What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-30 compared with 2021-03-01 · 119 added, 121 removed, 553 unchanged (30% of the section changed)

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FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2020 and 2021

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Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

We have served as the Company’s auditor since 2013.

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Clinical Trial Accrual and Expenses

As discussed in Note 2 and 8 of the consolidated financial statements, the Company’s total accrued expenses for research and development were $2.3 million at December 31, 2021, which included the estimated obligation for pre-clinical and clinical trial expenses incurred as of December 31, 2021, but not paid as of that date.

The Company’s clinical trial expenses are based on the Company’s estimates of the level of services performed each period pursuant agreements with third parties that conduct research and development on the Company’s behalf, which results in an accrual or prepaid at period end.

We identified the Company’s accrued clinical trial expenses as a critical audit matter because auditing the application of significant management judgment over the estimate of services provided but not yet invoiced required significant audit effort and a high degree of auditor judgment and subjectivity to evaluate the audit evidence obtained.

Specifically, the amount of accrued clinical trial expenses recognized is dependent on the availability of information to make the estimate, including information from multiple sources, the level of effort expended as of the balance sheet date and the associated cost of such services.

Additionally, due to the timing of invoicing received from third parties, the actual amounts incurred are not typically known on the date the Company issues its financial statements.

Our audit procedures to evaluate the Company’s estimate of services incurred as of period end pursuant to its clinical trials included, among others:

● We tested the accuracy and completeness of the underlying data used in the estimates and evaluated the significant assumptions stated above that are used by management to estimate the recorded amounts.

● To assess the reasonableness of the significant assumptions, we obtained information regarding the nature and extent of progress of clinical trials from the Company’s research and development personnel that oversee the clinical trials and obtained information directly from third parties which indicated the third parties’ estimate of costs incurred to date.

● To evaluate the completeness and valuation of the accrual clinical trial expenses, we compared invoices received by the Company subsequent to December 31, 2021, to the amounts recognized by the Company as of that date.

● We inspected the Company’s contracts with third parties and any pending change orders to assess the impact to the amounts recorded.

/s/ RSM US LLP

We have served as the Company’s auditor since 2013.

New York, New York

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Right-of-use lease asset

Non-current deposits

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Series B convertible preferred stock, $ 0.001 par value;

0 and 237,745 shares issued and outstanding at December 31, 2019 and December 31, 2020.

237,745 shares issued and outstanding at December 31, 2020 and December 31, 2021.

Common stock, $ 0.001 par value;

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(In thousands)

Year Ended December 31,

Translation adjustment

Unrealized foreign exchange gain on intercompany loans

Unrealized foreign exchange gain (loss) on intercompany loans

Comprehensive loss

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Balances at December 31, 2019

Issue of common stock on At Market Issuance sales agreement, net of expenses

Issue of common stock, preferred stock and associated warrants on underwritten offering, net of expenses

Beneficial conversion feature of Series B preferred stock

Warrant & stock option exercises

Stock-based compensation

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Balances at December 31, 2020

Issue of common stock, preferred stock, pre-funded warrants and warrants on equity financing, net of expenses

Beneficial conversion feature of Series B preferred stock

Warrant exercises

Issue of common stock and associated warrants on underwritten offering, net of expenses

Issue of common stock in At Market Issuance sales agreement, net of expenses

Warrant & stock option exercises

Stock-based compensation

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Adjustments to reconcile net loss to net cash used in operating activities:

Gain on disposal of property and equipment

Stock-based compensation

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Prepaid expenses and other assets

Accounts payable and other current liabilities

Accounts payable, accrued and other current liabilities

Net cash used in operating activities

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Purchase of property, plant and equipment

Proceeds from sale of property and equipment

Net cash provided by (used in) investing activities

Net cash used in investing activities

Financing activities:

Proceeds from issuing common stock, preferred stock and pre-funded warrants, net of issuance costs

Proceeds from issuing common stock and warrants, net of issuance costs

Proceeds from the exercise of stock options and warrants, net of issuance costs

Payment of preferred stock dividend

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Cash received during the period for:

Non cash activities on transition to ASC 842:

Lease liability

Right-of-use asset

Research & Development Tax Credits

Non cash financing activities:

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Cyclacel Pharmaceuticals, Inc.

(“Cyclacel” or “the Company”) is a clinical-stage biopharmaceutical company using cell cycle control, transcriptional regulation and DNA damage response biology to develop innovative, targeted medicines for cancer and other proliferative diseases.

Cyclacel is a pioneer company in the field of cell cycle biology with a vision to improve patient healthcare by translating cancer biology into medicines.

(“Cyclacel” or “the Company”) is a clinical-stage biopharmaceutical company developing innovative cancer medicines based on cell cycle, transcriptional regulation and mitosis control biology.

Cyclacel is a pioneer company in the field of cancer cell cycle biology with a vision to improve patient healthcare by translating insights in cancer biology into medicines that can overcome resistance and ultimately increase a patient’s overall survival.

As of December 31, 2021, substantially all efforts of the Company to date have been devoted to performing research and development, conducting clinical trials, developing and acquiring intellectual property, raising capital and recruiting and training personnel.

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Going Concern

Management considers that there are no conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern for a period of at least one year from the date the financial statements are issued.

The Company expects that its cash of $33.4 million as of December 31, 2020 will be sufficient to fund its operating expenses and capital expenditure requirements through 2022.

Management deems that there are no conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern for a period of at least one year from the date the financial statements are issued.

The Company expects that its cash of $ 36.6 million as of December 31, 2021 will be sufficient to fund its operating expenses and capital expenditure requirements through mid-2023.

This evaluation is based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued, including:

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Other conditions and events, when considered in conjunction with the above that may adversely affect the Company’s ability to meet its obligations.

The future viability of the Company beyond 2022 is dependent on its ability to raise additional capital to finance its operations.

The future viability of the Company beyond mid-2023 is dependent on its ability to raise additional capital to finance its operations.

The Company does not currently have sufficient funds to complete development and commercialization of any of its drug candidates.

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The Company’s cash and cash equivalents balance at December 31, 2021 was $ 36.6 million and it maintains its cash accounts in several entities both within the United States and the United Kingdom.

The total cash balances for amounts held in the United States are insured by the Federal Deposit Insurance Corporation, or FDIC up to $250,000 per account.

The cash balances for amounts held in the United States are insured by the Federal Deposit Insurance Corporation, or FDIC up to $ 250,000 per account.

The Company has cash balances exceeding the balance insured by the FDIC that totaled approximately $ 35.9 million at December 31, 2021.

The total cash balances for amounts held in the United Kingdom are insured by the UK Government Financial Services Compensation Scheme, or FSCS up to £85,000 per account.

The cash balances for amounts held in the United Kingdom are insured by the UK Government Financial Services Compensation Scheme, or FSCS up to £ 85,000 per account.

The Company has cash balances exceeding the balance insured by the FSCS that totaled approximately $ 0.33 million at December 31, 2021.

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The components of property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful lives of the related assets, which are generally three to five years .

Amortization of leasehold improvements is performed using the straight-line method over the shorter of the remaining lease term or the estimated useful life of the related assets, currently between five and fifteen years.

Upon sale or retirement of assets, the costs and related accumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss on sale is reflected as a component of operating income or loss.

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Revenue Recognition

The Company recognizes revenue in accordance to Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, or ASC 606.

The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers .

The Company had no revenue in 2020 or 2021 under such contracts.

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Other income is primarily related to royalty income received under a historical Asset Purchase Agreement for activities which are not part of the Company’s ongoing operations and activities.

Research and Development Expenditures

Research and development expenses consist primarily of costs associated with the Company’s product candidates, upfront fees, milestones, compensation and other expenses for research and development personnel, supplies and development materials, costs for consultants and related contract research, facility costs and depreciation.

Research and Development Costs

Research and development expenses consist primarily of costs associated with the development of the Company’s product candidates, including upfront fees, milestones, compensation and other expenses for research and development personnel, supplies and development materials, costs for consultants and related contract research, facility costs and depreciation.

Expenditures relating to research and development are expensed as incurred.

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Typically, CROs and CRAs bill monthly for services performed, and others bill based upon milestones achieved.

For outstanding amounts, the Company accrues unbilled clinical trial expenses based on estimates of the level of services performed each period.

Costs of setting up clinical trial sites for participation in the trials are recognized upon execution of the clinical trial agreement and expensed immediately as research and development expenses.

The Company accrues unbilled clinical trial expenses based on estimates of the level of services performed each period.

Clinical trial costs related to patient enrollment are accrued as patients are entered into and progress through the trial.

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As the Company’s leases do not indicate an implicit rate, the Company uses a best estimate of its incremental borrowing rate to discount the future lease payments.

The Company estimates its incremental borrowing rate based on observable information about risk-free interest rates that are the same tenure as the lease term, adjusted for various factors, including the effects of assumed collateral, the nature of how the loan is repaid (e.g., amortizing versus bullet), and the Company’s credit risk.

The Company estimates its incremental borrowing rate based on observable information about risk-free interest rates that are the same tenure as the lease term, adjusted for various factors, including the effects of assumed collateral, the nature of how a loan would be repaid (e.g., amortizing versus bullet), and the Company’s credit risk.

The Company evaluates options included in its lease agreements to extend or terminate the lease.

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The Company measures all stock options and other stock-based awards granted to employees and directors based on the fair value on the date of the grant and recognizes compensation expense of those awards over the requisite service period, which for the Company is the period between the grant date and the date the award vests or becomes exercisable.

Most of the awards granted by the Company vest ratably over three or four years.

Many awards granted by the Company vest ratably over three or four years .

However, certain awards granted to members of the Company’s Board of Directors vest in their entirety on the one-year anniversary following the date of grant.

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The determination of grant-date fair value for stock option awards is estimated using the Black-Scholes model, which includes variables such as the expected volatility of the Company’s share price, expected term of the award, interest rates, and dividend yields.

The Company relies exclusively on its historical volatility as an input to the option pricing model as management believes that this rate will be representative of future volatility over the expected term of the options.

The Company relies on its historical volatility as an input to the option pricing model as management believes that this rate will be representative of future volatility over the expected term of the options.

The expected term assumption is estimated using past history of early exercise behavior and expectations about future behaviors.

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If the term of available treasury constant maturity instruments is not equal to the expected term of an employee option, Cyclacel uses the weighted average of the two Federal Reserve securities closest to the expected term of the employee option.

The expected dividend yield is zero, based on the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.

The expected dividend yield is zero, as the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends on common stock in the foreseeable future.

The Company accounts for income taxes using the liability method.

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Net Loss Per Common Share

The Company calculates net loss per common share in accordance with ASC 260 “Earnings Per Share”, or ASC 260.

The Company calculates net loss per common share in accordance with ASC 260 “Earnings Per Share”.

Basic and diluted net loss per common share was determined by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period.

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Recently Issued Accounting Pronouncements

In July 2017, the FASB issued Accounting Standards Update, or ASU, No.

2017-11, Accounting for Certain Financial Instruments with Down Round Features, or ASU 2017-11, which simplifies the accounting for certain financial instruments with down-round features.

A down round feature is a provision in a financial instrument that reduces the strike price of an issued financial instrument if the issuer sells shares of its stock for an amount less than the currently stated strike price of the issued financial instrument or issues an equity-linked financial instrument with a strike price below the currently stated strike price of the issued financial instrument.

ASU 2017-11 was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.

This standard did not have a material impact on the company’s consolidated financial statements.

In February 2016, the FASB issued guidance on accounting for leases in ASU No.

The guidance requires that lessees recognize a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis;

and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term at the commencement date.

The guidance was effective for fiscal years beginning after December 15, 2018.

The Company has applied the new leases standard at the adoption date.

Upon adoption, there was no cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

However, upon adoption of ASU No.

2016-02, the Company initially recognized an operating lease liability, and a corresponding right-of-use asset, of approximately $1.5 million.

The Company has elected the package of practical expedients permitted in ASC 842.

Accordingly, the Company accounted for its existing operating leases as operating leases under the new guidance, without reassessing (a) whether the contracts contain a lease under ASC 842, (b) whether classification of the operating leases would be different in accordance with ASC 842, (c) whether any unamortized initial direct costs would have met the definition of initial direct costs in ASC 842 at lease commencement, or (d) whether existing or expired land easements contain a lease under ASC 842.

In addition, the Company has elected an accounting policy to not allocate payments made under the lease agreement between lease and non-lease components.

The Financial Accounting Standards Board (“FASB”) has issued ASU 2020-04, “Reference Rate Reform (Topic 848)”.

This standard provides optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform initiatives that would replace interbank offered rates, including the London Interbank Offered Rate (LIBOR).

For example, modifications of lease contracts within the scope of ASC 842 solely for changes in reference rates would be accounted for as a continuation of the existing contracts with no reassessments of the lease classification and the discount rate.

The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022.

The Company does not currently have any contracts affected by this guidance.

The FASB has issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”.

This standard simplifies the accounting for convertible instruments, such as convertible debt or convertible preferred stock, by eliminating two potential methods in accounting for the embedded conversion feature.

The standard also removes certain conditions previously used to evaluate whether a freestanding financial instrument, or certain types of embedded features, are considered to be settled in the issuer’s own equity.

Finally, ASU 2020-06 requires that an entity use the if-converted method in calculating the effects of convertible instruments on diluted earnings per share, with one limited exception.

As a smaller reporting company, the amendments in this ASU are effective for the Company for fiscal years beginning after December 15, 2023, including interim periods within those years.

Early adoption is permitted, but no earlier than for fiscal years beginning after December 15, 2020.

The Company elected to adopt ASU 2020-06 as of January 1, 2021.

There was no impact of early adoption of this pronouncement on the Company’s consolidated financial statements and disclosures.

Significant Contracts

Distribution, Licensing and Research Agreements

The Company has entered into licensing agreements with academic and research organizations.

The Company has entered into licensing and similar agreements with academic and research organizations.

Under the terms of these agreements, the Company has received licenses to technology and patent applications.

The Company is required to pay royalties on future sales of products employing the technology or falling under claims of patent applications.

Under the Daiichi Sankyo license under which the Company licenses certain patent rights for sapacitabine.

Under the Daiichi Sankyo 2003 license, the Company licenses certain patent rights for sapacitabine.

The Company is under an obligation to use reasonable endeavors to develop a product and obtain regulatory approval to sell a product and has agreed to pay Daiichi Sankyo an up-front fee, reimbursement for Daiichi Sankyo’s enumerated expenses, milestone payments and royalties on a country-by-country basis.

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There were no milestones earned in 2020 or 2021.

On October 1, 2018, the Company entered into a three-year Clinical Collaboration Agreement, or CCA with The University of Texas MD Anderson Cancer Center, or MD Anderson.

The main objective of the CCA is to clinically evaluate the safety and efficacy of three Cyclacel medicines in patients with hematological malignancies, including chronic lymphocytic leukemias, acute myeloid leukemias, myelodysplastic syndromes and other advanced leukemias.

Under the terms of the CCA, MD Anderson will conduct four clinical studies with a total projected enrollment of up to 170 patients.

Under the risk-sharing agreement MD Anderson will assume the patient costs for all studies and Cyclacel, who is the sponsor, will provide investigational drugs and other limited support.

Upon first commercial sale in specific indications studied in the alliance, Cyclacel will make certain payments to MD Anderson.

The three-year term of the Clinical Collaboration Agreement, or CCA with The University of Texas MD Anderson Cancer Center, or MD Anderson ended in September 2021, in accordance to its terms.

The main objective of the CCA was to clinically evaluate the safety and efficacy of three Cyclacel medicines in patients with hematological malignancies, including chronic lymphocytic leukemias, acute myeloid leukemias, myelodysplastic syndromes and other advanced leukemias.

Under the terms of the CCA, MD Anderson conducted four clinical studies and under the risk-sharing agreement MD Anderson assumed the patient costs for all studies and Cyclacel, who is the sponsor, provided investigational drugs and other limited support.

The agreement provided that the Company would make certain payments to MD Anderson upon first commercial sale in specific indications studied in the alliance.

There were no such payments earned in 2020 or 2021.

Cash and Cash Equivalents

The following is a summary of cash and cash equivalents at December 31, 2020 and 2021 (in thousands):

Investments with original maturity of less than three months at the time of purchase

Cash equivalents

Total cash and cash equivalents

Investments with original maturity of less than three months at time of purchase are made up of money market funds and commercial paper.

Cash equivalents are made up entirely of money market funds.

Fair Value of Financial Assets and Liabilities

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Cash equivalents

Prepaid Expenses and Other Current Assets

Prepaid Expenses and Other Assets

The following is a summary of prepaid expenses and other current assets at December 31, 2020 and 2021 (in thousands):

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Other current assets

As at December 31, 2021, the Company had non-current assets of $ 1.6 million, which comprised of clinical trial deposits held by a contract research organization in relation to the Company’s Phase 1/2 clinical trials.

Property and Equipment

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accumulated depreciation and amortization

Depreciation and amortization expense for property and equipment was $20,000 for each of the years ended December 31, 2019 and 2020.

During the year ended December 31, 2020, the Company wrote-off fully depreciated assets which were no longer in use and had no associated re-sale value other than scrap value.

During each of the years ended December 31, 2020 and 2021, the Company wrote-off fully depreciated assets which were no longer in use and had no associated re-sale value other than scrap value.

The significant reduction in leasehold improvements was a result of the lease assignment of the Company’s facility in Dundee, Scotland in May 2021 and involved the derecognition of $ 0.4 million of fully depreciated assets associated with the lease.

Accrued and Other Current Liabilities

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Other current liabilities

Other current liabilities includes an approximately $80,000 Payment Protection Program loan received during the year from the US Federal government and subsequently repaid in February 2021.

Other current liabilities for the year ended December 31, 2020 includes an approximately $ 80,000 Payment Protection Program loan received during the year from the US Federal government and subsequently repaid in February 2021.

Commitments and Contingencies

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In October 2000, the Company entered into a twenty-five year lease for its research and development facility in Dundee, Scotland.

In August 2020, the Company extended for a further two years, the lease for its corporate headquarters facility in Berkeley Heights, New Jersey.

The following is a summary of the Company’s future contractual obligations and commitments relating to its facilities leases as at December 31, 2020 (in thousands):

In May 2021, the Company vacated its former facility in Dundee, Scotland and assigned the related lease and all future commitments to a third party.

Accordingly, the Company derecognized the associated right-of-use lease asset of $ 1.1 million as well as the associated lease liability of $ 1.2 million, with the balancing $ 0.1 million credited to general and administrative expenses.

Costs of $ 0.4 million relating to the assignment of the lease were also recorded within the consolidated statement of operations.

In August 2020, the Company extended for a further two years , expiring in August 2022, the lease for its corporate headquarters facility in Berkeley Heights, New Jersey.

Rent expense, which includes lease payments related to the Company’s research and development facilities and corporate headquarters and other rent related expenses was $ 0.4 million for the year ended December 31, 2020 and decreased to $ 0.2 million for the year ended December 31, 2021, the reduction due to the assignment of the Company’s former facility in Dundee, Scotland.

The following is a summary of the Company’s future contractual obligations and commitments relating to its former facilities lease as at December 31, 2021 (in thousands):

Operating Lease

Total future minimum lease obligations

Total future minimum lease obligation

Stockholders’ Equity

The Company has completed the following equity issuances during the periods presented in the consolidated financial statements.

August 2021 Controlled Equity Offering Sales Agreement

On August 12, 2021, the Company entered into a Controlled Equity Offering Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co.

("Cantor"), pursuant to which it may issue and sell, from time to time, shares of its common stock having an aggregate offering price of up to $ 50.0 million through Cantor as the sales agent.

Cantor may sell the Company’s common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act.

Subject to the terms and conditions of the Sales Agreement, Cantor will use commercially reasonable efforts consistent with its normal trading and sales practices to sell shares of the Company’s common stock from time to time, based upon the Company's instructions, including any price, time or size limits specified by the Company.

The Company has provided Cantor with customary indemnification rights, and Cantor will be entitled to a commission at a fixed rate equal to 3.0 % of the gross proceeds per share sold.

The Company has no obligation to sell any of the shares and may at any time suspend sales under the Sales Agreement or terminate the Sales Agreement.

The Sales Agreement will terminate upon the sale of all of the shares under the Sales Agreement unless terminated earlier by either party as permitted under the Sales Agreement.

During the year ended December 31, 2021, the Company sold 752,425 shares under the Sales Agreement for net proceeds of approximately $ 4.0 million.

March 2021 Equity Financing

On March 12, 2021, the Company entered into an Underwriting Agreement (the “Underwriting Agreement”) with Oppenheimer & Co.

Inc., as representative of the underwriters identified therein (collectively, the “Underwriters”), pursuant to which the Company agreed to issue and sell 1,807,143 shares of common stock, $ 0.001 par value per share, at a public offering price of $ 7.00 per share (the “Offering”) along with a 30-day overallotment option to purchase up to an additional 271,071 shares of common stock at the public offering price, less underwriting discounts and commissions.

The closing of the offering occurred on March 16, 2021, and the net proceeds to the Company (including exercise of the over-allotment option) were approximately $ 13.5 million, after deducting placement agent fees and other offering expenses payable by the Company.

December 2020 equity financing

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The pre-funded warrants and accompanying common stock warrants were sold at a combined public offering price of $ 4.999 per pre-funded warrant and common stock warrant.

The pre-funded warrants were sold to purchasers whose purchase of shares of common stock in the public offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of the Company’s outstanding common stock immediately following the consummation of the public offering, in lieu of shares of common stock.

of the Company’s outstanding common stock immediately following the consummation of the public offering, in lieu of shares of common stock.

Each pre-funded warrant represents the right to purchase one share of the Company’s common stock at an exercise price of $ 0.001 per share.

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Subsequent to the closing of the offering and within the year ended December 31, 2020, all of the pre-funded warrants issued in connection therewith were exercised in exchange for 2,090,000 shares of common stock.

October 2018 At Market Issuance

On October 4, 2018, the Company entered into a Common Stock Sales Agreement, or the Sales Agreement, with H.C.

Wainwright & Co., LLC, or Wainwright, as sales agent, pursuant to which Wainwright was permitted to sell shares of our common stock, par value $0.001 per share, having an aggregate offering price of up to $5,000,000, by any method that is deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended.

Shares sold under the Sales Agreement were offered and sold pursuant to the Company’s previously filed and effective Registration Statement on Form S-3 and a prospectus supplement and accompanying base prospectus.

The Company paid Wainwright a commission of 3.0% of the gross sales price per share sold.

The Sales Agreement was concluded during the first quarter of 2019, and thus terminated by its terms.

Pursuant to the Sales Agreement, the Company sold an aggregate 260,126 shares for net proceeds of approximately $4.7 million, after deducting commissions and other expenses.

July 2017 Underwritten Public Offering

On July 21, 2017, the Company issued (i) 157,700 Class A Units for $40 per unit, each consisting of one share of the Company’s common stock, and a warrant to purchase one share of common stock, or Class A Warrants, and (ii) 8,872 Class B Units, each consisting of one share of the Company’s Series A Convertible Preferred Stock, par value $0.001 per share, or Series A Preferred Stock, convertible into 25 shares of Common Stock at the initial conversion price, and a warrant to purchase a number of shares of common stock equal to $1,000.00 divided by the conversion price, or Class B Warrants for $1,000 per unit.

The net proceeds to the Company after the underwriters’ exercise in full

of the over-allotment option were approximately $13.7 million, after deducting underwriting discounts, commissions and other estimated offering expenses.

The Class A Units and Class B Units have no stand-alone rights and the shares of common stock, Series A Preferred Stock and the Class A and Class B Warrants comprising those units were immediately separable.

The common stock, Class A Warrants and Class B Warrants (together the “Warrants”) and Series A Preferred Stock are freestanding financial instruments.

The Warrants are classified within equity (as a component of additional paid-in capital) in the consolidated balance sheet and are not remeasured on a recurring basis.

The Series A Preferred Stock is classified within permanent equity in the consolidated balance sheet.

The following is a description of the Company’s outstanding equity instruments.

December 2020 Warrants

As of December 31, 2020, 669,854 warrants issued in the December 2020 offering remained outstanding.

All such warrants were issued in connection with the December 2020 Securities Purchase Agreement.

Each Warrant shall be exercisable beginning on the 12-month anniversary of the date of issuance for a period of five years after the date of issuance, at an exercise price of $4.13 per Warrant Share.

As of December 31, 2021, all 669,854 warrants issued in the December 2020 offering remain outstanding.

Each Warrant shall be exercisable beginning on the 12 -month anniversary of the date of issuance for a period of five years after the date of issuance (December 2026), at an exercise price of $ 4.13 per Warrant Share.

The exercise price of the Warrants will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrants.

The Warrants may be exercised on a “cashless” basis.

No warrants were exercised during the year ended December 31, 2020.

April 2020 Warrants

As of December 31, 2020, 3,099,000 warrants issued in the April 2020 offering remained outstanding, each with an exercise price of $5.00.

All such warrants were issued in connection with the April 2020 co-placement agency agreement.

In 2020, 3,099,000 warrants were issued in the April 2020 offering, of which 2,190,000 remain outstanding as of December 31, 2021, each with an exercise price of $ 5.00 .

The common warrants are immediately exercisable and will expire on the fifth anniversary of the original issuance date.

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On the expiration date, unexercised warrants will automatically be exercised via the “cashless” exercise provision.

There were no warrants exercised during each of the years ended December 31, 2019 and 2020.

There were no portion of these warrants exercised during each of the years ended December 31, 2020 and 2021.

Series B Preferred Stock

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Stock based compensation has been reported within expense line items on the consolidated statement of operations for the years ended 2020 and 2021 as shown in the following table (in thousands):

Research and development

General and administrative

Research and development

Stock-based compensation costs before income taxes

In May 2018, the Company’s stockholders approved the 2018 Equity Incentive Plan (the “2018 Plan”), under which Cyclacel may make equity incentive grants to its officers, employees, directors and consultants.

The 2018 Plan replaces the 2015 Equity Incentive Plan (the “2015 Plan”).

The 2018 Plan allows for the issuance of up to 775,000 shares of the Company’s common stock pursuant to various types of award grants, including stock options and restricted stock units.

In addition, the 2018 Plan allows up to 35,494 additional shares to be issued if awards outstanding under the 2018 Plan are cancelled or expire on or after the date of the Company’s 2018 annual meeting of stockholders.

As of December 31, 2020, the Company has reserved 328,035 shares of the Company’s common stock under the 2018 Plan, including shares that were available under the 2015 Plan and carried forward to the 2018 Plan.

The 2018 Plan allows for various types of award grants, including stock options and restricted stock units.

As of December 31, 2021, the Company has reserved 522,294 shares of the Company’s common stock under the 2018 Plan.

Stock option awards granted under the Company’s equity incentive plans have a maximum life of 10 years and generally vest over a one to four-year period from the date of grant.

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There were 511,800 options granted during the year ended December 31, 2020.

Of these awards, 391,800 were issued under the 2018 Plan and the remaining 120,000 shares were issued under the Inducement Plan.

There were 552,153 options granted during the year ended December 31, 2021, all issued under the 2018 Plan.

The weighted average grant-date fair values of options granted during the years ended December 31, 2020 and 2021 were $ 3.47 and $ 3.36 , respectively.

As of December 31, 2020, the total remaining unrecognized compensation cost related to the non-vested stock options with service conditions amounted to approximately $1.9 million, which will be amortized over the weighted-average remaining requisite service period of 2.66 years.

As of December 31, 2021, the total remaining unrecognized compensation cost related to the unvested stock options with service conditions amounted to approximately $ 2.5 million, which will be amortized over the weighted-average remaining requisite service period of 2.37 years.

During the years ended December 31, 2020 and 2021, the Company did not settle any equity instruments with cash.

There were no stock option exercises during the years ended 2019 and 2020.

There were no stock option exercises during the year ended 2020.

There were 6,600 stock option exercises during the year ended 2021.

No income tax benefits were recorded for the years ended December 31, 2020 and 2021.

As the Company has accumulated net operating losses for tax purposes, it is not likely to benefit from any deductions associated with future exercises of granted option awards.

In September 2020, the Company modified outstanding stock option awards for two of its directors, whose service terminated in September 2020.

Specifically, the Company immediately vested a total of 10,400 options that otherwise would have been forfeited.

In addition, the Company extended the period in which all of these directors’ outstanding vested awards could be exercised from one to three years (but not beyond the contractual term of the awards).

The Company recognized a charge of approximately $20,000 in the quarter ended September 30, 2020 related to these modifications.

The Company does not expect to be able to benefit from the deduction for stock option exercises that may occur because the Company has tax loss carryforwards from prior periods that would be expected to offset any potential taxable income.

Outstanding Options

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The Company issued 14,000 restricted stock units to employees during the year ended December 31, 2019.

The Company issued 3,938 additional restricted stock units to employees during the quarter ended March 31, 2020, of which 1,414 units have been forfeited.

The vesting of the remaining 16,524 outstanding restricted stock units is dependent upon the fulfillment of certain clinical conditions.

The Company determined that the satisfaction of the clinical conditions was not probable at December 31, 2020 and, as a result, recorded no compensation expense related to restricted stock units for the year ended December 31, 2020.

The restricted stock units were valued based on their fair value at the date of grant, which is equivalent to the market price of a share of the Company’s common stock.

The Company issued 3,938 additional restricted stock units to employees during the year ended December 31, 2020, of which 1,491 units have been forfeited.

The vesting of the remaining 16,524 outstanding restricted stock units was dependent upon the fulfillment of certain clinical conditions.

The Company determined that the clinical conditions would not be satisfied as of December 31, 2021 and, as a result, these restricted stock units were cancelled as of December 31, 2021.

The Company issued an additional 18,992 restricted stock units to non-executive directors of the Company during the year ended December 31, 2021.

These restricted stock units will vest over a period of one or three years .

Each restricted stock unit was valued at $ 6.69 based on their fair value at the date of grant, which is equivalent to the market price of a share of the Company’s common stock.

Summarized information for restricted stock units’ activity for the year ended December 31, 2021 is as follows:

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The valuation allowance has increased by approximately $ 14.7 million in 2021.

As of December 31, 2019, the UK government had announced legislation to reduce the corporate tax rate from 19% to 17%.

Accordingly, the UK deferred tax assets were tax affected at 17%.

As of December 31, 2020, the UK government announced that the corporate tax rate would remain at 19%.

As a result of this enacted rate of 19%, the UK deferred tax assets increased by $3.9 million, fully offset by a $3.9 million increase in the valuation allowance.

As specified in the Tax Reform Act of 1986, due to ownership changes, the Company’s ability to utilize its net operating loss (“NOL”) carryforwards may be limited.

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These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively.

The Company completed a Section 382 study and has concluded that an ownership changed occurred on March 4, 2015 and July 21, 2017.

completed a Section 382 study and has concluded that an ownership changed occurred on March 4, 2015 and July 21, 2017.

As a result of the ownership changes, the NOLs are limited.

As of December 31, 2019 and 2020, the Company had federal NOLs of $0.4 million and $1.1 million, respectively.

As of December 31, 2020 and 2021, the Company has federal NOLs of $ 1.1 million and $ 2.5 million, respectively.

The federal NOLs have an indefinite life.

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In addition, the CARES Act allows NOLs incurred in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

The CARES Act had no material impact the Company.

The CARES Act had no material impact on the Company.

Net Loss Per Share

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Beneficial conversion feature of Series B preferred stock

Conversion of Series B preferred stock

Net loss attributable to common shareholders

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Subsequent Events

A total of 857,500 warrants, totaling approximately $4.3 million, issued in connection with the April 2020 financing, were exercised after December 31, 2020.

Including the 901,000 warrants exercised during 2020, the aggregate exercise proceeds total approximately $8.8 million.

On December 13, 2021 , the Board of Directors declared a quarterly cash dividend in the amount of $ 0.15 per share on the Company’s Preferred Stock.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data