Company registration number 03237549 (England and Wales)
Cyclacel Limited
Annual report and financial statements
for the year ended 31 December 2023
Cyclacel Limited
Company information
Directors
Paul McBarron
Spiro G Rombotis
Secretary
Paul McBarron
Company number
03237549
Registered office
2 London Wall Place
London
EC2Y 5AU
Auditor
Henderson Loggie LLP
The Vision Building
20 Greenmarket
Dundee
DD1 4QB
Bankers
HSBC
69 Pall Mall
London
SW1 5EY
Cyclacel Limited
Contents
Page
Directors' report
1
Directors' responsibilities statement
2
Independent auditor's report
3 - 5
Statement of comprehensive income
6
Balance sheet
7
Statement of changes in equity
8
Statement of cash flows
9
Notes to the financial statements
10 - 24
Cyclacel Limited
Directors' report
for the year ended 31 December 2023
- 1 -

The directors present their annual report and financial statements for the year ended 31 December 2023.

Principal activities

The principal activity of the company during the year continued to be the research and development of therapeutics for cancer. The company is a clinical-stage biopharmaceutical company developing innovative cancer medicines based on cell cycle, transcriptional regulation, epigenetics and mitosis control biology. The company is a pioneer in the field of cancer cell cycle biology with a vision to improve patient healthcare by translating insights in cancer biology into medicines that can overcome resistance and ultimately increase a patient’s overall survival.

 

The company’s strategy is to build a diversified biopharmaceutical business based on a pipeline of novel drug candidates addressing oncology and hematology indications. The company has retained rights to commercialize its clinical development candidates and its business objective is to enter into selective partnership arrangements with these programs. Substantially all efforts of the company to date have been devoted to performing research and development, conducting clinical trials, developing and acquiring intellectual property, raising capital and recruiting and training personnel.

Results and dividends

The results for the year are set out on page 6.

The directors do not recommend payment of an ordinary dividend.

No preference dividends were paid.

Directors

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

Paul McBarron
Spiro G Rombotis
Statement of disclosure to auditor

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

On behalf of the board
Paul McBarron
Director
1 February 2024
Cyclacel Limited
Directors' responsibilities statement
for the year ended 31 December 2023
- 2 -

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

 

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Cyclacel Limited
Independent auditor's report
to the members of Cyclacel Limited
- 3 -
Opinion

We have audited the financial statements of Cyclacel Limited (the 'company') for the year ended 31 December 2023 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going concern

We draw attention to the going concern accounting policy in note 1.2 of the financial statements which discloses the significant uncertainty facing the company in terms of availability of funding from its parent company. As stated in the going concern accounting policy, these conditions, along with the other matters as set forth in the note, indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

 

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

Cyclacel Limited
Independent auditor's report (continued)
to the members of Cyclacel Limited
- 4 -
Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the directors' report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

 

Responsibilities of directors

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud, are detailed below.

Cyclacel Limited
Independent auditor's report (continued)
to the members of Cyclacel Limited
- 5 -

As part of our planning process:

 

The key procedures we undertook to detect irregularities including fraud during the course of the audit included:

 

Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). For instance, the further removed non-compliance is from the events and transactions reflected in the financial statements, the less likely the auditor is to become aware of it or to recognise the non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. The primary responsibility for the prevention and detection of irregularities and fraud rests with the directors.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Gavin Black
Senior Statutory Auditor
For and on behalf of Henderson Loggie LLP
1 February 2024
Chartered Accountants
Statutory Auditor
The Vision Building
20 Greenmarket
Dundee
DD1 4QB
Cyclacel Limited
Statement of comprehensive income
for the year ended 31 December 2023
- 6 -
2023
2022
Notes
£
£
Research and development costs
(15,100,317)
(16,636,826)
Administrative expenses
(1,523,489)
(1,812,990)
Other operating income
408,171
98,985
Operating loss
3
(16,215,635)
(18,350,831)
Interest receivable and similar income
6
9,935,419
-
0
Interest payable and similar expenses
7
(12,254,411)
(19,530,627)
Loss before taxation
(18,534,627)
(37,881,458)
Tax on loss
8
2,364,022
3,839,468
Loss for the financial year
(16,170,605)
(34,041,990)

The Statement of Comprehensive Income has been prepared on the basis that all operations are continuing operations.

Cyclacel Limited
Balance sheet
as at 31 December 2023
- 7 -
2023
2022
Notes
£
£
£
£
Fixed assets
Tangible assets
9
5,258
26,827
Current assets
Debtors
10
4,428,067
7,145,845
Cash at bank and in hand
607,848
504,080
5,035,915
7,649,925
Creditors: amounts falling due within one year
11
(5,901,031)
(5,667,627)
Net current (liabilities)/assets
(865,116)
1,982,298
Total assets less current liabilities
(859,858)
2,009,125
Creditors: amounts falling due after more than one year
13
(197,953,191)
(185,360,973)
Net liabilities
(198,813,049)
(183,351,848)
Capital and reserves
Called up share capital
17
19,837
19,837
Share premium account
18
65,714,501
65,714,501
Capital contribution reserve
19
4,003,571
4,003,571
Capital redemption reserve
20
6,540
6,540
Profit and loss reserves
21
(268,557,498)
(253,096,297)
Total equity
(198,813,049)
(183,351,848)
The financial statements were approved by the board of directors and authorised for issue on 1 February 2024 and are signed on its behalf by:
Paul McBarron
Director
Company Registration No. 03237549
Cyclacel Limited
Statement of changes in equity
for the year ended 31 December 2023
- 8 -
Share capital
Share premium account
Capital contribution reserve
Capital redemption reserve
Profit and loss reserves
Total
Notes
£
£
£
£
£
£
Balance at 1 January 2022
19,837
65,714,501
4,003,571
6,540
(219,696,889)
(149,952,440)
Year ended 31 December 2022:
Loss and total comprehensive income for the year
-
-
-
-
(34,041,990)
(34,041,990)
Credit to equity for equity settled share-based payments
16
-
-
-
-
642,582
642,582
Balance at 31 December 2022
19,837
65,714,501
4,003,571
6,540
(253,096,297)
(183,351,848)
Year ended 31 December 2023:
Loss and total comprehensive income for the year
-
-
-
-
(16,170,605)
(16,170,605)
Credit to equity for equity settled share-based payments
16
-
-
-
-
709,404
709,404
Balance at 31 December 2023
19,837
65,714,501
4,003,571
6,540
(268,557,498)
(198,813,049)
Cyclacel Limited
Statememt of cash flows
for the year ended 31 December 2023
- 9 -
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash absorbed by operations
22
(14,083,799)
(17,508,164)
Interest paid
(182)
(90)
Income taxes refunded
3,774,867
2,739,852
Net cash outflow from operating activities
(10,309,114)
(14,768,402)
Investing activities
Purchase of tangible fixed assets
(2,479)
(4,985)
Net cash used in investing activities
(2,479)
(4,985)
Financing activities
Proceeds from new loans
10,415,361
14,630,606
Net cash generated from financing activities
10,415,361
14,630,606
Net increase/(decrease) in cash and cash equivalents
103,768
(142,781)
Cash and cash equivalents at beginning of year
504,080
646,861
Cash and cash equivalents at end of year
607,848
504,080
Cyclacel Limited
Notes to the financial statements
for the year ended 31 December 2023
- 10 -
1
Accounting policies
Company information

Cyclacel Limited is a limited company incorporated in England and Wales. The registered office is 2 London Wall Place, London, EC2Y 5AU.

1.1
Accounting convention

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

On the basis that the consolidated financial statements of the parent provide disclosures which are the equivalent to the requirements of FRS 102, the following disclosure exemptions have been adopted:

Cyclacel Limited is a wholly owned subsidiary of Cyclacel Pharmaceuticals, Inc. and the results of Cyclacel Limited are included in the consolidated financial statements of Cyclacel Pharmaceuticals, Inc. which are available from the parent company.

1.2
Going concern

The financial statements have been prepared on a going concern basis.true

 

Cyclacel Ltd has a history of losses and negative cash flows from operations and is largely dependent on funding from it’s parent company, Cyclacel Pharmaceuticals Inc. (the parent company”).

 

As of 31st December 2023, the parent company had a cash balance of approximately £2.7 million, which along with the £2.3 million research and development tax credit expected during the first quarter of this year, is sufficient to fund its operating expenses and capital expenditure requirements into the second quarter of 2024.

 

The parent company intends to raise additional funding to fulfil liquidity requirements beyond the second quarter of 2024. This additional funding may be through a combination of public or private equity financings or by entering into partnership agreements for further development of our drug candidates. The parent company has demonstrated this recently, whereby in December 2023, it raised approximately £1.0 million in gross proceeds from a registered direct offering.

 

In addition to the above, Cyclacel Limited expects, during the Spring of 2024, to receive the second tranche of it’s 2023 research and development tax credit totalling approximately £0.5 million.

 

Furthermore, the current operating plan includes discretionary expenditures, which if not incurred would extend the parent company’s, and in turn Cyclacel Limited's, ability to meet it’s liquidity requirements.

 

While the parent company has mitigating plans in place as outlined above, there is no guarantee that it will be successful in these mitigation efforts.

1.3
Other income

Other income relates to the pass through of certain costs to third parties and is recognised as the costs are incurred.

Cyclacel Limited
Notes to the financial statements (continued)
for the year ended 31 December 2023
1
Accounting policies (continued)
- 11 -
1.4
Tangible fixed assets

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Office equipment
3 years

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.

1.5
Cash and cash equivalents

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

1.6
Financial instruments

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

 

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

 

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Other financial assets

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Cyclacel Limited
Notes to the financial statements (continued)
for the year ended 31 December 2023
1
Accounting policies (continued)
- 12 -
Impairment of financial assets

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

 

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

 

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Classification of financial liabilities

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

 

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

 

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Other financial liabilities

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

 

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Cyclacel Limited
Notes to the financial statements (continued)
for the year ended 31 December 2023
1
Accounting policies (continued)
- 13 -
Derecognition of financial liabilities

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

1.7
Equity instruments

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

1.8
Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

 

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

1.9
Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

 

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

 

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

1.10
Retirement benefits

The company operates a defined contribution pension scheme. Contributions are charged in the profit and loss account as they become payable in accordance with the rules of the scheme.

1.11
Share-based payments
Cyclacel Limited
Notes to the financial statements (continued)
for the year ended 31 December 2023
1
Accounting policies (continued)
- 14 -

Equity settled transactions

The cost of equity-settled transactions with employees is measured with reference to the fair value at the date on which they are granted and is recognised as an expense over the requisite service period, which for the company is the period between the grant date and the date the award vests or becomes exercisable. The fair value is determined by the Company using the Black-Scholes option-pricing model. The company has elected to recognise all share-based awards issued under the straight-line attribution method.

 

No expense is recognised for awards that do not ultimately vest. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. This analysis will be evaluated quarterly and the forfeiture rate will be adjusted as necessary. Ultimately, the actual expense recognised over the vesting period will be based on only those shares that vest.

 

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the income statement for the award is expensed immediately.

 

At each balance sheet date before vesting, the cumulative expense is calculated. The movement in the cumulative expense since the previous balance sheet date is recognised in the income statement, with a corresponding entry in equity.

When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over the remaining vesting period in addition to the grant date fair value of the original share-based payment. The share-based payment expense is not adjusted if the modified fair value is less than the original fair value.

 

Cancellations or settlements (including those resulting from employee redundancies) are treated as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.

1.12
Leases

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.

1.13
Foreign exchange

Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction.

 

Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date.

 

All differences are taken to the profit and loss account.

1.14

Research and development

Research and development expenses consist primarily of costs associated with the company’s product candidates, upfront fees, milestones, compensation and other expenses for research and development personnel, supplies and development materials, costs for consultants and related contract research, facility costs, amortisation of purchased technology and depreciation. Expenditures relating to research and development are expensed as incurred.

Cyclacel Limited
Notes to the financial statements (continued)
for the year ended 31 December 2023
1
Accounting policies (continued)
- 15 -
1.15

Clinical trial accounting

The data management and monitoring of all of the company’s clinical trials are performed by contract research organizations (“CROs”) or clinical research assistants (“CRAs”) according to standard operating procedures. CRAs and some CROs bill monthly for services performed, and others bill based upon milestones achieved. For outstanding amounts, the company accrues unbilled clinical trial expenses based on the services performed each period. Costs of setting up clinical trial sites for participation in the trials are expensed immediately as research and development expenses. Clinical trial site costs related to patient enrolment are accrued as patients are entered into the trial and any initial payment made to the clinical trial site is recognised upon execution of the clinical trial agreements and expensed as research and development expenses.

1.16

Research and development tax credits

Credit is taken in the accounting period for research and development tax credits, which will be claimed from the H.M. Revenue & Customs, in respect of qualifying research and development costs incurred in the same accounting period.

2
Judgements and key sources of estimation uncertainty

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

Key sources of estimation uncertainty

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.

Clinical trial accounting

The company accrues for clinical trial costs in line with its accounting policy and based on available clinical trial data which may involve an element of estimation.

3
Operating loss
2023
2022
Operating loss for the year is stated after charging:
£
£
Fees payable to the company's auditor for the audit of the company's financial statements
8,730
8,315
Depreciation of owned tangible fixed assets
24,048
25,163
Share-based payments
709,404
642,582
Operating lease charges
8,708
-
Cyclacel Limited
Notes to the financial statements (continued)
for the year ended 31 December 2023
- 16 -
4
Employees

The average monthly number of persons (including directors) employed by the company during the year was:

2023
2022
Number
Number
Research and development
9
9
Management and administration
6
6
Total
15
15

Their aggregate remuneration comprised:

2023
2022
£
£
Wages and salaries
2,803,247
3,171,680
Social security costs
261,843
40,288
Pension costs
114,049
101,830
3,179,139
3,313,798

Included in wages and salaries is a total expense of share-based payments of £709,404 (2022 – £642,582) all of which arises from transactions accounted for as equity-settled share-based payment transactions.

 

Included in social security costs is a credit of £Nil (2022 - £193,038) in relation to Employer Retention Credits, a US Government Covid assistance programme providing refundable employer tax credits for eligible US based employees.

5
Directors' remuneration
2023
2022
£
£
Remuneration for qualifying services
308,554
396,232
Company pension contributions to defined contribution schemes
10,041
9,369
318,595
405,601

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2022 - 2).

The number of directors who are entitled to receive shares under long term incentive schemes during the year was 2 (2022 - 2).

Cyclacel Limited
Notes to the financial statements (continued)
for the year ended 31 December 2023
5
Directors' remuneration (continued)
- 17 -
Remuneration disclosed above include the following amounts paid to the highest paid director:
2023
2022
£
£
Remuneration for qualifying services
182,660
238,574
Company pension contributions to defined contribution schemes
6,868
6,196

Compensation paid to key management personnel is not disclosed on the basis that key management personnel and directors are the same.

6
Interest receivable and similar income
2023
2022
£
£
Unrealised foreign exchange gain
9,935,419
-
0
7
Interest payable and similar expenses
2023
2022
£
£
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans
182
90
Interest payable on parent company loan
12,112,276
1,348,053
Unrealised foreign exchange loss
141,953
18,182,484
12,254,411
19,530,627
8
Taxation
2023
2022
£
£
Current tax
Benefit arising from a previously unrecognised tax loss or credit
(2,364,022)
(3,839,468)
Cyclacel Limited
Notes to the financial statements (continued)
for the year ended 31 December 2023
8
Taxation (continued)
- 18 -

The actual credit for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:

2023
2022
£
£
Loss before taxation
(18,534,627)
(37,881,458)
Expected tax credit based on the standard rate of corporation tax in the UK of 25% (2022: 19%)
(4,633,657)
(7,197,477)
Tax effect of expenses that are not deductible in determining taxable profit
177,353
122,004
Unutilised tax losses carried forward
1,391,401
1,154,612
Change in unrecognised deferred tax assets
(677)
61
Adjustments in respect of prior years
(14,409)
-
0
Depreciation in excess of capital allowances
5,360
3,801
Transfer pricing adjustment
544,214
3,710,802
Research and development tax relief
(2,535,382)
(2,868,057)
Research and development tax relief rate difference
2,744,879
1,201,797
Margin
(43,104)
32,989
Taxation credit for the year
(2,364,022)
(3,839,468)

There are tax losses of £173 million (2022 – £167 million) available to carry forward against future trading profits, subject to the agreement of the H.M. Revenue & Customs.

 

The recoverability of tax losses carried forward has been estimated having regard to forecast taxable profits arising over the following three years. No account has been taken of timing differences arising on future transactions or future tax losses which may give rise to a deferred tax asset.

 

On 3 March 2021, the UK Budget 2021 announcements included measures to support economic recovery as a result of the COVID-19 pandemic. These included an increase to the UK’s main corporation tax rate to 25%, which became effective from 1 April 2023.

Cyclacel Limited
Notes to the financial statements (continued)
for the year ended 31 December 2023
- 19 -
9
Tangible fixed assets
Office equipment
£
Cost
At 1 January 2023
110,912
Additions
2,479
At 31 December 2023
113,391
Depreciation and impairment
At 1 January 2023
84,085
Depreciation charged in the year
24,048
At 31 December 2023
108,133
Carrying amount
At 31 December 2023
5,258
At 31 December 2022
26,827
10
Debtors
2023
2022
Amounts falling due within one year:
£
£
Trade debtors
-
0
26,631
Corporation tax recoverable
2,447,203
3,858,048
Other debtors
1,828,234
2,772,120
Prepayments and accrued income
152,630
489,046
4,428,067
7,145,845
11
Creditors: amounts falling due within one year
2023
2022
Notes
£
£
Trade creditors
2,507,296
2,012,253
Taxation and social security
54,737
39,409
Deferred income
14
-
0
7,655
Accruals
3,338,998
3,608,310
5,901,031
5,667,627
Cyclacel Limited
Notes to the financial statements (continued)
for the year ended 31 December 2023
- 20 -
12
Loans
2023
2022
£
£
Parent company - intercompany charges and accrued interest
50,990,844
42,388,727
Parent company - loan
146,962,347
142,972,246
197,953,191
185,360,973
Payable after one year
197,953,191
185,360,973

Amounts due to parent company represent transactions between the company and Cyclacel Pharmaceuticals Inc.

 

Being:

(1) an inter-company loan of £146,962,347 (2022 - £142,972,246);

 

(2) costs allocated by the company to Cyclacel Pharmaceuticals, Inc. relating to operating costs incurred by the company, together with cumulative foreign exchange differences, of £13,399,223 (2022 - £16,909,382); and

 

(3) cumulative interest payable by the company to Cyclacel Pharmaceuticals, Inc. on the loan of £37,591,621 (2022 - £25,479,345). The rate of interest payable is based on the Bank of America prime rate.

13
Creditors: amounts falling due after more than one year
2023
2022
Notes
£
£
Loans
12
197,953,191
185,360,973
14
Deferred income
2023
2022
£
£
Other deferred income
-
7,655
15
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
114,049
101,830

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

Cyclacel Limited
Notes to the financial statements (continued)
for the year ended 31 December 2023
15
Retirement benefit schemes (continued)
- 21 -

The unpaid contributions at the year end, included in 'Accruals and deferred income' are £Nil (2022 – £4,318).

16
Share-based payment transactions

Stock purchase options were granted to employees of Cyclacel Limited under the Cyclacel Pharmaceuticals, Inc. 2018 Equity Incentive Plans. Options granted under these plans operate over shares of common stock in Cyclacel Pharmaceuticals, Inc. As of 31 December 2023, a total of 104,851 options have been granted to directors and employees of Cyclacel Limited pursuant to the 2018 Plans, vesting rateably from date of grant.

Number of share options
Weighted average exercise price
Restated for reverse stock split
Restated for reverse stock split
2023
2022
2022
2023
2022
2022
Number
Number
Number
$
$
$
Outstanding at 1 January 2023
84,814
66,881
1,003,219
95.38
106.95
7.13
Granted
26,367
18,666
280,000
6.57
37.65
2.51
Expired
(6,330)
(733)
(11,000)
362.28
46.65
3.11
Outstanding at 31 December 2023
104,851
84,814
1,272,219
57.51
95.38
6.36
Exercisable at 31 December 2023
64,327
42,302
634,536
78.34
134.10
8.94

 

On 18 December 2023, a reverse stock split took place where every 15 shares of the Company's issued and outstanding common stock was converted into one issued and outstanding share of common stock. This change has been reflected in the current year number disclosures, with 2022 comparatives also restated for consistency of presentation.

 

The options outstanding at 31 December 2023 had an exercise price ranging from $8.73 to $3,096.00 and a remaining contractual life of 7.9 years.

Cyclacel Limited
Notes to the financial statements (continued)
for the year ended 31 December 2023
16
Share-based payment transactions (continued)
- 22 -

The weighted average fair value of options granted during the year was $6.57. Fair value was measured using Black-Scholes option-pricing model.

Inputs were as follows:
2023
2022
Weighted average share price
$6.63
$1.76
Expected volatility
89-92%
86-93%
Expected life
5-6 years
5-6 years
Risk free rate
3.660-4.160%
1.370-3.605%
Expected dividends yields
0.00%
0.00%

The expected term assumption was estimated using past history of early exercise behaviour and expectations about future behaviours.

 

The expected volatility assumption was based on the historical volatility of peer companies over the expected term of the option awards.

 

The weighted average risk-free interest rate represents interest rate for treasury constant maturities published by the US Federal Reserve Board. If the term of available treasury constant maturity instruments is not equal to the expected term of an employee option, Cyclacel uses the weighted average of the two Federal Reserve securities closest to the expected term of the employee option.

 

No share options were exercised during the year ended 31 December 2023 (2022 – none).

Total expenses of £709,404 relating to equity settled share based payment transactions were recognised in the year (2022 - £642,582).

On 31 January 2023, the company issued 16,833 restricted common stock to certain employees which are subject to performance criteria. These restricted stock grants are accounted for at fair value at the vesting date.

Cyclacel Limited
Notes to the financial statements (continued)
for the year ended 31 December 2023
- 23 -
17
Share capital
2023
2022
£
£
Ordinary share capital
Issued and fully paid
1,871,210 Ordinary shares of 0.1p each
1,871
1,871
Preference share capital
Issued and fully paid
17,965,835 Preferred Ordinary 'D' shares of 0.1p each
17,966
17,966

Represents the nominal value of shares that have been issued and fully paid.

 

Preferred Ordinary ‘D’ shares

Return of assets under liquidation or winding up

Upon the return of assets under liquidation or winding up of the company, Preferred Ordinary ‘D’ shareholders are, after all liabilities have been paid, entitled to the greater of:

(i) the subscription price per share multiplied by 1.5 together with a sum equal to a fixed cumulative preferential dividend of 8% per annum from the date of issue down to the relevant liquidation event;

(ii) the pro-rata share of the proceeds between the ordinary shareholders and the Preferred Ordinary ‘D’ shareholders, as if the Preferred Ordinary ‘D’ shares had been converted into fully paid up ordinary shares.

 

After such payments, the balance of such assets shall be distributed amongst the ordinary shareholders in proportion to the amounts paid up.

 

Conversion

The Preferred Ordinary ‘D’ shares may at any time, at the option of the holder, be converted into Ordinary shares at the rate of one Ordinary share for every Preferred Ordinary ‘D’ share.

 

Redemption

The Preferred Ordinary ‘D’ shares have no right to redemption.

 

Voting

Preferred Ordinary ‘D’ shares and Ordinary shares rank pari passu as regards voting rights.

 

Dividends

The Preferred Ordinary ‘D’ shares have no preferential right to dividends and rank pari passu with the Ordinary shares.

18
Share premium account

The share premium account includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium.

19
Capital contribution reserve

The capital contribution reserve is a non-distributable reserve and represents capital introduced into the company without taking shares in return or creating a debt.

Cyclacel Limited
Notes to the financial statements (continued)
for the year ended 31 December 2023
- 24 -
20
Capital redemption reserve

The capital redemption reserve is a non-distributable reserve representing the nominal value of shares following the redemption or purchase of the company's own shares.

21
Profit and loss reserves

Profit and loss reserves includes all current and prior period retained profits and losses.

22
Cash absorbed by operations
2023
2022
£
£
Loss for the year after tax
(16,170,605)
(34,041,990)
Adjustments for:
Taxation credited
(2,364,022)
(3,839,468)
Finance costs
12,254,411
19,530,627
Investment income
(9,935,419)
-
0
Non cash foreign exchange loss included in finance costs
(141,953)
-
0
Depreciation and impairment of tangible fixed assets
24,048
25,163
Equity settled share based payment expense
709,404
642,582
Movements in working capital:
Decrease/(increase) in debtors
1,306,933
(1,894,653)
Increase in creditors
241,059
2,061,920
(Decrease)/increase in deferred income
(7,655)
7,655
Cash absorbed by operations
(14,083,799)
(17,508,164)
23
Analysis of changes in net debt
1 January 2023
Cash flows
Other non-cash movement
Exchange rate movements
31 December 2023
£
£
£
£
£
Cash at bank and in hand
504,080
103,768
-
-
607,848
Borrowings excluding overdrafts
(185,360,973)
(10,415,361)
(12,112,276)
9,935,419
(197,953,191)
(184,856,893)
(10,311,593)
(12,112,276)
9,935,419
(197,345,343)
24
Ultimate controlling party

The company’s immediate parent undertaking and controlling party is Cyclacel Pharmaceuticals, Inc. which is incorporated in the State of Delaware, USA. It has included the company in its group financial statements, copies of which are available from its corporate office: 200 Connell Drive, Suite 1500, Berkeley Heights, NJ 07922, USA.

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