UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-38207

CELCUITY INC.

(Exact name of registrant as specified in its charter)

Delaware		No. 82-2863566
(State of incorporation)		(IRS Employer Identification No.)

16305 36th Avenue North; Suite 100

Minneapolis, Minnesota 55446

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (763) 392-0767

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.001 par value per share		CELC		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

On November 3, 2022 there were 15,459,739 shares of the registrant’s common stock, $0.001 par value per share, outstanding.

Celcuity Inc.

Table of Contents

	PAGE
PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements (unaudited)	3

Condensed Balance Sheets as of September 30, 2022 and December 31, 2021	3

Condensed Statements of Operations for the three months and nine months ended September 30, 2022 and 2021	4

Condensed Statements of Stockholders’ Equity for the three months and nine months ended September 30, 2022	5

Condensed Statements of Stockholders’ Equity for the three months and nine months ended September 30, 2021	6

Condensed Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	7

Notes to Unaudited Condensed Financial Statements	8

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	24

ITEM 4. Controls and Procedures	24

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings	25

ITEM 1A. Risk Factors	25

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	46

ITEM 3. Defaults Upon Senior Securities	46

ITEM 4. Mine Safety Disclosures	46

ITEM 5. Other Information	46

ITEM 6. Exhibits	47

Signatures	48

As used in this report, the terms “we,” “us,” “our,” “Celcuity,” and the “Company” mean Celcuity Inc., unless the context indicates another meaning.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

Celcuity Inc.

Condensed Balance Sheets

	September 30, 2022			December 31, 2021
		(unaudited)
Assets
Current Assets:
Cash and cash equivalents	$	57,483,776		$	84,286,381
Deposits		22,009			22,009
Deferred transaction costs		349,147			22,144
Payroll tax receivable		260,926			298,764
Prepaid assets		6,578,252			722,677
Total current assets		64,694,110			85,351,975
Property and equipment, net		302,005			312,444
Operating lease right-of-use assets		295,535			241,901
Total Assets	$	65,291,650		$	85,906,320
Liabilities and Stockholders’ Equity:
Current Liabilities:
Accounts payable	$	3,168,198		$	1,507,099
Finance lease liabilities		3,916			5,850
Operating lease liabilities		194,643			189,858
Accrued expenses		3,278,315			802,893
Total current liabilities		6,645,072			2,505,700
Finance lease liabilities		-			2,449
Operating lease liabilities		107,830			61,771
Note payable, non-current		15,013,407			14,625,923
Total Liabilities		21,766,309			17,195,843
Commitments and Contingencies (Note 4)		-			-
Stockholders’ Equity:
Preferred stock, $0.001 par value: 2,500,000 shares authorized; 0 shares issued and outstanding as of September 30, 2022 and December 31, 2021		-			-
Common stock, $0.001 par value: 65,000,000 and 25,000,000 shares authorized as of September 30, 2022 and December 31, 2021, respectively; 14,942,958 and 14,918,887 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		14,943			14,919
Additional paid-in capital		128,225,939			124,622,405
Accumulated deficit		(84,715,541	)		(55,926,847	)
Total Stockholders’ Equity		43,525,341			68,710,477
Total Liabilities and Stockholders’ Equity	$	65,291,650		$	85,906,320

See accompanying notes to the financial statements

Celcuity Inc.

Condensed Statements of Operations

(unaudited)

	2022			2021			2022			2021
	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021

Operating expenses:

Research and development	$	9,621,505		$	4,960,515		$	24,685,505		$	20,266,965
General and administrative		1,022,050			639,271			3,066,382			1,768,058
Total operating expenses		10,643,555			5,599,786			27,751,887			22,035,023
Loss from operations		(10,643,555	)		(5,599,786	)		(27,751,887	)		(22,035,023	)

Other income (expense)
Interest expense		(537,661	)		(433,072	)		(1,428,108	)		(824,283	)
Interest income		287,495			5,612			391,301			7,803
Loss on sale of fixed assets		-			-			-			(263	)
Other income (expense), net		(250,166	)		(427,460	)		(1,036,807	)		(816,743	)
Net loss before income taxes		(10,893,721	)		(6,027,246	)		(28,788,694	)		(22,851,766	)
Income tax benefits		-			-			-			-
Net loss	$	(10,893,721	)	$	(6,027,246	)	$	(28,788,694	)	$	(22,851,766	)

Net loss per share, basic and diluted	$	(0.75	)	$	(0.41	)	$	(1.95	)	$	(1.78	)

Weighted average common shares outstanding, basic and diluted		14,938,224			14,877,619			14,928,727			12,867,484

See accompanying notes to the financial statements

Celcuity Inc.

Condensed Statements of Changes in Stockholders’ Equity

Three and Nine Months Ended September 30, 2022

	Shares		Amount		Capital		Deficit			Total
	Common Stock				Additional Paid-In		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance at December 31, 2021	14,918,887	$	14,919	$	124,622,405	$	(55,926,847	)	$	68,710,477
Stock-based compensation	-		-		756,271		-			756,271
Exercise of common stock options, net of shares withheld for exercise price	1,415		1		7,413		-			7,414
Net loss	-		-		-		(7,934,447	)		(7,934,447	)
Balance at March 31, 2022 (unaudited)	14,920,302	$	14,920	$	125,386,089	$	(63,861,294	)	$	61,539,715
Stock-based compensation	3,273		3		1,519,456		-			1,519,459
Employee stock purchases	15,888		16		80,525		-			80,541
Exercise of common stock options, net of shares withheld for exercise price	1,871		2		9,540		-			9,542
Net loss	-		-		-		(9,960,526	)		(9,960,526	)
Balance at June 30, 2022 (unaudited)	14,941,334	$	14,941	$	126,995,610	$	(73,821,820	)	$	53,188,731
Stock-based compensation	250		-		1,223,054		-			1,223,054
Exercise of common stock options, net of shares withheld for exercise price	1,374		2		7,275		-			7,277
Net loss	-		-		-		(10,893,721	)		(10,893,721	)
Balance at September 30, 2022 (unaudited)	14,942,958	$	14,943	$	128,225,939	$	(84,715,541	)	$	43,525,341

See accompanying notes to the financial statements

Celcuity Inc.

Condensed Statements of Changes in Stockholders’ Equity

Three and Nine Months Ended September 30, 2021

	Common Stock				Additional Paid-In			Accumulated
	Shares		Amount		Capital			Deficit			Total
Balance at December 31, 2020		10,299,822	$	10,300	$	38,013,551		$	(26,321,581	)	$	11,702,270
Stock-based compensation		-		-		449,098			-			449,098
Exercise of common stock warrants		1,185		1		11,256			-			11,257
Exercise of common stock options, net of shares withheld for exercise price		12,707		13		(13	)		-			-
Issuance of common stock upon closing of follow-on offering, net of underwriting discounts and offering costs		1,971,100		1,971		25,766,522			-			25,768,493
Issuance of common stock in an at-the-market (“ATM”) offering		3,082		3		38,959			-			38,962
Issuance costs associated with ATM offering		-		-		(3,868	)		-			(3,868	)
Net loss		-		-		-			(2,791,668	)		(2,791,668	)
Balance at March 31, 2021 (unaudited)		12,287,896	$	12,288	$	64,275,505		$	(29,113,249	)	$	35,174,544
Stock-based compensation		2,964		3		540,314			-			540,317
Employee stock purchases		5,496		6		25,811			-			25,817
Exercise of common stock options, net of shares withheld for exercise price		9,136		9		36,850			-			36,859
Issuance of common stock warrants, note payable		-				289,839			-			289,839
Issuance of common stock, licensing agreement		349,406		349		4,999,651			-			5,000,000
Net loss		-		-		-			(14,032,852	)		(14,032,852	)
Balance at June 30, 2021 (unaudited)		12,654,898	$	12,655	$	70,167,970		$	(43,146,101	)	$	27,034,524
Stock-based compensation		-		-		699,916			-			699,916
Exercise of common stock options, net of shares withheld for exercise price		1,000		1		5,099			-			5,100
Issuance of common stock upon closing of follow-on offering, net of underwriting discounts and offering costs		2,250,000		2,250		52,759,842			-			52,762,092
Net loss		-		-		-			(6,027,246	)		(6,027,246	)
Balance at September 30, 2021 (unaudited)		14,905,898	$	14,906	$	123,632,827		$	(49,173,347	)	$	74,474,386

See accompanying notes to the financial statements

Celcuity Inc.

Condensed Statements of Cash Flows

(unaudited)

	2022			2021
	Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities:
Net loss	$	(28,788,694	)	$	(22,851,766	)
Adjustments to reconcile net loss to net cash used for operations:
Depreciation		161,981			240,206
Stock-based compensation		3,498,784			1,689,331
Issuance of common stock, licensing agreement		-			5,000,000
Amortization of debt issuance costs and discount		284,184			173,361
Payment-in-Kind interest		311,764			196,348
Non-cash operating lease, net		(2,791	)		(7,681	)
Loss on sale of fixed assets		-			263
Changes in operating assets and liabilities:
Payroll tax receivable		37,838			(166,309	)
Prepaid assets and deposits		(5,855,575	)		(120,311	)
Accounts payable		1,553,176			1,553,381
Accrued expenses		2,270,422			105,239
Net cash used for operating activities		(26,528,911	)		(14,187,938	)

Cash flows from investing activities:
Purchases of property and equipment		(46,724	)		(71,959	)
Proceeds from sale of property and equipment		-			500
Net cash used for investing activities		(46,724	)		(71,459	)

Cash flows from financing activities:
Proceeds from exercise of common stock warrants		-			11,257
Proceeds from exercise of employee stock options		24,233			41,959
Proceeds from employee stock purchases		80,541			25,817
Proceeds from follow-on offering, net of underwriting discounts and offering costs		-			78,530,585
Proceeds from note payable, net of debt issuance costs and discount of $652,061		-			14,347,939
Payments for debt issuance costs		(8,463	)		-
Gross proceeds from an ATM offering		-			38,962
Payments for secondary registration statement costs		(318,897	)		(3,868	)
Payments for finance leases		(4,384	)		(4,353	)
Net cash (used for) provided by financing activities		(226,970	)		92,988,298
Net change in cash and cash equivalents		(26,802,605	)		78,728,901

Cash and cash equivalents:
Beginning of period		84,286,381			11,637,911
End of period	$	57,483,776		$	90,366,812

Supplemental disclosure of cash flow information:
Interest paid	$	832,161		$	454,573
Supplemental disclosures of non-cash investing and financing activities:
Property and equipment included in accounts payable	$	104,818		$	-
Offering and registration statement costs included in accounts payable		11,230			-
Deferred financing costs and offering and registration statement costs included in accrued expenses		205,000			-
Issuance of common stock warrants and final fee recognized as discount to note payable		-			964,839

See accompanying notes to the financial statements

CELCUITY INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)

(For the Three and Nine Months Ended September 30, 2022 and 2021)

1. Organization

Nature of Business

Celcuity Inc., a Delaware corporation (the “Company”), is a clinical-stage biotechnology company focused on development of targeted therapies for multiple solid tumor indications. The Company’s lead therapeutic candidate is gedatolisib, a potent, reversible dual inhibitor that selectively targets all Class I PI3K isoforms and mTOR. Its mechanism of action and pharmacokinetic properties are highly differentiated from other currently approved and investigational therapies that target PI3K or mTOR alone or together. The Company initiated a Phase 3 study evaluating gedatolisib in patients with HR+/HER2- advanced breast cancer in 2022. Its CELsignia companion diagnostic platform is uniquely able to analyze live patient tumor cells to identify new groups of cancer patients likely to benefit from already approved targeted therapies. The Company was co-founded in 2012 by Brian F. Sullivan and Dr. Lance G. Laing and is based in Minnesota. The Company has not generated any revenues to date.

2. Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements

Basis of Presentation

The accompanying unaudited financial statements include the accounts of the Company and have been prepared in accordance with Article 10 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, as permitted by Article 10, the unaudited financial statements do not include all of the information required by accounting principles generally accepted in the United States (“U.S. GAAP”). The balance sheet at December 31, 2021 was derived from the audited financial statements at that date and does not include all the disclosures required by U.S. GAAP. In the opinion of management, all adjustments which are of a normal recurring nature and necessary for a fair presentation have been reflected in the financial statements. These unaudited condensed financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2021 and the related footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period.

Accounting Estimates

Management uses estimates and assumptions in preparing these unaudited condensed financial statements in accordance with U.S. GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates and the difference could be material. Significant items subject to such estimates and assumptions include the valuation of stock-based compensation and prepaid or accrued clinical trial costs.

Risks and Uncertainties

The Company is subject to risks common to companies in the development stage including, but not limited to, dependency on, the clinical and commercial success of its initial drug product, gedatolisib, the clinical and commercial success of its diagnostic tests, ability to obtain regulatory approval of its drug product, gedatolisib, ability to obtain regulatory approval of its diagnostic tests, the need for substantial additional financing to achieve its goals, uncertainty of broad adoption of its approved products, if any, by physicians and consumers, and significant competition.

Clinical Trial Costs

The Company records prepaid assets or accrued expenses for prepaid or estimated clinical trial costs conducted by third-party service providers, which includes the conduct of preclinical studies and clinical trials. These costs can be a significant component of the Company’s research and development expenses. The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with service agreements with its third-party service providers. The Company makes significant judgments and estimates in determining the accrued liabilities balance in each reporting period. As actual costs become known, the Company adjusts its prepaid assets or accrued expenses. The Company has not experienced any material differences between accrued costs and actual costs incurred. However, the status and timing of actual services performed, number of patients enrolled, and the rate of patient enrollments may vary from the Company’s estimates, resulting in an adjustment to expense in future periods. Changes in these estimates that result in material changes to the Company’s prepaid assets or accrued expenses could materially affect the Company’s results of operations.

Application of New or Revised Accounting Standards

Pursuant to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), a company constituting an “emerging growth company” is, among other things, entitled to rely upon certain reduced reporting requirements. The Company is an emerging growth company but has irrevocably elected not to take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. As a result, the Company will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for public companies that are not emerging growth companies. The Company’s emerging growth company filer status will cease on its Form 10-K filing for the year ended December 31, 2022.

Recently Adopted Accounting Pronouncements

In May 2021, the FASB issued ASU No. 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, which provides guidance on how an issuer should account for modifications made to equity-classified written call options. The guidance in the ASU requires the issuer to treat the modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant. The issuer should measure the effect of a modification as the difference between the fair value of the modified warrant and the fair value of that warrant immediately before modification. The standard is effective for all entities for all fiscal years beginning after December 15, 2021. The Company adopted this accounting standard effective January 1, 2022, and based on the standard, determined that the Representative’s Warrant amendment was equity-classified, treated as a deemed dividend within Additional Paid-in Capital, and the estimated incremental fair value of the modification for the Representative’s Warrant at the date of amendment was $271,988.

3. Net Loss Per Common Share

Basic and diluted net loss per common share is determined by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding during the period. For all periods presented, the common shares underlying the options and warrants have been excluded from the calculation because their effect would be anti-dilutive. Therefore, the weighted-average shares outstanding used to calculate both basic and diluted loss per common share is the same.

For the three and nine months ended September 30, 2022 and 2021, potentially dilutive securities excluded from the computations of diluted weighted-average shares outstanding were options to purchase 1,919,114 and 1,184,721 shares of common stock, respectively, warrants to purchase 309,652 and 378,442 shares of common stock, respectively, and 3,273 and 2,964 shares of restricted common stock, respectively.

In accordance with ASU 2021-04, for purposes of calculating basic and diluted net loss per share for the three- and nine-month periods ended September 30, 2022, the reported net loss was increased by approximately $272,000 related to the deemed dividend resulting from the amendment to the warrant agreement as further discussed in Note 5. This adjustment increased the basic and diluted net loss per share by $.02 for the three- and nine-month periods ended September 30, 2022.

4. Commitments

Operating and Finance Leases

The Company leases its corporate space in Minneapolis, Minnesota. In September 2017, the Company entered into a non-cancelable operating lease agreement for building space. The lease commenced, and the Company moved to the facility in May 2018, in conjunction with the termination of its then existing lease. Rent expense is recorded on a straight-line basis over the lease term. In July 2020, the Company signed an amendment to extend this lease through April 30, 2022. The lease amendment provides for monthly rent, real estate taxes and operating expenses. As a result of the lease amendment, the Company recorded an incremental $197,211 in the operating right-of-use (“ROU”) asset and lease liability. In July 2021, the Company signed the second amendment to extend this lease through April 30, 2023. The lease amendment provides for monthly rent, real estate taxes and operating expenses. As a result of the lease amendment, the Company recorded an incremental $193,571 in the operating right-of-use (“ROU”) asset and lease liability. In July 2022, the Company signed the third amendment to extend this lease through April 30, 2024. This amendment provides for monthly rent, real estate taxes and operating expenses. The Company recorded an incremental $195,437 in the operating right-of-use (“ROU”) asset and lease liability pertaining to this amendment.

In May 2018, the Company entered into a non-cancelable finance lease agreement for office equipment with a five-year term. The underlying assets are included in furniture and equipment. The lease contains a bargain purchase option at the end of the lease.

When an implicit rate is not provided, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.

Clinical Research Studies

The Company enters into contracts in the normal course of business to conduct research and development programs internally and through third parties that include, among others, arrangements with vendors, consultants, CMO’s, and CRO’s. The Company currently has five Phase 2 clinical trial agreements in place to evaluate targeted therapies selected with one of our CELsignia tests. Timing of milestone payments related to the Phase 2 clinical trials are uncertain and the contracts generally provide for termination following a certain period after notice, therefore the Company believes that non-cancelable obligations under the agreements are not material. The Company also has a license agreement in place with Pfizer to research, develop, manufacture and commercialize gedatolisib. In conjunction with the license agreement, the Company continued a Phase 1b study – B2151009 related to gedatolisib. These patients subsequently transitioned to an Expanded Access study – CELC-G-001. Contracts related to the Phase 1B study and the Expanded Access study, are generally based on time and material. In addition, contracts related to the Company’s Phase 3 clinical study (VIKTORIA-1) are generally cancelable with reasonable notice within 120 days and the Company’s obligations under these contracts are primarily based on services performed through termination dates plus certain cancelation charges, if any, as defined in each of the respective agreements. In addition, these agreements may, from time to time, be subjected to amendments as a result of any change orders executed by the parties. As of September 30, 2022, the Company had only one material non-cancelable contractual commitment with respect to these arrangements, which totaled approximately $2.5 million.

5. Stockholders’ Equity

On September 13, 2022, the Company entered into a First Amendment to Representative’s Warrant (the “Warrant Amendment”) with Craig-Hallum Capital Group LLC (“Craig-Hallum”), amending the terms of that certain Representative’s Warrant, dated September 22, 2017 (the “Representative’s Warrant”) issued by the Company to Craig-Hallum in connection with the Company’s initial public offering. Under the terms of the Warrant Amendment, (i) the number of shares of the Company’s common stock issuable upon exercise of the Representative’s Warrant was reduced from 138,000 shares to 70,000 shares, and (ii) the exercise period of the Representative’s Warrant was extended three years to September 19, 2025. There were no other material amendments or modifications to the Representative’s Warrant. The estimated incremental fair value of the Representative’s Warrant at the date of amendment was $271,988. As the Company has an accumulated deficit balance in Retained Earnings, the incremental impact will be recorded as a deemed dividend, classified within Additional Paid-in Capital.

On September 1, 2022, the Company held a Special Meeting of Stockholders, at which the Company’s stockholders approved a proposal to amend the Company’s Certificate of Incorporation to increase the authorized number of the Company’s Common Stock from 30,000,000 shares to 65,000,000 shares.

On May 15, 2022, the Company entered into a securities purchase agreement with certain institutional and other accredited investors for the sale of Company common stock, preferred stock that may be convertible into common stock and warrants initially exercisable for preferred stock for $100 million in the aggregate, before deducting placement agent fees and other offering expenses. Pursuant to the securities purchase agreement, investors will purchase shares of common stock and preferred stock at a price per share of $5.75 (on an as converted to common stock basis). For each share of common stock and each 1/10 of a share of preferred stock purchased, investors will receive a warrant exercisable for 0.40 shares of common stock. The exercise price of the warrants will be at a 40% premium to the price paid by investors for the initial shares of common stock purchased in the private placement. The preferred stock will be convertible into common stock at the holder’s election, subject to certain limitations such as beneficial ownership. The closing of the private placement is conditioned on, among other customary items, the first patient enrolled in the Company’s Phase 3 clinical study (VIKTORIA-1) having received their first dose of treatment at a clinical site located in the United States, provided that if such date does not occur on or before December 31, 2022, each investor will have the right to terminate its obligation to purchase securities under the securities purchase agreement. The Company also entered into a customary registration rights agreement with the investors pursuant to which it agreed to file a registration statement with the SEC registering the resale of (i) the shares of common stock to be issued and sold in the private placement, (ii) the shares of common stock issuable upon conversion of the preferred stock purchased in the private placement and (iii) the shares of common stock issuable upon conversion of the shares of preferred stock that may be issued upon exercise of warrants purchased in the private placement. As of September 30, 2022, the Company has incurred $142,241 in fees related to the transaction.

On February 4, 2022, the Company entered into an Open Market Sale Agreement^SM with Jefferies LLC, as agent (“Jefferies”), pursuant to which we may offer and sell, from time to time, through Jefferies, shares of our common stock having an aggregate offering price of up to $50,000,000. The Company will pay Jefferies a commission equal to 3.0% of the aggregate gross proceeds from each sale of such shares. On October 12, 2022, pursuant to the above agreement, the Company sold 500,000 shares of common stock in a single transaction at a price of $10.35 per share, generating gross proceeds of $5.2 million ($4.8 million net of commissions and offering expenses).

On July 1, 2021, the Company completed a follow-on offering whereby it sold 2,250,000 shares of common stock at a public offering price of $25.00 per share. The offering generated approximately $56.3 million before deducting underwriting discounts of approximately $3.4 million and offering expenses of approximately $0.1 million.

On February 26, 2021, the Company completed a follow-on offering whereby it sold 1,971,100 shares of common stock (including 257,100 shares of common stock in connection with the full exercise of the underwriters’ option to purchase additional shares) at a public offering price of $14.00 per share. The aggregate gross proceeds from the sale of shares in the follow-on offering, including the sale of shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, was approximately $27.6 million before deducting underwriting discounts of approximately $1.6 million and offering expenses of approximately $0.2 million.

On June 5, 2020, the Company entered into an At Market Issuance Sales Agreement (the “ATM Agreement”) with B. Riley FBR, Inc. (the “Agent”). Pursuant to the ATM Agreement, the Company was able to offer and sell from time to time, at its option, shares of common stock having an aggregate offering price of up to $10,000,000, par value $0.001 per share (the “Placement Shares”), through the Agent.

During the nine months ended September 30, 2022 and 2021, the Company sold 0 and 3,082 shares, respectively, of common stock pursuant to the ATM Agreement, at an average selling price of $12.64 per share. On February 23, 2021, in conjunction with the Company’s follow-on offering, the ATM Agreement was terminated through the Agent.

6. Stock-Based Compensation

The following table summarizes the activity for all stock options outstanding for the nine months ended September 30:

Schedule of Stock Options Activity

	2022					2021
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Options outstanding at beginning of year		1,315,321		$	11.97		849,949		$	9.33
Granted		720,047			7.19		402,550			23.04
Exercised		(4,660	)		5.20		(40,620	)		7.26
Forfeited		(111,594	)		10.86		(27,158	)		19.07
Balance at September 30		1,919,114		$	6.08		1,184,721		$	13.84

Options exercisable at September 30:		882,215		$	5.92		560,915		$	9.45

Weighted Average Grant Date Fair Value for options granted during the period:				$	4.87				$	15.28

The following table summarizes additional information about stock options outstanding and exercisable at September 30, 2022:

Options Outstanding							Options Exercisable
Options Outstanding	Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Aggregate Intrinsic Value		Options Exercisable	Weighted Average Exercise Price		Aggregate Intrinsic Value
1,919,114		7.98	$	6.08	$	7,791,703	882,215	$	5.92	$	3,779,591

The Company recognized stock-based compensation expense for stock options of $1,162,751 and $673,022 for the three months ended September 30, 2022 and 2021, respectively and $3,329,969 and $1,611,575 for the nine months ended September 30, 2022 and 2021, respectively. In May 2022, the Company modified the exercise price on 776,324 stock option awards to $5.50, the closing market price on the Nasdaq Capital Market on May 17, 2022. The effect of this modification on stock-based compensation was $49,088 for the three months ending September 30, 2022 and $477,431 for the nine months ending September 30, 2022. The effect of this modification on stock-based compensation over the remaining service period will be approximately $389,000. In December 2021, the Company modified the exercise price on 311,000 stock option awards to $13.44, the closing market price on the Nasdaq Capital Market on December 15, 2021. No director or officer awards were modified. The effect of this modification on stock-based compensation was $21,778 and $0 for the three months ended September 30, 2022 and 2021, respectively and $75,562 and $0 for the nine months ended September 30, 2022 and 2021, respectively. The effect of this modification on stock-based compensation over the remaining service period will be approximately $219,000. In May 2020, the Company modified the exercise price on 203,750 stock option awards to $5.10, the closing market price on the Nasdaq Capital Market on May 14, 2020. No director or officer awards were modified. The effect of this modification on stock-based compensation was $7,681 and $12,602 for the three months ended September 30, 2022 and 2021, respectively and $30,897 and $34,396 for the nine months ended September 30, 2022 and 2021. The effect of this modification on stock-based compensation over the remaining service period will be approximately $27,000.

The Black-Scholes option-pricing model was used to estimate the grant date fair value of equity-based awards with the following weighted-average assumptions for the nine months ended September 30:

	2022		2021
Risk-free interest rate		1.68% - 3.93%		0.63% - 1.16%
Expected volatility		76.2% - 79.6%		76.6% - 76.9%
Expected life (years)		5.29 to 6.25		5.0 to 6.08
Expected dividend yield		0%		0%

The inputs for the Black-Scholes valuation model require management’s significant assumptions. Prior to the Company’s initial public offering, the price per share of common stock was determined by the Company’s board based on recent prices of common stock sold in private offerings. Subsequent to the initial public offering, the price per share of common stock is determined by using the closing market price on the Nasdaq Capital Market on the grant date. The risk-free interest rates are based on the rate for U.S. Treasury securities at the date of grant with maturity dates approximately equal to the expected life at the grant date. The expected life is based on the simplified method in accordance with the SEC Staff Accounting Bulletin Nos. 107 and 110. The expected volatility is estimated based on historical volatility information of peer companies that are publicly available in combination with the Company’s calculated volatility since being publicly traded.

All assumptions used to calculate the grant date fair value of non-employee options are generally consistent with the assumptions used for options granted to employees. In the event the Company terminates any of its consulting agreements, the unvested options issued in connection with the agreements would also be cancelled.

The Company had 3,273 and 2,964 shares of restricted stock outstanding as of September 30, 2022 and 2021, respectively, and 250 and 0 shares of restricted stock vested during the three months ended September 30, 2022 and 2021. The Company recognized stock-based compensation expense for restricted stock of $7,245 and $20,792 for the three months ended September 30, 2022 and 2021, respectively and $36,686 and $59,359 for the nine months ended September 30, 2022 and 2021, respectively.

The Company initially reserved a maximum of 750,000 shares of common stock for issuance under the 2017 Amended and Restated Stock Incentive Plan (the “2017 Plan”). The number of shares reserved for issuance was automatically increased by 102,540, 102,998 and 149,189 shares on January 1, 2020, 2021 and 2022, respectively, and will increase automatically on January 1 each year from 2023 through 2027 by the number of shares equal to 1.0% of the aggregate number of outstanding shares of Company common stock as of the immediately preceding December 31. At the Annual Meeting held on May 12, 2021 and May 12, 2022, the stockholders approved a one-time, 500,000 increase each year for a total increase of 1,000,000 to the number of shares reserved for issuance under the 2017 Plan. However, the Company’s board may reduce the amount of the increase in any particular year. The total remaining shares available for grant under the Company’s 2017 Plan as of September 30, 2022 was 325,094.

Total unrecognized compensation cost related to stock options and restricted stock is estimated to be recognized as follows for the year ended:


2022	$	1,116,837
2023		3,277,254
2024		2,130,739
2025		1,333,749
2026		176,866
Total estimated compensation cost to be recognized	$	8,035,445

The Company recognized stock-based compensation expense related to its employee stock purchase plan of $53,058 and $6,102 for the three months ended September 30, 2022 and 2021, respectively and $132,129 and $18,397 for the nine months ended September 30, 2022 and 2021, respectively. The Company initially reserved a total of 100,000 shares for issuance under the employee stock purchase plan. The number of shares reserved for issuance was automatically increased by 51,270, 51,499 and 74,594 shares on January 1, 2020, 2021 and 2022, respectively, and will increase automatically on each subsequent January 1 by the number of shares equal to 0.5% of the total outstanding number of shares of Company common stock as of the immediately preceding December 31. However, the Company’s board may reduce the amount of the increase in any particular year. The total remaining shares available for issuance under the employee stock purchase plan as of September 30, 2022 was 208,929.

The Company recognized total stock-based compensation expense as follows for the three and nine months ended September 30:

	2022		2021		2022		2021
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Stock-based compensation expense in operating expenses:
Research and development	$	676,524	$	434,597	$	1,937,707	$	1,017,855
General and administrative		546,530		265,319		1,561,077

SEC Form 10-Q filed by Celcuity Inc.