Actinium Pharmaceuticals, Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information and financial data discussed below is derived from the audited consolidated financial statements of Actinium Pharmaceuticals, Inc. for its fiscal years ended December 31, 2024 and 2023. The consolidated financial statements of Actinium Pharmaceuticals, Inc. were prepared and presented in accordance with generally accepted accounting principles in the United States. The information and financial data discussed below is only a summary and should be read in conjunction with the historical financial statements and related notes of Actinium Pharmaceuticals, Inc. contained elsewhere in this Report. The financial statements contained elsewhere in this Report fully represent Actinium Pharmaceuticals, Inc.’s financial condition and operations; however, they are not indicative of the Company’s future performance. See “Cautionary Note Regarding Forward-Looking Statements” above for a discussion of forward-looking statements and the significance of such statements in the context of this Report. See also “Risk Factors” in Part I, Item 1A of this Report for a discussion of risks and uncertainties that could impact Actinium Pharmaceuticals, Inc.’s future financial condition, operations and performance. Actinium Pharmaceuticals, Inc. (“Actinium”, the “Company”, or “we”) is a pioneer in the development of targeted radiotherapies intended to meaningfully improve outcomes for patients with relapsed or refractory cancer who have failed existing therapies. We operate as a single operating segment focused on research, discovery, and clinical development of targeted radiotherapies. Results of Operations – Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 The following table sets forth, for the periods indicated, data derived from our statements of operations: For the years ended December 31, Increase (amounts in thousands) 2024 2023 (Decrease) Revenue: Revenue $ - $ - $ - Other revenue - 81 (81 ) Total revenue - 81 (81 ) Operating expenses: Research and development, net of reimbursements 30,045 38,670 (8,625 ) General and administrative 12,076 13,331 (1,255 ) Total operating expenses 42,121 52,001 (9,880 ) Other income: Interest income – net 3,878 3,102 776 Total other income 3,878 3,102 776 Net loss $ (38,243 ) $ (48,818 ) $ (10,575 ) Revenues We recorded no commercial revenues for the years ended December 31, 2024 and 2023, respectively. Other revenue The National Institutes of Health awarded us a Small Business Technology Transfer cost reimbursable grant to support a clinical collaboration with Memorial Sloan Kettering Cancer Center, or MSK, to study Iomab-ACT, our CD45-targeting Antibody Radio-Conjugate, for targeted conditioning to achieve lymphodepletion prior to administration of a CD19-targeted CAR T-cell therapy developed at MSK. We recognized other revenue during the year ended December 31, 2023 of $0.1 million from this grant. 66 On April 7, 2022, we entered into a License Agreement with Immedica, pursuant to which Immedica licensed the exclusive product rights for commercialization of Iomab-B in certain countries in the EUMENA region. Upon signing, we were entitled to an upfront, non-refundable payment of $35.0 million from Immedica, which was received in May 2022. Under the terms of the License Agreement, we are eligible to receive certain regulatory and commercial milestone payments and royalties on net sales of the product in certain countries that may result from the License Agreement. We continue to retain commercialization rights in the U.S. and rest of the world. Our contract liabilities are recorded within Other revenue deferred – current liability or Long-term license revenue deferred in our condensed consolidated balance sheets depending on the short-term or long-term nature of the payments to be recognized. Our contract liabilities primarily consist of advanced payments from licensees. Long-term license revenue deferred was $35.0 million at December 31, 2024 and December 31, 2023, resulting from the receipt from Immedica; this deferred revenue will be recognized upon the European Union’s regulatory approval of Iomab-B or provision of definitive feedback that Iomab-B will not receive approval in the European Union. Research and Development Expenses, net of reimbursements Research and development expenses decreased by $8.6 million to $30.0 million for the year ended December 31, 2024, compared to $38.7 million for the year ended December 31, 2023. This decrease was primarily due to CMC expenses declining by $12.0 million and consulting expenses declining by $1.7 million due to lower CMC activity related to Iomab-B. These declines were partially offset by increased preclinical expenses of $5.0 million. In the third quarter of 2024, our overall headcount was reduced by approximately twenty percent, with a majority of these former employees being from our clinical and CMC groups. As a result of these departures, we expect our personnel expenses to be reduced by approximately $3.7 million in 2025, which may be offset by additional hires or consultants. We do not expect these departures to have a material impact on our operations or ability to execute our operating plan. General and Administrative Expenses General and administrative expenses decreased by $1.3 million to $12.1 million for the year ended December 31, 2024, compared to $13.3 million for the year ended December 31, 2023. Lower expenses were primarily the result of lower consulting fees and legal fees of $1.6 million and lower compensation expense of $0.6 million due to lower headcount, partially offset by higher non-cash compensation expense of $1.2 million. Other Income Other income is comprised of net interest income in both reporting periods. Other income of $3.9 million for the year ended December 31, 2024 increased from $3.1 million for the year ended December 31, 2023 primarily due to higher average interest rates. Net Loss Net loss decreased by $10.6 million to $38.2 million for the year ended December 31, 2024, compared to $48.8 million for the year ended December 31, 2023 due to lower research and development expenses, lower general and administrative expenses and a higher level of other income. Liquidity and Capital Resources Historically, we have financed our operations primarily through sales of our common stock and common stock equivalents. The following tables sets forth selected cash flow information for the periods indicated: For the years ended December 31, (amounts in thousands) 2024 2023 Cash used in operating activities $ (33,072 ) $ (47,335 ) Cash used in investing activities (11 ) (153 ) Cash provided by financing activities 29,321 14,870 Net change in cash, cash equivalents and restricted cash $ (3,762 ) $ (32,618 ) 67 Net cash used in operating activities for the year ended December 31, 2024 was $33.1 million, a decrease of $14.2 million from $47.3 million in the prior-year period, primarily as a result of a lower net loss of $10.8 million and a decrease in net operating assets and liabilities of $2.2 million. Net cash used in investing activities was $11 thousand and $153 thousand for the years ended December 31, 2024 and December 31, 2023, respectively, primarily due to the purchase of equipment for our laboratory space. In August 2020, we entered into the Capital on Demand™ Sales Agreement with JonesTrading Institutional Services LLC, or JonesTrading, pursuant to which we are able to sell, from time to time, through or to JonesTrading, up to an aggregate of $200 million of our common stock. On June 28, 2022, we entered into an Amendment and Restated Capital on Demand™ Sales Agreement, or the Amended Sales Agreement, with JonesTrading and B. Riley Securities, Inc. (“B. Riley”). The Amended Sales Agreement modifies the original Capital on Demand™ Sales Agreement to include B. Riley as an additional sales agent thereunder. Shares of common stock were offered pursuant to a shelf registration statement on Form S-3 (File No. 333-242322) filed with the SEC on August 7, 2020 (the “Prior Shelf Registration Statement”). On August 11, 2023, we filed a registration statement on Form S-3 (File No. 333-273911), and amended on February 2, 2024, which was declared effective on February 5, 2024, to replace the Prior Shelf Registration Statement, including a base prospectus which covers the offering, issuance and sale of up to $500 million of common stock, preferred stock, warrants, units and/or subscription rights; and a sales agreement prospectus covering the offering, issuance and sale of up to a maximum aggregate offering price of $200 million of common stock that may be issued and sold under the Amended Sales Agreement. For the year ended December 31, 2024, we sold 3.5 million shares of common stock, resulting in gross proceeds of $29.9 million and net proceeds of $29.3 million. For the year ended December 31, 2023, we sold 1.9 million shares of common stock, resulting in gross proceeds of $15.1 million and net proceeds of $14.6 million. We entered into a lease for corporate office space effective June 1, 2022. The lease has a term of five years and two months, with an expiration date in 2027, and current annual rent of $0.6 million. We are also responsible for certain other costs, such as insurance, utilities and maintenance. We issued a letter of credit in connection with the lease and as of December 31, 2024 maintain a $0.3 million certified deposit as collateral for the letter of credit. We will require additional funds to conduct clinical and non-clinical trials, achieve regulatory approvals, and, subject to such approvals, commercially launch our product candidates, and will need to secure additional financing in the future to support our operations. As of the date of filing this report, we expect that our existing resources will be more than sufficient to fund our planned operations for more than 12 months following the date of this report. We base this belief on assumptions that are subject to change, and we may be required to use our available cash and cash equivalent resources sooner than we currently expect. Our actual future capital requirements will depend on many factors, including the progress and results of our ongoing clinical trials, the duration and cost of discovery and preclinical development, laboratory testing and clinical trials for our pipeline candidates, the timing and outcome of regulatory review of our product candidates, the costs involved in preparing, filing, prosecuting, maintaining, defending, and enforcing patent claims and other intellectual property rights, the number and development requirements of other pipeline candidates that we pursue, and the costs of commercialization activities, including product marketing, sales, and distribution. We expect to continue to operate at a net loss as we continue our research and development efforts, continue to conduct clinical trials and develop manufacturing, sales, marketing and distribution capabilities. There can be no assurance that the products under development by us will be approved for sale in the United States or elsewhere. Our ability to obtain additional capital may depend on prevailing economic conditions and financial, business, and other factors beyond our control. Current economic conditions have been, and continue to be, volatile. Continued instability in these market conditions may limit our ability to access the capital necessary to fund and grow our business. 68 Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements. Critical Accounting Estimates Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements during the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially from these estimates under different assumptions or conditions. The Company does not have any critical accounting estimates. Recently Adopted Accounting Pronouncements In November 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures , which provides improvements to reportable segment disclosure requirements, primarily through enhanced disclosures around segment expenses. ASU 2023-07 requires us to disclose significant segment expenses that are regularly provided to the chief operating decision maker, or CODM, and included within each reported measure of segment profit or loss. ASU 2023-07 also requires that we disclose an amount for other segment items by reportable segment, a description of their composition and provide all annual disclosures about a reportable segment’s profit or loss and assets pursuant to Topic 280 during interim periods. We must also disclose the CODM’s title and position, as well as certain information around the measures used by the CODM and an explanation of how the CODM uses the reported measures in assessing segment performance and deciding how to allocate resources. For public entities with a single reportable segment, such as us, the entity must provide all the disclosures required pursuant to ASU 2023-07 and all existing segment disclosures under Topic 280. The amendments of ASU 2023-07 are effective for annual periods beginning January 1, 2024, and effective for interim periods beginning January 1, 2025. We adopted this standard effective January 1, 2024 and reported on it in this Annual Report on Form 10-K for the year ended December 31, 2024. Recently Issued Accounting Pronouncements In November 2024, FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), to improve the disaggregation of expenses within the consolidated statement of operations. The amendments in ASU 2024-03 require disclosures in the notes to the consolidated financial statements and specified information about certain costs and expenses. The amendments require that at each interim and annual reporting period an entity disclose (a) employee compensation, (b) depreciation, and (c) intangible asset amortization included in each relevant expense caption; include certain amounts that are already required to be disclosed under current GAAP in the same disclosure as the other disaggregation requirements; and disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. The amendments in ASU 2024-03 are effective January 1, 2027 and effective for interim periods beginning January 1, 2028. We will evaluate the impact of ASU 2024-03 on our financial statements. In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 provide improvements primarily related to the rate reconciliation and income taxes paid information included in income tax disclosures. We will be required to disclose additional information regarding reconciling items equal to or greater than five percent of the amount computed by multiplying pretax income (loss) by the applicable statutory tax rate. Similarly, we will be required to disclose income taxes paid (net of refunds received) equal to or greater than five percent of total income taxes paid (net of refunds received). The amendments in ASU 2023-09 are effective for fiscal years beginning January 1, 2025, including interim periods. We will evaluate the impact of ASU 2023-09 on our financial statements. Subsequent Events On March 27, 2025, a putative class action complaint (the “Complaint”) was filed by alleged stockholder Nihil Kohil against the Company and executives Sandesh Seth, Avinash Desai, Madhuri Vusirikala, and Sergio Giralt, styled Kohil v. Actinium Pharmaceuticals, Inc., et al ., Case No. 1:25-cv-02553 in the Southern District of New York, wherein, the Complaint alleges that the defendants made material misrepresentations and omissions concerning the Iomab-B Phase 3 Sierra Trial and the plaintiff asserts claims against all defendants pursuant to section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, as well as additional claims against the individual defendants pursuant to Section 20(a) of the Exchange Act. The Complaint purports to assert class action claims on behalf of all persons and entities that purchased or otherwise acquired Actinium securities between October 31, 2022 and August 2, 2024. Plaintiff seeks unspecified damages. The defendants have not yet responded to the complaint, and they intend to vigorously defend themselves against the plaintiff’s allegations however, there can be no assurances as to the outcome. On March 31, 2025, our Board of Directors of approved the cancellation of certain stock options to purchase 5,149,944 shares of common stock held by certain current employees and directors that were initially granted under the Company’s Amended and Restated 2013 Stock Plan and 2019 Amended and Restated Stock Plan. Such cancellation is subject to the consent of the applicable holder of the stock options, which the Company is expecting to receive shortly following the filing of this Annual Report on Form 10-K. Our Compensation Committee intends to conduct an analysis of our equity compensation plan and develop an equity compensation strategy that satisfies the purpose of the 2019 Plan to attract and retain the best available personnel who can make meaningful contributions towards achieving the business objectives of the Company. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item. 69