The accompanying notes are an integral part of these consolidated financial statements.

CYCLACEL PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In $000s)

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

CYCLACEL PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Nature of Operations

Cyclacel Pharmaceuticals, Inc. (“Cyclacel” or “the Company”) is aclinical-stage biopharmaceutical companyusing cell cycle control, transcriptional regulation and DNA damage response biology to develop innovative, targeted medicines for cancer and other proliferative diseases. Cyclacel is a pioneer company in the field of cell cycle biology with a vision to improve patient healthcare by translating cancer biology into medicines.

As of SeptemberJune 30, 2018,2019, 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.

Basis of Presentation

The consolidated balance sheet as of SeptemberJune 30, 2018,2019, the consolidated statements of operations, and comprehensive loss, and stockholders’ equity for the three and ninesix months ended SeptemberJune 30, 20182019 and 20172018 and the consolidated statements of cash flows for the ninesix months ended SeptemberJune 30, 20182019 and 2017,2018, and all related disclosures contained in the accompanying notes, are unaudited. The consolidated balance sheet as of December 31, 20172018 is derived from the audited consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 20172018 filed with the Securities and Exchange Commission (“SEC”). The consolidated financial statements are presented on the basis of accounting principles that are generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the SEC. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for a complete set of financial statements. In the opinion of management, all adjustments, which include only normal recurring adjustments necessary to present fairly the consolidated balance sheet as of SeptemberJune 30, 2018,2019, and the results of operations and, comprehensive loss for the three and ninesix months ended SeptemberJune 30, 20182019, and cash flows for the ninesix months ended SeptemberJune 30, 2018,2019 have been made. The interim results for the three and ninesix months ended SeptemberJune 30, 20182019 are not necessarily indicative of the results to be expected for the year ending December 31, 20182019 or for any other year. The consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes for the year ended December 31, 20172018 that are included in the Company’s Annual Report on Form 10-K filed with the SEC.

Going Concern

Management considers that there are no conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern for a period of at least one year from the date the financial statements are issued. The Company expects that its cash of approximately $19.0$15.2 million as of SeptemberJune 30, 20182019 will be sufficient to fund its operating expenses and capital expenditure requirements through to the second quarterend of 2020.

This evaluation is based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued, including:

The future viability of the Company beyond the second quarterend of 2020 is dependent on its ability to raise additional capital to finance its operations.The Company will needdoes not currently have sufficient funds to raise substantial additional capital to pursue it’s transcriptional regulation program evaluating CYC065 in patients with advanced cancers, the DNA damage responsecomplete development and CYC140 programs.commercialization of any of its drug candidates. Additional funding may not be available to the Company on favorable terms, or at all. If the Company is unablenot able to obtainsecure additional funds,funding when needed, it will needmay have to reduce operating expenses, enter into a collaboration or other similar arrangement with respect to development and/or commercialization rights to its development candidates, if available, or be forced to cancel or delay, or reduce the scope of or eliminate one or more of its currentclinical trials or research and development programs including any potential regulatory filings relatedor make changes to its operating plan. In addition, it may have to partner one or more of its product candidate programs at an earlier stage of development, which would lower the economic value of those programs to the SEAMLESS study of sapacitabine, and/or limit or cease its operations.Company. The Company’s inability to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies.

Accounting standards adopted in the period

On January 1, 2019, the Company adopted the guidance on accounting for leases (“ASC 842”) in Accounting Standards Update No, 2016-02,Leases, as amended by subsequent updates issued in 2018 and 2019. The guidance requires that lessees recognize both a lease liability, which is a lessee’s obligation to make lease payments arising from a lease measured on a discounted basis, and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term at the commencement date.

The Company has elected the package of practical expedients permitted in ASC 842. Accordingly, the Company accounted for its existing operating leases as operating leases under the new guidance, without reassessing (a) whether the contracts contain a lease under ASC 842, (b) whether classification of the operating leases would be different in accordance with ASC 842, or (c) whether any unamortized initial direct costs would have met the definition of initial direct costs in ASC 842 at lease commencement. In addition, the Company has elected an accounting policy to not allocate payments made under the lease agreement between lease and non-lease components.

The Company transitioned to the new guidance at the adoption date by recognizing a lease liability of $1.5 million for the present value of the remaining minimum rental payments, as defined under prior accounting rules, and a corresponding right-of-use asset. In addition, the Company reclassified an existing deferred rent obligation of $120,000 created under prior accounting rules against the opening right-of-use asset. Because the Company adopted the new leasing guidance on a cumulative catch-up basis effective January 1, 2019, the Company has not recast prior period financial statements for the effects of this new standard. Accordingly, the Company’s financial condition as of December 31, 2018 and June 30, 2019 may not be comparable.

Recently Issued Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-15, "Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract." ASU 2018-15 requires implementation costs incurred by customers in cloud computing arrangements to be deferred over the non-cancellable term of the cloud computing arrangements plus any optional renewal periods (1) that are reasonably certain to be exercised by the customer or (2) for which exercise of the renewal option is controlled by the cloud service provider. The effective date of this pronouncement is for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and early adoption is permitted. The standard can be adopted either using the prospective or retrospective transition approach. The Company is currently evaluating the impact of this pronouncement on the Company's consolidated financial statements and disclosures.

Fair Value of Financial Instruments

Financial instruments consist of cash equivalents, accounts payable and accrued liabilities. The carrying amounts of cash equivalents, accounts payable and accrued liabilities approximate their respective fair values due to the nature of the accounts, notably their short maturities.

Comprehensive Income (Loss)

All components of comprehensive income (loss), including net income (loss), are reported in the financial statements in the period in which they are recognized. Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Net income (loss) and other comprehensive income (loss), including foreign currency translation adjustments, are reported, net of any related tax effect, to arrive at comprehensive income (loss). No taxes were recorded on items of other comprehensive income (loss). There were no reclassifications out of other comprehensive income (loss) during the three months and ninesix months ended SeptemberJune 30, 20172018 and 2018.2019.

Revenue recognition

On January 1, 2018, the Company adopted new guidance on revenue recognition, which has been codified within Accounting Standards Codification (ASC) 606,Revenue from Contracts with Customers(“ASC 606”). The accounting policy applicable from January 1, 2018 and further details on the transition are described below. The comparative financial information for the three and nine months ended September 30, 2017 and as of December 31, 2017 has not been restated and is prepared in accordance with the accounting policies that are described in Note 2 to the financial statements included in the Company’s Annual Report on Form 10-K.

With effect from January 1, 2018, the Company recognizes revenue using the five step modelstep-model provided in ASC 606:

(1) identify the contract606,Revenue from Contracts with a customer;

(2) identify the performance obligations in the contract;

(3) determine the transaction price;

(4) allocate the transaction price to the performance obligations in the contract; and

(5) recognize revenue when, or as, the Company satisfies a performance obligation.Customers(“ASC 606”):

The transaction price includes fixed payments and an estimate of variable consideration, including milestone payments. The Company determines the variable consideration to be included in the transaction price by estimating the most likely amount that will be received and then applies a constraint to reduce the consideration to the amount which is probable of being received. When applying the constraint, the Company considers:

The transaction price is allocated to each performance obligation based on the relative selling price of each performance obligation. The best estimate of the selling price is determined after considering all reasonably available information, including market data and conditions, entity-specific factors such as the cost structure of the deliverable and internal profit and pricing objectives.

The revenue allocated to each performance obligation is recognized as or when the Company satisfies the performance obligation.

The Company recognizes a contract asset, when the value of satisfied (or part satisfied) performance obligations is in excess of the payment due to the Company, and deferred revenue when the amount of unconditional consideration is in excess of the value of satisfied (or part satisfied) performance obligations. Once a right to receive consideration is unconditional, that amount is presented as a receivable.

With effect from January 1, 2018, grant revenue, if new grants are obtained, will be presented as a reduction ofagainst the related research and development expenses.

Accounting standards adopted in the periodLeases

TheEffective from January 1, 2019, the Company has adopted Accounting Standards Update (“ASU”) No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transferaccounts for lease contracts in accordance with ASC 842. As of Assets Other than Inventory (‘‘ASU 2016-16’’), which requires the recognitionJune 30, 2019, all of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. The adoption of this standard did not have a material impact onthe company’s consolidated financial statements.Company’s leases are classified as operating leases.

The Company has adopted ASU No. 2016-15, Statementrecognizes an asset for the right to use an underlying leased asset for the lease term and records lease liabilities based on the present value of Cash Flows: Classificationthe Company’s obligation to make lease payments under the lease. As the Company’s leases do not indicate an implicit rate, the Company uses a best estimate of Certain Cash Receiptsits incremental borrowing rate to discount the future lease payments. The Company estimates its incremental borrowing rate based on observable information about risk-free interest rates that are the same tenure as the lease term, adjusted for various factors, including the effects of assumed collateral, the nature of how the risk-free loan is repaid (e.g., amortizing versus bullet), and Cash Payments (“ASU 2016-15”), to address diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The adoption of this standard did not have a material impact onthe company’s consolidated financial statements.Company’s credit risk.

The Company has adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (‘‘ASU 2014-09’’), which supersedes existing revenue recognition guidance.evaluates options included in its lease agreements to extend or terminate the lease. The standard’s core principle is that a companyCompany will recognize revenuereflect the effects of exercising those options in the lease term when it transfers promised goods or services to customers in an amountis reasonably certain that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The standard defines a five-step process to achieve this principle. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts.

The Company has adopted the guidance on using a modified retrospective approach with the cumulative effect of initially applying the guidance recognized as of January 1, 2018. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and it did not have a cumulative effect requiring adjustment to opening retained earnings.

The most significant impact relates to its accounting for revenues related to grants received from government agencies or nonprofit organizations and revenues from contingent “milestone” based payments. Under the new standard the Company will report grant revenue,exercise that option. In assessing whether it is reasonably certain that the Company will exercise an option, the Company considers factors such as:

Lease expense for lease payments is recognized on a straight-line basis over the lease term. Variable lease payments, if new grantsany, are obtainedrecognized in a nonreciprocal transaction,the period when the obligation to make those payments is incurred. Lease incentives received prior to lease commencement are recorded as a reduction ofin the corresponding researchright-of-use asset. Fixed lease incentives received after lease commencement reduce both the lease liability and development expense. Historically grants have been reported in revenue, but as the grantor is not likely to be receiving a good or service in exchange for the payment the grant cannot be reported in revenue.right-of-use asset.

The Company also expects to recognize revenue associated with contingent milestone-based payments at the time the contingent event is likely to be met, rather than when the milestone is achieved. However, given the limited number of potential milestones owed to Cyclacel, and the inherent risk involved in developing drugs, the timing of when milestones are recognized as revenues is unlikely to be affected.

Recently Issued Accounting Pronouncements

In July 2017, the FASB issued ASU No. 2017-11, Accounting for Certain Financial Instruments with Down Round Features (“ASU 2017-11”), which simplifies the accounting for certain financial instruments with down-round features. A down round feature is a provision in a financial instrument that reduces the strike price of an issued financial instrument if the issuer sells shares of its stock for an amount less than the currently stated strike price of the issued financial instrument or issues an equity-linked financial instrument with a strike price below the currently stated strike price of the issued financial instrument. ASU 2017-11 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. ASU 2017-11 should be adopted retrospectively for each prior reporting period presented or retrospectively as of the beginning of the year of adoption. The Companyanticipates this standard will not have a material impact onits consolidated financial statements.

In February 2016, the FASB issued guidance onThe Company has elected an accounting for leases in ASU No, 2016-02. The guidance requires that lessees recognize a lease liability, which is a lessee’s obligationpolicy to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified assetaccount for the lease term at the commencement date. The guidance is effective for fiscal years beginning after December 15, 2018. Early application is permitted. The guidance in ASU 2016-02 may be adopted onand non-lease components as a modified retrospective transition approach for leases existing, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently evaluating the impact of the guidance on the consolidated financial statements. In August 2018, the FASB issued ASU 2018-11, Leases, which, in addition to the existing requirements to transition, permits an entity to adopt the newsingle lease accounting guidelines by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without restating prior periods. The Company is currently evaluating the impact of the guidance on the consolidated financial statements. We anticipate adopting this as of January 1, 2019 without recasting prior periods. We anticipate that the adoption of the guidance will have a material impact on the Company’s consolidated balance sheet due to the recognition of a lease liability and corresponding right-of-use asset.component.

Revenue recognized in the three and ninesix months ended September 30, 2017 and 2018 was $0. Deferred revenue as of December 31, 2017 and SeptemberJune 30, 2018 and 2019 was $150,000 and is included in Accrued and other current liabilities on the accompanying balance sheets. We expect to recognize this deferred revenue by the end of 2018.$nil.

The aggregate transaction price that is allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of SeptemberJune 30, 20182019 was $0.$nil.

The Company calculates net loss per common share in accordance with ASC 260 “Earnings Per Share” (“ASC 260”). Basic and diluted net loss per common share was determined by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period.

The following potentially dilutive securities have not been included in the computation of diluted net loss per share for the three and ninesix months ended SeptemberJune 30, 20172018 and 2018,2019, as the result would be anti-dilutive:

Prepaid expenses and other current assets consisted of the following (in $000s):

Included in other current assets at June 30, 2019 is $170,000 of receivables. This relates to royalty payments receivable under a December 2005 Asset Purchase Agreement, or APA, whereby Xcyte Therapies, Inc., or Xcyte (a business acquired by the Company in March 2006) sold certain assets and intellectual property to ThermoFisher Scientific Company, or TSC (formerly Invitrogen Corporation) through the APA and other related agreements. The assets and technology were not part of the Company’s product development plan following the transaction between Xcyte and Cyclacel in March 2006. Accordingly, the company recognized $170,000 of other income related to this transaction during the six months ended June 30, 2019.

Accrued and other current liabilities consisted of the following (in $000s):

Other current liabilities at

The Company has a single lease related to its facility in Dundee, Scotland.

As of and for the six months ended June 30, 2019

The Company recognized operating lease expense of $156,329. Cash payments made during the three months ended June 30, 2019 totaled $245,222 and were presented as cash outflows from operating activities. The remaining lease term is approximately 6.3 years as of June 30, 2019. The discount rate used by the Company in determining the lease liability was 12%.

Remaining lease payments under the lease are:

As of and for the twelve months ended December 31, 2018

Prior to January 1, 2019, the Company accounted for its Dundee facility lease under ASC 840,Leases.Rent expense, which includes lease payments related to the Company’s research and development facilities and corporate headquarters and other rent related expenses, was $0.5 and $0.4 million for each of the years ended December 31, 2017 and September 30, 2018, include $150,000respectively.

The following is a summary of deferred revenue in respect of payment received in advance of achieving a milestone under the ManRos agreement.Company’s future contractual obligations and commitments relating to its facilities leases as at December 31, 2018 (in thousands):

ASC 718 requires compensation expense associated with share-based awards to be recognized 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. Most of the awards granted by the Company (and still outstanding) vest ratably over one to four years. The Company recognizes all share-based awards under the straight-line attribution method, assuming that all granted awards will vest. Forfeitures are recognized in the periods when they occur.

Stock based compensation has been reported within expense line items on the consolidated statement of operations for the three and ninesix months ended SeptemberJune 30, 20172018 and 20182019 as shown in the following table (in $000s):

2018 Plan

In May 2018, the Company’s stockholders approved the 2018 Equity Incentive Plan (the “2018 Plan”), under which Cyclacel may make equity incentive grants to its officers, employees, directors and consultants. The 2018 Plan replaces the 2015 Equity Incentive Plan (the “2015 Plan”).

The 2018 Plan allows for the issuance of up to 1,500,000 shares of the Company’s common stock pursuant to various types of award grants, including stock options and restricted stock units. In addition, the 2018 Plan allows up to 709,889 additional shares to be issued if awards outstanding under the 2018 Plan are cancelled or expire on or after the date of the Company’s 2018 annual meeting of stockholders.

As of SeptemberJune 30, 2018,2019, the Company has reserved 1,657,500152,083 shares of the Company’s common stock under the 2018 Plan, including shares that were available under the 2015 Plan and carried forward to the 2018 Plan. Stock option awards granted under the Company’s equity incentive plans have a maximum life of 10 years and generally vest over a one to four-year period from the date of grant.

There were 1,550,270 options granted during the six months ended June 30, 2019. These options had a grant date fair value ranging between $0.52-$0.61 per option.

There were 306,304 options granted during the nine monthsyear ended September 30,December 31, 2018. These options had grant date fair values ranging between $1.17-$1.29 per option. Of these options, approximately 174,272 are performance based and will vest upon the fulfillment of certain clinical objectives. The Company determined that the satisfaction of one criterion, the commencement of the objectives was probableHEM study by December 31, 2018, occurred as of September 30,December 31, 2018, but that the other vesting criteria related to these awards were not probable as of September 30,December 31, 2018. As such, the Company recognized compensation cost for these grants under the expectation that 25% of these awards will vest.

There were 170,853 options granted during(the portion associated with the year ended December 31, 2017. Of these options, 158,853 are performance based, which will vest upon the fulfillment of certain clinical objectives. The Company determined that the satisfaction of one of the objectives was probable as of September 30, 2018, but that the other vesting criteria related to these awards were not probable as of September 30, 2018. As such, the Company recognized compensation cost for these grants under the expectation that 25% of these awardsHEM study) will vest.

There were no stock options exercised during each of the ninesix months ended SeptemberJune 30, 20172018 and 2018,2019, respectively. The Company does not expect to be able to benefit from the deduction for stock option exercises that may occur because the company has tax loss carryforwards from prior periods that would be expected to offset any potential taxable income.

Outstanding Options

A summary of the share option activity and related information is as follows:

The fair value of the stock options granted is calculated using the Black-Scholes option-pricing model as prescribed by ASC 718.718 using the following assumptions:

July 2017 Underwritten Public OfferingOctober 2018 At Market Issuance

On July 21, 2017,October 4, 2018, the Company issued (i) 3,154,000 Class A Units for $2 per unit, each consisting of one share ofentered into a Common Stock Sales Agreement, or the Company’s common stock, and a warrantSales Agreement, with H.C. Wainwright & Co., LLC, or Wainwright, as sales agent, pursuant to purchase one sharewhich Wainwright was authorized to sell shares of common stock, (the “Class A Warrants”), and (ii) 8,872 Class B Units, each consisting of one share of the Company’s Series A Convertible Preferred Stock, par value $0.001 per share, (the “Series A Preferred Stock”), convertible into 500 shareshaving an aggregate offering price of Common Stock atup to $5,000,000, by any method that is deemed to be an “at the initial conversion price,market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended.  Shares sold under the Sales Agreement were offered and sold pursuant to the Company’s previously filed and effective Registration Statement on Form S-3 and a warrant to purchaseprospectus supplement and accompanying base prospectus.  The Company paid Wainwright a numbercommission of 3.0% of the gross sales price per share sold. The Sales Agreement was concluded during the first quarter of 2019, during which the Company sold a further 4,702,527 shares for gross proceeds of common stock equal to $1,000.00 divided by the conversion price (the “Class B Warrants”) for $1,000 per unit. Theapproximately $4.3 million. Aggregate net proceeds to the Company after the underwriters’ exercise in full of the over-allotment option were approximately $13.7$4.7 million, after deducting underwriting discounts, commissions and other estimated offering expenses. The Class A Units and Class B Units have no stand-alone rights and the shares of common stock, Series A Preferred Stock and the Class A and Class B Warrants comprising those units were immediately separable.

The common stock, Class A Warrants and Class B Warrants (together the “Warrants”) and Series A Preferred Stock are freestanding financial instruments. The Warrants are classified within equity in the consolidated balance sheet and are not remeasured on a recurring basis. The Series A Preferred Stock is classified within equity in the consolidated balance sheet.

Warrants

As of SeptemberJune 30, 2018,2019, there were 7,490,500 warrants to purchase the Company’s common stock outstanding, each with an exercise price of $2.00. All such warrants were issued in connection with the July 2017 Underwritten Public Offeringunderwritten public offering and are immediately exercisable. The Warrantswarrants expire in 2024.Subject to limited exceptions, a holder of warrants will not have the right to exercise any portion of its warrants if the holder (together with such holder’s affiliates, and any persons acting as a group together with such holder or any of such holder’s affiliates) would beneficially own a number of shares of common stock in excess of 4.99% (or, at the election of the purchaser, 9.99%) of the shares of our Common Stock then outstanding after giving effect to such exercise.

The exercise price and the number of shares issuable upon exercise of the warrants is subject to appropriate adjustment in the event of recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Company’s common stock. The warrant holders must pay the exercise price in cash upon exercise of the warrants, unless such warrant holders are utilizing the cashless exercise provision of the warrants. On the expiration date, unexercised warrants will automatically be exercised via the “cashless” exercise provision.

Prior to the exercise of any warrants to purchase common stock, holders of the warrants will not have any of the rights of holders of the common stock purchasable upon exercise, including the right to vote, except as set forth therein.

There was no exercise of warrants during the three and ninesix months ended SeptemberJune 30, 2018.2019.

Series A Preferred Stock

8,872 shares of the Company’sSeries A Preferred Stock were issued in the July 2017 Underwritten Public Offering.underwritten public offering. During the year ended December 31, 2017, 8,608 shares of the Series A Preferred Stock were converted into 4,304,000 shares of common stock. As of SeptemberJune 30, 2018,2019, 264 shares of the Series A Preferred Stock remain issued and outstanding.

Each share of Series A Preferred Stock is convertible at any time at the option of the holder thereof, into a number of shares of common stock determined by dividing $1,000 by the initial conversion price of $2.00 per share, subject to a 4.99% blocker provision, or, upon election by a holder prior to the issuance of shares of Series A Preferred Stock, 9.99%,and is subject to adjustment for stock splits, stock dividends, distributions, subdivisions and combinations. The 264 shares of Series A Preferred Stock issued and outstanding at SeptemberJune 30, 2018,2019, are convertible into 132,000 shares of common stock.

In the event of a liquidation, the holders of shares of the Series A Preferred Stock mayshall be permitted to participate on an as-converted-to-common-stock basis in any distribution of assets of the Company. The Company shall not pay any dividends on shares of common stock (other than dividends in the form of common stock) unless and until such time as dividends on each share of Series A Preferred Stock are paid on an as-converted basis. There is no restriction on the Company’s ability to repurchase shares of Series A Preferred Stock while there is any arrearage in the payment of dividends on such shares, and there are no sinking fund provisions applicable to the Series A Preferred Stock.

Subject to certain conditions, at any time following the issuance of the Series A Preferred Stock, the Company has the right to cause each holder of the Series A Preferred Stock to convert all or part of such holder’s Series A Preferred Stock in the event that (i) the volume weighted average price of our common stock for 30 consecutive trading days (the “Measurement Period”) exceeds 300% of the initial conversion price of the Series A Preferred Stock (subject to adjustment for forward and reverse stock splits, recapitalizations, stock dividends and similar transactions), (ii) the daily trading volume on each Trading Day during such Measurement Period exceeds $500,000 per trading day and (iii) the holder is not in possession of any information that constitutes or might constitute, material non-public information which was provided by the Company. The right to cause each holder of the Series A Preferred Stock to convert all or part of such holder’s Series A Preferred Stock shall be exercised ratably among the holders of the then outstanding preferred stock.

The Series A Preferred Stock has no maturity date, will carry the same dividend rights as the common stock, and with certain exceptions, contains no voting rights. In the event of any liquidation or dissolution of the Company, the Series A Preferred Stock ranks senior to the common stock in the distribution of assets, to the extent legally available for distribution.

6% Convertible Exchangeable Preferred Stock

As of SeptemberJune 30, 2018,2019, there were 335,273 shares of the Company’s 6% Convertible Exchangeable Preferred Stock (“6% Preferred Stock”) issued and outstanding at an issue price of $10.00 per share. Dividends on the 6% Preferred Stock are cumulative from the date of original issuance at the annual rate of 6% of the liquidation preference of the 6% Preferred Stock, payable quarterly on the first day of February, May, August and November, commencing February 1, 2005. Any dividends must be declared by the Company’s Board and must come from funds that are legally available for dividend payments. The 6% Preferred Stock has a liquidation preference of $10.00 per share, plus accrued and unpaid dividends.

The Company may automatically convert the 6% Preferred Stock into common stock if the per share closing price of the Company’s common stock has exceeded $2,961, which is 150% of the conversion price of the 6% Preferred Stock, for at least 20 trading days during any 30-day trading period, ending within five trading days prior to notice of automatic conversion.

The 6% Preferred Stock has no maturity date and no voting rights prior to conversion into common stock, except under limited circumstances.

The Company may, at its option, redeem the 6% Preferred Stock in whole or in part, out of funds legally available at the redemption price of $10.00 per share.

The 6% Preferred Stock is exchangeable, in whole but not in part, at the option of the Company on any dividend payment date beginning on November 1, 2005 (the “Exchange Date”) for the Company’s 6% Convertible Subordinated Debentures (“Debentures”) at the rate of $10.00 principal amount of Debentures for each share of 6% Preferred Stock. The Debentures, if issued, will mature 25 years after the Exchange Date and have terms substantially similar to those of the 6% Preferred Stock. No such exchanges have taken place to date.

Subsequent Events

On September 6, 2018,May 29, 2019, the Board of Directors declared a quarterly cash dividend in the amount of $0.15 per share on the Company’s Preferred Stock. The cash dividend was paid on NovemberAugust 1, 20182019 to the holders of record of the Preferred Stock as of the close of business on October 15, 2018.July 12, 2019.

On October 4, 2018,July 9, 2019, the Company entered intoreceived a Commonwritten notice from The Nasdaq Stock Sales Agreement,Market LLC (“Nasdaq”) that the Company has been granted an additional 180 calendar days, or until January 6, 2020, to regain compliance with the Sales Agreement, with H.C. Wainwright & Co., LLC, or Wainwright, as sales agent, pursuant to which Wainwright may sell shares of our common stock, par value $0.001 per share, having an aggregate offering price of up to $5,000,000, by any method that is deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended.  Shares sold under the Sales Agreement will be offered and sold pursuant to the Company’s previously filed and effective Registration Statement on Form S-3 and a prospectus supplement and accompanying base prospectus.  The Company will pay Wainwright a commission of 3.0% of the gross salesminimum $1.00 bid price per share sold.requirement of the Listing Rules of Nasdaq (the “Written Notice”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company had an initial period of 180 calendar days, or until July 8, 2019, to regain compliance with the minimum closing bid price requirement. The Company did not regain compliance with the minimum closing bid price requirement by July 8, 2019. The Company was previously notified by Nasdaq that it might be afforded a second 180 calendar period to regain compliance with the minimum closing bid price requirement under certain circumstances if the Company notified Nasdaq of its intent to cure the deficiency. As a result, the Company applied for an extension of the cure period, as permitted under the notification. In order to cure the deficiency, the Company indicated that, to the extent necessary, it planned to effect a reverse stock split in order to regain compliance with the minimum closing bid price requirement.

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including, without limitation, Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains “forward-looking statements” within the meaning of Section 27A of the Securities Exchange Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend that the forward-looking statements be covered by the safe harbor for forward-looking statements in the Exchange Act. The forward-looking information is based on various factors and was derived using numerous assumptions. All statements, other than statements of historical fact, that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. These forward-looking statements are usually accompanied by words such as “believe,” “anticipate,” “plan,” “seek,” “expect,” “intend” and similar expressions.

Forward-looking statements necessarily involve risks and uncertainties, and our actual results could differ materially from those anticipated in the forward looking statements due to a number of factors, including those set forth in Part I, Item 1A, entitled “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2017,2018, as updated and supplemented by Part II, Item 1A, entitled “Risk Factors,” of our Quarterly Reports on Form 10-Q, and elsewhere in this report. These factors as well as other cautionary statements made in this Quarterly Report on Form 10-Q, should be read and understood as being applicable to all related forward-looking statements wherever they appear herein. The forward-looking statements contained in this Quarterly Report on Form 10-Q represent our judgment as of the date hereof. We encourage you to read those descriptions carefully. We caution you not to place undue reliance on the forward-looking statements contained in this report. These statements, like all statements in this report, speak only as of the date of this report (unless an earlier date is indicated) and we undertake no obligation to update or revise the statements except as required by law. Such forward-looking statements are not guarantees of future performance and actual results will likely differ, perhaps materially, from those suggested by such forward-looking statements. In this report, “Cyclacel,” the “Company,” “we,” “us,” and “our” refer to Cyclacel Pharmaceuticals, Inc.

Overview

During 2018,Through the first half of 2019, our primary focus has been on our transcriptional regulation program where we are evaluating CYC065, our cyclin dependent kinase, or CDK, inhibitor, as a single agent andin combination with venetoclaxin Phase 1 studies in patients with solid tumors and hematological malignancies. In ourDNA damage response, or DDR, program where we are evaluating sapacitabinein combination with venetoclaxin Phase 1 studies in patients with hematological malignancies and in combination with our CDK inhibitor seliciclib in Phase 1/2 studies in patients with solid tumors. AdditionallyIn ouranti-mitotic program, we are evaluating CYC140, a PLK1 inhibitor, in our SEAMLESS studyPhase 1 studies in patients with hematological malignancies. Cyclacel's strategy is to build a diversified biopharmaceutical business focused in hematology and oncology based on a pipeline of sapacitabine in Acute Myeloid Leukemia, or AML, stratified and exploratory subgroup analyses have been completed and have defined a patient population who may benefit from treatment with the experimental arm. We have begun discussing the SEAMLESS data with certain regulatory authorities.novel drug candidates.

TranscriptionalTranscriptional Regulation Program

CDKs are a family of enzymes first discovered as regulators of the cell cycle, but that are now understood to also provide pivotal functions in the regulation of transcription, DNA repair and metastatic spread. The precise selectivity of an individual CDK inhibitor molecule for certain specific CDKs is key to targeting particular tumor types and minimizing undesirable side effects through non-specific antiproliferative activity.

In general, cell cycle regulation is less well controlled in cancer cells than in normal cells, which explains in part why cancer cells divide uncontrollably. Different CDKs are responsible for control of different aspects of proliferation, and when dysregulated, can be drivers of particular cancer sub-sets. Modulating CDK activity with targeted therapies is an attractive strategy to reinforce cell cycle control and decrease the rate of abnormal proliferation of cancer cells. The first FDA approval in March 2015 of a CDK inhibitor forinhibitors, palbociclib, and more recently in 2017, ribociclib and abemaciclib, for a type of breast cancer, has led to great interest in the development of this class of drugs as oncology therapeutics.

Cyclacel’s founding scientist, Professor Sir David Lane, is a globally recognized authority in cell cycle biology, who discovered p53, a key tumor suppressor that malfunctions in about two-thirds of human cancers. Under his guidance, Cyclacel’s drug discovery and development programs concentrated on the CDK2/9 isoforms, which operate as key components of the p53 pathway. These efforts resulted in bringing two molecules into clinical trials: seliciclib, a first-generation CDK inhibitor, and CYC065, a second-generation CDK inhibitor, which has benefited from the Company’s clinical experience with seliciclib.

CYC065 has been evaluated in a first-in-human, Phase 1 trial in patients with advanced solid tumors and a recommended Phase 2 dose was established. The study demonstrated that at the recommended Phase 2 dose CYC065 durably suppresses Mcl-1,MCL1, a member of the Bcl-2BCL2 family of survival proteins. CYC065 is under investigation in combination with other anticancer drugs, including Bcl-2BCL2 inhibitors such as venetoclax.venetoclax with this combination currently being evaluated in two clinical studies enrolling patients with relapsed refractory chronic lymphocytic leukemia (CLL) and relapsed or refractory acute myeloid leukemia (AML) respectively. Preclinical data showsuggests that CYC065 may benefit adults and children with hematological malignancies, including acute myeloid leukemias (AML),AML, acute lymphocytic leukemias (ALL), and in particular leukemias with rearrangement of the Mixed Lineage Leukemia gene (MLL-r), chronic lymphocytic leukemias (CLL),CLL, B-cell lymphomas, multiple myelomas, and patients with certain solid tumors, including breast and uterine cancers, and neuroblastomas.

Seliciclib, our first-generation CDK inhibitor, is being evaluated in an all-oral Phase 1/2 combination study with our sapacitabine in patients with BRCA mutations, and has been evaluated to date in approximately 450 patients.

DNA Damage Response, or DDR, Program

Many cancers have defects in the way in which cells monitor and repair damaged DNA, collectively termed DNA damage response, or DDR. These deficiencies in DDR pathways render cells more susceptible to DNA damage. Many traditional cancer treatments, such as DNA-damaging chemotherapy and radiotherapy, are based on this finding. However, such treatments are often accompanied by significant and unwanted side effects. Developing treatments which target specific DDR deficiencies to preferentially kill cancer cells, while minimizing the impact on normal cells, has potential for more selective, better tolerated therapies to improve survival in multiple cancers.

We have focused on developing treatments targeting DNA damage pathways for several years. For example, sapacitabine is an oral nucleoside analogue prodrug whose metabolite, CNDAC, generates single-strand DNA breaks, or SSB, either leading to arrest of the cell cycle at G2 phase or development of double-strand DNA breaks, or DSB.Repair ofCNDAC-induced DSB is dependent on the homologous recombination, or HR repair pathway. BRCA mutations in cancer cells are a cause of HR deficiency, making such cancer cells more susceptible to cell death induced by sapacitabine.

We have dosed the first patient in a Phase 1/2 study evaluating the safety and effectiveness of sapacitabine, in an all oral regimen in combination with venetoclax in patients with relapsed or refractory AML or myelodysplastic syndromes (MDS). The Phase 1/2 study (NCT01211457) is intended to enroll up to 40 patients with relapsed or refractory AML or MDS with the objective of determining the safety and efficacy of the combination. Secondary objectives include duration of response, CR, CRp, PR, or major HI, transfusion requirements, number of hospitalized days and overall survival. We are also evaluating sapacitabine in a Phase 1/2 combination study with seliciclib in patients with BRCA mutations. A Phase 1b/2 investigator-sponsored clinical trial has been initiated to evaluateis evaluating the safety and effectiveness of sapacitabine in combination with olaparib in patients with BRCA mutant breast cancer. The trial will beis being conducted at the Dana-Farber Cancer Institute with collaborators Cyclacel and AstraZeneca providing sapacitabine investigational drug and the approved PARP-inhibitorPARP inhibitor olaparib, respectively.

CYC140

CYC140 is a novel, small molecule, selective polo-like-kinase 1 (PLK1) inhibitor which is ready to start investigation in cancer patients.a first-in-human Phase 1 study in patients with advanced leukemias and MDS. CYC140 is differentiated from otherprevious clinical-stage PLK1 inhibitors, demonstrating potent and selective target inhibition and high activity in xenograft models of human cancers when dosed orally at non-toxic doses anddoses. CYC140 is the subject of a translational biology program focused on acute leukemias and esophageal cancer.

MD AndersonClinical Collaboration

On October 1, 2018, the Company entered into a three-year Clinical Collaboration Agreement, or CCA, with The University of Texas MD Anderson Cancer Center, or MD Anderson. The main objective of the CCA is to clinically evaluate the safety and efficacy of three Cyclacel medicines in patients with hematological malignancies, including chronic lymphocytic leukemias, acute myeloid leukemias, myelodysplastic syndromesMDS and other advanced leukemias. Under the terms of the CCA, MD Anderson will conduct four clinical studies, all of which are now open for patients, with a total projected enrollment of up to 170 patients. The four protocolsUnder the risk-sharing agreement, MD Anderson will study CYC065, CYC140assume the patient costs for all studies and sapacitabine either as single agents orCyclacel, who is the sponsor, will provide investigational drugs and other limited support. Upon first commercial sale in combination with approved drugs. The CCA shall remainspecific indications studied in effect for the duration of the period during whichalliance, Cyclacel will make certain payments are due to MD Anderson.

Cyclacel currently retains virtually all marketing rights worldwide to the compounds associated with the Company’s drug programs.

Results of Operations

Three Months Ended SeptemberJune 30, 20172018 and 20182019

Results of Continuing Operations

Revenues

Revenues for the three months ended SeptemberJune 30, 20172018 and 20182019 were $0$nil and $0.$nil.

The future

Recognition of any further revenue from milestones under acollaboration, licensing and supply agreement with ManRos Therapeutics SA is dependent on the clinical progress of the program, which we do not control.

Research and development expenses

From our inception, we have focused on drug discovery and development programs, with a particular emphasis on orally-available anticancer agents, and our research and development expenses have represented costs incurred to discover and develop novel small molecule therapeutics, including clinical trial costs for CYC065, CYC140sapacitabine, seliciclib, and sapacitabine.sapacitabine in combination with seliciclib. We have also incurred costs in the advancement of product candidates toward clinical and preclinicalpre-clinical trials and the development of in-house research to advance our biomarker program and technology platforms. We expense all research and development costs as they are incurred. Research and development expenses primarily include:

The following table provides information with respect to our research and development expenditures for the three months ended SeptemberJune 30, 20172018 and 20182019 (in $000s except percentages):

Total research and development expenses represented 45%48% and 49% of our operating expenses for the three months ended SeptemberJune 30, 20172018 and 2018,2019, respectively.

Research and development expenses increased by $0.2 million from $1.0 million for the three months ended September 30, 2017 toremained flat at $1.2 million for the three months ended SeptemberJune 30, 2018.2018 and 2019. Research and development expenses relating to transcriptional regulation increased by $0.5 million$47,000 from $0.2$0.6 million for the three months ended SeptemberJune 30, 20172018 to $0.7 million for the three months ended SeptemberJune 30, 2018,2019, primarily due to progression of the clinical evaluation of CYC065. Research and development expenses relating to sapacitabine decreased by $0.3$0.2 million from $0.6 million for the three months ended September 30, 2017 to $0.3 million for the three months ended SeptemberJune 30, 2018 to $0.1 million for the three months ended June 30, 2019, primarily as a result of a reduction in expenses associated with the SEAMLESS Phase 3 trial and related costs.

The future

We anticipate that overall research and development expenses for the year ended December 31, 20182019 will increase compared to the year ended December 31, 2017,2018, as we progress the clinical development of CYC065.CYC065 and our other clinical-stage drugs. The timing and extent of any future SEAMLESS expenditure, including the possibility of registration submissions to regulatory authorities in Europe and the U.S., are dependent upon the outcome of discussions with regulatory authorities.

General and administrative expenses

General and administrative expenses include costs for administrative personnel, legal and other professional expenses and general corporate expenses. The following table summarizes the general and administrative expenses for the three months ended SeptemberJune 30, 20172018 and 20182019 (in $000s except percentages):

Total general and administration expenses represented 55%52% and 51% of our operating expenses for the three months ended SeptemberJune 30, 20172018 and 2018,2019, respectively. General and administrative activity has been consistent year over year resulting in expenses remaining relatively flat at $1.2decreased by $0.1 million andfrom $1.3 million for the ninethree months ended SeptemberJune 30, 20172018 to $1.2 million for the three months ended June 30, 2019 due to a reduction in legal and 2018, respectively.professional costs.

The future

We expect general and administrative expensesexpenditures for the year ended December 31, 2019 to decrease as compared to our expenditures for the year ended December 31, 2018 compareddue to our expenses for the year ended December 31, 2017 to remain relatively flat.reduced recruitment and professional consultancy costs.

Other income (expense), net

The following table summarizes other income for the three months ended SeptemberJune 30, 20172018 and 20182019 (in $000 except percentages):

Total other income increased by approximately $50,000$0.1 million from $36,000$0.1 million for the three months ended SeptemberJune 30, 20172018 to $86,000$0.2 million for the three months ended SeptemberJune 30, 2018.2019. The increase in other income is primarilywholly related to increased yields on cash held on deposit, offset by royaltiesroyalty receivable under a December 2005 Asset Purchase Agreement, or APA, whereby Xcyte Therapies, Inc., or Xcyte (a business acquired by the Company in March 2006) sold certain assets and intellectual property to ThermoFisher Scientific Company, or TSC (formerly Invitrogen Corporation) through anthe APA and other related agreements. The assets and technology were not part of the Company’s product development plan following the transaction between Xcyte and Cyclacel in March 2006. Accordingly, the company recognized $28,000$66,000 and $0$170,000 of other income arising from sales related to this transaction during the three months ended SeptemberJune 30, 20172018 and 2018, respectively2019 respectively. We have no knowledge of TSC’s activities and cannot predict when we may receive income under the APA, if any.

Foreign exchange gains (losses)

Foreign exchange losses decreasedgains increased by approximately $23,000,$60,000, from a loss of $22,000$39,000 for the three months ended SeptemberJune 30, 2017,2018, to a gain of $1,000$21,000 for the three months ended SeptemberJune 30, 2018.2019.

The future

Other income (expense), net for the year ended December 31, 2018,2019, will continue to be impacted by changes in foreign exchange rates and the receipt of income under the APA. As we are not in control of sales made by TSC, we are unable to estimate the level and timing of income under the APA, if any.

Because the nature of funding advanced through intercompany loans is that of a long-term investment, unrealized foreign exchange gains and losses on such funding will be recognized in other comprehensive income until repayment of the intercompany loan becomes foreseeable.

Income tax benefit

Credit is taken for research and development tax credits, which are claimed from the United Kingdom’s revenue and customs authority, or HMRC, in respect of qualifying research and development costs incurred.

The following table summarizes total income tax benefit for the three months ended SeptemberJune 30, 20172018 and 20182019 (in $000s except percentages):

The total income tax benefit, which comprised of research and development tax credits recoverable, increaseddecreased by $0.1$0.2 million from an income tax benefit of $0.2$0.5 million for the three months ended SeptemberJune 30, 20172018 to an income tax benefit of $0.3 million for the three months ended SeptemberJune 30, 2018.2019. The level of tax credits recoverable is linked directly to qualifying research and development expenditure incurred in any one year and the availability of trading losses.

The future

We expect to continue to be eligible to receive United Kingdom research and development tax credits for the foreseeable future and will elect to do so. The amount of tax credits we will receive is entirely dependent on the amount of eligible expenses we incur and having sufficient trading losses. We expect our qualifying research and development expenditure to increase for the year ended December 31, 20182019 in comparison to the year ended December 31, 2017.2018.

NineSix Months Ended SeptemberJune 30, 20172018 and 20182019

Results of Continuing Operations

Revenues

Revenues for the ninesix months ended SeptemberJune 30, 20172018 and 20182019 were $0$nil and $0.$nil.

The future

Recognition of any further revenue from milestones under acollaboration, licensing and supply agreement with ManRos Therapeutics SAis dependent on the clinical progress of the program, which we do not control.

Research and development expenses

From our inception, we have focused on drug discovery and development programs, with a particular emphasis on orally-available anticancer agents, and our research and development expenses have represented costs incurred to discover and develop novel small molecule therapeutics, including clinical trial costs for our CDK and PLK inhibitors and sapacitabine. We have also incurred costs in the advancement of product candidates toward clinical and preclinical trials and the development of in-house research to advance our biomarker program and technology platforms. We expense all research and development costs as they are incurred. Research and development expenses primarily include:

Research and development expenses

The following table provides information with respect to our research and development expenditures for the ninesix months ended SeptemberJune 30, 20172018 and 20182019 (in $000s except percentages):

Total research and development expenses represented 48%43% and 45%48% of our operating expenses for the ninesix months ended SeptemberJune 30, 20172018 and 2018,2019, respectively.

Research and development expenses decreasedincreased by $0.3$0.2 million from $3.5$2.0 million for the ninesix months ended SeptemberJune 30, 20172018 to $3.2$2.2 million for the ninesix months ended SeptemberJune 30, 2018.2019. Research and development expenses relating to transcriptional regulation increased by $1.1$0.2 million from $0.7$1.1 million for the ninesix months ended SeptemberJune 30, 20172018 to $1.8$1.3 million for the ninesix months ended SeptemberJune 30, 2018,2019, as the clinical evaluation CYC065 progresses. Research and development expenses relating to sapacitabine decreased by $1.4$0.3 million from $2.2$0.5 million for the ninesix months ended SeptemberJune 30, 20172018 to $0.8$0.2 million for the ninesix months ended SeptemberJune 30, 2018,2019, primarily as a result of a reduction in expenditures associated with the SEAMLESS Phase 3 trial and related costs. Research and development expenses relating to other research and development increased by $0.3 million from $0.3 million for the six months ended June 30, 2018 to $0.6 million for the six months ended June 30, 2019 primarily due to the progression of the clinical evaluation of the CYC140 program.

The future

We anticipate that overall research and development expenses for the year ended December 31, 20182019 will increase compared to the year ended December 31, 2017,2018, as we progress the clinical development of CYC065. The timing and extent of any future SEAMLESS expenditure, including the possibility of registration submissions to regulatory authorities in Europe and the U.S., are dependent upon the outcome of discussions with regulatory authorities.

General and administrative expenses

General and administrative expenses include costs for administrative personnel, legal and other professional expenses and general corporate expenses. The following table summarizes the general and administrative expenses for the ninesix months ended SeptemberJune 30, 20172018 and 20182019 (in $000s except percentages):

Total general and administration expenses represented 52%57% and 55%52% of our operating expenses for the ninesix months ended SeptemberJune 30, 20172018 and 2018,2019, respectively. General and administrative activity has been consistent year over year resulting in expenses remaining relatively flat at $3.8decreased by $0.3 million and $3.9from $2.7 million for the ninesix months ended SeptemberJune 30, 20172018 to $2.4 million for the six months ended June 30, 2019 due to a reduction in legal and 2018, respectively.professional costs.

The future

We expect general and administrative expenditures for the year ended December 31, 20182019 to decrease as compared to our expenditures for the year ended December 31, 20172018 due to remain relatively flat.reduced recruitment and professional consultancy costs.

Other income (expense), net

The following table summarizes other income, net for the ninesix months ended SeptemberJune 30, 20172018 and 20182019 (in $000 except percentages):

Total other income decreased by approximately $0.1$0.4 million, from $0.9$0.7 million for the ninesix months ended SeptemberJune 30, 20172018 to $0.8$0.3 million for the ninesix months ended SeptemberJune 30, 2018.2019. The decrease in other income is primarily related to royalty payments receivable under a December 2005 APA, whereby Xcyte sold certain assets and intellectual property to TSC through an APA and other related agreements. We have no knowledge of TSC’s activities and cannot predict when we may receive income under the APA, if any.

Foreign exchange losses

Foreign exchange losses decreasedgains increased by approximately $23,000,$79,000, from a loss of $65,000$43,000 for the ninesix months ended SeptemberJune 30, 2017,2018, to a lossgain of $42,000$36,000 for the ninesix months ended SeptemberJune 30, 2018.2019.

The future

Other income (expense), net for the year ended December 31, 20182019 will continue to be impacted by changes in foreign exchange rates and the receipt of income under the APA. As we are not in control of sales made by TSC we are unable to estimate the level and timing of income under the APA, if any.

Because the nature of funding advanced through intercompany loans is that of a long-term investment in nature, unrealized foreign exchange gains and losses on such funding will be recognized in other comprehensive income until repayment of the intercompany loan becomes foreseeable.

Income tax benefit

Credit is taken for research and development tax credits, which are claimed from the United Kingdom’s revenue and customs authority, or HMRC, in respect of qualifying research and development costs incurred.

The following table summarizes total income tax benefit for the ninesix months ended SeptemberJune 30, 20172018 and 20182019 (in $000s except percentages):

The total income tax benefit, which comprised of research and development tax credits recoverable, increaseddecreased by $0.2$0.1 million from an income tax benefit of $0.8$0.7 million for the ninesix months ended SeptemberJune 30, 20172018 to an income tax benefit of $1.0$0.6 million for the ninesix months ended SeptemberJune 30, 2018.2019. The level of tax credits recoverable is linked directly to qualifying research and development expenditure incurred in any one year.