Item 5. Market for Registrant’s Common Equity
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our ordinary shares have been listed on the Nasdaq Capital Market since March 9, 2017 under the symbol “BYSI.”
Holders
As of February 28, 2025, we had approximately 67 holders of record of our ordinary shares. These numbers do not include beneficial owners whose ordinary shares are held by nominees in street name. Because many ordinary shares are held by broker nominees, we are unable to estimate the total number of beneficial holders represented by these record holders.
Dividends
We have never declared or paid cash dividends to our shareholders, and we do not intend to pay cash dividends in the foreseeable future. We intend to reinvest any earnings in developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and will depend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, business prospects, our strategic goals and plans to expand our business, applicable law and other factors that our board of directors may deem relevant.
See “Item 1A. Risk Factors—Risks Related to Our Ordinary Shares—Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of the ordinary shares for return on your investment.”
We are a holding company incorporated in the Cayman Islands. We will rely to some extent on dividends from our U.S. and PRC subsidiaries for payment of any dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiaries to make such dividend payments to us. See “Item 1A. Risk Factors—Risks Related to Our Doing Business in China—In the future, we may rely to some extent on dividends and other distributions on equity from our principal operating subsidiaries to fund offshore cash and financing requirements” and “Item 1. Business—Government Regulation—Chinese Regulation—Regulations Relating to Foreign Exchange and Dividend Distribution—Regulation of Dividend Distribution.”
Securities Authorized for Issuance Under Equity Compensation Plans
Our equity compensation plan information required by this item is incorporated by reference to the information in “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report.
Performance Graph
The performance graph has been omitted as permitted under rules applicable to smaller reporting companies.
Recent Sales of Unregistered Securities
None.
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Issuer Purchases of Equity Securities
None.
Taxation
The following is a summary of the Cayman Islands, Chinese and U.S. federal income tax considerations relevant to the ownership and disposition of our ordinary shares. This summary is not intended to be, nor should it be construed as, legal or tax advice to any particular prospective investor. This summary is based on laws and relevant interpretations thereof as of the date of this Form 10-K, all of which are subject to change or different interpretations, possibly with retroactive effect. This summary does not address all possible tax considerations relating to an investment in our ordinary shares, such as the considerations under U.S. state or local tax laws, or tax laws of jurisdictions other than the Cayman Islands, China and the United States. Potential investors should consult their tax advisors with respect to the considerations relevant to the ownership and disposition of our ordinary shares.
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation, and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after execution brought within, the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
Payments of dividends and capital in respect of the ordinary shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of the ordinary shares, as the case may be, nor will gains derived from the disposal of the ordinary shares be subject to Cayman Islands income or corporation tax.
People ’ s Republic of China Taxation
Under the EIT Law, an enterprise established outside of China with a “de facto management body” within China is considered a “resident enterprise,” which means that it is treated in a manner similar to a Chinese enterprise for enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Although the implementation rules of the EIT Law define “de facto management body” as a managing body that exercises substantive and overall management and control over the production and business, personnel, accounting books and assets of an enterprise, the only official guidance for this definition currently available is set forth in Circular 82, issued by the SAT, which provides guidance on the determination of the tax residence status of a Chinese-controlled offshore incorporated enterprise, defined as an enterprise that is incorporated under the laws of a foreign country or territory and that has a Chinese enterprise or enterprise group as its primary controlling shareholder. Although BeyondSpring Inc. does not have a Chinese enterprise or enterprise group as our primary controlling shareholder and is therefore not a Chinese-controlled offshore incorporated enterprise within the meaning of Circular 82, in the absence of guidance specifically applicable to us, we have applied the guidance set forth in Circular 82 to evaluate the tax residence status of BeyondSpring Inc. and its subsidiaries organized outside China.
According to Circular 82, a Chinese-controlled offshore incorporated enterprise will be regarded as a PRC tax resident by virtue of having a “de facto management body” in China and will be subject to Chinese enterprise income tax on its worldwide income only if all of the following criteria are met:
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the primary location of the enterprise’s senior executives of the day-to-day operational management and senior management departments performing their duties is in China;
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decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in China;
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the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder meeting minutes are located or maintained in China; and
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50% or more of voting board members or senior executives habitually reside in China.
Currently, none of our executive officers are located in China, and almost all of our board members are located outside of China. BeyondSpring Inc. and its offshore subsidiaries are incorporated outside China. As a holding company, our key assets and records, including the resolutions and meeting minutes of our board of directors and the resolutions and meeting minutes of our shareholders, are located and maintained outside China. Moreover, we are not aware of any offshore holding companies with a corporate structure similar to ours that has been deemed a Chinese “resident enterprise” by the Chinese tax authorities. Accordingly, we believe that BeyondSpring Inc. and its offshore subsidiaries should not be treated as a “resident enterprise” for Chinese tax purposes if the criteria for “de facto management body” as set forth in Circular 82 were deemed applicable to us. However, as the tax residency status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body” as applicable to our offshore entities, we will continue to monitor our tax status.
The implementation rules of the EIT Law provide that, (1) if the enterprise that distributes dividends is domiciled in China or (2) if gains are realized from transferring equity interests of enterprises domiciled in China, then such dividends or capital gains are treated as China-sourced income. It is not clear how “domicile” may be interpreted under the EIT Law, and it may be interpreted as the jurisdiction where the enterprise is a tax resident. Therefore, if we are considered as a Chinese tax resident enterprise for Chinese tax purposes, any dividends we pay to our overseas shareholders as well as gains realized by such shareholders from the transfer of our shares may be regarded as China-sourced income. If we are considered a “non-resident enterprise” by the PRC tax authorities, the dividends paid to us by our PRC subsidiaries will be subject to a 10% withholding tax. The EIT Law also imposes a withholding income tax of 10% on dividends distributed by an foreign-invested enterprise to its immediate holding company outside of China, if such immediate holding company is considered as a non-resident enterprise without any establishment or place within China or if the received dividends have no connection with the establishment or place of such immediate holding company within China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. The Cayman Islands, where we are incorporated does not have such tax treaty with China. Under the Hong Kong Tax Treaty, the dividend withholding tax rate may be reduced to 5%, if a Hong Kong resident enterprise that receives a dividend is considered a non-PRC tax resident enterprise and directly holds at least 25% of the equity interests in the PRC enterprise distributing the dividends as the beneficial owner, subject to approval of the PRC local tax authority. However, if the Hong Kong resident enterprise is not considered to be the beneficial owner of such dividends under applicable PRC tax regulations, such dividends may remain subject to withholding tax at a rate of 10%. In February, 2018, the SAT promulgated the Announcement on Issues relating to “Beneficial Owner” in Tax Agreements, which provides the criteria of determination of “Beneficial Owner.” For determination of “Beneficial Owner”, actual conditions of the specific case shall be taken into account to conduct a comprehensive analysis. Accordingly, BeyondSpring HK may be able to enjoy the 5% withholding tax rate for the dividends it receives from its PRC subsidiaries if it satisfies the relevant conditions under tax rules and regulations and obtains the approvals as required.
U.S. Federal Income Tax Considerations
The following is a summary of U.S. federal income tax considerations generally applicable to the ownership and disposition of our ordinary shares by U.S. Holders (as defined below). Unless otherwise noted, this summary addresses only U.S. Holders that hold our ordinary shares as “capital assets” (generally, property held for investment) for U.S. federal income tax purposes. This summary is based on the Code, U.S. Treasury regulations promulgated thereunder, or the Regulations, judicial decisions, administrative pronouncements, the income tax treaty between the United States and China, or the Treaty, and other relevant authorities, all as in effect as of the date hereof and all of which are subject to change or differing interpretations (possibly with retroactive effect).
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This summary does not address U.S. federal estate, gift or other non-income tax considerations, the alternative minimum tax, the Medicare tax on certain net investment income, or any state, local or non-U.S. tax considerations, relating to the ownership or disposition of our ordinary shares, nor does it address all aspects of U.S. federal income taxation that may be relevant to a particular U.S. Holder in light of that U.S. Holder’s particular circumstances or that may be relevant to certain types of U.S. Holders subject to special treatment under U.S. federal income tax law, such as:
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banks and other financial institutions;
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insurance companies;
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pension plans;
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cooperatives;
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regulated investment companies;
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real estate investment trusts;
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broker-dealers;
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traders that elect to use a mark-to-market method of accounting;
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certain former citizens or long-term residents of the United States;
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tax-exempt entities (including private foundations);
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persons that acquire our ordinary shares pursuant to any employee share option or otherwise as compensation;
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persons that hold our ordinary shares as part of a straddle, hedge, conversion, constructive sale or other integrated transaction for U.S. federal income tax purposes;
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persons whose functional currency is not the U.S. Dollar;
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persons that actually or constructively own 10% or more of our stock (by vote or value); and
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partnerships or other entities or arrangements subject to tax as partnerships for U.S. federal income tax purposes.
The information set forth below is of a general nature only and is not intended to be tax advice. Each prospective investor should consult its tax advisor with respect to the U.S. federal, state, local and non-U.S. income and other tax considerations relevant to the ownership and disposition of our ordinary shares in light of its particular circumstances.
For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our ordinary shares that is, for U.S. federal income tax purposes:
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an individual who is a citizen or resident of the United States;
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a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created in, or organized in or under the laws of, the United States or any political subdivision thereof;
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an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
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a trust if (i) a United States court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all of the trust’s substantial decisions, or (ii) that has validly elected to be treated as a U.S. person for U.S. federal income tax purposes.
If a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) owns our ordinary shares, the U.S. federal income tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding our ordinary shares and their partners should consult their tax advisors regarding an investment in our ordinary shares.
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Tax Residence of BeyondSpring Inc. for U.S. Federal Income Tax Purposes
Under current U.S. federal income tax law, a corporation is generally considered a tax resident in the jurisdiction of its organization or incorporation. Thus, as a corporation incorporated under the laws of the Cayman Islands, we should generally be classified as a non-U.S. corporation (and therefore as a non-U.S. tax resident) for U.S. federal income tax purposes. In certain circumstances, however, under section 7874 of the Code a corporation organized outside the United States will be treated as a U.S. corporation (and, therefore, as a U.S. tax resident).
In July of 2015, we completed our internal restructuring. Based on the rules in effect at the time of the internal restructuring, we believe that the internal restructuring did not result in us being treated as a U.S. corporation for U.S. federal income tax purposes by virtue of section 7874 of the Code. Nevertheless, because the section 7874 rules and exceptions are complex and subject to factual and legal uncertainties, there can be no assurance that we will not be treated as a U.S. corporation for U.S. federal income tax purposes.
The remainder of this discussion assumes that we are not treated as a U.S. corporation for U.S. federal income tax purposes.
Notwithstanding the foregoing, as discussed elsewhere in this Annual Report on Form 10-K, for purposes of U.S. federal securities law, we have become a domestic issuer for purposes of U.S. federal securities law. As a domestic issuer for purposes of U.S. federal securities law, we, among other obligations, must file this Annual Report on Form 10-K and not Form 20-F. Our characterization as a domestic issuer for purposes of U.S. federal securities law does not, however, alter our characterization as a non-U.S. corporation for U.S. federal income tax purposes.
Distributions
The gross amount of any distributions received by a U.S. Holder on our ordinary shares (including any amounts withheld in respect of PRC withholding taxes) will generally be subject to tax as dividends to the extent paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes, and will be includible in the gross income of such U.S. Holder on the day actually or constructively received. Such dividends will not be eligible for the dividends received deduction generally allowed to U.S. corporations under the Code. The following discussion assumes that any dividends will be paid in U.S. dollars. Distributions in excess of our current and accumulated earnings and profits will be treated as a non-taxable return of capital to the extent of the U.S. Holder’s adjusted tax basis in our ordinary shares and thereafter generally as capital gain. We do not intend to determine our earnings and profits in accordance with U.S. federal income tax principles. Therefore, U.S. Holders should expect that the full amount of any distribution we pay will be treated as a dividend for U.S. federal income tax purposes even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above.
An individual or other non-corporate U.S. Holder of our ordinary shares may be eligible for reduced rates of taxation on dividends: (i) received from a qualified foreign corporation if such qualified foreign corporation is neither a PFIC nor treated as such with respect to such U.S. Holder for the taxable year in which the dividend is paid or for the preceding taxable year, and (ii) provided that certain holding period and other requirements are met. A foreign corporation that is not classified as a PFIC is generally treated as a qualified foreign corporation with respect to dividends paid on ordinary shares if such ordinary shares are “readily tradable” on an “established securities market” in the United States. Although our ordinary shares are listed on the Nasdaq Capital Market, our ordinary shares may not be considered readily tradable on an established securities market in the current year or subsequent years. As discussed below under “—Passive Foreign Investment Company,” although there can be no assurances regarding our PFIC status for any taxable year, we believe that we were not a PFIC for our 2024 taxable year. Thus, dividends paid on our ordinary shares to individuals and other non-corporate U.S. Holders may constitute “qualified dividend income” eligible for reduced rates of taxation if we are a qualified foreign corporation and we are not a PFIC with respect to such U.S. Holders for the taxable year in which the dividend is paid or in the preceding taxable year.
For U.S. foreign tax credit purposes, dividends received on our ordinary shares will generally be treated as income from sources outside the United States and will generally constitute passive category income. If we are deemed to be a PRC resident enterprise under the EIT Law (see “―People’s Republic of China Taxation”), a U.S. Holder may be subject to PRC withholding taxes on such dividends. Subject to certain conditions and limitations and depending on the individual facts and circumstances, a Treaty-eligible U.S. Holder may be entitled to claim a foreign tax credit in respect of any PRC income taxes paid or withheld with respect to dividends on our ordinary shares to the extent such taxes are nonrefundable under the Treaty. A U.S. Holder that does not elect to claim a foreign tax credit for foreign taxes withheld may instead elect to deduct such taxes in computing its taxable income for U.S. federal income tax purposes. A U.S. Holder’s election to deduct foreign taxes instead of claiming foreign tax credits applies to all creditable foreign income taxes paid or accrued in the relevant taxable year. The rules regarding foreign tax credits and the deductibility of foreign taxes are complex and the application thereof depends in large part on the U.S. Holder’s individual facts and circumstances. All U.S. Holders, whether or not they are Treaty-eligible, should consult their tax advisors regarding the availability of foreign tax credits and the deductibility of foreign taxes in light of their particular circumstances.
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Sale or Other Disposition of Our Ordinary Shares
A U.S. Holder will generally recognize gain or loss on the sale or other disposition of our ordinary shares in an amount equal to the difference between the amount realized on the disposition and the U.S. Holder’s adjusted tax basis in our ordinary shares. Any such gain or loss will generally be long-term capital gain or loss if the U.S. Holder’s holding period in our ordinary shares exceeds one year at the time of disposition and will generally be U.S. source gain or loss for U.S. foreign tax credit purposes. Long-term capital gains of individuals and certain other non-corporate U.S. Holders are generally eligible for a reduced rate of taxation relative to the rate applicable to ordinary income. The deductibility of capital losses may be subject to limitations.
Any gain or loss on the sale or other disposition of our ordinary shares will generally be treated as U.S. source income or loss for U.S. foreign tax credit purposes. However, if as described in “—People’s Republic of China Taxation,” gains from the sale or other disposition of our ordinary shares may be subject to PRC income tax, a Treaty-eligible U.S. Holder may apply the Treaty to treat such gains as foreign source-gains for U.S. foreign tax credit purposes. Treaty-eligible U.S. Holders that do not apply the Treaty and U.S. Holders that are not Treaty-eligible may not be able to claim a foreign tax credit for any PRC tax imposed on a sale or other disposition of our ordinary shares. Any such U.S. Holder may instead elect to deduct such taxes in computing its taxable income for U.S. federal income tax purposes, but only for a year in which such U.S. Holder elects to do so for all foreign taxes paid or accrued during such year. The rules regarding foreign tax credits and the deductibility of foreign taxes are complex and the application thereof depends in large part on the U.S. Holder’s individual facts and circumstances.
U.S. Holders should consult their tax advisors regarding the tax consequences if a foreign tax is imposed on their disposition of our ordinary shares, including with respect to the availability of the foreign tax credit or deduction in lieu thereof in light of their particular circumstances.
Passive Foreign Investment Company
A non-U.S. corporation, such as our company, will be classified as a PFIC for U.S. federal income tax purposes for any taxable year in which either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the value of its assets (determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income.
Passive income generally includes dividends, interest, royalties, rents, annuities, net gains from the sale or exchange of property producing such income and net foreign currency gains. Passive assets are those which give rise to passive income and include assets held for investment, as well as cash, assets readily convertible into cash, and (subject to certain exceptions) working capital. Our company’s goodwill and other unbooked intangibles are taken into account and may be classified as active or passive depending on the income such assets generate or are held to generate. We will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly, indirectly or constructively, 25% or more (by value) of its stock.
Based on an analysis of our income and the value of our assets, we believe that we were not a PFIC for the taxable year ended December 31, 2024, although no assurance can be given due to the highly factual nature of such analysis. Our PFIC status for the current taxable year ending December 31, 2025, will not be determinable until after the close of the year, and it is possible that we may be classified as a PFIC for the current taxable year and for future taxable years. We believe we were a PFIC for each of the 2016–2020 taxable years, and we may have been a PFIC in prior taxable years as well. No assurance can be given with respect to our PFIC status for the current taxable year or any future taxable year, however. The determination of whether we are or will become a PFIC is uncertain, because it is a fact-intensive inquiry made on an annual basis that depends, in part, on the composition of our income and assets. Fluctuations in the market price of our ordinary shares may influence whether we are classified as a PFIC for the current or subsequent taxable years because the value of our assets for the purpose of the asset test may be determined by reference to the market price of our ordinary shares from time to time (which may be volatile for biopharmaceutical companies, such as ours, that have not yet achieved commercialization with respect to any of their products). The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets. Under circumstances where our revenue from activities that produce passive income increases relative to our revenue from activities that produce non-passive income, or where we determine not to deploy cash for active purposes, our risk of being classified as a PFIC will substantially increase. Furthermore, prior to the commercialization of any of our drug candidates, interest and other passive income could constitute more than 75% of our gross income for any taxable year.
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If we are a PFIC for any taxable year during which a U.S. Holder holds our ordinary shares, the U.S. Holder will be subject to special tax rules with respect to any “excess distribution” that the holder receives on our ordinary shares and any gain the U.S. Holder recognizes from a sale or other disposition (including a pledge) of our ordinary shares, unless the U.S. Holder makes a “mark-to-market” election as discussed below. Distributions received by a U.S. Holder on our ordinary shares in a taxable year that are greater than 125% of the average annual distributions the U.S. Holder received in the three preceding taxable years or, if shorter, such U.S. Holder’s holding period for our ordinary shares will be treated as an excess distribution. Under these special tax rules:
• the excess distribution or gain will be allocated pro rata over the U.S. Holder’s holding period for our ordinary shares;
• amounts allocated to the current taxable year and to any taxable years in the U.S. Holder’s holding period prior to the first taxable year in which we are classified as a PFIC (each, a “pre-PFIC year”) will be subject to tax as ordinary income;
• amounts allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest marginal tax rate in effect applicable to the U.S. Holder for that year; and
• an additional tax equal to the interest charge generally applicable to underpayments of tax will be imposed on the tax attributable to each prior taxable year, other than a pre-PFIC year.
If we are a PFIC for any taxable year during which a U.S. Holder holds our ordinary shares, we will continue to be treated as a PFIC with respect to such U.S. Holder’s ordinary shares in future taxable years unless (i) we cease to be a PFIC and (ii) the U.S. Holder has made a “deemed sale” election under the PFIC rules. If a U.S. Holder makes a deemed sale election, the U.S. Holder will be deemed to have sold our ordinary shares at their fair market value as of the last day of the last year for which we were a PFIC. Any gain from such deemed sale would be treated as an excess distribution subject to the excess distribution rules described above.
Alternatively, a U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election for such stock of a PFIC to elect out of the excess distribution tax treatment discussed in the second preceding paragraph. If a U.S. Holder makes a valid mark-to-market election for our ordinary shares, the U.S. Holder will include in income each year an amount equal to the excess, if any, of the fair market value of our ordinary shares as of the close of such U.S. Holder’s taxable year over such U.S. Holder’s adjusted basis in such ordinary shares. The U.S. Holder is allowed a deduction for the excess, if any, of such U.S. Holder’s adjusted basis in our ordinary shares over their fair market value as of the close of the taxable year. Deductions are allowable, however, only to the extent of any net mark-to-market gains on our ordinary shares included in the U.S. Holder’s income for prior taxable years. Amounts included in the U.S. Holder’s income under a mark-to-market election, as well as gain on the actual sale or other disposition of our ordinary shares, will be treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on our ordinary shares, as well as to any loss realized on the actual sale or disposition of our ordinary shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included in income with respect to such ordinary shares. The U.S. Holder’s basis in our ordinary shares will be adjusted to reflect any such income or loss amounts. If a U.S. Holder makes such a mark-to-market election, then, in any taxable year for which we are a PFIC, tax rules that apply to distributions by corporations which are not PFICs would apply to distributions by us (except that the lower applicable capital gains rate for qualified dividend income would not apply). If a U.S. Holder makes a valid mark-to-market election, and we subsequently cease to be classified as a PFIC, such U.S. Holder will not be required to take into account the mark-to-market income or loss described above during any period that we are not classified as a PFIC.
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The mark-to-market election is available only for “marketable stock” which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter(“regularly traded”) on a qualified exchange or other market, as defined in applicable regulations. We expect that our ordinary shares will continue to be listed on the Nasdaq Capital Market, which is a qualified exchange for these purposes, and, consequently, assuming that our ordinary shares are regularly traded, if a U.S. Holder holds our ordinary shares, it is expected that the mark-to-market election would be available to such U.S. Holder were we to be or become a PFIC.
In addition, because, as a technical matter, a mark-to-market election cannot be made for any lower-tier PFICs that we may own, a U.S. Holder may continue to be subject to the PFIC rules with respect to such U.S. Holder’s indirect interest in any such lower-tier PFICs.
We do not intend to provide the information necessary for U.S. Holders to make qualified electing fund elections, which, if available, would result in tax treatment different from the general tax treatment for PFICs described above.
A U.S. Holder that owns our ordinary shares during any taxable year that we are a PFIC must generally file an annual report with the IRS regarding their ownership of such shares. U.S. Holders should consult their tax advisors concerning the U.S. federal income tax considerations with respect to holding and disposing of our ordinary shares if we were, are, or become a PFIC, including the availability and possibility of making a mark-to-market election and the annual PFIC filing requirements, if any.
THE PRECEDING SUMMARY OF U.S. FEDERAL INCOME TAX CONSIDERATIONS IS INTENDED FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE TAX ADVICE. U.S. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE U.S. FEDERAL, STATE, LOCAL, AND NON-U.S. TAX CONSIDERATIONS GENERALLY APPLICABLE TO THE OWNERSHIP AND DISPOSITION OF OUR ORDINARY SHARES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
Item 6. [Reserved]
Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of the Company ’ s financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and the notes related thereto which are included in “ Item 8. Financial Statements and Supplementary Data ” of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “ Forward-Looking Statements, ” “ Item 1A. Risk Factors ” and elsewhere in this Annual Report on Form 10-K.
Overview
We are a clinical stage global biopharmaceutical company focused on developing innovative therapies to improve clinical outcomes for patients with high unmet medical needs. Our first-in-class lead asset, Plinabulin, which has been administered to over 700 cancer patients with generally good tolerability, is being developed as a potential “pipeline in a drug” in various cancer indications as a direct anti-cancer agent. We are also developing three small molecule immune agents, which are currently in pre-clinical stages. In addition, we founded and continue to own an equity stake in SEED. See “Item 1. Business—SEED’s Targeted Protein Degradation (TPD) Platform and Pipeline—SEED’s relationship with BeyondSpring” for additional information. SEED is utilizing a proprietary Targeted Protein Degradation (TPD) drug discovery platform, or “molecular glue” technology, to develop innovative therapeutic agents from internal research and development efforts and with our collaborators on currently undruggable protein targets. SEED is partnering with Eli Lilly and Eisai to discover and develop new chemical entities through this proprietary TPD platform which could produce therapeutic benefits to patients suffering from oncology and CNS disease, among others.
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Plinabulin is being studied as an anti-cancer agent in a number of company-sponsored studies and investigator-initiated studies. We completed a randomized global Phase 3 study of Plinabulin in combination with docetaxel compared with docetaxel alone for second- and third- line treatment of NSCLC, EGFR wild type (DUBLIN-3 Phase 3 registration study). The DUBLIN-3 study enrolled 559 patients at 58 clinical sites globally and the final results from the study showed that the Plinabulin and docetaxel combination had statistically significant and clinically meaningful overall survival benefit compared to standard of care docetaxel alone. Key secondary endpoints were also achieved with additional clinically significant benefits in progression free survival (PFS) and objective response rate (ORR), coupled with a significant reduction in grade 4 neutropenia, with over 80% reduction. The finding was published in LANCET Respiratory Medicine journal in September 2024, and at the same time we made an oral presentation at the IASLC conference. We plan to use our best efforts to file an NDA with the NMPA as soon as possible.
The current standard of care for first-line NSCLC without driver mutations is chemotherapy plus PD-1/PD-L1 antibodies, with 60% patients progress on these therapies. Once patients progress on these regimens, docetaxel is the recommended in the second line, but it has modest clinical benefit and high severe neutropenia. To address the significant unmet need in this population, our collaborators at Peking Union Medical College Hospital in China are conducting an investigator-initiated Phase 2 study (Study 303): Plinabulin in combination with Keytruda® (pembrolizumab), a PD-1 antibody, and docetaxel for the treatment of NSCLC patients who progressed from PD-1/PD-L1 antibodies. We presented the early data of disease control rate and prolonged PFS from this study at ESMO 2024 and SITC 2024.
Plinabulin is also being studied in a Phase 2 investigator-initiated study (Study 302) in combination with Keytruda®, etoposide and platinum for the first-line treatment of ES-SCLC patients at Wuhan Union Hospital in China, where the current standard of care has limited median PFS.
Additional investigator initiated studies with Plinabulin include: 1) in combination with nivolumab, a PD-1 antibody, for the treatment of NSCLC at UCSD and the University of Washington (Phase 1 completed); 2) in combination with nivolumab and ipilimumab, a CTLA-4 antibody, for the treatment of ES-SCLC at the Rutgers University and other U.S. clinical centers (Phase 1 completed, Phase 2 completed for patients who progressed on PD-1/PD-L1 antibodies); and 3) in combination with PD-1 or PD-L1 antibodies and radiation for the treatment of patients with various cancers who progressed from PD-1/PD-L1 antibodies at MD Anderson (Phase 1 completed and presented at SITC 2023). We provide financial support for these various investigator-initiated clinical trials as well as the drug supply of Plinabulin.
We expect each of these studies to benefit from our previous investigation of Plinabulin as an agent that has been studied in two randomized, controlled Phase 3 clinical studies to have demonstrated a statistically significant reduction in CIN. In total, over 700 patients have been treated with Plinabulin, where improvements in CIN have been repeatedly observed. Our strategy is to develop Plinabulin in multiple indications with the potential for Plinabulin to be an important component of the multiple-agent combination with immune checkpoint inhibitor regimes to elevate the anti-cancer benefit for cancer patients, supported by Plinabulin’s potent dendritic cell maturation mechanism. To implement our strategy, we use a highly efficient business model that integrates clinical resources in the U.S. and China. We work with global CRO companies, such as ICON and Covance (now Labcorp), to ensure data quality with studies conducted under U.S. GCP. Our drug development capabilities are facilitated by strong interest from clinical investigators in the U.S. as well as by our understanding of the pharmaceutical industry, clinical resources and regulatory system in China.
We have partnered with Hengrui to commercialize Plinabulin, if approved, in Greater China through our subsidiary, Wanchunbulin. China recognized Plinabulin as a National Science and Technology Major Project for “essential new drug research and development.” Also, with receipt of the 2017 Grant, Plinabulin has been included in the National Drug Priority Review List. We believe that, pending drug approval and successful pricing negotiations with the Chinese government, the 2017 Grant could help position Plinabulin for inclusion in the National Insurance System, which would allow for faster access to patients and reimbursement. In the U.S. and for the rest of the world, we currently plan to seek a co-development and commercialization partner to maximize Plinabulin’s potential in multiple cancer indications, if approved.
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Since the inception of Wanchun Biotech, the former holding company of our U.S. subsidiary, in 2010, our operations have focused on organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio, including protecting the rights to Plinabulin, and conducting studies in animals and clinical trials of Plinabulin. We do not have any product candidates approved for sale and have not generated any revenue from product sales. We have financed our operations with a combination of equity financings, shareholder and third-party loans, including bank loans, sale of subsidiary interests and collaboration arrangements.
Through December 31, 2024, we have raised approximately $299.0 million in equity financings, $10.2 million of issuance of non-controlling interests, $34.0 million from the sale of preferred shares of SEED, $2.1 million from bank loans, of which $0.6 million has been forgiven in July 2021 and $1.5 million has been repaid in March 2022, $2.5 million in third party loans, of which $1.0 million has since been converted into an equity investment and $1.5 million has been repaid, and $14.4 million in shareholder loans, of which $6.0 million has been repaid and $8.4 million was assumed by Wanchun Biotech, the former holding company of our U.S. subsidiary, on July 20, 2015 pursuant to our internal restructuring, $10.0 million upfront payment to SEED from Eli Lilly, and approximately $31.0 million upfront payment to Wanchunbulin from Hengrui. As of December 31, 2024, our continuing operations had cash and cash equivalents of $2.9 million. In February 2025, we received approximately $7.35 million in cash as consideration for the first closing of the sale of a portion of our equity interests in SEED, as further described under “Item 1. Business—SEED’s Targeted Protein Degradation (TPD) Platform and Pipeline.”
Since inception we have incurred operating losses. Our consolidated net losses were $21.9 million and $16.7 million for the years ended December 31, 2023 and 2024, respectively. As of December 31, 2023 and 2024, we had an accumulated deficit of $396.3 million and $407.4 million, respectively. Substantially all of our losses have resulted from funding our preclinical studies, clinical trials, manufacturing our drug product, our research and development programs and from general and administrative costs associated with our operations. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses may increase in connection with our ongoing activities, as we:
●
continue preclinical studies and clinical development of our programs including in connection with the clinical development programs for Plinabulin in NSCLC and combination studies with immune agents and related chemistry, manufacturing, and controls (CMC) and regulatory activities;
●
incur additional costs associated with operating as a domestic issuer;
●
maintain, expand and protect our intellectual property portfolio; and
●
fund the discovery and development of new product candidates.
We will need substantial additional funding to support our operating activities as we advance our product candidates through clinical development, seek regulatory approval and prepare for and, if any of our product candidates are approved, proceed to commercialization. We continue to explore strategic options in the United States and globally to support the execution of our business plan and to maximize shareholder value. These options may include licensing and partnership arrangements, a sale of the Company or its assets, equity or debt financing, or a combination of the above. Adequate funding may not be available to us on acceptable terms, or at all. In particular, inflation and high interest rates across the global economy, governments’ monetary policy in response to inflation concerns, concerns around tariffs and a possible recession, the ongoing hostilities between Russia and Ukraine and the current war between Israel and Hamas have caused, and may continue to cause, market volatility, and under such market conditions, we may not be able to obtain funding on reasonable terms or at all.
Discontinued Operations
SEED was founded by us in 2019. As of December 31, 2024, the BYSI Entities owned an aggregate of 12,019,999 Series A-1 Preferred Shares of SEED. In January 2025, we entered into definitive agreements to sell a portion of our Series A-1 Preferred Shares of SEED for $35.4 million, or $4.25 per share, to certain third-party investors in three installments. The first closing of 1,730,454 shares for approximately $7.35 million occurred in February 2025. The second closing of 3,103,055 shares for approximately $13.19 million and the third closing of 3,500,128 shares for approximately $14.88 million are expected to occur no later than December 15, 2025 and 2026, respectively. Each agreement contains specified termination rights for us and each purchaser, including a mutual termination right in the event a closing shall not have occurred by such specified date as set forth in each agreement. As of the date of this Annual Report on Form 10-K, the BYSI Entities own approximately 40.12% of the outstanding equity interest in SEED, and are expected to own approximately 28.02% and 14.37% of the outstanding equity interest in SEED after the second and third closings, respectively, in each case calculated on an as-converted basis (excluding any shares that may be reserved under an employee stock ownership plan, or similar arrangement), and assuming there is no other change to SEED’s share capital prior to such closings. For so long as the BYSI Entities remain holders of a majority of the Series A-1 Preferred Shares of SEED, they have the right to elect two directors of SEED. In addition, holders of a majority of the Series A-1 Preferred Shares and ordinary shares of SEED will have the right to elect two independent directors of SEED.
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As a result, SEED’s operations met the criteria under ASC 205-20 as discontinued operations for financial reporting purposes. We reclassified the financial results of SEED to Discontinued Operations in the Consolidated Statements of Comprehensive Loss for all periods presented. We also reclassified the related assets and liabilities as current and noncurrent assets and liabilities of discontinued operations on the accompanying Consolidated Balance Sheets as of December 31, 2024 and 2023. Cash flows from discontinued operations are not reclassified in the Consolidated Statements of Cash Flows but are disclosed in the accompanying financial footnotes. See Note 3 (Discontinued operations) to our consolidated financial statements for additional information.
Segments
From 2022 to 2024, we operated in two reportable segments, namely Plinabulin pipeline and TPD platform. The TPD platform segment was comprised of SEED’s operations. As a result of SEED’s operations being reclassified as discontinued operations, the TPD platform segment is excluded from the Company’s continuing operations at year end 2024.
See Note 14 (Segment reporting and geographic information) to our consolidated financial statements for additional information.
Components of Results of Operations
Revenue
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future. In 2024, our discontinued operations generated $2.0 million of revenue through SEED’s research collaboration and license agreement with Eli Lilly and our continuing operations did not generate any revenue. The RMB 200 million (approximately $31 million) upfront payment received by Wanchunbulin from Hengrui is recorded as deferred revenue and will be recognized as revenue over time after product approval using unit of delivery measure of progress. In the future, we may generate revenue from a combination of product sales, reimbursements, upfront payments, milestone payments and royalties in connection with existing and future collaborations. If we fail to complete the development of our product candidates in a timely manner or fail to obtain their regulatory approval, we will not generate revenue from product sales in the future.
Operating Expenses
Research and Development Expenses
The largest component of our total operating expenses has historically been our investment in research and development activities. Research and development expenses consist of costs associated with our research and development activities, conducting preclinical studies and clinical trials of Plinabulin and development of our pipeline of immune-oncology product candidates. Research and development expenses also include activities related to:
●
employee-related expenses, including salaries, benefits, share-based compensation and travel expense for research and development personnel;
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●
expenses incurred under agreements with CROs, contract manufacturing organizations, and consultants that conduct and support clinical trials and preclinical studies;
●
costs associated with preclinical studies and development activities;
●
costs associated with regulatory operations;
●
costs associated with protecting intellectual property;
●
share-based compensation to employees, directors and non-employee consultants; and
●
other expenses, which include direct and allocated expenses for rent, insurance and other supplies used in research and development activities.
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to continue to be significant over the next several years as we continue to develop our product pipeline through additional preclinical studies and clinical trials.
We expense research and development costs when we incur them. We record costs for some development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as subject enrollment, clinical site activations or information our vendors provide to us.
There are numerous factors that will impact research and development costs, including future clinical trials and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial requirements and regulatory factors beyond our control will impact our clinical development programs and plans. The successful development of our product candidates is highly uncertain. Due to the inherently unpredictable nature of preclinical studies and clinical development and commercialization of product candidates, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of, or when, if ever, material net cash inflows may commence from, any of our other product candidates. This unpredictability is due to the numerous risks and uncertainties associated with the duration and cost of clinical trials and commercialization of product candidates, which vary significantly over the life of a project as a result of many factors, including:
●
the number of clinical sites included in the trials;
●
the design of the trial and changes to the design of the trial;
●
establishing an appropriate safety profile;
●
the length of time required to enroll suitable patients;
●
the number of patients that ultimately participate in the trials;
●
the number of doses patients receive;
●
the duration of patient follow-up;
●
the results of our clinical trials;
●
making arrangements with third-party manufacturers;
●
receipt of marketing approvals from applicable regulatory authorities;
●
commercializing the product candidates, if and when approved, whether alone or in collaboration with others;
●
obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;
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●
continued acceptable safety profiles of the products following approval; and
●
retention of key research and development personnel.
A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel costs, including executive, finance and human resource functions, and information technology, and share-based compensation costs. Other general and administrative expenses include professional fees for legal, consulting, auditing and tax services as well as other direct expenses for rent, insurance and supplies used in general and administrative activities. We currently do not expect to incur significant pre-commercialization costs in the near future. We also incur legal, compliance, accounting, directors and officers insurance, and investor and public relations expenses associated with being a public company.
Other Income (Expenses)
Other income consists primarily of government grants received and interest income earned on our cash and cash equivalents. Other expenses consist primarily of foreign exchange losses.
Results of Operations
Comparison of Years Ended December 31, 2024 and 2023
The following table summarizes the results of our operations for the years ended December 31, 2024 and 2023, respectively, together with the percentage changes in those items:
Years Ended December 31,
2024
2023
Change
(in thousands of U.S. Dollars (“$”))
%
Revenue
—
—
—
Operating expenses
Research and development
(2,644
)
(7,272
)
-64
%
General and administrative
(6,110
)
(7,809
)
-22
%
Loss from operations
(8,754
)
(15,081
)
-42
%
Other income (expense)
Foreign exchange loss, net
(96
)
(128
)
-25
%
Interest income
59
322
-82
%
Other income, net
22
964
-98
%
Total other income (expense)
(15
)
1,158
-101
%
Net loss before income tax
(8,769
)
(13,923
)
-37
%
Income tax expenses
(96
)
(92
)
4
%
Net loss from continuing operations
(8,865
)
(14,015
)
-37
%
Discontinued operations:
Loss from discontinued operations
(7,828
)
(7,919
)
-1
%
Income tax expenses
—
(14
)
-100
%
Net loss from discontinued operations
(7,828
)
(7,933
)
-1
%
Net loss
(16,693
)
(21,948
)
-24
%
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Research and Development Expenses
Research and development (R&D) expenses were $2.6 million for the year ended December 31, 2024 compared to $7.3 million for the year ended December 31, 2023. The $4.7 million decrease was primarily due to lower clinical development expense, lower professional services expense, lower personnel costs and lower facility and other expenses, as results of completion of DUBLIN-3, PROTECTIVE-1 and PROTECTIVE-2 studies.
The following table summarizes the research and development expenses for the years ended December 31, 2024 and 2023:
Year Ended December 31,
2024
2023
Change
(in thousands of U.S. Dollars (“$”))
%
Clinical expenses
417
2,483
-83
%
Preclinical expenses
45
113
-60
%
Professional services
994
1,363
-27
%
Personnel compensation and related costs
1,015
2,815
-64
%
Facility and other expenses
173
498
-65
%
Total research and development
2,644
7,272
-64
%
General and Administrative Expenses
General and administrative (G&A) expenses were $6.1 million for the year ended December 31, 2024, compared to $7.8 million for the year ended December 31, 2023. The $1.7 million decrease was primarily due to lower professional services costs. There were also decreases in costs in facilities, financial operations and miscellaneous items such as travel and entertainment, as results of process optimization and workflow streamlining.
Other Income (Expenses)
Other income for the year ended December 31, 2024 consisted primarily of foreign exchange losses, offset by interest income. Other income for the year ended December 31, 2023 consisted primarily of $0.8 million of cash government grants received for R&D expenses incurred in the past and $0.3 million of interest income.
Non-Accelerated Filer
As a non-accelerated filer, we intend to rely on an exemption from the rule requiring us to provide an auditor’s attestation report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and potential exemptions from the rule requiring us to comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis.
Liquidity and Capital Resources
Since inception, we have incurred net losses and negative cash flows from our operations. Substantially all of our negative cash flows have resulted from funding our research and development programs and general and administrative costs associated with our operations. We incurred consolidated net losses of $16.7 million and $21.9 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024 and 2023, we had an accumulated deficit of $407.4 million and $396.3 million, respectively. Our primary use of cash is to fund research and development costs and for general and administrative costs. Our operating activities used $16.4 million and $16.5 million of cash, including $7.7 million and $5.5 million used in discontinued operating activities, during the years ended December 2024 and 2023, respectively. We have financed our operations with a combination of equity offerings, shareholder and third-party loans, including bank loans, sale of subsidiary interests and collaboration arrangements. For the year ended December 31, 2024, we have received aggregate net cash proceeds of $3.0 million from the issuance of our equity securities. As of December 31, 2024, our continuing operations had cash and cash equivalents of $2.9 million. In February 2025, we received approximately $7.35 million in cash as consideration for the first closing of the sale of a portion of our equity interests in SEED, as further described under “Item 1. Business—SEED’s Targeted Protein Degradation (TPD) Platform and Pipeline.”
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Our liquidity is affected by financing activities, our clinical trials, and research and development and general and administrative expenses. We will need, among other things, additional capital resources. We anticipate that our current financial resources will allow us to meet our operational expenses and capital expenditures in the next 12 months after the date of this Annual Report on Form 10-K. We are evaluating various financing alternatives to fund our operations in the medium to long term, including equity and debt financings, potential licensing and partnership arrangements, sale of subsidiary or investee interests, as well as other strategic transactions. There can be no assurance that capital will be available as necessary to meet our working capital requirements or, if the capital is available, that it will be on terms acceptable to us. The issuances of additional equity securities by us may result in dilution in the equity interests of our current shareholders. Obtaining commercial loans, assuming those loans will be available, will increase our liabilities and future cash commitments and may include financial covenants and restrictions. If we are unable to obtain financing in the amounts and on terms deemed acceptable, our business and future success will be materially and adversely affected.
The following table provides information regarding our consolidated cash flows for the years ended December 31, 2024 and 2023:
Year Ended December 31,
2024
2023
(in thousands of U.S. Dollars (“$”))
Net cash used in operating activities
(16,443
)
(16,474
)
Net cash used in investing activities
(12,012
)
(100
)
Net cash provided by financing activities
26,785
4
Net effect of foreign exchange rate changes
(33
)
(76
)
Net decrease in cash, cash equivalents and restricted cash
(1,703
)
(16,646
)
The following table provides information regarding cash flows of discontinued operations for the years ended December 31, 2024 and 2023:
Year Ended December 31,
2024
2023
(in thousands of U.S. Dollars (“$”))
Net cash used in discontinued operating activities
(7,665
)
(5,474
)
Net cash used in discontinued investing activities
(12,012
)
(91
)
Net cash provided by discontinued financing activities
23,815
4
Cash inflows generated by our discontinued operations were used to support their own operations, including funding their own R&D activities, rather than being transferred to or used by the continuing operations. As such, we believe the liquidity of our continuing operations will not be negatively affected by the absence of discontinued operation’s cash flows.
Net Cash Used in Operating Activities
The cash used in operating activities for the years ended December 31, 2024 and 2023 resulted primarily from our net losses of $16.7 million and $21.9 million, respectively, adjusted for non-cash charges and changes in components of working capital. During 2024, these non-cash charges mainly consisted of $2.3 million of non-cash share-based compensation and $0.7 million of non-cash operating lease expenses. Net cash used in operating activities was $16.4 million for the year ended December 31, 2024, compared to $16.5 million for the year ended December 31, 2023. There were no major changes to the scale of operating activities on a consolidated basis.
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The primary use of our cash in the periods presented was to fund the development of our research and development, regulatory and other clinical trial costs and related administrative costs. Our advances to suppliers and other current assets, accounts payable and accrued expense balances in all periods presented were affected by the timing of vendor invoicing and payments.
Net Cash Used in Investing Activities
Net cash used in investing activities for the year ended December 31, 2024 and 2023 was $12.0 million and $0.1 million, respectively. During 2024, net cash was primarily used for acquiring time deposits. During 2023, net cash was primarily used for acquiring property and equipment.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the year ended December 31, 2024 was $26.8 million. Net cash provided by financing activities for the year ended December 31, 2023 was $4.0 thousand. During 2024, we received aggregate net cash proceeds of $3.0 million from the issuance of our equity securities. SEED received $20.0 million from the issuance of its Series A-3 Preferred Shares. During 2023, net cash was primarily provided by the proceed of employees’ exercise of share options issued by SEED.
Future Liquidity and Material Cash Requirements
We do not expect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize any of our current product candidates. We anticipate that we will continue to generate losses for the foreseeable future as we continue the development of, and seek regulatory approvals for, our current product candidates. In addition, as we have begun reporting with the SEC as a domestic issuer since January 1, 2025, we expect our general and administrative expenses to further increase. Accordingly, we anticipate that we will need additional funding in connection with our future operations.
Our liquidity is affected by financing activities, our clinical trials, and research and development and general and administrative expenses. We will need, among other things, additional capital resources to fund our business activities. There can be no assurance that capital will be available as necessary to meet our working capital requirements or, if the capital is available, that it will be on terms acceptable to us. If we are unable to obtain financing in the amounts and on terms deemed acceptable, our business and future success will be materially and adversely affected. We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development, regulatory approval and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures necessary to complete the development, regulatory filing and commercialization of our product candidates.
Our future capital requirements will depend on many factors, including:
●
the costs, timing and outcome of regulatory reviews and approvals;
●
the ability of our product candidates to progress through clinical development successfully;
●
the initiation, progress, timings, costs and results of studies in animals and clinical trials for our other programs and potential product candidates;
●
the number and characteristics of the product candidates we pursue;
●
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
●
the extent to which we acquire or in-license other products and technologies;
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●
our ability to establish and maintain arrangements partnership with other pharmaceutical companies for the development, licensing and commercialization of our assets; and
●
our ability to maintain and establish collaboration arrangements on favorable terms, if at all.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity and debt financing, potential licensing and partnership arrangements, sale of subsidiary or investee interests, or other strategic transactions. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our shareholders. Debt financing, if available, will increase our liabilities and future cash commitments and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially dilute the ownership interest of our shareholders. If we raise additional funds through collaborations, strategic alliances, marketing or distribution arrangements or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or research programs or to grant licenses on terms that may not be favorable to us. Sale of subsidiary or investee interests, such as the sale of our Series A-1 Preferred Shares of SEED as described under “Item 1. Business—SEED’s Targeted Protein Degradation (TPD) Platform and Pipeline,” will cause our controlling power over such subsidiary or investee to diminish and limit our ability to benefit from potential growth of its business. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations
Lease commitments
The principal commitments from continuing operations consist of obligations under our operating leases for office space.
We lease all of our facilities and believe our current facilities are sufficient to meet our needs. Our principal executive offices are located in New Jersey, and we also have offices in Beijing and Dalian, China.
We currently lease office space in New Jersey, with total space of 9,727 square feet. The lease expires in February 2027. Our current rent is $25,939 per month. Starting in August 2025, our annual rent will increase by $0.50 per square foot leased. We additionally pay for the cost of utilities, as well as our share of building real estate taxes and building operating expenses. Payments under the lease are expensed on a straight-line basis over the period of the lease.
As of December 31, 2024, we occupied office space in Dalian, China, under a rent-free arrangement with the local government. This space, measuring 860.12 square meters, remained in use throughout 2024 while our formal application for rent exemption was under review. The local government office has since approved the rent-free subsidy for the 2024 lease, and as of March 1, 2025, the subsidy is pending disbursement by the government’s finance department. Upon the lease’s expiration on December 31, 2024, we transitioned to a new office space in Dalian, China, under a lease agreement with a different landlord. The new office, effective January 1, 2025, measures 210.65 square meters, with a monthly rent of $1,404. The lease is set to expire on December 31, 2027. Payments under the lease are expensed on a straight-line basis over the period of the lease.
Other contractual obligations
We enter into agreements in the normal course of business with CROs and institutions to license intellectual property. These contracts are cancelable at any time by us with prior written notice.
Our subsidiary Wanchunbulin has entered into a government grant agreement with specific local authorities in the PRC. Wanchunbulin commits to staying within designated districts, maintaining current tax jurisdictions, and retaining its registered capital, until 2033. Wanchunbulin also undertakes not to establish additional entities in other jurisdictions within Greater China for the purposes of conducting research, development, and commercialization activities related to Plinabulin, provided such activities fall within the scope of the government grant agreement. Otherwise, Wanchunbulin may be required to refund the grants.
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Critical Accounting 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 U.S. GAAP. The preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses. We evaluate our estimates and judgments on an ongoing basis, and our actual results may differ from these estimates. We base our estimates on historical experience, known trends and events, contractual milestones and other various factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Certain of these estimates are considered critical as they involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our consolidated financial statements. Our critical accounting estimates are summarized below. For a summary of significant accounting policies and the effect on our financial statements, see Note 2 to our consolidated financial statements included in this Annual Report.
Research Contract Costs and Accruals
We have entered into various research and development contracts with research institutions and other companies in China, the U.S., and Europe. Related payments are recorded as research and development expenses as incurred. We record accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, we analyze progress of the studies, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from our estimates. Our historical accrual estimates have not been materially different from the actual costs.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements included in this Annual Report for recent accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
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