SEC Filing | Cyclacel Pharmaceuticals, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


	☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

	☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from __________________ to __________________

Commission file number 000-50626

CYCLACEL PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)


Delaware		91-1707622
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

200 Connell Drive, Suite 1500 Berkeley Heights, New Jersey		07922
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (908) 517-7330

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	CYCC	The Nasdaq Stock Market LLC
Preferred Stock, $0.001 par value	CYCCP	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting filer ☒
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 7, 2022 there were 12,539,189 shares of the registrant’s common stock outstanding.

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CYCLACEL PHARMACEUTICALS, INC.

INDEX

		Page
Part I. Financial Information
Item 1.	Financial Statements (Unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
Part II. Other Information
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	30

SIGNATURE PAGE		31

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CYCLACEL PHARMACEUTICALS, INC.

CONSOLIDATED BALANCE SHEETS

(In $000s, except share, per share, and liquidation preference amounts)

(Unaudited)


	September 30,		December 31,
	2022		2021
ASSETS
Current assets:
Cash and cash equivalents	$	23,706	$	36,559
Prepaid expenses and other current assets		4,209		4,383
Total current assets		27,915		40,942
Property and equipment, net		37		64
Right-of-use lease asset		153		30
Non-current deposits		2,916		1,551
Total assets	$	31,021	$	42,587
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	983	$	2,117
Accrued and other current liabilities		3,370		3,177
Total current liabilities		4,353		5,294
Lease liability		107		30
Total liabilities		4,460		5,324

Redeemable common stock, $0.001 par value;
0 and 3,117,100 shares issued and outstanding at December 31, 2021 and September 30, 2022 (Note 10)		4,494		—

Stockholders’ equity:

Preferred stock, $0.001 par value; 5,000,000 shares authorized at December 31, 2021 and September 30, 2022;
6% Convertible Exchangeable preferred stock; 335,273 shares issued and outstanding at December 31, 2021 and September 30, 2022. Aggregate preference in liquidation of $4,006,512 as of December 31, 2021 and September 30, 2022.		—		—
Series A convertible preferred stock, $0.001 par value; 264 shares issued and outstanding at December 31, 2021 and September 30, 2022.		—		—
Series B convertible preferred stock, $0.001 par value; 237,745 shares issued and outstanding at December 31, 2021 and September 30, 2022.		—		—
Common stock, $0.001 par value; 100,000,000 shares authorized at December 31, 2021 and September 30, 2022; 9,993,135 and 12,539,189 shares issued and outstanding at December 31, 2021 and September 30, 2022 respectively.		9		10
Additional paid-in capital		422,542		422,960
Accumulated other comprehensive loss		(1,746)		(748)
Accumulated deficit		(398,738)		(384,959)
Total stockholders’ equity		22,067		37,263
Total liabilities and stockholders’ equity	$	31,021	$	42,587

The accompanying notes are an integral part of these consolidated financial statements.

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CYCLACEL PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In $000s, except share and per share amounts)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021

Revenues	$	—	$	—		—		—

Operating expenses:
Research and development		4,413		4,217		13,572		10,884
General and administrative		2,054		1,781		5,239		5,520
Total operating expenses		6,467		5,998		18,811		16,404
Operating loss		(6,467)		(5,998)		(18,811)		(16,404)
Other income (expense):
Foreign exchange gains (losses)		276		9		514		5
Interest income		67		4		88		12
Other income, net		14		—		1,294		144
Total other income, net		357		13		1,896		161
Loss before taxes		(6,110)		(5,985)		(16,915)		(16,243)
Income tax benefit		1,014		998		3,136		2,650
Net loss		(5,096)		(4,987)		(13,779)		(13,593)
Dividend on convertible exchangeable preferred shares		(50)		(50)		(151)		(151)
Net loss applicable to common shareholders	$	(5,146)	$	(5,037)	$	(13,930)	$	(13,744)
Basic and diluted earnings per common share:
Net loss per share – basic and diluted	$	(0.42)	$	(0.54)	$	(1.29)	$	(1.60)
Weighted average common shares outstanding		12,314,679		9,368,056		10,823,138		8,575,379

The accompanying notes are an integral part of these consolidated financial statements.

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CYCLACEL PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In $000s)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Net loss	$	(5,096)	$	(4,987)	$	(13,779)	$	(13,593)
Translation adjustment		17,874		5,348		39,392		2,896
Unrealized foreign exchange gain (loss) on intercompany loans		(18,344)		(5,443)		(40,390)		(2,903)
Comprehensive loss	$	(5,566)	$	(5,082)	$	(14,777)	$	(13,600)

The accompanying notes are an integral part of these consolidated financial statements.

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CYCLACEL PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In $000s, except share amounts)

(Unaudited)


									Accumulated
							Additional		Other				Total
	Preferred Stock			Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Loss		Deficit		Equity
Balances at December 31, 2020	573,282	$	—	6,246,896	$	6	$	400,071	$	(746)	$	(366,072)	$	33,259
Issue of common stock and associated warrants on underwritten offering, net of expenses	—		—	2,078,214		2		13,499		—		—		13,501
Warrant Exercises	—		—	909,000		1		4,544		—		—		4,545
Stock-based compensation	—		—	—		—		255		—		—		255
Preferred stock dividends	—		—	—		—		(50)		—		—		(50)
Unrealized foreign exchange on intercompany loans	—		—	—		—		—		1,599		—		1,599
Translation adjustment	—		—	—		—		—		(1,583)		—		(1,583)
Loss for the period	—		—	—		—		—		—		(3,478)		(3,478)
Balances at March 31, 2021	573,282	$	—	9,234,110	$	9	$	418,319	$	(730)	$	(369,550)	$	48,048

Stock-based compensation	—		—	—		—		279		—		—		279
Preferred stock dividends	—		—	—		—		(50)		—		—		(50)
Unrealized foreign exchange on intercompany loans	—		—	—		—		—		941		—		941
Translation adjustment	—		—	—		—		—		(869)		—		(869)
Loss for the period	—		—	—		—		—		—		(5,127)		(5,127)
Balances at June 30, 2021	573,282	$	—	9,234,110	$	9	$	418,548	$	(658)	$	(374,677)	$	43,222

Issue of common stock on At Market Issuance sales agreement, net of expenses	—		—	563,625		1		2,954.00		—		—		2,955
Stock-based compensation	—		—	—		—		319		—		—		319
Preferred stock dividends	—		—	—		—		(50)		—		—		(50)
Unrealized foreign exchange on intercompany loans	—		—	—		—		—		(5,443)		—		(5,443)
Translation adjustment	—		—	—		—		—		5,348		—		5,348
Loss for the period	—		—	—		—		—		—		(4,987)		(4,987)
Balances at September 30, 2021	573,282	$	—	9,797,735	$	10	$	421,771	$	(753)	$	(379,664)	$	41,364


Balances at December 31, 2021	573,282	$	—	9,993,135	$	10	$	422,960	$	(748)	$	(384,959)	$	37,263
Stock-based compensation	—		—	—		—		380		—		—		380
Preferred stock dividends	—		—	—		—		(50)		—		—		(50)
Unrealized foreign exchange on intercompany loans	—		—	—		—		—		(5,878)		—		(5,878)
Translation adjustment	—		—	—		—		—		5,803		—		5,803
Loss for the period	—		—	—		—		—		—		(4,108)		(4,108)
Balances at March 31, 2022	573,282	$	—	9,993,135	$	10	$	423,290	$	(823)	$	(389,067)	$	33,410

Issue of common stock on At Market issuance sales agreement, net of expenses	—		—	1,339,742		1		1,524		—		—		1,525
Stock-based compensation	—		—	—		—		350		—		—		350
Stock-based awards	—		—	17,412		—		—		—		—		—
Preferred stock dividends	—		—	—		—		(50)		—		—		(50)
Unrealized foreign exchange on intercompany loans	—		—	—		—		—		(16,168)		—		(16,168)
Translation adjustment	—		—	—		—		—		15,715		—		15,715
Loss for the period	—		—	—		—		—		—		(4,575)		(4,575)
Balances at June 30, 2022	573,282	$	—	11,350,289	$	11	$	425,114	$	(1,276)	$	(393,642)	$	30,207

Issue of common stock on At Market issuance sales agreement, net of expenses	—		—	1,188,900		1		1,581		—		—		1,582
Reclassification of redeemable common stock	—		—	(3,117,100)		(3)		(4,491)		—		—		(4,494)
Stock-based compensation	—		—	—		—		388		—		—		388
Preferred stock dividends	—		—	—		—		(50)		—		—		(50)
Unrealized foreign exchange on intercompany loans	—		—	—		—		—		(18,344)		—		(18,344)
Translation adjustment	—		—	—		—		—		17,874		—		17,874
Loss for the period	—		—	—		—		—		—		(5,096)		(5,096)
Balances at September 30, 2022	573,282	$	—	9,422,089	$	9	$	422,542	$	(1,746)	$	(398,738)	$	22,067

The accompanying notes are an integral part of these consolidated financial statements.

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CYCLACEL PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In $000s)

(Unaudited)


	Nine Months Ended
	September 30,
	2022		2021
Operating activities:
Net loss	$	(13,779)	$	(13,593)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		24		36
Stock-based compensation		1,119		853
Changes in lease liability		29		173
Changes in operating assets and liabilities:
Prepaid expenses and other assets		(2,816)		(2,655)
Accounts payable, accrued and other current liabilities		(235)		1,195
Net cash used in operating activities		(15,658)		(13,991)
Investing activities:
Purchase of property, plant and equipment		(7)		(25)
Net cash used in investing activities		(7)		(25)
Financing activities:
Proceeds, net of issuance costs, from issuing common stock and warrants		3,107		21,001
Payment of preferred stock dividend		(151)		(151)
Net cash provided by financing activities		2,956		20,850

Effect of exchange rate changes on cash and cash equivalents		(144)		(21)
Net (decrease) increase in cash and cash equivalents		(12,853)		6,813
Cash and cash equivalents, beginning of period		36,559		33,406
Cash and cash equivalents, end of period	$	23,706	$	40,219
Supplemental cash flow information:
Cash received during the period for:
Interest		89		13
Research & Development Tax Credits		3,050		1,352

Non cash financing activities:
Accrual of preferred stock dividends		50		50

The accompanying notes are an integral part of these consolidated financial statements.

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CYCLACEL PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Company Overview

Nature of Operations

Cyclacel Pharmaceuticals, Inc. (“Cyclacel” or the “Company”) is a clinical-stage biopharmaceutical company developing innovative cancer medicines based on cell cycle, transcriptional regulation and mitosis control biology. Cyclacel is a pioneer in the field of cancer cell cycle biology with a vision to improve patient healthcare by translating insights in cancer biology into medicines that can overcome resistance and ultimately increase a patient’s overall survival rate.

Through September 30, 2022, substantially all efforts of the Company to date have been devoted to performing research and development, conducting clinical trials, developing and acquiring intellectual property, raising capital and recruiting and training personnel.

2. Summary of Significant Accounting Policies

Basis of Presentation

The consolidated balance sheet as of September 30, 2022, the consolidated statements of operations, comprehensive loss, and stockholders’ equity for the three and nine months ended September 30, 2022 and 2021 and the consolidated statements of cash flows for the nine months ended September 30, 2022 and 2021, and all related disclosures contained in the accompanying notes, are unaudited. The consolidated balance sheet as of December 31, 2021 is derived from the audited consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2022. The consolidated financial statements are presented on the basis of accounting principles that are generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the SEC. Accordingly, they do not include all the information and footnotes required by GAAP for a complete set of financial statements. In the opinion of management, all adjustments, which include only normal recurring adjustments necessary to present fairly the consolidated balance sheet as of September 30, 2022, and the results of operations and, comprehensive loss for the three and nine months ended September 30, 2022, and cash flows for the nine months ended September 30, 2022, have been made. The interim results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other reporting period. The consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes for the year ended December 31, 2021 that are included in the Company’s Annual Report on Form 10-K filed with the SEC on March 30, 2022.

Going Concern

Management considers that there are no conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern for a period of at least one year from the date the financial statements are issued. The Company expects that its cash of approximately $23.7 million as of September 30, 2022 will be sufficient to fund its operating expenses and capital expenditure requirements to the end of 2023.

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

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

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

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

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

The future viability of the Company beyond 2023 is dependent on its ability to raise additional capital to finance its operations. The Company does not currently have sufficient funds to complete development and commercialization of any of its drug candidates. Additional funding may not be available to the Company on favorable terms, or at all. If the Company is not able to secure additional funding when needed, it may have to delay, reduce the scope of or eliminate one or more of its clinical trials or research and development programs or make changes to its operating plan. In addition, it may have to partner one or more of its product candidate programs at an earlier stage of development, which would lower the economic value of those programs to the Company. The Company’s inability to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies.

Accounting Standards Adopted in the Period

In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. This ASU requires business entities to make annual disclosures about transactions with a government they account for by analogizing to a grant or contribution accounting model under ASC 958-605 or based on International Accounting Standard No. 20. ASU 2021-10 which became effective for us on January 1, 2022. The Company has evaluated the effect that this guidance has on its Consolidated Financial Statements and has determined it does not have a material impact.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The new ASU addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment became effective for us on January 1, 2022. This new guidance does not have a material impact on our financial statements for any past transactions, but it could change the way that the Company accounts for subsequent amendments to its outstanding warrants, if any.

Recently Issued Accounting Pronouncements

The FASB has issued ASU 2020-04, “Reference Rate Reform (Topic 848)”. This standard provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform initiatives that would replace interbank offered rates, including the London Interbank Offered Rate (“LIBOR”). For example, modifications of lease contracts within the scope of ASC 842 solely for changes in reference rates would be accounted for as a continuation of the existing contracts with no reassessments of the lease classification and the discount rate. The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022. The Company does not currently have any contracts affected by this guidance.

Fair Value of Financial Instruments

Financial instruments consist of cash equivalents, accounts payable and accrued liabilities. The carrying amounts of cash equivalents, accounts payable and accrued liabilities approximate their respective fair values due to the nature of the accounts, notably their short maturities.

Comprehensive Income (Loss)

All components of comprehensive income (loss), including net income (loss), are reported in the financial statements in the period in which they are recognized. Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Net income (loss) and other comprehensive income (loss), including foreign currency translation adjustments, are reported, net of any related tax effect, to arrive at comprehensive income (loss). No taxes were recorded on items of other comprehensive income

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(loss). There were no reclassifications out of other comprehensive income (loss) during the nine months ended September 30, 2021 and 2022.

Revenue Recognition

When the Company enters into contracts with customers, the Company recognizes revenue using the five step-model provided in ASC 606, Revenue from Contracts with Customers (“ASC 606”):

(1)

Identify the contract with a customer;

(2)

Identify the performance obligations in the contract;

(3)

Determine the transaction price;

(4)

Allocate the transaction price to the performance obligations in the contract; and

(5)

Recognize revenue when, or as, the Company satisfies a performance obligation.

The transaction price includes fixed payments and an estimate of variable consideration, including milestone payments. The Company determines the variable consideration to be included in the transaction price by estimating the most likely amount that will be received and then applies a constraint to reduce the consideration to the amount which is probable of being received. When applying the constraint, the Company considers:

●

Whether achievement of a development milestone is highly susceptible to factors outside the entity’s influence, such as milestones involving the judgment or actions of third parties, including regulatory bodies;

●

Whether the uncertainty about the achievement of the milestone is not expected to be resolved for a long period of time;

●

Whether the Company can reasonably predict that a milestone will be achieved based on previous experience; and.

●

The complexity and inherent uncertainty underlying the achievement of the milestone.

The transaction price is allocated to each performance obligation based on the relative selling price of each performance obligation. The best estimate of the selling price is determined after considering all reasonably available information, including market data and conditions, entity-specific factors such as the cost structure of the deliverable and internal profit and pricing objectives.

The revenue allocated to each performance obligation is recognized as or when the Company satisfies the performance obligation.

The Company recognizes a contract asset, when the value of satisfied (or part satisfied) performance obligations is in excess of the payment due to the Company, and deferred revenue when the amount of unconditional consideration is in excess of the value of satisfied (or part satisfied) performance obligations. Once a right to receive consideration is unconditional, that amount is presented as a receivable.

Grant revenue received from organizations that are not the Company’s customers, such as charitable foundations or government agencies, is presented as a reduction against the related research and development expenses. Moreover, other inflows that are not a result of the Company’s ongoing and central operations are presented as other income, net.

Leases

The Company accounts for lease contracts in accordance with ASC 842. As of September 30, 2022, the Company’s only outstanding facilities lease is classified as an operating lease.

The Company recognizes an asset for the right to use an underlying leased asset for the lease term and records lease liabilities based on the present value of the Company’s obligation to make lease payments under the lease. As the

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Company’s lease does not specify an implicit rate, the Company uses a best estimate of its incremental borrowing rate to discount the future lease payments. The Company estimates its incremental borrowing rate based on observable information about risk-free interest rates that are the same tenure as the lease term, adjusted for various factors, including the effects of assumed collateral, the nature of how the loan is repaid (e.g., amortizing versus bullet), and the Company’s credit risk.

The Company evaluates options included in its lease agreement to extend or terminate the lease. The Company will reflect the effects of exercising those options in the lease term when it is reasonably certain that the Company will exercise that option. In assessing whether it is reasonably certain that the Company will exercise an option, the Company considers factors such as:

●

The lease payments due in any optional period;

●

Penalties for failure to exercise (or not exercise) the option;

●

Market factors, such as the availability of similar assets and current rental rates for such assets;

●

The nature of the underlying leased asset and its importance to the Company’s operations; and

●

The remaining useful lives of any related leasehold improvements.

Lease expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease payments, if any, are recognized in the period when the obligation to make those payments is incurred. Lease incentives received prior to lease commencement are recorded as a reduction in the right-of-use asset. Fixed lease incentives received after lease commencement reduce both the lease liability and the right-of-use asset.

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

3. Revenue

Revenue recognized in the three and nine months ended September 30, 2021 and 2022 was $0.

4. Net Loss per Common Share

The Company calculates net loss per common share in accordance with ASC 260 “Earnings Per Share” (“ASC 260”). Basic and diluted net loss per common share was determined by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period.

The following potentially dilutive securities have not been included in the computation of diluted net loss per share for the three months ended September 30, 2021 and 2022, as the result would be anti-dilutive:


	September 30,	September 30,
	2022	2021
Stock options	1,618,089	720,788
Restricted Stock Units	137,657	—
6% convertible exchangeable preferred stock	85	85
Series A preferred stock	6,600	6,600
Series B preferred stock	1,188,725	1,188,725
Common stock warrants	3,234,379	3,234,379
Total shares excluded from calculation	6,185,535	5,150,577

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5. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in $000s):


	September 30,		December 31,
	2022		2021
Research and development tax credit receivable	$	2,791	$	3,727
Prepayments and VAT receivable		1,248		577
Other current assets		170		79
	$	4,209	$	4,383

6. Non-Current Assets

As of September 30, 2022, the Company had non-current assets of $2.9 million, which is comprised of clinical trial deposits held by a contract research organization in relation to the Company’s Phase 1/2 clinical trials.

7. Accrued and Other Liabilities

Accrued and other current liabilities consisted of the following (in $000s):


	September 30,		December 31,
	2022		2021
Accrued research and development	$	2,767	$	2,310
Accrued legal and professional fees		431		233
Other current liabilities		172		634
	$	3,370	$	3,177

Other current liabilities for the year ended December 31, 2021 were largely attributed to accrued payroll costs.

8. Leases

The Company currently has one lease, relating to its facility in Berkeley Heights, New Jersey. On April 4, 2022 the Company extended this lease by three years, expiring July 31, 2025. On May 4, 2021, the Company assigned an operating lease relating to its U.K. facility to the University of Dundee, Scotland, incurring lease assignment costs of approximately $400,000, of which 50% was paid on assignment and the remaining 50% was paid on May 4, 2022. The Company has no further obligations, liabilities or commitments in relation to this facility.

As of and for the nine months ended September 30, 2022 and 2021:

The Company recognized operating lease expenses of $46,699 and $159,898 in the nine month periods ending September 30, 2022 and 2021 respectively. Cash payments made during the nine months ended September 30, 2022 and 2021 totaled $46,489 and $166,376 respectively and were presented within cash outflows from operating activities. The remaining lease term as of September 30, 2022 is approximately 2.8 years for the Berkeley Heights facility. The discount rate used by the Company in determining the lease liability was 12%.

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Remaining lease payments under the lease are (in $000’s):


2022	$	16
2023		63
2024		65
2025		38
2026		—
Thereafter		—
	$	182

9. Stock Based Compensation

ASC 718 requires compensation expense associated with share-based awards to be recognized over the requisite service period which, for the Company, is the period between the grant date and the date the award vests or becomes exercisable. Most of the awards granted by the Company (and still outstanding) vest ratably over one to four years. The Company recognizes all share-based awards under the straight-line attribution method, assuming that all granted awards will vest. Forfeitures are recognized in the periods when they occur.

Stock based compensation has been reported within expense line items on the consolidated statement of operations for the three and nine months ended September 30, 2021 and 2022 as shown in the following table (in $000s):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
General and administrative	$	255	$	223	$	724	$	587
Research and development		134	$	96	$	396	$	266
Stock-based compensation costs before income taxes	$	389	$	319	$	1,119	$	853

2018 Plan

In May 2018, the Company’s stockholders approved the 2018 Equity Incentive Plan (the “2018 Plan”), under which Cyclacel may make equity incentive grants to its officers, employees, directors and consultants. The 2018 Plan replaces the 2015 Equity Incentive Plan (the “2015 Plan”).

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

On June 14, 2022, the Company’s stockholders approved an amendment to the 2018 Plan to increase the number of shares of common stock available for grant under the 2018 Plan by 500,000 shares. As of September 30, 2022, the Company has reserved 384,896 shares of the Company’s common stock under the 2018 Plan for future issuances, including shares that were available under the 2015 Plan and carried forward to the 2018 Plan. Stock option awards granted under the Company’s equity incentive plans have a maximum life of 10 years and generally vest over a one to four-year period from the date of grant.

2020 Inducement Equity Incentive Plan

In October 2020, the Inducement Equity Incentive Plan (the “Inducement Plan”), became effective. Under the Inducement Plan, Cyclacel may make equity incentive grants to new senior level Employees (persons to whom the Company may issue securities without stockholder approval). The Inducement Plan allows for the issuance of up to 200,000 shares of the Company’s common stock (or the equivalent of such number). As of September 30, 2022, 120,000 shares under the Inducement Plan have been issued, leaving a remaining reserve of 80,000 shares.

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Option Grants and Exercises

There were 522,337 options granted during the nine months ended September 30, 2022. These options had a grant date fair value ranging between $0.83-$2.90 per option. There were 154,653 options granted during the nine months ended September 30, 2021. These options had a grant date fair value ranging between $3.44-$6.14 per option. The fair value of the stock options granted is calculated using the Black-Scholes option-pricing model as prescribed by ASC 718 using the following assumptions:



	Nine months ended	Nine months ended
	September 30, 2022	September 30, 2021
Expected term (years)	5 – 6	5 – 6
Risk free interest rate	1.370% – 3.605%	0.420% – 1.000%
Volatility	86% – 93%	96% – 102%
Expected dividend yield over expected term	0.00%	0.00%

There were no stock options exercised during each of the nine months ended September 30, 2021 and 2022, respectively. The Company does not expect to be able to benefit from the deduction for stock option exercises that may occur because the company has tax loss carryforwards from prior periods that would be expected to offset any potential taxable income.

In the second quarter of 2022, the Company amended the terms of 11,952 options and 2,374 restricted stock units issued to a former director. Specifically, the Company accelerated the vesting of 4,748 options and 2,374 restricted stock units that otherwise would have been forfeited upon the director’s retirement from service. In addition, the Company extended the time by which the director may exercise all vested awards from 90 days to two years. The Company recorded an additional $3,500 of compensation cost in the second quarter of 2022 as a result of these modifications.

Outstanding Options

A summary of the share option activity and related information is as follows:


				Weighted
		Weighted		Average
	Number of	Average		Remaining	Aggregate
	Options	Exercise		Contractual	Intrinsic
	Outstanding	Price Per Share		Term (Years)	Value ($000)
Options outstanding at December 31, 2021	1,099,357	$	7.53	8.99	$	189
Granted	522,337	$	2.41	—		—
Cancelled/forfeited	(3,604)	$	28.15
Options outstanding at September 30, 2022	1,618,090	$	5.83	8.60	$	85