Cyclo Therapeutics(CYTH) - 2024 Q3 - Quarterly Report

Financial Performance - Product sales for the three months ended September 30, 2024, were $233,772, down from $495,477 in the same period in 2023, representing a decrease of 52.8%[10] - Gross profit for the nine months ended September 30, 2024, was $517,324, compared to $696,134 for the same period in 2023, a decline of 25.7%[10] - Total revenues for the three months ended September 30, 2024, were $233,772, a decrease of 52.8% compared to $495,477 for the same period in 2023[69] - For the nine months ended September 30, 2024, total revenues were $559,326, down 26.9% from $765,006 in the prior year[69] - The product mix for revenues consisted of 99% basic natural and chemically modified cyclodextrins for the nine months ended September 30, 2024[73] Expenses and Losses - Total expenses increased to $19,563,520 for the nine months ended September 30, 2024, from $15,103,668 in the same period in 2023, an increase of 29.8%[10] - The net loss for the nine months ended September 30, 2024, was $(19,157,261), compared to $(14,414,893) for the same period in 2023, reflecting an increase in loss of 32.5%[10] - For the three months ended September 30, 2024, Cyclo Therapeutics reported a net loss of $8,832,944, compared to a net loss of $4,771,353 for the same period in 2023, reflecting an increase of 85% in losses year-over-year[11] - For the nine months ended September 30, 2024, the net loss was $19,157,261, compared to $14,414,893 for the same period in 2023, representing a 33% increase in losses[13] Cash Flow and Assets - Cash and cash equivalents decreased significantly from $9,246,592 in December 2023 to $928,010 in September 2024, a drop of approximately 90%[8] - Cyclo Therapeutics experienced a cash outflow of $18,222,671 from operating activities for the nine months ended September 30, 2024, compared to $11,890,144 for the same period in 2023, indicating a 53% increase in cash used[13] - As of September 30, 2024, cash and cash equivalents were $928,010, a decrease from $1,801,809 at the end of September 30, 2023[13] - The Company had negative working capital of $15,463,491 as of September 30, 2024, compared to positive working capital of $3,850,000 at December 31, 2023[133] Shareholder Equity - The accumulated deficit increased from $(83,856,681) in December 2023 to $(103,013,942) in September 2024, an increase of approximately 22.9%[8] - The total stockholders' equity deficit as of September 30, 2024, was $(13,473,340), a decrease from $(1,052,670) as of September 30, 2023, indicating a significant deterioration in equity position[11] Research and Development - Research and development expenses for the three months ended September 30, 2024, were $5,492,844, compared to $3,469,067 in the same period in 2023, an increase of 58.3%[10] - Research and development costs are expensed as incurred, primarily consisting of materials for clinical trials and personnel-related expenses[49] - The Company’s prepaid clinical expenses include active pharmaceutical ingredients and other raw materials for the Trappsol® Cyclo™ drug, expected to be utilized in clinical trials[41] Mergers and Acquisitions - The Company completed a strategic merger with Applied Molecular Transport Inc. on December 27, 2023, with AMTI becoming a wholly-owned subsidiary[17] - The proposed merger with Rafael Holdings is expected to close in late December 2024, subject to customary conditions and stockholder approvals[28] - The company entered into a merger agreement with Rafael Holdings, which will result in the company becoming a wholly-owned subsidiary of Rafael[115] Compliance and Regulatory - The company received a Nasdaq delisting notice on October 4, 2024, due to non-compliance with four listing rules, including a closing bid price below $1.00 per share for 30 consecutive trading days[101] - The company has 180 days from October 4, 2024, to regain compliance with Nasdaq listing rules, with the possibility of an additional 180 days under certain conditions[102] Internal Controls and Accounting - The company identified a material weakness in internal controls related to the accounting of complex equity instruments, which is being addressed through updated internal procedures[146] - The financial statements were prepared on a going concern basis, with substantial doubt about the company's ability to continue as a going concern due to reliance on future capital raising efforts[136] Capital Raising - Cyclo Therapeutics raised $10,000,000 from the issuance of a convertible note during the nine months ended September 30, 2024[13] - The company has entered into multiple convertible promissory notes with Rafael Holdings, totaling $10,000,000, with a maturity date of December 21, 2024[83] Inventory and Assets - The Company has recorded no reserve for obsolete inventory as of September 30, 2024, and December 31, 2023[39] - The Company’s inventory consists of cyclodextrin products and chemical complexes recorded at the lower of cost or net realizable value[39]