Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement Regarding Forward-Looking Statements
This report contains certain statements that may be deemed ‘forward-looking statements’ within the meaning of United States securities laws. All statements, other than statements of historical fact, that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. Certain factors that could cause results to differ materially from those projected or implied in the forward-looking statements are set forth in this Annual Report on Form 10-K for the year ended December 31, 2024 under the caption “Item 1A — Risk factors”.
We encourage you to read those descriptions carefully. We caution you not to place undue reliance on the forward-looking statements contained in this report. These statements, like all statements in this report, speak only as of the date of this report (unless an earlier date is indicated) and we undertake no obligation to update or revise the statements except as required by law. Such forward-looking statements are not guarantees of future performance and actual results will likely differ, perhaps materially, from those suggested by such forward-looking statements.
We effected a 15:1 reverse stock split of our common stock on December 18, 2023 (the “Reverse Stock Split”). All share and per share information has been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented, unless otherwise indicated.
Recent developments
In December 2024 the Company announced that it was in the process of exploring and reviewing strategic alternatives on an expedited basis in order to preserve the Company’s cash, including a potential transaction with investor David Lazar of Activist Investing, LLC, or “Lazar”. The Company’s Board of Directors (the “Board”) reviewed a range of appropriate strategies to realize value from its assets. The Board directed management to reduce operating costs, which included the potential liquidation of the Company’s wholly owned United Kingdom subsidiary Cyclacel Limited, or Subsidiary, while such alternatives were being explored. On January 2, 2025 the Company entered into a securities purchase agreement with investor Lazar, pursuant to which he agreed to purchase from the Company 1,000,000 shares of Series C Convertible Preferred Stock and 2,100,000 shares of Series D Convertible Preferred Stock of Cyclacel at a purchase price of $1.00 per share for aggregate gross proceeds of $3.1 million, subject to the terms and conditions of the Agreement. The proceeds of the transaction will be used to settle outstanding liabilities of the Company and other general corporate and operating purposes.
On January 2, 2025 the Company entered into a securities purchase agreement with investor Lazar, pursuant to which he agreed to purchase from the Company 1,000,000 shares of Series C Convertible Preferred Stock and 2,100,000 shares of Series D Convertible Preferred Stock of Cyclacel at a purchase price of $1.00 per share for aggregate gross proceeds of $3.1 million, subject to the terms and conditions of the Agreement. The proceeds of the transaction will be used to settle outstanding liabilities of the Company and other general corporate and operating purposes.
On January 2, 2025, the Company entered into settlement agreements with the Resigning Directors effective as of the signing of the Purchase Agreement. Pursuant to the terms of the Director Settlement Agreements, each Resigning Director resigned his or her position as a member of the Board of Directors, and any positions held on committees of the Board of Directors. Each Resigning Director has received his or her accrued Board fees in full consideration of the release of claims against the Company and other promises and covenants set forth in the Director Settlement Agreements.
On January 2, 2025, the Company entered into a settlement agreement with Mr. Spiro Rombotis (the “Rombotis Settlement Agreement”). Pursuant to the terms of the Rombotis Settlement Agreement, Mr. Rombotis resigned his position as President and Chief Executive Officer of the Company effective as of the signing of the Purchase Agreement, and agreed to provide transition services to the Company in his capacity as a member of the Board of Directors through
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the filing of the Company’s Annual Report on Form 10-K for the year ended 2024. On January 2, 2025, the Company also entered into a settlement agreement with Paul McBarron (together with Mr. Rombotis, the “Resigning Officers”) effective immediately following the Initial Closing, as such term is defined in the Purchase Agreement (the “McBarron Settlement Agreement” and together with the Rombotis Settlement Agreement, the “Executive Officer Settlement Agreements” and together with the Director Settlement Agreements, the “Settlement Agreements”).
Pursuant to the terms of the McBarron Settlement Agreement, Mr. McBarron agreed to provide transition services to the Company in his capacity as a member of the Board of Directors through the filing of the Company’s Annual Report on Form 10-K for the year ended 2024. Pursuant to the Executive Officer Settlement Agreements, and subject to the Purchase Agreement, the Company will pay to Mr. Rombotis and Mr. McBarron payments of $279,415.50 and $165,164.50, respectively, as soon as practicable, and three months later a further one-time payment of $279,415.50 and $165,164.50 either in cash or through the issuance of common stock, respectively, in full consideration of the release of claims against the Company and other promises and covenants set forth in the Executive Officer Settlement Agreements (the “Settlement Payments”) and the Purchase Agreement.
Pursuant to the terms of the Settlement Agreements, the Company will provide continuing indemnification to the Resigning Directors and Resigning Officers in a manner consistent with that which was in place as of the effective date of the Settlement Agreements, and will cause to be maintained in effect the Company’s existing director and officer liability insurance pursuant to the Company’s tail insurance coverage and will not modify its governing documents to modify the Resigning Directors’ and Resigning Officers’ rights under such policy, as further set forth in the Settlement Agreements. The Settlement Agreements contain a mutual non-disparagement clause.
On January 31, 2025, the creditors voluntary liquidation of Cyclacel Limited was announced in the London Gazette, one of the official public records of the government of the United Kingdom. As part of the Company’s efforts to reduce operating costs it has determined to focus on the development of the Plogo clinical program only and therefore fadraciclib, the Subsidiary’s other drug development program, is being marketed for sale by the joint liquidator through Hilco Appraisals Limited, a firm of professional valuation agents and will no longer be part of the assets of the Company as of January 2025. On March 10, 2025, the Company entered into an Agreement for the Sale and Purchase of certain assets related to plogosertib (“Plogo”) with Cyclacel Limited and the joint liquidator.
On February 26, 2025, the Company entered into settlement agreements with Dr. Barker. Pursuant to the terms of the settlement agreement, Dr. Barker resigned his position as a member of the Board of Directors, and any positions held on committees of the Board of Directors. In addition, Dr. Barker will receive his accrued Board fees in full consideration of the release of claims against the Company and other promises and covenants set forth in the settlement agreement. Pursuant to the terms of the settlement agreement, the Company will provide continuing indemnification to Dr. Barker in a manner consistent with that which was in place as of the effective date of the settlement agreement, and will cause to be maintained in effect the Company’s existing director and officer liability insurance pursuant to the Company’s tail insurance coverage and will not modify its governing documents to modify Dr. Barker’s rights under such policy, as further set forth in the settlement agreement. The settlement agreement contains a mutual non-disparagement clause.
With the commencement of the liquidation of the Subsidiary, the Company will no longer be considered to have control over the Subsidiary and the financial results of the Subsidiary will be deconsolidated from those of the Company. The deconsolidation, which is anticipated to increase stockholders’ equity by approximately $5.0 million, will be reported in the Company’s Form 10-Q for the three months ended March 31, 2025.
Overview
We are a clinical-stage biopharmaceutical company incorporated in the State of Delaware on January 5, 1996 that has focused on the development of innovative cancer medicines based on cell cycle, transcriptional regulation, epigenetics and mitosis control biology. Our principal executive office is now located at Level 10, Tower 11, Avenue 5, No. 8, Jalan Kerinchi, Kuala Lumpur, Malaysia , and our telephone number is (908) 517-7330 . Our website address is www.cyclacel.com. The information contained on, or that can be accessed through, our website is not part of, and is not incorporated by reference into, this Annual Report.
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During 2024, our primary focus has been on our transcriptional regulation program, which evaluated fadraciclib, a CDK2/9 inhibitor, in solid tumors and hematological malignancies . The epigenetic/anti-mitotic program is evaluating Plogo, a PLK1 inhibitor, in advanced cancers.
We currently retain all marketing rights worldwide to our product candidate Plogo.
Revenue
We have not generated any revenues from product sales to date. Our product candidates will require significant additional research and development efforts, including extensive preclinical and clinical testing. Plogo and any future product candidates that we advance to clinical testing will require regulatory approval prior to commercial use and will require significant costs for commercialization. We have recognized revenue of $43,000 for the year ended December 31, 2024 related to the recovery of clinical manufacturing costs associated with an investigator sponsored study managed by Cedars Sinai Medical Center. We recognized $0.4 million of revenue for the year ended December 31, 2023. We do not expect to report revenue for the foreseeable future.
Funding Requirements and Going Concern
As of December 31, 2024, we had cash and cash equivalents of $3.1 million We have incurred losses since our inception and as of December 31, 2024, we had an accumulated deficit of $439.5 million. We expect to continue to incur substantial operating losses in the future.
We do not currently have sufficient funds to complete development and commercialization of any of our drug candidates. Current business and capital market risks could have a detrimental effect on the availability of sources of funding and our ability to access them in the future, which may delay or impede our progress of advancing our drugs currently in the clinical pipeline to approval by the FDA or EMA for commercialization. Additionally, we plan to continue to evaluate in-licensing and acquisition opportunities to gain access to new drugs or drug targets that would fit with our strategy. Any such transaction would likely increase our funding needs in the future.
Our future funding requirements will depend on many factors, including but not limited to:
● the rate of progress and cost of our clinical trials, preclinical studies and other discovery and research and development activities;
● the costs associated with establishing manufacturing and commercialization capabilities;
● the costs of acquiring or investing in businesses, Plogo or any of our future product candidates and technologies;
● the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;
● the costs and timing of seeking and obtaining FDA and EMA approvals;
● the effect of competing technological and market developments; and
● the economic and other terms and timing of any collaboration, licensing or other arrangements into which we may enter.
Until we can generate a sufficient amount of product revenue to finance our cash requirements, which we may never do, we expect to finance future cash needs primarily through public or private equity offerings, debt financings or strategic collaborations. Although we are not reliant on institutional credit finance and therefore not subject to debt covenant compliance requirements or potential withdrawal of credit by banks, we are reliant on the availability of funds and activity in equity markets. We do not know whether additional funding will be available on acceptable terms, or at
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all. If we are not able to secure additional funding when needed, we may have to delay, reduce the scope of or eliminate one or more of our clinical trials or research and development programs or make changes to our operating plan. In addition, we may have to partner one or more of our product candidate programs at an earlier stage of development, which would lower the economic value of those programs to us.
Since our inception, we have relied primarily on the proceeds from sales of common and preferred equity securities to finance our operations and internal growth. Additional funding has come through research and development tax credits, government grants, the sale of product rights, interest on investments, licensing revenue, royalty income, and a limited amount of product revenue from operations discontinued in September 2012.
As discussed in Note 1 of the Notes to the Consolidated Financial Statements accompanying this Annual Report on Form 10-K, under ASC Topic 205-40, Presentation of Financial Statements - Going Concern , management is required at each reporting period to evaluate whether there are conditions and 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.
Based on our current operating plan, we anticipate that our cash and cash equivalents of $3.1 million as of December 31, 2024, will allow us to meet our liquidity requirements into the second quarter of 2025. As of March 24, 2025, our cash balance on hand was approximately $3.5 million. We continue to work to raise additional capital however as of the date of the Consolidated Financial Statements accompanying this Annual Report on Form 10-K, there is no guarantee that we will be able to raise additional funds to extend operations beyond the second quarter of 2025. Our history of losses, our negative cash flows from operations, our liquidity resources currently on hand, and our dependence on the ability to obtain additional financing to fund our operations after the current resources are exhausted, about which there can be no certainty, have resulted in our assessment that there is substantial doubt about our ability to continue as a going concern for a period of at least twelve months from the issuance date of this Annual Report on Form 10-K. While we have 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 we will be successful in these mitigation efforts.
Agreements to Sell Securities
On November 13, 2024, Cyclacel Pharmaceuticals, Inc. (the “Company”) entered into a letter agreement (the “Warrant Exercise and Reload Agreement”) with the holder (the “Holder”) of its issued and outstanding Series B Warrants (the “Prior Warrants”) to purchase an aggregate of 4,968,945 shares of common stock of the Company offering the Holder the opportunity to exercise all of its Prior Warrants for cash at a reduced exercise price equal to $0.415 per share provided the Prior Warrants were exercised in full for cash on or before 12:30 P.M. Eastern Time on the date of the Warrant Exercise and Reload Agreement. In consideration for the exercise of the Prior Warrants, the Holder received new unregistered Series C Warrants (the “Series C Warrants”) exercisable for up to an aggregate of 9,937,890 shares of common stock (the “Series C Warrant Shares”) and new unregistered Series D Warrants (the “Series D Warrants” and, together with the Series C Warrants, the “New Warrants”) exercisable for up to an aggregate of 9,937,890 shares of common stock (the “Series D Warrant Shares” and, together with the Series C Warrant Shares, the “New Warrant Shares”). The Series C Warrants are exercisable beginning on the date upon which the Company receives stockholder approval of the issuance of the New Warrant Shares and the Placement Agent Warrant Shares (the “Stockholder Approval Date”) for a period of five and one-half (5.5) years following the Stockholder Approval Date and the Series D Warrants are exercisable beginning on the Stockholder Approval Date for a period of eighteen (18) months following the Stockholder Approval Date. The New Warrants each have an exercise price of $0.415 per share. The shares of common stock issued upon exercise of the Prior Warrants are registered pursuant to an effective registration statement on Form S-1 (No. 333-279157).
On April 30, 2024, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an institutional investor (the “Purchaser”) for the issuance and sale in a private placement (the “Private Placement”) of (i) 145,000 shares of the Company’s common stock, (ii) pre-funded warrants to purchase up to 4,823,945 shares of common stock (the “Pre-Funded Warrants”), (iii) series A warrants to purchase up to 4,968,945 shares of common stock (the “Series A Warrants”), and (iv) series B warrants to purchase up to 4,968,945 shares of common stock (the “Series B
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Warrants” and together with the Series A Warrants, the “Common Warrants”). The purchase price of each share of common stock and associated Common Warrants was $1.61 and the purchase price of each Pre-Funded Warrant and associated Common Warrants was $1.6099.
The Common Warrants are exercisable immediately upon issuance at an exercise price of $1.36 per share. The Series A Warrants will expire five and one-half years from the date of issuance and the Series B Warrants will expire eighteen months from the date of issuance. The Pre-Funded Warrants are exercisable immediately upon issuance at an exercise price of $0.0001 per share and may be exercised at any time until the Pre-Funded Warrants are exercised in full. A holder of Pre-Funded Warrants or Common Warrants (together with its affiliates) may not exercise any portion of such warrants to the extent that the holder would own more than 4.99% (or, at the election of the holder 9.99%) of the Company’s outstanding common stock immediately after exercise.
In connection with the Private Placement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”), dated as of April 30, 2024, with the Purchaser, pursuant to which the Company agreed to prepare and file a registration statement with the Securities and Exchange Commission (the “SEC”) registering the resale of the securities issued in the Private Placement.
On December 21, 2023, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain institutional investors (the “Purchasers”). Pursuant to the Securities Purchase Agreement, we agreed to sell in a registered direct offering (“Registered Direct Offering”) 168,500 shares (“Shares”) of our common stock and pre-funded warrants (“Pre-Funded Warrants”) to purchase up to 219,700 shares of common stock. The Pre-Funded Warrants have an exercise price of $0.001 per share and are immediately exercisable and can be exercised at any time after their original issuance until such Pre-Funded Warrants are exercised in full. Each Share was sold at a price of $3.315 and each Pre-Funded Warrant was sold at a price of $3.314 (equal to the purchase price per Share minus the exercise price of the Pre-Funded Warrant).
Pursuant to the Securities Purchase Agreement, in a concurrent private placement (together with the Registered Direct Offering, the “Offerings”), we also agreed to issue to the Purchasers unregistered warrants (“Common Warrants”) to purchase up to 388,200 shares of common stock. Each Common Warrant has an exercise price of $3.19 per share, is exercisable immediately following their original issuance and will expire seven years from the original issuance date. The closing of the offering occurred on December 26, 2023, and the net proceeds to us were approximately $1.0 million, after deducting placement agent fees and other offering expenses payable by us. Ladenburg Thalmann & Co. Inc. (the “Placement Agent”) acted as the exclusive placement agent for the Offerings, pursuant to a placement agency agreement dated December 21, 2023, by and between us and the Placement Agent.
On December 21, 2023, in a separate concurrent insider private placement (the “Insider Private Placement”), we also entered into a Securities Purchase Agreement with certain of our executive officers (the “Insider Securities Purchase Agreement”) pursuant to which we agreed to sell in a private placement (i) 6,070 shares of common stock and warrants to purchase 6,070 shares of common stock on the same terms as the Common Warrants issued to the Purchasers in the Offerings to Spiro Rombotis, our Chief Executive Officer, and (ii) 1,886 shares of common stock and warrants to purchase 1,886 shares of common stock on the same terms as the Common Warrants issued to the Purchasers in the Offerings to Paul McBarron, our Executive Vice President-Finance, Chief Financial Officer and Chief Operating Officer. Each such share of common stock and accompanying warrant was sold at a purchase price of $3.315, which was the same purchase price for the Shares sold in the Registered Direct Offering.
On August 12, 2021, we entered into a Controlled Equity Offering Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. ("Cantor"), pursuant to which we could issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $50.0 million through Cantor as the sales agent. Cantor could sell our 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, we 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, but following the expiration, we sold an aggregate of 132,473 shares of our common stock at market prices for aggregate proceeds of approximately $2,721,187. The sale of these shares were subject to potential
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rescission rights by certain stockholders. As a result of these rescission rights, we classified 207,807 shares (including 75,333 previously issued and outstanding shares sold for which the Company did not receive proceeds and which were reclassified to temporary equity as of September 30, 2022), with an aggregate redemption value of $4,494,496 of our common stock as stock outside stockholders equity. We also restated our loss per share as a result of $135,000 of associated fees not initially accounted for as accretion to the maximum redemption amount of the shares subject to potential rescission. During the third quarter of 2023, upon expiration of the rescission rights and with no claims or demands to exercise such rights, we reclassified all 207,807 shares back to permanent equity. In all periods presented, the shares subject to the rescission rights were treated as issued and outstanding for purposes of earnings per share and general financial reporting.
Dividend on Preferred Stock
On January 29, 2025, the Board of Directors of Cyclacel Pharmaceuticals, Inc. (the “Company”) passed a resolution to suspend payment of the quarterly cash dividend on the Company’s 6% Convertible Exchangeable Preferred Stock (the “Preferred Stock”) scheduled for February 1, 2025. The quarterly cash dividend payments were suspended for payments scheduled for May 1, 2024, August 1, 2024 and November 1, 2024. The Board of Directors will continue to evaluate the payment of a quarterly cash dividend on a quarterly basis.
Results of Operations
Years Ended December 31, 2024 and 2023
Results of Continuing Operations
Revenues
The following table summarizes the revenues for years ended December 31, 2024 and 2023 (in thousands except percentages):
Year ended December 31,
Difference
2024
2023
$
%
Clinical trial supply
43
420
(377)
(90)
Total Revenue
$
43
$
420
$
(377)
(90)
We recognize recognized $43,000 of revenue for the year ended December 31, 2024. This revenue relates to recovery of clinical manufacturing costs associated with an investigator sponsored study managed by Cedars-Sinai Medical Center. We recognized $420,000 of revenue for the comparative period in 2023.
We do not expect to report revenue for the foreseeable future.
Research and development
We expense all research and development costs as they are incurred. Research and development expenses primarily include:
● Clinical trial and regulatory-related costs;
● Payroll and personnel-related expenses, including consultants and contract research organizations;
● Preclinical studies and materials;
● Technology license costs;
● Stock-based compensation; and
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● Rent and facility expenses for our office.
The following table provides information with respect to our research and development expenditures for the years ended December 31, 2024 and 2023 (in thousands except percentages):
Year Ended
December 31,
Difference
2024
2023
$
%
Transcriptional Regulation (fadraciclib)
$
4,970
$
13,358
$
(8,388)
(63)
Anti-mitotic (plogo)
1,566
4,987
(3,421)
(69)
Other research and development expenses
119
810
(691)
(85)
Total research and development expenses
$
6,655
$
19,155
$
(12,500)
(65)
Research and development expenses represented 55% and 74% of our operating expenses for the years ended December 31, 2024 and 2023, respectively.
Research and development expenses decreased by $12.5 million from $19.2 million for the year ended December 31, 2023 to $6.7 million for the year ended December 31, 2024. Expenditure for the transcriptional regulation program decreased by $8.4 million for the year ending December 31, 2024 relative to the respective comparative period. This decrease was primarily due to a decrease in clinical trial costs of $2.4 million associated with the temporary halt in the Phase 1/2 study in hematological malignancies, the completion of a bioequivalence and tox studies during the prior year of $2.1 million, reduction in manufacturing costs of $3.5 million and other non-clinical expenditure of $0.4 million. Research and development expenses relating to Plogo decreased by $3.4 million for the year ending December 31, 2024 relative to the respective comparative period. This decrease was primarily due to a decrease in clinical trial costs of $1.6 million associated with the progression of clinical trials for the evaluation of Plogo in Phase 1/2 studies, a decrease in manufacturing costs of $0.5 million, employment costs of $0.6 million and other non-clinical expenditure of $0.7 million.
The future
We anticipate that overall research and development expenses for the year ended December 31, 2025 will decrease significantly compared to the year ended December 31, 2024 as we focus on our Plogo clinical program. There will be no expenditure related to fadraciclib as the program is being marketed for sale by the joint liquidator of the Subsidiary.
General and administrative
General and administrative expenses include costs for administrative personnel, legal and other professional expenses and general corporate expenses. The following table summarizes the total general and administrative expenses for the years ended December 31, 2024 and 2023 (in thousands except percentages):
Year Ended
December 31,
Difference
2024
2023
$
%
Total general and administrative expenses
$
5,392
$
6,718
$
(1,326)
(20)
Total general and administrative expenses represented 45% and 26% of our operating expenses for the years ended December 31, 2024 and 2023, respectively.
Our general and administrative expenditures decreased by $1.3 million from $6.7 million for the year ended December 31, 2023 to $5.4 million for the year ended December 31, 2024. This decrease was primarily due to reduction in stock compensation costs of $0.5 million, employment related costs of $0.2 million, corporate reporting costs of $0.2 million and investor relation costs of $0.2 million against the comparative prior period.
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The future
We expect general and administrative expenditures for the year ended December 31, 2025 to reduce significantly compared to the year ended December 31, 2024 following the deconsolidation of the UK Subsidiary and elimination of related expenditures.
Other expense, net
The following table summarizes the other income (expense) for years ended December 31, 2024 and 2023 (in thousands except percentages):
Year Ended
December 31,
Difference
2024
2023
$
%
Foreign exchange losses
$
(54)
$
(414)
$
360
(87)
Interest income
12
266
(254)
(95)
Other income, net
52
50
2
4
Total other income (expense), net
$
10
(98)
$
108
(110)
Total other expense, net, increased by $108,000 from an expense of $98,000 for the year ended December 31, 2023 to an income of $10,000 for the year ended December 31, 2024. The decrease in other expense, net primarily relates to a reduction in interest income of $254,000 as a direct result of holding lower cash balances during 2024. Other income, net relates to royalties receivable under a December 2005 Asset Purchase Agreement, or APA, whereby Xcyte Therapies, Inc., or Xcyte (a business acquired by us in March 2006) sold through the APA and other related agreements certain assets and intellectual property which are not related to our product development plans to ThermoFisher Scientific Company, or TSC. Accordingly, we presented $52,000 and $50,000 as other income received from TSC during the years ended December 31, 2024 and 2023 respectively. We have no knowledge of TSC’s activities and cannot predict when we may receive income under the APA, if any.
Foreign exchange losses
Foreign exchange losses increased by $360,000 to a loss of $54,000 for the year ended December 31, 2024 compared to a loss of $414,000 for the year ended December 31, 2023.
We have intercompany loans in place between our parent company based in New Jersey and our subsidiary based in Scotland. The intercompany loans outstanding are not expected to be repaid in the foreseeable future and the nature of the funding advanced is of a long-term investment nature. Therefore, all unrealized foreign exchange gains or losses arising on the intercompany loans are recognized in other comprehensive income until repayment of the intercompany loan becomes foreseeable. Unfavorable unrealized foreign exchange movements related to intercompany loans resulted in a loss of $2.9 million for the year ended December 31, 2024 compared to a gain of $12.6 million for the year ended December 31, 2023.
The future
Other income (expense), net will continue to be impacted by changes in foreign exchange rates and the receipt of income under the APA. As we are not in control of sales made by TSC, we are unable to estimate the level and timing of income under the APA, if any.
As a result of the liquidation of the UK subsidiary in January 2025, the intercompany loans will be written off as part of the deconsolidation process. The accumulated translation adjustments currently recorded in other comprehensive income within equity will be reversed and recorded as part of the gain/loss from deconsolidation of the subsidiary.
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Income tax benefit
We record research and development tax credits within income taxes. Credit is taken for research and development tax credits, which are claimed from the United Kingdom’s taxation and customs authority (HMRC), in respect of qualifying research and development costs incurred.
The following table summarizes total income tax benefit from such credits for the years ended December 31, 2024 and 2023 (in thousands except percentages):
Year Ended
December 31,
Difference
2024
2023
$
%
Total income tax benefit
$
782
$
2,996
$
(2,214)
(74)
The income tax benefit decreased significantly by approximately $2.2 million, from $3.0 million for the year ended December 31, 2023 to $0.8 million for the year ended December 31, 2024, due to the ineligibility to recover qualifying research and developments expenditure incurred during 2024. The $0.8 million tax benefit in 2024 relates to a deferred claim based on 2023 qualifying research and development expenditure. The level of tax credits recoverable is linked directly to qualifying research and development expenditure incurred in any one year and the availability of trading losses.
The future
We do not expect to continue to be eligible to receive United Kingdom research and development tax credits for the year ending December 31, 2025
Liquidity and Capital Resources
The following is a summary of our key liquidity measures as of December 31, 2024 and 2023 (in thousands):
December 31,
2024
2023
Cash and cash equivalents
$
3,137
$
3,378
Working capital:
Current assets
$
3,674
$
7,444
Current liabilities
(6,268)
(8,161)
Total working capital deficit
$
(2,594)
$
(717)
Cash Flows
Cash provided by (used in) operating, investing and financing activities for the years ended December 31, 2024 and 2023 is summarized as follows (in thousands):
Year Ended December 31,
2024
2023
Net cash used in operating activities
$
(7,990)
$
(16,112)
Net cash used in investing activities
—
(6)
Net cash provided by financing activities
7,822
848
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Operating activities
Net cash used in operating activities decreased by $8.1 million, from $16.1 million for the year ended December 31, 2023 to $8.0 million for the year ended December 31, 2024. The decrease in cash used by operating activities was primarily the result of a decrease in net loss of $11.3 million, offset by a change in working capital of $2.3 million and stock based compensation of $0.9 million. The $2.3 million change in working capital was primarily due to receivables for research and development tax credits. A cash receipt of approximately $3.7 million in research and development tax credit was received during the year ended December 31, 2024.
Investing activities
There was no net cash used in investing activities for the year ended December 31, 2024 and $6,000 in capital expenditures on information technology (“IT”) during the respective comparative period.
Financing activities
Net cash provided by financing activities was $7.8 million for the year ended December 31, 2024 as a direct result of receiving approximately:
- $6.2 million, net of expenses, from the issuance of common stock and warrants under a Securities Purchase Agreement with an institutional investor,
- $1.6 million in net proceeds from a warrant exercise and reload agreement
Net cash provided by financing activities was $0.8 million for the year ended December 31, 2023 as a direct result of receiving approximately:
- $1.0 million in net proceeds from the issuance of common stock and pre-funded warrants pursuant to the Registered Direct Offering,
- offset by dividend payments of approximately $0.2 million to the holders of our 6% Convertible Exchangeable Preferred Stock in 2023 that were not paid in 2024.
Contractual Obligations
The following table summarizes our long-term contractual obligations as of December 31, 2024 (in thousands):
Payments Due by Period
Less than
More than
Total
1 year
1 – 3 years
3 – 5 years
5 years
Operating Lease Obligations (1)
$
5
$
5
$
—
$
—
$
—
(1) Operating lease obligations relates to leasing office space at our Berkeley Heights, New Jersey location. The lease for our Berkeley Heights location, which was entered into in April 2022, has been terminated, effective January 31, 2025. Effective March 1, 2025, the Company entered into a two year lease agreement for our corporate headquarters at Level 10, Tower 11, Avenue 5, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia.
Off-Balance Sheet Arrangements
Since our inception, we have not had any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities, which are typically established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
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Recently Issued Accounting Pronouncements
Please see Note 2 to the consolidated financial statements for a discussion of the potential effects that recently issued, but not yet effective, accounting standards will have on our financial statements when adopted in a future period.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities. We review our estimates on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. We believe the judgments and estimates required by the following accounting policies to be critical in the preparation of our consolidated financial statements.
Our significant accounting policies are more fully described in Note 2 to our consolidated financial statements included elsewhere in this report. We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our consolidated financial statements.
Accrued Research and Development Costs
Accrued research and development costs comprise our best estimates related to the cost of clinical trials, laboratory, and manufacturing activities that were incurred, but not paid or invoiced, as of the end of a reporting period.
Data management and monitoring of our clinical trials are performed with the assistance of contract research organizations, or CROs, or clinical research associates, or CRAs, in accordance with our standard operating procedures. Typically, CROs and CRAs bill monthly for services performed, or based upon milestones achieved. We accrue unbilled clinical trial expenses based on estimates of the level of services performed each period. Moreover, clinical trial costs related to patient enrollment are accrued as patients are entered into and progress through the trial.
We also perform outsourced laboratory and manufacturing activities. We accrue for unbilled laboratory and manufacturing activities performed by third parties based on estimates of their progress towards completing the requested tasks.
As of December 31, 2024, we accrued $1.3 million research and development costs, that we have estimated to have been incurred as of year-end but had not been invoiced. This represents approximately 20% of our total research and development expense for the year ended December 31, 2024. As of December 31, 2023, we accrued $3.7 million research and development costs, that we have estimated to have been incurred as of year-end but had not been invoiced. This represents approximately 19% of our total research and development expense for the year ended December 31, 2023.
When recording these accruals, we must make judgments about the progress of our various clinical activities. We (as well as our CROs and CRAs) are reliant on information being provided timely and accurately by the multitude of clinics and hospitals where the studies are being conducted, some of which are located internationally. We must also make estimates about the progress our third-party vendors are making towards completing laboratory and manufacturing activities.
Stock-based Compensation
We grant stock options, restricted stock units and restricted stock to officers, employees, directors and consultants under our 2018 Equity Incentive Plan (the 2018 Plan) and the 2020 Inducement Equity Incentive Plan. We measure compensation cost for all stock-based awards at fair value on date of grant and recognize compensation over the requisite service period. The fair value of restricted stock and restricted stock units is determined based on the number of
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shares granted and the quoted price of our common stock on the date of grant. The determination of grant-date fair value for stock option awards is estimated using an option-pricing model, which includes variables such as the expected volatility of our share price, the anticipated exercise behavior of our employees, interest rates, and dividend yields. These variables are projected based on our historical data, experience, and other factors. Changes in any of these variables could result in significant adjustments to the costs recognized for share-based payments.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide information response to this item.
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