SECURITIES AND EXCHANGE COMMISSION
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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) |
Name of Each Exchange on Which | ||
Title of Each Class | Registered | |
Common Stock, $0.001 par value Preferred Stock, $0.001 par value | The NASDAQ Stock Market LLC The NASDAQ Stock Market LLC |
Yeso Noþ
Yeso Noo
Large accelerated filero | Accelerated filero | Non-accelerated filero | Smaller reporting companyþ | |||
[Do not check if a smaller reporting company] |
Yeso Noþ
Year ended December 31 | |||||||||||||
2007 | 2008 | 2009 | |||||||||||
($000s except for per share amounts) | |||||||||||||
Net loss as reported | (24,053 | ) | (40,386 | ) | (19,570 | ) | |||||||
Restatement changes: | |||||||||||||
Less: preferred dividends | (307 | ) | (1,227 | ) | (1,228 | ) | |||||||
Net loss attributable to common shareholders | (24,360 | ) | (41,613 | ) | (20,798 | ) | |||||||
Weighted-average shares outstanding during the period | 19,873,911 | 20,433,129 | 22,196,840 | ||||||||||
Loss per share (basic and diluted) as reported | ($1.21 | ) | ($1.98 | ) | ($0.88 | ) | |||||||
Restatement changes | ($0.02 | ) | ($0.06 | ) | ($0.06 | ) | |||||||
Basic and diluted, as restated | ($1.23 | ) | ($2.04 | ) | ($0.94 | ) | |||||||
Item 1A. | Risk Factors |
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• | fund research and development and clinical trials connected with our research; |
• | fund clinical trials and seek regulatory approvals; |
• | build or access manufacturing and commercialization capabilities; |
• | implement additional internal control systems and infrastructure; |
• | commercialize and secure coverage, payment and reimbursement of our drug candidates, if any such candidates receive regulatory approval; |
• | maintain, defend and expand the scope of our intellectual property; and |
• | hire additional management, sales and scientific personnel. |
• | the scope, rate of progress and cost of our clinical trials and other research and development activities; |
• | the costs and timing of seeking and obtaining regulatory approvals; |
• | the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; |
• | the costs associated with establishing sales and marketing capabilities; |
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• | the costs of acquiring or investing in businesses, products and technologies; |
• | the effect of competing technological and market developments; and |
• | the payment, other terms and timing of any strategic alliance, licensing or other arrangements that we may establish. |
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• | delays in securing clinical investigators or trial sites for our clinical trials; |
• | delays in obtaining institutional review board, or IRB, and other regulatory approvals to commence a clinical trial; |
• | slower than anticipated rates of patient recruitment and enrollment, or reaching the targeted number of patients because of competition for patients from other trials or other reasons; |
• | negative or inconclusive results from clinical trials; |
• | unforeseen safety issues; |
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• | uncertain dosing issues may or may not be related to suboptimal pharmacokinetic and pharmacodynamic behaviors; |
• | approval and introduction of new therapies or changes in standards of practice or regulatory guidance that render our clinical trial endpoints or the targeting of our proposed indications obsolete; |
• | inability to monitor patients adequately during or after treatment or problems with investigator or patient compliance with the trial protocols; |
• | inability to replicate in large controlled studies safety and efficacy data obtained from a limited number of patients in uncontrolled trials; |
• | inability or unwillingness of medical investigators to follow our clinical protocols; and |
• | unavailability of clinical trial supplies. |
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• | we may not be able to control the amount and timing of resources that our collaborators may devote to the drug candidates; |
• | our collaborators may experience financial difficulties; |
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• | we may be required to relinquish important rights such as marketing and distribution rights; |
• | business combinations or significant changes in a collaborator’s business strategy may also adversely affect a collaborator’s willingness or ability to complete our obligations under any arrangement; |
• | a collaborator could independently move forward with a competing drug candidate developed either independently or in collaboration with others, including our competitors; and |
• | collaborative arrangements are often terminated or allowed to expire, which would delay the development and may increase the cost of developing our drug candidates. |
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• | those discussed in the risk factor which immediately follows; |
• | the fact that the FDA or other regulatory officials may not approve our or our third party manufacturer’s processes or facilities; or |
• | the fact that new regulations may be enacted by the FDA or other regulators may change their approval policies or adoption of new regulations requiring new or different evidence of safety and efficacy for the intended use of a drug candidate. |
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• | developing drug candidates; |
• | conducting preclinical and clinical trials; |
• | obtaining regulatory approvals; and |
• | commercializing product candidates. |
• | timing of market introduction, number and clinical profile of competitive drugs; |
• | our ability to provide acceptable evidence of safety and efficacy; |
• | relative convenience and ease of administration; |
• | cost-effectiveness; |
• | availability of coverage, reimbursement and adequate payment from health maintenance organizations and other third party payors; |
• | prevalence and severity of adverse side effects; and |
• | other potential advantages over alternative treatment methods. |
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• | be prohibited from selling or licensing any product that we may develop unless the patent holder licenses the patent to us, which it is not required to do; |
• | be required to pay substantial royalties or grant a cross license to our patents to another patent holder; |
• | decide to move some of our screening work outside Europe; |
• | be required to pay substantial damages for past infringement, which we may have to pay if a court determines that our product candidates or technologies infringe a competitor’s patent or other proprietary rights; or |
• | be required to redesign the formulation of a drug candidate so it does not infringe, which may not be possible or could require substantial funds and time. |
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Pursuant to the Daiichi-Sankyo license under which we license sapacitabine, we are obligated to pay license fees, milestone payments and royalties, provide regular progress reports and use commercially reasonable efforts to commercialize products based on the licensed rights and obtain regulatory approval to sell the products in at least one country by September 2011, unless we are prevented from doing so by virtue of certain causes outside of our reasonable control, including but not limited to difficulties in patient recruitment into trials or significant, unexpected change in regulatory requirements affecting the development of our drug. Pursuant to the CNRS and Institut Curie license under which we license seliciclib, we are obligated to pay license fees, milestone payments and royalties and provide regular progress reports.
Although we are currently in compliance with all of our material obligations under these licenses, if we were to breach any such obligations our counterparties may be entitled to terminate the licenses. This would restrict or delay or eliminate our ability to develop and commercialize these drug candidates, which could adversely affect our business. With respect to seliciclib we hold a license from CNRS and Institut Curie under which we are obligated to pay license fees, milestone payments and royalties. We are obligated to use reasonable efforts to develop and commercialize products based on the licensed patents. Although we are currently in compliance with all of our material obligations under these licenses, if we were to breach any such obligations our counterparties could attempt to terminate the licenses and there can be no assurance as to what would constitute exceptional cause. This would restrict or delay or eliminate our ability to develop and commercialize these drug candidates, which could adversely affect our business.
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• | disclosure of actual or potential clinical results with respect to product candidates we are developing; |
• | regulatory developments in both the United States and abroad; |
• | developments concerning proprietary rights, including patents and litigation matters; |
• | public concern about the safety or efficacy of our product candidates or technology, or related technology, or new technologies generally; |
• | concern about the safety or efficacy of our product candidates or technology, or related technology, or new technologies generally; |
• | public announcements by our competitors or others; and |
• | general market conditions and comments by securities analysts and investors. |
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• | authorize the issuance of preferred stock that can be created and issued by the Board of Directors without prior stockholder approval, commonly referred to as “blank check” preferred stock, with rights senior to those of our common stock; |
• | provide for the Board of Directors to be divided into three classes; and |
• | require that stockholder actions must be effected at a duly called stockholder meeting and prohibit stockholder action by written consent. |
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• | additions to or departures of our key personnel; |
• | announcements of technological innovations or new products or services by us or our competitors; |
• | announcements concerning our competitors or the biotechnology industry in general; |
• | new regulatory pronouncements and changes in regulatory guidelines; |
• | general and industry-specific economic conditions; |
• | changes in financial estimates or recommendations by securities analysts; |
• | variations in our quarterly results; |
• | announcements about our collaborators or licensors; and |
• | changes in accounting principles. |
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Item 6. | Selected Financial Data |
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Period from | ||||||||||||||||||||||||
August 13, | ||||||||||||||||||||||||
1996 | ||||||||||||||||||||||||
(inception) to | ||||||||||||||||||||||||
Years Ended December 31, | December 31, | |||||||||||||||||||||||
2005 | 2006 | 2007(1) | 2008(1) | 2009(1) | 2009(1) | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Consolidated Statements of Operations: | ||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Collaboration and research and development income | $ | 245 | $ | 231 | $ | 10 | $ | — | $ | — | $ | 3,000 | ||||||||||||
Product revenue | — | — | — | 838 | 910 | 1,748 | ||||||||||||||||||
Grant income | 111 | 156 | 119 | 39 | 1 | 3,636 | ||||||||||||||||||
356 | 387 | 129 | 877 | 911 | 8,384 | |||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Cost of goods sold | — | — | — | 429 | 545 | 974 | ||||||||||||||||||
Research and development | 15,841 | 21,205 | 19,569 | 18,869 | 9,766 | 170,179 | ||||||||||||||||||
Selling, general and administrative | 5,290 | 12,598 | 12,033 | 15,354 | 8,538 | 71,846 | ||||||||||||||||||
Goodwill and intangibles impairment | — | — | — | 7,934 | — | 7,934 | ||||||||||||||||||
Other restructuring costs | — | 225 | 1,554 | 489 | 366 | 2,634 | ||||||||||||||||||
Total operating expenses | 21,131 | 34,028 | 33,156 | 43,075 | 19,215 | 253,567 | ||||||||||||||||||
Operating loss | (20,775 | ) | (33,641 | ) | (33,027 | ) | (42,198 | ) | (18,304 | ) | (245,183 | ) | ||||||||||||
Total other income (expense) | 827 | 2,138 | 6,933 | 63 | (2,214 | ) | 5,676 | |||||||||||||||||
Loss before taxes | (19,948 | ) | (31,503 | ) | (26,094 | ) | (42,135 | ) | (20,518 | ) | (239,507 | ) | ||||||||||||
Income tax benefit | 1,900 | 2,245 | 2,041 | 1,749 | 948 | 17,222 | ||||||||||||||||||
Net loss | (18,048 | ) | (29,258 | ) | (24,053 | ) | (40,386 | ) | (19,570 | ) | (222,285 | ) | ||||||||||||
Dividends on preferred shares | (11,876 | ) | (2,827 | ) | — | — | — | (38,123 | ) | |||||||||||||||
Dividends on convertible exchangeable preferred shares | — | — | (307 | ) | (1,227 | ) | (1,228 | ) | (2,762 | ) | ||||||||||||||
Net loss applicable to common shareholders | $ | (29,924 | ) | $ | (32,085 | ) | $ | (24,360 | ) | $ | (41,613 | ) | $ | (20,798 | ) | $ | (263,170 | ) | ||||||
Net loss per share — basic and diluted | $ | (4.50 | ) | $ | (2.40 | ) | $ | (1.23 | ) | $ | (2.04 | ) | $ | (0.94 | ) | |||||||||
Shares used in computing basic and diluted net loss per share | 6,656,732 | 13,390,933 | 19,873,911 | 20,433,129 | 22,196,840 | |||||||||||||||||||
(1) | The effects of the correction of the errors reported in “Note 20 — Restatement — Net Loss Per Share Disclosure and Consolidated Statement of Cash Flows,” of the audited financial statements are reflected in years 2007 through and including 2009. |
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As of December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Consolidated Balance Sheet Data: | ||||||||||||||||||||
Cash and cash equivalents | $ | 3,117 | $ | 44,238 | $ | 30,987 | $ | 24,220 | $ | 11,493 | ||||||||||
Short-term investments | 10,690 | 9,764 | 27,766 | 1,502 | — | |||||||||||||||
Working capital | 2,152 | 50,244 | 49,065 | 20,387 | 3,547 | |||||||||||||||
Total assets | 19,071 | 63,276 | 75,912 | 30,957 | 14,466 | |||||||||||||||
Long-term liabilities, net of current portion | (78 | ) | (1,436 | ) | (3,231 | ) | (1,688 | ) | — | |||||||||||
Total stockholders’ equity | 4,119 | 53,919 | 57,969 | 20,642 | 4,644 |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | Acute myeloid leukemia, or AML in the elderly; |
• | Myelodysplastic syndromes, or MDS; and |
• | Non-small cell lung cancer or NSCLC. |
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Years ended | $ Differences | % Differences | ||||||||||||||||||||||||||
2007 | 2008 | 2009 | 2007 to 2008 | 2008 to 2009 | 2007 to 2008 | 2008 to 2009 | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Collaboration and research and development revenue | $ | 10 | $ | — | $ | — | $ | (10 | ) | $ | — | (100 | )% | — | % | |||||||||||||
Product Revenue | — | 838 | 910 | 838 | 72 | 100 | % | 9 | % | |||||||||||||||||||
Grant revenue | 119 | 39 | 1 | (80 | ) | (38 | ) | (67 | )% | (97 | )% | |||||||||||||||||
Total revenue | $ | 129 | $ | 877 | $ | 911 | $ | 748 | $ | 34 | 580 | % | 4 | % | ||||||||||||||
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Years ended | $ Differences | % Differences | ||||||||||||||||||||||||||
2007 | 2008 | 2009 | 2007 to 2008 | 2008 to 2009 | 2007 to 2008 | 2008 to 2009 | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Cost of goods sold | $ | — | $ | 429 | $ | 545 | $ | 429 | $ | 116 | 100 | % | 27 | % |
• | clinical trial and regulatory-related costs; |
• | payroll and personnel-related expenses, including consultants and contract research; |
• | preclinical studies and laboratory supplies and materials; |
• | technology license costs; and |
• | rent and facility expenses for our laboratories. |
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Years ended | $ Differences | % Differences | ||||||||||||||||||||||||||
2007 | 2008 | 2009 | 2007 to 2008 | 2008 to 2009 | 2007 to 2008 | 2008 to 2009 | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Sapacitabine | $ | 3,326 | $ | 6,601 | $ | 7,001 | $ | 3,275 | $ | 400 | 98 | % | 6 | % | ||||||||||||||
Seliciclib | 3,270 | 2,906 | (84 | ) | (364 | ) | (2,990 | ) | (11 | )% | (103 | )% | ||||||||||||||||
CYC116 | 2,626 | 1,695 | 162 | (931 | ) | (1,533 | ) | (35 | )% | (90 | )% | |||||||||||||||||
Other costs related to research and development programs, management and exploratory research | 10,347 | 7,667 | 2,687 | (2,680 | ) | (4,980 | ) | (26 | )% | (65 | )% | |||||||||||||||||
Total research and development expenses | $ | 19,569 | $ | 18,869 | $ | 9,766 | $ | (700 | ) | $ | (9,103 | ) | (4 | )% | $ | (9,103 | ) | |||||||||||
Years ended | $ Differences | % Differences | ||||||||||||||||||||||||||
2007 | 2008 | 2009 | 2007 to 2008 | 2008 to 2009 | 2007 to 2008 | 2008 to 2009 | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Total selling, general and administrative expenses | $ | 12,033 | $ | 15,354 | $ | 8,538 | $ | 3,321 | $ | (6,816 | ) | 28 | % | (44 | )% | |||||||||||||
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Years ended | $ Differences | % Differences | ||||||||||||||||||||||||||
2007 | 2008 | 2009 | 2007 to 2008 | 2008 to 2009 | 2007 to 2008 | 2008 to 2009 | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Goodwill and intangibles impairment | $ | — | $ | 7,934 | $ | — | $ | 7,934 | $ | (7,934 | ) | 100 | % | (100 | )% | |||||||||||||
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Years ended | $ Differences | % Differences | ||||||||||||||||||||||||||
2007 | 2008 | 2009 | 2007 to 2008 | 2008 to 2009 | 2007 to 2008 | 2008 to 2009 | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Total restructuring charge | $ | 1,554 | $ | 546 | $ | 366 | $ | (1,008 | ) | $ | (180 | ) | (65 | )% | (33 | )% | ||||||||||||
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Years ended | $ Differences | % Differences | ||||||||||||||||||||||||||
2007 | 2008 | 2009 | 2007 to 2008 | 2008 to 2009 | 2007 to 2008 | 2008 to 2009 | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Payment under guarantee | $ | — | $ | — | $ | (1,652 | ) | $ | — | $ | (1,652 | ) | — | (100 | )% | |||||||||||||
Change in valuation of derivative | (93 | ) | — | — | 93 | — | 100 | % | 0 | % | ||||||||||||||||||
Change in valuation of warrants liability | 3,205 | 3,502 | (299 | ) | $ | 297 | (3,801 | ) | 9 | % | (109 | )% | ||||||||||||||||
Change in valuation of warrant | — | — | (44 | ) | — | (44 | ) | — | (100 | )% | ||||||||||||||||||
Foreign Exchange gain/(loss) | 490 | (4,501 | ) | (144 | ) | (4,991 | ) | 4,357 | (1019 | )% | 97 | % | ||||||||||||||||
Interest income | 3,554 | 1,380 | 102 | (2,174 | ) | (1,278 | ) | (61 | )% | (93 | )% | |||||||||||||||||
Interest expense | (223 | ) | (318 | ) | (177 | ) | (95 | ) | 141 | (42 | )% | 44 | % | |||||||||||||||
Total other income (expense), net | $ | 6,933 | $ | 63 | $ | (2,214 | ) | $ | (6,870 | ) | $ | (2,277 | ) | (99 | )% | 3,614 | % | |||||||||||
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Years ended | $ Differences | % Differences | ||||||||||||||||||||||||||
2007 | 2008 | 2009 | 2007 to 2008 | 2008 to 2009 | 2007 to 2008 | 2008 to 2009 | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Total income tax benefit | $ | 2,041 | $ | 1,749 | $ | 948 | $ | (292 | ) | $ | (801 | ) | (14 | )% | (46 | )% | ||||||||||||
December 31, | December 31, | |||||||||||||||
2008 | 2009 | $ Difference | % Difference | |||||||||||||
(in thousands) | ||||||||||||||||
Cash and cash equivalents | $ | 24,220 | $ | 11,493 | $ | (12,727 | ) | (53 | )% | |||||||
Short-term investments, available for sale | 1,502 | — | (1,502 | ) | (100 | )% | ||||||||||
Total cash and cash equivalents and short-term investments | $ | 25,722 | $ | 11,493 | $ | (14,229 | ) | (55 | )% | |||||||
Current assets | $ | 29,014 | $ | 13,369 | $ | (15,645 | ) | (54 | )% | |||||||
Current liabilities | 8,627 | 9,822 | 1,195 | 14 | % | |||||||||||
Working capital | $ | 20,387 | $ | 3,547 | $ | (16,840 | ) | (83 | )% | |||||||
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Year ended December 31, | ||||||||||||
2007(2) | 2008 | 2009(1) | ||||||||||
(in thousands) | ||||||||||||
Net cash used in operating activities | $ | (24,363 | ) | $ | (29,905 | ) | $ | (14,886 | ) | |||
Net cash provided by (used by) investing activities | $ | (22,693 | ) | $ | 27,342 | $ | 1,559 | |||||
Net cash provided by (used by) financing activities | $ | 33,431 | $ | (1,238 | ) | $ | 3,545 | |||||
(1) | The effects of the correction of the error noted in the consolidated statements of cash flows is reflected in 2009. | |
(2) | The effects of the correction of the error noted in the consolidated statements of cash flows is reflected in 2007. |
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• | the rate of progress and cost of our clinical trials, preclinical studies and other discovery and research and development activities; |
• | the costs associated with establishing manufacturing and commercialization capabilities; |
• | the costs of acquiring or investing in businesses, product candidates and technologies; |
• | the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; |
• | the costs and timing of seeking and obtaining FDA and other regulatory approvals; |
• | the effect of competing technological and market developments; and |
• | the economic and other terms and timing of any collaboration, licensing or other arrangements into which we may enter. |
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CYCLACEL PHARMACEUTICALS, INC.
(A Development Stage Company)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Cyclacel Pharmaceuticals, Inc.
We have audited the accompanying consolidated balance sheets of Cyclacel Pharmaceuticals, Inc. (a development stage company) as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2009 and the period from August 13, 1996 (inception) to December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cyclacel Pharmaceuticals, Inc.(a development stage company) at December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2009 and for the period from August 13, 1996 (inception) to December 31, 2009, in conformity with U.S. generally accepted accounting principles.
As discussed in Note 20 to the consolidated financial statements, the net loss per share and the consolidated statements of cash flows have been restated to correct the Company’s computation of its net loss per share and the presentation of preferred dividends in its consolidated statements of cash flows.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Cyclacel Pharmaceuticals Inc.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 29, 2010, except for the effects of the material weakness described in the sixth paragraph of that report, as to which the date is May 14, 2010, expressed an adverse opinion thereon.
/s/ Ernst & Young LLP |
London, England
March 29 2010, except for Note 20,
as to which the date is May 14, 2010
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(A Development Stage Company)
December 31, | ||||||||
2008 | 2009 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | 24,220 | 11,493 | ||||||
Short-term investments | 1,502 | — | ||||||
Inventory | 508 | 145 | ||||||
Prepaid expenses and other current assets | 2,784 | 1,731 | ||||||
Total current assets | 29,014 | 13,369 | ||||||
Property, plant and equipment (net) | 1,748 | 901 | ||||||
Deposits and other assets | 195 | 196 | ||||||
Total assets | 30,957 | 14,466 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | 754 | 1,709 | ||||||
Accrued and other current liabilities | 6,801 | 6,709 | ||||||
Warrant liability | 43 | 342 | ||||||
Current portion of other accrued restructuring charges | 1,029 | 1,062 | ||||||
Total current liabilities | 8,627 | 9,822 | ||||||
Other accrued restructuring charges, net of current | 1,062 | — | ||||||
Other long term payables | 626 | — | ||||||
Total liabilities | 10,315 | 9,822 | ||||||
Commitments and contingencies (Note 11) | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.001 par value; 5,000,000 shares authorized at December 31, 2008 and 2009, respectively; 2,046,813 shares issued and outstanding at December 31, 2008 and 2009, respectively. Aggregate preference in liquidation of $20,673,000 and $21,696,218 at December 31, 2008 and December 31, 2009, respectively | 2 | 2 | ||||||
Common stock, $0.001 par value; 100,000,000 shares authorized at December 31, 2008 and 2009, respectively; 20,433,129 and 25,743,363 shares issued and outstanding at December 31, 2008 and 2009, respectively | 20 | 26 | ||||||
Additional paid-in capital | 223,377 | 226,881 | ||||||
Accumulated other comprehensive (loss)/income | (42 | ) | 20 | |||||
Deficit accumulated during the development stage | (202,715 | ) | (222,285 | ) | ||||
Total stockholders’ equity | 20,642 | 4,644 | ||||||
Total liabilities and stockholders’ equity | 30,957 | 14,466 | ||||||
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(A Development Stage Company)
Period from | ||||||||||||||||
August 13, | ||||||||||||||||
1996 | ||||||||||||||||
Year ended | Year ended | Year ended | (inception) to | |||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
2007(1) | 2008(1) | 2009(1) | 2009(1) | |||||||||||||
Revenues: | ||||||||||||||||
Collaboration and research and development revenue | 10 | — | — | 3,000 | ||||||||||||
Product Revenue | — | 838 | 910 | 1,748 | ||||||||||||
Grant revenue | 119 | 39 | 1 | 3,636 | ||||||||||||
129 | 877 | 911 | 8,384 | |||||||||||||
Operating expenses: | ||||||||||||||||
Cost of goods sold | — | 429 | 545 | 974 | ||||||||||||
Research and development | 19,569 | 18,869 | 9,766 | 170,179 | ||||||||||||
Selling, general and administrative | 12,033 | 15,354 | 8,538 | 71,846 | ||||||||||||
Goodwill and intangibles impairment | — | 7,934 | — | 7,934 | ||||||||||||
Other restructuring costs | 1,554 | 489 | 366 | 2,634 | ||||||||||||
Total operating expenses | 33,156 | 43,075 | 19,215 | 253,567 | ||||||||||||
Operating loss | (33,027 | ) | (42,198 | ) | (18,304 | ) | (245,183 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Costs associated with aborted 2004 IPO | — | — | — | (3,550 | ) | |||||||||||
Payment under guarantee | — | — | (1,652 | ) | (1,652 | ) | ||||||||||
Change in valuation of derivative | (93 | ) | — | — | (308 | ) | ||||||||||
Change in valuation of warrants liability | 3,205 | 3,502 | �� | (299 | ) | 6,408 | ||||||||||
Warrant re-pricing | — | — | (44 | ) | (44 | ) | ||||||||||
Foreign exchange gains / (losses) | 490 | (4,501 | ) | (144 | ) | (4,187 | ) | |||||||||
Interest income | 3,554 | 1,380 | 102 | 13,643 | ||||||||||||
Interest expense | (223 | ) | (318 | ) | (177 | ) | (4,634 | ) | ||||||||
Total other income, net | 6,933 | 63 | (2,214 | ) | 5,676 | |||||||||||
Loss before taxes | (26,094 | ) | (42,135 | ) | (20,518 | ) | (239,507 | ) | ||||||||
Income tax benefit | 2,041 | 1,749 | 948 | 17,222 | ||||||||||||
Net loss | (24,053 | ) | (40,386 | ) | (19,570 | ) | (222,285 | ) | ||||||||
Dividends on preferred shares | — | — | — | (38,123 | ) | |||||||||||
Dividends on convertible exchangeable preferred shares | (307 | ) | (1,227 | ) | (1,228 | ) | (2,762 | ) | ||||||||
Net loss applicable to common shareholders | (24,360 | ) | (41,613 | ) | (20,798 | ) | (263,170 | ) | ||||||||
Net loss per share — basic and diluted | $ | (1.23 | ) | $ | (2.04 | ) | $ | (0.94 | ) | |||||||
Weighted average common shares outstanding | 19,873,911 | 20,433,129 | 22,196,840 | |||||||||||||
(1) | The effects of the corrections of the errors reported in “Note 20 — Restatement — Net Loss Per Share Disclosure and Consolidated Statement of Cash Flows,” of the audited financial statements are reflected in years 2007 through and including 2009. |
48
(A Development Stage Company)
Deficit | ||||||||||||||||||||||||||||||||||||
Accumulated | accumulated | |||||||||||||||||||||||||||||||||||
Additional | other | during | ||||||||||||||||||||||||||||||||||
paid in | comprehensive | Deferred | development | |||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | capital | income/(loss) | compensation | stage | Total | ||||||||||||||||||||||||||||||
No. | $000 | No. | $000 | $000 | $000 | $000 | $000 | $000 | ||||||||||||||||||||||||||||
On incorporation, | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Issue of shares for cash | — | — | — | — | 1 | — | — | — | 1 | |||||||||||||||||||||||||||
Translation adjustment | — | — | — | — | — | (4 | ) | — | — | (4 | ) | |||||||||||||||||||||||||
Loss for the period | — | — | — | — | — | — | — | (290 | ) | (290 | ) | |||||||||||||||||||||||||
Comprehensive loss for the period | — | — | — | — | — | — | — | — | (294 | ) | ||||||||||||||||||||||||||
Balance at March 31, 1997 | — | — | — | — | 1 | (4 | ) | — | (290 | ) | (293 | ) | ||||||||||||||||||||||||
Issue of shares for cash, net of issuance costs | — | — | 266,778 | — | 4,217 | — | — | — | 4,217 | |||||||||||||||||||||||||||
Issue of shares for IP rights agreement | — | — | — | — | 262 | — | — | — | 262 | |||||||||||||||||||||||||||
Deferred stock-based compensation | — | — | — | — | 2,002 | — | (2,002 | ) | — | — | ||||||||||||||||||||||||||
Amortization of deferred stock-based compensation | — | — | — | — | — | — | 302 | — | 302 | |||||||||||||||||||||||||||
Translation adjustment | — | — | — | — | — | 55 | — | — | 55 | |||||||||||||||||||||||||||
Loss for the year | — | — | — | — | — | — | — | (2,534 | ) | (2,534 | ) | |||||||||||||||||||||||||
Comprehensive loss for the year | — | — | — | — | — | — | — | — | (2,479 | ) | ||||||||||||||||||||||||||
Balance at March 31, 1998 | — | — | 266,778 | — | 6,482 | 51 | (1,700 | ) | (2,824 | ) | 2,009 | |||||||||||||||||||||||||
Amortization of deferred stock-based compensation | — | — | — | — | — | — | 406 | — | 406 | |||||||||||||||||||||||||||
Translation adjustment | — | — | — | — | — | 11 | — | — | 11 | |||||||||||||||||||||||||||
Loss for the year | — | — | — | — | — | — | — | (3,964 | ) | (3,964 | ) | |||||||||||||||||||||||||
Comprehensive loss for the year | — | — | — | — | — | — | — | — | (3,953 | ) | ||||||||||||||||||||||||||
Balance at March 31, 1999 | — | — | 266,778 | — | 6,482 | 62 | (1,294 | ) | (6,788 | ) | (1,538 | ) |
49
(A Development Stage Company)
Deficit | ||||||||||||||||||||||||||||||||||||
Accumulated | accumulated | |||||||||||||||||||||||||||||||||||
Additional | other | during | ||||||||||||||||||||||||||||||||||
paid in | comprehensive | Deferred | development | |||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | capital | income/(loss) | compensation | stage | Total | ||||||||||||||||||||||||||||||
No. | $000 | No. | $000 | $000 | $000 | $000 | $000 | $000 | ||||||||||||||||||||||||||||
Issue of shares for cash, net of issuance costs | — | — | 538,889 | 1 | 12,716 | — | — | — | 12,717 | |||||||||||||||||||||||||||
Issue of shares on conversion of bridging loan | — | — | 90,602 | — | 1,638 | — | — | — | 1,638 | |||||||||||||||||||||||||||
Issue of shares in lieu of cash bonus | — | — | 9,060 | — | 164 | — | — | — | 164 | |||||||||||||||||||||||||||
Issue of shares for research & development agreement | — | — | — | — | 409 | — | — | — | 409 | |||||||||||||||||||||||||||
Exercise of share options | — | — | 2,265 | — | 40 | — | — | — | 40 | |||||||||||||||||||||||||||
Deferred stock-based compensation | — | — | — | — | 167 | — | (167 | ) | — | — | ||||||||||||||||||||||||||
Amortization of deferred stock-based compensation | — | — | — | — | — | — | 433 | — | 433 | |||||||||||||||||||||||||||
Translation adjustment | — | — | — | — | — | (194 | ) | — | — | (194 | ) | |||||||||||||||||||||||||
Loss for the year | — | — | — | — | — | — | — | (5,686 | ) | (5,686 | ) | |||||||||||||||||||||||||
Comprehensive loss for the year | — | — | — | — | — | — | — | — | (5,880 | ) | ||||||||||||||||||||||||||
Balance at March 31, 2000 | 907,594 | 1 | 21,616 | (132 | ) | (1,028 | ) | (12,474 | ) | 7,983 | ||||||||||||||||||||||||||
Deferred stock-based compensation | — | — | — | — | 294 | — | (294 | ) | — | — | ||||||||||||||||||||||||||
Amortization of deferred stock-based compensation | — | — | — | — | — | — | 275 | — | 275 | |||||||||||||||||||||||||||
Translation adjustment | — | — | — | — | — | (466 | ) | — | — | (466 | ) | |||||||||||||||||||||||||
Loss for the year | — | — | — | — | — | — | — | (10,382 | ) | (10,382 | ) | |||||||||||||||||||||||||
Comprehensive loss for the year | — | — | — | — | — | — | — | — | (10,848 | ) | ||||||||||||||||||||||||||
Balance at March 31, 2001 | — | — | 907,594 | 1 | 21,910 | (598 | ) | (1,047 | ) | (22,856 | ) | (2,590 | ) |
50
(A Development Stage Company)
Deficit | ||||||||||||||||||||||||||||||||||||
Accumulated | accumulated | |||||||||||||||||||||||||||||||||||
Additional | other | during | ||||||||||||||||||||||||||||||||||
paid in | comprehensive | Deferred | development | |||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | capital | income/(loss) | compensation | stage | Total | ||||||||||||||||||||||||||||||
No. | $000 | No. | $000 | $000 | $000 | $000 | $000 | $000 | ||||||||||||||||||||||||||||
Issue of shares for cash, net of issuance costs | — | — | 5,451 | — | — | — | — | — | — | |||||||||||||||||||||||||||
Exercise of share options for cash | — | — | — | — | 106 | — | — | — | 106 | |||||||||||||||||||||||||||
Issue of shares for license agreement | — | — | 4,510 | — | 183 | — | — | — | 183 | |||||||||||||||||||||||||||
Fair value of warrants issued to shareholders | — | — | — | — | 1,215 | — | — | — | 1,215 | |||||||||||||||||||||||||||
Deferred stock-based compensation | — | — | — | — | 363 | — | (363 | ) | — | — | ||||||||||||||||||||||||||
Amortization of deferred stock-based compensation | — | — | — | — | — | — | 672 | — | 672 | |||||||||||||||||||||||||||
Translation adjustment | — | — | — | — | — | 191 | — | — | 191 | |||||||||||||||||||||||||||
Loss for the year | — | — | — | — | — | — | — | (14,853 | ) | (14,853 | ) | |||||||||||||||||||||||||
Comprehensive loss for the year | — | — | — | — | — | — | — | — | (14,662 | ) | ||||||||||||||||||||||||||
Balance at March 31, 2002 | — | — | 917,555 | 1 | 23,777 | (407 | ) | (738 | ) | (37,709 | ) | (15,076 | ) | |||||||||||||||||||||||
Exercise of share options for cash | — | — | — | — | 12 | — | — | — | 12 | |||||||||||||||||||||||||||
Deferred stock-based compensation | — | — | — | — | (84 | ) | — | 84 | — | — | ||||||||||||||||||||||||||
Amortization of deferred stock-based compensation | — | — | — | — | — | — | 305 | — | 305 | |||||||||||||||||||||||||||
Translation adjustment | — | — | — | — | — | (1,846 | ) | — | — | (1,846 | ) | |||||||||||||||||||||||||
Loss for the year | — | — | — | — | — | — | — | (15,542 | ) | (15,542 | ) | |||||||||||||||||||||||||
Comprehensive loss for the year | — | — | — | — | — | — | — | — | (17,388 | ) | ||||||||||||||||||||||||||
Balance at March 31, 2003 | — | — | 917,555 | 1 | 23,705 | (2,253 | ) | (349 | ) | (53,251 | ) | (32,147 | ) |
51
(A Development Stage Company)
Deficit | ||||||||||||||||||||||||||||||||||||
Accumulated | accumulated | |||||||||||||||||||||||||||||||||||
Additional | other | during | ||||||||||||||||||||||||||||||||||
paid in | comprehensive | Deferred | development | |||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | capital | income/(loss) | compensation | stage | Total | ||||||||||||||||||||||||||||||
No. | $000 | No. | $000 | $000 | $000 | $000 | $000 | $000 | ||||||||||||||||||||||||||||
Issue of shares for cash, net of issuance costs | — | — | 1,510,288 | 1 | 27,634 | — | — | — | 27,635 | |||||||||||||||||||||||||||
Exercise of share options for cash | — | — | 6,549 | — | 115 | — | — | — | 115 | |||||||||||||||||||||||||||
Conversion of Preferred ‘C’ Ordinary shares | — | — | 3,769,139 | 4 | 58,144 | — | — | — | 58,148 | |||||||||||||||||||||||||||
Amortization of deferred stock-based compensation | — | — | — | — | — | — | 217 | — | 217 | |||||||||||||||||||||||||||
Translation adjustment | — | — | — | — | — | (1,343 | ) | — | — | (1,343 | ) | |||||||||||||||||||||||||
Loss for the period | — | — | — | — | — | — | — | (14,977 | ) | (14,977 | ) | |||||||||||||||||||||||||
Comprehensive loss for the period | — | — | — | — | — | — | — | — | (16,320 | ) | ||||||||||||||||||||||||||
Balance at December 31, 2003 | — | — | 6,203,531 | 6 | 109,598 | (3,596 | ) | (132 | ) | (68,228 | ) | 37,648 | ||||||||||||||||||||||||
Issues of shares for cash, net of issuance costs | — | — | 430,571 | 1 | 8,540 | — | — | — | 8,541 | |||||||||||||||||||||||||||
Exercise of warrants for cash | — | — | 22,630 | — | — | — | — | — | — |
52
(A Development Stage Company)
Deficit | ||||||||||||||||||||||||||||||||||||
Accumulated | accumulated | |||||||||||||||||||||||||||||||||||
Additional | other | during | ||||||||||||||||||||||||||||||||||
paid-in | comprehensive | Deferred | development | |||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | capital | income/(loss) | compensation | stage | Total | ||||||||||||||||||||||||||||||
No. | $000 | No. | $000 | $000 | $000 | $000 | $000 | $000 | ||||||||||||||||||||||||||||
Deferred stock-based compensation | — | — | — | — | (2,050 | ) | — | 132 | — | (1,918 | ) | |||||||||||||||||||||||||
Translation adjustment | — | — | — | — | — | 2,424 | — | — | 2,424 | |||||||||||||||||||||||||||
Loss for the year | — | — | — | — | — | — | — | (22,742 | ) | (22,742 | ) | |||||||||||||||||||||||||
Comprehensive loss for the year | — | — | — | — | — | — | — | — | (20,318 | ) | ||||||||||||||||||||||||||
Balance at December 31, 2004 | 6,656,732 | 7 | 116,088 | (1,172 | ) | — | (90,970 | ) | 23,953 | |||||||||||||||||||||||||||
Translation adjustment | — | — | — | — | — | (1,786 | ) | — | — | (1,786 | ) | |||||||||||||||||||||||||
Loss for the year | — | — | — | — | — | — | — | (18,048 | ) | (18,048 | ) | |||||||||||||||||||||||||
Comprehensive loss for the year | — | — | — | — | — | — | — | — | (19,834 | ) | ||||||||||||||||||||||||||
Balance at December 31, 2005 | — | — | 6,656,732 | 7 | 116,088 | (2,958 | ) | — | (109,018 | ) | 4,119 | |||||||||||||||||||||||||
Issue of shares to certain directors and officers | — | — | 648,413 | 1 | (1 | ) | — | — | — | — | ||||||||||||||||||||||||||
Issue of shares on conversion of Loan Note Instrument | — | — | 456,308 | — | — | — | — | — | — | |||||||||||||||||||||||||||
Reverse Acquisition | 2,046,813 | 2 | 1,967,928 | 2 | 16,251 | — | — | — | 16,255 | |||||||||||||||||||||||||||
Loan from Cyclacel Group plc waived | — | — | — | — | 10,420 | — | — | — | 10,420 | |||||||||||||||||||||||||||
Issue of common stock and warrants for cash | — | — | 6,428,572 | 6 | 42,356 | — | — | — | 42,362 | |||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 9,600 | — | — | 9,600 | ||||||||||||||||||||||||||||
Change in unrealized loss on investment | — | — | — | — | — | 5 | — | — | 5 | |||||||||||||||||||||||||||
Translation adjustment | — | — | — | — | — | 416 | — | — | 416 | |||||||||||||||||||||||||||
Loss for the year | — | — | — | — | — | — | — | (29,258 | ) | (29,258 | ) | |||||||||||||||||||||||||
53
(A Development Stage Company)
Deficit | ||||||||||||||||||||||||||||||||||||
Accumulated | accumulated | |||||||||||||||||||||||||||||||||||
Additional | other | during | ||||||||||||||||||||||||||||||||||
paid-in | comprehensive | Deferred | development | |||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | capital | income/(loss) | compensation | stage | Total | ||||||||||||||||||||||||||||||
No. | $000 | No. | $000 | $000 | $000 | $000 | $000 | $000 | ||||||||||||||||||||||||||||
Comprehensive loss for the year | — | — | — | — | — | — | — | — | (28,842 | ) | ||||||||||||||||||||||||||
Balance at December 31, 2006 | 2,046,813 | 2 | 16,157,953 | 16 | 194,714 | (2,537 | ) | — | (138,276 | ) | 53,919 | |||||||||||||||||||||||||
Loss for the year | — | — | — | — | — | — | — | (24,053 | ) | (24,053 | ) | |||||||||||||||||||||||||
Translation adjustment | — | — | — | — | — | (93 | ) | — | — | (93 | ) | |||||||||||||||||||||||||
Comprehensive loss for the year | — | — | — | — | — | — | — | — | (24,146 | ) | ||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 1,733 | — | — | — | 1,733 | |||||||||||||||||||||||||||
Issue of common stock upon exercise of stock options | — | — | 25,508 | — | 163 | — | — | — | 163 | |||||||||||||||||||||||||||
Issue of common stock for cash on registered direct offering, net of expenses | — | — | 4,249,668 | 4 | 33,353 | — | — | — | 33,357 | |||||||||||||||||||||||||||
Preferred stock dividends declared | — | — | — | — | (307 | ) | — | — | — | (307 | ) | |||||||||||||||||||||||||
Issue of warrants in connection with registered direct offering | — | — | — | — | (6,750 | ) | — | — | — | (6,750 | ) | |||||||||||||||||||||||||
Balance at December 31, 2007 | 2,046,813 | 2 | 20,433,129 | 20 | 222,906 | (2,630 | ) | — | (162,329 | ) | 57,969 | |||||||||||||||||||||||||
Loss for the year | — | — | — | — | — | — | — | (40,386 | ) | (40,386 | ) | |||||||||||||||||||||||||
Unrealized foreign exchange on intercompany loans | — | — | — | — | — | (12,330 | ) | — | — | (12,330 | ) | |||||||||||||||||||||||||
Translation adjustment | — | — | — | — | — | 14,918 | — | — | 14,918 | |||||||||||||||||||||||||||
Comprehensive loss for the year | — | — | — | — | — | — | — | — | (37,798 | ) |
54
(A Development Stage Company)
�� | Deficit | |||||||||||||||||||||||||||||||||||
Accumulated | accumulated | |||||||||||||||||||||||||||||||||||
Additional | other | during | ||||||||||||||||||||||||||||||||||
paid-in | comprehensive | Deferred | development | |||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | capital | income/(loss) | compensation | stage | Total | ||||||||||||||||||||||||||||||
No. | $000 | No. | $000 | $000 | $000 | $000 | $000 | $000 | ||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 1,698 | — | — | — | 1,698 | |||||||||||||||||||||||||||
Preferred stock dividends declared | — | — | — | — | (1,227 | ) | — | — | — | (1,227 | ) | |||||||||||||||||||||||||
Balance at December 31, 2008 | 2,046,813 | 2 | 20,433,129 | 20 | 223,377 | (42 | ) | — | (202,715 | ) | 20,642 | |||||||||||||||||||||||||
Loss for the year | — | — | — | — | — | — | — | (19,570 | ) | (19,570 | ) | |||||||||||||||||||||||||
Unrealized foreign exchange on intercompany loans | — | — | — | — | — | 5,651 | — | — | 5,651 | |||||||||||||||||||||||||||
Translation adjustment | — | — | — | — | — | (5,589 | ) | — | — | (5,589 | ) | |||||||||||||||||||||||||
Warrant re-pricing | — | — | — | — | 44 | — | — | 44 | ||||||||||||||||||||||||||||
Issue of common stock for cash on registered direct offering, net of expenses | — | — | 4,000,000 | 4 | 2,843 | — | — | — | 2,847 | |||||||||||||||||||||||||||
Issue of common stock upon draw down of Committed Equity Finance Facility | — | — | 1,255,024 | 2 | 1,028 | — | — | — | 1,030 | |||||||||||||||||||||||||||
Issue of common stock upon exercise of stock options, restricted stock units and restricted stock | — | — | 55,210 | 7 | — | — | — | 7 | ||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 810 | — | — | — | 810 | |||||||||||||||||||||||||||
Preferred stock dividends declared | — | — | — | — | (1,228 | ) | — | — | — | (1,228 | ) | |||||||||||||||||||||||||
Balance at 31 December, 2009 | 2,046,813 | 2 | 25,743,363 | 26 | 226,881 | 20 | — | (222,285 | ) | 4,644 | ||||||||||||||||||||||||||
55
(A Development Stage Company)
Period from | ||||||||||||||||
August 13, | ||||||||||||||||
1996 | ||||||||||||||||
Year ended | Year ended | Year ended | (inception) to | |||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
2007(2) | 2008 | 2009(1) | 2009(1)(2) | |||||||||||||
$000 | $000 | $000 | $000 | |||||||||||||
Operating activities: | ||||||||||||||||
Net loss | (24,053 | ) | (40,386 | ) | (19,570 | ) | (222,285 | ) | ||||||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
Accretion of guaranteed stock | 10 | (10 | ) | — | — | |||||||||||
Amortization of interest payable on notes payable | 19 | 79 | 2 | 100 | ||||||||||||
Amortization of investment premiums, net | (844 | ) | (1,444 | ) | 20 | (2,297 | ) | |||||||||
Change in valuation of derivative | 93 | — | — | 308 | ||||||||||||
Change in valuation of warrants | (3,205 | ) | (3,502 | ) | 299 | (6,408 | ) | |||||||||
Warrant re-pricing | — | — | 44 | 44 | ||||||||||||
Depreciation | 946 | 1,154 | 668 | 11,857 | ||||||||||||
Amortization of intangible assets | 178 | 708 | — | 886 | ||||||||||||
Fixed asset impairment | — | — | 221 | 221 | ||||||||||||
Unrealized foreign exchange (gains) losses | (449 | ) | 4,831 | — | 7,747 | |||||||||||
Deferred revenue | — | — | — | (98 | ) | |||||||||||
Compensation for warrants issued to non employees | — | — | — | 1,215 | ||||||||||||
Shares issued for IP rights | — | — | — | 446 | ||||||||||||
Gain on disposal of property, plant and equipment | — | 2 | 83 | 112 | ||||||||||||
Goodwill and intangibles impairment | — | 7,934 | — | 7,934 | ||||||||||||
Stock-based compensation | 1,733 | 1,698 | 810 | 16,395 | ||||||||||||
Provision for restructuring | 1,554 | — | — | 1,779 | ||||||||||||
Amortization of issuance costs of Preferred Ordinary ‘C’ shares | — | — | — | 2,517 | ||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Prepaid expenses and other current assets | (653 | ) | 1,732 | 1,716 | (748 | ) | ||||||||||
Accounts payable and other current liabilities | 308 | (2,701 | ) | 821 | (2,823 | ) | ||||||||||
Net cash used in operating activities | (24,363 | ) | (29,905 | ) | (14,886 | ) | (183,098 | ) | ||||||||
(1) | An amount of $307,000, representing a preferred stock dividend payment incorrectly classified in operating activities has now been correctly disclosed in Net cash provided by (used in) financing activities. |
(2) | An amount of $1,223,000 representing a payment of a derivative liability in 2007 was incorrectly classified as financing activities has now been correctly disclosed in Net cash used in operating activities.(Period from inception $2,144) |
56
(A Development Stage Company)
Period from | ||||||||||||||||
August 13, 1996 | ||||||||||||||||
Year ended | Year ended | Year ended | (inception) to | |||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
2007(2) | 2008 | 2009(1) | 2009(1)(2) | |||||||||||||
$000 | $000 | $000 | $000 | |||||||||||||
Investing activities: | ||||||||||||||||
Purchase of ALIGN | (3,763 | ) | — | — | (3,763 | ) | ||||||||||
Purchase of property, plant and equipment | (1,773 | ) | (366 | ) | (15 | ) | (8,823 | ) | ||||||||
Proceeds from sale of property, plant and equipment | — | — | 91 | 117 | ||||||||||||
Purchase of short-term investments on deposit, net of maturities | (153,597 | ) | (3,057 | ) | — | (156,657 | ) | |||||||||
Cash proceeds from redemption of short term securities | 136,440 | 30,765 | 1,483 | 162,729 | ||||||||||||
Net cash provided by (used in) investing activities | (22,693 | ) | 27,342 | 1,559 | (6,397 | ) | ||||||||||
Financing activities: | ||||||||||||||||
Payments of capital lease obligations | (89 | ) | (11 | ) | — | (3,719 | ) | |||||||||
Proceeds from issuance of ordinary and preferred ordinary shares, net of issuance costs | — | — | — | �� | 90,858 | |||||||||||
Proceeds from issuance of common stock and warrants, net of issuance costs | 33,357 | — | 3,845 | 79,828 | ||||||||||||
Proceeds from the exercise of stock options and issue of warrants, net of issuance costs | 163 | — | 7 | 170 | ||||||||||||
Preferred dividend payment | — | (1,227 | ) | (307 | ) | (1,534 | ) | |||||||||
Repayment of government loan | — | — | — | (455 | ) | |||||||||||
Government loan received | — | — | — | 414 | ||||||||||||
Loan received from Cyclacel Group plc | — | — | — | 9,103 | ||||||||||||
Proceeds of committable loan notes issued from shareholders | — | — | — | 8,883 | ||||||||||||
Loans received from shareholders | — | — | — | 1,645 | ||||||||||||
Cash and cash equivalents assumed on stock purchase of Xcyte | — | — | — | 17,915 | ||||||||||||
Costs associated with stock purchase | — | — | — | (1,951 | ) | |||||||||||
Net cash provided by (used in) financing activities | 33,431 | (1,238 | ) | 3,545 | 201,157 | |||||||||||
Effect of exchange rate changes on cash and cash equivalents | 374 | (2,966 | ) | (2,945 | ) | (168 | ) | |||||||||
Net (decrease) increase in cash and cash equivalents | (13,251 | ) | (6,767 | ) | (12,727 | ) | 11,493 | |||||||||
Cash and cash equivalents, beginning of period | 44,238 | 30,987 | 24,220 | — | ||||||||||||
Cash and cash equivalents, end of period. | 30,987 | 24,220 | 11,493 | 11,493 | ||||||||||||
(1) | An amount of $307,000 representing a preferred stock dividend payment incorrectly classified in operating activities has now been correctly disclosed in Net cash provided by (used in) financing activities. |
(2) | An amount of $1,223,000 representing a payment of a derivative liability in 2007 was incorrectly classified as financing activities has now been correctly disclosed in Net cash used in operating activities. (Period from inception $2,144) |
57
(A Development Stage Company)
Period from | ||||||||||||||||
August 13, 1996 | ||||||||||||||||
Year ended | Year ended | Year ended | (inception) to | |||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
2007 | 2008 | 2009 | 2009 | |||||||||||||
$000 | $000 | $000 | $000 | |||||||||||||
Supplemental cash flow information: | ||||||||||||||||
Cash received during the period for: | ||||||||||||||||
Interest | 2,437 | 723 | 59 | 11,704 | ||||||||||||
Taxes | 2,045 | 2,033 | 1,523 | 16,440 | ||||||||||||
Cash paid during the period for: | ||||||||||||||||
Interest | (858 | ) | — | (78 | ) | (1,759 | ) | |||||||||
Schedule of non-cash transactions | ||||||||||||||||
Acquisitions of equipment purchased through capital leases | — | — | — | 3,470 | ||||||||||||
Issuance of common shares in connection with license agreements | — | — | — | 592 | ||||||||||||
Issuance of Ordinary shares on conversion of bridging loan | — | — | — | 1,638 | ||||||||||||
Issuance of Preferred Ordinary ’C’ shares on conversion of secured convertible loan notes and accrued interest | — | — | — | 8,893 | ||||||||||||
Issuance of Ordinary shares in lieu of cash bonus | — | — | — | 164 | ||||||||||||
Issuance of other long term payable on ALIGN acquisition | 1,122 | — | — | 1,122 | ||||||||||||
Accrued dividends on preferred stock(1) | 307 | — | 921 | 1,228 |
(1) | The above supplemental cash flow information has been restated to disclose the accrued dividends on preferred stock. |
58
(A Development Stage Company)
• | Acute myeloid leukemia, or AML in the elderly; |
• | Myelodysplastic syndromes, or MDS; and |
• | Non-small cell lung cancer or NSCLC. |
59
60
61
62
63
Years ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
Stock options | 2,592,246 | 3,674,899 | 3,349,876 | |||||||||
Restricted Stock and Restricted Stock Units | — | 141,700 | 91,145 | |||||||||
Convertible preferred stock | 870,980 | 870,980 | 870,980 | |||||||||
Cyclacel stock to be issued on October 5, 2008 | 46,044 | — | — | |||||||||
Common stock issuable to Kingsbridge | — | — | 328,602 | |||||||||
Common stock warrants | 3,809,703 | 3,809,272 | 7,044,363 | |||||||||
Total shares excluded from calculation | 7,318,973 | 8,496,851 | 11,684,966 | |||||||||
Years ended December 31 | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
($000s except for per share amounts) | ||||||||||||
Net loss reported | (24,053 | ) | (40,386 | ) | (19,570 | ) | ||||||
Less: dividends on convertible exchangeable preferred shares | (307 | ) | (1,227 | ) | (1,228 | ) | ||||||
Net loss applicable to common shareholders | (24,360 | ) | (41,613 | ) | (20,798 | ) | ||||||
Weighted average common shares outstanding | 19,873,911 | 20,433,129 | 22,196,840 | |||||||||
Loss per share — basic and diluted | ($1.23 | ) | ($2.04 | ) | ($0.94 | ) | ||||||
64
65
66
67
68
December 31, | ||||||||
2008 | 2009 | |||||||
$000 | $000 | |||||||
Cash | 4,580 | 2,996 | ||||||
Deposits with original maturity of less than three months | 19,640 | 8,497 | ||||||
24,220 | 11,493 | |||||||
December 31, 2008 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | unrealized | unrealized | ||||||||||||||
cost | gains | losses | Fair value | |||||||||||||
$000 | $000 | $000 | $000 | |||||||||||||
Corporate bonds & commercial paper | 1,501 | 1 | — | 1,502 | ||||||||||||
• | Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. |
• | Level 2: Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. |
• | Level 3: Unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. |
69
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
$000 | $000 | $000 | $000 | |||||||||||||
Warrants | — | 342 | — | 342 | ||||||||||||
December 31, | ||||||||
2008 | 2009 | |||||||
$000 | $000 | |||||||
Research and development tax credit receivable | 1,530 | 1,096 | ||||||
Prepayments | 1,017 | 456 | ||||||
Other current assets | 237 | 179 | ||||||
2,784 | 1,731 | |||||||
Useful lives in years from | December 31, | |||||||||
date of acquisition | 2008 | 2009 | ||||||||
$000 | $000 | |||||||||
Leasehold improvements | Life of lease (15 yrs) | 811 | 860 | |||||||
Research and laboratory equipment | 3 to 5 yrs | 7,170 | 7,894 | |||||||
Office equipment and furniture | 3 to 5 yrs | 1,859 | 1,280 | |||||||
9,840 | 10,034 | |||||||||
Less: accumulated depreciation and amortization | (8,003 | ) | (8,912 | ) | ||||||
Impairment | (89 | ) | (221 | ) | ||||||
1,748 | 901 | |||||||||
70
Beneficial | |||||||||||||||||||||||||
contract | |||||||||||||||||||||||||
License | Customer | ALIGN trade | Non-compete | pricing | |||||||||||||||||||||
agreements | relationships | name | agreements | arrangement | Total | ||||||||||||||||||||
Intangible Assets | |||||||||||||||||||||||||
Useful lives in years from date of acquisition | 7 yrs | 7 yrs | 2 yrs | 2 yrs | 2 yrs | — | |||||||||||||||||||
$000 | $000 | $000 | $000 | $000 | $000 | ||||||||||||||||||||
Balance as of December 31, 2007 | 2,945 | 516 | 88 | 343 | 413 | 4,305 | |||||||||||||||||||
Less: amortization | (295 | ) | (51 | ) | (38 | ) | (147 | ) | (177 | ) | (708 | ) | |||||||||||||
Less: impairment charge | (2,650 | ) | (465 | ) | (50 | ) | (196 | ) | (236 | ) | (3,597 | ) | |||||||||||||
Balance as of December 31, 2008 | — | — | — | — | — | — | |||||||||||||||||||
71
December 31, | ||||||||
2008 | 2009 | |||||||
$000 | $000 | |||||||
Accrued research and development | 3,653 | 2,654 | ||||||
Accrued IP / Patent costs | 264 | 283 | ||||||
Accrued compensation | 707 | 136 | ||||||
Amount payable under license agreement | 594 | 651 | ||||||
Amount payable under guarantee | — | 796 | ||||||
Preference dividend | 307 | 1,228 | ||||||
Other current liabilities | 1,276 | 961 | ||||||
6,801 | 6,709 | |||||||
Operating | ||||
lease | ||||
obligations | ||||
$ 000 | ||||
2010 | 1,606 | |||
2011 | 671 | |||
2012 | 415 | |||
2013 | 407 | |||
2014 | 407 | |||
Thereafter | 4,396 |
72
73
74
Year from November 1, 2009 to October 31, 2010 | $ | 10.30 | ||
Year from November 1, 2010 to October 31, 2011 | $ | 10.24 | ||
Year from November 1, 2011 to October 31, 2012 | $ | 10.18 | ||
Year from November 1, 2012 to October 31, 2013 | $ | 10.12 | ||
Year from November 1, 2013 to October 31, 2014 | $ | 10.06 | ||
November 1, 2014 and thereafter | $ | 10.00 |
75
76
77
Weighted | ||||||||||||
Expiration | Common Shares | Average | ||||||||||
Issued in Connection With | Date | Issuable | Exercise Price | |||||||||
March 2006 stock issuance | 2013 | 2,571,429 | 7.00 | |||||||||
February 2007 stock issuance | 2014 | 1,062,412 | 8.44 | |||||||||
December 2007 CEFF | 2012 | 175,000 | 1.40 | |||||||||
July 2009 Series I stock issuance | 2010 | 2,500,000 | 1.00 | |||||||||
July 2009 Series II stock issuance | 2014 | 735,522 | 1.00 | |||||||||
Total | 7,044,363 | 4.32 | ||||||||||
Year ended | Year ended | Year ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2007 | 2008 | 2009 | ||||||||||
($000s) | ||||||||||||
Research and development | 837 | 736 | 271 | |||||||||
Selling, general and administrative | 896 | 962 | 539 | |||||||||
Stock-based compensation costs before income taxes | $ | 1,733 | $ | 1,698 | $ | 810 | ||||||
78
79
Weighted | ||||||||||||||||
Weighted | average | |||||||||||||||
Number of | average | remaining | Aggregate | |||||||||||||
options | exercise | contractual | intrinsic | |||||||||||||
Cyclacel Pharmaceuticals, Inc. | outstanding | price | term (years) | value | ||||||||||||
Balance as of December 31, 2007 | 2,592,346 | $ | 6.39 | 9.14 | — | |||||||||||
Granted | 1,469,575 | $ | 1.18 | |||||||||||||
Exercised | — | — | ||||||||||||||
Cancelled/forfeited | (387,022 | ) | $ | 5.92 | ||||||||||||
Options outstanding at December 31, 2008 | 3,674,899 | $ | 4.36 | 8.74 | 2 | |||||||||||
Granted | 221,000 | $ | 0.39 | |||||||||||||
Exercised | (17,180 | ) | $ | 0.43 | 7 | |||||||||||
Cancelled/forfeited | (528,843 | ) | $ | 3.76 | ||||||||||||
Options outstanding at December 31, 2009 | 3,349,876 | $ | 4.21 | 7.76 | 698 | |||||||||||
Unvested at December 31, 2009 | 1,381,616 | $ | 2.62 | 8.43 | 484 | |||||||||||
Vested and exercisable at December 31, 2009 | 1,968,260 | $ | 5.34 | 7.79 | — |
80
Weighted Average | ||||||||||||
Exercise | Number | remaining | Number | |||||||||
price | outstanding | contractual life | exercisable | |||||||||
$ | ||||||||||||
0.31 – 1.98 | 1,176,146 | 8.92 | 365,676 | |||||||||
2.15 – 4.95 | 223,667 | 8.04 | 107,134 | |||||||||
5.26 – 5.81 | 619,030 | 7.79 | 324,738 | |||||||||
6.30 – 8.30 | 1,309,033 | 6.71 | 1,148,712 | |||||||||
15.00 – 45.30 | 22,000 | 5.12 | 22,000 | |||||||||
3,349,876 | 1,968,260 | |||||||||||
Year ended | Year ended | Year ended | ||||
December 31, | December 31, | December 31, | ||||
2007 | 2008 | 2009 | ||||
Expected term (years) | 4.25 – 6.00 | 4.25 – 6.00 | 0.75 – 5 Yrs | |||
Risk free interest rate | 3.28 – 5.07% | 1.54 – 3.76% | 0.325 – .84% | |||
Volatility | 65 – 80% | 45 – 75% | 65 – 169% | |||
Dividends | 0.00% | 0.00% | 0.00% | |||
Resulting weighted average grant date fair value | $3.68 | $0.68 | $0.39 |
81
Weighted Average Grant | ||||||||
Restricted Stock Units | Date Value Per Share | |||||||
Non-vested at December 31, 2007 | — | — | ||||||
Granted | 50,000 | $ | 0.44 | |||||
Non-vested at December 31, 2008 | 50,000 | $ | 0.44 | |||||
Granted | — | — | ||||||
Vested | (13,542 | ) | $ | 0.44 | ||||
Cancelled | — | — | ||||||
Non-vested at December 31, 2009 | 36,458 | $ | 0.44 |
82
Weighted Average Grant | ||||||||
Restricted Stock Units | Date Value Per Share | |||||||
Non-vested at December 31, 2007 | — | — | ||||||
Granted | 91,700 | $ | 0.44 | |||||
Non-vested at December 31, 2008 | 91,700 | $ | 0.44 | |||||
Granted | — | — | ||||||
Vested | (24,488 | ) | $ | 0.44 | ||||
Cancelled | (12,525 | ) | $ | 0.44 | ||||
Non-vested at December 31, 2009 | 54,687 | $ | 0.44 |
83
Lease restructuring | Sales tax | |||||||||||
charges | assessment | Total | ||||||||||
$000 | $000 | $000 | ||||||||||
Balance at December 31, 2007 | 2,995 | 270 | 3,265 | |||||||||
Cash payments | (1,106 | ) | — | (1,106 | ) | |||||||
Adjustments for lease-related deferred expenses and liabilities | 202 | — | 202 | |||||||||
Balance at December 31, 2008 | 2,091 | 270 | 2,361 | |||||||||
Cash payments | (1,156 | ) | (372 | ) | (1,528 | ) | ||||||
Adjustments for lease-related deferred expenses and liabilities | 127 | — | 125 | |||||||||
Adjustment for sales tax assessment | — | 102 | 102 | |||||||||
Balance at December 31, 2009 | 1,062 | — | 1,062 | |||||||||
Current | 1,062 | — | 1,062 | |||||||||
Long term liabilities | — | — | — | |||||||||
84
Year ended | Year ended | Year ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2007 | 2008 | 2009 | ||||||||||
$000 | $000 | $000 | ||||||||||
Domestic | (5,448 | ) | (11,337 | ) | (3,013 | ) | ||||||
Foreign | (20,646 | ) | (30,798 | ) | (17,505 | ) | ||||||
Total loss before taxes | (26,094 | ) | (42,135 | ) | (20,518 | ) | ||||||
Year ended | Year ended | Year ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2007 | 2008 | 2009 | ||||||||||
$000 | $000 | $000 | ||||||||||
Current — domestic | (2 | ) | (4 | ) | (12 | ) | ||||||
Current — foreign | 2,043 | 1,753 | 960 | |||||||||
Current — total | 2,041 | 1,749 | 948 | |||||||||
Year ended | Year ended | Year ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2007 | 2008 | 2009 | ||||||||||
$000 | $000 | $000 | ||||||||||
Loss before income taxes | (26,094 | ) | (42,135 | ) | (20,518 | ) | ||||||
Income tax expense computed at statutory federal tax rate | (8,872 | ) | (14,361 | ) | (6,976 | ) | ||||||
State income tax (net of federal benefit) | 1 | 3 | 8 | |||||||||
Disallowed expenses and non-taxable income | (3,005 | ) | (1,939 | ) | (773 | ) | ||||||
Tax losses | 4,349 | 3,584 | 2,322 | |||||||||
Research and development tax relief | (2,551 | ) | (2,191 | ) | (1,185 | ) | ||||||
Valuation allowance | 7,272 | 11,161 | 4,605 | |||||||||
Change in state tax rate | (268 | ) | ||||||||||
Research and development tax credit rate difference | 510 | 438 | 237 | |||||||||
Foreign tax rate differential | 525 | 1,556 | 814 | |||||||||
(2,039 | ) | (1,749 | ) | (948 | ) | |||||||
85
2008 | 2009 | |||||||
$000 | $000 | |||||||
Net operating loss carryforwards | 35,140 | 42, 534 | ||||||
Depreciation, amortization and impairment of property and equipment | 2,178 | 1,996 | ||||||
Lease restructuring charges | 817 | 399 | ||||||
Tax Credits | 61 | — | ||||||
Stock Options | 582 | 775 | ||||||
Accrued Expenses | 1,563 | 2,684 | ||||||
Other | 110 | 67 | ||||||
Translation adjustment | (2,814 | ) | (3,097 | ) | ||||
Deferred Tax Assets | 37,637 | 45,358 | ||||||
Valuation allowance for deferred tax assets | (37,637 | ) | (45,358 | ) | ||||
Net deferred taxes | — | — | ||||||
2008 | 2009 | |||||||
$000 | $000 | |||||||
Accumulated tax losses | 110,478 | 131,685 | ||||||
86
2007 | 2008 | 2009 | ||||||||||
$000 | $000 | $000 | ||||||||||
Revenue | ||||||||||||
United States | — | 838 | 910 | |||||||||
United Kingdom | 129 | 39 | 1 | |||||||||
129 | 877 | 911 | ||||||||||
Net loss | ||||||||||||
United States | (1,783 | ) | (11,341 | ) | (3,007 | ) | ||||||
United Kingdom | (22,270 | ) | (29,045 | ) | (16,563 | ) | ||||||
(24,053 | ) | (40,386 | ) | (19,570 | ) | |||||||
Total Assets | ||||||||||||
United States | 66,947 | 22,842 | 10,460 | |||||||||
United Kingdom | 8,965 | 8,115 | 4,006 | |||||||||
75,912 | 30,957 | 14,466 | ||||||||||
Long Lived Assets, net | ||||||||||||
United States | 532 | 516 | 330 | |||||||||
United Kingdom | 2,484 | 1,232 | 571 | |||||||||
3,016 | 1,748 | 901 | ||||||||||
87
For the three months ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2009 | 2009 | 2009 | 2009 | |||||||||||||
$000, except per share amounts | ||||||||||||||||
Revenues | 228 | 266 | 230 | 187 | ||||||||||||
Loss before taxes | (5,421 | ) | (7,278 | ) | (3,329 | ) | (4,490 | ) | ||||||||
Net loss applicable to common shareholders | (5,370 | ) | (7,352 | ) | (3,431 | ) | (4,645 | ) | ||||||||
Net loss per share — basic and diluted (1) | $ | (0.26 | ) | $ | (0.36 | ) | $ | (0.15 | ) | $ | (0.19 | ) | ||||
For the three months ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2008 | 2008 | 2008 | 2008 | |||||||||||||
$000, except per share amounts | ||||||||||||||||
Revenues | 177 | 180 | 269 | 251 | ||||||||||||
Loss before taxes | (6,927 | ) | (8,969 | ) | (18,058 | ) | (8,181 | ) | ||||||||
Net loss applicable to common shareholders | (6,559 | ) | (8,851 | ) | (17,954 | ) | (8,249 | ) | ||||||||
Net loss per share — basic and diluted (1) | $ | (0.32 | ) | $ | (0.43 | ) | $ | (0.88 | ) | $ | (0.40 | ) | ||||
(1) | The addition of loss per common share by quarter may not equal the total loss per common share for the year or year to date due to rounding. |
88
Year ended December 31 | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
($000s except for per share amounts) | ||||||||||||
Net loss as reported | (24,053 | ) | (40,386 | ) | (19,570 | ) | ||||||
Restatement changes | ||||||||||||
Less: preferred dividends | (307 | ) | (1,227 | ) | (1,228 | ) | ||||||
Net loss attributable to common shareholders | (24,360 | ) | (41,613 | ) | (20,798 | ) | ||||||
Weighted-average shares outstanding during the period | 19,873,911 | 20,433,129 | 22,196,840 | |||||||||
Loss per share (basic and diluted) as reported | ($1.21 | ) | ($1.98 | ) | ($0.88 | ) | ||||||
Restatement changes | ($0.02 | ) | ($0.06 | ) | ($0.06 | ) | ||||||
Basic and diluted, as restated | ($1.23 | ) | ($2.04 | ) | ($0.94 | ) | ||||||
89
(a) Disclosure Controls
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. As described below, a material weakness was identified in our internal control over financial reporting. Exchange Act Rule 12b-2 (17 CFR 240.12b-2) and Rule 1-02 of Regulation S-X (17 CFR 210.1-02) define a material weakness as a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements will not be prevented or detected on a timely basis. As a result of the material weakness, our chief executive officer and chief financial officer have concluded that, as of December 31, 2009, the end of the period covered by this report, our disclosure controls and procedures were not effective at a reasonable assurance level.
(b) Management’s Annual Report on Internal Control Over Financial Reporting
Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
1. | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
2. | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and |
3. | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), as of December 31, 2009.
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
In the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, filed on March 29, 2010, management concluded that our internal control over financial reporting was effective as of December 31, 2009. Subsequently, our management identified a deficiency in respect of our internal control over financial reporting, specifically in our controls over the computation of net loss per share and the financial statement presentation of our preferred stock dividends in the statement of cash flows that constitutes a material weakness as described in SEC’s guidance regarding Management’s Report on Internal Control Over Financial Reporting as of December 31, 2009. As a result of this deficiency, the financial statements included in Form 10-K for the year ended December 31, 2009, included errors related to the presentation and disclosure of our preferred stock dividends in the net loss per share disclosure and in the statement of cash flows. As a result of this material weakness, management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2009, based on the criteria established in “Internal Control — Integrated Framework”, issued by the COSO.
Ernst & Young LLP, an independent registered public accounting firm, has audited our consolidated financial statements and has also issued an attestation report on the effectiveness of our internal controls over financial reporting as of December 31, 2009 which is set forth below:
(c) Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Cyclacel Pharmaceuticals, Inc.
We have audited Cyclacel Pharmaceuticals, Inc’s internal control over financial reporting as of December 31, 2009 based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Cyclacel Pharmaceuticals, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying “Management’s Annual Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
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We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our report dated March 29, 2010, we expressed an unqualified opinion that Cyclacel Pharmaceuticals, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based upon the COSO criteria. Management has subsequently determined that a deficiency in internal controls relating to the computation of Cyclacel Pharmaceuticals, Inc.’s net loss per share and the presentation of its preferred stock dividends in the statement of cash flows existed as of the previous assessment date, and has further concluded that such deficiency represented a material weakness as of December 31, 2009. As a result, management revised its assessment, as presented in item 9T, “Management’s Annual Report on Internal Control over Financial Reporting”, to conclude that Cyclacel Pharmaceuticals, Inc.’s internal control over financial reporting was not effective as of December 31, 2009. Accordingly, our present opinion on the effectiveness of Cyclacel Pharmaceuticals, Inc.’s internal control over financial reporting as of December 31, 2009, as expressed herein, is different from that expressed in our previous report.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management identified a material weakness related to its internal control over financial reporting, specifically related to the operational failure of the controls in place to ensure the correct computation of its net loss per share and presentation of preferred stock dividends in the statement of cash flows. The material weakness resulted in the restatement of Cyclacel Pharmaceuticals, Inc.’s financial statements including the net loss per share – basic and diluted and the statement of cash flows for each of the three years in the period ended December 31, 2009. We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Cyclacel Pharmaceuticals, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2009 and the period from August 13, 1996 (inception) to December 31, 2009. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audits of the consolidated financial statements and this report does not affect our report dated March 29, 2010, except for Note 20 as to which the date is May 14, 2010, on those financial statements.
In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, Cyclacel Pharmaceuticals, Inc. has not maintained effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria.
/s/Ernst & Young LLP
London, England
March 29, 2010, except for the effects of the material weakness described in the sixth paragraph above, as to which the date is May 14, 2010
(d) Remediation Activities
To remediate the material weakness in our internal control over financial reporting as described above, management is enhancing its controls over financial statement presentation and disclosures in this area, specifically by adding additional review procedures over the Company’s computation of net loss per share and in the presentation and disclosure of preferred stock dividends in the statement of cash flows. We anticipate that the actions described above will remediate the December 31, 2009 material weakness. The material weakness will only be considered remediated when the revised internal controls are operational for a period of time and are tested and management has concluded that the controls are operating effectively.
(e) Changes in Internal Control over Financial Reporting
Except as described above, there have been no significant changes in our internal control over financial reporting during the year ended December 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Item 15. | Exhibits and Financial Statement Schedules |
EXHIBIT | ||||
NUMBER | DESCRIPTION | |||
1.1 | Placement Agent Agreement, dated July 23, 2009, by and between the Company and Lazard Capital Markets LLC (previously filed as Exhibit 1.1 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on July 24, 2009, and incorporated herein by reference). | |||
1.2 | Placement Agent Agreement, dated January 11, 2010, by and between the Company and ROTH Capital Partners, LLC (previously filed as Exhibit 1.1 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on January 11, 2010, and incorporated herein by reference). | |||
1.3 | Placement Agent Agreement, dated January 21, 2010, by and between the Company and ROTH Capital Partners, LLC (previously filed as Exhibit 1.1 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on January 21, 2010, and incorporated herein by reference). | |||
3.1 | Amended and Restated Certificate of Incorporation of Xcyte Therapies, Inc. (previously filed as Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1, File No. 333-109653, originally filed with the SEC on October 10, 2003, as subsequently amended, and incorporated herein by reference). | |||
3.1.1 | Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Xcyte Therapies, Inc. (previously filed as Exhibit 3.3.1 to the Registrant’s Quarterly Report on Form 10-Q, for the quarterly period ended March 31, 2006, originally filed with the SEC on May 16, 2006, and incorporated herein by reference). | |||
3.2 | Amended and Restated Bylaws of Xcyte Therapies, Inc. (Previously filed as Exhibit 3.3 to Registrant’s Registration Statement on Form S-1, File No. 333-109653, originally filed with the SEC on October 10, 2003, as subsequently amended, and incorporated herein by reference). | |||
3.2.1 | Amendment No. 1 to the Amended and Restated Bylaws of Xcyte Therapies, Inc. (previously filed as Exhibit 3.01 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on September 8, 2008, and incorporated herein by reference). | |||
3.3 | Preferred Stock Certificate of Designations (previously filed as Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on November 5, 2004, and incorporated herein by reference). | |||
4.1 | Specimen of Common Stock Certificate (previously filed as Exhibit 4.1 to Registrant’s Registration Statement on Form S-1, File No. 333-109653, originally filed with the SEC on October 10, 2003, as subsequently amended, and incorporated herein by reference). | |||
4.2 | Specimen of Preferred Stock Certificate of Designation (previously filed as Exhibit 3.2 to Registrant’s Registration Statement on Form S-1, File No. 333-119585, originally filed with the SEC on October 7, 2004, as subsequently amended, and incorporated herein by reference). | |||
4.3 | Form of Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common Stock (previously filed as Exhibit 99.3 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on April 28, 2006, and incorporated herein by reference). | |||
4.4 | Form of Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common Stock (previously filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on February 15, 2007, and incorporated herein by reference). | |||
4.5 | Form of Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common Stock, dated December 10, 2007, issued to Kingsbridge Capital Limited (previously filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on December 11, 2007, and incorporated herein by reference). | |||
4.6 | Registration Rights Agreement, dated December 10, 2007, by and between Cyclacel Pharmaceuticals, Inc. and Kingsbridge Capital Limited (previously filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on December 11, 2007, and incorporated herein by reference). | |||
4.7 | Amended and Restated Warrant to purchase Common Stock, dated as of November 24, 2009, issued by the Company to Kingsbridge Capital Limited. (previously filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on November 25, 2009, and incorporated herein by reference). | |||
4.8 | Form of Series I Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common Stock (previously filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on July 24, 2009, and incorporated herein by reference). | |||
4.9 | Form of Series II Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common Stock (previously filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on July 24, 2009, and incorporated herein by reference). | |||
4.10 | Form of Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common Stock (previously filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on January 11, 2010, and incorporated herein by reference). | |||
4.11 | Form of Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common Stock (previously filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on January 21, 2010, and incorporated herein by reference). | |||
10.1 | Stock Purchase Agreement, dated December 15, 2005, between Xcyte Therapies, Inc., and Cyclacel Group plc (previously filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on December 20, 2005, and incorporated herein by reference). |
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EXHIBIT | ||||
NUMBER | DESCRIPTION | |||
10.2 | Amendment No. 1 to the Stock Purchase Agreement, dated January 13, 2006, between Xcyte Therapies Inc., and Cyclacel Group plc (previously filed as exhibit 2.1 to the Registrant’s current report on Form 8-K filed with the Commission on January 19, 2006, and incorporated herein by reference). | |||
10.3 | Form of Securities Purchase Agreement, dated April 26, 2006 (previously filed as Exhibit 99.2 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on April 28, 2006, and incorporated herein by reference). | |||
10.4 | Form of Subscription Agreement, dated February 13, 2007, by and between Cyclacel Pharmaceuticals, Inc. and certain purchasers (previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on February 15, 2007, and incorporated herein by reference). | |||
10.5 | Form of Placement Agent Agreement, dated February 13, 2007, by and among Cyclacel Pharmaceuticals, Inc., Lazard Capital Markets LLC, Needham & Company, LLC and ThinkEquity Partners LLC (previously filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on February 15, 2007, and incorporated herein by reference). | |||
10.6 | Asset Purchase Agreement by and among ALIGN Pharmaceuticals, LLC, ALIGN Holdings, LLC and Achilles Acquisition, LLC, dated October 5, 2007 (previously filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, for the quarterly period ended September 30, 2007, originally filed with the SEC on November 7, 2007, and incorporated herein by reference). | |||
10.7 | Common Stock Purchase Agreement, dated December 10, 2007, by and between Cyclacel Pharmaceuticals, Inc. and Kingsbridge Capital Limited (previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on December 11, 2007, and incorporated herein by reference). | |||
10.8 | † | Employment Offer Letter by and between Achilles Acquisition, LLC and William C. Collins, dated October 3, 2007 (previously filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q, for the quarterly period ended September 30, 2007, originally filed with the SEC on November 7, 2007, and incorporated herein by reference). | ||
10.9 | † | Amended and Restated 2006 Equity Incentive Plan (previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on June 19, 2007, and incorporated herein by reference). | ||
10.10 | † | Employment Agreement by and between Cyclacel Pharmaceuticals, Inc. and Spiro Rombotis, dated as of January 1, 2008 (previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on March 24, 2008, and incorporated herein by reference). | ||
10.11 | † | Employment Agreement by and between Cyclacel Pharmaceuticals, Inc. and Paul McBarron, dated as of January 1, 2008 (previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on April 2, 2008, and incorporated herein by reference). | ||
10.12 | † | Amendment No. 1, dated as of December 31, 2008, to Employment Agreement by and between Cyclacel Pharmaceuticals, Inc. and Spiro Rombotis, dated as of January 1, 2008 (previously filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, for the quarterly period ended March 31, 2009, originally filed with the SEC on May 15, 2009, and incorporated herein by reference). | ||
10.13 | Amendment No. 1 to Common Stock Purchase Agreement, dated as of November 24, 2009, by and between the Company and Kingsbridge Capital Limited (previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on November 25, 2009, and incorporated herein by reference). | |||
10.14 | Form of Subscription Agreement between the Company and certain investors (previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on July 24, 2009, and incorporated herein by reference). | |||
10.15 | Form of Subscription Agreement between the Company and certain investors (previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on January 11, 2010, and incorporated herein by reference). | |||
10.16 | Form of Subscription Agreement between the Company and certain investors (previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, originally filed with the SEC on January 21, 2010, and incorporated herein by reference). | |||
10.17 | Agreement between the Company and Scottish Enterprise dated March 27, 2006 (previously filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q, for the quarterly period ended June 30, 2009, originally filed with the SEC on August 13, 2009, and incorporated herein by reference). | |||
10.18 | Addendum to Agreement between the Company and Scottish Enterprise dated June 22, 2009 (previously filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q, for the quarterly period ended June 30, 2009, originally filed with the SEC on August 13, 2009, and incorporated herein by reference). | |||
21 | Subsidiaries of Cyclacel Pharmaceuticals, Inc. (previously filed) | |||
23.1 | * | Consent of Independent Registered Public Accounting Firm. | ||
31.1 | * | Certificate of Spiro Rombotis, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31.2 | * | Certification of Paul McBarron, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32.1 | ** | Certification of Spiro Rombotis, pursuant to Section 906 of the Sarbanes-Oxley Act of | ||
2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code). | ||||
32.2 | ** | Certification of Paul McBarron, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code). |
† | Indicates management compensatory plan, contract or arrangement. | |
* | Filed herewith. | |
** | Furnished herewith. |
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CYCLACEL PHARMACEUTICALS, INC. | ||||
Date: May 17, 2010 | By: | /s/ Paul McBarron | ||
Paul McBarron | ||||
Chief Operating Officer & Executive Vice President, Finance | ||||
Signature | Title | Date | ||
/s/ Spiro Rombotis | President & Chief Executive Officer (Principal Executive Officer) and Director | May 17, 2010 | ||
/s/ Paul McBarron | Chief Operating Officer & Executive Vice President, Finance (Principal Financial and Accounting Officer) and Director | May 17, 2010 | ||
/s/ Dr. David U’Prichard | Chairman | May 17, 2010 | ||
Dr. David U’Prichard | ||||
/s/ Dr. Christopher Henney | Vice Chairman | May 17, 2010 | ||
Dr. Christopher Henney | ||||
/s/ Dr. Nicholas Bacopoulos | Director | May 17, 2010 | ||
Dr. Nicholas Bacopoulos | ||||
/s/ Sir John Banham | Director | May 17, 2010 | ||
Sir John Banham | ||||
/s/ Daniel Spiegelman | Director | May 17, 2010 | ||
Daniel Spiegelman |