Tiziana Life Sciences (US:TLSA)2023-04-26 18:36PART I Key Information This section presents the company's selected consolidated financial data for the past five years, showing consistent net losses and a decrease in cash and total assets in 2022, along with a comprehensive list of risk factors. Selected Financial Data The company presents its audited consolidated financial data for the five years ended December 31, 2022, indicating a history of net losses, with a net loss of $15.4 million in 2022 and a significant decrease in cash and cash equivalents to $18.1 million from $42.2 million in the prior year Financial Performance (in thousands) | Financial Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net Loss | $(15,397) | $(23,417) | $(26,131) | | Total Comprehensive Loss | $(18,979) | $(27,895) | $(22,657) | | Basic and Diluted Net Loss per Share | $(0.15) | $(0.24) | $(0.16) | Balance Sheet Items (in thousands) | Balance Sheet Item | As of Dec 31, 2022 | As of Dec 31, 2021 | As of Dec 31, 2020 | | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | $18,122 | $42,186 | $65,824 | | Working Capital | $17,619 | $41,133 | $62,196 | | Total Assets | $26,477 | $48,826 | $70,656 | | Total Shareholders' Equity | $19,571 | $41,280 | $62,386 | Risk Factors This section details significant risks facing the company, including potential clinical trial failures, a history of net losses, reliance on third parties, commercialization challenges, intellectual property dependence, and complex government regulations. - The company has incurred significant net losses since its inception in 2013, with losses of $15.4 million, $23.4 million, and $26.1 million for the years 2022, 2021, and 2020, respectively, accumulating to $116 million as of December 31, 202259 - The company relies heavily on licenses from Nerviano, Lonza, and Novimmune for patent rights and technology essential for developing its product candidates, with non-compliance potentially leading to loss of core product rights108 - The company believes it was a Passive Foreign Investment Company (PFIC) for the 2022 tax year, which could subject U.S. shareholders to adverse federal income tax consequences, including higher tax rates on gains and dividends259 - On June 14, 2022, the company received a notice from Nasdaq for non-compliance with the minimum $1.00 bid price rule, although compliance was regained on April 21, 2023, the risk of failing to maintain listing standards persists224226 Information on the Company This section provides a comprehensive overview of Tiziana Life Sciences, detailing its history, corporate reorganization into a Bermuda-based entity, business strategy focused on neurodegenerative and lung diseases with intranasal Foralumab as its lead asset, product pipeline, competitive landscape, intellectual property, material license agreements, organizational structure, and physical properties. History and Development of the Company Originally incorporated in England and Wales in 1998, the company became Tiziana Life Sciences plc in 2014, and underwent a corporate reorganization in October 2021, establishing Tiziana Life Sciences Ltd, a Bermuda-incorporated company, as the new ultimate parent. - The company executed a strategic reorganization, making Tiziana Life Sciences Ltd, a Bermuda-incorporated entity, the ultimate parent company, effective October 20, 2021267 Business Overview Tiziana is a biotechnology company focused on developing therapies for neurodegenerative and lung diseases, utilizing novel administration routes, with its near-term strategy centered on advancing intranasal Foralumab for Secondary Progressive Multiple Sclerosis (SPMS) and other CNS indications. - The company's near-term strategic focus is on the clinical development of intranasally-administered Foralumab for neurodegenerative diseases, particularly SPMS, with plans to initiate a Phase 2 trial in Q3 2023294311 - Development programs for the oncology drug candidate Milciclib and the anti-IL-6R mAb TZLS-501 have been temporarily paused to focus resources on the intranasal Foralumab program304309311 - In an Expanded Access Program, an SPMS patient treated with intranasal Foralumab showed significant reduction in activated microglial cells, a key marker of neuroinflammation, after 3 and 6 months of treatment, along with clinical improvements282284285 - The company's core product candidates, Foralumab, Milciclib, and TZLS-501, are based on intellectual property in-licensed from Novimmune SA and Nerviano Medical Sciences S.r.l273302305 Organizational Structure The company's organizational structure consists of the Bermuda-based parent, Tiziana Life Sciences Ltd, and its wholly-owned subsidiaries in England & Wales, the USA, and Italy. Company Subsidiaries | Name | Principal Activity | Country of Incorporation | | :--- | :--- | :--- | | Tiziana Life Sciences Ltd | Clinical stage biotechnology company | England & Wales | | Tiziana Pharma Limited | Clinical stage biotechnology company | England & Wales | | Tiziana Therapeutics Inc. | Clinical stage biotechnology company | USA | | Longevia Genomics S.r.l. | Biotechnology discovery company | Italy | Operating and Financial Review and Prospects This section details the company's financial performance and condition, highlighting a net loss of $15.4 million in 2022, a decrease from $23.4 million in 2021 primarily due to lower general and administrative expenses, and a decrease in cash position to $18.1 million from $42.2 million, emphasizing its pre-revenue status and reliance on equity financing. Results of Operations For the year ended December 31, 2022, the company reported a net loss of $15.4 million, compared to a net loss of $23.4 million in 2021, driven by a significant decrease in general and administrative expenses to $1.6 million from $13.3 million, while research and development expenses remained relatively stable at $13.0 million. Operating Expenses (in thousands) | (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Research and Development | $(12,955) | $(13,208) | | Operating Expenses (G&A) | $(1,638) | $(13,311) | | Loss from operations | $(14,593) | $(27,374) | | Loss for the year | $(15,397) | $(23,417) | - General and administrative expenses decreased by $11.7 million in 2022, primarily due to a $6.3 million decrease in option-related expenses from forfeitures, a $2.4 million saving in labor costs from reduced headcount, and a $1.5 million reduction in legal costs537 - No income tax credit was recognized in 2022, compared to a $3.2 million credit in 2021, as the company awaits the results of a review of its 2020 claim by HMRC before proceeding with a new claim541 Liquidity and Capital Resources As of December 31, 2022, the company had cash and cash equivalents of $18.1 million, down from $42.2 million at the end of 2021, primarily due to $19.6 million in net cash used in operating activities and $4.0 million used in investing activities, with future funding expected through equity sales. - The company's cash and cash equivalents decreased by $24.1 million during 2022, ending the year at $18.1 million551552 Cash Flow Activities (in thousands) | (in thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(19,615) | $(21,762) | $(11,335) | | Net cash used in investing activities | $(3,996) | $(23) | $(123) | | Net cash (used in) / provided by financing activities | $(55) | $130 | $75,346 | - The company expects expenses to increase substantially as it advances its product candidates through clinical trials and seeks regulatory approvals, with future funding anticipated through equity offerings559561 Directors, Senior Management and Employees This section provides information on the company's leadership and workforce, listing the three members of the Board of Directors and key senior management, detailing compensation for 2022 including a realization bonus structure for the Executive Chairman, describing equity incentive plans, outlining the board committee structure, and stating the company had 9 full-time employees as of year-end 2022. - As of December 31, 2022, the company had 9 full-time employees, with 3 in research and development and 6 in management, administration, and finance666 - The Executive Chairman, Gabriele Cerrone, is eligible for a realization bonus of 3.5% of the Enterprise Value if it equals or exceeds £300 million upon a sale or change of control, with a previous realization bonus triggered in August 2020582583 - The company's board consists of three directors: Gabriele Marco Antonio Cerrone (Executive Chairman), Willy Simon (Non-Executive), and John Brancaccio (Non-Executive)568 Major Shareholders and Related Party Transactions This section details the ownership structure and related party dealings of the company, identifying Executive Chairman Gabriele Cerrone as the only major shareholder, beneficially owning approximately 38.58% of the company's ordinary shares as of April 24, 2023, and outlining related party transactions including shared services agreements and loan facilities with OKYO Pharma Ltd and Rasna Therapeutics Inc. - As of April 24, 2023, Executive Chairman Gabriele Cerrone beneficially owned 39,806,023 ordinary shares, representing approximately 38.58% of the company671 - The company has a shared services agreement and provided a $2 million short-term credit facility to OKYO Pharma Ltd, a related party, in August 2022916917 - Tiziana has a shared services agreement with Rasna Therapeutics Inc, a related party, and extended a $75,000 loan to it during 2022914 Financial Information This section refers to Item 18 for the company's consolidated financial statements and other related financial information, and states that the company is not currently a party to any material legal proceedings. - The company is not currently involved in any governmental, legal, or arbitration proceedings that are expected to have a significant effect on its financial position or profitability679 Additional Information This section provides supplementary information, including a reference to the company's memorandum of association and Bye-laws, details Bermuda's exchange control regulations, and a significant portion dedicated to U.S. and Bermuda tax considerations for shareholders, highlighting the company's belief that it qualifies as a Passive Foreign Investment Company (PFIC). - The company believes it was a Passive Foreign Investment Company (PFIC) for its 2017 tax year and expects to be a PFIC for the current taxable year, which can lead to adverse U.S. federal income tax consequences for U.S. Holders695 - Under Bermuda law, there is no withholding tax on dividends or other distributions, and the company has received an assurance from the Minister of Finance of Bermuda protecting it from certain new taxes until March 31, 2035718719 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate fluctuations and foreign currency exchange rate fluctuations, with exposure to interest rate risk considered minimal due to a conservative investment portfolio, and foreign exchange risk primarily between the U.S. dollar and Pound Sterling, for which the company does not currently use hedging instruments. - The company's main market risks are interest rate and foreign currency exchange fluctuations727 - The company does not currently engage in currency hedging activities to mitigate its foreign currency exchange risk731 PART II Controls and Procedures Management has concluded that as of December 31, 2022, the company's disclosure controls and procedures were not effective due to a material weakness in the internal control over financial reporting related to an ineffective control environment, specifically the failure to timely develop and communicate an employee handbook, which management intends to remediate. - Management concluded that disclosure controls and procedures were not effective as of December 31, 2022739 - A material weakness was identified in the internal control over financial reporting due to an ineffective control environment, specifically the lack of a timely developed employee handbook744745 Other Information This section covers various governance and compliance topics, identifying John Brancaccio as the Audit Committee Financial Expert, disclosing accountant fees totaling $325,000 in 2022, reporting the purchase of 1,683,544 of its own common shares during 2022, and reiterating that as a foreign private issuer, it follows certain home country (Bermuda) corporate governance practices in lieu of some Nasdaq requirements. - The Board of Directors has determined that Mr. John Brancaccio is an "audit committee financial expert"747 Accountant Fees (in thousands) | (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Audit fees | 297 | 292 | | Other assurance services | 28 | 32 | | Total | 325 | 324 | - During the year ended December 31, 2022, the company purchased 1,683,544 of its own common shares at an average price of $0.78 per share752 PART III Financial Statements This section contains the audited consolidated financial statements for Tiziana Life Sciences Ltd for the year ended December 31, 2022, prepared in accordance with IFRS, including the Consolidated Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Shareholders' Equity, and Statements of Cash Flows, along with detailed notes. Consolidated Balance Sheet (in thousands) | (In thousands) | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $26,477 | $48,826 | | Total Liabilities | $6,906 | $7,546 | | Total Shareholders' Equity | $19,571 | $41,280 | Consolidated Statement of Operations and Comprehensive Loss (in thousands) | (In thousands) | Year ended Dec 31, 2022 | Year ended Dec 31, 2021 | | :--- | :--- | :--- | | Total operating expenses | $(14,586) | $(27,374) | | Loss for the year | $(15,397) | $(23,417) | | Comprehensive loss | $(18,979) | $(27,895) | - The company's financial commitments include potential future milestone payments for its licensed products, such as up to $15 million for Milciclib upon NDA equivalent in breast cancer and up to $2 million for Foralumab upon BLA approval925926 Exhibits This section lists all the exhibits filed as part of the Form 20-F annual report, including the company's memorandum of association and bye-laws, material contracts such as license agreements with Nerviano and Novimmune, lease agreements, equity incentive plans, and various certifications required by the Sarbanes-Oxley Act. - Key exhibits filed include the license agreement for Milciclib with Nerviano Medical Services S.r.l. and license agreements for Foralumab (CD3) and TZLS-501 (IL-6r) with Novimmune SA763