第一部分. 財務資訊

第1項。基本報表。

CYCLO THERAPEUTICS, INC. 及其子公司

簡明綜合資產負債表

See accompanying Notes to Condensed Consolidated Financial Statements.

CYCLO THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements.

CYCLO THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024 and 2023

(Unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements.

CYCLO THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 and 2023

(Unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements.

CYCLO THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements.

The information presented herein as of September 30, 2024 and for the three and nine months ended September 30, 2024 and 2023 is unaudited.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis provides information to explain our results of operations and financial condition.  You should also read our unaudited condensed consolidated financial statements and their notes included in this Form 10-Q, and our audited consolidated financial statements and their notes and other information included in our Annual Report on Form 10-K for the year ended December 31, 2023.  This report may contain forward-looking statements. Forward-looking statements within this Form 10-Q are identified by words such as “believes,” “anticipates,” “expects,” “intends,” “may,” “will,” “plans” and other similar expressions; however, these words are not the exclusive means of identifying such statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements.  These forward-looking statements are subject to significant risks, uncertainties and other factors, which may cause actual results to differ materially from those expressed in, or implied by, these forward-looking statements.  Except as expressly required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements to reflect events, circumstances or developments occurring subsequent to the filing of this Form 10-Q with the U.S. Securities and Exchange Commission (the “SEC”) or for any other reason and you should not place undue reliance on these forward-looking statements.  You should carefully review and consider the various disclosures the Company makes in this report and our other reports filed with the SEC that attempt to advise interested parties of the risks, uncertainties and other factors that may affect our business.

Overview

We are a clinical stage biotechnology company that develops cyclodextrin-based products for the treatment of neurodegenerative diseases. We filed a Type II Drug Master File with the U.S. Food and Drug Administration (“FDA”) in 2014 for our lead drug candidate, Trappsol® Cyclo™ (hydroxypropyl beta cyclodextrin) as a treatment for Niemann-Pick Type C disease (“NPC”). NPC is a rare and fatal autosomal recessive genetic disease resulting in disrupted cholesterol metabolism that impacts the brain, lungs, liver, spleen, and other organs. In 2015, we launched an International Clinical Program for Trappsol® Cyclo™ as a treatment for NPC. In 2016, we filed an Investigational New Drug application (“IND”) with the FDA, which described our Phase I clinical plans for a randomized, double blind, parallel group study at a single clinical site in the U.S. The Phase I study evaluated the safety and pharmacokinetics of Trappsol® Cyclo™ along with markers of cholesterol metabolism and markers of NPC during a 12-week treatment period of intravenous administration of Trappsol® Cyclo™ every two weeks to participants 18 years of age and older. The IND was approved by the FDA in September 2016, and in January 2017 the FDA granted Fast Track designation to Trappsol® Cyclo™ for the treatment of NPC. Initial patient enrollment in the U.S. Phase I study commenced in September 2017, and in May 2020 we announced top line data showing Trappsol® Cyclo™ was well tolerated in this study.

We have also completed a Phase I/II clinical study approved by European regulatory bodies with clinical trial centers in the United Kingdom, Sweden, and Israel. The Phase I/II study evaluated the safety, tolerability and efficacy of Trappsol® Cyclo™ through a range of clinical outcomes, including neurologic, respiratory, and measurements of cholesterol metabolism and markers of NPC. Consistent with the 12-week Phase  study (single US site), the European/Israel study administered Trappsol® Cyclo™ intravenously to NPC patients every two weeks in a double-blind, randomized trial, but differs in that the study period was for 48 weeks (24 doses). In March of 2021 we announced that 100% of patients who completed the trial (9 out of 12) improved or remained stable, and 89% met the outcome measure in at least two domains of the 17-domain NPC severity scale. We did not conduct a Phase II trial in the U.S. and instead relied on the data obtained from our Phase I/II trial abroad to support the commencement of our Phase III trial in the U.S.

In February 2020 we had a face-to-face “Type C” meeting with the FDA with respect to the initiation of our pivotal Phase III clinical trial of Trappsol® Cyclo™ based on the clinical data obtained to date. At that meeting, we also discussed with the FDA submitting a New Drug Application (NDA) under Section 505(b)(1) of the Federal Food, Drug, and Cosmetic Act for the treatment of NPC in pediatric and adult patients with Trappsol® Cyclo™. A similar request was submitted to the European Medicines Agency (“EMA”) in February 2020, seeking scientific advice and protocol assistance from the EMA for proceeding with a Phase III clinical trial in Europe. In October 2020 we received a “Study May Proceed” notification from the FDA with respect to the proposed Phase III clinical trial, and in June of 2021 we commenced enrollment in TransportNPC, a pivotal Phase III study of Trappsol® Cyclo™ for the treatment of NPC. In May 2024, we enrolled the last of the 104 patients enrolled in the Phase III study.

On May 17, 2010, the FDA designated Trappsol® Cyclo™ as an orphan drug for the treatment of NPC, which would provide us with the exclusive right to sell Trappsol® Cyclo™ for the treatment of NPC for seven years following FDA drug approval. In April 2015, we also obtained Orphan Drug Designation for Trappsol® Cyclo™ in Europe, which will provide us with ten years of market exclusivity following regulatory approval, which period will be extended to 12 years upon acceptance by the EMA’s Pediatric Committee of our pediatric investigation plan (PIP) demonstrating that Trappsol® Cyclo™ addresses the pediatric population. On January 12, 2017, we received Fast Track Designation from the FDA, and on December 1, 2017, the FDA designated NPC a Rare Pediatric Disease.

We are also exploring the use of cyclodextrins in the treatment of Alzheimer’s disease. In January 2018, the FDA authorized a single patient IND expanded access program using Trappsol® Cyclo™ for the treatment of Alzheimer’s disease. Based on the data collected from this patient combined with the data from our NPC studies, we prepared a synopsis for an early stage protocol using Trappsol® Cyclo™ intravenously to treat Alzheimer’s disease that was presented to the FDA in January of 2021. We received feedback from the FDA on this synopsis in April 2021 and incorporated the feedback into an IND for a Phase II study for the treatment of Alzheimer’s disease with Trappsol® Cyclo™ that we submitted to the FDA in November 2021. In December of 2021, we received IND clearance from the FDA, allowing us to proceed with our Phase II study of Trappsol® Cyclo™ for the treatment of Alzheimer’s disease. U.S. sites for the study were activated during the second half of 2022, with patient dosing beginning in the first quarter of 2023.

We filed an international patent application in October 2019 under the Patent Cooperation Treaty directed to the treatment of Alzheimer’s disease with cyclodextrins, and we are pursuing national and regional stage applications based on this international application. The terms of any patents resulting from these national or regional stage applications would be expected to expire in 2039 if all the requisite maintenance fees are paid.

On January 2024, we received a notice of allowance of our patent application for the treatment of Alzheimer’s disease from the U.S. Patent and Trademark Office ("USPTO”) regarding our Patent Application No. 17/289,137 "Methods of Treating Alzheimer’s Disease.” In July 2024 we received a notice of decision from the European Patent Office to grant a patent application regarding the methods to treat Alzheimer’s Disease, with an effective date of August 21, 2024.

We also continue to operate our legacy fine chemical business, consisting of the sale of cyclodextrins and related products to the pharmaceutical, nutritional, and other industries, primarily for use in diagnostics and specialty drugs. However, our core business has transitioned to a biotechnology company primarily focused on the development of cyclodextrin- based biopharmaceuticals for the treatment of disease from a business that had been primarily reselling basic cyclodextrin products.

Proposed Acquisition by Rafael Holdings

On August 21, 2024, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Rafael Holdings, Inc. (“Rafael”), a Delaware corporation; and Tandem Therapeutics, Inc., a Nevada corporation and a wholly-owned subsidiary of the Rafael (“First Merger Sub”); and Tandem Therapeutics, LLC, a Nevada limited liability company and a wholly-owned subsidiary of the Rafael (“Second Merger Sub”). Pursuant to the terms of the Merger Agreement, the Rafael, First Merger Sub and the Company will be merged with and into Rafael (the “First Merger”), with Company surviving the Merger as a wholly-owned subsidiary of Rafael. Immediately following the First Merger, the Company will merge with and into the Second Merger Sub (the “Second Merger”, and together with the First Merger, the “Merger”) with Rafael being the surviving entity of the Second Merger. The name of the Surviving Entity will be changed to Cyclo Therapeutics, LLC. More information regarding the proposed acquisition and the terms of the Merger Agreement are discussed in Note 1 – Organization and Description of Business of the notes to the Condensed Consolidated Financial Statements contained elsewhere in this Quarterly Report on Form 10-Q.

Subsequent events

Nasdaq Delisting Notice

On October 4, 2024, the Company received two letters from The Nasdaq Stock Market ("Nasdaq”) stating that the Company was not in compliance with the following four Nasdaq Listing Rules: (1) failing to maintain a closing bid price of no less than $1.00 per share for 30 consecutive trading days, (2) stockholders’ equity of the Company was below the minimum requirement of $2.5 million, (3) failing to maintain a minimum Market Value of Listed Securities of $35 million, and (4) failing to maintain net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the three most recently completed fiscal years.

Pursuant to the Nasdaq Listing Rules, the Company has 180 calendar days from October 4, 2024 (until April 2, 2025) to regain compliance with the Nasdaq Listing Rules. In the event the Company does not regain compliance with item (1) above prior to the expiration of the compliance period, the Company may be granted an additional 180 calendar days to regain compliance, subject to certain conditions. In the event the Company does not regain compliance with item (2) above prior to the expiration of the compliance period, the Company will receive written notification from Nasdaq that its securities are subject to delisting.

Convertible Promissory Notes

On October 8, 2024, the Company entered into the Fourth Amended NPA with Rafael, pursuant to which the Company issued and sold a convertible promissory note in the principal amount of $3,000,000 to Rafael. On November 7, 2024, the Company entered into the Fifth Amended NPA with Rafael, pursuant to which the Company issued and sold a convertible promissory note in the principal amount of $2,000,000 to Rafael. For additional information on these convertible promissory notes, please read Note 7, Convertible Notes Payable, to these condensed consolidated financial statements.

Results of Operations – Three and Nine Months Ended September 30, 2024 Compared to Three and Nine Months Ended September 30, 2023

We reported net losses of approximately $8,832,000 and $19,157,000 for the three and nine months ended September 30, 2024, compared to net losses of approximately $4,771,000 and $14,415,000 for the three and nine months ended September 30, 2023.

Total revenues for the three month period ended September 30, 2024, decreased 53% to approximately $234,000 compared to approximately $495,000 for the same period in 2023. Total revenues for the nine month period ended September 30, 2024, decreased 27% to approximately $559,000 compared to approximately $765,000 for the same period in 2023. Our change in the mix of our product sales for the three and nine months ended September 30, 2024 and 2023 is as follows:

Trappsol® HPB

Our sales of Trappsol® HPB decreased by 89% for the three month period ended September 30, 2024, to approximately $37,000 compared to approximately $342,000 for the three months ended September 30, 2023. Our sales of Trappsol® HPB decreased by 47% for the nine month period ended September 30, 2024, to approximately $256,000 compared to approximately $485,000 for the nine months ended September 30, 2023. Sales of cyclodextrin are very volatile and hard to predict. The decrease was caused by a reclassification of revenue derived from compassionate sales of Trappsol® Cyclo™

Other Trappsol® products

Our sales of other Trappsol® products increased by 29% for the three month period ended September 30, 2024, to approximately $196,000 compared to approximately $152,000 for the three months ended September 30, 2023. Our sales of other Trappsol® products increased by 12% for the nine month period ended September 30, 2024, to approximately $300,000, compared to approximately $267,000 for the nine months ended September 30, 2023.

Aquaplex®

Our sales of Aquaplex® for the three month period ended September 30, 2024, were approximately $100, as compared to sales of Aquaplex® for the three months ended September 30, 2023 of approximately $60. Our sales of Aquaplex® for the nine month period ended September 30, 2024, were approximately $660, as compared to sales of Aquaplex® for the nine months ended September 30, 2023 of approximately $10,000.

The largest customers for our legacy fine chemical business continue to follow historical product ordering trends by placing periodic large orders that represent a significant share of our annual sales volume. During the nine months ended September 30, 2024, our four largest customers accounted for 90% of our sales; the largest accounted for 35% of sales. During the nine months ended September 30, 2023, our three largest customers accounted for 86% of our sales; the largest accounted for 42% of sales. Historically, our usual smaller sales of HPB occur more frequently throughout the year compared to our large sales that we receive periodically. The timing of when we receive and are able to complete these two kinds of sales has a significant effect on our quarterly revenues and operating results and makes period to period comparisons difficult.

Our cost of products sold (excluding any allocation of direct and indirect overhead and handling costs) for the three month period ended September 30, 2024, decreased 56% to approximately $17,000 compared to approximately $39,000 for the same period in 2023. Our cost of products sold (excluding any allocation of direct and indirect overhead and handling costs) for the nine month period ended September 30, 2024, decreased 39% to approximately $42,000 compared to approximately $69,000 for the same period in 2023. Our cost of products sold (excluding any allocation of direct and indirect overhead and handling costs) as a percentage of sales was 8% for the nine months ended September 30, 2024, and 9% for the nine months ended September 30, 2023. Historically, the timing and product mix of sales to our large customers has had a significant effect on our sales, cost of products sold (excluding any allocation of direct and indirect overhead and handling costs) and the related margin. We did not experience any significant increases in material costs during 2023 or the first nine months of 2024.

Our gross margins may not be comparable to those of other entities, since some entities include all the costs related to their distribution network in cost of goods sold. Our cost of goods sold includes only the cost of products sold and does not include any allocation of inbound or outbound freight charges, indirect overhead expenses, warehouse and distribution expenses, or depreciation expense. Our employees provide receiving, inspection, warehousing and shipping operations for us. The cost of our employees is included in personnel expense. Our other costs of warehousing and shipping functions are included in office and other expense.

As we buy inventory from foreign suppliers, the change in the value of the U.S. dollar in relation to the Euro, Yen and Yuan has an effect on our cost of inventory. Our main supplier of specialty cyclodextrins and complexes, Cyclodextrin Research & Development Laboratory, is located in Hungary and its prices are set in Euros. The cost of our bulk inventory often changes due to fluctuations in the U.S. dollar. The cost of shipping from outside the U.S. also has a significant effect on our inventory acquisition costs. When we experience short-term increases in currency fluctuation or supplier price increases, we are often not able to raise our prices sufficiently to maintain our historical margins.  Therefore, our margins on these sales may decline. 

Personnel expenses increased by 1%, to approximately $843,000 for the three months ended September 30, 2024, compared to approximately $835,000 for the three months ended September 30, 2023. Personnel expenses increased by 2%, to approximately $2,581,000 for the nine months ended September 30, 2024 compared to approximately $2,527,000 for the nine months ended September 30, 2023. The increase in personnel expenses is primarily due to an increase in stock compensation expense. We expect to maintain our level of employees and related costs in the near term.

Research and development expenses increased 58% to approximately $5,493,000 for the three months ended September 30, 2024, compared to approximately $3,469,000 for the three months ended September 30, 2023. Research and development expenses increased 18% to approximately $11,830,000 for the nine months ended September 30, 2024, compared to approximately $10,037,000 for the nine months ended September 30, 2023. Research and development expenses as a percentage of our total operating expenses decreased to 60% for the nine months ended September 30, 2024 from 66% for the nine months ended September 30, 2023. The overall increase in research and development expense resulted in the spending related to the NPC program, while the decrease was related to an increase in operating expenses.

Professional fees increased 137% to approximately $1,412,000 for the three months ended September 30, 2024, compared to approximately $597,000 for the three months ended September 30, 2023. Professional fees increased 63% to approximately $2,430,000 for the nine months ended September 30, 2024, compared to approximately $1,494,000 for the nine months ended September 30, 2023. Professional fees may continue to increase in the future due to Merger expenses and the continuation of product development.

Office and other expenses increased 190% to approximately $641,000 for the three months ended September 30, 2024, compared to approximately $221,000 for the three months ended September 30, 2023. Office and other expenses increased 204% to approximately $2,361,000 for the nine months ended September 30, 2024, compared to approximately $776,000 for the nine months ended September 30, 2023. The increase is attributable to lease expense for a lease assumed in December 2023. The lease expense is offset by sublease income.

We increased our valuation allowance to offset the increase in our deferred tax asset from our net operating loss and did not recognize an income benefit or provision for the three or nine months ended September 30, 2024, and 2023, respectively.

Liquidity and Capital Resources

Our cash and cash equivalents decreased to approximately $928,000 as of September 30, 2024, compared to approximately $9,247,000 as of December 31, 2023. We had negative working capital of approximately $15,463,491 as of September 30, 2024, compared to positive working capital of approximately $3,850,000 at December 31, 2023. Cash used in operations was approximately $18,223,000 for the nine months ended September 30, 2024, compared to approximately $11,890,000 for the same period in 2023.

The Company has continued to realize losses from operations. As a result of our recent note financings with Rafael, we have had sufficient cash to meet our ongoing operating costs and capital expenditure requirements. Rafael has agreed to fund the Company through the earlier of the consummation of the Merger or termination of the Merger Agreement in such amounts as may be necessary for the Company to operate its business and pay its debts and obligations as they become due, provided that the Company is not in active discussions regarding an acquisition proposal and is being operated in a manner consistent with the terms of the Merger Agreement and the financial forecast previously shared with Rafael.  As discussed in Note 7, the Company has borrowed $15,000,000 from Rafael through November 12, 2024.

We intend to continue to borrow from Rafael through the consummation of the Merger or termination of the Merger Agreement.  If the Merger Agreement is terminated, we will need to raise additional capital through the sale of our securities or the entering into of alternative transactions in order to support our ongoing operations and continue our clinical trials. These activities are necessary to fund the development of our drug product candidates through clinical development, manufacturing and commercialization. Our ability to obtain such additional capital will likely be subject to various factors, including our overall business performance, market conditions and our ability to identify strategic partners. There can be no guarantee that the Company will be successful in its ability to raise capital to fund future operational and development initiatives.

Our condensed consolidated financial statements as of and for the nine months ended September 30, 2024 and the consolidated financial statements as of and for the year ended December 31, 2023 were prepared on the basis of a going concern, which contemplates that we will be able to realize assets and discharge liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon the availability of equity or debt financing or an alternative strategy as noted above. As stated above, various factors including our overall business performance, market conditions and the ability to identify strategic partners raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

At December 31, 2023, we had approximately $49,807,000 in net state and federal operating loss carryforwards expiring from 2024 through 2037, including $41,409,000 that will not expire, that can be used to offset our current and future taxable net income and reduce our income tax liabilities. We experienced an "ownership change" within the meaning of Section 382(g) of the Internal Revenue Code during the year ended December 31, 2023. As a result of the “ownership change” we are limited in our ability to utilize our net operating loss carryforwards and certain other built in deductions in computing our taxable income beginning with the ownership change date. We have not performed an analysis to determine such limitations. We have provided a 100% valuation allowance on our deferred tax asset based on our expected future expenses related to our clinical trials and other development initiatives. 

We had no off-balance sheet arrangements as of September 30, 2024.

Cash Flows

Operating Activities

Net cash used in operating activities was approximately $18,223,000 for the nine month period ended September 30, 2024, compared to net cash used in operating activities of approximately $11,890,000 for the nine month period ended September 30, 2023. The increase in net cash used in operating activities was primarily due to the increase in activities for our clinical trials and on-going operational expenses.

Investment Activities

The Company had no net cash provided by or used in investing activities for the nine month periods ended September 30, 2024 and September 30, 2023.

Financing Activities

Net cash provided by financing activities was approximately $9,904,000 for the nine month period ended September 30, 2024, compared to net cash provided by financing activities of approximately $12,149,000 for the nine month period ended September 30, 2023. The decrease in net cash provided by financing activities is attributable to proceeds from the sale of warrants and stock during the nine months ended September 30, 2023, that did not occur during the nine months ended September 30, 2024. During the nine month period ended September 30, 2024, the Company received proceeds of $10,000,000 from convertible notes payable to Rafael.

Critical Estimates

Our discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these condensed consolidated financial statements requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenue and expenses during the reporting periods. We continually evaluate our judgments, estimates and assumptions. We base our estimates on the terms of underlying agreements, our expected course of development, historical experience and other factors we believe are reasonable based on the circumstances, the results of which form our management’s basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There were no significant changes to our critical accounting policies during the quarter ended September 30, 2024. For information about critical accounting policies, see the discussion of critical accounting policies in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

a.  Evaluation of Disclosure Controls and Procedures.

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report (the "Evaluation Date"). Based on such evaluation, our principal executive officer and principal financial officer, have concluded that, at the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective as of September 30, 2024.

b. Material Weakness over Complex Equity Instruments

During the preparation of our interim condensed consolidated financial statements for the period ended March 31, 2023, we identified a material weakness in our internal controls relating to the accounting of complex equity instruments. 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. Specifically, the controls related to the evaluation of the appropriate accounting classification of warrants as equity classified.

Remediation Plan

Management, with the oversight from our Audit Committee and the Board of Directors, updated our internal controls to remediate the material weakness by supplementing our internal procedures through the contracted review of equity transactions by technical accounting experts.

We will not be able to conclude whether the actions we are taking will fully remediate the material weakness in our internal control over financial reporting until the updated controls have operated for a sufficient period of time and management has concluded, through testing, that such controls are operating effectively. We may also conclude that additional measures may be required to remediate the material weakness in our internal control over financial reporting, which may necessitate further action. 

c. Changes in Internal Control.

Other than the remediation plan discussed above, we made no changes in our internal control over financial reporting (as defined in Rules 13a-15(f)) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation of our internal controls that occurred during our last fiscal quarter that has materially affected, or which is reasonably likely to materially affect, our internal controls over financial reporting. We are now taking actions to remediate the material weakness, which may result in changes in our internal control over financial reporting in subsequent periods.

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

From time to time, we are a party to claims and legal proceedings arising in the ordinary course of business. Our management evaluates our exposure to these claims and proceedings individually and in the aggregate and allocates additional monies for potential losses on such litigation if it is possible to estimate the amount of loss and if the amount of the loss is probable. We are not currently involved in any litigation nor to our knowledge, is any litigation threatened against us, the outcome of which would, in our judgment based on information currently available to us, have a material adverse effect on our financial position or results of operations.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which is available at www.sec.gov and on our website at www.cyclotherapeutics.com. Any of the risk factors contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 could materially affect our business, financial condition or future results, and such risk factors may not be the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. We do not undertake to update any of the "forward-looking" statements or to announce the results of any revisions to these "forward-looking" statements except as required by law.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

On June 3, 2024, the Company issued an aggregate of 81,644 fully vested shares of its common stock to its non-employee directors in lieu of cash compensation.  These grants reflect director compensation for the first quarter of 2024.  The number of shares received in lieu of cash was calculated based on the closing price of the Company’s common stock on June 3, 2024 which was $1.28 per share.   The shares of common stock issued to the non-employee directors contain a Rule 144 restrictive legend and are exempt from registration in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended, as a transaction by an issuer not involving a public offering. 

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

None.

Item 6. Exhibits

+ The schedules and exhibits to this document have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request. The Company may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedules or exhibits so furnished.

*Filed herewith

**Furnished herewith

SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.