shares of our common stock issuable upon the exercise of stock options that are exercisable within 60 days of September 12, 2023, and September 12, 2023. |
| (7) | Does not include September 12, 2023. |
| (8) | Includes 11,246 shares of our common stock issuable upon the exercise of stock options that are exercisable within 60 days of September 12, 2023. Does not include |
| (9) | Includes (i) 16,500 shares of our common stock issuable upon exercise of warrants that are currently exercisable, (ii) 11,246 shares of our common stock issuable upon the exercise of stock options that are exercisable within 60 days of September 12, 2023, and
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Includes | |
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| (11) | Includes (i) 375,300 shares of our common stock issuable upon exercise of warrants that are currently exercisable, (ii) 11,246 shares of our common stock issuable upon the exercise of stock options that are
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| (12) | Does not include |
TRANSACTIONS WITH RELATED PERSONS
The following is a description of transactions since January 1, 2020 to which we have been a participant in which the amount involved exceeded or will exceed $120,000 and in which any of our directors, executive officers or holders of more than 5% of our voting securities, or any members of their immediate family, had or will have a direct or indirect material interest, other than compensation arrangements.
Related Party Notes
On February 26, 2020, CTx issued a $314,000 promissory note (the “February Note”) to Matthew Brams, our Chief Medical Officer. On September 30, 2020, we issued a $40,000 promissory note (the “September Note”, and together with the February Note, the “Brams Notes”) to Mr. Brams. The Brams Notes accrued interest at the rate of 8% per annum. The principal of the Brams Notes and accrued interest thereon was convertible, at Dr. Brams’ option into preferred units of CTx at a Twenty-Five (25%) Percent discount to the offered unit price at the time of conversion. We had the right to prepay these notes without penalty or premium. On each of December 30, 2020 and July 1, 2020, we made a $100,000 repayment of the February Note. The February Note, which initially matured on February 24, 2021 was extended for an additional 12 months to February 24, 2022. The September Note, which initially matured on September 30, 2021 was extended to February 24, 2022. On July 1, 2021 we made a $100,000 payment on the February Note and on August 17, 2021, we made a $50,000 payment on the February Note. As of closing of our IPO, we owed $104,000 and $37,025 in principal and interest, respectively, on the Brams Notes, which were paid in full in December 2021with IPO proceeds.
On July 25, 2020, CTx issued a $100,000 promissory note (the “July Note”) to Raul R. Silva, our Executive Vice President and Chief Science Officer. The July Note accrued interest at the rate of 8% per annum. The principal of the July Note and accrued interest thereon was convertible, at Dr. Silva’s option into preferred units of CTx at a Twenty-Five (25%) Percent discount to the offered unit price at the time of conversion. We had the right to prepay this note without penalty or premium. The July Note, which initially matured on July 24, 2021, was extended for an additional seven months to February 24, 2022. As of the closing of our IPO, we owed $100,000 and $11,047 in principal and interest, respectively, on the July Note, which was paid in full in December 2021 with IPO proceeds.
On February 1, 2020, CTx issued a $500,000 promissory note to Dresch, Inc., a former CTx member (the “Member Note”, and together with the Brams Notes and the July Note, the “Related Party Notes”). Principal and interest of the Member Note was convertible upon lender’s notice into preferred units of CTx at the offered unit prices at the time of conversion. On September 30, 2020, $353,665 was converted to 246,096 Preferred Units of CTx at the current unit price in accordance with the terms of the Member Note leaving a note payable amount of $146,335. The Member Note, which initially matured on February 1, 2021 was extended for an additional 12 months to February 1, 2022. As of the closing of our IPO, we owed $146,335 and $39,941 in principal and interest, respectively, on the Member Note, which was paid in full in December 2021 with IPO proceeds.
Initial Public Offering
Patrick Gallagher, a member of our Board of Directors, is a Senior Managing Director at Laidlaw & Co. and a Managing Partner at Laidlaw Venture Partners. Laidlaw & Company (UK) Ltd. acted as co-lead book-running underwriter for our IPO, which closed December 10, 2021. The discounts and commissions paid to Laidlaw & Company (UK) Ltd. in connection with the IPO were approximately $500,000.
Indemnification of Officers and Directors
We have entered into indemnification agreements with each of our current directors and executive officers. These agreements require us to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We also intend to enter into indemnification agreements with our future directors and executive officers.
Policies and Procedures for Related Party Transactions
We adopted policies and procedures for related party transactions that prohibit our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of our common stock, any members of the immediate family of any of the foregoing persons and any firms, corporations or other entities in which any of the foregoing persons is employed or is a partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest, or related parties, from entering into a transaction with us without the prior consent of our board of directors acting through the Audit committee or, in certain circumstances, the chairman of the Audit committee. Any request for us to enter into a transaction with a related party, in which the amount involved will, or may be expected to, exceed $100,000 and such related party would have a direct or indirect interest must first be presented to our Audit committee, or in certain circumstances the chairman of our Audit committee, for review, consideration and approval. In approving or rejecting any such proposal, our Audit committee is to consider the material facts of the transaction, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the benefits to us, the availability of other sources of comparable products or services and the extent of the related person’s interest in the transaction.
PROPOSAL 2: RATIFY THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has reappointed KPMG LLP (“KPMG”) as our independent registered public accounting firm to audit the financial statements of the Company for the fiscal year ending December 31, 2022, and has further recommended that our Board submit their selection of independent registered public accounting firm for ratification by our stockholders at the Annual Meeting. Neither the accounting firm nor any of its members has any direct or indirect financial interest in or any connection with us in any capacity other than as public registered accounting firm.
A representatives of KPMG will attend the Annual Meeting, will have an opportunity to make a statement and will be available to respond to appropriate questions from stockholders.
Principal Accountant Fees and Services
Our independent registered public accounting firm is KPMG LLP, Kansas City, MO, Auditor Firm ID: 185. The following table summarizes the fees billed by KPMG for audit and other services provided to the Company for the fiscal years ended December 31, 2021 and 2020:
| 2021 | 2020 | |||||||
| Audit Fees (1) | $ | 1,100,000 | $ | 57,500 | ||||
| Audit-Related Fees | — | — | ||||||
| Tax Fees (2) | 527,040 | 85,656 | ||||||
| All Other Fees | — | — | ||||||
| Total | $ | 1,627,040 | $ | 143,156 | ||||
Pre-Approval Policy
The Audit Committee or its Chairman pre-approves audit and non-audit services to be rendered to the Company and establishes a dollar limit on the amount of fees the Company will pay for each category of services. Generally, management will submit to the Audit Committee a list of services that it recommends the Audit Committee engage the independent registered public accounting firm to provide for the fiscal year. The Audit Committee is informed from time to time of the non-audit services provided pursuant to the pre-approval process. During the year, the Audit Committee periodically reviews the types of services and dollar amounts approved and adjusts such amounts, as it deems appropriate. Unless a service to be provided by the independent registered public accounting firm has received general pre-approval, it will require specific pre-approval by the Audit Committee or its Chairman. Any service pre-approved by the Chairman will be presented to the Audit Committee at its next regularly scheduled meeting. The Audit Committee also periodically reviews all non-audit services to ensure such services do not impair the independence of the Company’s independent registered public accounting firm. All fees incurred after our IPO in December 2021 have been pre-approved by our Audit Committee.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE RATIFICATION OF KPMG AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2022.
REPORT OF THE AUDIT COMMITTEE*
The undersigned members of the Audit Committee of the Board of Directors of Cingulate Inc. (the “Company”) submit this report in connection with the committee’s review of the financial reports for the fiscal year ended December 31, 2021 as follows:
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In addition, the Audit Committee considered whether the provision of non-audit services by KPMG LLP is compatible with maintaining its independence. In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board of Directors has approved) that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for filing with the Securities and Exchange Commission.
Submitted by the Audit Committee of the Board of Directors
Gregg Givens, Chairman
Jeff Hargroves
Curt Medeiros
*The foregoing report of the Audit Committee is not to be deemed “soliciting material” or deemed to be “filed” with the Securities and Exchange Commission (irrespective of any general incorporation language in any document filed with the Securities and Exchange Commission) or subject to Regulation 14A of the Securities Exchange Act of 1934, as amended, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent we specifically incorporate it by reference into a document filed with the Securities and Exchange Commission.
Stockholder Proposals to be Considered for Inclusion in the Company’s Proxy Materials
In order for a stockholder proposal to be eligible to be included in the Company’s proxy statement and proxy card for the 20232024 Annual Meeting of Stockholders, the proposal must (1) be received by the Company at its principal executive offices, 1901 W. 47th Place, 3rd Floor, Kansas City, Kansas 66205, Attn: Craig S. Gilgallon, Secretary, on or before December 23, 2022,30, 2023, and (2) concern a matter that may be properly considered and acted upon at the annual meeting in accordance with applicable laws, regulations and the Company’s Bylaws and policies, and must otherwise comply with Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).Act.
Director Nominations and Other Business to be Brought Before the 20232024 Annual Meeting of Stockholders
Notice of any director nomination or the proposal of other business that you intend to present at the 20232024 Annual Meeting of Stockholders, but do not intend to have included in the Company’s proxy statement and form of proxy relating to the 20232024 Annual Meeting of Stockholders, must be received by the Company at its principal executive offices, 1901 W. 47th Place, 3rd Floor, Kansas City, Kansas 66205, Attn: Craig S. Gilgallon, Secretary, not earlier than the close of business on February 8, 202316, 2024 and not later than the close of business on March 10, 2023.17, 2024. In the event that the date of the 20232024 Annual Meeting of Stockholders is more than 30 days before or more than 70 days after the anniversary date of the 20222023 Annual Meeting of Stockholders, the notice must be delivered to the Company not earlier than the 120th day prior to the 20232024 Annual Meeting of Stockholders and not later than the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such annual meeting is first made by the Company. In addition, your notice must include the information required by the Company’s Bylaws with respect to each director nomination or proposal of other business that you intend to present at the 20232024 Annual Meeting of Stockholders.
In addition to satisfying the foregoing requirements pursuant to the Company’s Bylaws, to comply with the universal proxy rules, (once effective), stockholders who intend to solicit proxies in support of director nominees other than Cingulate’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than April 9, 2023.16, 2024. The supplemental notice and information required under Rule 14a-19 is in addition to the applicable advance notice requirements under the Company’s Bylaws as described in this section and it shall not extend any such deadline set forth in the Company’s Bylaws.
Copies of our Annual Report on Form 10-K (including audited financial statements) filed with the SEC may be obtained without charge by writing to Cingulate Inc., 1901 W. 47th Place, 3rd Floor, Kansas City, Kansas 66205, Attn: Craig S. Gilgallon, Secretary. A request for a copy of our Annual Report on Form 10-K must set forth a good-faith representation that the requesting party was either a holder of record or a beneficial owner of our common stock on April 13, 2022. Exhibits to the Form 10-K will be mailed upon similar request and payment of specified fees to cover the costs of copying and mailing such materials.
Our audited financial statements for the fiscal year ended December 31, 2021 and certain other related financial and business information are contained in our Annual Report on Form 10-K, which is being made available to our stockholders along with this Proxy Statement, but which is not deemed a part of the proxy soliciting material.
HOUSEHOLDING OF ANNUALSPECIAL MEETING MATERIALS
Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements. This means that only one copy of this Proxy Statement may have been sent to multiple stockholders in the same household. We will promptly deliver a separate copy of this Proxy Statement to any stockholder upon written or oral request to: Cingulate Inc., Attn: Craig S. Gilgallon, Secretary, 1901 W. 47th Place, 3rd Floor, Kansas City, Kansas 66205 or by phone at (913) 942-2300. Any stockholder who wants to receive a separate copy of this Proxy Statement, or of our proxy statements or annual reports in the future, or any stockholder who is receiving multiple copies and would like to receive only one copy per household, should contact the stockholder’s bank, broker, or other nominee record holder, or the stockholder may contact us at the address and phone number above.
AsManagement and the Board of the dateCompany know of this proxy statement,no matters to be brought before the Board does not intend to present at the AnnualSpecial Meeting any matters other than those described herein and does not presently know of any matters that will be presented by other parties. If any other matter requiring a vote of the stockholders should come before the meeting, it is the intention of the persons named in the proxy to vote with respect to any such matter in accordance with the recommendation of the Board or, in the absence of such a recommendation, in accordance with the best judgment of the proxy holder.as set forth herein.
| By Order of the Board of Directors | |
| /s/ Craig S. Gilgallon | |
| Craig S. Gilgallon | |
| Executive Vice President, General Counsel and Secretary |
October 2, 2023 | |
| Kansas City, Kansas |
| 18 |
FORM OF CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CINGULATE INC.
Cingulate Inc., a corporation duly organized and validly existing under and by virtue of the General Corporation Law of the State of Delaware (the “DGCL”);
DOES HEREBY CERTIFY AS FOLLOWS:
FIRST: That a resolution was duly adopted on September 20, 2023, by the Board of Directors of the Corporation pursuant to Section 242 of the General Corporation Law of the State of Delaware setting forth an amendment to the Certificate of Incorporation of the Corporation and declaring said amendment to be advisable. The stockholders of the Corporation duly approved said proposed amendment at the special meeting of stockholders held on November 3, 2023, in accordance with Section 242 of the General Corporation Law of the State of Delaware. The proposed amendment set forth as follows:
Article IV of the Amended and Restated Certificate of Incorporation of the Corporation be and hereby is amended by adding the following after the first paragraph of Section A of Article IV:
“Upon effectiveness (“Effective Time”) of this amendment to the Certificate of Incorporation, a one-for-[ ]1 reverse stock split (the “Reverse Split”) of the Corporation’s Common Stock shall become effective, pursuant to which each [ ] shares of Common Stock outstanding and held of record by each stockholder of the Corporation and each share of Common Stock held in treasury by the Corporation immediately prior to the Effective Time (“Old Common Stock”) shall automatically, and without any action by the holder thereof, be reclassified and combined into one (1) validly issued, fully paid and non-assessable share of Common Stock (“New Common Stock”), subject to the treatment of fractional interests as described below and with no corresponding reduction in the number of authorized shares of our Common Stock. The Reverse Split shall also apply to any outstanding securities or rights convertible into, or exchangeable or exercisable for, Old Common Stock and all references to such Old Common Stock in agreements, arrangements, documents and plans relating thereto or any option or right to purchase or acquire shares of Old Common Stock shall be deemed to be references to the New Common Stock or options or rights to purchase or acquire shares of New Common stock, as the case may be, after giving effect to the Reverse Split.
No fractional shares of Common Stock will be issued in connection with the Reverse Split. If, upon aggregating all of the Common Stock held by a holder of Common Stock immediately following the Reverse Split a holder of Common Stock would otherwise be entitled to a fractional share of Common Stock, the Corporation shall issue to such holder such fractions of a share of Common Stock as are necessary to round the number of shares of Common Stock held by such holder up to the nearest whole share.
Each holder of record of a certificate or certificates for one or more shares of the Old Common Stock shall be entitled to receive as soon as practicable, upon surrender of such certificate, a certificate or certificates representing the largest whole number of shares of New Common Stock to which such holder shall be entitled pursuant to the provisions of the immediately preceding paragraphs. Each stock certificate that, immediately prior to the Effective Time, represented shares of Old Common Stock that were issued and outstanding immediately prior to the Effective Time shall, from and after the Effective Time, automatically and without the necessity of presenting the same for exchange, represent that number of whole shares of New Common Stock after the Effective Time into which the shares formerly represented by such certificate have been reclassified, subject to adjustment for fractional shares as described above.
SECOND: That said amendment will have an Effective Time of , Eastern Time, on.
1 Shall be a whole number equal to or greater than 2 and equal to or lesser than 40, which number is referred to as the “Approved Split Ratio” (it being understood that any Approved Split Ratio within such range shall, together with the remaining provisions of this Certificate of Amendment not appearing in brackets, constitute a separate amendment being approved and adopted by the Board of Directors of the Corporation and the stockholders of the Corporation in accordance with Section 242 of the General Corporation Law of the State of Delaware). The Board of Directors of the Corporation shall select the Approved Split Ratio prior to the filing of the Certificate of Amendment and any amendment not setting forth the Approved Split Ratio selected by the Board of Directors and included in the Certificate of Amendment filed with the Secretary of State shall be automatically abandoned upon the filing of such Certificate of Amendment.
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IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of Amendment on this _____ day of ________, 2023.
| CINGULATE INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
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