What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-08 compared with 2022-03-30 · 122 added, 132 removed, 540 unchanged (32% of the section changed)

13 unchanged sentences

We have audited the accompanying consolidated balance sheets of Cyclacel Pharmaceuticals, Inc.

and its subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations (loss), comprehensive loss, changes in stockholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).

and its subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations (loss), comprehensive loss, stockholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt About the Company’s Ability to Continue as a Going C o ncern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company does not currently have sufficient funds to complete development and commercialization if they are unable to raise additional capital for operations.

This raises substantial doubt about the Company’s ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 1.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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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.

As discussed in Notes 2 and 8 of the consolidated financial statements, the Company’s total accrued expenses for research and development were $3.6 million at December 31, 2022, which included the estimated obligation for pre-clinical and clinical trial expenses incurred as of December 31, 2022, 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.

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Total liabilities

Redeemable common stock, $ 0.001 par value;

0 and 3,117,100 shares issued and outstanding at December 31, 2021 and December 31, 2022 (Note 10).

Stockholders’ equity:

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Dividend on convertible exchangeable preferred shares

Beneficial conversion feature of Series B preferred stock

Net loss applicable to common shareholders

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(In thousands)

Year Ended December 31,

Translation adjustment

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

Beneficial conversion feature of Series B preferred stock

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

Warrant & stock option exercises

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Balances at December 31, 2021

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

Reclassification of redeemable common stock

( 3,117,100 )

Warrant & stock option exercises

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Financing activities:

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

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

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

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Effect of exchange rate changes on cash and cash equivalents

Net increase in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

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As of December 31, 2022, 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.

The Company is subject to risks and uncertainties common to early-stage companies in the biopharmaceutical industry, including, but not limited to, the fact that drug candidates developed by the Company typically will require approvals or clearances from the FDA, EMA or other similar regulatory agencies in other countries prior to commercial sales.

Food and Drug Administration, the European Medicines Agency or other similar regulatory agencies in other countries prior to commercial sales.

There can be no assurance that the Company’s drug candidates will receive any of the required approvals or clearances.

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Going Concern

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:

The Company’s current financial condition, including its liquidity sources

The Company’s conditional and unconditional obligations due or anticipated within one year

The funds necessary to maintain the Company’s operations considering its current financial condition, obligations, and other expected cash flows, and

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 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.

Additional funding may not be available to the Company on favorable terms, or at all.

If the Company is not able to secure additional funding when needed, it may have to delay, reduce the scope of or eliminate one or more of its clinical trials or research and development programs or make changes to its operating plan.

In addition, it may have to partner one or more of its product candidate programs at an earlier stage of development, which would lower the economic value of those programs to the Company.

The Company’s inability to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies.

Pursuant to the requirements of Accounting Standard Codification (ASC) 205-40, Presentation of Financial Statements-Going Concern , management is required at each reporting period to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued.

When substantial doubt exists under this methodology, management evaluates whether the mitigating effects of its plans sufficiently alleviate the substantial doubt about the Company’s ability to continue as a going concern.

The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern for one year after the date that these financial statements are issued.

In performing its analysis, management excluded certain elements of its operating plan that cannot be considered probable.

Under ASC 205-40, the future receipts of potential funding from future equity or debt issuances or by entering into partnership agreements cannot be considered probable at this time because these plans are not entirely within the Company’s control nor have they been approved by the Board of Directors as of the date of these consolidated financial statements.

Based on the Company’s current operating plan, it is anticipated that cash and cash equivalents of $ 18.3 million as of December 31, 2022 will allow it to meet liquidity requirements to the fourth quarter of 2023.

The Company’s history of losses, negative cash flows from operations, potential rescission rights, liquidity resources currently on hand, and its dependence on the ability to obtain additional financing to fund its operations after the current resources are exhausted, about which there can be no certainty, have resulted in the assessment that there is substantial doubt about the Company’s ability to continue as a going concern for a period of at least twelve months from the issuance date of these financial statements.

While the Company has plans in place to mitigate this risk, which primarily consist of raising additional capital through a combination of public or private equity or debt financings or by entering into partnership agreements for further development of our drug candidates, there is no guarantee that it will be successful in these mitigation efforts.The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business.

Basis of Presentation

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Use of Estimates

The preparation of financial statements in accordance with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.

Critical estimates include inputs used to determine clinical trial accruals and stock-based compensation expense.

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The objectives of the Company’s cash management policy are to safeguard and preserve funds, to maintain liquidity sufficient to meet Cyclacel’s cash flow requirements and to attain a market rate of return.

The Company deposits its cash in financial institutions that it believes have high credit quality and has not experienced any losses on such accounts and does not believe it is exposed to any significant credit risk on cash and cash equivalents.

The Company deposits its cash in financial institutions that it believes have high credit quality

and has not experienced any losses on such accounts and does not believe it is exposed to any significant credit risk on cash and cash equivalents.

The Company’s cash and cash equivalents balance at December 31, 2022 was $18.6 million and it maintains its cash accounts in several entities both within the United States and the United Kingdom.

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● The remaining useful lives of any related leasehold improvements.

Lease expense for the Company’s operating leases are recognized on a straight-line basis over the lease term.

Lease expense for the Company’s operating leases is recognized on a straight-line basis over the lease term and is reported as a component of general and administrative expense.

Variable lease payments, if any, are recognized in the period when the obligation to make those payments is incurred.

Lease incentives received prior to lease commencement are recorded as a reduction in the right-of-use asset.

Fixed lease incentives received after lease commencement reduces both the lease liability and the right-of-use asset.

Fixed lease incentives received after lease commencement reduce both the lease liability and the right-of-use asset.

The Company has elected an accounting policy to account for the lease and non-lease components as a single lease component.

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In such instances where the performance condition must be met for the award to vest, the company only recognizes compensation expense when the award is probable of vesting (See Note 11 — Stock-Based Compensation).

The Company classifies stock-based compensation expense in its statement of operations in the same manner in which the award recipient’s payroll costs are classified.

The Company classifies stock-based compensation expenses in its statement of operations in the same manner in which the award recipient’s payroll costs are classified.

The Company accounts for forfeitures as they occur.

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

The weighted average risk-free interest rate represents interest rate for treasury constant maturities published by the Federal Reserve Board.

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 weighted average risk-free interest rate represents the interest rate for treasury constant maturities published by the Federal Reserve Board.

If the term of available treasury constant maturity instruments is not equal to the expected term of an employee option, Cyclacel interpolates a discount rate based on the two Federal Reserve securities closest to the expected term of the employee option.

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.

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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.

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

In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since potentially dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

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Recently Issued Accounting Pronouncements

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).

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

This standard provides optional expedients and exceptions for applying 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.

Following the issuance of ASU 2022-06, “Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848”, the relief remains effective for all entities as of March 12, 2020 through December 31, 2024.

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.

In November 2021 , the FASB issued ASU No.

2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance .

This ASU requires business entities to make annual disclosures about transactions with a government they account for by analogizing to a grant or contribution accounting model under ASC 958-605 or based on International Accounting Standard No.

ASU 2021-10 which became effective for us on January 1, 2022.

The Company has evaluated the effect that this guidance has on its Consolidated Financial Statements and has determined it does not have a material impact.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40) .

The new ASU addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options.

This amendment became effective for the Company on January 1, 2022.

This new guidance does not have a material impact on our financial statements for any past transactions, but it could change the way that the Company accounts for subsequent amendments to its outstanding warrants, if any .

Significant Contracts

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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 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.

The up-front fee, Phase 3 entry milestone, and certain past reimbursements have been paid.

A further $ 10.0 million in aggregate milestone payments could be payable subject to achievement of all the specific contractual milestones which are primarily related to regulatory approval in various territories, and the Company’s decision to continue with these projects.

Royalties are payable in each country for the term of patent protection in the country or for ten years following the first commercial sale of licensed products in the country, whichever is later.

If the Company wishes to appoint a third party to develop or commercialize a sapacitabine-based product in Japan, within certain limitations, Daiichi Sankyo must be notified and given a right of first refusal, with the right of first refusal ending sixty days after notification, to develop and/or commercialize in Japan.

In general, the license may be terminated by the Company for technical, scientific, efficacy, safety, or commercial reasons on six months ’ notice, or twelve months ’ notice, if after a launch of a sapacitabine-based product, or by either party for material default.

There were no milestones earned in 2020 or 2021.

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

Under a 2003 license agreement, the Company licensed certain patent rights for sapacitabine.

The Company will not be pursuing further development of sapacitabine and has notified Daiichi Sankyo Co., Ltd., the licensor, that it wishes to terminate the sapacitabine license agreement effective as of March 23, 2023 for commercial reasons.

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 with 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.

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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.

As at December 31, 2022, the Company had non-current assets of $ 2.9 million, which comprised 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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Leasehold improvements

Research and laboratory equipment

Office equipment and furniture

accumulated depreciation and amortization

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 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.

Other current liabilities include accrued payroll costs of approximately $ 680,000 and $ 495,000 for the years ended December 31, 2022 and 2021 respectively.

Commitments and Contingencies

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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.

In April 2022, the Company extended for a further three years , expiring in July 2025, 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 $ 0.2 million for the year ended December 31, 2021 and decreased to $ 0.1 million for the year ended December 31, 2022, 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):

Rent expense is reported as a component of General and Administrative expense.

The following is a summary of the Company’s future contractual obligations and commitments relating to its facilities lease as at December 31, 2022 (in thousands):

Operating Lease

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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.

("Cantor"), pursuant to which the Company could 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 could 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.

On August 12, 2022, the Company became aware that the shelf registration statement on Form S-3 (file number 333-231923) (the “Registration Statement”) associated with this Sales Agreement had expired on June 21, 2022.

Prior to becoming aware of the expiration, the Company sold an aggregate of 3,117,100 shares of its common stock at the market price, following the expiration of the Registration Statement and through August 12, 2022, for aggregate proceeds of approximately $ 4,494,496 .

There was no sale of shares post August 12, 2022.

The sale of these shares may be subject to potential rescission rights by certain shareholders.

As of December 31, 2022, there have been no claims or demands to exercise such rights.

As a result of these potential rescission rights, the Company reclassified 3,117,100 shares, with an aggregate purchase price of $ 4,494,496 of its common as stock outside stockholders’ equity.

The reclassification of these shares shall remain for a period of one year from transaction date.

These shares have been treated as issued and outstanding for earnings per share and financial reporting purposes.

On August 15, 2022, due to expiry of the Registration Statement, the Sales Agreement was mutually terminated.

A total of 3,281,067 shares, for gross proceeds of approximately $ 7.6 million, had been sold pursuant to the Sales Agreement, including 2,528,642 shares during the year ended December 31, 2022 for gross proceeds of approximately $ 3.4 million.

March 2021 Equity Financing

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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

On December 18, 2020, Cyclacel Pharmaceuticals, Inc.

(the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Acorn Bioventures, LP (the “Purchaser”), pursuant to which the Company agreed to offer, issue and sell to the Purchaser, (i) in a registered direct offering, (a) an aggregate of 485,912 shares (the “Common Shares”) of common stock, par value $ 0.001 per share (“Common Stock”), and (b) an aggregate of 237,745 shares of Series B Convertible Preferred Stock (the “Preferred Shares,” and collectively with the Common Shares, the “Shares”), par value $ 0.001 per share (“Series B Preferred Stock”), and (ii) in a concurrent private placement, warrants (the “Warrants”) to purchase up to an aggregate of 669,854 shares (the “Warrant Shares”) of Common Stock.

The combined purchase price for each Share, together with one Warrant to purchase 0.4 shares of Common Stock, is $ 4.18 .

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.

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.

Each share of Series B Convertible Preferred Stock will convert into five shares of Common Stock.

The conversion feature within the Series B Convertible Preferred Stock was determined to be beneficial as of the offering date.

A beneficial conversion feature is defined as a nondetachable conversion feature that is "in-the-money"

The Company calculated the value of the beneficial conversion feature based on its intrinsic value, which is the difference between the “effective conversion price” (after allocating the proceeds of the offering between the Series B Convertible Preferred Stock, the Warrants and Common Stock issued) and the market price of the Company's common shares, multiplied by the number of shares into which the Series B Convertible Preferred Stock is convertible.

The effective conversion price of $ 3.18 per share is different from the $ 4.18 per share contractual conversion price.

As the series B Preferred Stock contained no stated redemption date and the conversion feature could be exercised at any time, the discount associated with the beneficial conversion feature was immediately charged against additional paid-in-capital and treated as a deemed dividend for both financial reporting and earnings per share purposes.

The common stock, Warrants and Series B 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 B Preferred Stock is classified within permanent equity in the consolidated balance sheet.

The closing of the offering occurred on December 22, 2020 and the net proceeds to the Company were approximately $ 6.9 million, after deducting offering expenses payable by the Company.

April 2020 equity financing

On April 21, 2020, the Company entered into a co-placement agency agreement with Roth Capital Partners, LLC, Ladenburg Thalmann & Co.

Inc., and Brookline Capital Markets, a division of Arcadia Securities, LLC (the “Co-Placement Agents”) and a securities purchase agreement with certain purchasers for the purchase and sale of (i) 1,910,000 shares of common stock, (ii) pre-funded warrants to purchase up to 2,090,000 shares of common stock at an exercise price of $ 0.001 per share, and (iii) accompanying common stock warrants to purchase up to 4,000,000 shares of common stock at an exercise price of $ 5.00 per share.

The shares of common stock and accompanying common stock warrants were sold at a combined public offering price of $ 5.00 per share and common stock warrant.

Each common stock warrant sold with the shares of common stock represents the right to purchase one share of common stock at an exercise price of $ 5.00 per share.

The common stock warrants are exercisable immediately and expire five years from the date of issuance.

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.

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.

The pre-funded warrants are exercisable immediately and may be exercised at any time until the pre-funded warrants are exercised in full.

The shares of common stock and pre-funded warrants, and accompanying common stock warrants, were issued separately and are immediately separable upon issuance.

The closing of the offering occurred on April 24, 2020, and the net proceeds to the Company were approximately $ 18.3 million, after deducting placement agent fees and other offering expenses payable by the Company.

The common stock, pre-funded warrants and common stock warrants (together the “warrants”) 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.

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.

December 2020 Warrants

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.

As of December 31, 2022, warrants to purchase 669,854 shares of common stock issued in a December 2020 financing transaction remained 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, 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.

There were no exercises of these warrants during the year ended December 31, 2022 or December 31, 2021.

April 2020 Warrants

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 .

As of December 31, 2022, 2,190,000 warrants issued in connection with an April 2020 equity financing remained outstanding, 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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A common warrant to purchase one share of common stock was issued for every share of common stock purchased in this offering.

A total of 909,000 warrants, totaling approximately $ 4.5 million, were exercised during the year ended December 31, 2021.

The common warrants are exercisable, at the option of each holder, in whole or in part, by delivering to the Company a duly executed exercise notice accompanied by payment in full for the number of shares of the Company’s common stock purchased upon such exercise (except in the case of a cashless exercise).

A holder (together with its affiliates) may not exercise any portion of the common warrant to the extent that the holder would own more than 4.99 % of the outstanding common stock immediately after exercise, except that upon at least 61 days prior notice from the holder to the Company, the holder may increase the amount of ownership of outstanding stock after exercising the holder’s common warrants up to 9.99 % of the number of shares of the Company’s common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the common warrants.

No fractional shares of common stock will be issued in connection with the exercise of a common warrant.

In lieu of fractional shares, the Company will round down to the next whole share.

There were no warrants exercised during the year ended December 31, 2022, and a total of 909,000 warrants exercised during the year ended December 31, 2021.

July 2017 Warrants

As of December 31, 2021, 374,525 warrants issued in connection with the July 2017 underwritten public offering remained outstanding, each with an exercise price of $ 40.00 .

As of December 31, 2022, 374,525 warrants issued in connection with a July 2017 underwritten public offering remained outstanding, each with an exercise price of $ 40.00 .

All such warrants were issued in connection with the July 2017 underwritten public offering and are immediately exercisable.

The warrants expire in 2024.

The exercise price and the number of shares issuable upon exercise of the warrants is subject to appropriate adjustment in the event of recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Company’s common stock.

Subject to limited exceptions, a holder of warrants will not have the right to exercise any portion of its warrants if the holder (together with such holder’s affiliates, and any persons acting as a group together with such holder or any of such holder’s affiliates) would beneficially own a number of shares of common stock in excess of 4.99 % (or, at the election of the purchaser, 9.99 %) of the shares of our Common Stock then outstanding after giving effect to such exercise.

reorganizations or similar events affecting the Company’s common stock.

The warrant holders must pay the exercise price in cash upon exercise of the warrants unless such warrant holders are utilizing the cashless exercise provision of the warrants.

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

Prior to the exercise of any warrants to purchase common stock, holders of the warrants will not have any of the rights of holders of the common stock purchasable upon exercise, including the right to vote, except as set forth therein.

There were no portion of these warrants exercised during each of the years ended December 31, 2021 and 2022.

Series B Preferred Stock

237,745 shares of the Company’s Series B Preferred Stock were issued in the December 2020 Securities Purchase Agreement.

237,745 shares of the Company’s Series B Preferred Stock were issued in a December 2020 Securities Purchase Agreement.

Each share of Series B Preferred Stock shall initially be convertible into five shares of Common Stock (the “Conversion Shares”), subject to adjustment in accordance with the Certificate of Designation.

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Series A Preferred Stock

8,872 shares of the Company’s Series A Preferred Stock were issued in the July 2017 Underwritten Public Offering.

8,872 shares of the Company’s Series A Preferred Stock were issued in a July 2017 Underwritten Public Offering.

Each share of Series A Preferred Stock is convertible at any time at the option of the holder thereof, into a number of shares of common stock determined by dividing $ 1,000 by the initial conversion price of $ 40.00 per share, subject to a 4.99 % blocker provision, or, upon election by a holder prior to the issuance of shares of Series A Preferred Stock, 9.99 %, and is subject to adjustment for stock splits, stock dividends, distributions, subdivisions and combinations.

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The Company shall not pay any dividends on shares of common stock (other than dividends in the form of common stock) unless and until such time as dividends on each share of Series A Preferred Stock are paid on an as-converted basis.

There is no restriction on the Company’s ability to repurchase shares of Series A Preferred Stock while there is any arrearage in the payment of dividends on such shares, and there are no sinking fund provisions applicable to the Series A Preferred Stock.

Subject to certain conditions, at any time following the issuance of the Series A Preferred Stock, the Company has the right to cause each holder of the Series A Preferred Stock to convert all or part of such holder’s Series A Preferred Stock in the event that (i) the volume weighted average price of our common stock for 30 consecutive trading days, or Measurement Period exceeds 300 % of the initial conversion price of the Series A Preferred Stock (subject to adjustment for forward and reverse stock splits, recapitalizations, stock dividends and similar transactions), (ii) the daily trading volume on each Trading Day during such Measurement Period exceeds $ 500,000 per trading day and (iii) the holder is not in possession of any information that constitutes or might constitute, material non-public information which was provided by the Company.

The right to cause each holder of the Series A Preferred Stock to convert all or part of such holder’s Series A Preferred Stock shall be exercised ratably among the holders of the then outstanding preferred stock.

for forward and reverse stock splits, recapitalizations, stock dividends and similar transactions), (ii) the daily trading volume on each Trading Day during such Measurement Period exceeds $ 500,000 per trading day and (iii) the holder is not in possession of any information that constitutes or might constitute, material non-public information which was provided by the Company.

The right to cause each holder of Series A Preferred Stock to convert all or part of such holder’s Series A Preferred Stock shall be exercised ratably among the holders of the then outstanding preferred stock.

The Series A Preferred Stock has no maturity date, will carry the same dividend rights as the common stock, and with certain exceptions contains no voting rights.

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6 % Convertible Exchangeable Preferred Stock

As of December 31, 2020 and 2021, there were 335,273 shares of the Company’s 6 % Convertible Exchangeable, or Preferred Stock issued and outstanding at an issue price of $ 10.00 per share.

Dividends on the Preferred Stock are cumulative from the date of original issuance at the annual rate of 6 % of the liquidation preference of the Preferred Stock, payable quarterly on the first day of February, May, August and November, commencing February 1, 2005.

As of December 31, 2022, there were 335,273 shares of the Company’s 6 % Convertible Exchangeable, or Preferred Stock issued and outstanding at an issue price of $ 10.00 per share.

Dividends on the Preferred Stock are cumulative from the date of original issuance at the annual rate of 6 % of the liquidation preference of the Preferred Stock, and if declared, payable quarterly on the first day of February, May, August and November, commencing February 1, 2005.

Any dividends must be declared by the Company’s Board of Directors and must come from funds that are legally available for dividend payments.

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The Company’s Board of Directors considers numerous factors in determining whether to declare the quarterly dividend pursuant to the Certificate of Designations governing the terms of the Company’s Preferred Stock, including the requisite financial analysis and determination of a surplus.

Accumulated but unpaid dividends in arrears on preferred stock were $ 0.7 million, or $ 1.95 per share, of preferred stock, as of December 31, 2020 and 2021.

Accumulated but unpaid dividends in arrears on preferred stock were $ 0.7 million, or $ 1.95 per share, of preferred stock, as of December 31, 2022.

The Preferred Stock is convertible at the option of the holder at any time into the Company’s shares of common stock at a conversion rate of approximately 0.00025 shares of common stock for each share of Preferred Stock based on a price of $ 39,480 .

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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 replaced the 2015 Equity Incentive Plan (the “2015 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.

On June 14, 2022, the Company’s stockholders approved an increase of 500,000 shares of common stock to be reserved for issuance under the 2018 Plan.

As of December 31, 2022, the Company has 392,396 shares of the Company’s common stock reserved and available for issuance under the 2018 Plan, including shares that were available under the 2015 Plan and carried forward to 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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In October 2020, the Inducement Equity Incentive Plan (the “Inducement Plan”), became effective.

Under this Plan, Cyclacel may make equity incentive grants to new senior level Employees (persons to whom the Company may issue securities without stockholder approval).

Under the Inducement Plan, Cyclacel may make equity incentive grants to new senior level Employees (persons to whom the Company may issue securities without stockholder approval).

The Inducement Plan allows for the issuance of up to 200,000 shares of the Company’s common stock (or the equivalent of such number).

As of December 31, 2022, 120,000 shares under the Inducement Plan have been issued, leaving a remaining reserve of 80,000 shares.

Option Grants

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.

Option Grants and Exercises

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

There were 522,337 options granted during the year ended December 31, 2022, all issued under the 2018 Plan.

The weighted average grant-date fair values of options granted during the years ended December 31, 2021 and 2022 were $ 3.36 and $ 1.76 , respectively.

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During the years ended December 31, 2021 and 2022, the Company did not settle any equity instruments with cash.

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

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

There were no stock option exercises during the year ended 2022.

No income tax benefits were recorded for the years ended December 31, 2021 and 2022.

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The Company issued 18,992 restricted stock units to employees during the year ended December 31, 2021.

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:

The Company issued an additional 118,665 restricted stock units during the year ended December 31, 2022.

These restricted stock units will vest over a period of one year for awards granted to directors and three years for grants to employees.

Each restricted stock unit was valued at $ 1.11 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 as of December 31, 2022 is as follows:

Value Per Share

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Restricted Stock Units outstanding at December 31, 2021

Restricted Stock Units outstanding at December 31, 2022

Unvested at December 31, 2022

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Company matching contributions are tax deductible by the Company when made.

Company employees may elect to reduce their current compensation by up to the statutorily prescribed annual limit of $ 19,500 if under 50 years old and $ 26,000 if over 50 years old and to have those funds contributed to the 401(k) Plan.

In 2022, Company employees could elect to reduce their current compensation by up to the statutorily prescribed annual limit of $ 20,500 if under 50 years old and $ 27,000 if over 50 years old and to have those funds contributed to the 401(k) Plan.

The Company made contributions of approximately $ 71,000 and $ 95,000 to the 401(k) Plan for the years ended December 31, 2021 and 2022, respectively.

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Additional research and development tax relief

Stock Compensation

Change in valuation allowance

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Accordingly, a valuation allowance of approximately $53.0 million has been established at December 31, 2022.

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

The valuation allowance has decreased by approximately $ 3.4 million in 2022.

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.

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

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

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

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As of December 31, 2021 and 2022, the Company had foreign NOLs of $ 218.5 million and $ 203.0 million, respectively.

The Company’s foreign NOL’s do not expire under UK tax law however the use of these NOLs is restricted to an annual £ 5 million allowance in each standalone company or group and above this allowance, there will be a 50 % restriction in the profits that can be covered by losses brought forward.

The Company’s foreign NOL’s do not expire under UK tax law however the use of these NOLs is restricted to an annual £ 5 million allowance in each

standalone company or group and above this allowance, there will be a 50 % restriction in the profits that can be covered by losses brought forward.

Management has evaluated all significant tax positions at December 31, 2021 and 2022 and concluded that there are no material uncertain tax positions.

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The Company has not recorded any interest and penalties on any unrecognized tax benefits since its inception.

Tax years 2018, 2019 and 2020 remain open to examination by major taxing jurisdictions to which the Company is subject, which are primarily in the United Kingdom and the United States, as carryforward attributes generated in years past may still be adjusted upon examination by the United Kingdom’s H.M.

Tax years 2018 - 2021 remain open to examination by major taxing jurisdictions to which the Company is subject, which are primarily in the United Kingdom and the United States, as carryforward attributes generated in years past may still be adjusted upon examination by the United Kingdom’s H.M.

Revenue & Customs, the Internal Revenue Service (“IRS”) or state tax authorities.

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We would recognize this deferred tax liability if we were to experience a change in circumstances producing a change in that intention.

As a result of the repeal of the Section 902 foreign tax credit under the Tax Act, future distributions would not be offset by a foreign tax credit.

As a result of the repeal of Section 902 foreign tax credit under the Tax Act, future distributions would not be offset by a foreign tax credit.

On December 27, 2020, the Consolidations Appropriations Act, 2021 (“CAA” or the “Act”) was signed into law and included government appropriations and additional economic stimulus.

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The CARES Act had no material impact on the Company.

Effective for tax years beginning after December 31, 2021, taxpayers are required to capitalize any expenses incurred that are considered incidental to research and experimentation (R&E) activities under IRC Section 174.

While taxpayers historically had the option of deducting these expenses under IRC Section 174, the December 2017 Tax Cuts and Jobs Act mandates capitalization and amortization of R&E expenses for tax years tax years beginning after December 31, 2021.

Expenses incurred in connection with R&E activities in the US must be amortized over a 5-year period if incurred, and R&E expenses incurred outside the US must be amortized over a 15-year period.

R&E activities are broader in scope than qualified research activities that are considered under IRC Section 41 (relating to the research tax credit).

For the year ended December 31, 2022, the Company performed an analysis based on available guidance and determined that the company does not have any R&E expenses in the US.

The company will continue to monitor this issue for future developments, but it does not expect R&E capitalization and amortization to require it to pay cash taxes now or in the near future.

Net Loss Per Share

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Stock options

Restricted Stock Units

6 % convertible exchangeable 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