Cyclo Therapeutics, Inc., a biopharmaceutical company, announced today that it has entered into a material definitive agreement with Rafael Holdings, Inc., securing a new convertible promissory note worth $3 million. This agreement amends previous arrangements, extending the maturity date of existing notes and aligning them with the new note's terms.
On Monday, the Nevada-based company specializing in biological products detailed the issuance of the note under a Fourth Amended and Restated Note Purchase Agreement. The note carries an interest rate of 5% per annum, maturing on December 21, 2024, and is convertible into shares of the company's common stock at Rafael's discretion or automatically upon certain financing conditions.
The proceeds from this note are earmarked for working capital and general corporate purposes, providing Cyclo Therapeutics with financial flexibility for its operations. In conjunction with this funding, the company also entered into an amendment with Rafael, adjusting the maturity dates of prior notes to align with the new December 2024 deadline. Upon completion of a planned merger with a subsidiary of Rafael, the principal and accrued interest of these notes will be fully discharged.
The merger, which was agreed upon on August 21, 2024, is contingent on stockholder approval and other conditions. Rafael Holdings currently owns approximately 31.4% of Cyclo Therapeutics' common stock, and the merger will result in the company becoming a wholly-owned subsidiary of Rafael.
In other recent news, Cyclo Therapeutics, Inc. reported significant developments. The biopharmaceutical company secured a $3 million convertible promissory note agreement with Rafael Holdings, Inc., which also holds a substantial percentage of Cyclo Therapeutics' common stock. The note carries a 5% annual interest rate and is set to mature in December 2024.
Moreover, Cyclo Therapeutics and Rafael Holdings have entered into a merger agreement, with the merger contingent on various conditions and shareholder approvals. This merger is aimed at advancing the development of Trappsol Cyclo for the treatment of Niemann-Pick Disease Type C1 (NPC1) and is expected to finalize in late 2024.
In response to these developments, Maxim Group downgraded Cyclo Therapeutics stock from Buy to Hold, and Ascendiant Capital maintained its Buy rating but reduced its price target. H.C. Wainwright also downgraded the stock to Neutral.
Cyclo Therapeutics also reported progress in its ongoing TransportNPC™ study for treating NPC1, with interim data expected in the first half of 2025. Additionally, the company received approval from the European Patent Office for its Alzheimer's disease treatment method, set to take effect in 2024. These are recent developments in Cyclo Therapeutics' ongoing efforts.
InvestingPro Insights
Cyclo Therapeutics' recent financial maneuver aligns with several key metrics and trends highlighted by InvestingPro. The company's market capitalization stands at a modest $21.81 million, reflecting its current position in the biopharmaceutical sector. Despite the new $3 million convertible note, which will provide much-needed working capital, InvestingPro Tips indicate that the company is "quickly burning through cash" and that "short term obligations exceed liquid assets." This underscores the importance of the recent funding agreement with Rafael Holdings.
The company's financial health presents a mixed picture. While Cyclo Therapeutics boasts "impressive gross profit margins" of 91.56% for the last twelve months as of Q2 2024, it is currently "not profitable over the last twelve months." However, an InvestingPro Tip suggests that "net income is expected to grow this year," and "analysts predict the company will be profitable this year," which could be a positive sign for investors considering the recent financial restructuring.
It's worth noting that the stock has faced significant challenges, with InvestingPro data showing a 44.04% price decline over the past three months and a 46.82% drop over six months. This aligns with the InvestingPro Tip that the "stock price often moves in the opposite direction of the market," which may be of interest to contrarian investors.
For those considering a deeper dive into Cyclo Therapeutics' financial outlook, InvestingPro offers 8 additional tips that could provide valuable insights into the company's potential trajectory following this latest funding development.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.