Cyclo Therapeutics, Inc. (NASDAQ:CYTH), a biopharmaceutical company specializing in biological products, has entered into a financial agreement with Rafael Holdings, Inc., involving a $3 million convertible promissory note. The transaction was completed today, and the note carries a 5% annual interest rate, maturing on December 21, 2024.
The agreement, officially titled the Third Amended and Restated Note Purchase Agreement, amends previous agreements dating back to June 11, 2024. It allows for the note's principal to be converted into common stock shares at Rafael's discretion, under certain conditions, including a qualified financing or a sale transaction.
Rafael Holdings, currently holding approximately 31.4% of Cyclo Therapeutics' common stock, has also entered into a Merger Agreement with the company, with the merger contingent upon various conditions and stockholder approvals.
The newly secured funds are designated for working capital and general corporate purposes. This financial move follows a series of prior notes issued to Rafael, with the latest being in August 2024 for an equal amount of $3 million.
In other recent news, Cyclo Therapeutics has reported progress in its ongoing TransportNPC™ study and substudy for treating Niemann-Pick Disease Type C1 (NPC1), with interim data expected in the first half of 2025. The company has also announced a definitive merger agreement with Rafael Holdings, aimed at advancing the development of Trappsol Cyclo for NPC1 treatment, which is expected to finalize in late 2024.
In financial developments, Cyclo Therapeutics secured a $2 million convertible promissory note deal with Rafael Holdings. Analysts have responded to these developments with Maxim (NASDAQ:MXIM) Group downgrading Cyclo Therapeutics stock from Buy to Hold, Ascendiant Capital maintaining its Buy rating but reducing its price target, and H.C. Wainwright also downgrading the stock to Neutral.
The company has also 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
As Cyclo Therapeutics, Inc. (NASDAQ:CYTH) fortifies its financial position through the recent convertible promissory note agreement with Rafael Holdings, Inc., it's pertinent to consider the company's financial metrics and market performance. According to InvestingPro data, Cyclo Therapeutics has a market capitalization of approximately $19.51 million and a noteworthy gross profit margin of 91.56% as of the last twelve months leading to Q2 2024. Despite these strong margins, the company is not profitable over the last twelve months, with an operating income margin of -1868.1%.
InvestingPro Tips highlight that Cyclo Therapeutics is expected to see net income growth this year, which aligns with the company's need for working capital to advance its product pipeline. Additionally, the stock's price movement has been quite volatile, often moving in the opposite direction of the market and currently trading near its 52-week low. These insights, along with the fact that the stock is in oversold territory according to the Relative Strength Index (RSI), could be valuable for investors considering the timing of their investments in CYTH.
For those seeking more in-depth analysis, InvestingPro offers additional tips on Cyclo Therapeutics, which can be accessed at InvestingPro's website. These tips may provide further guidance for investors as they assess the company's financial health and market position following its latest financial agreement.
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