Cingulate Inc. Debt Disclosure

(8) Unsecured Promissory Notes

 

On December 20, 2024, the Company entered into a note purchase agreement (2024 Note Purchase Agreement) with Streeterville Capital, LLC, a Utah limited liability company (Lender), pursuant to which the Company issued and sold to Lender an unsecured promissory note in the amount of $5,480,000 (2024 Note). The 2024 Note included an original issue discount of $450,000 and Lender expenses payable by the Company of $30,000. In exchange for the 2024 Note, the Lender paid a purchase price of $5,000,000 in cash. The 2024 Note bore interest at a rate of 9% per annum and had a maturity 18 months after its issuance date.

 

From time to time, beginning on July 2, 2025, Lender could redeem a portion of the 2024 Note. Pursuant to the terms of the 2024 Note, we were charged a monitoring fee equal to the outstanding balance on the 90-day anniversary of the effective date of the 2024 Note divided by 0.85 less the outstanding balance on such date. Subject to the terms and conditions set forth in the 2024 Note, the Company could prepay all or any portion of the outstanding balance of the Promissory Note at any time. As of December 31, 2025, the Company had entered into exchange agreements with Lender to exchange a total of $4,675,000 principal for 1,167,300 shares of common stock, thereby extinguishing a portion of the Promissory Note. In connection with the exchange agreements, the Company recorded the pro rata portion of the monitoring fee as well as accrued interest on the pro rata portion of the monitoring fee. As of December 31, 2025, the pro rata portion of the monitoring fee recognized was $671,792 as a loss on debt extinguishment within interest and other income (expense), net and the accrued interest on the pro rata portion of the monitoring fee was $48,704.

 

In connection with the 2024 Note, the Company incurred $46,277 of debt issuance costs. The debt issuance costs, the debt discount of $450,000 and the expenses payable by the Company of $30,000 have been recorded as a reduction in the carrying amount of the 2024 Note and are being amortized over the term of the 2024 Note using the effective interest rate method.

 

As of December 31, 2025 and 2024, the outstanding balances relating to this note are as follows:

Schedule of Outstanding Balances 

		12/31/2025				12/31/2024
2024 Note Purchase Agreement:
Principal		$	805,000			$	5,480,000
Monitoring fee on pro rata portion of exchanges			671,792				-
Unamortized discounts/deferred financing			(83,922	)			(516,013	)
Total outstanding debt		$	1,392,870			$	4,963,987
Accrued Interest		$	474,598			$	15,089

 

On November 7, 2025, the Company entered into a note purchase agreement (2025 Note Purchase Agreement) with Avondale Capital, LLC, a Utah limited liability company (Avondale), pursuant to which the Company issued and sold to Avondale an unsecured promissory note in the amount of $6,570,000 (2025 Note). The principal amount includes an original issue discount of $540,000 and expenses payable by the Company of $30,000. In exchange for the 2025 Note, Avondale paid a purchase price of $6,000,000 in cash. The 2025 Note bears interest at a rate of 9% per annum and matures 18 months after its issuance date.

 

From time to time, beginning on May 7, 2026, Avondale may redeem a portion of the 2025 Note, not to exceed an amount of $660,000 per month; and provided that the Company has not previously received a “complete response letter” from the FDA, the Company may defer up to two redemptions for up to thirty (30) days each. If the Company exercises its deferral right, the outstanding balance of the 2025 Note will be increased by 1% of the outstanding balance on the date of the deferral. The Company was charged a monitoring fee equal to the outstanding balance on the 90-day anniversary of the effective date of the 2025 Note divided by 0.85 less the outstanding balance on such date. Subject to the terms and conditions set forth in the 2025 Note, the Company may prepay all or any portion of the outstanding balance of the 2025 Note at any time. As the redemptions are outside of the control of the Company, the Company has recorded the gross amount of the expected FY 26 Avondale redemptions within current note payable on the balance sheet.

 

 

The 2025 Note provides for customary events of default (each as defined in the 2025 Note, an Event of Default), including, among other things, the event of nonpayment of principal, interest, fees or other amounts, a representation or warranty proving to have been incorrect when made, failure to perform or observe covenants within a specified cure period, a cross-default to certain other indebtedness and material agreements of the Company, and the occurrence of a bankruptcy, insolvency or similar event affecting the Company. Upon the occurrence of an Event of Default that is deemed a “Major Trigger Event” as defined in the promissory note, Avondale may increase the outstanding balance of the 2025 Note by 15%, and upon the occurrence of an Event of Default that is deemed a “Minor Trigger Event” as defined in the 2025 Note, Avondale may increase the outstanding balance of the 2025 Note by 5%. Avondale can exercise its right to increase the outstanding balance upon a Major or Minor Trigger Event three times each. Upon the occurrence of an Event of Default, Avondale may declare all amounts owed under the 2025 Note immediately due and payable. In addition, upon the occurrence of an Event of Default, upon the election of Avondale, interest shall begin accruing on the outstanding balance of the 2025 Note from the date of the Event of Default equal to the lesser of 22% per annum and the maximum rate allowable under law.

 

The debt discount of $540,000 and the expenses payable by the Company of $30,000 have been recorded as a reduction in the carrying amount of the 2025 Note and are being amortized over the term of the 2025 Note using the effective interest rate method.

 

The following table provides a breakdown of interest expense (income) for the periods presented:

Schedule of Interest Expense (Income) 

		2025				2024
Interest expense - WFIA		$	-			$	31,250
Interest expense - promissory notes			901,325				25,354
Interest expense - loss on debt extinguishment			805,951				-
Interest expense - other			23,121				6,259
Interest income			(369,267	)			(162,099	)
Total		$	1,361,130			$	(99,236	)